```

[Federal Register Volume 77, Number 199 (Monday, October 15, 2012)]
[Rules and Regulations]
[Pages 62623-63200]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-21972]

[[Page 62623]]

Vol. 77

Monday,

No. 199

October 15, 2012

Part II

Environmental Protection Agency

40 CFR Parts 85, 86, and 600

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Department of Transportation

National Highway Traffic Safety Administration

49 CFR Parts 523, 531, 533, et al.

2017 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions 
and Corporate Average Fuel Economy Standards; Final Rule

Federal Register / Vol. 77, No. 199 / Monday, October 15, 2012 / 
Rules and Regulations

[[Page 62624]]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 85, 86, and 600

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Parts 523, 531, 533, 536, and 537

[EPA-HQ-OAR-2010-0799; FRL-9706-5; NHTSA-2010-0131]
RIN 2060-AQ54; RIN 2127-AK79

2017 and Later Model Year Light-Duty Vehicle Greenhouse Gas 
Emissions and Corporate Average Fuel Economy Standards

AGENCIES: Environmental Protection Agency (EPA) and National Highway 
Traffic Safety Administration (NHTSA), DOT.

ACTION: Final rule.

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SUMMARY: EPA and NHTSA, on behalf of the Department of Transportation, 
are issuing final rules to further reduce greenhouse gas emissions and 
improve fuel economy for light-duty vehicles for model years 2017 and 
beyond. On May 21, 2010, President Obama issued a Presidential 
Memorandum requesting that NHTSA and EPA develop through notice and 
comment rulemaking a coordinated National Program to improve fuel 
economy and reduce greenhouse gas emissions of light-duty vehicles for 
model years 2017-2025, building on the success of the first phase of 
the National Program for these vehicles for model years 2012-2016. This 
final rule, consistent with the President's request, responds to the 
country's critical need to address global climate change and to reduce 
oil consumption. NHTSA is finalizing Corporate Average Fuel Economy 
standards for model years 2017-2021 and issuing augural standards for 
model years 2022-2025 under the Energy Policy and Conservation Act, as 
amended by the Energy Independence and Security Act. NHTSA will set 
final standards for model years 2022-2025 in a future rulemaking. EPA 
is finalizing greenhouse gas emissions standards for model years 2017-
2025 under the Clean Air Act. These standards apply to passenger cars, 
light-duty trucks, and medium-duty passenger vehicles, and represent 
the continuation of a harmonized and consistent National Program. Under 
the National Program automobile manufacturers will be able to continue 
building a single light-duty national fleet that satisfies all 
requirements under both programs while ensuring that consumers still 
have a full range of vehicle choices that are available today. EPA is 
also finalizing minor changes to the regulations applicable to model 
years 2012-2016, with respect to air conditioner performance, nitrous 
oxides measurement, off-cycle technology credits, and police and 
emergency vehicles.

DATES: This final rule is effective on December 14, 2012, sixty days 
after date of publication in the Federal Register. The incorporation by 
reference of certain publications listed in this regulation is approved 
by the Director of the Federal Register as of December 14, 2012.

ADDRESSES: EPA and NHTSA have established dockets for this action under 
Docket ID No. EPA-HQ-OAR-2010-0799 and NHTSA 2010-0131, respectively. 
All documents in the docket are listed in the http://www.regulations.gov index. Although listed in the index, some 
information is not publicly available, e.g., confidential business 
information (CBI) or other information whose disclosure is restricted 
by statute. Certain other material, such as copyrighted material, will 
be publicly available in hard copy in EPA's docket, and electronically 
in NHTSA's online docket. Publicly available docket materials can be 
found either electronically in www.regulations.gov by searching for the 
dockets using the Docket ID numbers above, or in hard copy at the 
following locations: EPA: EPA Docket Center, EPA/DC, EPA West, Room 
3334, 1301 Constitution Ave. NW., Washington, DC. The Public Reading 
Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, 
excluding legal holidays. The telephone number for the Public Reading 
Room is (202) 566-1744. NHTSA: Docket Management Facility, M-30, U.S. 
Department of Transportation (DOT), West Building, Ground Floor, Rm. 
W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590. The DOT 
Docket Management Facility is open between 9 a.m. and 5 p.m. Eastern 
Time, Monday through Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT: EPA: Christopher Lieske, Office of 
Transportation and Air Quality, Assessment and Standards Division, 
Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor MI 
48105; telephone number: 734-214-4584; fax number: 734-214-4816; email 
address: lieske.christopher@epa.gov, or contact the Assessment and 
Standards Division; email address: otaqpublicweb@epa.gov. NHTSA: 
Rebecca Yoon, Office of the Chief Counsel, National Highway Traffic 
Safety Administration, 1200 New Jersey Avenue SE., Washington, DC 
20590. Telephone: (202) 366-2992.

SUPPLEMENTARY INFORMATION: 

A. Does this action apply to me?

    This action affects companies that manufacture or sell new light-
duty vehicles, light-duty trucks, and medium-duty passenger vehicles, 
as defined under EPA's CAA regulations,\1\ and passenger automobiles 
(passenger cars) and non-passenger automobiles (light trucks) as 
defined under NHTSA's CAFE regulations.\2\ Regulated categories and 
entities include:
---------------------------------------------------------------------------

    \1\ ``Light-duty vehicle,'' ``light-duty truck,'' and ``medium-
duty passenger vehicle'' are defined in 40 CFR 86.1803-01. 
Generally, the term ``light-duty vehicle'' means a passenger car, 
the term ``light-duty truck'' means a pick-up truck, sport-utility 
vehicle, or minivan of up to 8,500 lbs gross vehicle weight rating, 
and ``medium-duty passenger vehicle'' means a sport-utility vehicle 
or passenger van from 8,500 to 10,000 lbs gross vehicle weight 
rating. Medium-duty passenger vehicles do not include pick-up 
trucks.
    \2\ ``Passenger car'' and ``light truck'' are defined in 49 CFR 
Part 523.

----------------------------------------------------------------------------------------------------------------
                                                  NAICS Codes
                   Category                           \A\          Examples of potentially regulated entities
----------------------------------------------------------------------------------------------------------------
Industry......................................          336111  Motor Vehicle Manufacturers.
                                                        336112
Industry......................................          811111  Commercial Importers of Vehicles and Vehicle
                                                                 Components.
                                                        811112
                                                        811198
                                                        423110
Industry......................................          335312  Alternative Fuel Vehicle Converters.
                                                        336312

[[Page 62625]]

 
                                                        336399
                                                        811198
----------------------------------------------------------------------------------------------------------------
\A\ North American Industry Classification System (NAICS).

    This list is not intended to be exhaustive, but rather provides a 
guide regarding entities likely to be regulated by this action. To 
determine whether particular activities may be regulated by this 
action, you should carefully examine the regulations. You may direct 
questions regarding the applicability of this action to the person 
listed in FOR FURTHER INFORMATION CONTACT.

Table of Contents

I. Overview of Joint EPA/NHTSA Final 2017-2025 National Program
    A. Executive Summary
    1. Purpose of the Regulatory Action
    2. Summary of the Major Provisions of the Final Rule
    3. Costs and Benefits of National Program
    B. Introduction
    1. Continuation of the National Program
    2. Additional Background on the National Program and Stakeholder 
Engagement Prior to the NPRM
    3. Public Participation and Stakeholder Engagement Since the 
NPRM Was Issued
    4. California's Greenhouse Gas Program
    C. Summary of the Final 2017-2025 National Program
    1. Joint Analytical Approach
    2. Level of the Standards
    3. Form of the Standards
    4. Program Flexibilities for Achieving Compliance
    5. Mid-Term Evaluation
    6. Coordinated Compliance
    7. Additional Program Elements
    D. Summary of Costs and Benefits for the National Program
    1. Summary of Costs and Benefits for the NHTSA CAFE Standards
    2. Summary of Costs and Benefits for the EPA's GHG Standards
    3. Why are the EPA and NHTSA MY 2025 estimated per-vehicle costs 
different?
    E. Background and Comparison of NHTSA and EPA Statutory 
Authority
    1. NHTSA Statutory Authority
    2. EPA Statutory Authority
    3. Comparing the Agencies' Authority
II. Joint Technical Work Completed for This Final Rule
    A. Introduction
    B. Developing the Future Fleet for Assessing Costs, Benefits, 
and Effects
    1. Why did the agencies establish baseline and reference vehicle 
fleets?
    2. What comments did the agencies receive regarding fleet 
projections for the NPRM?
    3. Why were two fleet projections created for the FRM?
    4. How did the agencies develop the MY 2008 baseline vehicle 
fleet?
    5. How did the agencies develop the projected MY 2017-2025 
vehicle reference fleet for the 2008 model year based fleet?
    6. How did the agencies develop the model year 2010 baseline 
vehicle fleet as part of the 2010 based fleet projection?
    7. How did the agencies develop the projected my 2017-2025 
vehicle reference fleet for the 2010 model year based fleet?
    8. What are the differences in the sales volumes and 
characteristics of the MY 2008 based and the MY 2010 based fleets 
projections?
    C. Development of Attribute-Based Curve Shapes
    1. Why are standards attribute-based and defined by a 
mathematical function?
    2. What attribute are the agencies adopting, and why?
    3. How have the agencies changed the mathematical functions for 
the MYs 2017-2025 standards, and why?
    4. What curves are the agencies promulgating for MYs 2017-2025?
    5. Once the agencies determined the slope, how did the agencies 
determine the rest of the mathematical function?
    6. Once the agencies determined the complete mathematical 
function shape, how did the agencies adjust the curves to develop 
the proposed standards and regulatory alternatives?
    D. Joint Vehicle Technology Assumptions
    1. What technologies did the agencies consider?
    2. How did the agencies determine the costs of each of these 
technologies?
    3. How did the agencies determine the effectiveness of each of 
these technologies?
    4. How did the agencies consider real-world limits when defining 
the rate at which technologies can be deployed?
    5. Maintenance and Repair Costs Associated With New Technologies
    E. Joint Economic and Other Assumptions
    F. CO2 Credits and Fuel Consumption Improvement 
Values for Air Conditioning Efficiency, Off-cycle Reductions, and 
Full-size Pickup Trucks
    1. Air Conditioning Efficiency Credits and Fuel Consumption 
Improvement Values
    2. Off-Cycle CO2 Credits
    3. Advanced Technology Incentives for Full-Size Pickup Trucks
    G. Safety Considerations in Establishing CAFE/GHG Standards
    1. Why do the agencies consider safety?
    2. How do the agencies consider safety?
    3. What is the current state of the research on statistical 
analysis of historical crash data?
    4. How do the agencies think technological solutions might 
affect the safety estimates indicated by the statistical analysis?
    5. How have the agencies estimated safety effects for the final 
rule?
III. EPA MYs 2017-2025 Light-Duty Vehicle Greenhouse Gas Emissions 
Standards
    A. Overview of EPA Rule
    1. Introduction
    2. Why is EPA establishing MYs 2017-2025 standards for light-
duty vehicles?
    3. What is EPA finalizing?
    4. Basis for the GHG Standards Under Section 202(a)
    5. Other Related EPA Motor Vehicle Regulations
    B. Model Year 2017-2025 GHG Standards for Light-duty Vehicles, 
Light-duty Trucks, and Medium Duty Passenger Vehicles
    1. What fleet-wide emissions levels correspond to the 
CO2 standards?
    2. What are the CO2 attribute-based standards?
    3. Mid-Term Evaluation
    4. Averaging, Banking, and Trading Provisions for CO2 
Standards
    5. Small Volume Manufacturer Standards
    6. Additional Lead Time for Intermediate Volume Manufacturers
    7. Small Business Exemption
    8. Police and Emergency Vehicle Exemption From GHG Standards
    9. Nitrous Oxide, Methane, and CO2-equivalent 
Approaches
    10. Test Procedures
    C. Additional Manufacturer Compliance Flexibilities
    1. Air Conditioning Related Credits
    2. Incentives for Electric Vehicles, Plug-in Hybrid Electric 
Vehicles, Fuel Cell Vehicles, and Dedicated and Dual Fuel Compressed 
Natural Gas Vehicles
    3. Incentives for Using Advanced ``Game-Changing'' Technologies 
in Full-Size Pickup Trucks
    4. Treatment of Plug-in Hybrid Electric Vehicles, Dual Fuel 
Compressed Natural Gas Vehicles, and Ethanol Flexible Fuel Vehicles 
for GHG Emissions Compliance
    5. Off-cycle Technology Credits
    D. Technical Assessment of the CO2 Standards
    1. How did EPA develop reference and control fleets for 
evaluating standards?
    2. What are the effectiveness and costs of CO2-
reducing technologies?
    3. How were technologies combined into ``Packages'' and what is 
the cost and effectiveness of packages?
    4. How does EPA project how a manufacturer would decide between 
options to improve CO2 performance to meet a fleet 
average standard?
    5. Projected Compliance Costs and Technology Penetrations
    6. How does the technical assessment support the final 
CO2 standards as compared to the alternatives has EPA 
considered?
    7. Comments Received on the Analysis of Technical Feasibility 
and Appropriateness of the Standards

[[Page 62626]]

    8. To what extent do any of today's vehicles meet or surpass the 
final MY 2017-2025 CO2 footprint-based targets with 
current powertrain designs?
    E. Certification, Compliance, and Enforcement
    1. Compliance Program Overview
    2. Compliance With Fleet-Average CO2 Standards
    3. Vehicle Certification
    4. Useful Life Compliance
    5. Credit Program Implementation
    6. Enforcement
    7. Other Certification Issues
    8. Warranty, Defect Reporting, and Other Emission-related 
Components Provisions
    9. Miscellaneous Technical Amendments and Corrections
    10. Base Tire Definition
    11. Treatment of Driver-Selectable Modes and Conditions
    12. Publication of GHG Compliance Information
    F. How will this rule reduce GHG emissions and their associated 
effects?
    1. Impact on GHG Emissions
    2. Climate Change Impacts From GHG Emissions
    3. Changes in Global Climate Indicators Associated With This 
Rule's GHG Emissions Reductions
    G. How will the rule impact Non-GHG emissions and their 
associated effects?
    1. Inventory
    2. Health Effects of Non-GHG Pollutants
    3. Environmental Effects of Non-GHG Pollutants
    4. Air Quality Impacts of Non-GHG Pollutants
    5. Other Unquantified Health and Environmental Effects
    H. What are the estimated cost, economic, and other impacts of 
the rule?
    1. Conceptual Framework for Evaluating Consumer Impacts
    2. Costs Associated With the Vehicle Standards
    3. Cost per Ton of Emissions Reduced
    4. Reduction in Fuel Consumption and its Impacts
    5. Cost of Ownership, Payback Period and Lifetime Savings on New 
Vehicle Purchases
    6. CO2 Emission Reduction Benefits
    7. Non-Greenhouse Gas Health and Environmental Impacts
    8. Energy Security Impacts
    9. Additional Impacts
    10. Summary of Costs and Benefits
    11. U.S. Vehicle Sales Impacts and Affordability of New Vehicles
    12. Employment Impacts
    I. Statutory and Executive Order Reviews
    J. Statutory Provisions and Legal Authority
IV. NHTSA Final Rule for Passenger Car and Light Truck CAFE 
Standards for Model Years 2017 and Beyond
    A. Executive Overview of NHTSA Final Rule
    1. Introduction
    2. Why does NHTSA set CAFE standards for passenger cars and 
light trucks?
    3. Why is NHTSA presenting CAFE standards for MYs 2017-2025 now?
    B. Background
    1. Chronology of Events Since the MY 2012-2016 Final Rule was 
Issued
    2. How has NHTSA developed the CAFE standards since the 
President's announcement, and what has changed between the proposal 
and the final rule?
    C. Development and Feasibility of the Proposed Standards
    1. How was the baseline vehicle fleet developed?
    2. How were the technology inputs developed?
    3. How did NHTSA develop its economic assumptions?
    4. How does NHTSA use the assumptions in its modeling analysis?
    D. Statutory Requirements
    1. EPCA, as Amended by EISA
    2. Administrative Procedure Act
    3. National Environmental Policy Act
    E. What are the CAFE standards?
    1. Form of the Standards
    2. Passenger Car Standards for MYs 2017-2025
    3. Minimum Domestic Passenger Car Standards
    4. Light Truck Standards
    F. How do the final standards fulfill NHTSA's statutory 
obligations?
    1. Overview
    2. What are NHTSA's statutory obligations?
    3. How did the agency balance the factors for the NPRM?
    4. What comments did the agency receive regarding the proposed 
maximum feasible levels?
    5. How has the agency balanced the factors for this final rule?
    G. Impacts of the Final CAFE Standards
    1. How will these standards improve fuel economy and reduce GHG 
emissions for MY 2017-2025 vehicles?
    2. How will these standards improve fleet-wide fuel economy and 
reduce GHG emissions beyond MY 2025?
    3. How will these standards impact non-GHG emissions and their 
associated effects?
    4. What are the estimated costs and benefits of these standards?
    5. How would these final standards impact vehicle sales and 
employment?
    6. Social Benefits, Private Benefits, and Potential Unquantified 
Consumer Welfare Impacts of the Standards
    7. What other impacts (quantitative and unquantifiable) will 
these standards have?
    H. Vehicle Classification
    I. Compliance and Enforcement
    1. Overview
    2. How does NHTSA determine compliance?
    3. What compliance flexibilities are available under the CAFE 
program and how do manufacturers use them?
    4. What new incentives are being added to the CAFE program for 
MYs 2017-2025?
    5. Other CAFE Enforcement Issues
    J. Record of Decision
    1. The Agency's Decision
    2. Alternatives NHTSA Considered in Reaching its Decision
    3. NHTSA's Environmental Analysis, Including Consideration of 
the Environmentally Preferable Alternative
    4. Factors Balanced by NHTSA in Making its Decision
    5. How the Factors and Considerations Balanced by NHTSA Entered 
Into its Decision
    6. The Agency's Preferences Among Alternatives Based on Relevant 
Factors, Including Economic and Technical Considerations and Agency 
Statutory Missions
    7. Mitigation
    K. Regulatory Notices and Analyses
    1. Executive Order 12866, Executive Order 13563, and DOT 
Regulatory Policies and Procedures
    2. National Environmental Policy Act
    3. Clean Air Act (CAA) as Applied to NHTSA's Action
    4. National Historic Preservation Act (NHPA)
    5. Fish and Wildlife Conservation Act (FWCA)
    6. Coastal Zone Management Act (CZMA)
    7. Endangered Species Act (ESA)
    8. Floodplain Management (Executive Order 11988 and DOT Order 
5650.2)
    9. Preservation of the Nation's Wetlands (Executive Order 11990 
and DOT Order 5660.1a)
    10. Migratory Bird Treaty Act (MBTA), Bald and Golden Eagle 
Protection Act (BGEPA), Executive Order 13186
    11. Department of Transportation Act (Section 4(f))
    12. Regulatory Flexibility Act
    13. Executive Order 13132 (Federalism)
    14. Executive Order 12988 (Civil Justice Reform)
    15. Unfunded Mandates Reform Act
    16. Regulation Identifier Number
    17. Executive Order 13045
    18. National Technology Transfer and Advancement Act
    19. Executive Order 13211
    20. Department of Energy Review
    21. Privacy Act

I. Overview of Joint EPA/NHTSA Final 2017-2025 National Program

A. Executive Summary

1. Purpose of the Regulatory Action
a. The Need for the Action and How the Action Addresses the Need
    NHTSA, on behalf of the Department of Transportation, and EPA are 
issuing final rules to further reduce greenhouse gas emissions and 
improve fuel economy for light-duty vehicles for model years 2017 and 
beyond. On May 21, 2010, President Obama issued a Presidential 
Memorandum requesting that EPA and NHTSA develop through notice and 
comment rulemaking a coordinated National Program to improve fuel 
economy and reduce greenhouse gas emissions of light-duty vehicles for 
model years 2017-2025, building on the success of the first phase of 
the National Program for these vehicles for model years 2012-2016. 
These final rules are consistent with the President's request and 
respond to the country's critical need to address global

[[Page 62627]]

climate change and to reduce oil consumption.
    These standards apply to passenger cars, light-duty trucks, and 
medium-duty passenger vehicles (i.e. sport utility vehicles, cross-over 
utility vehicles, and light trucks), and represent the continuation of 
a harmonized and consistent National Program for these vehicles. Under 
the National Program automobile manufacturers will be able to continue 
building a single light-duty national fleet that satisfies all 
requirements under both programs.
    The National Program is estimated to save approximately 4 billion 
barrels of oil and to reduce GHG emissions by the equivalent of 
approximately 2 billion metric tons over the lifetimes of those light 
duty vehicles produced in MYs 2017-2025. The agencies project that fuel 
savings will far outweigh higher vehicle costs, and that the net 
benefits to society of the MYs 2017-2025 National Program will be in 
the range of $326 billion to $451 billion (7 and 3 percent discount 
rates, respectively) over the lifetimes of those light duty vehicles 
sold in MYs 2017-2025.
    The National Program is projected to provide significant savings 
for consumers due to reduced fuel use. Although the agencies estimate 
that technologies used to meet the standards will add, on average, 
about $1,800 to the cost of a new light duty vehicle in MY 2025, 
consumers who drive their MY 2025 vehicle for its entire lifetime will 
save, on average, $5,700 to $7,400 (7 and 3 percent discount rates, 
respectively) in fuel, for a net lifetime savings of $3,400 to $5,000. 
This estimate assumes gasoline prices of $3.87 per gallon in 2025 with 
small increases most years throughout the vehicle's lifetime.
b. Legal Authority
    EPA and NHTSA are finalizing separate sets of standards for 
passenger cars and for light trucks, under their respective statutory 
authority. EPA is setting national CO2 emissions standards 
for passenger cars and light-trucks under section 202 (a) of the Clean 
Air Act (CAA) ((42 U.S.C. 7521 (a)), and under its authority to measure 
passenger car and passenger car fleet fuel economy pursuant to the 
Energy Policy and Conservation Act (EPCA) 49 U.S.C. 32904 (c). NHTSA is 
setting national corporate average fuel economy (CAFE) standards under 
the Energy Policy and Conservation Act (EPCA), as amended by the Energy 
Independence and Security Act (EISA) of 2007 (49 U.S.C. 32902).
    Section 202 (a) of the Clean Air Act requires EPA to establish 
standards for emissions of pollutants from new motor vehicles which 
emissions cause or contribute to air pollution which may reasonably be 
anticipated to endanger public health or welfare. See Coalition for 
Responsible Regulation v. EPA, No. 09-1322 (D.C. Cir. June 26, 2012) 
slip op. p. 41 (``'[i]f EPA makes a finding of endangerment, the Clean 
Air Act requires the [a]gency to regulate emissions of the deleterious 
pollutant from new motor vehicles. `* * * Given the non-discretionary 
duty in Section 202 (a)(1) and the limited flexibility available under 
Section 202 (a)(2), which this court has held relates only to the 
motor-vehicle industry,* * * EPA had no statutory basis on which it 
could `ground [any] reasons for further inaction'' (quoting State of 
Massachusetts v. EPA, 549 U.S. 497, 533, 535 (2007). In establishing 
such standards, EPA must consider issues of technical feasibility, 
cost, and available lead time. Standards under section 202 (a) thus 
take effect only ``after providing such period as the Administrator 
finds necessary to permit the development and application of the 
requisite technology, giving appropriate consideration to the cost of 
compliance within such period'' (CAA section 202 (a)(2) (42 U.S.C. 7512 
(a)(2)).
    EPCA, as amended by EISA, contains a number of provisions regarding 
how NHTSA must set CAFE standards. EPCA requires that NHTSA establish 
separate passenger car and light truck standards (49 U.S.C. 
32902(b)(1)) at ``the maximum feasible average fuel economy level that 
it decides the manufacturers can achieve in that model year (49 U.S.C. 
32902(a)),'' based on the agency's consideration of four statutory 
factors: Technological feasibility, economic practicability, the effect 
of other standards of the Government on fuel economy, and the need of 
the nation to conserve energy (49 U.S.C. 32902(f)). EPCA does not 
define these terms or specify what weight to give each concern in 
balancing them; thus, NHTSA defines them and determines the appropriate 
weighting that leads to the maximum feasible standards given the 
circumstances in each CAFE standard rulemaking. For MYs 2011-2020, EPCA 
further requires that separate standards for passenger cars and for 
light trucks be set at levels high enough to ensure that the CAFE of 
the industry-wide combined fleet of new passenger cars and light trucks 
reaches at least 35 mpg not later than MY 2020 (49 U.S.C. 
32902(b)(2)(A))]. For model years 2021-2030, standards need simply be 
set at the maximum feasible level (49 U.S.C.32903(b)(2)(B).
    Section I.E of the preamble contains a detailed discussion of both 
agencies' statutory authority.
2. Summary of the Major Provisions of the Final Rule
    NHTSA and EPA are finalizing rules for light-duty vehicles that the 
agencies believe represent the appropriate levels of fuel economy and 
GHG emissions standards for model years 2017 and beyond pursuant to 
their respective statutory authorities.
a. Standards
    EPA is establishing standards that are projected to require, on an 
average industry fleet wide basis, 163 grams/mile of carbon dioxide 
(CO2) in model year 2025, which is equivalent to 54.5 mpg if 
this level were achieved solely through improvements in fuel 
efficiency.\3\ Consistent with its statutory authority, NHTSA has 
developed two phases of passenger car and light truck standards in this 
rulemaking action. The first phase, from MYs 2017-2021, includes final 
standards that are projected to require, on an average industry fleet 
wide basis, a range from 40.3-41.0 mpg in MY 2021. The second phase of 
the CAFE program, from MYs 2022-2025, includes standards that are not 
final, due to the statutory requirement that NHTSA set average fuel 
economy standards not more than 5 model years at a time. Rather, those 
standards are augural, meaning that they represent NHTSA's current best 
estimate, based on the information available to the agency today, of 
what levels of stringency might be maximum feasible in those model 
years. NHTSA projects that those standards could require, on an average 
industry fleet wide basis, a range from 48.7-49.7 mpg in model year 
2025.
---------------------------------------------------------------------------

    \3\ Real-world CO2 is typically 25 percent higher and 
real-world fuel economy is typically 20 percent lower than the 
CO2 and CAFE compliance values discussed here. 163g/mi 
would be equivalent to 54.5 mpg, if the entire fleet were to meet 
this CO2 level through tailpipe CO2 and fuel 
economy improvements. The agencies expect, however, that a portion 
of these improvements will be made through improvements in air 
conditioning leakage and through use of alternative refrigerants, 
which would not contribute to fuel economy.
---------------------------------------------------------------------------

    Both the CO2 and CAFE standards are footprint-based, as 
are the standards currently in effect for these vehicles through model 
year 2016. The standards will become more stringent on average in each 
model year from 2017 through 2025. Generally, the larger the vehicle 
footprint, the less numerically stringent the corresponding vehicle 
CO2 emissions and MPG targets. As a result of the footprint-
based standards, the burden of compliance is distributed

[[Page 62628]]

across all vehicle footprints and across all manufacturers. 
Manufacturers are not compelled to build vehicles of any particular 
size or type (nor do the rules create an incentive to do so), and each 
manufacturer will have its own fleet-wide standard that reflects the 
light duty vehicles it chooses to produce.
b. Mid-Term Evaluation
    The agencies will conduct a comprehensive mid-term evaluation and 
agency decision-making process for the MYs 2022-2025 standards as 
described in the proposal. The mid-term evaluation reflects the rules' 
long time frame and, for NHTSA, the agency's statutory obligation to 
conduct a de novo rulemaking in order to establish final standards for 
MYs 2022-2025. In order to align the agencies' proceedings for MYs 
2022-2025 and to maintain a joint national program, EPA and NHTSA will 
finalize their actions related to MYs 2022-2025 standards concurrently. 
If the EPA determination is that standards may change, the agencies 
will issue a joint NPRM and joint final rules. NHTSA and EPA fully 
expect to conduct this mid-term evaluation in coordination with the 
California Air Resources Board, given our interest in maintaining a 
National Program to address GHG emissions and fuel economy. Further 
discussion of the mid-term evaluation is found in Sections III.B.3 and 
IV.A.3.b.
c. Compliance Flexibilities
    As proposed, the agencies are finalizing several provisions which 
provide compliance flexibility to manufacturers to meet the standards 
without compromising the program's overall environmental and energy 
security objectives. Further discussion of compliance flexibilities is 
in Section C.4, II.F, III.B, III.C, IV.I.
Credit Averaging, Banking and Trading
    The agencies are continuing to allow manufacturers to generate 
credits for over-compliance with the CO2 and CAFE 
standards.\4\ A manufacturer will generate credits if its car and/or 
truck fleet achieves a fleet average CO2/CAFE level better 
than its car and/or truck standards. Conversely, a manufacturer will 
incur a debit/shortfall if its fleet average CO2/CAFE level 
does not meet the standard when all credits are taken into account. As 
in the prior CAFE and GHG programs, a manufacturer whose fleet 
generates credits in a given model year would have several options for 
using those credits, including credit carry-back, credit carry-forward, 
credit transfers, and credit trading.
---------------------------------------------------------------------------

    \4\ This credit flexibility is required by EPCA/EISA, see 49 
U.S.C. 32903, and is well within EPA's discretion under section 202 
(a) of the CAA.
---------------------------------------------------------------------------

Air Conditioning Improvement Credits
    As proposed, EPA is establishing that the maximum total A/C credits 
available for cars will be 18.8 grams/mile CO2-equivalent 
and 24.4 grams/mile for trucks CO2-equivalent.\5\ The 
approaches used to calculate these credits for direct and indirect A/C 
improvement (i.e., improvements to A/C leakage (including substitution 
of low GHG refrigerant) and A/C efficiency) are generally consistent 
with those of the MYs 2012-2016 program, although there are several 
revisions. Most notably, a new test for A/C efficiency, optional under 
the GHG program starting in MY 2014, will be used exclusively in MY 
2017 and beyond. Under its EPCA authority, EPA proposed and is 
finalizing provisions to allow manufacturers to generate fuel 
consumption improvement values for purposes of CAFE compliance based on 
these same improvements in air conditioner efficiency.
---------------------------------------------------------------------------

    \5\ This is further broken down by 5.0 and 7.2 g/mi respectively 
for car and truck A/C efficiency credits, and 13.8 and 17.2 g/mi 
respectively for car and truck alternative refrigerant credits.
---------------------------------------------------------------------------

Off-Cycle Credits
    EPA proposed and is finalizing provisions allowing manufacturers to 
continue to generate and use off-cycle credits to demonstrate 
compliance with the GHG standards. These credits are for measureable 
GHG emissions and fuel economy improvements attributable to use of 
technologies whose benefits are not measured by the two-cycle test 
mandated by EPCA. Under its EPCA authority, EPA proposed and is 
finalizing provisions to allow manufacturers to generate fuel 
consumption improvement values for purposes of CAFE compliance based on 
the use of off-cycle technologies.
Incentives for Electric Vehicles, Plug-in Hybrid Electric Vehicles, 
Fuel Cell Vehicles and Compressed Natural Gas Vehicles
    In order to provide temporary regulatory incentives to promote the 
penetration of certain ``game changing'' advanced vehicle technologies 
into the light duty vehicle fleet, EPA is finalizing, as proposed, an 
incentive multiplier for CO2 emissions compliance purposes 
for all electric vehicles (EVs), plug-in hybrid electric vehicles 
(PHEVs), and fuel cell vehicles (FCVs) sold in MYs 2017 through 2021. 
The incentives are expected to promote increased application of these 
advanced technologies in the program's early model years, which could 
achieve economies of scale that will support the wider application of 
these technologies to help achieve the more stringent standards in MYs 
2022-2025. In addition, in response to public comments persuasively 
explaining how infrastructure for compressed natural gas (CNG) vehicles 
could serve as a bridge to use of advanced technologies such as 
hydrogen fuel cells, EPA is finalizing an incentive multiplier for CNG 
vehicles sold in MYs 2017 through 2021.
    NHTSA currently interprets EPCA and EISA as precluding it from 
offering incentives for the alternative fuel operation of EVs, PHEVs, 
FCVs, and NGVs, except as specified by statute, and thus did not 
propose and is not including incentive multipliers comparable to the 
EPA incentive multipliers described above.
Incentives for Use of Advanced Technologies Including Hybridization for 
full-Size Pick-up Trucks
    The agencies recognize that the standards presented in this final 
rule for MYs 2017-2025 will be challenging for large vehicles, 
including full-size pickup trucks. To help address this challenge, the 
program will, as proposed, contain incentives for the use of hybrid 
electric and other advanced technologies in full-size pickup trucks.
3. Costs and Benefits of National Program
    It is important to note that NHTSA's CAFE standards and EPA's GHG 
standards will both be in effect, and both will lead to increases in 
average fuel economy and reductions in GHGs. The two agencies' 
standards together comprise the National Program, and the following 
discussions of the respective costs and benefits of NHTSA's CAFE 
standards and EPA's GHG standards does not change the fact that both 
the CAFE and GHG standards, jointly, are the source of the benefits and 
costs of the National Program.
    The costs and benefits projected by NHTSA to result from the CAFE 
standards are presented first, followed by those projected by EPA to 
result from the GHG emissions standards. For several reasons, the 
estimates for costs and benefits presented by NHTSA and EPA for their 
respective rules, while consistent, are not directly comparable, and 
thus should not be expected to be identical. See Section I.D of the 
preamble for further details and discussion.
    NHTSA has analyzed in detail the projected costs and benefits for 
the 2017-2025 CAFE standards for light-

[[Page 62629]]

duty vehicles. NHTSA estimates that the fuel economy increases would 
lead to fuel savings totaling about 170 billion gallons throughout the 
lives of light duty vehicles sold in MYs 2017-2025. At a 3 percent 
discount rate, the present value of the economic benefits resulting 
from those fuel savings is between $481 billion and $488 billion; at a 
7 percent private discount rate, the present value of the economic 
benefits resulting from those fuel savings is between $375 billion and 
$380 billion. The agency further estimates that these new CAFE 
standards will lead to corresponding reductions in CO2 
emissions totaling 1.8 billion metric tons during the lives of light 
duty vehicles sold in MYs 2017-2025. The present value of the economic 
benefits from avoiding those emissions is approximately $49 billion, 
based on a global social cost of carbon value of about $26 per metric 
ton (in 2017, and growing thereafter).
    The Table below shows NHTSA's estimated overall lifetime discounted 
costs and benefits, and net benefits for the model years 2017-2025 CAFE 
standards.

      NHTSA's Estimated MYs 2017-2021 and MYs 2017-2025 Costs, Benefits, and Net Benefits (Billions of 2010 dollars)) under the CAFE Standards \6\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Totals                                       Annualized
                                        Baseline fleet     ---------------------------------------------------------------------------------------------
                                                               3% Discount rate        7% Discount rate        3% Discount rate       7% Discount rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      Cumulative for MYs 2017-2021 Final Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs.............................  2010..................  ($61)-................  ($58)-................  ($2.4)-..............  ($3.6)-
                                    2008..................  ($57).................  ($54).................  ($2.2)...............  ($3.3)
Benefits..........................  2010..................  $243-.................  $195-.................  $9.2-................  $11.3-
                                    2008..................  $240..................  $194..................  $9.0.................  $11.0
Net Benefits......................  2010..................  $183-.................  $137-.................  $6.8-................  $7.7-
                                    2008..................  $184..................  $141..................  $6.8.................  $7.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                        Cumulative for MYs 2017--2025 (Includes MYs 2022-2025 Augural Standards)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs.............................  2010..................  ($154)-...............  ($147)-...............  ($5.4)-..............  ($7.6)-
                                    2008..................  ($156)................  ($148)................  ($5.4)...............  ($7.5)
Benefits..........................  2010..................  $629-.................  $502-.................  $21.0-...............  $24.2-
                                    2008..................  $639..................  $510..................  $21.3................  $24.4
Net Benefits......................  2010..................  $476-.................  $356-.................  $15.7-...............  $16.7-
                                    2008..................  $483..................  $362..................  $15.9................  $16.9
--------------------------------------------------------------------------------------------------------------------------------------------------------

     
---------------------------------------------------------------------------

    \6\ ``The ``Estimated Achieved'' analysis includes accounting 
for compliance flexibilities and advanced technologies that 
manufacturers may voluntarily use for compliance, but that NHTSA is 
prohibited from considering when determining the maximum feasible 
level of new CAFE standards.
---------------------------------------------------------------------------

    EPA has analyzed in detail the projected costs and benefits of the 
2017-2025 GHG standards for light-duty vehicles. The Table below shows 
EPA's estimated lifetime discounted cost, fuel savings, and benefits 
for all such vehicles projected to be sold in model years 2017-2025. 
The benefits include impacts such as climate-related economic benefits 
from reducing emissions of CO2 (but not other GHGs), 
reductions in energy security externalities caused by U.S. petroleum 
consumption and imports, the value of certain particulate matter-
related health benefits (including premature mortality), the value of 
additional driving attributed to the VMT rebound effect, the value of 
reduced refueling time needed to fill up a more fuel efficient vehicle. 
The analysis also includes estimates of economic impacts stemming from 
additional vehicle use, such as the economic damages caused by 
accidents, congestion and noise (from increased VMT rebound driving).

     EPA's Estimated 2017-2025 Model Year Lifetime Discounted Costs,
 Benefits, and Net Benefits Assuming the 3% Discount Rate SCC Value \7\
                       (Billions of 2010 dollars)
------------------------------------------------------------------------
 
------------------------------------------------------------------------
              Lifetime Present Value \d\--3% Discount Rate
------------------------------------------------------------------------
Program Costs...........................................            $150
Fuel Savings............................................             475
Benefits................................................             126
Net Benefits \d\........................................             451
------------------------------------------------------------------------
                 Annualized Value \f\--3% Discount Rate
------------------------------------------------------------------------
Annualized costs........................................            6.49
Annualized fuel savings.................................            20.5
Annualized benefits.....................................            5.46
Net benefits............................................            19.5
------------------------------------------------------------------------
              Lifetime Present Value \d\--7% Discount Rate
------------------------------------------------------------------------
 
Program Costs...........................................             144
Fuel Savings............................................             364
Benefits................................................             106
Net Benefits \e\........................................             326
------------------------------------------------------------------------
                 Annualized Value \f\--7% Discount Rate
------------------------------------------------------------------------
Annualized costs........................................            10.8
Annualized fuel savings.................................            27.3
Annualized benefits.....................................            7.96
Net benefits............................................            24.4
------------------------------------------------------------------------

B. Introduction
---------------------------------------------------------------------------

    \7\ Further notes and details concerning these SCC. Value are 
found in Section I.D.2. Table I-17.
---------------------------------------------------------------------------

    EPA is announcing final greenhouse gas emissions standards for 
model years 2017-2025 and NHTSA is announcing final Corporate Average 
Fuel Economy standards for model years 2017-2021 and issuing augural 
\8\ standards for

[[Page 62630]]

model years (MYs) 2022-2025. These rules establish strong and 
coordinated Federal greenhouse gas and fuel economy standards for 
passenger cars, light-duty trucks, and medium-duty passenger vehicles 
(hereafter light-duty vehicles or LDVs). Together, these vehicle 
categories, which include passenger cars, sport utility vehicles, 
crossover utility vehicles, minivans, and pickup trucks, among others, 
are presently responsible for approximately 60 percent of all U.S. 
transportation-related greenhouse gas (GHG) emissions and fuel 
consumption. These final rules extend the MYs 2012-2016 National 
Program by establishing more stringent Federal light-duty vehicle GHG 
emissions and corporate average fuel economy (CAFE) standards in MYs 
2017 and beyond. This coordinated program will achieve important 
reductions in GHG emissions and fuel consumption from the light-duty 
vehicle part of the transportation sector, based on technologies that 
either are commercially available or that the agencies project will be 
commercially available in the rulemaking timeframe and that can be 
incorporated at a reasonable cost. Higher initial vehicle costs will be 
more than offset by significant fuel savings for consumers over the 
lives of the vehicles covered by this rulemaking. NHTSA's final rule 
also constitutes the agency's Record of Decision for purposes of its 
NEPA analysis.
---------------------------------------------------------------------------

    \8\ For the NPRM/PRIA/Draft EIS, NHTSA described the proposed 
standards for MYs 2022-2025 as ``conditional.'' ``Conditional'' was 
understood and objected to by some readers as implying that the 
future proceeding would consist merely of a confirmation of the 
conclusions and analysis of the current rulemaking, which would be 
incorrect and inconsistent with the agency's obligations under both 
EPCA/EISA and the Administrative Procedure Act. The agency must 
conduct a de novo rulemaking for MYs 2022-2025. To avoid creating an 
incorrect impression, the agency is changing the descriptor for the 
MY 2022-2025 standards that are presented and discussed in these 
documents. The descriptor must convey that the standards we are now 
presenting for MYs 2022-2025 reflect the agency's current best 
judgment of what we would have set at this time had we the authority 
to do so, but also avoid suggesting that the future process for 
establishing final standards for MYs 2022-2025 would be anything 
other than a new and separate rulemaking based on the freshly 
gathered and solicited information before the agency at that future 
time and on a fresh assessing and balancing of all statutorily 
relevant factors, in light of the considerations existing at the 
time of that rulemaking. The agency deliberated extensively, 
considering many alternative descriptors, and concluded that the 
best descriptor was ``augural,'' from the verb ``to augur,'' meaning 
to foretell future events based on current information (as in, 
``these standards may augur well for what the agency might establish 
in the future''). This is precisely what the MYs 2022-2025 standards 
presented in these documents are--our effort to help interested 
parties anticipate the future by providing our current best judgment 
as to what standards we would now set, based on the information 
before us today, recognizing that our future decision as to what 
standards we will actually set will be based on the information then 
before us.
---------------------------------------------------------------------------

    This joint rulemaking builds on the success of the first phase of 
the National Program to regulate fuel economy and GHG emissions from 
U.S. light-duty vehicles, which established strong and coordinated 
standards for MYs 2012-2016. As with the MY 2012-2016 final rules, a 
key element in developing this rulemaking was the agencies' discussions 
with automobile manufacturers, the California Air Resources Board 
(CARB) and many other stakeholders. During the extended public comment 
period, the agencies received nearly 300,000 written comments (and 
nearly 400 oral comments through testimony at three public hearings 
held in Detroit, Philadelphia and San Francisco) on this rule and 
received strong support from most auto manufacturers, the United Auto 
Workers (UAW), nongovernmental organizations (NGOs), consumer groups, 
national security experts and veterans, State/local government and auto 
suppliers.
    Continuing the National Program in coordination with California 
will help to ensure that all manufacturers can build a single fleet of 
vehicles that satisfy all requirements under both federal programs as 
well as under California's program,\9\ which will in turn help to 
reduce costs and regulatory complexity while providing significant 
energy security, consumer savings, and environmental benefits.\10\
---------------------------------------------------------------------------

    \9\ Section I.B.4 provides a explanation of California's 
authority to set air pollution standards for vehicles.
    \10\ The California Air Resources Board (CARB) adopted 
California MYs 2017-2025 GHG emissions standards on January 26, 
2012. At its March 22, 2012 meeting the Board gave final approval to 
the California standards. The Board directed CARB's Executive 
Officer to ``continue collaborating with EPA and NHTSA as their 
standards are finalized and in the mid-term review * * *'' and the 
Board also reconfirmed its commitment to propose to revise its GHG 
emissions standards for MYs 2017 to 2025 ``to accept compliance with 
the 2017 through 2025 MY National Program as compliance with 
California's greenhouse gas emission standards in the 2017 through 
2025 model years if the Executive Officer determines that U.S. EPA 
has adopted a final rule that at a minimum preserve greenhouse 
reductions benefits set forth'' in the NPRM issued by EPA on 
December 1, 2011. State of California Air Resources Board, 
Resolution 12-11, January 26, 2012, at 20. Available at http://www.arb.ca.gov/regact/2012/cfo2012/res12-11.pdf (last accessed July 
9, 2012).
---------------------------------------------------------------------------

    Combined with the standards already in effect for MYs 2012-2016, as 
well as the MY 2011 CAFE standards, the final standards will result in 
MY 2025 light-duty vehicles with nearly double the fuel economy, and 
approximately one-half of the GHG emissions compared to MY 2010 
vehicles--representing the most significant federal actions ever taken 
to reduce GHG emissions and improve fuel economy in the U.S.
    EPA is establishing standards that are projected to require, on an 
average industry fleet wide basis, 163 grams/mile of carbon dioxide 
(CO2) in model year 2025, which is equivalent to 54.5 mpg if 
this level were achieved solely through improvements in fuel 
efficiency.\11\ Consistent with its statutory authority,\12\ NHTSA has 
developed two phases of passenger car and light truck standards in this 
rulemaking action. The first phase, from MYs 2017-2021, includes final 
standards that are projected to require, on an average industry fleet 
wide basis, a range from 40.3-41.0 mpg in MY 2021.\13\ The second phase 
of the CAFE program, from MYs 2022-2025, includes standards that are 
not final due to the statutory provision that NHTSA shall issue 
regulations prescribing average fuel economy standards for at least 1 
but not more than 5 model years at a time.\14\ The MYs 2022-2025 CAFE 
standards, then, are not final based on this rulemaking, but rather 
augural, meaning that they represent the agency's current judgment, 
based on the information available to the agency today, of what levels 
of stringency would be maximum feasible in those model years. NHTSA 
projects that those standards could require, on an average industry 
fleet wide basis, a range from 48.7-49.7 mpg in model year 2025. The 
agencies note that these estimated combined fleet average mpg levels 
are projections and, in fact the agencies are establishing separate 
standards for passenger cars and trucks, based on a vehicle's size or 
``footprint,'' and the actual average achieved fuel economy and GHG 
emissions levels will be determined by the actual footprints and 
production volumes of the vehicle models that are produced. NHTSA will 
undertake a de novo rulemaking at a later date to set legally binding 
CAFE standards for MYs 2022-2025. See

[[Page 62631]]

Section IV for more information. The agencies will conduct a 
comprehensive mid-term evaluation and agency decision-making process 
for the MYs 2022-2025 standards as described in the proposal. The mid-
term evaluation reflects the rules' long time frame and, for NHTSA, the 
agency's statutory obligation to conduct de novo rulemaking in order to 
establish final standards for vehicles for those model years. In order 
to align the agencies' proceedings for MYs 2022-2025 and to maintain a 
joint national program, EPA and NHTSA will finalize their actions 
related to MYs 2022-2025 standards concurrently.
---------------------------------------------------------------------------

    \11\ Real-world CO2 is typically 25 percent higher 
and real-world fuel economy is typically 20 percent lower than the 
CO2 and CAFE compliance values discussed here. 163g/mi 
would be equivalent to 54.5 mpg, if the entire fleet were to meet 
this CO2 level through tailpipe CO2 and fuel 
economy improvements. The agencies expect, however, that a portion 
of these improvements will be made through improvements in air 
conditioning leakage and use of alternative refrigerants, which 
would not contribute to fuel economy.
    \12\ 49 U.S.C. 32902.
    \13\ The range of values here and through this rulemaking 
document reflect the results of co-analyses conducted by NHTSA using 
two different light-duty vehicle market forecasts through model year 
2025. To evaluate the effects of the standards, the agencies must 
project what vehicles and technologies will exist in future model 
years and then evaluate what technologies can feasibly be applied to 
those vehicles to raise their fuel economy and reduce their 
greenhouse gas emissions. To project the future fleet, the agencies 
must develop a baseline vehicle fleet. For this final rule, the 
agencies have analyzed the impacts of the standards using two 
different forecasts of the light-duty vehicle fleet through MY 2025. 
The baseline fleets are discussed in detail in Section II.B of this 
preamble, and in Chapter 2 of the Technical Support Document. EPA's 
sensitivity analysis of the alternative fleet is included in Chapter 
10 of its RIA.
    \14\ 49 U.S.C. 32902(b)(3)(B).
---------------------------------------------------------------------------

    The agencies project that manufacturers will comply with the final 
rules by using a range of technologies, including improvements in air 
conditioning efficiency, which reduce both GHG emissions and fuel 
consumption. Compliance with EPA's GHG standards is also likely to be 
achieved through improvements in air conditioning system leakage and 
through the use of alternative air conditioning refrigerants with a 
lower global warming potential (GWP), which reduce GHGs (i.e., 
hydrofluorocarbons) but which do not generally improve fuel economy. 
The agencies believe there is a wide range of technologies already 
available to reduce GHG emissions and improve fuel economy from both 
passenger cars and trucks. The final rules facilitate long-term 
planning by manufacturers and suppliers for the continued development 
and deployment across their fleets of fuel saving and GHG emissions-
reducing technologies. The agencies believe that advances in gasoline 
engines and transmissions will continue for the foreseeable future, and 
that there will be continual improvement in other technologies, 
including vehicle weight reduction, lower tire rolling resistance, 
improvements in vehicle aerodynamics, diesel engines, and more 
efficient vehicle accessories. The agencies also expect to see 
increased electrification of the fleet through the expanded production 
of stop/start, hybrid, plug-in hybrid and electric vehicles. Finally, 
the agencies expect that vehicle air conditioners will continue to 
improve by becoming more efficient and by increasing the use of 
alternative refrigerants and lower leakage air conditioning systems. 
Many of these technologies are already available today, some on a 
limited number of vehicles while others are more widespread in the 
fleet, and manufacturers will be able to meet the standards through 
significant efficiency improvements in these technologies, as well as 
through a significant penetration of these and other technologies 
across the fleet. Auto manufacturers may also introduce new 
technologies that we have not considered for this rulemaking analysis, 
which could result in possible alternative, more cost-effective paths 
to compliance.
    From a societal standpoint, this second phase of the National 
Program is estimated to save approximately 4 billion barrels of oil and 
to reduce GHG emissions by the equivalent of approximately 2 billion 
metric tons over the lifetimes of those light duty vehicles produced in 
MYs 2017-2025. These savings and reductions come on top of those that 
are being achieved through the MYs 2012-2016 standards.\15\ The 
agencies project that fuel savings will far outweigh higher vehicle 
costs, and that the net benefits to society of the MYs 2017-2025 
National Program will be in the range of $326 billion to $451 billion 
(7 and 3 percent discount rates, respectively) over the lifetimes of 
those light duty vehicles sold in MY 2017-2025.
---------------------------------------------------------------------------

    \15\ The cost and benefit estimates provided in this final rule 
are only for the MYs 2017-2025 rulemaking. EPA and DOT's rulemaking 
establishing standards for MYs 2012-2016 are already part of the 
baseline for this analysis.
---------------------------------------------------------------------------

    These final standards are projected to provide significant savings 
for consumers due to reduced fuel use. Although the agencies estimate 
that technologies used to meet the standards will add, on average, 
about $1,800 to the cost of a new light duty vehicle in MY 2025, 
consumers who drive their MY 2025 vehicle for its entire lifetime will 
save, on average, $5,700 to $7,400 (7 and 3 percent discount rates, 
respectively) in fuel, for a net lifetime savings of $3,400 to $5,000. 
This estimate assumes gasoline prices of $3.87 per gallon in 2025 with 
small increases most years throughout the vehicle's lifetime.\16\ For 
those consumers who purchase their new MY 2025 vehicle with cash, the 
discounted fuel savings will offset the higher vehicle cost in roughly 
3.3 years, and fuel savings will continue for as long as the consumer 
owns the vehicle. Those consumers that buy a new vehicle with a typical 
5-year loan will immediately benefit from an average monthly cash flow 
savings of about $12 during the loan period, or about $140 per year, on 
average. So this type of consumer would benefit immediately from the 
time of purchase: the increased monthly fuel savings would more than 
offset the higher monthly payment. Section I.D provides a detailed 
discussion of the projected costs and benefits of the MYs 2017-2025 for 
CAFE and GHG emissions standards for light-duty vehicles.
---------------------------------------------------------------------------

    \16\ See Chapter 4.2.2 of the Joint TSD for full discussion of 
fuel price projections over the vehicle's lifetime.
---------------------------------------------------------------------------

    In addition to saving consumers money at the pump, the agencies 
have designed their final standards to preserve consumer choice--that 
is, the standards should not affect consumers' opportunity to purchase 
the size of vehicle with the performance, utility and safety features 
that meets their needs. The standards are based on a vehicle's size 
(technically they are based on vehicle footprint, which is the area 
defined by the points where the tires contact the ground), and larger 
vehicles have numerically less stringent fuel economy/GHG emissions 
targets and smaller vehicles have numerically more stringent fuel 
economy/GHG emissions targets. Footprint based standards promote fuel 
economy and GHG emissions improvements in vehicles of all sizes, and 
are not expected to create incentives for manufacturers to change the 
size of their vehicles in order to comply with the standards. Moreover, 
since the standards are fleet average standards for each manufacturer, 
no specific vehicle must meet a target.\17\ Thus, nothing in these 
rules prevents consumers in the 2017 to 2025 timeframe from choosing 
from the same mix of vehicles that are currently in the marketplace.
---------------------------------------------------------------------------

    \17\ A specific vehicle would only have to meet a fuel economy 
or GHG target value on the target curve standards being finalized 
today in the rare event that a manufacturer produces a single 
vehicle model.
---------------------------------------------------------------------------

1. Continuation of the National Program
    EPA is adopting final greenhouse gas emissions standards for model 
years 2017-2025 and NHTSA is adopting final Corporate Average Fuel 
Economy standards for model years 2017-2021 and presenting augural 
standards for model years 2022-2025. These rules will implement strong 
and coordinated Federal greenhouse gas and fuel economy standards for 
passenger cars, light-duty trucks, and medium-duty passenger vehicles. 
Together, these vehicle categories, which include passenger cars, sport 
utility vehicles, crossover utility vehicles, minivans, and pickup 
trucks, are presently responsible for approximately 60 percent of all 
U.S. transportation-related greenhouse gas emissions and fuel 
consumption. The final rules continue the National Program by setting 
more stringent standards for MY 2017 and beyond light duty vehicles. 
This coordinated program will achieve important reductions of

[[Page 62632]]

greenhouse gas (GHG) emissions and fuel consumption from the light-duty 
vehicle part of the transportation sector, based on technologies that 
either are commercially available or that the agencies project will be 
commercially available in the rulemaking timeframe and that can be 
incorporated at a reasonable cost.
    In working together to finalize these standards, NHTSA and EPA are 
building on the success of the first phase of the National Program to 
regulate fuel economy and GHG emissions from U.S. light-duty vehicles, 
which established the strong and coordinated light duty vehicle 
standards for model years (MY) 2012-2016. As with the MY 2012-2016 
final rules, a key element in developing the final rules was the 
agencies' collaboration with the California Air Resources Board (CARB) 
and discussions with automobile manufacturers and many other 
stakeholders. Continuing the National Program will help to ensure that 
all manufacturers can build a single fleet of U.S. light duty vehicles 
that satisfy all requirements under both federal programs as well as 
under California's program, helping to reduce costs and regulatory 
complexity while providing significant energy security, consumer 
savings and environmental benefits.
    The agencies have been developing the basis for these final 
standards almost since the conclusion of the rulemaking establishing 
the first phase of the National Program. Consistent with Executive 
Order 13563, this rule was developed with early consultation with 
stakeholders, employs flexible regulatory approaches to reduce burdens, 
maintains freedom of choice for the public, and helps to harmonize 
federal and state regulations. After much research and deliberation by 
the agencies, along with CARB and other stakeholders, on July 29, 2011 
President Obama announced plans for extending the National Program to 
MY 2017-2025 light duty vehicles and NHTSA and EPA issued a 
Supplemental Notice of Intent (NOI) outlining the agencies' plans for 
proposing the MY 2017-2025 standards and program.\18\ This July NOI 
built upon the extensive analysis conducted by the agencies during 2010 
and 2011, including an initial technical assessment report and NOI 
issued in September 2010, and a supplemental NOI issued in December 
2010. The State of California and thirteen auto manufacturers 
representing over 90 percent of U.S. vehicle sales provided letters of 
support for the program concurrent with the Supplemental NOI.\19\ The 
United Auto Workers (UAW) also supported the announcement,\20\ as did 
many consumer and environmental groups. As envisioned in the 
Presidential announcement, Supplemental NOI, and the December 2011 
Notice of Proposed Rulemaking (NPRM), these final rules establish 
standards for MYs 2017- and beyond light duty vehicles. These standards 
take into consideration significant public input that was received in 
response to the NPRM from the regulated industry, consumer groups, 
labor unions, states, environmental organizations, national security 
experts and veterans, industry suppliers and dealers, as well as other 
organizations and by thousands of U.S. citizens. The agencies 
anticipate that these final standards will spur the development of a 
new generation of clean and more fuel efficient cars and trucks through 
innovative technologies and manufacturing that will, in turn, spur 
economic growth and create high-quality domestic jobs, enhance our 
energy security, and improve our environment.
---------------------------------------------------------------------------

    \18\ 76 FR 48758 (August 9, 2011).
    \19\ Letters of support are available at http://www.epa.gov/otaq/climate/regulations.htm and at http://www.nhtsa.gov/fuel-economy (last accessed June 12, 2012).
    \20\ The UAW's support was expressed in a statement on July 29, 
2011, which can be found at http://www.uaw.org/articles/uaw-supports-administration-proposal-light-duty-vehicle-cafe-and-greenhouse-gas-emissions-r (last accessed June 12, 2012).
---------------------------------------------------------------------------

    As described below, NHTSA and EPA are finalizing a continuation of 
the National Program for light-duty vehicles that the agencies believe 
represents the appropriate levels of fuel economy and GHG emissions 
standards for model years 2017 and beyond, given the technologies that 
the agencies project will be available for use on these vehicles and 
the agencies' understanding of the cost and manufacturers' ability to 
apply these technologies during that time frame, and consideration of 
other relevant factors. Under this joint rulemaking, EPA is 
establishing GHG emissions standards under the Clean Air Act (CAA), and 
NHTSA is establishing CAFE standards under EPCA, as amended by the 
Energy Independence and Security Act of 2007 (EISA). This joint final 
rulemaking reflects a carefully coordinated and harmonized approach to 
implementing these two statutes, in accordance with all substantive and 
procedural requirements imposed by law.\21\
---------------------------------------------------------------------------

    \21\ For NHTSA, this includes the requirements of the National 
Environmental Policy Act (NEPA).
---------------------------------------------------------------------------

    These final rules allow for long-term planning by manufacturers and 
suppliers for the continued development and deployment across their 
fleets of fuel saving and emissions-reducing technologies. NHTSA's and 
EPA's technology assessment indicates there is a wide range of 
technologies available for manufacturers to consider utilizing to 
reduce GHG emissions and improve fuel economy. The agencies believe 
that advances in gasoline engines and transmissions will continue 
during these model years and that these technologies are likely to play 
a key role in compliance strategies for the MYs 2017-2025 standards, 
which is a view that is supported in the literature, among the vehicle 
manufacturers, suppliers, and by public comments.\22\ The agencies also 
believe that there will be continued improvement in diesel engines, 
vehicle aerodynamics, and tires as well as the use of lighter weight 
materials and optimized designs that will reduce vehicle mass. The 
agencies also expect to see increased electrification of the fleet 
through the expanded production of stop/start, hybrid, plug-in hybrid 
and electric vehicles.\23\ Finally, the agencies expect that vehicle 
air conditioners will continue to become more efficient, thereby 
improving fuel efficiency. The agencies also expect that air 
conditioning leakage will be reduced and that manufacturers will use 
reduced global warming refrigerants. Both of these improvements will 
reduce GHG emissions.
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    \22\ There are a number of competing gasoline engine 
technologies, with one in particular that the agencies project will 
increase beyond MY 2016. This is the downsized gasoline direct 
injection engine equipped with a turbocharger and cooled exhaust gas 
recirculation, which has better fuel efficiency than a larger engine 
and similar steady-state power performance. Paired with these 
engines, the agencies project that advanced transmissions (such as 
automatic and dual clutch transmissions with eight forward speeds) 
and higher efficiency gearboxes will contribute to providing fuel 
efficiency improvements. Transmissions with eight or more speeds can 
be found in the fleet today in very limited production, and while 
they are expected to penetrate further by MY 2016, we anticipate 
that by MY 2025 these will be common in new light duty vehicles.
    \23\ For example, while today less than three percent of annual 
vehicle sales are strong hybrids, plug-in hybrids and all electric 
vehicles, by MY 2025 we estimate in our analyses for this final rule 
that these technologies could represent 3-7%, while ``mild'' hybrids 
may be as high as 17- 27% of new sales and vehicles with stop/start 
systems only may be as high as 6-15% of new sales. Thus by MY 2025, 
26-49% of the fleet may have some level of electrification.
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    Although a number of these technologies are available today, the 
agencies' assessments support that there will be continuing 
improvements in the efficiency of some of the technologies and that the 
cost of many of the technologies will be lower in the future.

[[Page 62633]]

We anticipate that the standards will require most manufacturers to 
considerably increase the application of these technologies across 
their light duty vehicle fleets in order to comply with the standards. 
Manufacturers may also develop and introduce other technologies that we 
have not considered for this rulemaking analysis, which could play 
important roles in compliance with the standards and potentially offer 
more cost effective alternatives. Due to the relatively long lead time 
for the later model years in this rule, it is quite possible that 
innovations may arise that the agencies (and the automobile 
manufacturers) are not considering today, which may even become 
commonplace by MY 2025.
    As discussed further below, and as with the standards for MYs 2012-
2016, the agencies believe that the final standards help to preserve 
consumer choice, that is, the standards should not affect consumers' 
opportunity to purchase the size and type of vehicle that meets their 
needs, and should not otherwise affect vehicles' performance 
attributes. NHTSA and EPA are finalizing standards based on vehicle 
footprint, which is the area defined by the points where the tires 
contact the ground, where smaller vehicles have relatively more 
stringent targets, and larger vehicles have less stringent targets. 
Footprint based standards promote fuel economy and GHG emissions 
improvements in vehicles of all sizes, and are not expected to create 
incentives for manufacturers to change the size of their vehicles in 
order to comply with the standards. Consequently, these rules should 
not have a significant effect on the relative availability of different 
size vehicles in the fleet. The agencies' analyses used a constraint of 
preserving all other aspects of vehicles' functionality and 
performance, and the technology cost and effectiveness estimates 
developed in the analyses reflect this constraint.\24\ In addition, as 
with the standards for MYs 2012-2016, the agencies believe that the 
standards should not have a negative effect on vehicle safety, as it 
relates to vehicle size and mass as described in Section II.C and II.G 
below, respectively. Because the standards are fleet average standards 
for each manufacturer, no specific vehicle must meet a target.\25\ 
Thus, nothing in these rules prevents consumers in the 2017 to 2025 
timeframe from choosing from the same mix of vehicles that are 
currently in the marketplace.
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    \24\ One commenter asserted that the standards ``value purported 
consumer choice and the continued production of every vehicle in its 
current form over the need to conserve energy: as soon as increased 
fuel efficiency begins to affect any attribute of any existing 
vehicle, stringency increases cease.'' CBD Comments p. 4. This 
assertion is incorrect. As explained in the text above, the 
agencies' cost estimates include costs of preserving existing 
attributes, such as vehicle performance. These costs are reflected 
in the agencies' analyses of reasonableness of the costs of the 
rule, but do not by themselves dictate any particular level of 
standard stringency much less cause stringency to ``cease'' as the 
commenter would have it.
    \25\ A specific vehicle would only have to meet a fuel economy 
or GHG target value on the target curve standards being finalized 
today in the rare event that a manufacturer produces a single 
vehicle model.
---------------------------------------------------------------------------

    Given the long time frame at issue in setting standards for MYs 
2022-2025 light-duty vehicles, and given NHTSA's statutory obligation 
to conduct a de novo rulemaking in order to establish final standards 
for vehicles for the 2022-2025 model years, the agencies will conduct a 
comprehensive mid-term evaluation and agency decision-making process 
for the MYs 2022-2025 standards, as described in the proposal. As 
stated in the proposal, both NHTSA and EPA will develop and compile up-
to-date information for the mid-term evaluation, through a 
collaborative, robust and transparent process, including public notice 
and comment. The mid-term evaluation will assess the appropriateness of 
the MYs 2022-2025 standards, based on information available at the time 
of the mid-term evaluation and an updated assessment of all the factors 
considered in setting the standards and the impacts of those factors on 
the manufacturers' ability to comply. NHTSA and EPA fully expect to 
conduct this mid-term evaluation in coordination with the California 
Air Resources Board, given our interest in maintaining a National 
Program to address GHG emissions and fuel economy. NHTSA's rulemaking, 
which will incorporate findings from the mid-term evaluation, will be a 
totally fresh consideration of all relevant information and fresh 
balancing of statutory and other relevant factors in order to determine 
the maximum feasible CAFE standards for MYs 2022-2025. In order to 
align the agencies proceedings for MYs 2022-2025 and to maintain a 
joint national program, if the EPA determination is that its standards 
will not change, NHTSA will issue its final rule concurrently with the 
EPA determination. If the EPA determination is that standards may 
change, the agencies will issue a joint NPRM and joint final rule. 
Further discussion of the mid-term evaluation is found later in this 
section, as well as in Sections III.B.3 and IV.A.3.b.
    The 2017-2025 National Program is estimated to reduce GHGs by 
approximately 2 billion metric tons and to save 4 billion barrels of 
oil over the lifetime of MYs 2017-2025 vehicles relative to the MY 2016 
standard curves already in place.\26\ The average cost for a MY 2025 
vehicle to meet the standards is estimated to be about $1800 compared 
to a vehicle that meets the level of the MY 2016 standards in MY 2025. 
Fuel savings for consumers are expected to more than offset the higher 
vehicle costs. The typical driver will save a total of $5,700 to $7,400 
(7 percent and 3 percent discount rate, respectively) in fuel costs 
over the lifetime of a MY 2025 vehicle and, even after accounting for 
the higher vehicle cost, consumers will save a net $3,400 to $5,000 (7 
percent and 3 percent discount rate, respectively) over the vehicle's 
lifetime. This estimate assumes a gasoline price of $3.87 per gallon in 
2025 with small increases most years over the vehicle's lifetime.\27\ 
Further, the payback period for a consumer purchasing a 2025 light-duty 
vehicle with cash would be, on average, 3.4 years at a 7 percent 
discount rate or 3.2 years at a 3 percent discount rate, while 
consumers who buy with a 5-year loan would save more each month on fuel 
than the increased amount they will spend on the higher monthly loan 
payment, beginning in the first month of ownership.
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    \26\ The cost and benefit estimates provided here are only for 
the MY 2017-2025 rulemaking. The CAFE and GHG emissions standards 
for MYs 2012-2016 and CAFE standards for MY 2011 are already part of 
the baseline for this analysis.
    \27\ See Chapter 4.2.2 of the Joint TSD for full discussion of 
fuel price projections of the vehicle lifetimes.
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    Continuing the National Program has both energy security and 
climate change benefits. Climate change is a significant long-term 
threat to the global environment. EPA has found that elevated 
atmospheric concentrations of six greenhouse gases--carbon dioxide, 
methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and 
sulfur hexafluoride--taken in combination endanger both the public 
health and the public welfare of current and future generations. EPA 
further found that the combined emissions of these greenhouse gases 
from new motor vehicles and new motor vehicle engines contribute to the 
greenhouse gas air pollution that endangers public health and welfare. 
74 FR 66496 (Dec. 15, 2009). As summarized in EPA's Endangerment and 
Cause or Contribute Findings under Section 202(a) of the Clean Air Act, 
anthropogenic emissions of GHGs are very likely (90 to 99 percent 
probability) the cause of most of the observed global warming over the 
last

[[Page 62634]]

50 years.\28\ Mobile sources emitted 30 percent of all U.S. GHGs in 
2010 (transportation sources, which do not include certain off-highway 
sources, account for 27 percent) and have been the source of the 
largest absolute increases in U.S. GHGs since 1990.\29\ Mobile sources 
addressed in the endangerment and contribution findings under CAA 
section 202(a)--light-duty vehicles, heavy-duty trucks, buses, and 
motorcycles--accounted for 23 percent of all U.S. GHG emissions in 
2010.\30\ Light-duty vehicles emit CO2, methane, nitrous 
oxide, and hydrofluorocarbons and were responsible for nearly 60 
percent of all mobile source GHGs and over 70 percent of Section 202(a) 
mobile source GHGs in 2010.\31\ For light-duty vehicles in 2010, 
CO2 emissions represented about 94 percent of all greenhouse 
emissions (including HFCs), and similarly, the CO2 emissions 
measured over the EPA tests used for fuel economy compliance represent 
about 90 percent of total light-duty vehicle GHG 
emissions.32,33
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    \28\ 74 FR 66,496, 66,518, December 18, 2009; ``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, http://epa.gov/climatechange/endangerment/index.html (last accessed August 9. 2012)
    \29\ Memorandum: Mobile Source Contribution to U.S. GHGs in 2010 
(Docket EPA-HQ-OAR-2010-0799). See generally, U.S. Environmental 
Protection Agency. 2012. Inventory of U.S. Greenhouse Gas Emissions 
and Sinks: 1990-2010. EPA 430-R-12-001. Available at http://epa.gov/climatechange/emissions/downloads12/US-GHG-Inventory-2012-Main-Text.pdf (last accessed June 12, 2012).
    \30\ Section 202(a) sources include passenger cars, light-duty 
trucks, motorcycles, buses, and medium- and heavy-duty trucks. EPA's 
GHG Inventory groups these modes into on-road totals. However, the 
on-road totals in the Inventory include refrigerated transport for 
medium- and heavy-duty trucks, which is not considered a source for 
Section 202(a). In order to determine the Section 202(a) total, we 
took the on-road GHG total of 1556.8 Tg and subtracted the 11.6 Tg 
of refrigerated transport to yield a value of 1545.2 Tg.
    \31\ Memorandum: Mobile Source Contribution to U.S. GHGs in 2010 
(Docket EPA-HQ-OAR-2010-0799). See generally, U.S. Environmental 
Protection Agency. 2012. Inventory of U.S. Greenhouse Gas Emissions 
and Sinks: 1990-2010. EPA 430-R-12-001. Available at http://epa.gov/climatechange/emissions/downloads12/US-GHG-Inventory-2012-Main-Text.pdf (last accessed June 12, 2012)
    \32\ Memorandum: Mobile Source Contribution to U.S. GHGs in 2010 
(Docket EPA-HQ-OAR-2010-0799). See generally, U.S. Environmental 
Protection Agency. 2009. Inventory of U.S. Greenhouse Gas Emissions 
and Sinks: 1990-2007. EPA 430-R-09-004. Available at http://epa.gov/climatechange/emissions/downloads09/GHG2007entire_report-508.pdf.
    \33\ Memorandum: Mobile Source Contribution to U.S. GHGs in 2010 
(Docket EPA-HQ-OAR-2010-0799). See generally, U.S. Environmental 
Protection Agency. 2012. Inventory of U.S. Greenhouse Gas Emissions 
and Sinks: 1990-2010. EPA 430-R-12-001. Available at http://epa.gov/climatechange/emissions/downloads12/US-GHG-Inventory-2012-Main-Text.pdf
---------------------------------------------------------------------------

    Improving our energy and national security by reducing our 
dependence on foreign oil has been a national objective since the first 
oil price shocks in the 1970s. Although our dependence on foreign 
petroleum has declined since peaking in 2005, net petroleum imports 
accounted for approximately 45 percent of U.S. petroleum consumption in 
2011.\34\ World crude oil production is highly concentrated, 
exacerbating the risks of supply disruptions and price shocks as the 
recent unrest in North Africa and the Persian Gulf highlights. Recent 
tight global oil markets led to prices over $100 per barrel, with 
gasoline reaching over $4 per gallon in many parts of the U.S., causing 
financial hardship for many families and businesses. The export of U.S. 
assets for oil imports continues to be an important component of the 
historically unprecedented U.S. trade deficits. Transportation 
accounted for about 72 percent of U.S. petroleum consumption in 
2010.\35\ Light-duty vehicles account for about 60 percent of 
transportation oil use, which means that they alone account for about 
40 percent of all U.S. oil consumption.\36\
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    \34\ Energy Information Administration, ``How dependent are we 
on foreign oil?'' Available at http://www.eia.gov/energy_in_brief/foreign_oil_dependence.cfm (last accessed June12, 2012).
    \35\ Energy Information Administration, Annual Energy Outlook 
2011, ``Oil/Liquids.'' Available at http://www.eia.gov/forecasts/aeo/MT_liquidfuels.cfm (last accessed June 12, 2012).
    \36\ Energy Information Administration, Annual Energy Outlook 
2012 Early Release Overview. Available at http://www.eia.gov/forecasts/aeo/er/early_fuel.cfm (last accessed Jun. 14, 2012).
---------------------------------------------------------------------------

2. Additional Background on the National Program and Stakeholder 
Engagement Prior to the NPRM
    Following the successful adoption of a National Program for model 
years (MY) 2012-2016 light duty vehicles, President Obama issued a 
Memorandum on May 21, 2010 requesting that the NHTSA, on behalf of the 
Department of Transportation, and the U.S. EPA develop ``* * * a 
coordinated national program under the CAA [Clean Air Act] and the EISA 
[Energy Independence and Security Act of 2007] to improve fuel 
efficiency and to reduce greenhouse gas emissions of passenger cars and 
light-duty trucks for model years 2017-2025.'' \37\ Among other things, 
the agencies were tasked with researching and then developing standards 
for MYs 2017 through 2025 that would be appropriate and consistent with 
EPA's and NHTSA's respective statutory authorities. Several major 
automobile manufacturers and CARB sent letters to EPA and NHTSA in 
support of a MYs 2017 to 2025 rulemaking initiative as outlined in the 
President's announcement.\38\
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    \37\ The Presidential Memorandum is found at: http://www.whitehouse.gov/the-press-office/presidential-memorandum-regarding-fuel-efficiency-standards. For the reader's reference, the 
President also requested the Administrators of EPA and NHTSA to 
issue joint rules under the CAA and EISA to establish fuel 
efficiency and greenhouse gas emissions standards for commercial 
medium-and heavy-duty on-highway vehicles and work trucks beginning 
with the 2014 model year. The agencies recently promulgated final 
GHG and fuel efficiency standards for heavy duty vehicles and 
engines for MYs 2014-2018. 76 FR 57106 (September 15, 2011).
    \38\ These letters of support in response to the May 21, 2010 
Presidential Memorandum are available at http://www.epa.gov/otaq/climate/letters.htm (last accessed August 9, 2012).
---------------------------------------------------------------------------

    The President's memorandum requested that the agencies, ``work with 
the State of California to develop by September 1, 2010, a technical 
assessment to inform the rulemaking process * * *''. Together, NHTSA, 
EPA, and CARB issued the joint Technical Assessment Report (TAR) 
consistent with Section 2(a) of the Presidential Memorandum.\39\ In 
developing this assessment, the agencies and CARB held numerous 
meetings with a wide variety of stakeholders including the automobile 
original equipment manufacturers (OEMs), automotive suppliers, non-
governmental organizations, states and local governments, 
infrastructure providers, and labor unions. Concurrent with issuing the 
TAR, NHTSA and EPA also issued a joint Notice of Intent to Issue a 
Proposed Rulemaking (NOI) \40\ which highlighted the results of the TAR 
analyses, provided an overview of key program design elements, and 
announced plans for initiating the joint rulemaking to improve the fuel 
efficiency and reduce the GHG emissions of passenger cars and light-
duty trucks built in MYs 2017-2025.
---------------------------------------------------------------------------

    \39\ This Interim Joint Technical Assessment Report (TAR) is 
available at http://www.epa.gov/otaq/climate/regulations/ldv-ghg-tar.pdf (last accessed August 9, 2012) and http://www.nhtsa.gov/
staticfiles/rulemaking/pdf/cafe/2017+CAFE-GHG--Interim--TAR2.pdf. 
Section 2(a) of the Presidential Memorandum requested that EPA and 
NHTSA ``Work with the State of California to develop by September 1, 
2010, a technical assessment to inform the rulemaking process, 
reflecting input from an array of stakeholders on relevant factors, 
including viable technologies, costs, benefits, lead time to develop 
and deploy new and emerging technologies, incentives and other 
flexibilities to encourage development and deployment of new and 
emerging technologies, impacts on jobs and the automotive 
manufacturing base in the United States, and infrastructure for 
advanced vehicle technologies.''
    \40\ 75 FR 62739, October 13, 2010.
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    The TAR evaluated a range of potential stringency scenarios through 
model year 2025, representing a 3, 4, 5, and 6 percent per year 
estimated decrease in GHG levels from a model

[[Page 62635]]

year 2016 fleet-wide average of 250 gram/mile (g/mi), which was 
intended to represent a reasonably broad range of stringency increases 
for potential future GHG emissions standards, and was also consistent 
with the increases suggested by CARB in its letter of commitment in 
response to the President's memorandum.41,42 For each of 
these scenarios, the TAR also evaluated four illustrative 
``technological pathways'' by which these levels could be attained, 
each pathway offering a different mix of advanced technologies and 
assuming various degrees of penetration of advanced gasoline 
technologies, mass reduction, hybrid electric vehicles (HEVs), plug-in 
hybrids (PHEVs), and electric vehicles (EVs). These pathways were meant 
to represent ways that the industry as a whole could increase fuel 
economy and reduce greenhouse gas emissions, and did not represent ways 
that individual manufacturers would be required to or necessarily would 
employ in responding to future standards.
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    \41\ 75 FR 62744-45.
    \42\ Statement of the California Air Resources Board Regarding 
Future Passenger Vehicle Greenhouse Gas Emissions Standards, 
California Air Resources Board, May 21, 2010. Available at: http://www.epa.gov/otaq/climate/letters.htm (last accessed August 9, 2012).
---------------------------------------------------------------------------

    Manufacturers and others commented extensively on a variety of 
topics in the TAR, including the stringency of the standards, program 
design elements, the effect of potential standards on vehicle safety, 
and the TAR's discussion of technology costs, effectiveness, and 
feasibility. In response, the agencies and CARB spent the next several 
months continuing to gather information from the industry and others in 
response to the agencies' initial analytical efforts. EPA and NHTSA 
issued a follow-on Supplemental NOI in November 2010,\43\ highlighting 
many of the key comments the agencies received in response to the 
September NOI and TAR, and summarized some of the key themes from the 
comments and the additional stakeholder meetings.
---------------------------------------------------------------------------

    \43\ 75 FR 76337, December 8, 2010.
---------------------------------------------------------------------------

    The agencies' stakeholder engagement between December 2010 and July 
29, 2011 focused on ensuring that the agencies possessed the most 
complete and comprehensive set of information to inform the proposed 
rulemaking. Information that the agencies presented to stakeholders is 
posted in the NPRM docket and referenced in multiple places in the 
NPRM. Throughout this period, the stakeholders repeated many of the 
broad concerns and suggestions described in the TAR, NOI, and November 
2010 SNOI. For example, stakeholders uniformly expressed interest in 
maintaining a harmonized and coordinated national program that would be 
supported by CARB and allow auto makers to build one fleet and preserve 
consumer choice. The stakeholders also raised concerns about potential 
stringency levels, consumer acceptance of some advanced technologies 
and the potential structure of compliance flexibilities available under 
EPCA (as amended by EISA) and the CAA. In addition, most of the 
stakeholders wanted to discuss issues concerning technology 
availability, cost and effectiveness and economic practicability. The 
auto manufacturers, in particular, sought to provide the agencies with 
a better understanding of their respective strategies (and associated 
costs) for improving fuel economy while satisfying consumer demand in 
the coming years. Additionally, some stakeholders expressed concern 
about potential safety impacts associated with the standards, consumer 
costs and consumer acceptance, and potential disparate treatment of 
cars and trucks. Some stakeholders also stressed the importance of 
investing in infrastructure to support more widespread deployment of 
alternative vehicles and fuels. Many stakeholders also asked the 
agencies to acknowledge prevailing economic uncertainties in developing 
proposed standards. In addition, many stakeholders discussed the number 
of years to be covered by the program and what they considered to be 
important features of a mid-term review of any standards set or 
proposed for MY 2022-2025. In all of these meetings, NHTSA and EPA 
sought additional data and information from the stakeholders that would 
allow them to refine their initial analyses and determine proposed 
standards that are consistent with the agencies' respective statutory 
and regulatory requirements. The general issues raised by those 
stakeholders are addressed in the sections of this final rule 
discussing the topics to which the issues pertain (e.g., the form of 
the standards, technology cost and effectiveness, safety impacts, 
impact on U.S. vehicle sales and other economic considerations, costs 
and benefits).
    The first stage of the meetings occurred between December 2010 and 
June 20, 2011. These meetings covered topics that were generally 
similar to the meetings that were held prior to the publication of the 
November 2010 Supplemental NOI and that were summarized in that 
document. Manufacturers provided the agencies more detailed information 
related to their product plans for vehicle models and fuel efficiency 
improving technologies and associated cost estimates, as well as more 
detailed feedback regarding the potential program design elements to be 
included in the program. The second stage of meetings occurred between 
June 21, 2011 and July 14, 2011, during which EPA, NHTSA, CARB and 
several components of the Executive Office of the President kicked-off 
an intensive series of meetings, primarily with manufacturers, to share 
tentative regulatory concepts including concept stringency curves and 
program flexibilities based on the analyses completed by the agencies 
as of June 21, 2011 \44\ and requested manufacturer feedback; 
specifically \45\ detailed and reliable information on how they might 
comply with the concepts, potential changes to the concept stringency 
levels and program flexibilities available under EPA's and NHTSA's 
respective authority that might facilitate compliance, and if they 
projected they could not comply, information supporting that belief. In 
these second stage meetings, the agencies received considerable input 
from the manufacturers related to the questions asked by the agencies 
and also related to consumer acceptance and adoption of some advanced 
technologies and program costs based on their independent assessment or 
information previously submitted to the agencies. The third stage of 
meetings occurred between July 15, 2011 and July 28, 2011 during which 
the agencies continued to refine concept stringencies and compliance 
flexibilities based on further consideration of the information 
available to them as well as meeting with manufacturers who expressed 
ongoing interest in engaging with the agencies.\46\
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    \44\ The agencies consider a range of standards that may satisfy 
applicable legal criteria, taking into account the complete record 
before them. The initial concepts shared with stakeholders were 
within the range the agencies were considering, based on the 
information then available to the agencies.
    \45\ ``Agency Materials Provided to Manufacturers'' Memo to 
docket NHTSA-2010-0131.
    \46\ ``Agency Materials Provided to Manufacturers'' Memo to 
docket NHTSA-2010-0131.
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    Throughout all three stages, EPA and NHTSA continued to engage 
other stakeholders to ensure that the agencies were obtaining the most 
comprehensive and reliable information possible to guide the agencies 
in developing proposed standards for MY 2017-2025. Environmental 
organizations consistently stated that stringent standards are 
technically achievable and critical to important national interests. 
Labor interests stressed the need to

[[Page 62636]]

carefully consider economic impacts and the opportunity to create and 
support new jobs, and consumer advocates emphasized the economic and 
practical benefits to consumers of improved fuel economy and the need 
to preserve consumer choice.
    On July 29, 2011, President Obama with the support of thirteen 
major automakers, announced plans to pursue the next phase in the 
Administration's national vehicle program, increasing fuel economy and 
reducing GHG emissions for passenger cars and light trucks built in MYs 
2017-2025.\47\ The President was joined by Ford, GM, Chrysler, BMW, 
Honda, Hyundai, Jaguar/Land Rover, Kia, Mazda, Mitsubishi, Nissan, 
Toyota and Volvo, which together account for over 90 percent of all 
vehicles sold in the United States. The California Air Resources Board 
(CARB), the United Auto Workers (UAW) and a number of environmental and 
consumer groups, also announced their support.
---------------------------------------------------------------------------

    \47\ The President's remarks are available at http://www.whitehouse.gov/the-press-office/2011/07/29/remarks-president-fuel-efficiency-standards (last accessed August 9, 2012); see also 
http://www.nhtsa.gov/fuel-economy for more information from the 
agency about the announcement.
---------------------------------------------------------------------------

    On the same day as the President's announcement, EPA and NHTSA 
released a second SNOI (published in the Federal Register on August 9, 
2011) describing the joint proposal that the agencies expected to issue 
to establish the National Program for model years 2017-2025. The 
agencies received letters of support for the concepts laid out in the 
SNOI from BMW, Chrysler, Ford, General Motors, Global Automakers, 
Honda, Hyundai, Jaguar/Land Rover, Kia, Mazda, Mitsubishi, Nissan, 
Toyota, Volvo and CARB. The input of stakeholders, which is encouraged 
by Executive Order 13563, was invaluable to the agencies in developing 
the NPRM. A more detailed summary of the process leading to the 
proposed rulemaking is found at 76 FR 74862-865.
3. Public Participation and Stakeholder Engagement Since the NPRM Was 
Issued
    The agencies signed their respective proposed rules on November 16, 
2011 (76 FR 74854 (December 1, 2011)), and subsequently received a 
large number of comments representing many perspectives. Between 
January 17 and 24, 2012 the EPA and NHTSA held three public hearings in 
Detroit, Philadelphia and San Francisco. Nearly 400 people testified 
and many more attended the hearings. In response to requests, the 
written comment period was extended by two weeks for a total of 74 days 
from Federal Register publication, closing on February 13, 2012. The 
agencies received extensive written comments from more than 140 
organizations, including auto manufacturers and suppliers, State and 
local governments and their associations, consumer groups, labor 
unions, fuels and energy providers, auto dealers, academics, national 
security experts and veterans, environmental and other non-governmental 
organizations (NGOs), and nearly 300,000 comments from private 
individuals. In addition to comments received on the proposal, the 
agencies met with many different stakeholder groups between issuance of 
the NPRM and this final rule. Generally, the agencies met with nearly 
all automakers individually to discuss flexibilities such as the A/C, 
off-cycle, and pickup truck incentives, as well as different ways to 
meet the standards; with suppliers to discuss the same flexibilities; 
with environmental groups to discuss flexibilities and that the 
agencies maintain strong standards for the final rule; and with the 
natural gas interests to discuss incentives for natural gas in the 
final rule. Memoranda summarizing these meetings can be found in the 
EPA and NHTSA dockets for this rulemaking. EPA-HQ-OAR-2010-0799 and 
NHTSA-2010-0131.\48\
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    \48\ NHTSA is required to provide information on these meetings 
per DOT Order 2100.2, available at http://www.reg-group.com/library/DOT2100-2.PDF (last accessed Jun. 12, 2012). The agencies have 
placed memos summarizing these meetings in their respective dockets.
---------------------------------------------------------------------------

    An overwhelming majority of commenters supported the proposed 2017-
2025 CAFE and GHG standards with most organizations and nearly all of 
the private individuals expressing broad support for the program and 
for the continuation of the National Program to model years (MY) 2017-
2025 light-duty vehicles, and the Program's projected achievement of an 
emissions level of 163 gram/mile fleet average CO2, which 
would be equivalent to 54.5 miles per gallon if the automakers were to 
meet this CO2 level solely through fuel economy 
improvements.\49\
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    \49\ Real-world CO2 is typically 25 percent higher 
and real-world fuel economy is typically 20 percent lower than the 
CO2 and CAFE compliance values discussed here. 163 g/mi 
would be equivalent to 54.5 mpg, if the entire fleet were to meet 
this CO2 level through tailpipe CO2 and fuel 
economy improvements, and assumes gasoline fueled vehicles 
(significant diesel fuel penetration would have a different mpg 
equivalent). The agencies expect, however, that a portion of these 
improvements will be made through improvements in air conditioning 
leakage and alternative refrigerants, which would not contribute to 
fuel economy.
---------------------------------------------------------------------------

    In general, more than a dozen automobile manufacturers supported 
the proposed standards as well as the credit opportunities and other 
provisions that provide compliance flexibility, while also recommending 
some changes to the credit and flexibility provisions--in fact, a 
significant majority of comments from industry focused on the credit 
and flexibility provisions. Nearly all automakers stressed the 
importance of the mid-term evaluation to assess the progress of 
technology development and cost, and the accuracy of the agencies' 
assumptions due to the long time-frame of the rule. Many industry 
commenters expressly predicated their support of the 2017-2025 National 
Program on the existence of this evaluation. Environmental and public 
interest non-governmental organizations (NGOs), as well as States that 
commented were also very supportive of extending the National Program 
to MYs 2017-2025 passenger vehicles and light trucks. Many of these 
organizations expressed concern that the mid-term evaluation might be 
used as an opportunity to weaken standards or to delay the 
environmental benefits of the National Program.
    The agencies also received comments that either opposed the 
issuance of the standards, or that argued that they should be modified 
in various ways. The Center for Biological Diversity (CBD) commented 
that the proposed standards were not sufficiently stringent, 
recommending that the agencies increase the standards to 60-70 mpg in 
2025. CBD, as well as several other organizations,\50\ also argued that 
minimum standards (``backstops'') were necessary for all fleets in 
order to ensure anticipated fuel economy gains. Several environmental 
groups expressed concern that flexibilities, such as off-cycle credits, 
could result in significantly lower gains through double-counting and 
allowing manufacturers to avoid making fuel economy improvements.
---------------------------------------------------------------------------

    \50\ The Natural Resources Defense Council, the Union of 
Concerned Scientists, the Sierra Club, and the Consumer's Union.
---------------------------------------------------------------------------

    Some car-focused manufacturers objected to the truck curves, which 
they considered lenient while some small truck manufacturers objected 
to the large truck targets, which they considered lenient; and some 
intermediate and small volume manufacturers with limited product lines 
requested additional lead time, as well as less stringent standards for 
their vehicles. Manufacturers in general argued that backstops were not

[[Page 62637]]

necessary for fuel economy gains and would be outside NHTSA's 
authority. Manufacturers also commented extensively on the programs' 
flexibilities, such as off-cycle credits, generally requesting more 
permissive applications and requirements.
    The National Automobile Dealers Association (NADA) opposed the MYs 
2017-2025 proposed standards, arguing that the agencies should delay 
rulemaking since they believe there was no need to set standards so far 
in advance, that the costs of the proposed program are higher than 
agencies have projected, and that some (mostly low income) consumers 
will not be able to acquire financing for new cars meeting these more 
stringent standards.
    Many environmental and consumer groups commented that the benefits 
of the rule were understated and the costs overstated, arguing that 
several potential benefits had not been included and the technology 
effectiveness estimates were overly conservative. Some environmental 
groups also expressed concern that the benefits of the rule could be 
eroded if the agencies' assumptions about the market do not come to 
pass or if manufacturers build larger vehicles. Other groups, such as 
NADA, Competitive Enterprise Institute, and the Institute for Energy 
Research, argued that the benefits of the rule were overstated and the 
costs understated, asserting that manufacturers would have already made 
improvements if the agencies' calculations were correct.
    Many commenters discussed potential environmental and health 
aspects of the rule. Producers of specific materials, such as aluminum, 
steel, or plastic, commented that standards should ultimately reflect a 
life cycle analysis that accounts for the greenhouse gas emissions 
attributable to the materials from which vehicles are manufactured. 
Some environmental groups requested that standards for electrified 
vehicles reflect emissions attributable to upstream electricity 
generation. Many commenters expressed support for the rule and its 
health benefits, while other commenters were concerned about possible 
negative health impacts due to assumptions about future fuel 
properties.
    Many commenters also addressed issues relating to safety, with most 
generally supporting the agencies' efforts to continue to improve their 
understanding of the relationship between mass reduction and safety. 
Consistent with their comments in prior rulemakings, several 
environmental and consumer organizations commented that data exist that 
mass reduction does not have adverse safety impacts, and stated that 
the use of better designs and materials can improve both fuel economy 
and safety. Dynamic Research Institute (DRI) submitted a study, and 
other commenters pointed to DRI's work and additional studies for the 
agencies' consideration, as discussed in more detail in Section II.G 
below. Materials producers (aluminum, steel, composite, etc.) commented 
that their respective materials can be used to improve safety. The 
Alliance commented that while some recent mass reduction vehicle design 
concept studies have created designs that perform well in simulation 
modeling of safety standard and voluntary safety guideline tests, the 
design concepts yield aggressively stiffer crash pulses may be 
detrimental to rear seat occupants, vulnerable occupants and potential 
crash partners. The Alliance also commented that there are simulation 
model uncertainties with respect to advanced materials, and the real-
world crash behavior of these concepts may not match that predicted in 
those studies. The Alliance and Volvo commented that it is important to 
monitor safety trends, and the Alliance urged that the agencies revisit 
this topic during the mid-term evaluation.
    Additional comments touched on the use of ``miles per gallon'' to 
describe the standards, the agencies' baseline market forecast, 
consumer welfare and trends in consumer preferences for fuel economy, 
and a wide range of other topics.
    Throughout this notice, the agencies discuss key issues arising 
from the public comments and the agencies' responses to those comments. 
The agencies also respond to comments in the Joint TSD and in their 
respective RIAs. In addition, EPA has addressed all of the public 
comments specific to the GHG program in a Response to Comments 
document.\51\
---------------------------------------------------------------------------

    \51\ EPA Response to Comments document. (EPA-420-F-12-017) 
Available in the docket and at: http://www.epa.gov/otaq/climate/regs-light-duty.htm (last accessed August 8, 2012).
---------------------------------------------------------------------------

4. California's Greenhouse Gas Program
    In 2004, the California Air Resources Board (CARB) approved 
standards for new light-duty vehicles, regulating the emission of 
CO2 and other GHGs.\52\ On June 30, 2009, EPA granted 
California's request for a waiver of preemption under the CAA with 
respect to these standards.\53\ Thirteen states and the District of 
Columbia, comprising approximately 40 percent of the light-duty vehicle 
market, adopted California's standards.\54\ The granting of the waiver 
permits California and the other states to proceed with implementing 
the California emission standards for MYs 2009 and later. After EPA and 
NHTSA issued their MYs 2012-2016 standards, CARB revised its program 
such that compliance with the EPA greenhouse gas standards will be 
deemed to be compliance with California's GHG standards.\55\ This 
facilitates the National Program by allowing manufacturers to meet all 
of the standards with a single national fleet.
---------------------------------------------------------------------------

    \52\ Through operation of section 209(b) of the Clean Air Act, 
California is able to seek and receive a waiver of section 209(a)'s 
preemptions to enforce such standards. Section 209(b)(1) requires a 
waiver to be granted for any State that had adopted standards (other 
than crankcase emission standards) for the control of emissions from 
new motor vehicles or new motor vehicles' engines prior to March 30, 
1966. California is the only state to have adopted standards prior 
to 1966 and is therefore the only state qualified to seek and 
receive a waiver. EPA evaluates California's request under the three 
waiver criteria set forth in section 209(b)(1)(A)-(C) and must grant 
a waiver under section 209(e)(2) if these criteria are met.
    \53\ 74 FR 32744 (July 8, 2009). See also Chamber of Commerce v. 
EPA, 642 F.3d 192 (D.C. Cir. 2011) (dismissing petitions for review 
challenging EPA's grant of the waiver).
    \54\ The Clean Air Act allows other states to adopt California's 
motor vehicle emissions standards under section 177 if such 
standards are identical to the California standards for which a 
waiver has been granted. States are not required to seek EPA 
approval under the terms of section 177.
    \55\ See ``California Exhaust Emission Standards and Test 
Procedures for 2001 and Subsequent Model Passenger Cars, Light-Duty 
Trucks, and Medium-Duty Vehicles as approved by OAL,'' March 29, 
2010 at 7. Available at http://www.arb.ca.gov/regact/2010/ghgpv10/oaltp.pdf (last accessed June 12, 2012).
---------------------------------------------------------------------------

    As requested by the President and in the interest of maximizing 
regulatory harmonization, NHTSA and EPA worked closely with CARB 
throughout the development of the proposed rules. CARB staff released 
its proposal for MYs 2017-2025 GHG emissions standards consistent with 
the standards proposed by EPA on December 9, 2011 and the California 
Air Resources Board adopted these standards at its January 26, 2012 
Board meeting, with final approval at its March 22, 2012 Board 
meeting.\56\ In adopting their GHG standards the California Air 
Resources Board directed the Executive Officer to ``continue 
collaborating with EPA and NHTSA as their standards are finalized and 
in the mid-term review to minimize potential lost benefits from federal 
treatment of upstream emissions of electricity and hydrogen fueled 
vehicles,'' and also, ``to participate in U.S. EPA's review of the 2022 
through 2025 model year

[[Page 62638]]

passenger vehicle greenhouse gas standards being proposed under the 
2017 through 2025 MY National Program.'' \57\ CARB also reconfirmed its 
commitment, previously made in July 2011 in conjunction with release of 
the Supplemental NOI,\58\ to propose to revise its GHG emissions 
standards for MYs 2017-2025 such that compliance with EPA GHG emissions 
standards shall be deemed compliance with the California GHG emissions 
standards. The Board directed CARB's Executive Officer that, ``it is 
appropriate to accept compliance with the 2017 through 2025 model year 
National Program as compliance with California's greenhouse gas 
emission standards in the 2017 through 2025 model years, once United 
States Environmental Protection Agency (U.S. EPA) issues their final 
rule on or after its current July 2012 planned release, provided that 
the greenhouse gas reductions set forth in U.S. EPA's December 1, 2011 
Notice of Proposed Rulemaking for 2017 through 2025 model year 
passenger vehicles are maintained, except that California shall 
maintain its own reporting requirements.'' \59\
---------------------------------------------------------------------------

    \56\ See California Low-Emission Vehicles (LEV) & GHG 2012 
regulations adopted by State of California Air Resources Board, 
March 22, 2012, Resolution 12-21 incorporating by reference 
Resolution 12-11 (see especially Resolution 12-11 at 20) which was 
adopted January 26, 2012. Available at http://www.arb.ca.gov/regact/2012/leviiighg2012/leviiighg2012.htm (last accessed July 9, 2012).
    \57\ Id.
    \58\ See State of California July 28, 2011 letter available at: 
http://www.epa.gov/otaq/climate/letters.htm (last accessed August 9, 
2012).
    \59\ Id., CARB Resolution 12-21 (March 22, 2012) (last accessed 
June 6, 2012).
---------------------------------------------------------------------------

C. Summary of the Final 2017-2025 National Program

1. Joint Analytical Approach
    These final rules continue the collaborative analytical effort 
between NHTSA and EPA, which began with the MYs 2012-2016 rulemaking 
for light-duty vehicles. NHTSA and EPA have worked together on nearly 
every aspect of the technical analysis supporting these joint rules. 
The results of this collaboration are reflected in key elements of the 
respective NHTSA and EPA rules, as well as in the analytical work 
contained in the Joint Technical Support Document (Joint TSD). The 
agencies have continued to develop and refine the supporting analyses 
since issuing the proposed rule last December. The Joint TSD, in 
particular, describes important details of the analytical work that are 
common to both agencies' rules, and also explains any key differences 
in approach. The joint analyses addressed in the TSD include the build-
up of the baseline and reference fleets, the derivation of the shape of 
the footprint-based attribute curves that define the agencies' 
respective standards, a detailed description of the estimated costs and 
effectiveness of the technologies that are available to vehicle 
manufacturers, the economic inputs used to calculate the costs and 
benefits of the final rules, a description of air conditioner and other 
off-cycle technologies, and the agencies' assessment of the impacts of 
hybrid technology incentive provisions for full-size pick-up trucks. 
This comprehensive joint analytical approach has provided a sound and 
consistent technical basis for both agencies in developing their final 
standards, which are summarized in the sections below.
2. Level of the Standards
    EPA and NHTSA are finalizing separate sets of standards for 
passenger cars and for light trucks, each under its respective 
statutory authority. EPA is setting national CO2 emissions 
standards for passenger cars and light-trucks under section 202(a) of 
the Clean Air Act (CAA), while NHTSA is setting national corporate 
average fuel economy (CAFE) standards under the Energy Policy and 
Conservation Act (EPCA), as amended by the Energy Independence and 
Security Act (EISA) of 2007 (49 U.S.C. 32902). Both the CO2 
and CAFE standards for passenger cars and standards for light trucks 
are footprint-based, similar to the standards currently in effect for 
these vehicles through model year 2016, and will become more stringent 
on average in each model year from 2017 through 2025. The basis for 
measuring performance relative to standards continues to be based 
predominantly on the EPA city and highway test cycles (2-cycle test). 
However, EPA is finalizing optional air conditioning and off-cycle 
credits for the GHG program and adjustments to calculated fuel economy 
for the CAFE program that are based on test procedures other than the 
2-cycle tests.
    As proposed, EPA is finalizing standards that are projected to 
require, on an average industry fleet wide basis, 163 grams/mile of 
CO2 in model year 2025. This is projected to be achieved 
through improvements in fuel efficiency and improvements in non-
CO2 GHG emissions from reduced air conditioning (A/C) system 
leakage and use of lower global warming potential (GWP) refrigerants. 
The level of 163 grams/mile CO2 is equivalent on a mpg basis 
to 54.5 mpg, if this level was achieved solely through improvements in 
fuel efficiency.\60\
---------------------------------------------------------------------------

    \60\ Real-world CO2 is typically 25 percent higher 
and real-world fuel economy is typically 20 percent lower than the 
CO2 and CAFE values discussed here. The reference to 
CO2 here refers to CO2 equivalent reductions, 
as this included some degree of reductions in greenhouse gases other 
than CO2, as one part of the A/C-related reductions. In 
addition, greater penetration of diesel fuel (as opposed to 
gasoline) will change the fuel economy equivalent.
---------------------------------------------------------------------------

    Consistent with the proposal, for passenger cars, the 
CO2 compliance values associated with the footprint curves 
will be reduced on average by 5 percent per year from the model year 
2016 projected passenger car industry-wide compliance level through 
model year 2025. In recognition of manufacturers' unique challenges in 
improving the fuel economy and GHG emissions of full-size pickup trucks 
as the fleet transitions from the MY 2016 standards to MY 2017 and 
later, while preserving the utility (e.g., towing and payload 
capabilities) of those vehicles, EPA is finalizing standards reflecting 
an annual rate of improvement for light-duty trucks which is lower than 
that for passenger cars in the early years of the program. For light-
duty trucks, the average annual rate of CO2 emissions 
reduction in model years 2017 through 2021 is 3.5 percent per year. As 
proposed, EPA is also changing the slopes of the CO2-
footprint curves for light-duty trucks from those in the 2012-2016 
rule, in a manner that effectively means that the annual rate of 
improvement for smaller light-duty trucks in model years 2017 through 
2021 will be higher than 3.5 percent, and the annual rate of 
improvement for larger light-duty trucks over the same time period will 
be lower than 3.5 percent. For model years 2022 through 2025, EPA is 
finalizing an average annual rate of CO2 emissions reduction 
for light-duty trucks of 5 percent per year.
    Consistent with its statutory authority,\61\ NHTSA has developed 
two phases of passenger car and light truck standards in this 
rulemaking action. The first phase, from MYs 2017-2021, includes final 
standards that are projected to require, on an average industry fleet 
wide basis, a range from 40.3 to 41 mpg in MY 2021.\62\ For passenger 
cars, the annual increase in

[[Page 62639]]

the stringency of the target curves between model years 2017 to 2021 is 
expected to average 3.8 to 3.9 percent. In recognition of 
manufacturers' unique challenges in improving the fuel economy and GHG 
emissions of full-size pickup trucks as the fleet transitions from the 
MY 2016 standards to MY 2017 and later, while preserving the utility 
(e.g., towing and payload capabilities) of those vehicles, NHTSA is 
also finalizing a lower annual rate of improvement for light trucks in 
the first phase of the program. For light trucks, the annual increase 
in the stringency of the target curves in model years 2017 through 2021 
is 2.5 to 2.7 percent per year on average. NHTSA is changing the slopes 
of the fuel economy footprint curves for light trucks from those in the 
MYs 2012-2016 final rule, which effectively make the annual rate of 
improvement for smaller light trucks in MYs 2017-2021 higher than 2.5 
or 2.7 percent per year, and the annual rate of improvement for larger 
light trucks over that time period lower than 2.5 or 2.7 percent per 
year.
---------------------------------------------------------------------------

    \61\ 49 U.S.C. 32902.
    \62\ The range of values here and through this rulemaking 
document reflect the results of co-analyses conducted by NHTSA using 
two different light-duty vehicle market forecasts through model year 
2025. To evaluate the effects of the standards, the agencies must 
project what vehicles and technologies will exist in future model 
years and then evaluate what technologies can feasibly be applied to 
those vehicles to raise their fuel economy and reduce their 
greenhouse gas emissions. To project the future fleet, the agencies 
must develop a baseline vehicle fleet. For this final rule, the 
agencies have analyzed the impacts of the standards using two 
different forecasts of the light[hyphen]duty vehicle fleet through 
MY 2025. The baseline fleets are discussed in detail in Section II.B 
of this preamble, and in Chapter 1 of the Technical Support 
Document. EPA's sensitivity analysis of the alternative fleet is 
included in Chapter 10 of its RIA.
---------------------------------------------------------------------------

    The second phase of the CAFE program, from MYs 2022-2025, includes 
standards that are not final due to the statutory provision that NHTSA 
shall issue regulations prescribing average fuel economy standards for 
at least 1 but not more than 5 model years at a time.\63\ The MYs 2022-
2025 standards, then, are not final as part of this rulemaking, but 
rather augural, meaning that they represent the agency's current 
judgment, based on the information available to the agency today, of 
what levels of stringency would be maximum feasible in those model 
years. NHTSA projects that those standards would require, on an average 
industry fleet wide basis, a range from 48.7 to 49.7 mpg in model year 
2025. NHTSA will undertake a de novo rulemaking at a later date to set 
legally binding standards for MYs 2022-2025. See Section IV for more 
information. For passenger cars, the annual increase in the stringency 
of the target curves between model years 2022 and 2025 is expected to 
average 4.7 \64\ percent, and for light trucks, the annual increase 
during those model years is expected to average 4.8 to 4.9 percent.
---------------------------------------------------------------------------

    \63\ 49 U.S.C. 32902(b)(3)(B).
    \64\ The rate of increase is rounded at 4.7 percent per year 
using 2010 and 2008 baseline.
---------------------------------------------------------------------------

    NHTSA notes that for the first time in this rulemaking, EPA is 
finalizing, under its EPCA authority, rules allowing the impact of air 
conditioning system efficiency improvements to be included in the 
calculation of fuel economy for CAFE compliance. Given that these real-
world improvements will be available to manufacturers for compliance, 
NHTSA has accounted for this by determining the amount that industry is 
expected to improve air conditioning system efficiency in each model 
year from 2017-2025, and setting the CAFE standards to reflect these 
improvements, in a manner consistent with EPA's GHG standards. See 
Sections III.B.10 and IV.I.4.b of this final rule preamble for more 
information.
    NHTSA also notes that the rates of increase in stringency for CAFE 
standards are lower than EPA's rates of increase in stringency for GHG 
standards. As in the MYs 2012-2016 rulemaking, this is for purposes of 
harmonization and in reflection of several statutory constraints in 
EPCA/EISA. As a primary example, NHTSA's standards, unlike EPA's, do 
not reflect the inclusion of air conditioning system refrigerant and 
leakage improvements, but EPA's standards allows consideration of such 
A/C refrigerant improvements which reduce GHGs but do not affect fuel 
economy. As another example, the Clean Air Act allows various 
compliance flexibilities (among them certain credit generating 
mechanisms) not present in EPCA.
    As with the MYs 2012-2016 standards, NHTSA and EPA's final MYs 
2017-2025 passenger car and light truck standards are expressed as 
mathematical functions depending on the vehicle footprint 
attribute.\65\ Footprint is one measure of vehicle size, and is 
determined by multiplying the vehicle's wheelbase by the vehicle's 
average track width. The standards that must be met by each 
manufacturer's fleet will be determined by computing the production-
weighted average of the targets applicable to each of the 
manufacturer's fleet of passenger cars and light trucks.\66\ Under 
these footprint-based standards, the average levels required of 
individual manufacturers will depend, as noted above, on the mix and 
volume of vehicles the manufacturer produces in any given model year. 
The values in the tables below reflect the agencies' projection of the 
range of the corresponding average fleet levels that will result from 
these attribute-based curves given the agencies' current assumptions 
about the mix of vehicles that will be sold in the model years covered 
by these standards. EPA and NHTSA have each finalized the attribute-
based curves, as proposed, for the model years covered by these final 
rules, as discussed in detail in Section II.B of this preamble and 
Chapter 2 of the Joint TSD. The agencies have updated their projections 
of the impacts of the final rule standards since the proposal, as 
discussed in Sections III and IV of this preamble and in the agencies' 
respective RIAs.
---------------------------------------------------------------------------

    \65\ NHTSA is required to set attribute-based CAFE standards for 
passenger cars and light trucks. 49 U.S.C. 32902(b)(3).
    \66\ For CAFE calculations, a harmonic average is used.
---------------------------------------------------------------------------

    As shown in Table I-1 NHTSA's fleet-wide estimated required CAFE 
levels for passenger cars would increase from between 40.1 and 39.6 mpg 
in MY 2017 to between 55.3 and 56.2 mpg in MY 2025. Fleet-wide required 
CAFE levels for light trucks, in turn, are estimated to increase from 
between 29.1 and 29.4 mpg in MY 2017 and between 39.3 and 40.3 mpg in 
MY 2025. For the reader's reference, Table I-1 also provides the 
estimated average fleet-wide required levels for the combined car and 
truck fleets, culminating in an estimated overall fleet average 
required CAFE level of a range from 48.7 to 49.7 mpg in MY 2025. 
Considering these combined car and truck increases, the standards 
together represent approximately a 4.0 percent annual rate of 
increase,\67\ on average, relative to the MY 2016 required CAFE levels.
---------------------------------------------------------------------------

    \67\ This estimated average percentage increase includes the 
effect of changes in standard stringency and changes in the forecast 
fleet sales mix.

---------------------------------------------------------------------------

[[Page 62640]]

[GRAPHIC] [TIFF OMITTED] TR15OC12.000

    The estimated average required mpg levels for passenger cars and 
trucks under the standards shown in Table I-1 above include the use of 
A/C efficiency improvements, as discussed above, but do not reflect a 
number of flexibilities and credits that manufacturers may use for 
compliance that NHTSA cannot consider in establishing standards based 
on EPCA/EISA constraints. These flexibilities cause the actual achieved 
fuel economy to be lower than the required levels in the table above. 
The flexibilities and credits that NHTSA cannot consider include the 
ability of manufacturers to pay civil penalties rather than achieving 
required CAFE levels, the ability to use Flexible Fuel Vehicle (FFV) 
credits, the ability to count electric vehicles for compliance, the 
operation of plug-in hybrid electric vehicles on electricity for 
compliance prior to MY 2020, and the ability to transfer and carry-
forward credits. When accounting for these flexibilities and credits, 
NHTSA estimates that the CAFE standards will lead to the following 
average achieved fuel economy levels, based on the agencies' 
projections of what each manufacturer's fleet will comprise in each 
year of the program: \68\
---------------------------------------------------------------------------

    \68\ The CAFE program includes incentives for full size pick-up 
trucks that have mild HEV or strong HEV systems, and for full size 
pick-up trucks that have fuel economy performance that is better 
than the target curve by more than final levels. To receive these 
incentives, manufacturers must produce vehicles with these 
technologies or performance levels at volumes that meet or exceed 
final penetration levels (percentage of full size pick-up truck 
volume). This incentive is described in detail in Section IV.I.3.a.. 
The NHTSA estimates in Table I-2 do not account for the reduction in 
estimated average achieved fleet-wide CAFE fuel economy that will 
occur if manufacturers use this incentive. NHTSA has conducted a 
sensitivity study that estimates the effects for manufacturers' 
potential use of this flexibility in Chapter X of the RIA.

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[[Page 62641]]

[GRAPHIC] [TIFF OMITTED] TR15OC12.001

    NHTSA is also required by EISA to set a minimum fuel economy 
standard for domestically manufactured passenger cars in addition to 
the attribute-based passenger car standard. The minimum standard 
``shall be the greater of (A) 27.5 miles per gallon; or (B) 92 percent 
of the average fuel economy projected by the Secretary for the combined 
domestic and non-domestic passenger automobile fleets manufactured for 
sale in the United States by all manufacturers in the model year * * 
*,'' and applies to each manufacturer's fleet of domestically 
manufactured passenger cars (i.e., like the other CAFE standards, it 
represents a fleet average requirement, not a requirement for each 
individual vehicle within the fleet).
    Based on NHTSA's current market forecast, the agency is finalizing 
minimum standards for domestic passenger cars for MYs 2017-2021 and 
providing augural standards for MYs 2022-2025 as presented below in 
Table I-3.

                                     Table I-3--Minimum Standard for Domestically Manufactured Passenger Cars (mpg)
--------------------------------------------------------------------------------------------------------------------------------------------------------
      2017              2018             2019             2020             2021             2022             2023             2024             2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
         36.7              38.0             39.4             40.9             42.7             44.7             46.8             49.0             51.3
--------------------------------------------------------------------------------------------------------------------------------------------------------

    EPA is finalizing GHG emissions standards, and Table I-4 provides 
estimates of the projected overall fleet-wide CO2 emission 
compliance target levels. The values reflected in Table I-4 are those 
that correspond to the manufacturers' projected CO2 
compliance target levels from the passenger car and truck footprint 
curves, but do not account for EPA's projection of how manufacturers 
will implement two of the incentive programs being finalized in today's 
rulemaking (advanced technology vehicle multipliers, and hybrid and 
performance-based incentives for full-size pickup trucks). Table I-4 
also does not account for the intermediate volume manufacturer lead-
time provisions that EPA is adopting. EPA's projection of fleet-wide 
emissions levels that do reflect these provisions is shown in Table I-5 
below.

               Table I-4--Projected Fleet-Wide CO2 Compliance Targets Under the Footprint-Based CO2 Standards (g/mi) (Primary Analysis) a
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  2016
                                                                  base     2017     2018     2019     2020     2021     2022     2023     2024     2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger Cars................................................      225      212      202      191      182      172      164      157      150      143
Light Trucks..................................................      298      295      285      277      269      249      237      225      214      203
Combined Cars and Trucks......................................     \69\      243      232      222      213      199      190      180      171      163
                                                                    250
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Projected results using MY 2008 based fleet projection analysis. These values differ slightly from those shown in the proposal because of revisions
  to the MY 2008 based fleet.

[[Page 62642]]

    As shown in Table I-4, projected fleet-wide CO2 emission 
compliance targets for cars increase in stringency from 212 to 143 g/mi 
between MY 2017 and MY 2025. Similarly, projected fleet-wide 
CO2 equivalent emission compliance targets for trucks 
increase in stringency from 295 to 203 g/mi. As shown, the overall 
fleet average CO2 level targets are projected to increase in 
stringency from 243 g/mi in MY 2017 to 163 g/mi in MY 2025, which is 
equivalent to 54.5 mpg if all reductions are made with fuel economy 
improvements.
     
---------------------------------------------------------------------------

    \69\ As noted at proposal, the projected fleet compliance levels 
for 2016 are different for trucks and the fleet than were projected 
in the 2012-2016 rule. See 76 FR 74868 n. 44. Our assessment for 
this final rule is based on a predicted 2016 car value of 224, a 
2016 truck value of 297 and a projected combined car and truck value 
of 252 g/mi. That is because the standards are footprint based and 
the fleet projections, hence the footprint distributions, change 
slightly with each update of our projections, as described below. In 
addition, the actual fleet compliance levels for any model year will 
not be known until the end of that model year based on actual 
vehicle sales.
---------------------------------------------------------------------------

    EPA anticipates that manufacturers will take advantage of program 
flexibilities, credits and incentives, such as car/truck credit 
transfers, air conditioning credits, off-cycle credits, advanced 
technology vehicle multipliers, intermediate volume manufacturer lead-
time provisions, and hybrid and performance-based incentives for full 
size pick-up trucks. Three of these flexibility provisions--advanced 
technology vehicle multipliers, intermediate volume manufacturer lead-
time provisions, and the full size pick-up hybrid/performance 
incentives--are expected to have an impact on the fleet-wide emissions 
levels that manufacturers will actually achieve.\70\ Therefore, Table 
I-5 shows EPA's projection of the achieved emission levels of the fleet 
for MY 2017 through 2025. The differences between the emissions levels 
shown in Tables I-4 and I-5 reflect the impact on stringency due EPA's 
projection of manufacturers' use of the advanced technology vehicle 
multipliers, and the full size pick-up hybrid/performance incentives, 
but does not reflect car-truck trading, air conditioning credits, or 
off-cycle credits, because, while the latter credit provisions help 
reduce manufacturers' costs of the program, EPA believes that they will 
result in real-world emission reductions that will not affect the 
achieved level of emission reductions. These estimates are more fully 
discussed in III.B.
---------------------------------------------------------------------------

    \70\ There are extremely small (and unquantified) impacts on the 
achieved values from other flexibilities such as small volume 
manufacturer specific standards and emergency vehicle exemptions.

    Table I-5--Projected Fleet-Wide Achieved CO2-Equivalent Emission Levels Under the Footprint-Based CO2 Standards (g/mi) \71\ (Primary Analysis) a
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     2016
                                                                     base     2017     2018     2019     2020     2021     2022     2023     2024   2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger Cars...................................................      225      213      203      193      183      173      164      157      150  143
Light Trucks.....................................................      298      295      287      278      270      250      238      226      214  204
Combined Cars and Trucks.........................................     \72\      243      234      223      214      200      190      181      172  163
                                                                       250
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Projected results using 2008 based fleet projection analysis. These values differ slightly from those shown in the proposal because of revisions to
  the MY 2008 based fleet and updates to the analysis.

    A more detailed description of how the agency arrived at the year 
by year progression of both the projected compliance targets and the 
achieved CO2 emission levels can be found in Sections III of 
this preamble.
---------------------------------------------------------------------------

    \71\ Electric vehicles are assumed at 0 gram/mile in this 
analysis.
    \72\ The projected fleet achieved levels for 2016 are different 
for the fleet than were projected in the 2012-2016 rule. Our 
assessment is based on a predicted 2016 car value of 224, and a 2016 
truck value of 297 and a projected combined car and truck value of 
252 g/mi. That is because the standards are footprint based and the 
fleet projections, hence the footprint distributions, change 
slightly with each update of our projections, as described below. In 
addition, the actual fleet achieved levels for any model year will 
not be known until the end of that model year based on actual 
vehicle sales.
---------------------------------------------------------------------------

    As previously stated, there was broad support for the proposed 
standards by auto manufacturers including BMW, Chrysler, Ford, GM, 
Honda, Hyundai, Kia, Jaguar/Land Rover, Mazda, Mitsubishi, Nissan, 
Tesla, Toyota, Volvo, as well as the Global Automakers. Of the larger 
manufacturers, Volkswagen and Mercedes commented that the proposed 
passenger car standards were relatively too stringent while light truck 
standards were relatively too lenient and suggested several 
alternatives to the proposed standards. Toyota also commented that 
lower truck stringency puts more burdens on small cars. Honda was 
concerned that small light trucks face disproportionate stringency 
compared to larger footprint trucks under the proposed standards. The 
agencies' consideration of these and other comments and of the updated 
technical analyses did not lead to changes to the stringency of the 
standards nor in the shapes of the curves discussed above. These issues 
are discussed in more detail in Sections II, III and IV.
    NHTSA and EPA reviewed the technology assessment employed in the 
proposal in developing this final rule, and concluded that there is a 
wide range of technologies available in the MY 2017-2025 timeframe for 
manufacturers to consider in upgrading light-duty vehicles to reduce 
GHG emissions and improve fuel economy. Commenters generally agreed 
with this assessment and conclusion.\73\ The final technology 
assessment relied on our joint analyses for the proposed rule, as well 
as some new information and analyses, including information we received 
during the public comment period, as discussed in Section II.D below. 
The analyses performed for this final rule included an updated 
assessment of the cost, effectiveness and availability of several 
technologies.
---------------------------------------------------------------------------

    \73\ For more detail on comments regarding the agencies' 
technology assessment, see Section II.D.
---------------------------------------------------------------------------

    As noted further in Section II.D, for this final rule, the agencies 
considered over 40 current and evolving vehicle and engine technologies 
that manufacturers could use to improve the fuel economy and reduce 
CO2 emissions of their vehicles during the MYs 2017-2025 
timeframe. Many of the technologies we considered are available today, 
some on a limited number of vehicles and others more widespread 
throughout the fleet, and the agencies believe they could be 
incorporated into vehicles as manufacturers make their product 
development decisions. These ``near-term'' technologies are identical 
or very similar to those anticipated in the agencies' analyses of 
compliance strategies for the MYs 2012-2016 final rule, but we believe 
they can achieve wider penetration throughout the

[[Page 62643]]

vehicle fleet during the MYs 2017-2025 timeframe. For this rulemaking, 
given its timeframe, we also considered other technologies that are not 
currently in production, but that are beyond the initial research 
phase, and are under development and expected to be in production in 
the next 5-10 years. Examples of these technologies are downsized and 
turbocharged engines operating at combustion pressures even higher than 
today's turbocharged engines, and emerging hybrid architecture combined 
with an 8-speed dual clutch transmission, a combination that is not 
available today. These are technologies that the agencies believe that 
manufacturers can, for the most part, apply both to cars and trucks, 
and that we expect will achieve significant improvements in fuel 
economy and reductions in CO2 emissions at reasonable cost 
in the MYs 2017-2025 timeframe. Chapter 3 of the joint TSD provides the 
full assessment of these technologies. Due to the relatively long lead 
time before MY 2017, the agencies expect that manufacturers will be 
able to employ combinations of these and potentially other technologies 
and that manufacturers and the supply industry will be able to produce 
them in sufficient volumes to comply with the final standards.
    A number of commenters suggested that the proposed standards were 
either too stringent or not stringent enough (either in some model 
years or in all model years, depending on the commenter), and nearly 
all auto manufacturers and their associations stressed the importance 
of the mid-term evaluation of the MYs 2022-2025 standards in their 
comments due to the long timeframe of the rule and uncertainty in 
assumptions given this timeframe. Our consideration of these comments 
as well as our revised analyses, leads us to conclude that the general 
rate of increase in the stringency of the standards as proposed remains 
appropriate. The comprehensive mid-term evaluation process being 
finalized and our evaluation of the stringency of the standards is 
discussed further in Sections III and IV.
    Both agencies also considered other alternative standards as part 
of their respective Regulatory Impact Analyses that span a reasonable 
range of alternative stringencies both more and less stringent than the 
final standards. EPA's and NHTSA's analyses of these regulatory 
alternatives (and explanation of why we are finalizing the standards) 
are contained in Sections III and IV of this preamble, respectively, as 
well as in the agencies' respective Regulatory Impact Analyses (RIAs).
3. Form of the Standards
    NHTSA and EPA are finalizing attribute-based standards for 
passenger cars and light trucks, as required by EISA and as allowed by 
the CAA, and will continue to use vehicle footprint as the 
attribute.\74\ Footprint is defined as a vehicle's wheelbase multiplied 
by its average track width--in other words, the area enclosed by the 
points at which the wheels meet the ground. NHTSA and EPA adopted an 
attribute-based approach based on vehicle footprint for MYs 2012-2016 
light-duty vehicle standards.\75\ The agencies continue to believe that 
footprint is the most appropriate attribute on which to base the 
proposed standards, as discussed in Section II.C and in Chapter 2 of 
the Joint TSD. The majority of commenters supported the continued use 
of footprint as the vehicle attribute; those comments and the agencies' 
response are discussed in Section II.C below.
---------------------------------------------------------------------------

    \74\ NHTSA and EPA use the same vehicle category definitions for 
determining which vehicles are subject to the car curve standards 
versus the truck curve standards as were used for MYs 2012-2016 
standards. As in the MYs 2012-2016 rulemaking, a vehicle classified 
as a car under the NHTSA CAFE program will also be classified as a 
car under the EPA GHG program, and likewise for trucks. This 
approach of using common definitions allows the CO2 
standards and the CAFE standards to continue to be harmonized across 
all vehicles for the National Program.
    \75\ NHTSA also used the footprint attribute in its Reformed 
CAFE program for light trucks for model years 2008-2011 and 
passenger car CAFE standards for MY 2011.
---------------------------------------------------------------------------

    Under the footprint-based standards, the curve defines a GHG or 
fuel economy performance target for each separate car or truck 
footprint. Using the curves, each manufacturer thus will have a GHG and 
CAFE average standard that is unique to each of its fleets, depending 
on the footprints and production volumes of the vehicle models produced 
by that manufacturer. A manufacturer will have separate footprint-based 
standards for cars and for trucks. The curves are mostly sloped, so 
that generally, larger vehicles (i.e., vehicles with larger footprints) 
will be subject to higher CO2 grams/mile targets and lower 
CAFE mpg targets than smaller vehicles. This is because, generally 
speaking, smaller vehicles are more capable of achieving lower levels 
of CO2 and higher levels of fuel economy than larger 
vehicles. Although a manufacturer's fleet average standards could be 
estimated throughout the model year based on the projected production 
volume of its vehicle fleet (and are estimated as part of the EPA 
certification process), the standards to which the manufacturer must 
comply will be determined by its final model year production figures. A 
manufacturer's calculation of its fleet average standards as well as 
its fleets' average performance at the end of the model year will thus 
be based on the production-weighted average target and performance of 
each model in its fleet.\76\
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    \76\ As in the MYs 2012-2016 rule, a manufacturer may have some 
models that exceed their target, and some that are below their 
target. Compliance with a fleet average standard is determined by 
comparing the fleet average standard (based on the production 
weighted average of the target levels for each model) with fleet 
average performance (based on the production weighted average of the 
performance for each model).
---------------------------------------------------------------------------

    The final footprint-based standards are identical to those 
proposed. The passenger car curves are also similar in shape to the car 
curves for MYs 2012-2016. However, as proposed, the final light truck 
curves for MYs 2017-2025 reflect more significant changes compared to 
the light truck curves for MYs 2012-2016; specifically, the agencies 
have increased the slope and extended the large-footprint cutpoint for 
the light truck curves over time to larger footprints. We continue to 
believe that these changes from the MYs 2012-2016 curves represent an 
appropriate balance of both technical and policy issues, as discussed 
in Section II.C below and Chapter 2 of the Joint TSD.
    NHTSA is adopting the attribute curves below for model years 2017 
through 2021 and presenting the augural attribute curves below for 
model years 2022-2025. As just explained, these targets, expressed as 
mpg values, will be production-weighted to determine each 
manufacturer's fleet average standard for cars and trucks. Although the 
general model of the target curve equation is the same for each vehicle 
category and each year, the parameters of the curve equation differ for 
cars and trucks. Each parameter also changes on a model year basis, 
resulting in the yearly increases in stringency. Figure I-1 below 
illustrates the passenger car CAFE curves for model years 2017 through 
2025 while Figure I-2 below illustrates the light truck CAFE curves for 
model years 2017 through 2025.
    EPA is finalizing the attribute curves shown in Figure I-3 and 
Figure I-4 below, for model years 2017 through 2025. As with the CAFE 
curves, the general form of the equation is the same for each vehicle 
category and each year, but the parameters of the equation differ for 
cars and trucks. Again, each parameter also changes on a model year 
basis, resulting in the yearly increases in stringency. Figure I-3 
below illustrates the CO2 car standard curves for model 
years 2017 through 2025 while Figure I-

[[Page 62644]]

4 shows the CO2 truck standard curves for model years 2017-
2025.
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BILLING CODE 6560-50-C
    EPA and NHTSA received a number of comments about the shape of the 
car and truck curves. Some commenters, including Honda, Toyota and 
Volkswagen, stated that the light truck curve was too lenient for large 
trucks, while Nissan and Honda stated the light truck curve was too 
stringent for small trucks; Porsche and Volkswagen stated the car curve 
was too stringent generally, and Toyota stated it was too stringent for 
small cars. A number of NGOs (Center for Biological Diversity, 
International Council on Clean Transportation, Natural Resources 
Defense Council, Sierra Club, Union of Concerned Scientists) also 
commented on the truck curves as well as the relationship between the 
car and truck curves. We address all these comments further in Section 
II.C as well as in Sections III and IV.
    Generally speaking, a smaller footprint vehicle will tend to have 
higher fuel economy and lower CO2 emissions relative to a 
larger footprint vehicle when both have a comparable level of fuel 
efficiency improvement technology. Since the finalized standards apply 
to a manufacturer's overall passenger car fleet and overall light truck 
fleet, not to an individual vehicle, if one of a manufacturer's fleets 
is dominated by small footprint vehicles, then that fleet will have a 
higher fuel economy requirement and a lower CO2 requirement 
than a manufacturer whose fleet is dominated by large footprint 
vehicles. Compared to the non-attribute based CAFE standards in place 
prior to MY 2011, the final standards more evenly distribute the 
compliance burdens of the standards among different manufacturers, 
based on their respective product offerings. With this footprint-based 
standard approach, EPA and NHTSA continue to believe that the rules 
will not create significant incentives to produce vehicles of 
particular sizes, and thus there should be no significant effect on the 
relative availability of different vehicle sizes in the fleet due to 
these standards, which will help to maintain consumer choice during the 
MY 2017 to MY 2025 rulemaking timeframe. Consumers should still be able 
to purchase the size of vehicle that meets their needs. Table I-6 helps 
to illustrate the varying CO2 emissions and fuel economy 
targets under the final standards that different vehicle sizes will 
have, although we emphasize again that these targets are not actual 
standards--the standards are manufacturer-specific, rather than 
vehicle-specific.

[[Page 62648]]

            Table I-6--Model Year 2025 CO2 and Fuel Economy Targets for Various MY 2012 Vehicle Types
----------------------------------------------------------------------------------------------------------------
                                                                   Example model  CO2  Emissions   Fuel economy
             Vehicle type                    Example models       footprint (sq.  target  (g/mi)   target (mpg)
                                                                       ft.)             \a\             \b\
----------------------------------------------------------------------------------------------------------------
                                             Example Passenger Cars
----------------------------------------------------------------------------------------------------------------
Compact car..........................  Honda Fit................              40             131            61.1
Midsize car..........................  Ford Fusion..............              46             147            54.9
Full size car........................  Chrysler 300.............              53             170            48.0
----------------------------------------------------------------------------------------------------------------
                                            Example Light-duty Trucks
----------------------------------------------------------------------------------------------------------------
Small SUV............................  4WD Ford Escape..........              43             170            47.5
Midsize crossover....................  Nissan Murano............              49             188            43.4
Minivan..............................  Toyota Sienna............              56             209            39.2
Large pickup truck...................  Chevy Silverado (extended              67             252            33.0
                                        cab, 6.5 foot bed).
----------------------------------------------------------------------------------------------------------------
a,b Real-world CO2 is typically 25 percent higher and real-world fuel economy is typically 20 percent lower than
  the CO2 and fuel economy target values presented here.

4. Program Flexibilities for Achieving Compliance
a. CO2/CAFE Credits Generated Based on Fleet Average Over-
Compliance
    As proposed, the agencies are finalizing several provisions which 
provide compliance flexibility to manufacturers to meet the standards. 
Many of the provisions are also found in the MYs 2012-2016 rules. For 
example, the agencies are continuing to allow manufacturers to generate 
credits for over-compliance with the CO2 and CAFE 
standards.\77\ As noted above, under the footprint-based standards, a 
manufacturer's ultimate compliance obligations are determined at the 
end of each model year, when production of vehicles for that model year 
is complete. Since the fleet average standards that apply to a 
manufacturer's car and truck fleets are based on the applicable 
footprint-based curves, a production volume-weighted fleet average 
requirement will be calculated for each averaging set (cars and trucks) 
based on the mix and volumes of the models manufactured for sale by the 
manufacturer. If a manufacturer's car and/or truck fleet achieves a 
fleet average CO2/CAFE level better than its car and/or 
truck standards, then the manufacturer generates credits. Conversely, 
if the fleet average CO2/CAFE level does not meet the 
standard, the fleet would incur debits (also referred to as a 
shortfall). As in the MY 2011 CAFE program under EPCA/EISA, and also in 
MYs 2012-2016 for the light-duty vehicle GHG and CAFE program, a 
manufacturer whose fleet generates credits in a given model year would 
have several options for using those credits, including credit carry-
back, credit carry-forward, credit transfers, and credit trading.
---------------------------------------------------------------------------

    \77\ This credit flexibility is required by EPCA/EISA, see 49 
U.S.C. 32903, and is well within EPA's discretion under section 
202(a) of the CAA.
---------------------------------------------------------------------------

    Credit ``carry-back'' means that manufacturers are able to use 
credits to offset a deficit that had accrued in a prior model year, 
while credit ``carry-forward'' means that manufacturers can bank 
credits and use them toward compliance in future model years. EPCA, as 
amended by EISA, requires NHTSA to allow manufacturers to carry back 
credits for up to three model years, and to carry forward credits for 
up to five model years. EPA's MYs 2012-2016 light duty vehicle GHG 
program includes the same limitations and, as proposed, EPA is 
continuing this limitation in the MY 2017-2025 program. In its 
comments, Volkswagen requested that credits under the GHG rules be 
allowed to be carried back for five model years rather than three as 
proposed. A five year carry back could create a perverse incentive for 
shortfalls to accumulate past the point where they can be rectified by 
later model year performance. EPA is therefore adopting the three year 
carry back period in its rule. NHTSA is required to allow a three year 
carry-back period by statute.
    However, to facilitate the transition to the increasingly more 
stringent standards, EPA proposed, and is finalizing under its CAA 
authority a one-time CO2 carry-forward beyond 5 years, such 
that any credits generated from MYs 2010 through 2016 will be able to 
be used to comply with light duty vehicle GHG standards at any time 
through MY 2021. This provision does not apply to early credits 
generated in MY 2009. EPA received comments from the Alliance of 
Automobile Manufacturers and several individual manufacturers 
supporting the proposed additional credit carry-forward flexibility and 
also comments from the Center for Biological Diversity opposing the 
additional credit carry-forward provisions which are addressed in 
section III.B.4. NHTSA's program will continue the 5-year carry-forward 
and 3-year carry-back, as required by statute.
    Credit ``transfer'' means the ability of manufacturers to move 
credits from their passenger car fleet to their light truck fleet, or 
vice versa. As part of the EISA amendments to EPCA, NHTSA was required 
to establish by regulation a CAFE credit transferring program, now 
codified at 49 CFR Part 536, to allow a manufacturer to transfer 
credits between its car and truck fleets to achieve compliance with the 
standards. For example, credits earned by over-compliance with a 
manufacturer's car fleet average standard could be used to offset 
debits incurred due to that manufacturer's not meeting the truck fleet 
average standard in a given year. However, EISA imposed a cap on the 
amount by which a manufacturer could raise its CAFE standards through 
transferred credits: 1 mpg for MYs 2011-2013; 1.5 mpg for MYs 2014-
2017; and 2 mpg for MYs 2018 and beyond.\78\ These statutory limits 
will continue to apply to the determination of compliance with the CAFE 
standards. EISA also prohibits the use of transferred credits to meet 
the minimum domestic passenger car fleet CAFE standard.\79\
---------------------------------------------------------------------------

    \78\ 49 U.S.C. 32903(g)(3).
    \79\ 49 U.S.C. 32903(g)(4).
---------------------------------------------------------------------------

    Under section 202 (a) of the CAA there is no statutory limitation 
on car-truck credit transfers, and EPA's GHG program allows unlimited 
credit transfers across a manufacturer's car-light truck fleet to meet 
the GHG

[[Page 62649]]

standard. This is based on the expectation that this flexibility will 
facilitate setting appropriate GHG standards that manufacturers can 
comply with in the lead time provided, and will allow the required GHG 
emissions reductions to be achieved in the most cost effective way. 
Therefore, EPA did not constrain the magnitude of allowable car-truck 
credit transfers in the MY 2012-2016 rule,\80\ as doing so would reduce 
the flexibility to achieve the standards in the lead time provided, and 
would increase costs with no corresponding environmental benefit. EPA 
did not propose and is not finalizing any constraints on credit 
transfers for MY 2017 and later, consistent with the MY 2012-2016 
program. As discussed in Section III.B.4, EPA received one comment from 
Center for Biological Diversity that it should be consistent with EISA 
and establish limitations on credit transfers. EPA disagrees with the 
commenter and continues to believe that limiting transfers and trading 
would unnecessarily constrain program flexibility as discussed in 
section III.B.4 below.
---------------------------------------------------------------------------

    \80\ EPA's GHG program will continue to adjust car and truck 
credits by vehicle miles traveled (VMT), as in the MY2012-2016 
program.
---------------------------------------------------------------------------

    Credit ``trading'' means the ability of manufacturers to sell 
credits to, or purchase credits from, one another. EISA allowed NHTSA 
to establish by regulation a CAFE credit trading program, also now 
codified at 49 CFR Part 536, to allow credits to be traded between 
vehicle manufacturers. EPA also allows credit trading in the light-duty 
vehicle GHG program. These sorts of exchanges between averaging sets 
are typically allowed under EPA's current mobile source emission credit 
programs. EISA also prohibits manufacturers from using traded credits 
to meet the minimum domestic passenger car CAFE standard.\81\
---------------------------------------------------------------------------

    \81\ 49 U.S.C. 32903(f)(2).
---------------------------------------------------------------------------

b. Air Conditioning Improvement Credits/Fuel Economy Value Increases
    Air conditioning (A/C) systems contribute to GHG emissions in two 
ways. The primary refrigerant used in automotive air conditioning 
systems today--a hydrofluorocarbon (HFC) refrigerant and potent GHG 
called HFC-134a--can leak directly from the A/C system (direct A/C 
emissions). In addition, operation of the A/C system places an 
additional load on the engine that increases fuel consumption and thus 
results in additional CO2 tailpipe emissions (indirect A/C 
emissions). In the MY 2012-2016 program, EPA allows manufacturers to 
generate credits by reducing either or both types of GHG emissions 
related to A/C systems. For those model years, EPA anticipated that 
manufacturers would pursue these relatively inexpensive reductions in 
GHGs due to improvements in A/C systems and accounted for generation 
and use of both of these credits in setting the levels of the 
CO2 standards.
    For this rule, as with the MYs 2012-2016 program, EPA is finalizing 
its proposal to allow manufacturers to generate CO2-
equivalent\82\ credits to use in complying with the CO2 
standards by reducing direct and/or indirect A/C emissions. These 
reductions can be achieved by improving A/C system efficiency (and thus 
reducing tailpipe CO2 and improving fuel consumption), by 
reducing refrigerant leakage, and by using refrigerants with lower 
global warming potentials (GWPs) than HFC-134a. As proposed, EPA is 
establishing that the maximum total A/C credits available for cars will 
be 18.8 grams/mile CO2-equivalent and for trucks will be 
24.4 grams/mile CO2-equivalent.\83\ The approaches to be 
used to calculate these direct and indirect A/C credits are generally 
consistent with those of the MYs 2012-2016 program, although there are 
several revisions, including as proposed the introduction of a new A/C 
efficiency test procedure that will be applicable starting in MY 2014 
for compliance with EPA's GHG standards.
---------------------------------------------------------------------------

    \82\ CO2 equivalence (CO2e) expresses the 
global warming potential of a greenhouse gas (for A/C, 
hydrofluorocarbons) by normalizing that potency to CO2's. 
Thus, the maximum A/C credit for direct emissions is the equivalent 
of 18.8 grams/mile of CO2 for cars.
    \83\ This is further broken down by 5.0 and 7.2 g/mi 
respectively for car and truck AC efficiency credits, and 13.8 and 
17.2 g/mi respectively for car and truck alternative refrigerant 
credits.
---------------------------------------------------------------------------

    In addition to the grams-per-mile CO2-equivalent 
credits, for the first time the agencies are establishing provisions in 
the CAFE program that would account for improvements in air conditioner 
efficiency. Improving A/C efficiency leads to real-world fuel economy 
benefits, because as explained above, A/C operation represents an 
additional load on the engine. Thus, more efficient A/C operation 
imposes less of a load and allows the vehicle to go farther on a gallon 
of gas. Under EPCA, EPA has authority to adopt procedures to measure 
fuel economy and to calculate CAFE compliance values.\84\ Under this 
authority, EPA is establishing that manufacturers can generate fuel 
consumption improvement values for purposes of CAFE compliance based on 
air conditioning system efficiency improvements for cars and trucks. An 
increase in a vehicle's CAFE grams-per-mile value would be allowed up 
to a maximum based on 0.000563 gallon/mile for cars and on 0.000810 
gallon/mile for trucks. This is equivalent to the A/C efficiency 
CO2 credit allowed by EPA under the GHG program. For the 
CAFE program, EPA would use the same methods to calculate the values 
for air conditioning efficiency improvements for cars and trucks as are 
used in EPA's GHG program. Additionally, given that these real-world 
improvements will be available to manufacturers for compliance, NHTSA 
has accounted for this by determining the amount that industry is 
expected to improve air conditioning system efficiency in each model 
year from 2017-2025, and setting the CAFE standards to reflect these 
improvements, in a manner consistent with EPA's GHG standards. EPA is 
not allowing generation of fuel consumption improvement values for CAFE 
purposes, nor is NHTSA increasing stringency of the CAFE standard, for 
the use of A/C systems that reduce leakage or employ alternative, lower 
GWP refrigerant. This is because those changes do not generally affect 
fuel economy. Most industry commenters supported this proposal, while 
one NGO noted that the inclusion of air conditioning improvements for 
purposes of CAFE car compliance was a change from prior 
interpretations.
---------------------------------------------------------------------------

    \84\ See 49 U.S.C. 32904(c).
---------------------------------------------------------------------------

c. Off-cycle Credits/Fuel Economy Value Increases
    For MYs 2012-2016, EPA provided an option for manufacturers to 
generate credits for utilizing new and innovative technologies that 
achieve CO2 reductions that are not reflected on current 
test procedures. EPA noted in the MYs 2012-2016 rulemaking that 
examples of such ``off-cycle'' technologies might include solar panels 
on hybrids and active aerodynamics, among other technologies. See 
generally 75 FR 25438-39. EPA's current program allows off-cycle 
credits to be generated through MY 2016.
    EPA proposed and is finalizing provisions allowing manufacturers to 
continue to generate and use off-cycle credits for MY 2017 and later to 
demonstrate compliance with the light-duty vehicle GHG standards. In 
addition, as with A/C efficiency, improving efficiency through the use 
of off-cycle technologies leads to real-world fuel economy benefits and 
allows the vehicle to go farther on a gallon of gas. Thus, under its 
EPCA authority EPA proposed and is finalizing provisions to allow 
manufacturers to generate fuel consumption improvement

[[Page 62650]]

values for purposes of CAFE compliance based on the use of off-cycle 
technologies. Increases in fuel economy under the CAFE program based on 
off-cycle technology will be equivalent to the off-cycle credit allowed 
by EPA under the GHG program, and these amounts will be determined 
using the same procedures and test methods as are used in EPA's GHG 
program. For the reasons discussed in Sections III.D and IV.I of this 
final rule preamble, the ability to generate off-cycle credits and 
increases in fuel economy for use in compliance will not affect or 
change the stringency of the GHG or CAFE standards established by each 
agency.\85\
---------------------------------------------------------------------------

    \85\ The agencies have developed estimates for the cost and 
effectiveness of various off-cycle technologies, including active 
aerodynamics and stop-start. For the final rule analysis, NHTSA 
assumed that these two technologies are available to manufacturers 
for compliance with the standards, similar to all of the other fuel 
economy improving technologies that the analysis assumes are 
available. The costs and benefits of these technologies are included 
in the analysis, similar to all other available technologies and 
therefore, NHTSA has included the assessment of off-cycle credits in 
the assessment of maximum feasible standards. EPA has included the 
2-cycle benefit of stop-start and active aerodynamics in the 
standards setting analysis because these technologies have 2-cycle, 
in addition to off-cycle, effectiveness. As with all the 
technologies considered in TSD Chapter 3 which are modeled as part 
of potential compliance paths, EPA considers the 2-cycle 
effectiveness when setting the standard. The only exception where 
off-cycle effectiveness is reflected in the standard is for 
improvements to air conditioning leakage and efficiency.
---------------------------------------------------------------------------

    Many automakers indicated that they had a strong interest in 
pursuing off-cycle technologies, and encouraged the agencies to refine 
and simplify the evaluation process to provide more certainty as to the 
types of technologies the agencies would approve for credit generation. 
Other commenters, such as suppliers and some NGOs, also provided 
technical input on various aspects of the off-cycle credit program. 
Some environmental groups expressed concerns about the uncertainties in 
calculating off-cycle credits and that the ability for manufacturer's 
to earn credits from off-cycle technologies should not be a 
disincentive for implementing other (2-cycle) technologies. For MY 2017 
and later, EPA is finalizing several proposed provisions to expand and 
streamline the MYs 2012-2016 off-cycle credit provisions, including an 
approach by which the agencies will provide default values, which will 
eliminate the need for case-by-case-testing, for a subset of off-cycle 
technologies whose benefits are reliably and conservatively quantified. 
EPA is finalizing a list of technologies and default credit values for 
these technologies, as well as capping the maximum amount of these 
credits which can be utilized unless a manufacturer demonstrates 
through testing that greater amounts are justified. The agencies 
believe that our assessment of off-cycle technologies and associated 
credit values on this list is conservative, and emphasize that 
automakers may apply for additional off-cycle credits beyond the 
minimum credit value and cap if they present sufficient supporting 
data. Manufacturers may also apply to receive credit for off-cycle 
technologies besides those listed, again, if they have sufficient data. 
EPA received several comments regarding the list of technologies and 
associated credit values and has modified the list somewhat in response 
to these comments, as discussed in Section II.F.2. EPA was also 
persuaded by the public comments that the default credit values should 
not be contingent upon a minimum penetration of the technology into a 
manufacturer's fleet, and so is not adopting this aspect of the 
proposal. Manufacturers often apply new technologies on a limited basis 
to gain experience, gauge consumer acceptance, allow refinement of the 
manufacturing and production processes for quality and cost, and other 
legitimate reasons. The proposed minimum penetration requirement might 
have discouraged introduction of off-cycle technologies in these 
legitimate circumstances.
    In addition, as requested by commenters, EPA is providing 
additional detail on the process and timing for the credit/fuel 
consumption improvement values application and approval process for 
those instances where manufacturers seek off-cycle credits rather than 
using the default values from the list provided, or seek credits for 
technologies other than those provided through the list. EPA is 
finalizing a timeline for the approval process, including a 60-day EPA 
decision process from the time a manufacturer submits a complete 
application for credits based on 5-cycle testing. As proposed, EPA is 
also finalizing a detailed, step-by-step process, including a 
specification of the data that manufacturers must submit. EPA will also 
consult with NHTSA during the review process. For off-cycle 
technologies that are both not covered by the pre-approved off-cycle 
credit/fuel consumption improvement values list and that are not 
quantifiable based on the 5-cycle test cycle option provided in the 
2012-2016 rulemaking, EPA is retaining the public comment process from 
the MYs 2012-2016 rule, and will consult with NHTSA during the review 
process.
    Finally, in response to many OEM and supplier comments encouraging 
EPA to allow access to the pre-defined credit menu earlier than MY 
2017, EPA is allowing use of the credit menu for the GHG program 
beginning in MY 2014 to facilitate compliance with the GHG standards 
for MYs 2014-2016. This provision is for the GHG rules only, and does 
not apply to the 2012-2016 CAFE standards; the off-cycle credit program 
will not begin until MY 2017 for the CAFE program, as discussed in 
Section IV.I.4.c. A full description of the program, including an 
overview of key comments and responses, is provided in Section III.C.5. 
A number of technical comments were also submitted by a variety of 
stakeholders, which are addressed in Chapter 5 of the joint TSD.
d. Incentives for Electric Vehicles, Plug-in Hybrid Electric Vehicles, 
Fuel Cell Vehicles, and Compressed Natural Gas Vehicles
    In order to provide temporary regulatory incentives to promote 
advanced vehicle technologies, EPA is finalizing, as proposed, an 
incentive multiplier for CO2 emissions compliance purposes 
for all electric vehicles (EVs), plug-in hybrid electric vehicles 
(PHEVs), and fuel cell vehicles (FCVs) sold in MYs 2017 through 2021. 
In addition, in response to public comments explaining how 
infrastructure and technologies for compressed natural gas (CNG) 
vehicles could serve as a bridge to use of advanced technologies such 
as hydrogen fuel cells, EPA is finalizing an incentive multiplier for 
CNG vehicles sold in MYs 2017 through 2021. This multiplier approach 
means that each EV/PHEV/FCV/CNG vehicle would count as more than one 
vehicle in the manufacturer's compliance calculation. EPA is 
finalizing, as proposed, that EVs and FCVs start with a multiplier 
value of 2.0 in MY 2017 and phase down to a value of 1.5 in MY 2021, 
and that PHEVs would start at a multiplier value of 1.6 in MY 2017 and 
phase down to a value of 1.3 in MY 2021.\86\ EPA is finalizing 
multiplier values for both dedicated and dual fuel CNG vehicles for MYs 
2017-2021 that are equivalent to the multipliers for PHEVs. All 
incentive multipliers in EPA's program expire at the end of MY 2021. 
See Section III.C.2 for more discussion of these incentive multipliers.
---------------------------------------------------------------------------

    \86\ The multipliers are for EV/FCVs: 2017-2019--2.0, 2020--
1.75, 2021--1.5; for PHEVs and dedicated and dual fuel CNG vehicles: 
2017-2019--1.6, 2020--1.45, 2021--1.3.

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[[Page 62651]]

    NHTSA currently interprets EPCA and EISA as precluding it from 
offering additional incentives for the alternative fuel operation of 
EVs, PHEVs, FCVs, and NGVs, except as specified by statute,\87\ and 
thus did not propose and is not including incentive multipliers 
comparable to the EPA incentive multipliers described above.
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    \87\ Because 49 U.S.C. 32904(a)(2)(B) expressly requires EPA to 
calculate the fuel economy of electric vehicles using the Petroleum 
Equivalency Factor developed by DOE, which contains an incentive for 
electric operation already, 49 U.S.C. 32905(a) expressly requires 
EPA to calculate the fuel economy of FCVs using a specified 
incentive, and 49 U.S.C. 32905(c) expressly requires EPA to 
calculate the fuel economy of natural gas vehicles using a specified 
incentive, NHTSA believes that Congress' having provided clear 
incentives for these technologies in the CAFE program suggests that 
additional incentives beyond those would not be consistent with 
Congress' intent. Similarly, because the fuel economy of PHEVs' 
electric operation must also be calculated using DOE's PEF, the 
incentive for electric operation appears to already be inherent in 
the statutory structure.
---------------------------------------------------------------------------

    For EVs, PHEVs and FCVs, EPA is also finalizing, as proposed, to 
set a value of 0 g/mile for the tailpipe CO2 emissions 
compliance value for EVs, PHEVs (electricity usage) and FCVs for MY 
2017-2021, with no limit on the quantity of vehicles eligible for 0 g/
mi tailpipe emissions accounting. For MY 2022-2025, EPA is finalizing, 
as proposed, that 0 g/mi only be allowed up to a per-company cumulative 
sales cap, tiered as follows: 1) 600,000 EV/PHEV/FCVs for companies 
that sell 300,000 EV/PHEV/FCVs in MYs 2019-2021; or 2) 200,000 EV/PHEV/
FCVs for all other manufacturers. Starting with MY 2022, the compliance 
value for EVs, FCVs, and the electric portion of PHEVs in excess of 
individual automaker cumulative production caps must be based on net 
upstream accounting. These provisions are discussed in detail in 
Section III.C.2.
    As proposed and as discussed above, for EVs and other dedicated 
alternative fuel vehicles, EPA will calculate fuel economy for the CAFE 
program (under its EPCA statutory authority, as further described in 
Section I.E.2.a) using the same methodology as in the MYs 2012-2016 
rulemaking.\88\ For liquid alternative fuels, this methodology 
generally counts 15 percent of the volume of fuel used in determining 
the mpg-equivalent fuel economy. For gaseous alternative fuels (such as 
natural gas), the methodology generally determines a gasoline 
equivalent mpg based on the energy content of the gaseous fuel 
consumed, and then adjusts the fuel consumption by effectively only 
counting 15 percent of the actual energy consumed. For electricity, the 
methodology generally determines a gasoline equivalent mpg by measuring 
the electrical energy consumed, and then uses a petroleum equivalency 
factor to convert to a mpg-equivalent value. The petroleum equivalency 
factor for electricity includes an adjustment that effectively only 
counts 15 percent of the actual energy consumed. Counting 15 percent of 
the fuel volume or energy provides an incentive for alternative fuels 
in the CAFE program.
---------------------------------------------------------------------------

    \88\ See 49 U.S.C. 32904 and 32905.
---------------------------------------------------------------------------

    The methodology that EPA is finalizing for dual fueled vehicles 
under the GHG program and to calculate fuel economy for the CAFE 
program is discussed below in subsection I.C.7.a.
e. Incentives for Using Advanced, ``Game-Changing'' Technologies in 
Full-Size Pickup Trucks
    The agencies recognize that the standards presented in this final 
rule for MYs 2017-2025 will be challenging for large vehicles, 
including full-size pickup trucks often used in commercial 
applications. To help address this challenge, the program will, as 
proposed, adopt incentives for the use of hybrid electric and non-
hybrid electric ``game changing'' technologies in full-size pickup 
trucks.
    EPA is providing the incentive for the GHG program under EPA's CAA 
authority, and for the CAFE program under EPA's EPCA authority. EPA's 
GHG and NHTSA's CAFE standards are set at levels that take into account 
this flexibility as an incentive for the introduction of advanced 
technology. This provides the opportunity in the program's early model 
years to begin penetration of advanced technologies into this category 
of vehicles, and in turn creates more opportunities for achieving the 
more stringent MYs 2022-2025 truck standards.
    EPA is providing a per-vehicle CO2 credit in the GHG 
program and an equivalent fuel consumption improvement value in the 
CAFE program for manufacturers that sell significant numbers of large 
pickup trucks that are mild or strong hybrid electric vehicles (HEVs). 
To qualify for these incentives, a truck must meet minimum criteria for 
bed size, and for towing or payload capability. In order to encourage 
rapid penetration of these technologies in this vehicle segment, the 
final rules also establish minimum HEV sales thresholds, in terms of a 
percentage of a manufacturer's full-size pickup truck fleet, which a 
manufacturer must satisfy in order to qualify for the incentives.
    The program requirements and incentive amounts differ somewhat for 
mild and strong HEV pickup trucks. As proposed, mild HEVs will be 
eligible for a per-vehicle CO2 credit of 10 g/mi (equivalent 
to 0.0011 gallon/mile for a gasoline-fueled truck) during MYs 2017-
2021. To be eligible a manufacturer would have to show that the mild 
hybrid technology is utilized in a specified portion of its truck fleet 
beginning with at least 20% of a company's full-size pickup production 
in MY 2017 and ramping up to at least 80% in MY 2021. The final rule 
specifies a lower level of technology penetration for MYs 2017 and 2018 
than the 30% and 40% penetration rates proposed, based on our 
consideration of industry comments that too high a penetration 
requirement could discourage introduction of the technology. The lower 
required rates will help factor in the early experience gained with 
this technology and allow for a more efficient ramp up in manufacturing 
capacity. As proposed, strong HEV pickup trucks will be eligible for a 
20 g/mi credit (0.0023 gallon/mile) during MYs 2017-2025 if the 
technology is used on at least 10% of a company's full-size pickups in 
that model year. EPA and NHTSA are adopting specific definitions for 
mild and strong HEV pickup trucks, based on energy flow to the high-
voltage battery during testing. These definitions are slightly 
different from those proposed--reflecting the agencies' consideration 
of public comments and additional pertinent data. The details of this 
program are described in Sections II.F.3 and III.C.3, as well as in 
Chapter 5.3 of the joint TSD.
    Because there are other promising technologies besides 
hybridization that can provide significant reductions in GHG emissions 
and fuel consumption from full size pickup trucks, EPA is also 
adopting, as proposed, a performance-based CO2 emissions 
credit and equivalent fuel consumption improvement value for full-size 
pickup trucks. Eligible pickup trucks certified as performing 15 
percent better than their applicable CO2 target will receive 
a 10 g/mi credit (0.0011 gallon/mile), and those certified as 
performing 20 percent better than their target will receive a 20 g/mi 
credit (0.0023 gallon/mile). The 10 g/mi performance-based credit will 
be available for MYs 2017 to 2021 and, once qualifying; a vehicle model 
will continue to receive the credit through MY 2021, provided its 
CO2 emissions level does not increase. The 20 g/mi 
performance-based credit will be provided to a vehicle model for a 
maximum of 5 years within the 2017 to 2025 model year period provided 
its

[[Page 62652]]

CO2 emissions level does not increase. Minimum sales 
penetration thresholds apply for the performance-based credits, similar 
to those adopted for HEV credits.
    To avoid double-counting, no truck will receive credit under both 
the HEV and the performance-based approaches. Further details on the 
full-size truck technology credit program are provided in sections 
II.F.3 and III.C.3, as well as in Chapter 5.3 of the joint TSD.
    The agencies received a variety of comments on the proposal for 
this technology incentive program for full size pickup trucks. Some 
environmental groups and manufacturers questioned the need for it, 
arguing that this vehicle segment is not especially challenged by the 
standards, that hybrid systems would readily transfer to it from other 
vehicle classes, and that the credit essentially amounts to an economic 
advantage for manufacturers of these trucks. Other industry commenters 
requested that it be made available to a broader class of vehicles, or 
that the minimum penetration thresholds be removed or relaxed. There 
were also a number of comments on the technical requirements defining 
eligibility and mild/strong HEV performance. In response to the 
comments, the agencies made some changes to the proposed program, 
including adjustments to the penetration thresholds for mild HEVs, 
clarification that non-gasoline HEVs can qualify, and improvements to 
the technical criteria for mild and strong hybrids. The comments and 
changes are discussed in detail in sections II.F.3, and III.C.3, and in 
Chapter 5 of the TSD.
5. Mid-Term Evaluation
    Given the long time frame at issue in setting standards for MYs 
2022-2025, and given NHTSA's obligation to conduct a de novo rulemaking 
in order to establish final standards for vehicles for those model 
years, the agencies will conduct a comprehensive mid-term evaluation 
and agency decision-making process for the MYs 2022-2025 standards, as 
described in the proposal.
    The agencies received many comments about the importance of the 
proposed mid-term evaluation due to the long time-frame of the rule and 
the uncertainty in assumptions due to this long timeframe. Nearly all 
auto manufacturers and associations predicated their support of the MY 
2017-2025 National Program on the agencies conducting this evaluation 
and decision-making process. In addition, a number of auto 
manufacturers suggested additional factors that the agencies should 
consider during the evaluation process and also stressed the importance 
of completing the evaluation no later than April 1, 2018, the timeframe 
proposed by the agencies. Several associations also asked for more 
detail to be codified regarding the timeline, content and procedures of 
the review process. Several automakers and organizations suggested that 
the agencies also conduct a series of smaller, focused evaluations or 
``check-ins'' on key issues and technological and market trends. 
Several organizations and associations stressed the importance of 
involving CARB and broad public participation in the review process.
    The agencies also received a number of comments from environmental 
and consumer organizations expressing concerns about the mid-term 
evaluation--that it could occur too early, before reliable data on the 
new standards is available, be disruptive to auto manufacturers' 
product planning and add uncertainty, and that it should not be used as 
an opportunity to delay benefits or weaken the overall National Program 
for MY 2022-2025. Those organizations commented that if the agencies 
determined that a mid-term evaluation was necessary, it should be used 
as an opportunity to increase the stringency of the 2022-2025 
standards. Some environmental groups opposed the concept of the 
agencies performing additional interim reviews. Finally, several 
environmental organizations urged transparency and recommended that the 
agencies provide periodic updates on technology progress and compliance 
trends. One commenter, NADA, stated that the rule should not be 
organized in a way that would require a mid-term evaluation and that 
the agencies should wait to set standards for MYs 2017-2021 until more 
information is available. The mid-term evaluation comments are 
discussed in detail in sections III.B.3 and IV.A.3.b.
    The agencies are finalizing the mid-term evaluation and agency 
decision-making process as proposed. As stated in the proposal, both 
NHTSA and EPA will develop and compile up-to-date information for the 
mid-term evaluation, through a collaborative, robust and transparent 
process, including public notice and comment. The evaluation will be 
based on (1) a holistic assessment of all of the factors considered by 
the agencies in setting standards, including those set forth in this 
final rule and other relevant factors, and (2) the expected impact of 
those factors on the manufacturers' ability to comply, without placing 
decisive weight on any particular factor or projection. In order to 
align the agencies' rulemaking for MYs 2022-2025 and to maintain a 
joint national program, if the EPA determination is that standards will 
not change, NHTSA will issue its final rule concurrently with the EPA 
determination. If the EPA determination is that standards may change, 
the agencies will issue a joint NPRM and joint final rule. The 
comprehensive evaluation process will lead to final agency action by 
both agencies, as described in sections III.B.3 and IV.A.3 of this 
Notice.
    NHTSA's final action will be a de novo rulemaking conducted, as 
explained, with fresh inputs and a fresh consideration and balancing of 
all relevant factors, based on the best and most current information 
before the agency at that time. EPA will conduct a mid-term evaluation 
of the later model year light-duty GHG standards (MY2022-2025). The 
evaluation will determine what standards are appropriate for those 
model years.
    Consistent with the agencies' commitment to maintaining a single 
national framework for regulation of vehicle GHG emissions and fuel 
economy, the agencies fully expect to conduct the mid-term evaluation 
in close coordination with the California Air Resources Board (CARB). 
In adopting their GHG standards on March 22, 2012, the California Air 
Resources Board directed the Executive Officer to continue 
collaborating with EPA and NHTSA as the Federal GHG standards were 
finalized and also ``to participate in U.S. EPA's mid-term review of 
the 2022 through 2025 model year passenger vehicle greenhouse gas 
standards being proposed under the 2017 through 2025 MY National 
Program''.\89\ In addition, in order to align the agencies' proceedings 
for MYs 2022-2025 and to maintain a joint national program, if the EPA 
determination is that standards will not change, NHTSA will issue its 
final rule concurrently with the EPA determination. If the EPA 
determination is that standards may change, the agencies will issue a 
joint NPRM and joint final rule.
---------------------------------------------------------------------------

    \89\ See California Low-Emission Vehicles (LEV) & GHG 2012 
regulations approved by State of California Air Resources Board, 
Resolution 12-11. Available at: http://www.arb.ca.gov/regact/2012/cfo2012/res12-11.pdf (last accessed August 9, 2012).
---------------------------------------------------------------------------

    Further discussion of the mid-term evaluation can be found in 
Sections III.B.3 and IV.A.3.b of this final rule preamble.
6. Coordinated Compliance
    The MYs 2012-2016 final rules established detailed and 
comprehensive regulatory provisions for compliance and enforcement 
under the GHG and

[[Page 62653]]

CAFE programs. These provisions remain in place for model years beyond 
MY 2016 without additional action by the agencies and EPA and NHTSA are 
not finalizing any significant modifications to them. In the MYs 2012-
2016 final rule, NHTSA and EPA established a program that recognizes, 
and replicates as closely as possible, the compliance protocols 
associated with the existing CAA Tier 2 vehicle emission standards, and 
with earlier model year CAFE standards. The certification, testing, 
reporting, and associated compliance activities established for the GHG 
program closely track those in previously existing programs and are 
thus familiar to manufacturers. EPA already oversees testing, collects 
and processes test data, and performs calculations to determine 
compliance with both CAFE and CAA standards. Under this coordinated 
approach, the compliance mechanisms for both programs are consistent 
and non-duplicative. EPA is also continuing the provisions adopted in 
the MYs 2012-2016 GHG rule for in-use compliance with the GHG emissions 
standards.
    This compliance approach allows manufacturers to satisfy the GHG 
program requirements in the same general way they comply with 
previously existing applicable CAA and CAFE requirements. Manufacturers 
will demonstrate compliance on a fleet-average basis at the end of each 
model year, allowing model-level testing to continue throughout the 
year as is the current practice for CAFE determinations. The compliance 
program design includes a single set of manufacturer reporting 
requirements and relies on a single set of underlying data. This 
approach still allows each agency to assess compliance with its 
respective program under its respective statutory authority. The 
program also addresses EPA enforcement in instances of noncompliance.
7. Additional Program Elements
a. Compliance Treatment of Plug-in Hybrid Electric Vehicles (PHEVs), 
Dual Fuel Compressed Natural Gas (CNG) Vehicles, and Flexible Fuel 
Vehicles (FFVs)
    As proposed, EPA is finalizing provisions which state that 
CO2 emissions compliance values for plug-in hybrid electric 
vehicles (PHEVs) and dual fuel compressed natural gas (CNG) vehicles 
will be based on estimated use of the alternative fuels, recognizing 
that if a consumer incurs significant cost for a dual fuel vehicle and 
can use an alternative fuel that has significantly lower cost than 
gasoline, it is very likely that the consumer will seek to use the 
lower cost alternative fuel whenever possible. Accordingly, for 
CO2 emissions compliance, EPA is using the Society of 
Automotive Engineers ``utility factor'' methodology (based on vehicle 
range on the alternative fuel and typical daily travel mileage) to 
determine the assumed percentage of operation on gasoline and 
percentage of operation on the alternative fuel for both PHEVs and dual 
fuel CNG vehicles, along with the CO2 emissions test values 
on the alternative fuel and gasoline. Dual fuel CNG vehicles must have 
a minimum natural gas range-to-gasoline range of 2.0 in order to use 
this utility factor approach. Any dual fuel CNG vehicles that do not 
meet this requirement would use a utility factor of 0.50, the value 
that has been used in the past for dual fuel vehicles under the CAFE 
program. EPA is also finalizing, as proposed, an option allowing the 
manufacturer to use this utility factor methodology for CO2 
emissions compliance for dual fuel CNG vehicles for MY 2012 and later 
model years.
    As proposed, EPA is accounting for E85 use by flexible fueled 
vehicles (FFVs) as in the existing MY 2016 and later program, based on 
actual usage of E85 which represents a real-world tailpipe emissions 
reduction attributed to alternative fuels. Unlike PHEV and dual fuel 
CNG vehicles, there is not a significant cost differential between an 
FFV and a conventional gasoline vehicle and historically consumers have 
fueled these vehicles with E85 a very small percentage of the time. But 
E85 use in FFVs is expected to rise in the future due to Renewable Fuel 
Standard program requirements. GHG emissions compliance issues for dual 
fuel vehicles are discussed further in Section III.C.4.a.
    In the CAFE program for MYs 2017-2019, the fuel economy of dual 
fuel vehicles will be determined in the same manner as specified in the 
MY 2012-2016 rule, and as defined by EISA. Beginning in MY 2020, EISA 
does not specify how to measure the fuel economy of dual fuel vehicles, 
and EPA is finalizing its proposal, under its EPCA authority, to use 
the ``utility factor'' methodology for PHEV and CNG vehicles described 
above to determine how to apportion the fuel economy when operating on 
gasoline or diesel fuel and the fuel economy when operating on the 
alternative fuel. For FFVs under the CAFE program, EPA is using the 
same methodology it uses for the GHG program to apportion the fuel 
economy, namely based on actual usage of E85. As proposed, EPA is 
continuing to use Petroleum Equivalency Factors and the 0.15 divisor 
used in the MY 2012-2016 rule for the alternative fuels, however with 
no cap on the amount of fuel economy increase allowed. This issue is 
discussed further in Section III.C.4.b and in Section IV.I.3.a.
b. Exclusion of Emergency and Police Vehicles
    Under EPCA, manufacturers are allowed to exclude emergency vehicles 
from their CAFE fleet \90\ and all manufacturers that produce emergency 
vehicles have historically done so. In the MYs 2012-2016 program, EPA's 
GHG program applies to these vehicles. However, after further 
consideration of this issue, EPA proposed and is finalizing the same 
type of exclusion provision for these vehicles for MY 2012 and later 
because of their unique features. Law enforcement and emergency 
vehicles are necessarily equipped with features which reduce the 
ability of manufacturers to sufficiently improve the emissions control 
without compromising necessary vehicle utility. Manufacturers commented 
in support of this provision and EPA received only one comment against 
exempting emergency vehicles. These comments are addressed in Section 
III.B.8.
---------------------------------------------------------------------------

    \90\ 49 U.S.C. 32902(e).
---------------------------------------------------------------------------

c. Small Businesses, Small Volume Manufacturers, and Intermediate 
Volume Manufacturers
    As proposed, EPA is finalizing provisions to address two categories 
of smaller manufacturers. The first category is small businesses as 
defined by the Small Business Administration (SBA). For vehicle 
manufacturers, SBA's definition of small business is any firm with less 
than 1,000 employees. As with the MYs 2012-2016 program, EPA is 
exempting small businesses--that is, any company that meets the SBA's 
definition of a small business--from the MY 2017 and later GHG 
standards. EPA believes this exemption is appropriate given the unique 
challenges small businesses would face in meeting the GHG standards, 
and since these businesses make up less than 0.1% of total U.S. vehicle 
sales, there is no significant impact on emission reductions. As 
proposed, EPA is also finalizing an opt-in provision that will allow 
small businesses wishing to waive their exemption and comply with the 
GHG standards to do so. EPA received no adverse comments on its 
proposed approach for small businesses.
    EPA's final rule also addresses small volume manufacturers, those 
with U.S. annual sales of less than 5,000 vehicles.

[[Page 62654]]

Under the MYs 2012-2016 program, these small volume manufacturers are 
eligible for an exemption from the CO2 standards. As 
proposed, EPA will bring small volume manufacturers into the 
CO2 program for the first time starting in MY 2017, and 
allow them to petition EPA for alternative standards to be developed 
manufacturer-by-manufacturer in a public process. EPCA provides NHTSA 
with the authority to exempt from the generally applicable CAFE 
standards manufacturers that produce fewer than 10,000 passenger cars 
worldwide in the model year each of the two years prior to the year in 
which they seek an exemption.\91\ If NHTSA exempts a manufacturer, it 
must establish an alternate standard for that manufacturer for that 
model year, at the level that the agency decides is maximum feasible 
for that manufacturer.\92\ The exemption and alternative standard apply 
only if the exempted manufacturer also produces fewer than 10,000 
passenger cars worldwide in the year for which the exemption was 
granted. NHTSA is not changing its regulations pertaining to exemptions 
and alternative standards (49 CFR Part 525) as part of this rulemaking.
---------------------------------------------------------------------------

    \91\ 49 U.S.C. 32902(d). Implementing regulations may be found 
in 49 CFR Part 525.
    \92\ NHTSA may also apply an alternative average fuel economy 
standard to all automobiles manufactured by small volume 
manufacturers, or to classes of automobiles manufactured by small 
manufacturers, per EPCA, although this particular provision has not 
yet been exercised. See 49 U.S.C. 32902(d)(2).
---------------------------------------------------------------------------

    Also, EPA requested comment on allowing manufacturers able to 
demonstrate that they are operationally independent from a parent 
company (defined as 10% or greater ownership), to also be eligible for 
small volume manufacturer alternative standards and treatment under the 
GHG program. Under the current program, the vehicle sales of such 
companies must be aggregated with the parent company in determining 
eligibility for small volume manufacturer provisions. The only comments 
addressing this issue supported including a provision recognizing 
operational independence in the rules. EPA has continued to evaluate 
the issue and the final GHG rule includes provisions allowing 
manufacturers to demonstrate to EPA that they are operationally 
independent. This is different from the CAFE program, which aggregates 
manufacturers for compliance purposes if a control relationship exists, 
either in terms of stock ownership or design control, or both.\93\
---------------------------------------------------------------------------

    \93\ See 49 U.S.C. 32901(a)(4) and 49 CFR Part 534.
---------------------------------------------------------------------------

    EPA sought comment on whether additional lead-time is needed for 
niche intermediate sized manufacturers. Under the Temporary Lead-time 
Allowance Alternative Standards (TLAAS) provisions in the MYs 2012-2016 
GHG rules (see 75 FR 25414-417), manufacturers with sales of less than 
50,000 vehicles were provided additional flexibility through MY 2016. 
EPA invited comment on whether this or some other form of flexibility 
is warranted for niche intermediate volume, limited line manufacturers 
(see section III.B.7).
    NRDC commented in support of EPA's proposal not to extend the TLAAS 
program. EPA received comments from Jaguar Land Rover, Porsche and 
Suzuki that the standards will raise significant feasibility concerns 
for some intermediate volume manufacturers that will be part of the 
expanded TLAAS program in MY 2016, especially in the early transition 
years of the program. Porsche commented that they would need to meet 
standards up to 25 percent more stringent in MY 2017 compared to MY 
2016, requiring utilization of advanced technologies at rates wholly 
disproportionate to rates expected for larger manufacturers with more 
diverse product lines. EPA is persuaded that these manufacturers 
require additional lead-time to make the transition from the TLAAS 
regime to the more stringent standards. To provide this needed lead-
time, EPA is finalizing provisions for manufacturers with sales below 
50,000 vehicles per year that are part of the TLAAS program through MY 
2016, which will allow eligible manufacturers to remain at their MY 
2016 standards through MY 2018 and then begin making the transition to 
more stringent standards. The manufacturers that utilize this added 
lead time will be required to meet the primary program standards in MY 
2021 and later. The intermediate volume manufacturer lead-time 
provisions are discussed in detail in Section III.B.8.
d. Nitrous Oxide and Methane Standards
    As proposed, EPA is extending to MY 2017 and later the flexibility 
for manufacturers to use CO2 credits on a CO2-
equivalent basis to comply with the nitrous oxides (N2O) and 
methane (CH4) cap standards. These cap standards, 
established in the MYs 2012-2016 rulemaking were intended to prevent 
future emissions increases and were generally not expected to result in 
the application of new technologies or significant costs for 
manufacturers using current vehicle designs. EPA is also finalizing 
additional lead time for manufacturers to use compliance statements in 
lieu of N2O testing through MY 2016, as proposed. In 
addition, in response to comments, EPA is allowing the continued use of 
compliance statements in MYs 2017-2018 in cases where manufacturers are 
not conducting new emissions testing for a test group, but rather 
carrying over certification data from a previous year. EPA is also 
clarifying that manufacturers will not be required to conduct in-use 
testing for N2O in cases where a compliance statement has 
been used for certification. All of these provisions are discussed in 
detail below in section III.B.9.

D. Summary of Costs and Benefits for the National Program

    This section summarizes the projected costs and benefits of the MYs 
2017-2025 CAFE and GHG emissions standards for light-duty vehicles. 
These projections helped inform the agencies' choices among the 
alternatives considered and provide further confirmation that the final 
standards are appropriate under the agencies' respective statutory 
authorities. The costs and benefits projected by NHTSA to result from 
the CAFE standards are presented first, followed by those projected by 
EPA to result from the GHG emissions standards.
    For several reasons, the estimates for costs and benefits presented 
by NHTSA and EPA, while consistent, are not directly comparable, and 
thus should not be expected to be identical. NHTSA and EPA's standards 
are projected to result in slightly different fuel efficiency 
improvements. EPA's GHG standard is more stringent in part due to its 
assumptions about manufacturers' use of air conditioning leakage/
refrigerant replacement credits, which will result in reduced emissions 
of HFCs. NHTSA's final standards are at levels of stringency that 
assume improvements in the efficiency of air conditioning systems, but 
these standards do not require reductions in HFC emissions, which are 
generally not related to fuel economy or energy conservation. In 
addition, as noted above, the CAFE and GHG standards offer somewhat 
different program flexibilities and provisions, and the agencies' 
analyses differ in their accounting for these flexibilities, primarily 
because NHTSA is statutorily prohibited from considering some 
flexibilities when establishing CAFE standards,\94\ while EPA is not. 
These differences contribute to differences in the agencies' respective 
estimates of

[[Page 62655]]

costs and benefits resulting from the new standards.
---------------------------------------------------------------------------

    \94\ See 49 U.S.C. 32902(h).
---------------------------------------------------------------------------

    Specifically, the projected costs and benefits presented by NHTSA 
and EPA are not directly comparable because EPA's standards include air 
conditioning-related improvements in HFC reductions, and reflect 
compliance with the GHG standards, whereas NHTSA projects some 
manufacturers will pay civil penalties as part of their compliance 
strategy, as allowed by EPCA. EPCA also prohibits NHTSA from 
considering manufacturers' ability to earn, transfer or trade credits 
earned for over-compliance when setting standards. The Clean Air Act 
imposes no such limitations. The Clean Air Act also allows EPA to 
provide incentives for particular technologies, such as for electric 
vehicles and dual fueled vehicles. For these reasons, EPA's estimates 
of GHG reductions and fuel savings achieved by the GHG standards are 
higher than those projected by NHTSA for the CAFE standards. For these 
same reasons, EPA's estimates of manufacturers' costs for complying 
with the passenger car and light truck GHG standards are slightly 
higher than NHTSA's estimates for complying with the CAFE standards.
    It also bears discussion here that, for this final rulemaking, the 
agencies have analyzed the costs and benefits of the standards using 
two different forecasts of the light vehicle fleet through MY 2025. The 
agencies have concluded that the significant uncertainty associated 
with forecasting sales volumes, vehicle technologies, fuel prices, 
consumer demand, and so forth out to MY 2025, make it reasonable and 
appropriate to evaluate the impacts of the final CAFE and GHG standards 
using two baselines.\95\ One market forecast (or fleet projection), 
very similar to the one used for the NPRM, uses (corrected) MY 2008 
CAFE certification data, information from AEO 2011, and information 
purchased from CSM in December of 2009. The agencies received comments 
regarding the market forecast used in the NPRM suggesting that updates 
in several respects could be helpful to the agencies' analysis of final 
standards; given those comments and since the agencies were already 
considering producing an updated fleet projection, the final 
rulemakings also utilize a second market forecast using MY 2010 CAFE 
certification data, information from AEO 2012, and information 
purchased from LMC Automotive (formerly J.D. Power Forecasting).
---------------------------------------------------------------------------

    \95\ We refer to these baselines as ``fleet projections'' or 
``market forecasts'' in Section II.B of the preamble and Chapter 1 
of the TSD and elsewhere in the administrative record. The term 
``baseline'' has a specific definition and is described in Chapter 1 
of the TSD.
---------------------------------------------------------------------------

    These two market forecasts contain certain differences, although as 
will be discussed below, the differences are not significant enough to 
change the agencies' decision as to the structure and stringency of the 
final standards, and indeed corroborate the reasonableness of the EPA 
final GHG standards and that the NHTSA standards are the maximum 
feasible. For example, the 2008 based fleet forecast uses the MY 2008 
``baseline'' fleet, which represents the most recent model year for 
which the industry had sales data that was not affected by the 
subsequent economic recession. On the other hand, the 2010 based fleet 
projection employs a market forecast (provided by LMC Automotive) which 
is more current than the projection provided by CSM (utilized for the 
MY 2008 based fleet projection). The CSM forecast appears to have been 
particularly influenced by the recession, showing major declines in 
market share for some manufacturers (e.g., Chrysler) which the agencies 
do not believe are reasonably reflective of future trends.
    However, the MY 2010 based fleet projection also is highly 
influenced by the economic recession. The MY 2010 CAFE certification 
data has become available since the proposal (see section 1.2.1 of the 
Joint TSD for the proposed rule, which noted the possibility of these 
data becoming available), and is used in EPA's alternative analysis, 
and continues to show the effects of the recession. For example, 
industry-wide sales were skewed down 20% \96\ compared to pre-recession 
MY 2008 levels. For some companies like Chrysler, Mitsubishi, and 
Subaru, sales were down 30-40% \97\ from MY 2008 levels. For BMW, 
General Motors, Jaguar/Land Rover, Porsche, and Suzuki, sales were down 
more than 40% \98\ from 2008 levels. Using the MY 2008 vehicle data 
avoids projecting these abnormalities in predicting the future fleet, 
although it also perpetuates vehicle brands and models (and thus, their 
outdated fuel economy levels and engineering characteristics) that have 
since been discontinued. The MY 2010 CAFE certification data accounts 
for the phase-out of some brands (e.g., Saab) and the introduction of 
some technologies (e.g., Ford's Ecoboost engine), which may be more 
reflective of the future fleet in this respect.
---------------------------------------------------------------------------

    \96\ These figures are derived from the manufacturer and fleet 
volume tables in Chapter 1 of the TSD.
    \97\ These figures are derived from the manufacturer and fleet 
volume tables in Chapter 1 of the TSD.
    \98\ These figures are derived from the manufacturer and fleet 
volume tables in Chapter 1 of the TSD.
---------------------------------------------------------------------------

    Thus, given the volume of information that goes into creating a 
baseline forecast and given the significant uncertainty in any 
projection out to MY 2025, the agencies think that the best way to 
illustrate the possible impacts of that uncertainty for purposes of 
this rulemaking is the approach taken here of analyzing the effects of 
the final standards under both the MY 2008-based and the MY 2010-based 
fleet projections. EPA is presenting its primary analysis of the 
standards using the same baseline/future fleet projection that was used 
in the NPRM (i.e., corrected MY 2008 CAFE certification data, 
information from AEO 2011, and a future fleet forecast purchased from 
CSM). EPA also conducted an alternative analysis of the standards based 
on MY 2010 CAFE certification data, updated AEO 2012 (early release) 
projections of the future fleet sales volumes, and a forecast of the 
future fleet mix projections to MY 2025 purchased from LMC Automotive. 
At the same time, given that EPA believes neither projection is 
strongly superior to the other, EPA has performed a detailed analysis 
of the final standards using the MY 2010 baseline, and we have 
concluded that the final standards are likewise appropriate using this 
alternative baseline/fleet projection. EPA's analysis of the 
alternative baseline/future fleet (based on MY 2010) is presented in 
EPA's Final Regulatory Impact Analysis (RIA), Chapter 10. NHTSA's 
primary analysis uses both market forecasts, and accordingly presents 
values from both in tables throughout this preamble and in NHTSA's 
FRIA. Joint TSD Chapter 1 includes a full description of the two market 
projections and their derivation.
    As with the MYs 2012-2016 standards, and the MYs 2014-2018 
standards for heavy duty vehicles and engines, NHTSA and EPA have 
harmonized the programs as much as possible, and continuing the 
National Program to MYs 2017-2025 will result in significant cost 
savings and other advantages for the automobile industry by allowing 
them to manufacture and sell one fleet of vehicles across the U.S., 
rather than potentially having to comply with multiple state standards 
that may occur in the absence of the National Program. It is also 
important to note that NHTSA's CAFE standards and EPA's GHG standards 
will both be in effect, and each will lead to increases in average fuel 
economy and reductions in GHGs. The two agencies' standards together 
comprise the National Program,

[[Page 62656]]

and the following discussions of the respective costs and benefits of 
NHTSA's CAFE standards and EPA's GHG standards do not change the fact 
that both the CAFE and GHG standards, jointly, are the source of the 
benefits and costs of the National Program.
1. Summary of Costs and Benefits for the NHTSA CAFE Standards
    In reading the following section, we note that tables are 
identified as reflecting ``estimated required'' values and ``estimated 
achieved'' values. When establishing standards, EPCA allows NHTSA to 
only consider the fuel economy of dual-fuel vehicles (for example, FFVs 
and PHEVs) when operating on gasoline, and prohibits NHTSA from 
considering the use of dedicated alternative fuel vehicle credits 
(including for example EVs), credit carry-forward and carry-back, and 
credit transfer and trading. NHTSA's primary analysis of costs, fuel 
savings, and related benefits from imposing higher CAFE standards does 
not include them. However, EPCA does not prohibit NHTSA from 
considering the fact that manufacturers may pay civil penalties rather 
than comply with CAFE standards, and NHTSA's primary analysis accounts 
for some manufacturers' tendency to do so. The primary analysis is 
generally identified in tables throughout this document by the term 
``estimated required CAFE levels.''
    To illustrate the effects of the flexibilities and technologies 
that NHTSA is prohibited from including in its primary analysis, NHTSA 
performed a supplemental analysis of these effects on benefits and 
costs of the CAFE standards that helps to illustrate their real-world 
impacts. As an example of one of the effects, including the use of FFV 
credits reduces estimated per-vehicle compliance costs of the program, 
but does not significantly change the projected fuel savings and 
CO2 reductions, because FFV credits reduce the fuel economy 
levels that manufacturers achieve not only under the standards, but 
also under the baseline MY 2016 CAFE standards. As another example, 
including the operation of PHEV vehicles on both electricity and 
gasoline, and the expected use of EVs for compliance may raise the fuel 
economy levels that manufacturers achieve under the proposed standards. 
The supplemental analysis is generally identified in tables throughout 
this document by the term ``estimated achieved CAFE levels.''
    Thus, NHTSA's primary analysis shows the estimates the agency 
considered for purposes of establishing new CAFE standards, and its 
supplemental analysis including manufacturer use of flexibilities and 
advanced technologies currently reflects the agency's best estimate of 
the potential real-world effects of the CAFE standards.
    Without accounting for the compliance flexibilities and advanced 
technologies that NHTSA is prohibited from considering when determining 
the maximum feasible level of new CAFE standards, since manufacturers' 
decisions to use those flexibilities and technologies are voluntary, 
NHTSA estimates that the required fuel economy increases would lead to 
fuel savings totaling a range from 180 billion to 184 billion gallons 
throughout the lives of light duty vehicles sold in MYs 2017-2025. At a 
3 percent discount rate, the present value of the economic benefits 
resulting from those fuel savings is between $513 billion and $525 
billion; at a 7 percent private discount rate, the present value of the 
economic benefits resulting from those fuel savings is between $400 
billion and $409 billion.
    The agency further estimates that these new CAFE standards will 
lead to corresponding reductions in CO2 emissions totaling 
1.9 billion metric tons during the lives of light duty vehicles sold in 
MYs 2017-2025. The present value of the economic benefits from avoiding 
those emissions is approximately $53 billion, based on a global social 
cost of carbon value of about $26 per metric ton (in 2017, and growing 
thereafter).\99\ All costs are in 2010 dollars.
---------------------------------------------------------------------------

    \99\ NHTSA also estimated the benefits associated with three 
more estimates of a one ton GHG reduction in 2017 ($6, $41, and 
$79), which will likewise grow thereafter. See Section II.E for a 
more detailed discussion of the social cost of carbon.
---------------------------------------------------------------------------

    Accounting for compliance flexibilities reduces the fuel savings 
achieved by the standards, as manufacturers are able to comply through 
credit mechanisms that reduce the amount of fuel economy technology 
that must be added to new vehicles in order to meet the targets set by 
the standards. NHTSA estimates that the fuel economy increases would 
lead to fuel savings totaling about 170 billion gallons throughout the 
lives of light duty vehicles sold in MYs 2017-2025, when compliance 
flexibilities are considered. At a 3 percent discount rate, the present 
value of the economic benefits resulting from those fuel savings is 
between $481 billion and $488 billion; at a 7 percent private discount 
rate, the present value of the economic benefits resulting from those 
fuel savings is between $375 billion and $380 billion. The agency 
further estimates that these new CAFE standards will lead to 
corresponding reductions in CO2 emissions totaling 1.8 
billion metric tons during the lives of light duty vehicles sold in MYs 
2017-2025. The present value of the economic benefits from avoiding 
those emissions is approximately $49 billion, based on a global social 
cost of carbon value of about $26 per metric ton (in 2017, and growing 
thereafter).

Table I-7--NHTSA's Estimated MYs 2017-2025 Costs, Benefits, and Net Benefits ($Billion) Under the CAFE Standards
                                              (Estimated Achieved)
----------------------------------------------------------------------------------------------------------------
                                                              Totals                        Annualized
                                                 ---------------------------------------------------------------
                                  Baseline Fleet    3% Discount     7% Discount     3% Discount     7% Discount
                                                       rate            rate            rate            rate
----------------------------------------------------------------------------------------------------------------
                                  Cumulative for MYs 2017-2021 Final Standards
----------------------------------------------------------------------------------------------------------------
Costs...........................            2010          ($61)-          ($58)-         ($2.4)-         ($3.6)-
                                            2008           ($57)           ($54)          ($2.2)          ($3.3)
Benefits........................            2010           $243-           $195-           $9.2-          $11.3-
                                            2008            $240            $194            $9.0           $11.0
Net Benefits....................            2010           $183-           $137-           $6.8-           $7.7-
                                            2008            $184            $141            $6.8            $7.8
----------------------------------------------------------------------------------------------------------------

[[Page 62657]]

 
                     Cumulative for MYs 2017-2025 (Includes MYs 2022-2025 Augural Standards)
----------------------------------------------------------------------------------------------------------------
Costs...........................            2010         ($154)-         ($147)-         ($5.4)-         ($7.6)-
                                            2008          ($156)          ($148)          ($5.4)          ($7.5)
Benefits........................            2010           $629-           $502-          $21.0-          $24.2-
                                            2008            $639            $510           $21.3           $24.4
Net Benefits....................            2010           $476-           $356-          $15.7-          $16.7-
                                            2008            $483            $362           $15.9           $16.9
----------------------------------------------------------------------------------------------------------------

   Table I-8--NHTSA's Estimated Fuel Saved (Billion Gallons and Barrels) and CO2 Emissions Avoided (mmt) Under the CAFE Standards (Estimated Required)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   Total                                         Total
                                     MY     Earlier    2017     2018     2019     2020     2021   through    2022     2023     2024     2025    through
                                  baseline                                                          2021                                          2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger Cars:
    Fuel (b. gallons)...........      2008     5.3-     2.8-     5.3-     7.7-    10.9-    13.0-    45.0-    14.4-    15.8-    18.0-    19.7-     112.9-
                                      2010      7.7      3.6      5.3      8.3     10.8     13.0     48.7     14.3     16.2     18.3     20.0      117.4
    Fuel (b. barrels)...........      2008     0.1-     0.1-     0.1-     0.2-     0.3-     0.3-     1.1-     0.3-     0.4-     0.4-     0.5-       2.7-
                                      2010      0.2      0.1      0.1      0.2      0.3      0.3      1.2      0.3      0.4      0.4      0.5        2.8
    CO2 (mmt)...................      2008    58.1-    31.0-    58.1-    84.0-   116.9-   139.9-   488.0-   155.5-   171.0-   192.7-   210.9-   1,218.2-
                                      2010     83.9     39.5     57.2     90.1    117.4    140.9    529.0    155.8    176.3    198.5    216.4    1,275.9
Light Trucks:
    Fuel (b. gallons)...........      2008     0.5-     1.0-     2.5-     4.8-     6.8-     9.4-    25.0-    10.3-    10.9-    11.8-    12.7-      70.7-
                                      2010      0.9      0.8      1.5      3.7      5.6      8.2     20.7      8.9     10.0     11.1     12.1       62.9
    Fuel (b. barrels)...........      2008     0.0-     0.0-     0.1-     0.1-     0.2-     0.2-     0.6-     0.2-     0.3-     0.3-     0.3-       1.7-
                                      2010      0.0      0.0      0.0      0.1      0.1      0.2      0.4      0.2      0.2      0.3      0.3        1.5
    CO2 (mmt)...................      2008     5.8-    11.1-    26.8-    52.1-    74.0-   102.1-   271.9-   112.1-   118.6-   128.5-   138.0-     769.1-
                                      2010     10.1      8.6     16.1     39.9     60.1     87.8    222.6     95.8    107.5    119.9    130.8      676.6
Combined
    Fuel (b. gallons)...........      2008     5.9-     3.9-     7.8-    12.5-    17.7-    22.3-    70.1-    24.7-    26.7-    29.8-    32.4-     183.5-
                                      2010      8.6      4.4      6.7     12.0     16.4     21.1     69.2     23.2     26.2     29.5     32.1      180.3
    Fuel (b. barrels)...........      2008     0.1-     0.1-     0.2-     0.3-     0.4-     0.5-     1.6-     0.6-     0.6-     0.7-     0.8-       4.4-
                                      2010      0.2      0.1      0.2      0.3      0.4      0.5      1.7      0.6      0.6      0.7      0.8        4.3
    CO2 (mmt)...................      2008    63.9-    42.1-    84.9-   136.1-   191.0-   242.0-   760.0-   267.7-   289.6-   321.2-   348.9-   1,987.3-
                                      2010     93.9     48.1     73.3    130.0    177.5    228.6    751.4    251.6    283.9    318.4    347.2    1,952.5
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Considering manufacturers' ability to employ compliance 
flexibilities and advanced technologies for meeting the standards, 
NHTSA estimates the following for fuel savings and avoided 
CO2 emissions, assuming FFV credits will be used toward both 
the baseline and final standards:

   Table I-9--NHTSA's Estimated Fuel Saved (Billion Gallons and Barrels) and CO2 Emissions Avoided (mmt) Under the CAFE Standards (Estimated Achieved)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   Total                                         Total
                                     MY     Earlier    2017     2018     2019     2020     2021   through    2022     2023     2024     2025    through
                                  baseline                                                          2021                                          2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger Cars:
    Fuel (b. gallons)...........      2008     5.5-     2.9-     5.1-     7.5-    10.3-    12.0-    43.3-    13.7-    14.9-    16.8-    18.5-     107.3-
                                      2010      6.1      3.5      5.1      7.8      9.7     12.0     44.2     13.2     15.0     17.1     18.2      107.7
    Fuel (b. barrels)...........      2008     0.1-     0.1-     0.1-     0.2-     0.2-     0.3-     1.0-     0.3-     0.4-     0.4-     0.4-       2.6-
                                      2010      0.1      0.1      0.1      0.2      0.2      0.3      1.0      0.3      0.4      0.4      0.4        2.6
    CO2 (mmt)...................      2008    59.9-    32.2-    55.1-    81.5-   111.7-   130.6-   471.0-   148.8-   161.2-   180.8-   196.6-   1,158.3-
                                      2010     66.5     38.7     55.6     85.3    105.4    130.4    481.9    143.7    162.9    185.4    196.9    1,170.7
Light Trucks:
    Fuel (b. gallons)...........      2008     0.8-     1.0-     2.2-     4.1-     5.9-     7.9-    21.9-     9.0-     9.6-    10.7-    11.8-      62.8-
                                      2010      2.0      1.2      1.6      4.2      5.6      7.7     22.3      8.4      9.5     10.4     10.7       61.5
    Fuel (b. barrels)...........      2008     0.0-     0.0-     0.1-     0.1-     0.1-     0.2-     0.5-     0.2-     0.2-     0.3-     0.3-       1.5-
                                      2010      0.0      0.0      0.0      0.1      0.1      0.2      0.4      0.2      0.2      0.2      0.3        1.5
    CO2 (mmt)...................      2008     8.1-    10.4-    24.1-    44.5-    63.9-    86.4-   237.4-    97.9-   104.7-   116.2-   128.3-     684.5-
                                      2010     22.2     13.3     17.8     45.6     60.2     82.4    241.5     90.5    101.8    112.3    115.5      661.5
Combined
    Fuel (b. gallons)...........      2008     6.3-     3.9-     7.3-    11.6-    16.2-    20.0-    65.3-    22.7-    24.5-    27.4-    30.3-     170.1-
                                      2010      8.1      4.8      6.7     12.0     15.2     19.7     66.5     21.6     24.5     27.5     28.9      169.2
    Fuel (b. barrels)...........      2008     0.1-     0.1-     0.2-     0.3-     0.4-     0.5-     1.6-     0.5-     0.6-     0.7-     0.7-       4.0-
                                      2010      0.2      0.1      0.2      0.3      0.4      0.5      1.7      0.5      0.6      0.7      0.7        4.0
    CO2 (mmt)...................      2008    68.0-    42.6-    79.2-   126.0-   175.5-   216.9-   708.2-   246.6-   265.9-   296.9-   324.9-   1,842.7-
                                      2010     88.7     51.9     73.5    130.9    165.5    212.8    723.3    234.2    264.7    297.6    312.4    1,832.2
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 62658]]

     NHTSA estimates that the fuel economy increases resulting from the 
standards will produce other benefits both to drivers (e.g., reduced 
time spent refueling) and to the U.S. as a whole (e.g., reductions in 
the costs of petroleum imports beyond the direct savings from reduced 
oil purchases),\100\ as well as some disbenefits (e.g., increased 
traffic congestion) caused by drivers' tendency to travel more when the 
cost of driving declines (as it does when fuel economy increases). 
NHTSA has estimated the total monetary value to society of these 
benefits and disbenefits, and estimates that the standards will produce 
significant net benefits to society. Using a 3 percent discount rate, 
NHTSA estimates that the present value of these net benefits will range 
from $498 billion to $507 billion over the lives of the vehicles sold 
during MYs 2017-2025; using a 7 percent discount rate a narrower range 
from $372 billion to $377 billion. More discussion regarding monetized 
benefits can be found in Section IV of this preamble and in NHTSA's 
FRIA. Note that the benefit calculation in the following tables 
includes the benefits of reducing CO2 emissions,\101\ but 
not the benefits of reducing other GHG emissions (those have been 
addressed in a sensitivity analysis discussed in Section IV of this 
preamble and in NHTSA's FRIA).
---------------------------------------------------------------------------

    \100\ We note, of course, that reducing the amount of fuel 
purchased also reduces tax revenue for the Federal and state/local 
governments. NHTSA discusses this issue in more detail in Chapter 
VIII of its RIA.
    \101\ CO2 benefits for purposes of these tables are 
calculated using the $26/ton SCC value. Note that the net present 
value of reduced GHG emissions is calculated differently from 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.

                              Table I-10 NHTSA's Discounted Benefits ($Billion) Under the CAFE Standards Using a 3 and 7 Percent Discount Rate (Estimated Required)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                      Total                                        Total
                                       MY baseline                             Earlier    2017     2018     2019     2020     2021   through    2022     2023     2024     2025   through
                                                                                                                                       2021                                         2025
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        3% discount rate
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger  2008..............................................................    19.2-    10.4-    19.6-    28.6-    40.2-    48.4-  166.4-1    54.2-    60.1-    68.6-    75.9-   425.3-
      cars 2010..............................................................     27.5     13.2     19.3     30.5     40.1     48.5     79.1     54.0     61.6     70.1     77.0    441.9
    Light  2008 2010.........................................................     1.9-     3.7-     8.9-    17.3-    24.8-    34.4-  91.0-73    38.1-    40.7-    44.5-    48.3-   262.6-
    trucks                                                                         3.3      2.8      5.3     13.1     19.9     29.4       .8     32.4     36.7     41.3     45.6    229.9
 Combined  2008 2010.........................................................    21.1-    14.1-    28.5-    45.9-    65.0-    82.8-  257.4-2    92.3-   100.7-   113.1-   124.2-   687.5-
                                                                                  30.8     16.0     24.5     43.6     60.0     77.9     52.8     86.4     98.3    111.3    122.5    671.4
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        7% discount rate
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger  2008..............................................................    15.3-     8.3-    15.7-    22.9-    32.2-    38.8-  133.2-1    43.4-    48.2-    55.0-    60.8-   340.7-
      cars 2010..............................................................     22.0     10.6     15.5     24.5     32.1     38.9     43.6     43.3     49.4     56.2     61.7    354.1
    Light  2008 2010.........................................................     1.5-     2.9-     7.0-    13.7-    19.7-    27.3-  72.1-58    30.2-    32.3-    35.3-    38.3-   208.2-
    trucks                                                                         2.6      2.2      4.2     10.4     15.8     23.4       .6     25.7     29.1     32.8     36.1    182.3
 Combined  2008 2010.........................................................    16.8-    11.2-    22.7-    36.6-    51.9-    66.0-  205.2-2    73.6-    80.4-    90.3-    99.1-   548.6-
                                                                                  24.7     12.8     19.6     34.8     47.9     62.2     02.0     69.0     78.4     88.8     97.8    536.0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Considering manufacturers' ability to employ compliance 
flexibilities and advanced technologies for meeting the standards, 
NHTSA estimates the present value of these benefits will be reduced as 
follows:

                              Table I-11 NHTSA's Discounted Benefits ($Billion) under the CAFE Standards Using a 3 and 7 Percent Discount Rate (Estimated Achieved)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             Total                                                       Total
                                 MY baseline    Earlier        2017         2018         2019        2020        2021       through      2022        2023        2024        2025       through
                                                                                                                             2021                                                        2025
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        3% discount rate
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008.......  19.7-......  10.8-......  18.7-......  27.8-......  38.4-.....  45.2-.....  160.6-163.  51.9-.....  56.8-.....  64.4-.....  71.1-.....  404.8-
                                 2010.......  21.8.......  12.9.......  18.7.......  28.9.......  36.0......  44.9......   2.         49.9......  57.0......  65.4......  70.2......  405.6
Light trucks...................  2008.......  2.7-.......  3.4-.......  8.0-.......  14.8-......  21.5-.....  29.2-.....  79.6-80.0.  33.4-.....  36.0-.....  40.3-.....  44.8-.....  234.2-
                                 2010.......  7.2........  4.4........  5.9........  15.0.......  19.9......  27.6......              30.6......  34.7......  38.7......  40.2......  224.1
Combined.......................  2008.......  22.4-......  14.2-......  26.6-......  42.5-......  59.8-.....  74.4-.....  239.9-242.  85.2-.....  92.7-.....  104.6-....  115.9-....  638.5-
                                 2010.......  29.0.......  17.3.......  24.6.......  43.8.......  55.8......  72.4......   9.         80.3......  91.6......  104.0.....  110.2.....  629.1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        7% discount rate
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008.......  15.8-......  8.7-.......  15.0-......  22.3-......  30.8-.....  36.2-.....  128.8-130.  41.6-.....  45.5-.....  51.6-.....  57.0-.....  324.3-
                                 2010.......  17.4.......  10.3.......  15.0.......  23.1.......  28.8......  36.0......   6.         40.0......  45.7......  52.5......  56.2......  325.0
Light trucks...................  2008.......  2.1-.......  2.7-.......  6.3-.......  11.8-......  17.1-.....  23.2-.....  63.2-63.5.  26.5-.....  28.6-.....  32.0-.....  35.5-.....  185.7-
                                 2010.......  5.7........  3.5........  4.7........  11.9.......  15.8......  21.9......              24.3......  27.5......  30.7......  31.8......  177.7
Combined.......................  2008.......  17.9-......  11.4-......  21.3-......  34.0-......  47.8-.....  59.4-.....  191.8-194.  68.0-.....  74.0-.....  83.5-.....  92.5-.....  509.7-
                                 2010.......  23.2.......  13.8.......  19.6.......  35.0.......  44.6......  57.8......   0.         64.1......  73.1......  83.0......  88.0......  502.2
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    NHTSA attributes most of these benefits (between $513 billion and 
$525 billion at a 3 percent discount rate, or between $400 billion and 
$409 billion at a 7 percent discount rate, excluding consideration of 
compliance flexibilities and advanced technologies for meeting the 
standards) to reductions in fuel consumption, valuing fuel (for 
societal purposes) at the future pre-tax prices projected in the Energy 
Information Administration's (EIA) reference case

[[Page 62659]]

forecast from the Annual Energy Outlook (AEO) 2012. NHTSA's RIA 
accompanying this rulemaking presents a detailed analysis of specific 
benefits of the rule.

   Table I-12--Summary of NHTSA's Fuel Savings and CO2 Emissions Reduction Under the CAFE Standards (Estimated
                                                    Required)
----------------------------------------------------------------------------------------------------------------
                                                                                    3% discount     7% discount
                                                    MY baseline       Amount           rate            rate
----------------------------------------------------------------------------------------------------------------
2017-2021 standards:
    Fuel savings (billion gallons)..............            2008          70.1 -          $196 -          $153 -
                                                            2010            69.2            $193            $151
    CO2 emissions reductions (million metric                2008           760 -         $19.3 -         $19.3 -
     tons)......................................
                                                            2010          751.40             $19             $19
2017-2025 standards:
    Fuel savings (billion gallons)..............            2008         183.5 -          $525 -          $409 -
                                                            2010           180.3            $513            $400
    CO2 emissions reductions (million metric                2008         1,987 -           $53 -           $53 -
     tons)......................................
                                                            2010           1,953             $52             $52
----------------------------------------------------------------------------------------------------------------

    NHTSA estimates that the increases in technology application 
necessary to achieve the projected improvements in fuel economy will 
entail considerable monetary outlays. The agency estimates that the 
incremental costs for achieving the CAFE standards--that is, outlays by 
vehicle manufacturers over and above those required to comply with the 
MY 2016 CAFE standards--will total between about $134 billion and $140 
billion.

                                           Table I-13--NHTSA's Incremental Technology Outlays ($Billion) Under the CAFE Standards (Estimated Required)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                         Total
                                 MY baseline    Earlier      2017        2018        2019        2020        2021       through       2022         2023        2024        2025         Total
                                                                                                                         2021                                                       through 2025
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars................  2008........  3.9 -.....  2.3 -.....  4.3 -.....  6.1 -.....  9.4 -.....  11.7 -....  37.7 -....  13.1 -......  14.6 -....  18.8 -....  20.2 -....  104.4 -
                                2010........  7.7.......  3.6.......  4.8.......  6.5.......  8.5.......  9.9.......  41.0......  11.0........  12.4......  15.5......  16.7......  96.6
Light trucks..................  2008........  0.1 -.....  0.4 -.....  1.1 -.....  2.3 -.....  3.4 -.....  4.8 -.....  12.1 -....  5.4 -.......  5.6 -.....  6.1 -.....  6.6 -.....  35.9 -
                                2010........  1.1.......  0.8.......  1.1.......  2.2.......  3.4.......  4.9.......  13.5......  5.1.........  5.7.......  6.2.......  6.6.......  37.1
Combined......................  2008........  4.0 -.....  2.8 -.....  5.4 -.....  8.4 -.....  12.8 -....  16.5 -....  49.9 -....  18.5 -......  20.2 -....  24.9 -....  26.8 -....  140.3 -
                                2010........  8.7.......  4.4.......  5.8.......  8.7.......  11.9......  14.9......  54.4......  16.1........  18.1......  21.7......  23.3......  133.7
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    However, NHTSA estimates that manufacturers employing compliance 
flexibilities and advanced technologies to meet the standards can 
significantly reduce these outlays:

                                           Table I-14--NHTSA's Incremental Technology Outlays ($Billion) Under the CAFE Standards (Estimated Achieved)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                         Total
                                 MY baseline    Earlier      2017        2018        2019        2020        2021       through       2022         2023        2024        2025         Total
                                                                                                                         2021                                                       through 2025
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars................  2008........  3.3 -.....  2.0 -.....  3.6 -.....  5.5 -.....  8.5 -.....  10.6 -....  33.5 -....  12.2 -......  13.2 -....  15.6 -....  17.5 -....  91.9 -
                                2010........  4.6.......  2.8.......  4.2.......  6.0.......  7.6.......  9.4.......  34.6......  10.3........  11.5......  13.9......  14.4......  84.6
Light trucks..................  2008........  0.4 -.....  0.5 -.....  1.0 -.....  1.8 -.....  2.6 -.....  3.6 -.....  9.9 -.....  4.2 -.......  4.5 -.....  5.0 -.....  5.8 -.....  29.5 -
                                2010........  1.6.......  0.9.......  1.0.......  2.3.......  3.2.......  4.7.......  13.7......  4.9.........  5.4.......  5.8.......  5.7.......  35.5
Combined......................  2008........  3.7 -.....  2.5 -.....  4.6 -.....  7.3 -.....  11.1 -....  14.2 -....  43.4 -....  16.4 -......  17.8 -....  20.6 -....  23.3 -....  121.4 -
                                2010........  6.2.......  3.7.......  5.2.......  8.3.......  10.8......  14.0......  48.2......  15.3........  16.9......  19.7......  20.0......  120.1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    NHTSA projects that manufacturers will recover most or all of these 
additional costs through higher selling prices for new cars and light 
trucks. To allow manufacturers to recover these increased outlays (and, 
to a much less extent, the civil penalties that some manufacturers are 
expected to pay for non-compliance), the agency estimates that the 
standards will lead to increase in average new vehicle prices ranging 
from $183 to $287 per vehicle in MY 2017 to between $1,461 and $1,616 
per vehicle in MY 2025:

                Table I-15--NHTSA's Incremental Increases in Average New Vehicle Costs ($) Under the CAFE Standards (Estimated Required)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 MY baseline     2017        2018        2019        2020        2021        2022        2023        2024        2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars................  2008........  244 -.....  455 -.....  631 -.....  930 -.....  1,143 -...  1,272 -...  1,394 -...  1,751 -...  1,827 -

[[Page 62660]]

 
                                2010........  364.......  484.......  659.......  858.......  994.......  1,091.....  1,221.....  1,482.....  1,578
Light trucks..................  2008........  78 -......  192 -.....  423 -.....  622 -.....  854 -.....  951 -.....  997 -.....  1,081 -...  1,183 -
                                2010........  147.......  196.......  397.......  629.......  908.......  948.......  1,056.....  1,148.....  1,226
Combined......................  2008........  183 -.....  360 -.....  557 -.....  823 -.....  1,043 -...  1,162 -...  1,259 -...  1,528 -...  1,616 -
                                2010........  287.......  382.......  567.......  779.......  964.......  1,042.....  1,165.....  1,370.....  1,461
--------------------------------------------------------------------------------------------------------------------------------------------------------

    And as before, NHTSA estimates that manufacturers employing 
compliance flexibilities and advance technologies to meet the standards 
will significantly reduce these increases.

                Table I-16--NHTSA's Incremental Increases in Average New Vehicle Costs ($) Under the CAFE Standards (Estimated Achieved)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 MY baseline     2017        2018        2019        2020        2021        2022        2023        2024        2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars................  2008........  208-......  377-......  571-......  837-......  1,034-....  1,168-....  1,255-....  1,440-....  1,577-
                                2010........  284.......  424.......  603.......  762.......  934.......  1,024.....  1,129.....  1,328.....  1,361
Light trucks..................  2008........  87-.......  179-......  331-......  470-......  648-......  752-......  808-......  888-......  1,040-
                                2010........  158.......  187.......  416.......  596.......  863.......  911.......  1,000.....  1,081.....  1,047
Combined......................  2008........  164-......  306-......  486-......  709-......  900-......  1,025-....  1,104-....  1,256-....  1,400-
                                2010........  239.......  340.......  537.......  704.......  909.......  985.......  1,085.....  1,245.....  1,257
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Despite estimated increases in average vehicle prices of between 
$183 to $287 per vehicle in MY 2017 to between $1,461 and $1,616 per 
vehicle in MY 2025, NHTSA estimates that discounted fuel savings over 
the vehicles' lifetimes will be sufficient to offset initial costs. 
Even discounted at 7%, lifetime fuel savings are estimated to be more 
than 2.5 times the incremental price increase induced by manufacturers' 
compliance with the standards. Although NHTSA estimates lifetime fuel 
cost savings using 3% and 7% discount rates based on OMB guidance, it 
is possible that consumers use different discount rates when valuing 
fuel savings, or value savings over a period of time shorter than the 
vehicle's full useful life. A more nuanced discussion of consumer 
valuation of fuel savings appears in Section IV.G.6.

[[Page 62661]]

[GRAPHIC] [TIFF OMITTED] TR15OC12.006

    As is the case with technology costs, accounting for the program's 
compliance flexibilities reduces savings in lifetime fuel expenditures 
due to lower levels of achieved fuel economy than are required under 
the standards.

[[Page 62662]]

[GRAPHIC] [TIFF OMITTED] TR15OC12.007

    The CAFE standards are projected to produce net benefits in a range 
from $498 billion to $507 billion at a 3 percent discount rate (a range 
of $476 billion to $483 billion, with compliance flexibilities), or 
between $372 billion and $377 billion at a 7 percent discount rate (a 
range of $356 billion to $362 billion, with compliance flexibilities), 
over the useful lives of the light duty vehicles sold during MYs 2017-
2025.
    While the estimated incremental technology outlays and incremental 
increases in average vehicle costs for the final MYs 2017-2021 
standards in today's analysis are similar to the estimates in the 
proposal, we note for the reader's reference that the incremental cost 
estimates for the augural standards in MYs 2022-2025 are lower than in 
the proposal. The lower costs in those later model years result from 
the updated analysis used in this final rule. In MY 2021, the estimated 
incremental technology outlays for the combined fleet range from $14.9 
billion to $16.5 billion as compared to $17 billion in the proposal, 
while the estimated incremental increases in average vehicle costs 
range from $964 to $1,043, as compared to $1,104 in the proposal. In MY 
2025, the estimated incremental technology outlays for the combined 
fleet range from $23.3 billion to $26.8 billion, as compared to $32.4 
billion in the proposal, while the estimated incremental increases in 
average vehicle costs range from $1,461 to $1,616, as compared to 
$1,988 in the proposal. The changes in the MY 2025 incremental costs 
reflect the combined result of a number of changes and corrections to 
the CAFE model and inputs, including (but not limited to) the following 
items:
     Focused corrections were made to the MY2008-based market 
forecast;
     A new MY2010-based market forecast was introduced;
     Mild HEV technology and off-cycle technologies are now 
available in the analysis;
     The amount of mass reduction applied in the analysis \102\ 
has changed;
---------------------------------------------------------------------------

    \102\ The agencies limited the maximum amount of mass reduction 
technology that was applied to lighter vehicles in order that the 
analysis would show a way manufacturers could comply with the 
standards while maintaining overall societal safety. to demonstrate 
a path that industry could use to meet standards while maintaining 
societal safety
---------------------------------------------------------------------------

     The effectiveness of advanced transmissions when applied 
to conventional naturally aspirated engines has been revised based on a 
study completed by Argonne National Laboratory for NHTSA;
     Estimates of future fuel prices were updated;
     The model was corrected to ensure that post-purchase fuel 
prices are

[[Page 62663]]

applied when calculating the effective cost of available options to add 
technologies to specific vehicle models; and
     The model was corrected to ensure that the incremental 
costs and fuel savings are fully accounted for when applying diesel 
engines.
    These changes to the model and inputs are discussed in detail in 
Sections II.G, IV.C.2, and IV.C.4 of the preamble; Chapter V of NHTSA's 
FRIA, and Chapters 3 and 4 of the joint TSD.
    Acting together, these changes and corrections caused technology 
costs attributable to the baseline MYs 2009-2016 CAFE standards to 
increase for both fleets in most model years. In addition, the changes 
and corrections had the combined effect of reducing the total 
technology costs (i.e., including technology attributable to the 
baseline standards) in MYs 2022-2025, when greater levels of fuel 
economy-improving technologies would be required to comply with the 
augural standards. Because today's analysis applies these changes 
simultaneously, and because they likely interact in ways that would 
complicate attribution of impact, the agency has not attempted to 
quantify the extent to which each change impacted results. The combined 
effect of the increase in the baseline technology costs and reduction 
in the total technology costs in MYs 2022-2025 led to a reduction in 
the estimated incremental technology cost in MYs 2022-2025 in NHTSA's 
analysis, although estimated incremental technology costs were higher 
than or very similar to those reported in the NPRM for model years 
prior to MY 2022.
    While the incremental costs for MYs 2022-2025 are lower than in the 
NPRM, the total estimated costs for compliance (inclusive of baseline 
costs) were reduced to a lesser extent. In assessing the appropriate 
level for maximum feasible standards, NHTSA takes into consideration a 
number of factors, including technological feasibility, economic 
practicability (which includes the consideration of cost as well as 
many other factors), the effect of other motor vehicle standards of the 
Government on fuel economy, the need of the United States to conserve 
energy, and safety, as well as other factors. Considering all of these 
factors, NHTSA continues to believe that the final standards are 
maximum feasible, as discussed below in Section IV.F.
2. Summary of Costs and Benefits for the EPA's GHG Standards
    EPA has analyzed in detail the projected costs and benefits of the 
2017-2025 GHG standards for light-duty vehicles. Table I-19 shows EPA's 
estimated lifetime discounted cost, fuel savings, and benefits for all 
such vehicles projected to be sold in model years 2017-2025. The 
benefits include impacts such as climate-related economic benefits from 
reducing emissions of CO2 (but not other GHGs), reductions 
in energy security externalities caused by U.S. petroleum consumption 
and imports, the value of certain particulate matter-related health 
benefits (including premature mortality), the value of additional 
driving attributed to the VMT rebound effect, the value of reduced 
refueling time needed to fill up a more fuel efficient vehicle. The 
analysis also includes estimates of economic impacts stemming from 
additional vehicle use, such as the economic damages caused by 
accidents, congestion and noise (from increased VMT rebound driving).

  Table I-19--EPA's Estimated 2017-2025 Model Year Lifetime Discounted
   Costs, Benefits, and Net Benefits Assuming the 3% Discount Rate SCC
                               Value a b c
                       [Billions of 2010 dollars]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
               Lifetime Present Value d--3% Discount Rate
------------------------------------------------------------------------
Program Costs...........................................           -$150
Fuel Savings............................................             475
Benefits................................................             126
Net Benefits\d\.........................................             451
------------------------------------------------------------------------
                  Annualized Value f--3% Discount Rate
------------------------------------------------------------------------
Annualized costs........................................           -6.49
Annualized fuel savings.................................            20.5
Annualized benefits.....................................            5.46
Net benefits............................................            19.5
------------------------------------------------------------------------
               Lifetime Present Value d--7% Discount Rate
------------------------------------------------------------------------
Program Costs...........................................            -144
Fuel Savings............................................             364
Benefits................................................             106
Net Benefits \e\........................................             326
------------------------------------------------------------------------
                  Annualized Value f--7% Discount Rate
------------------------------------------------------------------------
Annualized costs........................................           -10.8
Annualized fuel savings.................................            27.3
Annualized benefits.....................................            7.96
Net benefits............................................            24.4
------------------------------------------------------------------------
Notes:
a The agencies estimated the benefits associated with four different
  values of a one ton CO2 reduction (model average at 2.5% discount
  rate, 3%, and 5%; 95th percentile at 3%), which each increase over
  time. For the purposes of this overview presentation of estimated
  costs and benefits, however, we are showing the benefits associated
  with the marginal value deemed to be central by the interagency
  working group on this topic: the model average at 3% discount rate, in
  2010 dollars. Section III.H provides a complete list of values for the
  4 estimates.
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 Projected results using 2008 based fleet projection analysis.
d Present value is the total, aggregated amount that a series of
  monetized costs or benefits that occur over time is worth in a given
  year. For this analysis, lifetime present values are calculated for
  the first year of each model year for MYs 2017-2025 (in year 2010
  dollar terms). The lifetime present values shown here are the present
  values of each MY in its first year summed across MYs.
e Net benefits reflect the fuel savings plus benefits minus costs.
f The annualized value is the constant annual value through a given time
  period (the lifetime of each MY in this analysis) whose summed present
  value equals the present value from which it was derived. Annualized
  SCC values are calculated using the same rate as that used to
  determine the SCC value, while all other costs and benefits are
  annualized at either 3% or 7%.

    Table I-20 shows EPA's estimated lifetime fuel savings and 
CO2 equivalent emission reductions for all light-duty 
vehicles sold in the model years 2017-2025. The values in Table I-20 
are projected lifetime totals for each model year and are not 
discounted. As documented in EPA's RIA, the potential credit transfer 
between cars and trucks may change the distribution of the fuel savings 
and GHG emission impacts between cars and trucks.

[[Page 62664]]

                   Table I-20--EPA's Estimated 2017-2025 Model Year Lifetime Fuel Saved and GHG Emissions Avoided (Primary Analysis) a
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  2017     2018     2019     2020     2021     2022     2023     2024     2025
                                                                   MY       MY       MY       MY       MY       MY       MY       MY       MY     Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cars:
    Fuel (billion gallons)...........................      2.4      4.5      6.8      9.3     11.9     14.8     17.4     20.2     23.0    110.3
    Fuel (billion barrels)...........................     0.06     0.11     0.16     0.22     0.28     0.35     0.41     0.48     0.55     2.63
    CO2 EQ (mmt).....................................     29.7     55.7     83.0      113      146      178      207      238      269    1,319
Light Trucks:
    Fuel (billion gallons)...........................      0.1      1.0      1.7      2.6      5.5      7.5      9.4     11.3     13.1     52.2
    Fuel (billion barrels)...........................     0.00     0.02     0.04     0.06     0.13     0.18     0.22     0.27     0.31     1.24
    CO2 EQ (mmt).....................................      0.8     13.9     24.6       36       70       92      113      134      154      638
Combined:
    Fuel (billion gallons)...........................      2.5      5.5      8.5     11.9     17.4     22.3     26.8     31.5     36.2    162.5
    Fuel (billion barrels)...........................     0.06     0.13     0.20     0.28     0.41     0.53     0.64     0.75     0.86     3.87
    CO2 EQ (mmt).....................................     30.5     69.6      108      149      216      270      320      371      423    1,956
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Projected results using 2008 based fleet projection analysis.

    Table I-21 shows EPA's estimated lifetime discounted benefits for 
all light-duty vehicles sold in model years 2017-2025. Although EPA 
estimated the benefits associated with four different values of a one 
ton CO2 reduction ($6, $26, $41, $79 in CY 2017 and in 2010 
dollars, see Section III.H), for the purposes of this overview 
presentation of estimated benefits EPA is showing the benefits 
associated with one of these marginal values, $26 per ton of 
CO2, in 2010 dollars and 2017 emissions. The values in Table 
I-21 are discounted values for each model year of vehicles throughout 
their projected lifetimes. The estimated benefits include GHG 
reductions, particulate matter-related health impacts (including 
premature mortality), energy security, reduced refueling time and 
additional driving as well as the impacts of accidents, congestion and 
noise from VMT rebound driving. The values in Table I-21 do not include 
costs associated with new technology projected to be needed to meet the 
GHG standards and they do not include the fuel savings expected from 
that technology.

                  Table I-21--EPA's Estimated 2017-2025 Model Year Lifetime Discounted Benefits Assuming the $26/ton SCC Value a b c d
                                                               [Billions of 2010 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Model year
                                           -------------------------------------------------------------------------------------------------------------
               Discount rate                                                                                                                     Sum of
                                               2017       2018       2019       2020       2021       2022       2023       2024       2025     Present
                                                                                                                                                 Values
--------------------------------------------------------------------------------------------------------------------------------------------------------
3%........................................      $1.81      $4.05      $6.37       $9.0      $13.4      $17.3      $20.9      $24.7      $28.6       $126
7%........................................      $1.52      $3.41      $5.35       $7.6      $11.3      $14.6      $17.6      $20.8      $24.1       $106
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Note that net present value of reduced CO2 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. The
  estimates in this table are based on the average SCC at a 3 percent discount rate. Refer to Section III.H.6 for more detail.
\b\ As noted in Section III.H.6, the $26/ton (2010$) value applies to 2017 emissions and grows larger over time. The estimates in this table include
  monetized benefits for CO2 impacts but exclude the monetized benefits of impacts on non-CO2 GHG emissions (HFC, CH4, N2O). EPA has instead conducted a
  sensitivity analysis of the final rule's monetized non-CO2 GHG impacts in section III.H.6.
\c\ Model year values are discounted to the first year of each model year; the ``Sum'' represents those discounted values summed across model years.
\d\ Projected results using 2008 based fleet projection analysis.

    Table I-22 shows EPA's estimated lifetime fuel savings, lifetime 
CO2 emission reductions, and the monetized net present 
values of those fuel savings and CO2 emission reductions. 
The fuel savings and CO2 emission reductions are projected 
lifetime values for all light-duty vehicles sold in the model years 
2017-2025. The estimated fuel savings in billions of gallons and the 
GHG reductions in million metric tons of CO2 shown in Table 
I-22 are totals for the nine model years throughout these vehicles' 
projected lifetime and are not discounted. The monetized values shown 
in Table I-22 are the summed values of the discounted monetized fuel 
savings and monetized CO2 reductions for the model years 
2017-2025 vehicles throughout their lifetimes. The monetized values in 
Table I-22 reflect both a 3 percent and a 7 percent discount rate as 
noted.

[[Page 62665]]

 Table I-22--EPA's Estimated 2017-2025 Model Year Lifetime Fuel Savings,
CO2 Emission Reductions, and Discounted Monetized SCC Benefits Using the
                         $26/ton SCC Value a,b,c
                   [Monetized values in 2010 dollars]
------------------------------------------------------------------------
                                                              $ value
                                          Amount            (billions)
------------------------------------------------------------------------
Fuel savings (3% discount rate)  163 billion gallons....            $475
                                 (3.9 billion barrels)..
Fuel savings (7% discount rate)  163 billion gallons....            $364
                                 (3.9 billion barrels)..
CO2e emission reductions
(CO2 portion valued assuming     1,956 MMT CO2e.........      a, b $46.6
 $22/ton CO2 in 2010).
------------------------------------------------------------------------
\a\ $46.6 billion for 1,747 MMT of reduced CO2 emissions. As noted in
  Section III.H.6, the $26/ton (2010$) value applies to 2017 emissions
  and grows larger over time. The estimates in this table include
  monetized benefits for CO2 impacts but exclude the monetized benefits
  of impacts on non-CO2 GHG emissions (HFC, CH4, N2O). EPA has instead
  conducted a sensitivity analysis of the final rule's monetized non-CO2
  GHG impacts in section III.H.6.
\b\ Note that net present value of reduced CO2 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. The estimates in this table are based on one of
  four SCC estimates (average SCC at a 3 percent discount rate). Refer
  to Section III.H.6 for more detail.
\c\ Projected results using 2008 based fleet projection analysis.

    Table I-23 shows EPA's estimated incremental and total technology 
outlays for cars and trucks for each of the model years 2017-2025. The 
technology outlays shown in Table I-21 are for the industry as a whole 
and do not account for fuel savings associated with the program. Also, 
the technology outlays shown in Table I-21 do not include the estimated 
maintenance costs which are included in the program costs presented in 
Table I-19. Table I-24 shows EPA's estimated incremental cost increase 
of the average new vehicle for each model year 2017-2025. The values 
shown are incremental to a baseline vehicle and are not cumulative. In 
other words, the estimated increase for 2017 model year cars is $206 
relative to a 2017 model year car meeting the MY 2016 standards. The 
estimated increase for a 2018 model year car is $374 relative to a 2018 
model year car meeting the MY 2016 standards (not $206 plus $374).

                              Table I-23--EPA's Estimated Incremental Technology Outlays Associated With the Standards a b
                                                               [Billions of 2010 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                 Sum of
                                                              2017 MY  2018 MY  2019 MY  2020 MY  2021 MY  2022 MY  2023 MY  2024 MY  2025 MY   present
                                                                                                                                                 values
--------------------------------------------------------------------------------------------------------------------------------------------------------
3% discount rate:
    Cars....................................................    $2.03    $3.65    $5.02    $6.43    $7.94    $11.4    $14.7    $18.0    $19.6      $88.8
    Trucks..................................................     0.33     1.10     1.67     2.29     4.28     6.67     8.75    10.70     11.6       47.4
    Combined................................................     2.40     4.78     6.72     8.73     12.2     18.1     23.4     28.7     31.2        136
7% discount rate:
    Cars....................................................     1.99     3.58     4.93     6.32     7.80     11.2     14.4     17.7     19.3       87.2
    Trucks..................................................     0.32     1.08     1.64     2.25     4.20     6.54     8.59    10.51     11.4       46.5
    Combined................................................     2.36     4.69     6.59     8.57     12.0     17.7     23.0     28.1     30.6        134
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Model year values are discounted to the first year of each model year; the ``Sum'' represents those discounted values summed across model years.
\b\ Projected results from using 2008 based fleet projection analysis.

                     Table I-24--EPA's Estimated Incremental Increase in Average New Vehicle Cost Relative to the Reference Case a b
                                                                 [2010 dollars per unit]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 2017 MY   2018 MY   2019 MY   2020 MY   2021 MY   2022 MY   2023 MY   2024 MY   2025 MY
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cars..........................................................      $206      $374      $510      $634      $767    $1,079    $1,357    $1,622    $1,726
Trucks........................................................        57       196       304       415       763     1,186     1,562     1,914     2,059
Combined......................................................       154       311       438       557       766     1,115     1,425     1,718     1,836
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ The reference case assumes the 2016MY standards continue indefinitely.
\b\ Projected results from using 2008 based fleet projection analysis.

[[Page 62666]]

3. Why are the EPA and NHTSA MY 2025 Estimated Per-Vehicle Costs 
Different?
    In Section I.C.1 and I.C.2 NHTSA and EPA present the agencies' 
estimates of the incremental costs and benefits of the final CAFE and 
GHG standards, relative to costs and benefits estimated to occur absent 
the new standards. Taken as a whole, these represent the incremental 
costs and benefits of the National Program for Model Years 2017-2025. 
On a year-by-year comparison for model years 2017-2025, the two 
agencies' per-vehicle cost estimates are similar for the beginning 
years of the program, but in the last few model years, EPA's cost 
estimates are significantly higher than the NHTSA cost estimates. When 
comparing the CAFE required new vehicle cost estimate in Table I-15 
with the GHG standard new vehicle cost estimate in Table I-24, we see 
that the model year 2025 CAFE incremental new vehicle cost estimate is 
$1,461-$1,616 per vehicle (when, as required by EISA/EPCA, NHTSA sets 
aside EVs, pre-MY2019 PHEVs, and credit-based CAFE flexibilities), and 
the GHG standard incremental cost estimate is $1,836 per vehicle--a 
difference of $220-$375. The agencies have examined these cost estimate 
differentials, and as discussed below, it is principally explained by 
how the two agencies modeled future compliance with their respective 
standards, and by the application of low-GWP refrigerants attributable 
only to EPA's standards. As also described below, in reality auto 
companies will build a single fleet of vehicles to comply with both the 
CAFE and GHG standards, and the only significant real-world difference 
in the program costs are is limited to the hydrofluorocarbon (HFC) 
reductions expected under the GHG standards, which EPA estimates at 
$68/vehicle cost.
    As documented below in Section IV, although NHTSA is precluded by 
EISA/EPCA from considering CAFE credits, EVs, and pre-MY2019 PHEVs when 
determining the maximum feasible stringency of new CAFE standards, 
NHTSA has conducted additional analysis that accounts for EISA/EPCA's 
provisions regarding CAFE credits, EVs, and PHEVs. Under that analysis, 
as shown in Table I-16, NHTSA's estimate of the incremental new vehicle 
costs attributable to the new CAFE standards ranges from $1,257 to 
$1,400. Insofar as EPA's analysis focuses on the agencies' MY 2008-
based market forecast and attempts to account for some CAA-based 
flexibilities (most notably, unlimited credit transfers between the PC 
and LT fleets), NHTSA's $1,400 result is based on methods conceptually 
more similar to those applied by EPA. Therefore, although the 
difference in MY 2025 is considerably greater than differences in 
earlier model years, the agencies have focused on understanding the 
$436 difference between NHTSA's $1,400 result and EPA's $1,836 result, 
both for the MY 2008-based market forecast.
    Of this $436 difference, $247 is explained by NHTSA's simulation of 
EISA/EPCA's credit carry-forward provisions. EISA/EPCA allows 
manufacturers to ``carry forward'' credits up to five model years, 
applying those credits to offset compliance shortfalls and thereby 
avoid civil penalties.\103\ In meetings with the agency, some 
manufacturers have indicated that, even under the preexisting MY 2012-
2016 standards, they would make full use of these provisions, 
effectively entering MY 2017 with little, if any, credit ``in 
reserve.'' \104\ As in the NPRM, NHTSA's analysis exercises its CAFE 
model in a manner that simulates manufacturers' carrying-forward and 
use of CAFE credits. This simulation of credit carry-forward acts in 
combination with the model's explicit simulation of multiyear 
planning--that is, the tendency of manufacturers to apply ``extra'' 
technology in earlier model years if doing so would economically 
facilitate compliance in later model years, considering estimated 
product cadence (i.e., estimated timing of vehicle redesigns) 
facilitate. When the potential to carry forward CAFE credits is also 
simulated, multiyear planning simulation estimates the extent to which 
manufacturers could generate CAFE credits in earlier model years and 
use those credits in later model years. In meetings with the agency, 
manufacturers have often provided forward-looking plans exhibiting this 
type of strategic timing of investment in technology. For the NPRM, 
NHTSA estimated that in MY 2025, accounting for credit carry-forward 
(and other flexibilities offered under EISA/EPCA), manufacturers could, 
on average, achieve 47.0 mpg, 2.6 mpg less than the agency's 49.6 mpg 
estimate of the average of manufacturers' fuel economy requirements in 
that model year. Using the corrected MY 2008-based market forecast, 
NHTSA today estimates that in MY 2025, manufacturers could achieve 47.4 
mpg, 2.3 mpg less than the agency's current 49.7 mpg estimate (also 
under the corrected MY 2008-based market forecast) of the average of 
the manufacturers' fuel economy requirements in MY 2025. This 47.4 mpg 
estimate corresponds to the incremental cost estimate of $1,400 cited 
above. When credit carry-forward is excluded from this analysis, 
NHTSA's estimate of manufacturers' average achieved fuel economy in MY 
2025 increases to 49.0 mpg, and NHTSA's estimate of the average 
incremental cost in MY 2025 increases to $1,647, an increase of $247. 
Although EPA's GHG standards allow manufacturers to bank (i.e., carry 
forward) GHG-based credits up to five years, EPA's OMEGA model was 
designed to estimate the costs of a specific standard in a specific 
year and EPA for this action did not estimate the potential credit bank 
companies could have on a year-by-year basis. As explained, this 
difference in simulation capabilities explains $247 of the $436 
difference mentioned above.
---------------------------------------------------------------------------

    \103\ 49 U.S.C. 32903.
    \104\ On the other hand, although EISA/EPCA also allows 
manufacturers to carry back CAFE credits, most manufacturers have 
indicated extreme reluctance to make use of these provisions, 
insofar as doing so would constitute ``borrowing against the 
future'' and incurring risk of paying civil penalties in the future.
---------------------------------------------------------------------------

    As it has in past rulemakings and in the NPRM preceding today's 
final rule, NHTSA has also applied its CAFE model in a manner that 
simulates the potential that, as allowed under EISA/EPCA and as 
suggested by their past CAFE levels, some manufacturers could elect to 
pay civil penalties rather than achieving compliance with future CAFE 
standards.\105\ EISA/EPCA allows NHTSA to take this flexibility into 
account when determining the maximum feasible stringency of future CAFE 
standards. As in the NPRM, simulating this flexibility leads NHTSA to 
estimate that, under EISA/EPCA, some manufacturers (e.g., BMW, 
Mercedes, Porsche, and Volkswagen) could achieve fuel economy levels 6 
to 9 mpg or more short of their respective required CAFE levels in MY 
2025. Having set aside the potential to carry forward CAFE credits, 
when NHTSA also sets aside the potential to pay civil penalties, NHTSA 
estimates that manufacturers could achieve a fuel economy average of 
49.7 mpg in MY 2025, reflecting, on average, manufacturers' achievement 
of their respective required CAFE levels. For MY 2025, this analysis 
shows this 0.7 mpg increase in average achieved fuel economy 
accompanied by a $119 increase in average incremental cost, increasing 
the average incremental cost to $1,766. Because the Clean Air Act, 
unlike EISA/EPCA, does not allow manufacturers to pay civil penalties 
rather than achieving compliance with GHG standards, EPA's OMEGA model

[[Page 62667]]

does not simulate this type of flexibility.\106\ Therefore, this 
further difference in simulation capabilities explains $119 of the $436 
difference mentioned above, and results in an estimated average 
incremental cost of $1,766 in MY 2025.
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    \105\ 49 U.S.C. 32912.
    \106\ See 75 FR 25341.
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    In addition to these differences in modeling of programmatic 
features, EPA projects that manufacturers will achieve significant GHG 
emissions reductions through the use of different air conditioning 
refrigerants (the HFC refrigerant in today's vehicles is a powerful 
greenhouse gas, with a global warming potential 1,430 times that of 
CO2).\107\ EPA estimates that in 2025, the incremental cost of the 
substitute is $68/vehicle. While all other technologies in the 
agencies' analyses are equally relevant to compliance with both CAFE 
and GHG standards, CAFE standards do not address HFC emissions, and 
NHTSA's analysis therefore does not include the costs of this HFC 
substitution. This factor results in the EPA 2025 cost estimate being 
$68/vehicle higher than the NHTSA MY 2025 per-vehicle cost estimate.
---------------------------------------------------------------------------

    \107\ As with the MY 2012-2016 Light Duty rule and the MY 2014-
2018 Medium and Heavy Duty rule, the GWPs used in this rule are 
consistent with 100-year time frame values in the 2007 
Intergovernmental Panel on Climate Change (IPCC) Fourth Assessment 
Report (AR4). At this time, the 100-year GWP values from the 1995 
IPCC Second Assessment Report are used in the official U.S. GHG 
inventory submission to the United Nations Framework Convention on 
Climate Change (UNFCCC) per the reporting requirements under that 
international convention. The UNFCCC recently agreed on revisions to 
the national GHG inventory reporting requirements, and will begin 
using the 100-year GWP values from AR4 for inventory submissions in 
the future.
---------------------------------------------------------------------------

    Taken together, as shown in Table I-25, these three factors suggest 
a difference of $434, based on $247 and $119 for NHTSA's simulation of 
EISA/EPCA's credit carry-forward and civil penalty provisions, 
respectively, and $68 for EPA's estimate of HFC costs. While $2 lower 
than the $436 difference mentioned above, the agencies consider this 
remaining difference to be small (about 0.1% of average incremental 
cost) and well within the range of differences to be anticipated given 
other structural differences between the agencies analyses and modeling 
systems.

 Table I--25--Major Factors Contributing to Difference in EPA and NHTSA
        Achieved MY2025 Per-Vehicle Cost Estimates (2010 dollars)
------------------------------------------------------------------------
                                                           Average per-
 Factor contributing to epa and nhtsa my2025 per-vehicle   vehicle cost
                cost estimate difference                   impact in MY
                                                               2025
------------------------------------------------------------------------
Air conditioning refrigerant substitution...............             $68
CAFE program provisions for civil penalties.............             119
CAFE program credit carry-forward value.................             247
                                                         ---------------
    Total impact on the difference between EPAs 2025                 434
     estimate and NHTSA's 2025 achieved estimate (sum of
     individual factors)................................
------------------------------------------------------------------------

    The agencies' estimates are based on each agency's different 
modeling tools for forecasting costs and benefits between now and MY 
2025. As described in detail in the Joint Technical Support Document, 
the agencies harmonized inputs for our modeling tools. However, our 
modeling tools (the NHTSA-developed CAFE model and the EPA-developed 
OMEGA model), while similar in core function, were developed to 
estimate the program costs based on each agencies' respective statutory 
authorities, which in some cases include specific constraints. It is 
important to note that these are modeling tool differences, but that, 
while the models result in different estimates of the costs of 
compliance, manufacturers will ultimately produce a single fleet of 
vehicles to be sold in the United States that considers both EPA 
greenhouse gas emissions standards and NHTSA CAFE standards. 
Manufacturers are currently selling MY2012 and MY2013 vehicles based on 
considering these standards. Every technology an automotive company 
applies to its vehicles that improves fuel economy will also lower 
CO2 emissions--thus each dollar of technology investment 
will count towards the company's overall compliance with the CAFE 
standard as well as the CO2 standard. The agencies' final 
footprint curve standards for passenger cars and for light trucks have 
been closely coordinated, with the principle difference being EPA's 
estimate of the application of HFC air conditioning refrigerant 
technology across a company's fleet of vehicles. Thus, within the 
entire fleet of vehicle models ultimately produced for sale in the 
United States, the agencies expect the only technology attributable 
solely to EPA's standards will be the low-GWP refrigerants, which EPA 
estimates at an average incremental unit cost of $68 in 2025.

E. Background and Comparison of NHTSA and EPA Statutory Authority

    Section I.E of the preamble contains a detailed overview discussion 
of the NHTSA and EPA respective statutory authorities. In addition, 
each agency discusses comments pertaining to its statutory authority 
and the agencies' responses in Sections III and IV, respectively and 
EPA responds as well in its response to comment documents.
1. NHTSA Statutory Authority
    NHTSA establishes CAFE standards for passenger cars and light 
trucks for each model year under EPCA, as amended by EISA. EPCA 
mandates a motor vehicle fuel economy regulatory program to meet the 
various facets of the need to conserve energy, including the 
environmental and foreign policy implications of petroleum use by motor 
vehicles. EPCA allocates the responsibility for implementing the 
program between NHTSA and EPA as follows: NHTSA sets CAFE standards for 
passenger cars and light trucks; EPA establishes the procedures for 
testing, tests vehicles, collects and analyzes manufacturers' data, and 
calculates the individual and average fuel economy of each 
manufacturer's passenger cars and light trucks; and NHTSA enforces the 
standards based on EPA's calculations.
a. Standard Setting
    We have summarized below the most important aspects of standard 
setting under EPCA, as amended by EISA. For each future model year, 
EPCA requires that NHTSA establish separate passenger car and light 
truck standards at ``the maximum feasible average fuel

[[Page 62668]]

economy level that it decides the manufacturers can achieve in that 
model year,'' based on the agency's consideration of four statutory 
factors: technological feasibility, economic practicability, the effect 
of other standards of the Government on fuel economy, and the need of 
the nation to conserve energy. EPCA does not define these terms or 
specify what weight to give each concern in balancing them; thus, NHTSA 
defines them and determines the appropriate weighting that leads to the 
maximum feasible standards given the circumstances in each CAFE 
standard rulemaking.\108\ For MYs 2011-2020, EPCA further requires that 
separate standards for passenger cars and for light trucks be set at 
levels high enough to ensure that the CAFE of the industry-wide 
combined fleet of new passenger cars and light trucks reaches at least 
35 mpg not later than MY 2020. For model years after 2020, standards 
need simply be set at the maximum feasible level.
---------------------------------------------------------------------------

    \108\ See Center for Biological Diversity v. NHTSA, 538 F.3d. 
1172, 1195 (9th Cir. 2008) (``The EPCA clearly requires the agency 
to consider these four factors, but it gives NHTSA discretion to 
decide how to balance the statutory factors--as long as NHTSA's 
balancing does not undermine the fundamental purpose of the EPCA: 
energy conservation.'').
---------------------------------------------------------------------------

    Because EPCA states that standards must be set for ``* * * 
automobiles manufactured by manufacturers,'' and because Congress 
provided specific direction on how small-volume manufacturers could 
obtain exemptions from the passenger car standards, NHTSA has long 
interpreted its authority as pertaining to setting standards for the 
industry as a whole. Prior to this NPRM, some manufacturers raised with 
NHTSA the possibility of NHTSA and EPA setting alternate standards for 
part of the industry that met certain (relatively low) sales volume 
criteria--specifically, that separate standards be set so that 
``intermediate-size,'' limited-line manufacturers do not have to meet 
the same levels of stringency that larger manufacturers have to meet 
until several years later. NHTSA sought comment in the NPRM on whether 
or how EPCA, as amended by EISA, could be interpreted to allow such 
alternate standards for certain parts of the industry. Suzuki requested 
that NHTSA and EPA both adopt an approach similar to California's of 
providing more lead time to manufacturers with national average sales 
below 50,000 units, by allowing those ``limited line manufacturers'' to 
meet the MY 2017 standards in MY 2020, the MY 2018 standards in MY 
2021, and so on, with a 3-year time lag in complying with the standards 
generally applicable for a compliance category. Suzuki stated simply 
that the standards are harder for small manufacturers to meet than for 
larger manufacturers, because the per-vehicle cost of developing or 
purchasing the necessary technology is higher, and that since the GHG 
emissions attributable to vehicles built by manufacturers who would be 
eligible for this option represent a very small portion of overall 
emissions, the impact should be minimal.\109\
---------------------------------------------------------------------------

    \109\ Suzuki comments, at 2-3. Available at http://www.regulations.gov, Docket No. ID No. EPA-HQ-OAR-2010-0799.
---------------------------------------------------------------------------

    Although EPA is adopting such an approach as part of its final rule 
(see Section I.C.7.c above and III.X), no commenter provided legal 
analysis that might lead NHTSA to change its current interpretation of 
EPCA/EISA. Thus, NHTSA is not finalizing such an option for purposes of 
this rulemaking.
i. Factors That Must Be Considered in Deciding the Appropriate 
Stringency of CAFE Standards
(1) Technological Feasibility
    ``Technological feasibility'' refers to whether a particular method 
of improving fuel economy can be available for commercial application 
in the model year for which a standard is being established. Thus, the 
agency is not limited in determining the level of new standards to 
technology that is already being commercially applied at the time of 
the rulemaking, a consideration which is particularly relevant for a 
rulemaking with a timeframe as long as the present one. For this 
rulemaking, NHTSA has considered all types of technologies that improve 
real-world fuel economy, including air-conditioner efficiency, due to 
EPA's decision to allow generation of fuel consumption improvement 
values for CAFE purposes based on improvements to air-conditioner 
efficiency that improves fuel efficiency.
(2) Economic Practicability
    ``Economic practicability'' refers to whether a standard is one 
``within the financial capability of the industry, but not so stringent 
as to'' lead to ``adverse economic consequences, such as a significant 
loss of jobs or the unreasonable elimination of consumer choice.'' 
\110\ The agency has explained in the past that this factor can be 
especially important during rulemakings in which the automobile 
industry is facing significantly adverse economic conditions (with 
corresponding risks to jobs). Consumer acceptability is also an element 
of economic practicability, one which is particularly difficult to 
gauge during times of uncertain fuel prices.\111\ In a rulemaking such 
as the present one, looking out into the more distant future, economic 
practicability is a way to consider the uncertainty surrounding future 
market conditions and consumer demand for fuel economy in addition to 
other vehicle attributes. In an attempt to ensure the economic 
practicability of attribute-based standards, NHTSA considers a variety 
of factors, including the annual rate at which manufacturers can 
increase the percentage of their fleet that employ a particular type of 
fuel-saving technology, the specific fleet mixes of different 
manufacturers, and assumptions about the cost of the standards to 
consumers and consumers' valuation of fuel economy, among other things.
---------------------------------------------------------------------------

    \110\ 67 FR 77015, 77021 (Dec. 16, 2002).
    \111\ See, e.g., Center for Auto Safety v. NHTSA (CAS), 793 F.2d 
1322 (D.C. Cir. 1986) (Administrator's consideration of market 
demand as component of economic practicability found to be 
reasonable); Public Citizen v. NHTSA, 848 F.2d 256 (Congress 
established broad guidelines in the fuel economy statute; agency's 
decision to set lower standard was a reasonable accommodation of 
conflicting policies).
---------------------------------------------------------------------------

    It is important to note, however, that the law does not preclude a 
CAFE standard that poses considerable challenges to any individual 
manufacturer. The Conference Report for EPCA, as enacted in 1975, makes 
clear, and the case law affirms, ``a determination of maximum feasible 
average fuel economy should not be keyed to the single manufacturer 
which might have the most difficulty achieving a given level of average 
fuel economy.'' \112\ Instead, NHTSA is compelled ``to weigh the 
benefits to the nation of a higher fuel economy standard against the 
difficulties of individual automobile manufacturers.'' \113\ The law 
permits CAFE standards exceeding the projected capability of any 
particular manufacturer as long as the standard is economically 
practicable for the industry as a whole. Thus, while a particular CAFE 
standard may pose difficulties for one manufacturer, it may also 
present opportunities for another. NHTSA has long held that the CAFE 
program is not necessarily intended to maintain the competitive 
positioning of each particular company. Rather, it is intended to 
enhance the fuel economy of the vehicle fleet on American roads, while 
protecting motor vehicle safety and being mindful of the risk to the 
overall United States economy.
---------------------------------------------------------------------------

    \112\ CEI-I, 793 F.2d 1322, 1352 (D.C. Cir. 1986).
    \113\ Id.

---------------------------------------------------------------------------

[[Page 62669]]

(3) The Effect of Other Motor Vehicle Standards of the Government on 
Fuel Economy
    ``The effect of other motor vehicle standards of the Government on 
fuel economy,'' involves an analysis of the effects of compliance with 
emission, safety, noise, or damageability standards on fuel economy 
capability and thus on average fuel economy. In previous CAFE 
rulemakings, the agency has said that pursuant to this provision, it 
considers the adverse effects of other motor vehicle standards on fuel 
economy. It said so because, from the CAFE program's earliest years 
\114\ until present, the effects of such compliance on fuel economy 
capability over the history of the CAFE program have been negative 
ones. For example, safety standards that have the effect of increasing 
vehicle weight lower vehicle fuel economy capability and thus decrease 
the level of average fuel economy that the agency can determine to be 
feasible.
---------------------------------------------------------------------------

    \114\ 42 FR 63184, 63188 (Dec. 15,1977). See also 42 FR 33534, 
33537 (Jun. 30, 1977).
---------------------------------------------------------------------------

    In the wake of Massachusetts v. EPA, 549 U.S. 497 (2007), and of 
EPA's endangerment finding, granting of a waiver to California for its 
motor vehicle GHG standards, and its own establishment of GHG 
standards, NHTSA is confronted with the issue of how to treat those 
standards under EPCA/EISA, such as in the context of the ``other motor 
vehicle standards'' provision. To the extent the GHG standards result 
in increases in fuel economy, they would do so almost exclusively as a 
result of inducing manufacturers to install the same types of 
technologies used by manufacturers in complying with the CAFE 
standards.
    In the NPRM, NHTSA sought comment on whether and in what way the 
effects of the California and EPA standards should be considered under 
EPCA/EISA, e.g., under the ``other motor vehicle standards'' provision, 
consistent with NHTSA's independent obligation under EPCA/EISA to issue 
CAFE standards. NHTSA explained that the agency had already considered 
EPA's proposal and the harmonization benefits of the National Program 
in developing its own proposal. The only comment received was from the 
Sierra Club, noting that the structure of the National Program accounts 
for both NHTSA's and EPA's authority and requires no separate 
action.\115\ NHTSA agrees that no further action is required as part of 
this rulemaking.
---------------------------------------------------------------------------

    \115\ Sierra Club et al. comments, at 10. Available at http://www.regulations.gov, Docket No. ID No. EPA-HQ-OAR-2010-0799.
---------------------------------------------------------------------------

(4) The Need of the United States To Conserve Energy
    ``The need of the United States to conserve energy'' means ``the 
consumer cost, national balance of payments, environmental, and foreign 
policy implications of our need for large quantities of petroleum, 
especially imported petroleum.'' \116\ Environmental implications 
principally include reductions in emissions of carbon dioxide and 
criteria pollutants and air toxics. Prime examples of foreign policy 
implications are energy independence and security concerns.
---------------------------------------------------------------------------

    \116\ 42 FR 63184, 63188 (1977).
---------------------------------------------------------------------------

(5) Fuel Prices and the Value of Saving Fuel
    Projected future fuel prices are a critical input into the economic 
analysis of alternative CAFE standards, because they determine the 
value of fuel savings both to new vehicle buyers and to society, which 
is related to the consumer cost (or rather, benefit) of our need for 
large quantities of petroleum. In this rule, NHTSA relies on fuel price 
projections from the U.S. Energy Information Administration's (EIA) 
most recent Annual Energy Outlook (AEO) for this analysis. Federal 
government agencies generally use EIA's projections in their 
assessments of future energy-related policies.
(6) Petroleum Consumption and Import Externalities
    U.S. consumption and imports of petroleum products impose costs on 
the domestic economy that are not reflected in the market price for 
crude petroleum, or in the prices paid by consumers of petroleum 
products such as gasoline. These costs include (1) higher prices for 
petroleum products resulting from the effect of U.S. oil import demand 
on the world oil price; (2) the risk of disruptions to the U.S. economy 
caused by sudden reductions in the supply of imported oil to the U.S.; 
and (3) expenses for maintaining a U.S. military presence to secure 
imported oil supplies from unstable regions, and for maintaining the 
strategic petroleum reserve (SPR) to provide a response option should a 
disruption in commercial oil supplies threaten the U.S. economy, to 
allow the United States to meet part of its International Energy Agency 
obligation to maintain emergency oil stocks, and to provide a national 
defense fuel reserve. Higher U.S. imports of crude oil or refined 
petroleum products increase the magnitude of these external economic 
costs, thus increasing the true economic cost of supplying 
transportation fuels above the resource costs of producing them. 
Conversely, reducing U.S. imports of crude petroleum or refined fuels 
or reducing fuel consumption can reduce these external costs.
(7) Air Pollutant Emissions
    While reductions in domestic fuel refining and distribution that 
result from lower fuel consumption will reduce U.S. emissions of 
various pollutants, additional vehicle use associated with the rebound 
effect \117\ from higher fuel economy will increase emissions of these 
pollutants. Thus, the net effect of stricter CAFE standards on 
emissions of each pollutant depends on the relative magnitudes of its 
reduced emissions in fuel refining and distribution, and increases in 
its emissions from vehicle use. Fuel savings from stricter CAFE 
standards also result in lower emissions of CO2, the main 
greenhouse gas emitted as a result of refining, distribution, and use 
of transportation fuels. Reducing fuel consumption reduces carbon 
dioxide emissions directly, because the primary source of 
transportation-related CO2 emissions is fuel combustion in 
internal combustion engines.
---------------------------------------------------------------------------

    \117\ The ``rebound effect'' refers to the tendency of drivers 
to drive their vehicles more as the cost of doing so goes down, as 
when fuel economy improves.
---------------------------------------------------------------------------

    NHTSA has considered environmental issues, both within the context 
of EPCA and the National Environmental Policy Act, in making decisions 
about the setting of standards from the earliest days of the CAFE 
program. As courts of appeal have noted in three decisions stretching 
over the last 20 years,\118\ NHTSA defined the ``need of the Nation to 
conserve energy'' in the late 1970s as including ``the consumer cost, 
national balance of payments, environmental, and foreign policy 
implications of our need for large quantities of petroleum, especially 
imported petroleum.'' \119\ In 1988, NHTSA included climate change 
concepts in its CAFE notices and prepared its first environmental 
assessment addressing that subject.\120\ It cited concerns about 
climate change as

[[Page 62670]]

one of its reasons for limiting the extent of its reduction of the CAFE 
standard for MY 1989 passenger cars.\121\ Since then, NHTSA has 
considered the benefits of reducing tailpipe carbon dioxide emissions 
in its fuel economy rulemakings pursuant to the statutory requirement 
to consider the nation's need to conserve energy by reducing fuel 
consumption.
---------------------------------------------------------------------------

    \118\ Center for Auto Safety v. NHTSA, 793 F.2d 1322, 1325 n. 12 
(D.C. Cir. 1986); Public Citizen v. NHTSA, 848 F.2d 256, 262-3 n. 27 
(D.C. Cir. 1988) (noting that ``NHTSA itself has interpreted the 
factors it must consider in setting CAFE standards as including 
environmental effects''); and Center for Biological Diversity v. 
NHTSA, 538 F.3d 1172 (9th Cir. 2007).
    \119\ 42 FR 63184, 63188 (Dec. 15, 1977) (emphasis added).
    \120\ 53 FR 33080, 33096 (Aug. 29, 1988).
    \121\ 53 FR 39275, 39302 (Oct. 6, 1988).
---------------------------------------------------------------------------

ii. Other Factors Considered by NHTSA
    NHTSA considers the potential for adverse safety consequences when 
establishing CAFE standards. This practice is recognized approvingly in 
case law.\122\ Under the universal or ``flat'' CAFE standards that 
NHTSA was previously authorized to establish, the primary risk to 
safety came from the possibility that manufacturers would respond to 
higher standards by building smaller, less safe vehicles in order to 
``balance out'' the larger, safer vehicles that the public generally 
preferred to buy. Under the attribute-based standards being presented 
in this final rule, that risk is reduced because building smaller 
vehicles tends to raise a manufacturer's overall CAFE obligation, 
rather than only raising its fleet average CAFE. However, even under 
attribute-based standards, there is still risk that manufacturers will 
rely on down-weighting to improve their fuel economy (for a given 
vehicle at a given footprint target) in ways that may reduce 
safety.\123\
---------------------------------------------------------------------------

    \122\ As the United States Court of Appeals pointed out in 
upholding NHTSA's exercise of judgment in setting the 1987-1989 
passenger car standards, ``NHTSA has always examined the safety 
consequences of the CAFE standards in its overall consideration of 
relevant factors since its earliest rulemaking under the CAFE 
program.'' Competitive Enterprise Institute v. NHTSA (CEI I), 901 
F.2d 107, 120 at n.11 (D.C. Cir. 1990).
    \123\ For example, by reducing the mass of the smallest vehicles 
rather than the largest, or by reducing vehicle overhang outside the 
space measured as ``footprint,'' which results in less crush space.
---------------------------------------------------------------------------

iii. Factors That NHTSA Is Statutorily Prohibited From Considering in 
Setting Standards
    EPCA provides that in determining the level at which it should set 
CAFE standards for a particular model year, NHTSA may not consider the 
ability of manufacturers to take advantage of several EPCA provisions 
that facilitate compliance with the CAFE standards and thereby reduce 
the costs of compliance. Specifically, in determining the maximum 
feasible level of fuel economy for passenger cars and light trucks, 
NHTSA cannot consider the fuel economy benefits of ``dedicated'' 
alternative fuel vehicles (like battery electric vehicles or natural 
gas vehicles), must consider dual-fueled automobiles to be operated 
only on gasoline or diesel fuel, and may not consider the ability of 
manufacturers to use, trade, or transfer credits.\124\ This provision 
limits, to some extent, the fuel economy levels that NHTSA can find to 
be ``maximum feasible''--if NHTSA cannot consider the fuel economy of 
electric vehicles, for example, NHTSA cannot set a standards predicated 
on manufacturers' usage of electric vehicles to meet the standards.
---------------------------------------------------------------------------

    \124\ 49 U.S.C. 32902(h). We note, as discussed in greater 
detail in Section IV, that NHTSA interprets 32902(h) as reflecting 
Congress' intent that statutorily-mandated compliance flexibilities 
remain flexibilities. When a compliance flexibility is not 
statutorily mandated, therefore, or when it ceases to be available 
under the statute, we interpret 32902(h) as no longer binding the 
agency's determination of the maximum feasible levels of fuel 
economy. For example, when the manufacturing incentive for dual-
fueled automobiles under 49 U.S.C. 32905 and 32906 expires in MY 
2019, there is no longer a flexibility left to protect per 32902(h), 
so NHTSA considers the calculated fuel economy of plug-in hybrid 
electric vehicles for purposes of determining the maximum feasible 
standards in MYs 2020 and beyond.
---------------------------------------------------------------------------

iv. Weighing and Balancing of Factors
    NHTSA has broad discretion in balancing the above factors in 
determining the average fuel economy level that the manufacturers can 
achieve. Congress ``specifically delegated the process of setting * * * 
fuel economy standards with broad guidelines concerning the factors 
that the agency must consider.'' \125\ The breadth of those guidelines, 
the absence of any statutorily prescribed formula for balancing the 
factors, the fact that the relative weight to be given to the various 
factors may change from rulemaking to rulemaking as the underlying 
facts change, and the fact that the factors may often be conflicting 
with respect to whether they militate toward higher or lower standards 
give NHTSA discretion to decide what weight to give each of the 
competing policies and concerns and then determine how to balance 
them--``as long as NHTSA's balancing does not undermine the fundamental 
purpose of the EPCA: Energy conservation,'' \126\ and as long as that 
balancing reasonably accommodates ``conflicting policies that were 
committed to the agency's care by the statute.'' \127\ Thus, EPCA does 
not mandate that any particular number be adopted when NHTSA determines 
the level of CAFE standards.
---------------------------------------------------------------------------

    \125\ Center for Auto Safety v. NHTSA, 793 F.2d 1322, at 1341 
(D.C. Cir. 1986).
    \126\ CBD v. NHTSA, 538 F.3d at 1195 (9th Cir. 2008).
    \127\ Id.
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v. Other Requirements Related to Standard Setting
    The standards for passenger cars and for light trucks must increase 
ratably each year through MY 2020.\128\ This statutory requirement is 
interpreted, in combination with the requirement to set the standards 
for each model year at the level determined to be the maximum feasible 
level that manufacturers can achieve for that model year, to mean that 
the annual increases should not be disproportionately large or small in 
relation to each other.\129\ Standards after 2020 must simply be set at 
the maximum feasible level.\130\
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    \128\ 49 U.S.C. 32902(b)(2)(C).
    \129\ See 74 FR 14196, 14375-76 (Mar. 30, 2009).
    \130\ 49 U.S.C. 32902(b)(2)(B).
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    The standards for passenger cars and light trucks must also be 
based on one or more vehicle attributes, like size or weight, which 
correlate with fuel economy and must be expressed in terms of a 
mathematical function.\131\ Fuel economy targets are set for individual 
vehicles and increase as the attribute decreases and vice versa. For 
example, footprint-based standards assign higher fuel economy targets 
to smaller-footprint vehicles and lower ones to larger footprint-
vehicles. The fleetwide average fuel economy that a particular 
manufacturer is required to achieve depends on the footprint mix of its 
fleet, i.e., the proportion of the fleet that is small-, medium- or 
large-footprint.
---------------------------------------------------------------------------

    \131\ 49 U.S.C. 32902(b)(3).
---------------------------------------------------------------------------

    This approach can be used to require virtually all manufacturers to 
increase significantly the fuel economy of a broad range of both 
passenger cars and light trucks, i.e., the manufacturer must improve 
the fuel economy of all the vehicles in its fleet. Further, this 
approach can do so without creating an incentive for manufacturers to 
make small vehicles smaller or large vehicles larger, with attendant 
implications for safety.
b. Test Procedures for Measuring Fuel Economy
    EPCA provides EPA with the responsibility for establishing 
procedures to measure fuel economy and to calculate CAFE. Current test 
procedures measure the effects of nearly all fuel saving technologies. 
EPA is revising the procedures for measuring fuel economy and 
calculating average fuel economy for the CAFE program, however, to 
account for certain impacts on fuel economy not currently included

[[Page 62671]]

in these procedures, specifically increases in fuel economy because of 
increases in efficiency of the air conditioning system; increases in 
fuel economy because of technology improvements that achieve ``off-
cycle'' benefits; incentives for use of certain hybrid technologies in 
a significant percentage of pick-up trucks; and incentives for 
achieving fuel economy levels in a significant percentage pick-up 
trucks that exceeds the target curve by specified amounts, in the form 
of increased values assigned for fuel economy. NHTSA has considered 
manufacturers' ability to comply with the CAFE standards using these 
efficiency improvements in determining the stringency of the fuel 
economy standards presented in this final rule. These changes would be 
the same as program elements that are part of EPA's greenhouse gas 
performance standards, discussed in Section III.B.10. As discussed 
below, these three elements will be implemented in the same manner as 
in the EPA's greenhouse gas program--a vehicle manufacturer would have 
the option to generate these fuel economy values for vehicle models 
that meet the criteria for these elements and to use these values in 
calculating their fleet average fuel economy. This revision to the CAFE 
calculations is discussed in more detail in Sections III.B.10 and III.C 
and IV.I.4 below.
c. Enforcement and Compliance Flexibility
    NHTSA determines compliance with the CAFE standards based on 
measurements of automobile manufacturers' CAFE from EPA. If a 
manufacturer's passenger car or light truck CAFE level exceeds the 
applicable standard for that model year, the manufacturer earns credits 
for over-compliance. 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 particular category of automobiles by the 
total volume of automobiles of that category manufactured by the 
manufacturer for a given model year. As discussed in more detail in 
Section IV.I, credits can be carried forward for 5 model years or back 
for 3, and can also be transferred between a manufacturer's fleets or 
traded to another manufacturer.
    If a manufacturer's passenger car or light truck CAFE level does 
not meet the applicable standard for that model year, NHTSA notifies 
the manufacturer. The manufacturer may use ``banked'' credits to make 
up the shortfall, but if there are no (or not enough) credits 
available, then the manufacturer has the option to submit a ``carry 
back plan'' to NHTSA. A carry back plan describes what the manufacturer 
plans to do in the following three model years to earn enough credits 
to make up for the shortfall through future over-compliance. NHTSA must 
examine and determine whether to approve the plan.
    In the event that a manufacturer does not comply with a CAFE 
standard, even after the consideration of credits, EPCA provides for 
the assessing of civil penalties.\132\ The Act specifies a precise 
formula for determining the amount of civil penalties for such a 
noncompliance. 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 short 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.\133\ The amount of the penalty may not be reduced except under 
the unusual or extreme circumstances specified in the statute, which 
have never been exercised by NHTSA in the history of the CAFE program.
---------------------------------------------------------------------------

    \132\ EPCA does not provide authority for seeking to enjoin 
violations of the CAFE standards.
    \133\ 49 U.S.C. 32912(b), 49 CFR 578.6(h)(2).
---------------------------------------------------------------------------

    Unlike the National Traffic and Motor Vehicle Safety Act, EPCA does 
not provide for recall and remedy in the event of a noncompliance. The 
presence of recall and remedy provisions \134\ in the Safety Act and 
their absence in EPCA is believed to arise from the difference in the 
application of the safety standards and CAFE standards. A safety 
standard applies to individual 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. Typically, a vehicle does not entirely lack an item or 
equipment or feature. Instead, the equipment or features fails to 
perform adequately. Recalling the vehicle to repair or replace the 
noncompliant equipment or feature can usually be readily accomplished.
---------------------------------------------------------------------------

    \134\ 49 U.S.C. 30120, Remedies for defects and noncompliance.
---------------------------------------------------------------------------

    In contrast, a CAFE standard applies to a manufacturer's entire 
fleet for a model year. It does not require that a particular 
individual 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. Further, although under the 
attribute-based approach to setting CAFE standards fuel economy targets 
are established for individual vehicles based on their footprints, the 
individual vehicles are not required to meet or exceed those targets. 
However, as a practical matter, if a manufacturer chooses to design 
some vehicles that fall below their target levels of fuel economy, it 
will need to design other vehicles that exceed their targets if the 
manufacturer's overall fleet average is to meet the applicable 
standard.
    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.
2. EPA Statutory Authority
    Title II of the Clean Air Act (CAA) provides for comprehensive 
regulation of mobile sources, authorizing EPA to regulate emissions of 
air pollutants from all mobile source categories. Pursuant to these 
sweeping grants of authority, EPA considers such issues as technology 
effectiveness, its cost (both per vehicle, per manufacturer, and per 
consumer), the lead time necessary to implement the technology, and 
based on this the feasibility and practicability of potential 
standards; the impacts of potential standards on emissions reductions 
of both GHGs and non-GHGs; the impacts of standards on oil conservation 
and energy security; the impacts of standards on fuel savings by 
consumers; the impacts of standards on the auto industry; other energy 
impacts; as well as other relevant factors such as impacts on safety
    Pursuant to Title II of the Clean Air Act, EPA has taken a 
comprehensive, integrated approach to mobile source emission control 
that has produced benefits well in excess of the costs of regulation. 
In developing the Title II program, the Agency's historic, initial 
focus was on personal vehicles since that category represented the 
largest source of mobile source emissions. Over time, EPA has 
established stringent emissions standards for large truck and other 
heavy-duty engines, nonroad engines, and marine and locomotive engines, 
as well. The Agency's initial focus on personal vehicles has resulted 
in significant control of emissions from these vehicles, and also led 
to technology transfer to the other mobile source categories that made 
possible the stringent standards for these other categories.
    As a result of Title II requirements, new cars and SUVs sold today 
have emissions levels of hydrocarbons, oxides of nitrogen, and carbon 
monoxide that are 98-99% lower than new vehicles sold in the 1960s, on 
a per

[[Page 62672]]

mile basis. Similarly, standards established for heavy-duty highway and 
nonroad sources require emissions rate reductions on the order of 90% 
or more for particulate matter and oxides of nitrogen. Overall ambient 
levels of automotive-related pollutants are lower now than in 1970, 
even as economic growth and vehicle miles traveled have nearly tripled. 
These programs have resulted in millions of tons of pollution reduction 
and major reductions in pollution-related deaths (estimated in the tens 
of thousands per year) and illnesses. The net societal benefits of the 
mobile source programs are large. In its annual reports on federal 
regulations, the Office of Management and Budget reports that many of 
EPA's mobile source emissions standards typically have projected 
benefit-to-cost ratios of 5:1 to 10:1 or more. Follow-up studies show 
that long-term compliance costs to the industry are typically lower 
than the cost projected by EPA at the time of regulation, which result 
in even more favorable real world benefit-to-cost ratios.\135\ 
Pollution reductions attributable to Title II mobile source controls 
are critical components to attainment of primary National Ambient Air 
Quality Standards, significantly reducing the national inventory and 
ambient concentrations of criteria pollutants, especially 
PM2.5 and ozone. See e.g. 69 FR 38958, 38967-68 (June 29, 
2004) (controls on non-road diesel engines expected to reduce entire 
national inventory of PM2.5 by 3.3% (86,000 tons) by 2020). 
Title II controls have also made enormous reductions in air toxics 
emitted by mobile sources. For example, as a result of EPA's 2007 
mobile source air toxics standards, the cancer risk attributable to 
total mobile source air toxics will be reduced by 30% in 2030 and the 
risk from mobile source benzene (a leukemogen) will be reduced by 37% 
in 2030. (reflecting reductions of over three hundred thousand tons of 
mobile source air toxic emissions) 72 FR 8428, 8430 (Feb. 26, 2007).
---------------------------------------------------------------------------

    \135\ OMB, 2011. 2011 Report to Congress on the Benefits and 
Costs of Federal Regulations and Unfunded Mandates on State, Local, 
and Tribal Entities. Office of Information and Regulatory Affairs. 
June, 2011. http://www.whitehouse.gov/omb/inforeg_regpol_reports_congress/ (Last accessed on August 12, 2012). Several commenters 
asserted that EPA had underestimated costs of rules controlling 
emissions of criteria pollutants from heavy duty diesel engines. 
These comments, which are incorrect and misplaced, are addressed in 
EPA's Response to Comments Section 18.2.
---------------------------------------------------------------------------

    Title II emission standards have also stimulated the development of 
a much broader set of advanced automotive technologies, such as on-
board computers and fuel injection systems, which are the building 
blocks of today's automotive designs and have yielded not only lower 
pollutant emissions, but improved vehicle performance, reliability, and 
durability.
    This final rule implements a specific provision from Title II, 
section 202(a).\136\ Section 202(a)(1) of the Clean Air Act (CAA) 
states that ``the Administrator shall by regulation prescribe (and from 
time to time revise) * * * standards applicable to the emission of any 
air pollutant from any class or classes of new motor vehicles * * * 
which in his judgment cause, or contribute to, air pollution which may 
reasonably be anticipated to endanger public health or welfare.'' If 
EPA makes the appropriate endangerment and cause or contribute 
findings, then section 202(a) authorizes EPA to issue standards 
applicable to emissions of those pollutants. Indeed, EPA's obligation 
to do so is mandatory: ``Coalition for Responsible Regulation v. EPA, 
No. 09-1322, slip op. at pp. 40-1 (D.C. Cir. June 26, 2012); 
Massachusetts v. EPA, 549 U.S. at 533. Moreover, EPA's mandatory legal 
duty to promulgate these emission standards derives from ``a statutory 
obligation wholly independent of DOT's mandate to promote energy 
efficiency.'' Massachusetts, 549 U.S. at 532. Consequently, EPA has no 
discretion to decline to issue greenhouse standards under section 
202(a), or to defer issuing such standards due to NHTSA's regulatory 
authority to establish fuel economy standards. Rather, ``[j]ust as EPA 
lacks authority to refuse to regulate on the grounds of NHTSA's 
regulatory authority, EPA cannot defer regulation on that basis.'' 
Coalition for Responsible Regulation v. EPA, slip op. at p. 41.
---------------------------------------------------------------------------

    \136\ 42 U.S.C. 7521 (a)
---------------------------------------------------------------------------

    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 under CAA section 202(a) are to take effect 
only ``after providing such period as the Administrator finds necessary 
to permit the development and application of the requisite technology, 
giving appropriate consideration to the cost of compliance within such 
period'' (section 202 (a)(2); see also NRDC v. EPA, 655 F. 2d 318, 322 
(D.C. Cir. 1981)). EPA must consider costs to those entities which are 
directly subject to the standards. Motor & Equipment Mfrs. Ass'n Inc. 
v. EPA, 627 F. 2d 1095, 1118 (D.C. Cir. 1979). Thus, ``the [s]ection 
202 (a)(2) reference to compliance costs encompasses only the cost to 
the motor-vehicle industry to come into compliance with the new 
emission standards.'' Coalition for Responsible Regulation v. EPA, slip 
op. p. 44; see also id. at pp. 43-44 rejecting arguments that EPA was 
required to, or should have considered costs to other entities, such as 
stationary sources, which are not directly subject to the emission 
standards. EPA is afforded considerable discretion under section 202(a) 
when assessing issues of technical feasibility and availability of lead 
time to implement new technology. Such determinations are ``subject to 
the restraints of reasonableness'', which ``does not open the 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). 
However, ``EPA is not obliged to provide detailed solutions to every 
engineering problem posed in the perfection of the trap-oxidizer. In 
the absence of theoretical objections to the technology, the agency 
need only identify the major steps necessary for development of the 
device, and give plausible reasons for its belief that the industry 
will be able to solve those problems in the time remaining. The EPA is 
not required to rebut all speculation that unspecified factors may 
hinder `real world' emission control.'' NRDC, 655 F. 2d at 333-34. In 
developing such technology-based standards, EPA has the discretion to 
consider different standards for appropriate groupings of vehicles 
(``class or classes of new motor vehicles''), or a single standard for 
a larger grouping of motor vehicles (NRDC, 655 F. 2d at 338). Finally, 
with respect to regulation of vehicular greenhouse gas emissions, EPA 
is not ``required to treat NHTSA's * * * regulations as establishing 
the baseline for the [section 202 (a) standards].'' Coalition for 
Responsible Regulation v. EPA, slip op. at p. 42 (noting further that 
``the [section 202 (a) standards] provid[e] benefits above and beyond 
those resulting from NHTSA's fuel-economy standards''.)
    Although standards under CAA section 202(a)(1) are technology-
based, they are not based exclusively on technological capability. EPA 
has the discretion to consider and weigh various factors along with 
technological feasibility, such as the 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

[[Page 62673]]

consumers,\137\ 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 permissible for EPA to consider factors 
not specifically enumerated in the Act).
---------------------------------------------------------------------------

    \137\ Since its earliest Title II regulations, EPA has 
considered the safety of pollution control technologies. See 45 
Fed.Reg. 14,496, 14,503 (1980). (``EPA would not require a 
particulate control technology that was known to involve serious 
safety problems. If during the development of the trap-oxidizer 
safety problems are discovered, EPA would reconsider the control 
requirements implemented by this rulemaking'').
---------------------------------------------------------------------------

    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 provisions such as section 202(a)(3) and section 213(a)(3)). 
EPA has interpreted a similar 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 
interprets its authority under section 231 to be somewhat similar to 
those provisions that require us to identify a reasonable balance of 
specified emissions reduction, cost, safety, noise, and other 
factors. See, e.g., Husqvarna AB v. EPA, 254 F.3d 195 (D.C. Cir. 
2001) (upholding EPA's promulgation of technology-based standards 
for small non-road engines under section 213(a)(3) of the CAA). 
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.\138\
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    \138\ 70 FR 69664, 69676, November 17, 2005.

    This interpretation was upheld as reasonable in NACAA v. EPA, (489 
F.3d 1221, 1230 (D.C. Cir. 2007)). CAA section 202(a) does not specify 
the degree of weight to apply to each factor, and EPA accordingly has 
discretion 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-forcing, the provision ``does not resolve how the 
Administrator should weigh all [the statutory] factors in the process 
of finding the `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 considering level of 
technology-based standard, and statutory requirement ``to [give 
appropriate] consideration to the cost of applying * * * technology'' 
does not mandate a specific 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 numbers 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).
    One commenter mistakenly characterized section 202(a) as a 
``technology-forcing'' provision. Comments of CBD p. 5. As just 
explained, it is not, but even if it were, EPA retains considerable 
discretion to balance the various relevant statutory factors, again as 
just explained. The same commenter maintained that the GHG standards 
should ``protect the public health and welfare with an adequate margin 
of safety.'' Id. p. 2. The commenter paraphrases the statutory standard 
for issuing health-based National Ambient Air Quality Standards under 
section 109(b) of the CAA.\139\ Section 202(a) is a technology-based 
provision with an entirely different legal standard. Moreover, the 
commenter's assertion that the standards must reduce the amount of 
greenhouse gases emitted by light duty motor vehicles (id. pp. 2-3) has 
no statutory basis. Section 202(a)(2) does not spell out any minimum 
level of effectiveness for standards, but instead directs EPA to set 
the standards at a level that is reasonable in light of applicable 
compliance costs and technology considerations. Nor is there any 
requirement that the GHG standards result in some specific quantum of 
amelioration of the endangerment to which light-duty vehicle emissions 
contribute. See Coalition for Responsible Regulation v. EPA, slip op. 
pp. 42-43. In addition, substantial GHG emission reductions required by 
section 202(a) standards in and of themselves constitute ``meaningful 
mitigation of greenhouse gas emissions'' without regard to the extent 
to which these reductions ameliorate the endangerment to public health 
and welfare caused by greenhouse gas emissions. Coalition for 
Responsible Regulation v. EPA, slip op. p. 43.
---------------------------------------------------------------------------

    \139\ 42 U.S.C. 7409(b).
---------------------------------------------------------------------------

a. EPA's Testing Authority
    Under section 203 of the CAA, sales of vehicles are prohibited 
unless the vehicle is covered by a certificate of conformity. EPA 
issues certificates of conformity pursuant to section 206 of the Act, 
based on (necessarily) pre-sale testing conducted either by EPA or by 
the manufacturer. The Federal Test Procedure (FTP or ``city'' test) and 
the Highway Fuel Economy Test (HFET or ``highway'' test) are used for 
this purpose. Compliance with standards is required not only at 
certification but throughout a vehicle's useful life, so that testing 
requirements may continue post-certification. Useful life standards may 
apply an adjustment factor to account for vehicle emission control 
deterioration or variability in use (section 206(a)).
    Pursuant to EPCA, EPA is required to measure fuel economy for each 
model and to calculate each manufacturer's average fuel economy.\140\ 
EPA uses the same tests--the FTP and HFET--for fuel economy testing. 
EPA established the FTP for emissions measurement in the early 1970s. 
In 1976, in response to the Energy Policy and Conservation Act (EPCA) 
statute, EPA extended the use of the FTP to fuel economy measurement 
and added the HFET.\141\ The provisions in the 1976 regulation, 
effective with the 1977 model year, established procedures to calculate 
fuel economy values both for labeling and for CAFE purposes. Under 
EPCA, EPA is required to use these procedures (or procedures which 
yield comparable results) for measuring fuel economy for cars for CAFE 
purposes, but not for labeling purposes.\142\ EPCA does not pose this 
restriction on CAFE test procedures for light trucks, but EPA does use 
the FTP and HFET for this purpose. EPA determines fuel economy by 
measuring the amount of CO2 and all other carbon compounds 
(e.g. total hydrocarbons (THC) and carbon monoxide (CO)), and then, by 
mass balance, calculating the amount of fuel consumed. EPA's final 
changes to the procedures for measuring fuel economy and calculating 
average fuel economy are discussed in section III.B.10.
---------------------------------------------------------------------------

    \140\ See 49 U.S.C. 32904(c).
    \141\ See 41 FR 38674 (Sept. 10, 1976), which is codified at 40 
CFR Part 600.
    \142\ See 49 U.S.C. 32904(c).
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b. EPA Enforcement Authority
    Section 207 of the CAA grants EPA broad authority to require 
manufacturers to remedy vehicles if EPA determines there are a 
substantial number of noncomplying vehicles. In addition, section 205 
of the CAA

[[Page 62674]]

authorizes EPA to assess penalties of up to $37,500 per vehicle for 
violations of various prohibited acts specified in the CAA. In 
determining the appropriate penalty, EPA must consider a variety of 
factors such as the gravity of the violation, the economic impact of 
the violation, the violator's history of compliance, and ``such other 
matters as justice may require.'' Unlike EPCA, the CAA does not 
authorize vehicle manufacturers to pay fines in lieu of meeting 
emission standards.
c. Compliance
    EPA oversees testing, collects and processes test data, and 
performs calculations to determine compliance with both CAA and CAFE 
standards. CAA standards apply not only at the time of certification 
but also throughout the vehicle's useful life, and EPA is accordingly 
finalizing in-use standards as well as standards based on testing 
performed at time of production. See section III.E. Both the CAA and 
EPCA provide for penalties should manufacturers fail to comply with 
their fleet average standards, but, unlike EPCA, there is no option for 
manufacturers to pay fines in lieu of compliance with the standards. 
Under the CAA, penalties are typically determined on a vehicle-specific 
basis by determining the number of a manufacturer's highest emitting 
vehicles that cause the fleet average standard violation. Penalties 
under Title II of the CAA are capped at $25,000 per day of violation 
and apply on a per vehicle basis. See CAA section 205(a).
d. Test Procedures
    EPA establishes the test procedures under which compliance with 
both the CAA GHG standards and the EPCA fuel economy standards are 
measured. EPA's testing authority under the CAA is flexible, but 
testing for fuel economy for passenger cars is by statute is limited to 
the Federal Test procedure (FTP) or test procedures which provide 
results which are equivalent to the FTP. 49 U.S.C. Sec.  32904 and 
section III.B, below. EPA developed and established the FTP in the 
early 1970s and, after enactment of EPCA in 1976, added the Highway 
Fuel Economy Test (HFET) to be used in conjunction with the FTP for 
fuel economy testing. EPA has also developed tests with additional 
cycles (the so-called 5-cycle test) which test is used for purposes of 
fuel economy labeling and is also used in the EPA program for extending 
off-cycle credits under both the light-duty and (along with NHTSA) 
heavy-duty vehicle GHG programs. See 75 FR 25439; 76 FR 57252. In this 
rule, EPA is retaining the FTP and HFET for purposes of testing the 
fleetwide average standards, and is further modifying the N2O 
measurement test procedures and the A/C CO2 efficiency test 
procedures EPA initially adopted in the 2012-2016 rule.
3. Comparing the Agencies' Authority
    As the above discussion makes clear, there are both important 
differences between the statutes under which each agency is acting as 
well as several important areas of similarity. One important difference 
is that EPA's authority addresses various GHGs, while NHTSA's authority 
addresses fuel economy as measured under specified test procedures and 
calculated by EPA. This difference is reflected in this rulemaking in 
the scope of the two standards: EPA's rule takes into account 
reductions of direct air conditioning emissions, and establishes 
standards for methane and N2O, but NHTSA's do not, because 
these emissions generally do not relate to fuel economy. A second 
important difference is that EPA is adopting certain compliance 
flexibilities, such as the multiplier for advanced technology vehicles, 
and has taken those flexibilities into account in its technical 
analysis and modeling supporting the GHG standards. EPCA specifies a 
number of particular compliance flexibilities for CAFE, and expressly 
prohibits NHTSA from considering the impacts of those statutory 
compliance flexibilities in setting the CAFE standard so that the 
manufacturers' election to avail themselves of the permitted 
flexibilities remains strictly voluntary.\143\ The Clean Air Act, on 
the other hand, contains no such prohibition. As explained earlier, 
these considerations result in some differences in the technical 
analysis and modeling used to support the agencies' respective 
standards.
---------------------------------------------------------------------------

    \143\ 49 U.S.C. 32902(h).
---------------------------------------------------------------------------

    Another important area where the two agencies' authorities are 
similar but not identical involves the transfer of credits between a 
single firm's car and truck fleets. EISA revised EPCA to allow for such 
credit transfers, but placed a cap on the amount of CAFE credits which 
can be transferred between the car and truck fleets. 49 U.S.C. 
32903(g)(3). Under CAA section 202(a), EPA is continuing to allow 
CO2 credit transfers between a single manufacturer's car and 
truck fleets, with no corresponding limits on such transfers. In 
general, the EISA limit on CAFE credit transfers is not expected to 
have the practical effect of limiting the amount of CO2 
emission credits manufacturers may be able to transfer under the CAA 
program, recognizing that manufacturers must comply with both the CAFE 
standards and the GHG standards. However, it is possible that in some 
specific circumstances the EPCA limit on CAFE credit transfers could 
constrain the ability of a manufacturer to achieve cost savings through 
unlimited use of GHG emissions credit transfers under the CAA program.
    These differences, however, do not change the fact that in many 
critical ways the two agencies are charged with addressing the same 
basic issue of reducing GHG emissions and improving fuel economy. The 
agencies are looking at the same set of control technologies (with the 
exception of the air conditioning leakage-related technologies). The 
standards set by each agency will drive the kind and degree of 
penetration of this set of technologies across the vehicle fleet. As a 
result, each agency is trying to answer the same basic question--what 
kind and degree of technology penetration is necessary to achieve the 
agencies' objectives in the rulemaking time frame, given the agencies' 
respective statutory authorities?
    In making the determination of what standards are appropriate under 
the CAA and EPCA, each agency is to exercise its judgment and balance 
many similar factors. NHTSA's factors are provided by EPCA: 
Technological feasibility, economic practicability, the effect of other 
motor vehicle standards of the Government on fuel economy, and the need 
of the United States to conserve energy. EPA has the discretion under 
the CAA to consider many related factors, such as the availability of 
technologies, the appropriate lead time for introduction of technology, 
and based on this the feasibility and practicability of their 
standards; the impacts of their standards on emissions reductions (of 
both GHGs and non-GHGs); the impacts of their standards on oil 
conservation; the impacts of their standards on fuel savings by 
consumers; the impacts of their standards on the auto industry; as well 
as other relevant factors such as impacts on safety. Conceptually, 
therefore, each agency is considering and balancing many of the same 
concerns, and each agency is making a decision that at its core is 
answering the same basic question of what kind and degree of technology 
penetration is it appropriate to call for in light of all of the 
relevant factors in a given rulemaking, for the model years concerned. 
Finally, each agency has the authority to take into consideration 
impacts of the standards of the other agency. Among the other factors 
that is considers in determining maximum

[[Page 62675]]

feasible standards, EPCA calls for NHTSA to take into consideration the 
effects of EPA's emissions standards on fuel economy capability (see 49 
U.S.C. 32902(f)), and EPA has the discretion to take into consideration 
NHTSA's CAFE standards in determining appropriate action under section 
202(a).\144\ This is consistent with the Supreme Court's statement that 
EPA's mandate to protect public health and welfare is wholly 
independent from NHTSA's mandate to promote energy efficiency, but 
there is no reason to think the two agencies cannot both administer 
their obligations and yet avoid inconsistency. Massachusetts v. EPA, 
549 U.S. 497, 532 (2007).
---------------------------------------------------------------------------

    \144\ It should be noted, however, that the D.C. Circuit noted 
the absence of an explicit obligation for EPA to consider NHTSA fuel 
economy standards as one basis for holding that the existence of 
NHTSA's fuel economy regulatory program provides no basis for EPA 
deferring regulation of vehicular greenhouse gas emissions. 
Coalition for Responsible Regulation v. EPA, slip op. pp. 41-42.
---------------------------------------------------------------------------

    In this context, it is in the Nation's interest for the two 
agencies to continue to work together in developing these standards, 
and they have done so. For example, the agencies have committed 
considerable effort to develop a joint Technical Support Document that 
provides a technical basis underlying each agency's analyses. The 
agencies also have worked closely together in developing and reviewing 
their respective modeling, to develop the best analysis and to promote 
technical consistency. The agencies have developed a common set of 
attribute-based curves that each agency supports as appropriate both 
technically and from a policy perspective. The agencies have also 
worked closely to ensure that their respective programs will work in a 
coordinated fashion, and will provide regulatory compatibility that 
allows auto manufacturers to build a single national light-duty fleet 
that would comply with both the GHG and the CAFE standards. The 
resulting overall close coordination of the GHG and CAFE standards 
should not be surprising, however, as each agency is using a jointly 
developed technical basis to address the closely intertwined challenges 
of energy security and climate change.
    As set out in detail in Sections III and IV of this notice, both 
EPA and NHTSA believe the agencies' standards are fully justified under 
their respective statutory criteria. The standards are feasible in each 
model year within the lead time provided, based on the agencies' 
projected increased use of various technologies which in most cases are 
already in commercial application in the fleet to varying degrees. 
Detailed assessment of the technologies that could be employed by each 
manufacturer supports this conclusion. The agencies also carefully 
assessed the costs of the rules, both for the industry as a whole and 
per manufacturer, as well as the costs per vehicle, and consider these 
costs to be reasonable during the rulemaking time frame and recoverable 
(from fuel savings). The agencies recognize the significant increase in 
the application of technology that the standards would require across a 
high percentage of vehicles, which will require the manufacturers to 
devote considerable engineering and development resources before 2017 
laying the critical foundation for the widespread deployment of 
upgraded technology across a high percentage of the 2017-2025 fleet. 
This clearly will be challenging for automotive manufacturers and their 
suppliers, especially in the current economic climate, and given the 
stringency of the recently-established MYs 2012-2016 standards. 
However, based on all of the analyses performed by the agencies, our 
judgment is that it is a challenge that can reasonably be met.
    The agencies also evaluated the impacts of these standards with 
respect to the expected reductions in GHGs and oil consumption and, 
found them to be very significant in magnitude. The agencies considered 
other factors such as the impacts on noise, energy, and vehicular 
congestion. The impact on safety was also given careful consideration. 
Moreover, the agencies quantified the various costs and benefits of the 
standards, to the extent practicable. The agencies' analyses to date 
indicate that the overall quantified benefits of the standards far 
outweigh the projected costs. All of these factors support the 
reasonableness of the standards. See Section III (GHG standards) and 
Section IV (CAFE standards) for a detailed discussion of each agency's 
basis for its selection of its standards.
    The fact that the benefits are estimated to considerably exceed 
their costs supports the view that the standards represent an 
appropriate balance of the relevant statutory factors.\145\ In drawing 
this conclusion, the agencies acknowledge the uncertainties and 
limitations of the analyses. For example, the analysis of the benefits 
is highly dependent on the estimated price of fuel projected out many 
years into the future. There is also significant uncertainty in the 
potential range of values that could be assigned to the social cost of 
carbon. There are a variety of impacts that the agencies are unable to 
quantify, such as non-market damages, extreme weather, socially 
contingent effects, or the potential for longer-term catastrophic 
events, or the impact on consumer choice. The cost-benefit analyses are 
one of the important things the agencies consider in making a judgment 
as to the appropriate standards to propose under their respective 
statutes. Consideration of the results of the cost-benefit analyses by 
the agencies, however, includes careful consideration of the 
limitations discussed above.
---------------------------------------------------------------------------

    \145\ The comment that the standards are insufficiently 
stringent because estimated benefits of the standards substantially 
exceed the estimated costs shows (Comment of CBD p.8) is misplaced. 
Neither EPCA/EISA nor the CAA dictates a particular weighing of 
costs and benefits, so the commenter's insistence that the 
respective statutes require ``maximized societal benefits, where the 
benefits most optimally compare to the anticipated costs'' (id. p. 
23) is not correct.
---------------------------------------------------------------------------

II. Joint Technical Work Completed for This Final Rule

A. Introduction

    In this section, NHTSA and EPA discuss several aspects of our joint 
technical analyses. These analyses are common to the development of 
each agency's standards. Specifically we discuss: The development of 
the vehicle market forecasts used by each agency for assessing costs, 
benefits, and effects; the development of the attribute-based standard 
curve shapes; the technologies the agencies evaluated and their costs 
and effectiveness; the economic assumptions the agencies included in 
their analyses; a description of the credit programs for air 
conditioning; off-cycle technology, and full-sized pickup trucks; as 
well as the effects of the standards on vehicle safety. The Joint 
Technical Support Document (TSD) discusses the agencies' joint 
technical work in more detail.
    The agencies have based this final rule on a very significant body 
of data and analysis that we believe is the best information currently 
available on the full range of technical and other inputs utilized in 
our respective analyses. As noted in various places throughout this 
preamble, the Joint TSD, the NHTSA RIA, and the EPA RIA, new 
information has become available since the proposal from a range of 
sources. These include work the agencies have completed (e.g., work on 
technology costs and effectiveness and creating a second future fleet 
forecast based on model year 2010 baseline data). In addition, 
information from other sources is now incorporated into our analyses, 
including the Energy Information

[[Page 62676]]

Agency's Annual Energy Outlook 2012 Early Release, as well as other 
information from the public comment process. Wherever appropriate, and 
as summarized throughout this preamble, we have used inputs for the 
final rule based on information from the proposal as well as new data 
and information that has become available since the proposal (either 
through the comments or through the agencies' analyses).

B. Developing the Future Fleet for Assessing Costs, Benefits, and 
Effects

1. Why did the agencies establish baseline and reference vehicle 
fleets?
    In order to calculate the impacts of the EPA and NHTSA regulations, 
it is necessary to estimate the composition of the future vehicle fleet 
absent regulatory action, to provide a reference point relative to 
which costs, benefits, and effects of the regulations are assessed. As 
in the NPRM, EPA and NHTSA have developed comparison fleets in two 
parts. The first step was to develop baseline estimates of the fleets 
of new vehicles to be produced for sale in the U.S. through MY2025, one 
starting with the actual MY 2008 fleet, and one starting with the 
actual MY 2010 fleet. These baselines include vehicle sales volumes, 
GHG/fuel economy performance levels, and contain listings of the base 
technologies on every MY 2008 or MY 2010 vehicle sold. This information 
comes from CAFE certification data submitted by manufacturers to EPA, 
and for purposes of rulemaking analysis, was supplemented with publicly 
and commercially available information regarding some vehicle 
characteristics (e.g., footprint). The second step was to project the 
baseline fleet volumes into model years 2017-2025. The vehicle volumes 
projected out to MY 2025 are referred to as the reference fleet 
volumes. The third step was to modify those MY 2017-2025 reference 
fleets such that they reflect the technology that manufacturers could 
apply if the MY 2016 standards were extended without change through MY 
2025.\146\ Each agency used its modeling system to develop modified or 
final reference fleets, or adjusted baselines, for use in its analysis 
of regulatory alternatives, as discussed below and in each agency's 
RIA. All of the agencies' estimates of emission reductions, fuel 
economy improvements, costs, and societal impacts are developed in 
relation to the respective reference fleets. This section discusses the 
first two steps, development of the baseline fleets and the reference 
fleets.
---------------------------------------------------------------------------

    \146\ EPA's MY 2016 GHG standards under the CAA would continue 
into the future absent this final rule. While NHTSA must actively 
promulgate standards in order for CAFE standards to extend past MY 
2016, the agency has, as in all recent CAFE rulemakings, defined a 
no-action (i.e., baseline) regulatory alternative as an indefinite 
extension of the last-promulgated CAFE standards for purposes of the 
main analysis of the standards in this preamble.
---------------------------------------------------------------------------

    EPA and NHTSA used a transparent approach to developing the 
baseline and reference fleets, largely working from publicly available 
data. Because both input and output sheets from our modeling are 
public, stakeholders can verify and check EPA's and NHTSA's modeling, 
and perform their own analyses with these datasets.\147\
---------------------------------------------------------------------------

    \147\ EPA's Omega Model and input sheets are available at http://www.epa.gov/oms/climate/models.htm; DOT/NHTSA's CAFE Compliance and 
Effects Modeling System (commonly known as the ``Volpe Model'') and 
input and output sheets are available at http://www.nhtsa.gov/fuel-economy.
---------------------------------------------------------------------------

2. What comments did the agencies receive regarding fleet projections 
for the NPRM?
    During the comment period, the agencies also received formal 
comments regarding the NPRM baseline and reference fleets. Chrysler 
questioned the agencies' assumption that the company's sales would 
decline by 53% over 17 years, and stated that the forecast had 
implications not just for the agencies' analysis, but also, indirectly, 
for Chrysler's competitiveness, because suppliers and customers who 
``see [such] projections supported by Federal agencies * * * are 
potentially given a highly negative view of the viability of the 
company * * * [which] may result in less favorable contracts with 
suppliers and lower sales to customers.'' Chrysler requested that the 
agencies update their volume projections for the final rule.\148\
---------------------------------------------------------------------------

    \148\ Chrysler, Docket No. NHTSA-2010-0131-0241, at 21.
---------------------------------------------------------------------------

    The agencies' projection that Chrysler's sales would steadily 
decline was primarily attributable to the manufacturer- and segment-
level forecasts provided in December 2009 by CSM. The agencies thought 
that forecast to have been credible at the time considering economic 
and industry conditions during the months before CSM provided the 
agencies with a long-range forecast, when the overall light vehicle 
market was severely depressed and Chrysler and GM were--with nascent 
federal assistance--in the process of reorganizing. We recognize that 
Chrysler's production has since recovered to levels suggesting much 
better long-term prospects than forecast by CSM in 2009. While the 
agencies are continuing to use the market forecast developed for the 
NPRM (after minor corrections unrelated to Chrysler's comments), we are 
also using a second market forecast we have developed for today's final 
rule, making use of a newer forecast (in this case, from LMC) of 
manufacturer- and segment-level shares, a forecast that shows 
significantly higher sales (more than double that of the earlier 
forecast) for Chrysler in 2025.
    Environmental Consultants of Michigan commented that use of 4-year-
old certification data was ``unconscionable'' and unreflective of 
technology improvements already made to vehicles since then, requesting 
that the agencies delay the final rule until the market forecast can be 
updated with appropriate data.\149\ As described in this chapter, even 
though the year of publication of this rule is 2012, model year 2010 
was the most recent baseline dataset available due to the lag between 
the actual conclusion of a given model year and the submission (for 
CAFE compliance purposes) of production volumes for that model year. 
Moreover, as explained below in the joint TSD and in our respective 
RIAs, EPA and NHTSA measure the costs and benefits of new standards as 
incremental levels beyond those that would result from the application 
of technology given continuation of baseline standards (i.e., 
continuation of the standards that will be in place in MY 2016). 
Therefore, our analysis of manufacturers' capabilities is informed by 
analysis of technology that could be applied in the future even absent 
the new standards, not just technology that had been applied in 2008 or 
2010. We further note that, while NHTSA has, in the past, made use of 
confidential product planning information provided to the agency by 
many manufacturers--information that typically extended roughly five 
years into the future--other stakeholders previously commented 
negatively regarding the agency's resultant inability to publish some 
of the detailed inputs to and outputs of its analysis. As during the 
rulemaking establishing the MYs 2012-2016 standards, EPA and NHTSA have 
determined that the benefits of a fully transparent market forecast 
outweigh the disbenefits of a market forecast that may not fully 
reflect likely forthcoming changes in manufacturers' products.
---------------------------------------------------------------------------

    \149\ Environmental Consultants of Michigan, Docket No. NHTSA-
2010-0131-0166, at 7.
---------------------------------------------------------------------------

    The agencies also received a comment from Volkswagen, stating that 
``Volkswagen sees no evidence that would suggest a near 30% decline in 
truck market share from domestic OEMs

[[Page 62677]]

[original emphasis].'' \150\ Volkswagen further suggested that the 
agencies' forecast was based on confidential ``strategic plans by 
[Volkswagen's] competitors''. On the contrary, the agencies' forecast 
was based on public and commercial information made fully available to 
all stakeholders, including Volkswagen. Also, while the agencies' 2008 
based fleet projection showed a decline in the share of light trucks 
expected to be produced by the aggregate of Chrysler, Ford, and General 
Motors, Volkswagen's statement mischaracterized the magnitude and 
nature of the decline. Between MY2008 and MY2025, the agencies' 
forecast showed declines from 17.8% to 5.8% for Chrysler, from 14.5% to 
12.0% for Ford, from 26.8% to 27.8% from General Motors, and from 58.3% 
to 44.5% for the aggregate of these three manufacturers. The latter 
represents a 22.5% reduction, not the 30% reduction cited by 
Volkswagen, and is dominated by the underlying forecast regarding 
Chrysler's overall position in the market; for General Motors, the 
agencies' forecast showed virtually no loss of share in the light truck 
market. As discussed above, the agencies' market forecast for the NPRM 
was informed by CSM's forecast of manufacturer- and segment-level 
shares, and by EIA's forecast of overall volumes of the passenger car 
and light truck markets, and CSM's forecast, in particular, was 
provided at a time when market conditions were economically severe. 
While the agencies are continuing to use this forecast, this agency is 
also using a second forecast, informed by MY 2010 certification data, 
an updated AEO-based forecast of overall volumes of passenger cars and 
light trucks, and an updated manufacturer- and segment-level market 
forecast from LMC Automotive.
---------------------------------------------------------------------------

    \150\ Volkswagen, NHTSA-2010-0131-0247, at 9.
---------------------------------------------------------------------------

    The Union of Concerned Scientists (UCS) expressed concern that if 
the light vehicle market does not shift toward passenger cars as 
indicated in the agencies' market forecast, energy and environmental 
benefits of the new standards could be less than projected.\151\ As 
discussed below, our MY 2008-based and MY 2010-based market forecasts, 
while both subject to uncertainty, reflect passenger car market shares 
estimated using EIA's National Energy Modeling System (NEMS). For both 
market forecasts, we re-ran NEMS by holding standards constant after MY 
2016 and also preventing the model from increasing the passenger car 
market share to achieve increases in fleetwide average fuel economy 
levels. Having done so, we obtained a somewhat lower passenger car 
market share than EIA obtained for AEO 2011 and AEO 2012, respectively. 
In our judgment, this approach provides a reasonable basis for 
developing a forecast of the overall sales of passenger cars and light 
trucks, while remaining consistent with our use of EIA's reference case 
estimates of future fuel prices. In any event, we note that EPCA/EISA 
requires NHTSA to ensure that the overall new vehicle fleet achieves 
average fuel economy of at least 35 mpg by MY 2020. Our analysis, 
discussed below, indicates based on the information currently before us 
that the fleet could achieve 39.9-40.8 mpg by MY 2020 (accounting for 
flexibilities available under EPCA)--well above the 35 mpg statutory 
requirement. However, NHTSA will monitor the fleet's progress and, if 
necessary, adjust standards to ensure that EPCA/EISA's ``35-by-2020'' 
requirement is met, even if this requires issuing revised fuel economy 
standards before the planned joint mid-term evaluation process has been 
completed. However, insofar as NHTSA's current analysis indicates the 
fleet could achieve 40-41 mpg by MY 2020, NHTSA currently expects the 
need for such a rulemaking to be unlikely. Beyond MY 2020, EPCA/EISA 
does not provide a minimum requirement for the overall fleet, but 
requires NHTSA to continue setting separate standards for passenger 
cars and light trucks, such that each standard is at the maximum 
feasible level in each model year. In other words, as long as the ``35-
by-2020'' requirement is achieved, NHTSA is required to consider 
stringency for passenger cars and light trucks separately, not to set 
those standards at levels achieving any particular level of average 
performance for the overall fleet.
---------------------------------------------------------------------------

    \151\ UCS, Docket No. EPA-HQ-OAR-2010-0799-9567, p. 8.
---------------------------------------------------------------------------

    Nonetheless, the agencies recognize that overall fuel consumption 
and GHG emissions by the light vehicle fleet will depend on, among many 
other things, the relative market shares of passenger cars and light 
trucks. In its probabilistic uncertainty analysis, presented in NHTSA's 
RIA accompanying today's notice as required by OMB for significant 
rulemakings, NHTSA has varied the passenger car share (as a function of 
fuel price), such that the resultant distributions of estimated model 
results--including fuel savings and CO2 emission 
reductions--reflect uncertainty regarding the relative market shares of 
passenger cars and light trucks. The results of the probabilistic 
uncertainty analysis along with the other analysis in this rulemaking 
support that the NHTSA standards are maximum feasible standards. The 
probabilistic uncertainty analysis is discussed in NHTSA's RIA Chapter 
XII. Like all other aspects of the outlook for the future light vehicle 
market, the agencies will closely monitor the relative market shares of 
passenger cars and light trucks in preparation for the planned midterm 
review.
3. Why were two fleet projections created for the FRM?
    Although much of the discussion in this and following sections 
describes the methodology for creating a single baseline and reference 
fleet, for this final rule the agencies actually developed two baseline 
and reference fleets. In the NPRM, the agencies used MY 2008 CAFE 
certification data to establish the ``2008-based fleet projection.'' 
\152\ The agencies noted that MY 2009 CAFE certification data was not 
likely to be representative of future conditions since it was so 
dramatically influenced by the economic recession (Joint Draft TSD 
section 1.2.1). The agencies further noted that MY 2010 CAFE 
certification data might be available for use in the final rulemaking 
for purposes of developing a baseline fleet. The agencies stated that a 
copy of the MY 2010 CAFE certification data would be put in the public 
docket if it became available during the comment period. The MY 2010 
data was reported by the manufacturers throughout calendar year 2011 as 
the final sales figures were compiled and submitted to the EPA 
database. Due to the lateness of the CAFE data submissions,\153\ 
however, it was not possible to submit the new 2010 data into the 
docket during the public comment period. As explained below, however, 
consistent with the agencies' expectations at proposal, and with the 
agencies' standard practice of updating relevant information as 
practicable between proposals and final rules, the agencies are using 
these data in one of the two fleet-based projections we are using to 
estimate the impacts of the final rules.
---------------------------------------------------------------------------

    \152\ ``2008 based fleet projection'' is a new term that is the 
same as the reference fleet. The term is added to clarify when we 
are using the 2008 baseline and reference fleet vs. the 2010 
baseline and reference fleet.
    \153\ Partly due to the earthquake and tsunami in Japan and the 
significant impact this had on their facilities, some manufacturers 
requested and were granted an extension on the deadline to submit 
their CAFE data.
---------------------------------------------------------------------------

    For analysis supporting the NPRM, the agencies developed a forecast 
of the light vehicle market through MY 2025

[[Page 62678]]

based on (a) the vehicle models in the MY 2008 CAFE certification data, 
(b) the AEO 2011 interim projection of future fleet sales volumes, and 
(c) the future fleet forecast conducted by CSM in 2009. In the 
proposal, the agencies stated we would consider using MY 2010 CAFE 
certification data, if available, for analysis supporting the final 
rule (Joint Draft TSD, p. 1-2). Shortly after the NPRM was issued, the 
agencies reiterated this intention in statements to Automotive News in 
response to a pending article by that publication.\154\ The agencies 
also indicated our intention to, for analysis supporting the final 
rule, use the most recent version of EIA's AEO available, and a market 
forecast updated relative to that purchased from CSM (Joint Draft TSD 
section 1.3.5).
---------------------------------------------------------------------------

    \154\ ``For CAFE rules, feds look at aging sales data'', 
Automotive News, December 22, 2011. Available at http://www.autonews.com/article/20111222/OEM11/111229956 (last accessed 
Jun. 27, 2012).
---------------------------------------------------------------------------

    For this final rulemaking, the agencies have analyzed the costs and 
benefits of the standards using two different forecasts of the light 
vehicle fleet through MY 2025. The agencies have concluded that the 
significant uncertainty associated with forecasting sales volumes, 
vehicle technologies, fuel prices, consumer demand, and so forth out to 
MY 2025 makes it reasonable and appropriate to evaluate the impacts of 
the final CAFE and GHG standards using two baselines. One market 
forecast, similar to the one used for the NPRM, uses corrected data 
regarding the MY 2008 fleet, information from AEO 2011, and information 
purchased from CSM. As noted above, the agencies received comments 
regarding the market forecast used in the NPRM suggesting that updates 
in several respects could be helpful to the agencies' analysis of final 
standards; given those comments and since the agencies were already 
planning to produce an updated market forecast, the final rule also 
contains another market forecast using MY 2010 CAFE certification data, 
information from AEO 2012, and information purchased from LMC 
Automotive (formerly JD Powers Automotive).
    The two market forecasts contain certain differences, although as 
will be discussed below, the differences are not significant enough to 
change the agencies' decision as to the structure and stringency of the 
final standards. For example, MY 2008 certification data represents the 
most recent model year for which the industry's offerings were not 
strongly affected by the subsequent economic recession, which may make 
it reasonable to use if we believe that the future vehicle mix of 
models are more likely to be reflective of the pre-recession mix than 
mix of models produced after MY 2008 (e.g., in MY 2010). Also, the MY 
2010-based fleet projection employs a future fleet forecast provided by 
LMC Automotive, which is more current than the projection provided by 
CSM in 2009. The CSM forecast, utilized for the MY 2008-based fleet 
projection, appears to have been influenced by the recession, in 
particular in predicting major declines in market share for some 
manufacturers (e.g., Chrysler) which the agencies do not believe are 
reasonably reflective of future trends.
    The MY 2010 based fleet projection, which is used in EPA's 
alternative analysis and in NHTSA's co-analysis, employs a future fleet 
forecast provided by LMC Automotive, which is more current than the 
projection provided by CSM in 2009, and which reflects the post-
proposal MY 2010 CAFE certification data. However, this MY 2010 CAFE 
data also shows effects of the economic recession. For example, 
industry-wide sales were skewed down 20% compared to MY 2008 levels. 
For some companies like Chrysler, Mitsubishi, and Subaru, sales were 
down by 30-40% from MY 2008 levels, as documented in today's joint TSD. 
For BMW, General Motors, Jaguar/Land Rover, Porsche, and Suzuki, sales 
were down by more than 40%. Employing the MY 2008 vehicle data avoids 
using these baseline market shifts when projecting the future fleet. On 
the other hand, it also perpetuates vehicle brands and models (and 
thus, their outdated fuel economy levels and engineering 
characteristics) that have since been discontinued. The MY 2010 CAFE 
certification data accounts for the phase-out of some brands (e.g., 
Saab, Pontiac, Hummer) \155\ and the introduction of some technologies 
(e.g., Ford's Ecoboost engine), which may be more reflective of the 
future fleet in this respect.
---------------------------------------------------------------------------

    \155\ Based on our review of the CAFE certification, the MY 
2010-based fleet contains no Saabs, and compared to the MY 2008-
based fleet, about 90% fewer Hummers and about 75% fewer Pontiacs.
---------------------------------------------------------------------------

    Thus, given the volume of information that goes into creating a 
baseline forecast and given the significant uncertainty in any 
projection out to MY 2025, the agencies think that a reasonable way to 
illustrate the possible impacts of that uncertainty for purposes of 
this rulemaking is the approach taken here of analyzing the effects of 
the final standards under both the MY 2008-based baseline and the MY 
2010-based baseline. The agencies' analyses are presented in our 
respective RIAs and preamble sections.
4. How did the Agencies develop the MY 2008 baseline vehicle fleet?
    NHTSA and EPA developed a baseline fleet comprised of model year 
2008 data gathered from EPA's emission and fuel economy database. This 
baseline fleet was used for the NPRM and was updated for this FRM.
    There was only one change since the NPRM. A contractor working on a 
market share model noted some problems with some of the 2008 MY vehicle 
wheelbase data. Each of the affected vehicle's wheelbase and footprint 
were corrected for the MY 2008-based fleet used for this final rule. A 
more complete discussion of these changes is available in Chapter 1.3.1 
of the TSD.
    The 2008 baseline fleet reflects all fuel economy technologies in 
use on MY 2008 light duty vehicles as reported by manufacturers in 
their CAFE certification data. The 2008 emission and fuel economy 
database included data on vehicle production volume, fuel economy, 
engine size, number of engine cylinders, transmission type, fuel type, 
etc.; however it did not contain complete information on technologies. 
Thus, the agencies relied on publicly available data like the more 
complete technology descriptions from Ward's Automotive Group.\156\ In 
a few instances when required vehicle information (such as vehicle 
footprint) was not available from these two sources, the agencies 
obtained this information from publicly accessible internet sites such 
as Motortrend.com and Edmunds.com.\157\ A description of all of the 
technologies used in modeling the 2008 vehicle fleet and how it was 
constructed are available in Chapter 1 of the Joint TSD.
---------------------------------------------------------------------------

    \156\ Note that WardsAuto.com is a fee-based service, but all 
information is public to subscribers.
    \157\ Motortrend.com and Edmunds.com are free, no-fee internet 
sites.
---------------------------------------------------------------------------

5. How did the Agencies develop the projected MY 2017-2025 vehicle 
reference fleet for the 2008 model year based fleet?
    As in the NPRM, EPA and NHTSA have based the projection of total 
car and total light truck sales for MYs 2017-2025 on projections made 
by the Department of Energy's Energy Information Administration (EIAEIA 
publishes a mid-term projection of national energy use called the 
Annual Energy Outlook (AEO). This projection utilizes a number of 
technical and econometric models which are designed to reflect both 
economic and regulatory

[[Page 62679]]

conditions expected to exist in the future. In support of its 
projection of fuel use by light-duty vehicles, EIA projects sales of 
new cars and light trucks. EIA published its Early Annual Energy 
Outlook for 2011 in December 2010. EIA released updated data to NHTSA 
in February (Interim AEO). The final release of AEO for 2011 came out 
in May 2011 and early release AEO came out in December of 2011, but for 
consistency with the NPRM, EPA and NHTSA chose to use the data from 
February 2011.
    The agencies used the Energy Information Administration's (EIA's) 
National Energy Modeling System (NEMS) to estimate the future relative 
market shares of passenger cars and light trucks. However, NEMS 
methodology includes shifting vehicle sales volume, starting after 
2007, away from fleets with lower fuel economy (the light truck fleet) 
towards vehicles with higher fuel economies (the passenger car fleet) 
in order to facilitate projected compliance with CAFE and GHG 
standards. Because we use our market projection as a baseline relative 
to which we measure the effects of new standards, and we attempt to 
estimate the industry's ability to comply with new standards without 
changing product mix (i.e., we analyze the effects of the rules 
assuming manufacturers will not change fleet composition as a 
compliance strategy, as opposed to changes that might happen due to 
market forces), the Interim AEO 2011-projected shift in passenger car 
market share as a result of required fuel economy improvements creates 
a circularity. Therefore, for the NPRM analysis, the agencies developed 
a new projection of passenger car and lighttruck sales shares by 
running scenarios from the Interim AEO 2011 reference case that first 
deactivate the above-mentioned sales-volume shifting methodology and 
then hold post-2017 CAFE standards constant at MY 2016 levels. As 
discussed in Chapter 1 of the agencies' joint Technical Support 
Document, incorporating these changes reduced the NEMS-projected 
passenger car share of the light vehicle market by an average of about 
5% during 2017-2025.
    In the AEO 2011 Interim data, EIA projects that total light-duty 
vehicle sales will gradually recover from their currently depressed 
levels by around 2013. In 2017, car sales are projected to be 8.4 
million (53 percent) and truck sales are projected to be 7.3 million 
(47 percent). Although the total level of sales of 15.8 million units 
is similar to pre-2008 levels, the fraction of car sales is projected 
to be higher than that existing in the 2000-2007 timeframe. This 
projection reflects the impact of assumed higher fuel prices. Sales 
projections of cars and trucks for future model years can be found in 
Chapter 1 of the joint TSD.
    In addition to a shift towards more car sales, sales of segments 
within both the car and truck markets have been changing and are 
expected to continue to change. Manufacturers are introducing more 
crossover utility vehicles (CUVs), which offer much of the utility of 
sport utility vehicles (SUVs) but use more car-like designs. The AEO 
2011 report does not, however, distinguish such changes within the car 
and truck classes. In order to reflect these changes in fleet makeup, 
EPA and NHTSA used a long range forecast\158\ from CSM Worldwide (CSM) 
the firm which, at the time of proposal development, offered the most 
detailed forecasting for the model years in question. The long range 
forecast from CSM Worldwide is a custom forecast covering the years 
2017-2025 which the agencies purchased from CSM in December of 2009. 
Since proposal, the agencies have worked with LMC Automotive (formerly 
J.D. Powers Forecasting) and found them to be capable of doing 
forecasting of equivalent detail and are using the LMC forecast for the 
2010 baseline fleet projection.
---------------------------------------------------------------------------

    \158\ The CSM Sales Forecast Excel file (``CSM North America 
Sales Forecasts 2017-2025 for the Docket'') is available in the 
docket (Docket EPA-HQ-OAR-2010-0799).
---------------------------------------------------------------------------

    The next step was to project the CSM forecasts for relative sales 
of cars and trucks by manufacturer and by market segment onto the total 
sales estimates of AEO 2011. Table II-1 and Table II-2 show the 
resulting projections for the reference 2025 model year and compare 
these to actual sales that occurred in the baseline 2008 model year. 
Both tables show sales using the traditional definition of cars and 
light trucks.

                             Table II-1--Annual Sales of Light-Duty Vehicles by Manufacturer in 2008 and Estimated for 2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Cars                        Light trucks                        Total
                                                         -----------------------------------------------------------------------------------------------
                                                              2008 MY         2025 MY         2008 MY         2025 MY         2008 MY         2025 MY
--------------------------------------------------------------------------------------------------------------------------------------------------------
Aston Martin............................................           1,370           1,182               0               0           1,370           1,182
BMW.....................................................         291,796         405,256          61,324         145,409         353,120         550,665
Chrysler/Fiat...........................................         703,158         436,479         956,792         331,762       1,659,950         768,241
Daimler.................................................         208,195         340,719          79,135         101,067         287,330         441,786
Ferrari.................................................           1,450           7,658               0               0           1,450           7,658
Ford....................................................         956,699       1,540,109         814,194         684,476       1,770,893       2,224,586
Geely/Volvo.............................................          65,649         101,107          32,748          42,588          98,397         143,696
GM......................................................       1,587,391       1,673,936       1,507,797       1,524,008       3,095,188       3,197,943
Honda...................................................       1,006,639       1,340,321         505,140         557,697       1,511,779       1,898,018
Hyundai.................................................         337,869         677,250          53,158         168,136         391,027         845,386
Kia.....................................................         221,980         362,783          59,472          97,653         281,452         460,436
Lotus...................................................             252             316               0               0             252             316
Mazda...................................................         246,661         306,804          55,885          61,368         302,546         368,172
Mitsubishi..............................................          85,358          73,305          15,371          36,387         100,729         109,692
Nissan..................................................         717,869       1,014,775         305,546         426,454       1,023,415       1,441,229
Porsche.................................................          18,909          40,696          18,797          11,219          37,706          51,915
Spyker/Saab.............................................          21,706          23,130           4,250           3,475          25,956          26,605
Subaru..................................................         116,035         256,970          82,546          74,722         198,581         331,692
Suzuki..................................................          79,339         103,154          35,319          21,374         114,658         124,528
Tata/JLR................................................           9,596          65,418          55,584          56,805          65,180         122,223
Tesla...................................................             800          31,974               0               0             800          31,974
Toyota..................................................       1,260,364       2,108,053         951,136       1,210,016       2,211,500       3,318,069

[[Page 62680]]

 
Volkswagen..............................................         291,483         630,163          26,999         154,284         318,482         784,447
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................       8,230,568      11,541,560       5,621,193       5,708,899      13,851,761      17,250,459
--------------------------------------------------------------------------------------------------------------------------------------------------------

        Table II-2--Annual Sales of Light-Duty Vehicles by Market Segment in 2008 and Estimated for 2025
----------------------------------------------------------------------------------------------------------------
                             Cars                                                 Light trucks
----------------------------------------------------------------------------------------------------------------
                                    2008 MY         2025 MY                           2008 MY         2025 MY
----------------------------------------------------------------------------------------------------------------
Full-Size Car.................         829,896         245,355  Full-Size Pickup       1,332,335       1,002,806
Luxury Car....................       1,048,341       1,637,410  Mid-Size Pickup.         452,013         431,272
Mid-Size Car..................       2,103,108       2,713,078  Full-Size Van...          33,384          88,572
Mini Car......................         617,902       1,606,114  Mid-Size Van....         719,529         839,452
Small Car.....................       1,912,736       2,826,190  Mid-Size MAV*...         110,353         548,457
Specialty Car.................         469,324         808,183  Small MAV.......         231,265         239,065
                                ..............  ..............  Full-Size SUV*..         559,160          46,978
                                ..............  ..............  Mid-Size SUV....         436,080         338,849
                                ..............  ..............  Small SUV.......         196,424          71,827
                                ..............  ..............  Full-Size CUV*..         264,717         671,665
                                ..............  ..............  Mid-Size CUV....         923,165       1,259,483
                                ..............  ..............  Small CUV.......       1,612,029       1,875,703
                               ---------------------------------------------------------------------------------
    Total Sales**.............       6,981,307       9,836,330  ................       6,870,454       7,414,129
----------------------------------------------------------------------------------------------------------------
* MAV--Multi-Activity Vehicle, or a vehicle with a tall roof and elevated seating positions such as a Mazda5.
  SUV--Sport Utility Vehicle, CUV--Crossover Utility Vehicle.
**Total Sales are based on the classic Car/Truck definition.

    NHTSA has changed the definition of a truck for 2011 model year and 
beyond. The new definition has moved some 2 wheel drive SUVs and CUVs 
to the car category. Table II-3 shows the different volumes for car and 
trucks based on the new and old NHTSA definition. The table shows the 
difference in 2008, 2021, and 2025 to give a feel for how the change in 
definition changes the car/truck split.

                 Table II-3--New and Old Car and Truck Definition in 2008, 2016, 2021, and 2025
----------------------------------------------------------------------------------------------------------------
                  Vehicle type                         2008         2016 \159\         2021            2025
----------------------------------------------------------------------------------------------------------------
Old Cars Definition.............................       6,981,307       8,576,717       8,911,173       9,836,330
New Cars Definition.............................       8,230,568      10,140,463      10,505,165      11,541,560
Old Truck Definition............................       6,870,454       7,618,459       7,277,894       7,414,129
New Truck Definition............................       5,621,193       6,054,713       5,683,902       5,708,899
----------------------------------------------------------------------------------------------------------------

    The CSM forecast provides estimates of car and truck sales by 
segment and by manufacturer separately. The forecast was broken up into 
two tables: one table with manufacturer volumes by year and the other 
with vehicle segments percentages by year. Table II-4 and
---------------------------------------------------------------------------

    \159\ In the NPRM, MY 2016 values reported for the New Cars 
Definition and Old Truck Definition were erroneously reversed.
---------------------------------------------------------------------------

    Table II--5 are examples of the data received from CSM. The task of 
estimating future sales using these tables is complex. We used the same 
methodology as in the previous rulemaking. A detailed description of 
how the projection process was done is found in Chapter 1.3.2 of the 
TSD.

                          Table II-4--CSM Manufacturer Volumes in 2016, 2021, and 2025
----------------------------------------------------------------------------------------------------------------
                                                                       2016            2021            2025
----------------------------------------------------------------------------------------------------------------
BMW.............................................................         328,220         325,231         317,178
Chrysler/Fiat...................................................         391,165         346,960         316,043
Daimler.........................................................         298,676         272,049         271,539
Ford*...........................................................         971,617         893,528         858,215
Subaru..........................................................         205,486         185,281         181,062
General Motors..................................................       1,309,246       1,192,641       1,135,305
Honda...........................................................       1,088,449         993,318         984,401
Hyundai.........................................................         429,926         389,368         377,500

[[Page 62681]]

 
Kia.............................................................         234,246         213,252         205,473
Mazda...........................................................         215,117         200,003         199,193
Mitsubishi......................................................          47,414          42,693          42,227
Spyker/Saab.....................................................               6               6               6
Tesla...........................................................             800             800             800
Aston Martin....................................................           1,370           1,370           1,370
Lotus...........................................................             252             252             252
Porsche.........................................................              12              12              12
Nissan..........................................................         803,177         729,723         707,361
Suzuki..........................................................          88,142          81,042          76,873
Tata/JLR........................................................          58,594          53,143          52,069
Toyota..........................................................       1,751,661       1,576,499       1,564,975
Volkswagen......................................................         578,420         530,378         494,596
----------------------------------------------------------------------------------------------------------------
*Ford volumes include Volvo in this table.

                           Table II-5--CSM Segment Percentages in 2016, 2021, and 2025
----------------------------------------------------------------------------------------------------------------
                                                                       2016            2021            2025
                                                                     (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Full-Size CUV...................................................            3.66            8.34            9.06
Full-Size Pickup................................................           19.39           15.42           13.53
Full-Size SUV...................................................            3.27            0.90            0.63
Full-Size Van...................................................            0.92            1.29            1.19
Mid-Size CUV....................................................           19.29           16.88           16.99
Mid-Size MAV....................................................            1.63            5.93            7.40
Mid-Size Pickup.................................................            4.67            5.74            5.82
Mid-Size SUV....................................................            2.28            4.73            4.57
Mid-Size Van....................................................           11.80           11.63           11.32
Small CUV.......................................................           30.67           25.06           25.30
Small MAV.......................................................            0.88            2.98            3.22
Small Pickup....................................................            0.00            0.00            0.00
Small SUV.......................................................            1.53            1.12            0.97
----------------------------------------------------------------------------------------------------------------

    The overall result was a projection of car and truck sales for 
model years 2017-2025--the reference fleet--which matched the total 
sales projections of the AEO forecast and the manufacturer and segment 
splits of the CSM forecast. These sales splits are shown in Table II-6 
below.

                                     Table II-6--Car and Truck Volumes and Split Based on NHTSA New Truck Definition
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  2016     2017     2018     2019     2020     2021     2022     2023     2024     2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Car Volume*...................................................   10,140    9,988    9,905    9,996   10,292   10,505   10,736   10,968   11,258   11,542
Truck Volume*.................................................    6,054    5,819    5,671    5,583    5,604    5,684    5,704    5,687    5,676    5,709
Car Split.....................................................    62.6%    63.2%    63.6%    64.2%    64.7%    64.9%    65.3%    65.9%    66.5%    66.9%
Truck Split...................................................    37.4%    36.8%    36.4%    35.8%    35.3%    35.1%    34.7%    34.1%    33.5%    33.1%
--------------------------------------------------------------------------------------------------------------------------------------------------------
*In thousands

    Given publicly- and commercially-available sources that can be made 
equally transparent to all reviewers, the forecast described above 
represented the agencies' best forecast available at the time of its 
publishing regarding the likely composition direction of the fleet. EPA 
and NHTSA recognize that it is impossible to predict with certainty how 
manufacturers' product offerings and sales volumes will evolve through 
MY 2025 under baseline conditions--that is, without further changes in 
standards after MY 2016. While the agencies have not included 
variations in the market forecast as aspects of our respective 
sensitivity analyses, we have conducted our central analyses twice--
once each for the MY 2008- and MY 2010-based market forecasts that 
reflect differences in available vehicle models, differences in 
manufacturer- and segment-level market shares, and differences in the 
overall volumes of passenger cars and light trucks. In addition, as 
discussed above, NHTSA's probabilistic uncertainty analysis accounts 
for uncertainty regarding the relative market shares of passenger cars 
and light trucks.
    The final step in the construction of the 2008 based fleet 
projection involves applying additional technology to individual 
vehicle models--that is, technology beyond that already present in MY 
2008--reflecting already-promulgated standards through MY 2016, and 
reflecting the assumption that MY 2016 standards would apply through MY 
2025. A description of the agencies' modeling work to develop their 
respective final reference (or adjusted baseline) fleets appear in the 
agencies' respective RIAs.
6. How did the agencies develop the model year 2010 baseline vehicle 
fleet as part of the 2010 based fleet projection?
    NHTSA and EPA also developed a baseline fleet comprised of model 
year

[[Page 62682]]

2010 data gathered from EPA's emission and fuel economy database. This 
alternative baseline fleet has the model year 2010 vehicle volumes and 
attributes. The 2010 baseline fleet reflects all fuel economy 
technologies in use on MY 2010 light duty vehicles as reported by 
manufacturers in their CAFE certification data. The 2010 emission and 
fuel economy database included data on vehicle production volume, fuel 
economy, engine size, number of engine cylinders, transmission type, 
fuel type, etc.; however it did not contain complete information on 
technologies. Thus, as with the 2008 baseline fleet, the agencies 
relied on publicly available data like the more complete technology 
descriptions from Ward's Automotive Group. In a few instances when 
required vehicle information (such as vehicle footprint) was not 
available from these two sources, the agencies obtained this 
information from publicly accessible internet sites such as 
Motortrend.com and Edmunds.com. A description of all of the 
technologies used in modeling the 2010 vehicle fleet and how it was 
constructed are available in Chapter 1.4 of the Joint TSD.
7. How did the Agencies develop the projected my 2017-2025 vehicle 
reference fleet for the 2010 model year based fleet?
    EPA and NHTSA have based the projection of total car and total 
light truck sales for MYs 2017-2025 on projections made by the 
Department of Energy's Energy Information Administration (EIA). EIA 
published its Early Annual Energy Outlook for 2012 in December 2011. 
EIA released updated data to NHTSA in February (AEO Early Release). The 
final version of AEO 2012 was released June 25, 2012, after the 
agencies had already completed our analyses using the early release 
results.
    As the we did with the Interim 2011 AEO data, the agencies 
developed a new projection of passenger car and light truck sales 
shares by running scenarios from the Early Release AEO 2012 reference 
case that first deactivate the above-mentioned sales-volume shifting 
methodology and then hold post-2017 CAFE standards constant at MY 2016 
levels. As discussed in Chapter 1 of the agencies' joint Technical 
Support Document, incorporating these changes reduced the NEMS-
projected passenger car share of the light vehicle market by an average 
of about 5% during 2017-2025.
    In the AEO 2012 Early Release data, EIA projects that total light-
duty vehicle sales will gradually recover from their currently 
depressed levels by around 2013. In 2017, car sales are projected to be 
8.7 million (55 percent) and truck sales are projected to be 7.1 
million (45 percent). Although the total level of sales of 15.8 million 
units is similar to pre-2008 levels, the fraction of car sales is 
projected to be higher than that existing in the 2000-2007 timeframe. 
This projection reflects the impact of assumed higher fuel prices. 
Sales projections of cars and trucks for future model years can be 
found in Chapter 1.4.3 of the joint TSD.
    In addition to a shift towards more car sales, sales of segments 
within both the car and truck markets have been changing and are 
expected to continue to change. Manufacturers are introducing more 
crossover utility vehicles (CUVs), which offer much of the utility of 
sport utility vehicles (SUVs) but use more car-like designs. The AEO 
2012 report does not, however, distinguish such changes within the car 
and truck classes. In order to reflect these changes in fleet makeup, 
EPA and NHTSA used a custom long range forecast purchased from LMC 
Automotive (formerly J.D. Powers Forecasting). NHTSA and EPA decided to 
use the forecast from LMC for the 2010 model year based fleet for 
several reasons discussed in Chapter 1 of the Joint TSD, and believe 
the projection provides a useful cross-check for the forecast used for 
the projections reflected in the 2008 model year based fleet. For the 
public's reference, a copy of LMC's long range forecast has been placed 
in the docket for this rulemaking.\160\
---------------------------------------------------------------------------

    \160\ The LMC Automotive's Sales Forecast Excel file (``LMC 
North America Sales Forecasts 2017-2025 for the Docket'') is 
available in the docket (Docket EPA-HQ-OAR-2010-0799).
---------------------------------------------------------------------------

    The next step was to project the LMC forecasts for relative sales 
of cars and trucks by manufacturer and by market segment onto the total 
sales estimates of AEO 2012. Table II-7 and Table II-8 show the 
resulting projections for the reference 2025 model year and compare 
these to actual sales that occurred in the baseline 2010 model year. 
Both tables show sales using the traditional definition of cars and 
light trucks. As discussed above, the new forecast from LMC shown in 
Table II-7 shows a significant increase in Chrysler/Fiat's sales (1.6 
million) from those projected by CSM (768 thousand).

                             Table II-7--Annual Sales of Light-Duty Vehicles by Manufacturer in 2010 and Estimated for 2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Cars                        Light trucks                        Total
                                                         -----------------------------------------------------------------------------------------------
                                                              2010 MY         2025 MY         2010 MY         2025 MY         2010 MY         2025 MY
--------------------------------------------------------------------------------------------------------------------------------------------------------
Aston Martin............................................             601             639               0               0             601             639
BMW.....................................................         143,638         363,380          26,788         101,013         170,426         464,394
Chrysler/Fiat...........................................         496,998         899,843         665,806         726,403       1,162,804       1,626,246
Daimler.................................................         157,453         261,242          72,393         119,090         229,846         380,332
Ferrari.................................................           1,780           1,894               0               0           1,780           1,894
Ford....................................................         940,241       1,441,350         858,798         997,694       1,799,039       2,439,045
Geely...................................................          28,223          65,883          29,719          31,528          57,942          97,411
GM......................................................       1,010,524       1,696,474         735,367       1,261,546       1,745,891       2,958,020
Honda...................................................         845,318       1,295,234         390,028         504,020       1,235,346       1,799,254
Hyundai.................................................         375,656         935,619          35,360         117,662         411,016       1,053,281
Kia.....................................................         226,157         350,765          21,721          37,957         247,878         388,723
Lotus...................................................             354             377               0               0             354             377
Mazda...................................................         249,489         262,732          61,451          53,183         310,940         315,916
Mitsubishi..............................................          54,263          67,925           9,146          15,464          63,409          83,389
Nissan..................................................         619,918         919,920         255,566         312,005         875,484       1,231,925
Porsche.................................................          11,937          17,609           3,978          19,091          15,915          36,701
Spyker..................................................               0               0               0               0               0               0
Subaru..................................................         184,587         218,870          73,665          96,326         258,252         315,196
Suzuki..................................................          25,002          48,710           3,938           4,173          28,940          52,883

[[Page 62683]]

 
Tata/JLR................................................          11,279          30,949          37,475          50,369          48,754          81,319
Tesla...................................................               0               0               0               0               0               0
Toyota..................................................       1,508,866       1,622,242         696,324         921,183       2,205,190       2,543,426
Volkswagen..............................................         284,046         479,423          36,327         105,009         320,373         584,432
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................       7,176,330      10,981,082       4,013,850       5,473,718      11,190,180      16,454,800
--------------------------------------------------------------------------------------------------------------------------------------------------------

        Table II-8--Annual Sales of Light-Duty Vehicles by Market Segment in 2010 and Estimated for 2025
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
                             Cars                 Light Trucks
----------------------------------------------------------------------------------------------------------------
                                    2010 MY         2025 MY                           2010 MY         2025 MY
----------------------------------------------------------------------------------------------------------------
Compact Conventional..........       2,107,568       2,380,540  Compact CUV.....       1,201,018       1,172,645
Compact Premium Conventional..         498,107         868,582  Compact MPV.....         250,816         409,034
Compact Premium Sporty........          45,373          59,523  Compact Premium          154,808         204,204
                                                                 CUV.
Compact Sporty................         136,464         170,121  Compact Utility.         216,634         234,737
Large Conventional............         485,656         832,113  Large Pickup....         992,473       1,426,193
Large Premium Conventional....          61,291         187,898  Large Premium             72,411         139,719
                                                                 Utility.
Large Premium Sporty..........           8,551          21,346  Large Utility...         164,416         323,992
Midsize Conventional..........       1,742,494       3,353,080  Large Van.......          17,516          31,198
Midsize Premium Conventional..         176,193         412,950  Midsize CUV.....         825,743       1,351,888
Midsize Premium Sporty........          27,023          67,005  Midsize Pickup..         288,508         443,502
Midsize Sporty................         244,895         257,865  Midsize Premium          333,790         493,977
                                                                 CUV.
Sub-Compact Conventional......         336,971         748,210  Midsize Premium           18,584          33,087
                                                                 Utility.
Unity Class *.................           7,351           7,820  Midsize Utility.         267,035         331,291
                                ..............  ..............  Midsize Van.....         508,491         492,280
                               ---------------------------------------------------------------------------------
    Total Sales * *...........       5,877,937       9,367,054  ................       5,312,243       7,087,746
----------------------------------------------------------------------------------------------------------------
* Unity Class--Is a special class created by the EPA for luxury brands that were not covered by the forecast.
* * Total Sales are based on the classic Car/Truck definition.

    NHTSA has changed the definition of a truck for 2011 model year and 
beyond. The new definition has moved some 2 wheel drive SUVs and CUVs 
to the car category. Table II-9 shows the different volumes for car and 
trucks based on the new and old NHTSA definition. The table shows the 
difference in 2010, 2021, and 2025 to give a feel for how the change in 
definition changes the car/truck split.

                 Table II-9--New and Old Car and Truck definition in 2010, 2016, 2021, and 2025
----------------------------------------------------------------------------------------------------------------
                  Vehicle type                         2010            2016            2021            2025
----------------------------------------------------------------------------------------------------------------
Old Cars Definition.............................       6,016,063       8,725,700       8,898,400       9,525,700
New Cars Definition.............................       7,176,330      10,227,185      10,310,594      10,981,082
----------------------------------------------------------------------------------------------------------------
Old Truck Definition............................       5,174,117       7,136,500       6,831,700       6,929,100
New Truck Definition............................       4,013,850       5,635,015       5,419,506       5,473,718
----------------------------------------------------------------------------------------------------------------

    The LMC forecast provides estimates of car and truck sales by 
manufacturer segment and by manufacturer separately. The forecast was 
broken up into two tables: one table with manufacturer volumes by year 
and the other with vehicle segments percentages by year. Table II-10 is 
an example of the data received from LMC. The task of estimating future 
sales using these tables is complex. Table II-11 is the LMC projected 
volumes for each manufacturer.
    Table II-12 has the LMC segment percentages for 2016, 2021, and 
2025. We used a new methodology that is different than we used for the 
2008 fleet projection. A detailed description of how the projection 
process was done is found in Chapter 1 of the TSD.

               Table II-10--Example of the LMC Segmented Chrysler Volumes in 2016, 2021, and 2025
----------------------------------------------------------------------------------------------------------------
            Manufacturer                     LMC segment               2016            2021            2025
----------------------------------------------------------------------------------------------------------------
Chrysler/Fiat......................  Compact Basic..............               0               0               0
Chrysler/Fiat......................  Compact Conventional.......          66,300          80,131          90,032
Chrysler/Fiat......................  Compact CUV................          66,861          73,867          79,812
Chrysler/Fiat......................  Compact MPV................          42,609          73,673         108,134

[[Page 62684]]

 
Chrysler/Fiat......................  Compact Premium                      32,080          36,654          40,287
                                      Conventional.
Chrysler/Fiat......................  Compact Premium CUV........          10,780          11,229          11,811
Chrysler/Fiat......................  Compact Premium Sporty.....             164             151             140
Chrysler/Fiat......................  Compact Utility............         227,901         249,383         274,171
Chrysler/Fiat......................  Large Conventional.........         182,468         231,692         251,766
Chrysler/Fiat......................  Large Pickup...............         334,980         366,592         382,492
Chrysler/Fiat......................  Large Van..................          19,981          20,639          21,569
Chrysler/Fiat......................  Midsize Conventional.......         106,105         108,965         112,637
Chrysler/Fiat......................  Midsize CUV................          82,615          90,608          95,281
Chrysler/Fiat......................  Midsize Pickup.............          31,246          42,374          48,862
Chrysler/Fiat......................  Midsize Premium                       9,078          13,074          15,891
                                      Conventional.
Chrysler/Fiat......................  Midsize Premium CUV........          10,983          19,432          24,749
Chrysler/Fiat......................  Midsize Premium Sporty.....           4,132           3,753           3,728
Chrysler/Fiat......................  Midsize Sporty.............               0               0               0
Chrysler/Fiat......................  Midsize Utility............         219,206         185,386         162,149
Chrysler/Fiat......................  Midsize Van................         181,402         155,543         145,019
Chrysler/Fiat......................  Sub-Compact Conventional...          77,361          75,478          79,533
Chrysler/Fiat......................  Unity Class*...............           3,163           3,163           3,163
----------------------------------------------------------------------------------------------------------------
* Note: Unity Class is created by EPA to account for luxury brands.

                          Table II-11 LMC Manufacturer Volumes in 2016, 2021, and 2025
----------------------------------------------------------------------------------------------------------------
                          Manufacturer                                 2016            2021            2025
----------------------------------------------------------------------------------------------------------------
Aston Martin....................................................             601             601             601
BMW.............................................................         411,137         441,500         461,752
Daimler.........................................................         354,175         385,197         404,899
Chrysler/Fiat...................................................       1,709,415       1,841,787       1,951,226
Ford............................................................       2,692,193       2,818,737       2,935,409
Geely...........................................................          91,711          97,548         100,912
GM..............................................................       3,382,343       3,532,217       3,676,282
Honda...........................................................       1,635,473       1,758,092       1,838,444
Hyundai.........................................................       1,325,712       1,378,186       1,438,427
Lotus...........................................................             354             354             354
Mazda...........................................................         309,864         308,298         318,450
Mitsubishi......................................................          69,397          80,028          87,468
Nissan..........................................................       1,221,374       1,247,279       1,288,609
Subaru..........................................................         313,619         321,934         339,206
Spyker..........................................................  ..............  ..............  ..............
Suzuki..........................................................          44,935          48,861          52,594
Tata/JLR........................................................          83,824          87,169          89,011
Toyota..........................................................       2,492,707       2,582,404       2,658,145
Volkswagen......................................................         608,484         604,255         619,274
----------------------------------------------------------------------------------------------------------------

                          Table II-12--LMC Segment Percentages in 2016, 2021, and 2025
----------------------------------------------------------------------------------------------------------------
                                                                       2016            2021            2025
                           LMC segment                               (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Unity Class*....................................................            0.04            0.04            0.04
Compact Basic...................................................            0.00            0.00            0.00
Compact Conventional............................................           12.44           12.07           12.03
Compact CUV.....................................................            7.74            7.38            7.30
Compact MPV.....................................................            2.61            2.47            2.56
Compact Premium Conventional....................................            4.59            4.68            4.69
Compact Premium CUV.............................................            1.49            1.54            1.55
Compact Premium Sporty..........................................            0.41            0.34            0.31
Compact Sporty..................................................            0.95            0.91            0.88
Compact Utility.................................................            1.37            1.45            1.53
Large Conventional..............................................            3.95            4.27            4.27
Large Pickup....................................................           12.62           12.95           12.92
Large Premium Conventional......................................            0.88            0.95            0.98
Large Premium Pickup............................................            0.00            0.00            0.00
Large Premium Sporty............................................            0.09            0.11            0.11
Large Premium Utility...........................................            0.91            0.91            0.91
Large Utility...................................................            2.32            2.21            2.11
Large Van.......................................................            2.24            2.34            2.40
Midsize Conventional............................................           16.49           17.04           17.17
Midsize CUV.....................................................            9.28            8.84            8.92
Midsize Pickup..................................................            2.56            2.79            2.89

[[Page 62685]]

 
Midsize Premium Conventional....................................            2.06            2.18            2.21
Midsize Premium CUV.............................................            2.87            3.08            3.11
Midsize Premium Sporty..........................................            0.40            0.36            0.34
Midsize Premium Utility.........................................            0.23            0.22            0.22
Midsize Sporty..................................................            1.59            1.41            1.33
Midsize Utility.................................................            2.57            2.42            2.16
Midsize Van.....................................................            3.53            3.32            3.21
Sub-Compact Conventional........................................            3.77            3.72            3.85
----------------------------------------------------------------------------------------------------------------
* Note: Unity Class is created by EPA to account for luxury brands.

    The overall result was a projection of car and truck sales for 
model years 2017-2025--the reference fleet--which matched the total 
sales projections of the AEO forecast and the manufacturer and segment 
splits of the LMC forecast. These sales splits are shown in Table II-13 
below.

                                    Table II-13--Car and Truck Volumes and Split Based on NHTSA New Truck Definition
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        2016      2017      2018      2019      2020      2021      2022      2023      2024      2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Car Volume*.........................................    10,227    10,213    10,089    10,140    10,194    10,311    10,455    10,594    10,812    10,981
Truck Volume*.......................................     5,635     5,599     5,516     5,522     5,436     5,420     5,432     5,413     5,435     5,474
Car Split...........................................     64.5%     64.6%     64.7%     64.7%     65.2%     65.5%     65.8%     66.2%     66.5%     66.7%
Truck Split.........................................     35.5%     35.4%     35.3%     35.3%     34.8%     34.5%     34.2%     33.8%     33.5%     33.3%
--------------------------------------------------------------------------------------------------------------------------------------------------------
\*\ In thousands.

    The final step in the construction of the 2010 model year based 
fleet involves applying additional technology to individual vehicle 
models--that is, technology beyond that already present in MY 2010----
reflecting already-promulgated standards through MY 2016, and 
reflecting the assumption that MY 2016 standards would continue to 
apply in each model year through MY 2025. A description of the 
agencies' modeling work to develop their respective final reference (or 
adjusted baseline) fleets appear in the agencies' respective RIAs.
8. What are the Differences in the Sales Volumes and Characteristics of 
the MY 2008 Based and the MY 2010 Based Fleets Projections?
    Table II-14 is the difference in actual and projected sales volumes 
between the 2010 based and the 2008 based fleet forecast. This summary 
table is the most convenient way to compare the projections from CSM 
and LMC, since the forecasting companies use different segmentations of 
vehicles. It also provides a comparison of the two AEO forecasts since 
the projections are normalized to AEO's total volume of cars and trucks 
in each year of the projection. The table shows a total projected 
reduction from the 2008 fleet to the 2010 fleet in 2025 of .5 million 
cars and .8 million trucks. The largest manufacturer changes in the 
2025 model projections are for Chrysler and Toyota. The newer 
projection increases Chrysler's total vehicles by .9 million vehicles, 
while it decreases Toyota's total vehicles by .8 million.
    The table also shows that the total actual reduction in cars from 
2008 MY to 2010 MY is 1.0 million vehicles, and the reduction in trucks 
is 1.6 million vehicles.

                                     Table II-14--Differences in Annual Sales of Light-Duty Vehicles by Manufacturer
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Cars                        Light trucks                        Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           2010-2008 MY       2025 MY      2010-2008 MY       2025 MY      2010-2008 MY       2025 MY
--------------------------------------------------------------------------------------------------------------------------------------------------------
Aston Martin............................................            -769            -543               0               0            -769            -543
BMW.....................................................        -148,158         -41,876         -34,536         -44,396        -182,694         -86,271
Chrysler/Fiat...........................................        -206,160         463,364        -290,986         394,641        -497,146         858,005
Daimler.................................................         -50,742         -79,477          -6,742          18,023         -57,484         -61,454
Ferrari.................................................             330          -5,764               0               0             330          -5,764
Ford....................................................         -16,458         -98,759          44,604         313,218          28,146         214,459
Geely...................................................         -37,426         -35,224          -3,029         -11,060         -40,455         -46,285
GM......................................................        -576,867          22,538        -772,430        -262,462      -1,349,297        -239,923
Honda...................................................        -161,321         -45,087        -115,112         -53,677        -276,433         -98,764
Hyundai.................................................          37,787         258,369         -17,798         -50,474          19,989         207,895
Kia.....................................................           4,177         -12,018         -37,751         -59,696         -33,574         -71,713
Lotus...................................................             102              61               0               0             102              61
Mazda...................................................           2,828         -44,072           5,566          -8,185           8,394         -52,256
Mitsubishi..............................................         -31,095          -5,380          -6,225         -20,923         -37,320         -26,303
Nissan..................................................         -97,951         -94,855         -49,980        -114,449        -147,931        -209,304
Porsche.................................................          -6,972         -23,087         -14,819           7,872         -21,791         -15,214
Spyker..................................................          -21706          -23130           -4250           -3475          -25956          -26605
Subaru..................................................          68,552         -38,100          -8,881          21,604          59,671         -16,496

[[Page 62686]]

 
Suzuki..................................................         -54,337         -54,444         -31,381         -17,201         -85,718         -71,645
Tata/JLR................................................           1,683         -34,469         -18,109          -6,436         -16,426         -40,904
Tesla...................................................            -800          -31974               0               0            -800          -31974
Toyota..................................................         248,502        -485,811        -254,812        -288,833          -6,310        -774,643
Volkswagen..............................................          -7,437        -150,740           9,328         -49,275           1,891        -200,015
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................      -1,054,238        -560,478      -1,607,343        -235,181      -2,661,581        -795,659
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table II-15 shows the change in volumes between the two forecasts 
for cars and trucks based on the new and old NHTSA definition. The 
table shows the change to give a feel for how the change in definition 
impacts the car/truck split. Many factors impact the changes shown here 
including differences in AEO, differences in the number of SUV and CUV 
vehicles becoming cars, and the future volume projected by CSM and LMC.

         Table II-15--Differences in New and Old Car and Truck definition in 2008, 2016, 2021, and 2025
----------------------------------------------------------------------------------------------------------------
                  Vehicle type                       2010-2008         2016            2021            2025
----------------------------------------------------------------------------------------------------------------
Old Cars Definition.............................        -965,244         148,983         -12,773        -310,630
New Cars Definition.............................      -1,054,238          86,722        -194,571        -560,478
Old Truck Definition............................      -1,696,337        -481,959        -446,194        -485,029
New Truck Definition............................      -1,607,343        -419,698        -264,396        -235,181
----------------------------------------------------------------------------------------------------------------

    Table II-16 is the changes in car and truck split due to the 
difference between the 2010 and 2008 forecast. The table shows that the 
different AEO forecasts, CSM and LMC projections have an insignificant 
impact on the car and truck split.

                             Table II-16--Differences in Car and Truck Volumes and Split Based on NHTSA New Truck Definition
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               2016       2017       2018       2019       2020       2021       2022       2023       2024       2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Car Volume \*\............................         87        225        184        144        -98       -194       -281       -374       -446       -561
Truck Volume \*\..........................       -419       -220       -155        -61       -168       -264       -272       -274       -241       -235
Car Split.................................       1.9%       1.4%       1.1%       0.5%       0.5%       0.6%       0.5%       0.3%       0.0%      -0.2%
Truck Split...............................      -1.9%      -1.4%      -1.1%      -0.5%      -0.5%      -0.6%      -0.5%      -0.3%       0.0%       0.2%
--------------------------------------------------------------------------------------------------------------------------------------------------------
\*\ in thousands.

    The joint TSD contains further comparisons of the two projections 
at the end of Chapter 1.
    So, given all of the discussion above, the agencies have created 
these two baselines to illustrate possible uncertainty in the future 
market forecast. The industry-wide differences between the forecasts 
are relatively minor, even if there are some fairly significant 
differences for individual manufacturers. Analysis under both baselines 
supports the agencies' respective decisions as to the stringency of the 
final standards, as discussed further in Sections III and IV below.

C. Development of Attribute-Based Curve Shapes

1. Why are standards attribute-based and defined by a mathematical 
function?
    As in the MYs 2012-2016 CAFE/GHG rules, and as NHTSA did in the MY 
2011 CAFE rule, NHTSA and EPA are promulgating attribute-based CAFE and 
CO2 standards that are defined by a mathematical function. 
EPCA, as amended by EISA, expressly requires that CAFE standards for 
passenger cars and light trucks be based on one or more vehicle 
attributes related to fuel economy, and be expressed in the form of a 
mathematical function.\161\ The CAA has no such requirement, although 
such an approach is permissible under section 202 (a) and EPA has used 
the attribute-based approach in issuing standards under analogous 
provisions of the CAA (e.g., criteria pollutant standards for non-road 
diesel engines using engine size as the attribute,\162\ in the recent 
GHG standards for heavy duty pickups and vans using a work factor 
attribute,\163\ and in the MYs 2012-2016 GHG rule itself which used 
vehicle footprint as the attribute). As for the MYs 2012-2016 
rulemaking, public comments on the MYs 2017-2025 proposal widely 
supported attribute-based standards for both agencies' standards as 
further discussed in section II.C.2.
---------------------------------------------------------------------------

    \161\ 49 U.S.C. 32902(a)(3)(A).
    \162\ 69 FR 38958 (June 29, 2004).
    \163\ 76 FR 57106, 57162-64, (Sept. 15, 2011).
---------------------------------------------------------------------------

    Under an attribute-based standard, every vehicle model has a 
performance target (fuel economy and CO2 emissions for CAFE 
and CO2 emissions standards, respectively), the level of 
which depends on the vehicle's attribute (for this final rule, 
footprint, as discussed below). Each manufacturers' fleet average 
standard is determined by the production-weighted \164\ average (for 
CAFE, harmonic average) of those targets.
---------------------------------------------------------------------------

    \164\ Production for sale in the United States.
---------------------------------------------------------------------------

    The agencies believe that an attribute-based standard is preferable 
to a single-industry-wide average standard in the

[[Page 62687]]

context of CAFE and CO2 standards for several reasons. 
First, if the shape is chosen properly, every manufacturer is more 
likely to be required to continue adding more fuel efficient technology 
each year across their fleet, because the stringency of the compliance 
obligation will depend on the particular product mix of each 
manufacturer. Therefore a maximum feasible attribute-based standard 
will tend to require greater fuel savings and CO2 emissions 
reductions overall than would a maximum feasible flat standard (that 
is, a single mpg or CO2 level applicable to every 
manufacturer).
    Second, depending on the attribute, attribute-based standards 
reduce the incentive for manufacturers to respond to CAFE and 
CO2 standards in ways harmful to safety.\165\ Because each 
vehicle model has its own target (based on the attribute chosen), 
properly fitted attribute-based standards provide little, if any, 
incentive to build smaller vehicles simply to meet a fleet-wide 
average, because the smaller vehicles will be subject to more stringent 
compliance targets.\166\
---------------------------------------------------------------------------

    \165\ The 2002 NAS Report described at length and quantified the 
potential safety problem with average fuel economy standards that 
specify a single numerical requirement for the entire industry. See 
2002 NAS Report at 5, finding 12. Ensuing analyses, including by 
NHTSA, support the fundamental conclusion that standards structured 
to minimize incentives to downsize all but the largest vehicles will 
tend to produce better safety outcomes than flat standards.
    \166\ Assuming that the attribute is related to vehicle size.
---------------------------------------------------------------------------

    Third, attribute-based standards provide a more equitable 
regulatory framework for different vehicle manufacturers.\167\ A single 
industry-wide average standard imposes disproportionate cost burdens 
and compliance difficulties on the manufacturers that need to change 
their product plans to meet the standards, and puts no obligation on 
those manufacturers that have no need to change their plans. As 
discussed above, attribute-based standards help to spread the 
regulatory cost burden for fuel economy more broadly across all of the 
vehicle manufacturers within the industry.
---------------------------------------------------------------------------

    \167\ 2002 NAS Report at 4-5, finding 10.
---------------------------------------------------------------------------

    Fourth, attribute-based standards better respect economic 
conditions and consumer choice as compared to single-value standards. A 
flat, or single value, standard encourages a certain vehicle size fleet 
mix by creating incentives for manufacturers to use vehicle downsizing 
as a compliance strategy. Under a footprint-based standard, 
manufacturers have the incentive to invest in technologies that improve 
the fuel economy of the vehicles they sell rather than shifting their 
product mix, because reducing the size of the vehicle is generally a 
less viable compliance strategy given that smaller vehicles have more 
stringent regulatory targets.
2. What attribute are the agencies adopting, and why?
    As in the MYs 2012-2016 CAFE/GHG rules, and as NHTSA did in the MY 
2011 CAFE rule, NHTSA and EPA are promulgating CAFE and CO2 
standard curves that are based on vehicle footprint, which has an 
observable correlation to fuel economy and emissions. There are several 
policy and technical reasons why NHTSA and EPA believe that footprint 
is the most appropriate attribute on which to base the standards for 
the vehicles covered by this rulemaking, even though some other vehicle 
attributes (notably curb weight) are better correlated to fuel economy 
and emissions.
    First, in the agencies' judgment, from the standpoint of vehicle 
safety, it is important that the CAFE and CO2 standards be 
set in a way that does not encourage manufacturers to respond by 
selling vehicles that are less safe. While NHTSA's research of 
historical crash data also indicates that reductions in vehicle mass 
tend to compromise overall highway safety, reductions in vehicle 
footprint do so to a much greater extent. If footprint-based standards 
are defined in a way that creates a relatively uniform burden for 
compliance for vehicles of all sizes, then footprint-based standards 
should not create incentives for manufacturers to downsize their fleets 
as a strategy for compliance which could compromise societal safety, or 
to upsize their fleets which might reduce the program's fuel savings 
and GHG emission reduction benefits. Footprint-based standards also 
enable manufacturers to apply weight-efficient materials and designs to 
their vehicles while maintaining footprint, as an effective means to 
improve fuel economy and reduce GHG emissions. On the other hand, 
depending on their design, weight-based standards can create 
disincentives for manufacturers to apply weight-efficient materials and 
designs. This is because weight-based standards would become more 
stringent as vehicle mass is reduced. The agencies discuss mass 
reduction and its relation to safety in more detail in Preamble section 
II.G.
    Further, although we recognize that weight is better correlated 
with fuel economy and CO2 emissions than is footprint, we 
continue to believe that there is less risk of ``gaming'' (changing the 
attribute(s) to achieve a more favorable target) by increasing 
footprint under footprint-based standards than by increasing vehicle 
mass under weight-based standards--it is relatively easy for a 
manufacturer to add enough weight to a vehicle to decrease its 
applicable fuel economy target a significant amount, as compared to 
increasing vehicle footprint. We also continue to agree with concerns 
raised in 2008 by some commenters to the MY 2011 CAFE rulemaking that 
there would be greater potential for gaming under multi-attribute 
standards, such as those that also depend on weight, torque, power, 
towing capability, and/or off-road capability. The agencies agree with 
the assessment first presented in NHTSA's MY 2011 CAFE final rule \168\ 
that the possibility of gaming an attribute-based standard is lowest 
with footprint-based standards, as opposed to weight-based or multi-
attribute-based standards. Specifically, standards that incorporate 
weight, torque, power, towing capability, and/or off-road capability in 
addition to footprint would not only be more complex, but by providing 
degrees of freedom with respect to more easily-adjusted attributes, 
they could make it less certain that the future fleet would actually 
achieve the average fuel economy and CO2 reduction levels 
projected by the agencies.\169\ This is not to say that a footprint-
based system will eliminate gaming, or that a footprint-based system 
eliminates the possibility that manufacturers will change vehicles in 
ways that compromise occupant protection. Such risks cannot be 
completely avoided, and in the agencies' judgment, footprint-based 
standards achieved the best balance among affected considerations.
---------------------------------------------------------------------------

    \168\ See 74 FR 14359 (Mar. 30, 2009).
    \169\ However, for heavy-duty pickups and vans not covered by 
today's standards, the agencies determined that use of footprint and 
work factor as attributes for heavy duty pickup and van GHG and fuel 
consumption standards could reasonably avoid excessive risk of 
gaming. See 76 FR 57106, 57161-62 (Sept. 15, 2011).
---------------------------------------------------------------------------

    The agencies recognize that based on economic and consumer 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. The agencies recognize that a recent 
independent analysis, discussed below, suggests that the NPRM form of 
the MY 2014 standards could, under some circumstances posited by the 
authors, induce some increases in vehicle footprint. Underlining the 
potential uncertainty, considering a range of scenarios, the authors 
obtained a wide range of results in their analyses. As discussed in 
later in this section,

[[Page 62688]]

slopes of the linear relationships underlying today's standards are 
within the range of technically reasonable analyses of the 
relationships between fuel consumption and footprint, and the agencies 
continue to expect that there will not be significant shifts in the 
distribution of footprints as a direct consequence of this final rule. 
The agencies also recognize that some attribute-based standards in 
other countries/regions use attributes other than footprint and that 
there could be benefits for some manufacturers if there was greater 
international harmonization of fuel economy and GHG standards for 
light-duty vehicles, but this is largely a question of how stringent 
standards are and how they are tested and enforced. It is entirely 
possible that footprint-based and weight-based systems can coexist 
internationally and not present an undue burden for manufacturers if 
they are carefully crafted. Different countries or regions may find 
different attributes appropriate for basing standards, depending on the 
particular challenges they face--from fuel prices, to family size and 
land use, to safety concerns, to fleet composition and consumer 
preference, to other environmental challenges besides climate change. 
The agencies anticipate working more closely with other countries and 
regions in the future to consider how fuel economy and related GHG 
emissions test procedures and standards might be approached in ways 
that least burden manufacturers while respecting each country's need to 
meet its own particular challenges.
    In the NPRM, the agencies stated that we continue to find that 
footprint is the most appropriate attribute upon which to base the 
proposed standards, but recognizing strong public interest in this 
issue, we sought comment on whether the agencies should consider 
setting standards for the final rule based on another attribute or 
another combination of attributes. The agencies also specifically 
requested that the commenters address the concerns raised in the 
paragraphs above regarding the use of other attributes, and explain how 
standards should be developed using the other attribute(s) in a way 
that contributes more to fuel savings and CO2 reductions 
than the footprint-based standards, without compromising safety.
    The agencies received several comments regarding the attribute(s) 
upon which post-MY 2016 CAFE and GHG standards should be based. The 
National Auto Dealers Association (NADA) \170\ and the Consumer 
Federation of America (CFA) \171\ expressed support for attribute-based 
standards, generally, indicating that such standards accommodate 
consumer preferences, level the playing field between manufacturers, 
and remove the incentive to push consumers into smaller vehicles. Many 
commenters, including automobile manufacturers, NGOs, trade 
associations and parts suppliers (e.g., General Motors,\172\ Ford,\173\ 
American Chemistry Council,\174\ Alliance of Automobile 
Manufacturers,\175\ International Council on Clean Transportation,\176\ 
Insurance Institute for Highway Safety,\177\ Society of the Plastics 
Industry,\178\ Aluminum Association,\179\ Motor and Equipment 
Manufacturers Association,\180\ and others) expressed support for the 
continued use of vehicle footprint as the attribute upon which to base 
CAFE and CO2 standards, citing advantages similar to those 
mentioned by NADA and CFA. Conversely, the Institute for Policy 
Integrity (IPI) at the New York University School of Law questioned 
whether non-attribute-based (flat) or an alternative attribute basis 
would be preferable to footprint-based standards as a means to increase 
benefits, improve safety, reduce ``gaming,'' and/or equitably 
distribute compliance obligations.\181\ IPI argued that, even under 
flat standards, credit trading provisions would serve to level the 
playing field between manufacturers. IPI acknowledged that NHTSA, 
unlike EPA, is required to promulgate attribute-based standards, and 
agreed that a footprint-based system could be at much less risk of 
gaming than a weight-based system. IPI suggested that the agencies 
consider a range of options, including a fuel-based system, and select 
the approach that maximizes net benefits. Ferrari and BMW suggested 
that the agencies consider weight-based standards, citing the closer 
correlation between fuel economy and footprint, and BMW further 
suggested that weight-based standards might facilitate international 
harmonization (i.e., between U.S. standards and related standards in 
other countries).\182\ Porsche commented that the footprint attribute 
is not well suited for manufacturers of high performance vehicles with 
a small footprint.\183\
---------------------------------------------------------------------------

    \170\ NADA, Docket No. NHTSA-2010-0131-0261, at 11.
    \171\ CFA, Docket No. EPA-HQ-OAR-2010-0799-9419 at 810, 44.
    \172\ GM, Docket No. NHTSA-2010-0131-0236, at 2.
    \173\ Ford, Docket No. NHTSA-2010-0131-0235, at 8.
    \174\ ACC, Docket No. EPA-HQ-OAR-2010-0799-9517 at 2.
    \175\ Alliance, Docket No. NHTSA-2010-0131-0262, at 85.
    \176\ ICCT, Docket No. NHTSA-2010-0131-0258, at 48.
    \177\ IIHS, Docket No. NHTSA-2010-0131-0222, at 1.
    \178\ SPI, Docket No. EPA-HQ-OAR-2010-0799-9492 at 4.
    \179\ Aluminum Association, Docket No. NHTSA-2010-0131-0226, at 
1.
    \180\ MEMA, Docket No. EPA-HQ-OAR-2010-0799-9478 at 1.
    \181\ IPI, Docket No. EPA-HQ-OAR-2010-0799-11485 at 13-15.
    \182\ BMW, Docket No. NHTSA-2010-0131-0250, at 3.
    \183\ Porsche, Docket No. EPA-HQ-OAR-2010-0799-9264.
---------------------------------------------------------------------------

    Regarding the comments from IPI, as IPI appears to acknowledge, 
EPCA/EISA expressly requires that CAFE standards be attribute-based and 
defined in terms of mathematical functions. Also, NHTSA has, in fact, 
considered and reconsidered options other than footprint, over the 
course of multiple CAFE rulemakings conducted throughout the past 
decade. When first contemplating attribute-based systems, NHTSA 
considered attributes such as weight, ``shadow'' (overall area), 
footprint, power, torque, and towing capacity. NHTSA also considered 
approaches that would combine two or potentially more than two such 
attributes. To date, every time NHTSA (more recently, with EPA) has 
considered options for light-duty vehicles, the agency has concluded 
that a properly designed footprint-based approach provides the best 
means of achieving the basic policy goals (i.e., by reducing 
disparities between manufacturers' compliance burdens, increasing the 
likelihood of improved fuel economy and reduced GHG emissions across 
the entire spectrum of footprint targets; and by reducing incentives 
for manufacturers to respond to standards by reducing vehicle size in 
ways that could compromise overall highway safety) involved in applying 
an attribute-based standards, and at the same time structuring 
footprint-based standards in a way that furthers the energy and 
environmental policy goals of EPCA and the CAA by not creating 
inappropriate incentives to increase vehicle size in ways that could 
increase fuel consumption and GHG emissions. As to IPI's suggestion to 
use fuel type as an attribute, although neither NHTSA nor EPA have 
presented quantitative analysis of standards that differentiate between 
fuel type, such standards would effectively use fuel type to identify 
different subclasses of vehicles, thus requiring mathematical 
functions--not addressed by IPI's comments--to

[[Page 62689]]

recombine these fuel types into regulated classes. Insofar as EPCA/EISA 
already specifies how different fuel types are to be treated for 
purposes of calculating fuel economy and CAFE levels, and moreover, 
insofar as the EISA revisions to EPCA removed NHTSA's previously-clear 
authority to set separate CAFE standards for different classes of light 
trucks, using fuel type to further differentiate subclasses of vehicles 
could conflict with the intent, and possibly the letter, of NHTSA's 
governing statute. Finally, in the agencies' judgment, while regarding 
IPI's suggestion that the agencies select the attribute-based approach 
that maximizes net benefits may have merit, net benefits are but one of 
many considerations which lead to the setting of the standard. Also, 
such an undertaking would be impracticable at this time, considering 
that the mathematical forms applied under each attribute-based approach 
would also need to be specified, and that the agencies lack methods to 
reliably quantify the relative potential for induced changes in vehicle 
attributes.
    Regarding Ferrari's and BMW's comments, as stated previously, in 
the agencies' judgment, footprint-based standards (a) discourage 
vehicle downsizing that might compromise occupant protection, (b) 
encourage the application of technology, including weight-efficient 
materials (e.g., high-strength steel, aluminum, magnesium, composites, 
etc.), and (c) are less susceptible than standards based on other 
attributes to ``gaming'' that could lead to less-than-projected energy 
and environmental benefits. It is also important to note that there are 
many differences between both the standards and the on-road light-duty 
vehicle fleets in Europe and the United States. The stringency of 
standards, independent of the attribute used, is another factor that 
influences harmonization. While the agencies agree that international 
harmonization of test procedures, calculation methods, and/or standards 
could be a laudable goal, again, harmonization is not simply a function 
of the attribute upon which the standards are based. Given the 
differences in the on-road fleet, in fuel composition and availability, 
in regional consumer preferences for different vehicle characteristics, 
in other vehicle regulations besides for fuel economy/CO2 
emissions, and in the balance of program goals given all of these 
factors in the model years affected, among other things, it would not 
necessarily be expected that the CAFE and GHG emission standards would 
align with standards of other countries. Thus, the agencies continue to 
judge vehicle footprint to be a preferable attribute for the same 
reasons enumerated in the proposal and reiterated above.
    Finally, as explained in section III.B.6 and documented in section 
III.D.6 below, EPA agrees with Porsche that the MY2017 GHG standards, 
and the GHG standards for the immediately succeeding model years, pose 
special challenges of feasibility and (especially) lead time for 
intermediate volume manufacturers, in particular for limited-line 
manufacturers of smaller footprint, high performance passenger cars. It 
is for this reason that EPA has provided additional lead time to these 
manufacturers. NHTSA, however, is providing no such additional lead 
time. As required under EISA/EPCA, manufacturers continue--as since the 
1970s--to have the option of paying civil penalties in lieu of 
achieving compliance with the standards, and NHTSA is uncertain as to 
what authority would allow it to promulgate separate standards for 
different classes of manufacturers, having raised this issue in the 
proposal and having received no legal analysis with suggestions from 
Porsche or other commenters.
3. How have the agencies changed the mathematical functions for the MYs 
2017-2025 standards, and why?
    By requiring NHTSA to set CAFE standards that are attribute-based 
and defined by a mathematical function, NHTSA interprets Congress as 
intending that the post-EISA standards to be data-driven--a 
mathematical function defining the standards, in order to be 
``attribute-based,'' should reflect the observed relationship in the 
data between the attribute chosen and fuel economy.\184\ EPA is also 
setting attribute-based CO2 standards defined by similar 
mathematical functions, for the reasonable technical and policy grounds 
discussed below and in Section II of the preamble to the proposed 
rule,\185\ and which supports a harmonization with the CAFE standards.
---------------------------------------------------------------------------

    \184\ A mathematical function can be defined, of course, that 
has nothing to do with the relationship between fuel economy and the 
chosen attribute--the most basic example is an industry-wide 
standard defined as the mathematical function average required fuel 
economy = X, where X is the single mpg level set by the agency. Yet 
a standard that is simply defined as a mathematical function that is 
not tied to the attribute(s) would not meet the requirement of EISA.
    \185\ See 76 FR 74913 et seq. (Dec. 1, 2011).
---------------------------------------------------------------------------

    The relationship between fuel economy (and GHG emissions) and 
footprint, though directionally clear (i.e., fuel economy tends to 
decrease and CO2 emissions tend to increase with increasing 
footprint), is theoretically vague and quantitatively uncertain; in 
other words, not so precise as to a priori yield only a single possible 
curve.\186\ There is thus a range of legitimate options open to the 
agencies in developing curve shapes. The agencies may of course 
consider statutory objectives in choosing among the many reasonable 
alternatives since the statutes do not dictate a particular 
mathematical function for curve shape. For example, curve shapes that 
might have some theoretical basis could lead to perverse outcomes 
contrary to the intent of the statutes to conserve energy and reduce 
GHG emissions.\187\ Thus, the decision of how to set the target curves 
cannot always be just about most ``clearly'' using a mathematical 
function to define the relationship between fuel economy and the 
attribute; it often has to reflect legitimate policy judgments, where 
the agencies adjust the function that would define the relationship in 
order to achieve environmental goals, reduce petroleum consumption, 
encourage application of fuel-saving technologies, not adversely affect 
highway safety, reduce disparities of manufacturers' compliance burdens 
(increasing the likelihood of improved fuel economy and reduced GHG 
emissions across the entire spectrum of footprint targets), preserve 
consumer choice, etc. This is true both for the decisions that guide 
the mathematical function defining the sloped portion of the target 
curves, and for the separate decisions that guide the agencies' choice 
of ``cutpoints'' (if any) that define the fuel economy/CO2 
levels and footprints at each end of the curves where the curves become 
flat. Data informs these decisions, but how the agencies define and 
interpret the relevant data, and then the choice of methodology for 
fitting a curve to the data, must include a consideration of both 
technical data and policy goals.
---------------------------------------------------------------------------

    \186\ In fact, numerous manufacturers have confidentially shared 
with the agencies what they describe as ``physics based'' curves, 
with each OEM showing significantly different shapes, and footprint 
relationships. The sheer variety of curves shown to the agencies 
further confirm the lack of an underlying principle of ``fundamental 
physics'' driving the relationship between CO2 emission 
or fuel consumption and footprint, and the lack of an underlying 
principle to dictate any outcome of the agencies' establishment of 
footprint-based standards.
    \187\ For example, if the agencies set weight-based standards 
defined by a steep function, the standards might encourage 
manufacturers to keep adding weight to their vehicles to obtain less 
stringent targets.
---------------------------------------------------------------------------

    The next sections examine the policy concerns that the agencies 
considered in developing the target curves that define

[[Page 62690]]

the MYs 2017-2025 CAFE and CO2 standards presented in this 
final rule, and the technical work supporting selection of the curves 
defining those standards.
4. What curves are the agencies promulgating for MYs 2017-2025?
    The mathematical functions for the MYs 2017-2025 curves are 
somewhat changed from the functions for the MYs 2012-2016 curves, in 
response to comments received from stakeholders pre-proposal in order 
to address technical concerns and policy goals that the agencies judge 
more significant in this rulemaking than in the prior one, given their 
respective timeframes, and have retained those same mathematical 
functions for the final rule as supported by commenters. This section 
discusses the methodology the agencies selected as, at this time, best 
addressing those technical concerns and policy goals, given the various 
technical inputs to the agencies' current analyses. Below the agencies 
discuss how the agencies determined the cutpoints and the flat portions 
of the MYs 2017-2025 target curves. We also note that both of these 
sections address only how the curves were fit to fuel consumption and 
CO2 emission values determined using the city and highway 
test procedures, and that in determining respective regulatory 
alternatives, the agencies made further adjustments to the curves to 
account for improvements to mobile air conditioners.
    Thus, recognizing that there are many reasonable statistical 
methods for fitting curves to data points that define vehicles in terms 
of footprint and fuel economy, as in past rules, the agencies added 
equivalent levels of technology to the baseline fleet as a starting 
point for the curve analysis. The agencies continue to believe that 
this is a valid method to adjust for technology differences between 
actual vehicle models in the MY 2008 and MY 2010 fleets. The 
statistical method for fitting that curve, however, was revisited by 
the agencies in this rule. For the NPRM, the agencies chose to fit the 
proposed standard curves using an ordinary least-squares formulation, 
on sales-weighted data, using a fleet that has had technology applied, 
and after adjusting the data for the effects of weight-to-footprint, as 
described below. This represented a departure from the statistical 
approach for fitting the curves in MYs 2012-2016, as explained in the 
next section. The agencies considered a wide variety of reasonable 
statistical methods in order to better understand the range of 
uncertainty regarding the relationship between fuel consumption (the 
inverse of fuel economy), CO2 emission rates, and footprint, 
thereby providing a range within which decisions about standards would 
be potentially supportable. In preparing for analysis supporting 
today's final rule, the agencies updated analytical inputs, including 
by developing two market forecasts (as discussed above in Section II.B 
of the preamble and in Chapter 1 of the joint TSD). Using all of this 
information, the agencies repeated the curve fitting analysis, once for 
each market forecast. The agencies obtained results that were broadly 
similar, albeit not identical, to those supporting the NPRM. Results 
obtained for the NPRM and for today's final rule span similar regions 
in footprint--fuel economy space, areas within which it would be 
technically reasonable to select specific linear relationships upon 
which to base new attribute-based standards. The agencies thus believe 
it is reasonable to finalize the curves as proposed. This updated 
analysis is presented in Chapter 2 of the joint TSD.
a. What concerns were the agencies looking to address that led them to 
change from the approach used for the MYs 2012-2016 curves?
    During the year and a half between when the MYs 2012-2016 final 
rule was issued and when the MYs 2017-2025 NPRM was issued, NHTSA and 
EPA received a number of comments from stakeholders on how curves 
should be fitted to the passenger car and light truck fleets. Some 
limited-line manufacturers have argued that curves should generally be 
flatter in order to avoid discouraging production of small vehicles, 
because steeper curves tend to result in more stringent targets for 
smaller vehicles. Most full-line manufacturers have argued that a 
passenger car curve similar in slope to the MY 2016 passenger car curve 
would be appropriate for future model years, but that the light truck 
curve should be revised to be less difficult for manufacturers selling 
the largest full-size pickup trucks. These manufacturers argued that 
the MY 2016 light truck curve was not ``physics-based,'' and that in 
order for future tightening of standards to be feasible for full-line 
manufacturers, the truck curve for later model years should be steeper 
and extended further (i.e., made less stringent) into the larger 
footprints. The agencies do not agree that the MY 2016 light truck 
curve was somehow deficient in lacking a ``physics basis,'' or that it 
was somehow overly stringent for manufacturers selling large pickups--
manufacturers making these arguments presented no ``physics-based'' 
model to explain how fuel economy should depend on footprint.\188\ The 
same manufacturers indicated that they believed that the light truck 
standard should be somewhat steeper after MY 2016, primarily because, 
after more than ten years of progressive increases in the stringency of 
applicable CAFE standards, large pickups would be less capable of 
achieving further improvements without compromising load carrying and 
towing capacity. The related issue of the stringency of the CAFE and 
GHG standards for light trucks is discussed in sections and III.D and 
IV.F of the preamble to this final rule.
---------------------------------------------------------------------------

    \188\ See footnote 186
---------------------------------------------------------------------------

    In developing the curve shapes for the proposed rule, the agencies 
were aware of the current and prior technical concerns raised by OEMs 
concerning the effects of the stringency on individual manufacturers 
and their ability to meet the standards with available technologies, 
while producing vehicles at a cost that allowed them to recover the 
additional costs of the technologies being applied. Although we 
continued to believe that the methodology for fitting curves for the 
MYs 2012-2016 standards was technically sound, we recognized 
manufacturers' concerns regarding their abilities to comply with a 
similarly shallow curve after MY 2016 given the anticipated mix of 
light trucks in MYs 2017-2025. As in the MYs 2012-2016 rules, the 
agencies considered these concerns in the analysis of potential curve 
shapes. The agencies also considered safety concerns which could be 
raised by curve shapes creating an incentive for vehicle downsizing as 
well the economic losses that could be incurred if curve shapes unduly 
discourage market shifts--including vehicle upsizing--that have vehicle 
buyers value. In addition, the agencies sought to improve the balance 
of compliance burdens among manufacturers, and thereby increase the 
likelihood of improved fuel economy and reduced GHG emissions across 
the entire spectrum of footprint targets. Among the technical concerns 
and resultant policy trade-offs the agencies considered were the 
following:
     Flatter standards (i.e., curves) increase the risk that 
both the weight and size of vehicles will be reduced, potentially 
compromising highway safety.
     Flatter standards potentially impact the utility of 
vehicles by providing an incentive for vehicle downsizing.
     Steeper footprint-based standards may create incentives to 
upsize

[[Page 62691]]

vehicles, thus increasing the possibility that fuel economy and 
greenhouse gas reduction benefits will be less than expected.
     Given the same industry-wide average required fuel economy 
or CO2 level, flatter standards tend to place greater 
compliance burdens on full-line manufacturers.
     Given the same industry-wide average required fuel economy 
or CO2 level, steeper standards tend to place greater 
compliance burdens on limited-line manufacturers (depending of course, 
on which vehicles are being produced).
     If cutpoints are adopted, given the same industry-wide 
average required fuel economy, moving small-vehicle cutpoints to the 
left (i.e., up in terms of fuel economy, down in terms of 
CO2 emissions) discourages the introduction of small 
vehicles, and reduces the incentive to downsize small vehicles in ways 
that could compromise overall highway safety.
     If cutpoints are adopted, given the same industry-wide 
average required fuel economy, moving large-vehicle cutpoints to the 
right (i.e., down in terms of fuel economy, up in terms of 
CO2 emissions) better accommodates the design requirements 
of larger vehicles--especially large pickups--and extends the size 
range over which downsizing is discouraged.
    All of these were policy goals that required weighing and 
consideration. Ultimately, the agencies did not agree that the MY 2017 
target curves for the proposal, on a relative basis, should be made 
significantly flatter than the MY 2016 curve,\189\ as we believed that 
this would undo some of the safety-related incentives and balancing of 
compliance burdens among manufacturers--effects that attribute-based 
standards are intended to provide.
---------------------------------------------------------------------------

    \189\ While ``significantly'' flatter is subjective, the year 
over year change in curve shapes is discussed in greater detail in 
Section II.C.6.a and Chapter 2 of the joint TSD.
---------------------------------------------------------------------------

    Nonetheless, the agencies recognized full-line OEM concerns and 
tentatively concluded that further increases in the stringency of the 
light truck standards would be more feasible if the light truck curve 
was made steeper than the MY 2016 truck curve and the right (large 
footprint) cut-point was extended over time to larger footprints. This 
conclusion was supported by the agencies' technical analyses of 
regulatory alternatives defined using the curves developed in the 
manner described below.
    The Alliance, GM, and the UAW commented in support of the 
reasonableness of the agencies' proposals regarding the shape and slope 
of the curves and how they were developed, although the Alliance stated 
that the weighting and regression analysis used to develop the curves 
for MYs 2022-2025 should be reviewed during the mid-term evaluation 
process.
    Other commenters objected to specific aspects of the agencies' 
approach to developing the curves. ACEEE provided extensive comments, 
arguing generally that agencies appeared to be proposing curve choices 
in response to subjective policy concerns (namely, protecting large 
trucks) rather than on a sound technical basis.\190\ ACEEE recommended 
that the agencies choose ``the most robust technical approach,'' and 
then make policy-driven adjustments to the curves for a limited time as 
necessary, and explain the curves in those terms, revisiting this issue 
for the final rule.\191\
---------------------------------------------------------------------------

    \190\ ACEEE comments, Docket No. EPA-HQ-OAR-2010-0799-9528 at 6.
    \191\ Id.
---------------------------------------------------------------------------

    The agencies reaffirm the reasonable technical and policy basis for 
selecting the truck curve. Three primary drivers form this technical 
basis: (a) The largest trucks have unique equipment and design, as 
described in the Ford comment referenced below in section II.C.4.f; (b) 
the agencies agree with those large truck manufacturers who indicated 
in discussions prior to the proposal that they believed that the light 
truck standard should be somewhat steeper after MY 2016, primarily 
because, after more than ten recent years of progressive increases in 
the stringency of applicable CAFE standards (after nearly ten years 
during which Congress did not allow NHTSA to increase light truck CAFE 
standards), manufacturers of large pickups would have limited options 
to comply with more stringent standards without resorting to 
compromising large truck load carrying and towing capacity; and (c) 
given the relatively few platforms which comprise the majority of the 
sales at the largest truck footprints, the agencies were concerned 
about requiring levels of average light truck performance that might 
lead to overly aggressive technology penetration rates in this 
important segment of the work fleet. Specifically, the agencies were 
concerned at proposal, and remain concerned about issues of lead time 
and cost with regard to manufacturers of these work vehicles. As noted 
later in this chapter, while the largest trucks are a small segment of 
the overall truck fleet, and an even smaller segment of the overall 
fleet, \192\ these changes to the truck slope have been made in order 
to provide a clearer path toward compliance for manufacturers of these 
vehicles, and reduce the potential that new standards would lead these 
manufacturers to choose to downpower, modify the structure, or 
otherwise reduce the utility of these work vehicles.
---------------------------------------------------------------------------

    \192\ The agencies' market forecast used at proposal includes 
about 24 vehicle configurations above 74 square feet with a total 
volume of about 50,000 vehicles or less during any MY in the 2017-
2025 time frame, In the MY2010 based market forecast, there are 14 
vehicle configurations with a total volume of 130,000 vehicles or 
less during any MY in the 2017-2025 time frame. This is a similarly 
small portion of the overall number of vehicle models or vehicle 
sales.
---------------------------------------------------------------------------

    As discussed in the NPRM and in Chapter 2 of the TSD, as well as in 
section III.D and IV.E below, we considered all of the utilized methods 
of normalizing (including not normalizing) fuel economy levels and the 
different methods for fitting functional forms to the footprint and 
fuel economy and CO2 levels, to be technically reasonable 
options. We indicated that, within the range spanned by these 
technically reasonable options, the selection of curves for purposes of 
specifying standards involves consideration of technical concerns and 
policy implications. Having considered the above comments on the 
estimation and selection of curves, we have not changed our judgment 
about the process--that is, that the agencies can make of policy-
informed selection within the range spanned by technically reasonable 
quantitative methods. We disagree with ACEEE's portrayal of this 
involving the ``protection'' of large trucks. We have selected a light 
truck slope that addresses real engineering aspects of large light 
trucks and real fleet aspects of the manufacturers producing these 
trucks, and sought to avoid creating an incentive for such 
manufacturers to reduce the hauling and towing capacity of these 
vehicles, an undesirable loss of utility. Such concerns are applicable 
much more directly to light trucks than to passenger cars. The 
resulting curves are well within the range of curves we have estimated. 
The steeper slope at the right hand of the truck curve recognizes the 
physical differences in these larger vehicles \193\ and the fleet 
differences in

[[Page 62692]]

manufacturers that produce them. Further, we disagree with ACEEE's 
suggestion that the agencies should commit to a particular method for 
selecting curves; as the approaches we have considered demonstrate that 
the range of technically reasonable curve fitting methods spans a wide 
range, indicating uncertainty that could make it unwise to ``lock in'' 
a particular method for all future rulemakings. The agencies plan on 
observing fleet trends in the future to see if there are any unexpected 
shifts in the distribution of technology and utility within the 
footprint range for both cars and trucks.
---------------------------------------------------------------------------

    \193\ As Ford Motor Company detailed, in its public comments, 
``towing capability generally requires increased aerodynamic drag 
caused by a modified frontal area, increased rolling resistance, and 
a heavier frame and suspension to support this additional 
capability.'' Ford further noted that these vehicles further require 
auxiliary transmission oil coolers, upgraded radiators, trailer 
hitch connectors and wiring harness equipment, different steering 
ratios, upgraded rear bumpers and different springs for heavier 
tongue load (for upgraded towing packages), body-on-frame (vs. 
unibody) construction (also known as ladder frame construction) to 
support this capability and an aggressive duty cycle, and lower axle 
ratios for better pulling power/capability.
---------------------------------------------------------------------------

    We note that comments by CBD, ACEEE, NACAA, and an individual, 
Yegor Tarazevich, referenced a 2011 study by Whitefoot and Skerlos, 
``Design incentives to increase vehicle size created from the U.S. 
footprint-based fuel economy standards.'' \194\ This study concluded 
that MY 2014 standards, as proposed, ``create an incentive to increase 
vehicle size except when consumer preference for vehicle size is near 
its lower bound and preference for acceleration is near its upper 
bound.'' \195\ The commenters who cited this study generally did so as 
part of arguments in favor of flatter standards (i.e., curves that are 
flatter across the range of footprints) for MYs 2017-2025. While the 
agencies consider the concept of the Whitefoot and Skerlos analysis to 
have some potential merits, it is also important to note that, among 
other things, the authors assumed different inputs than the agencies 
actually used in the MYs 2012-2016 rule regarding the baseline fleet, 
the cost and efficacy of potential future technologies, and the 
relationship between vehicle footprint and fuel economy.
---------------------------------------------------------------------------

    \194\ Available at Docket No. EPA-HQ-OAR-2010-0799.
    \195\ page 410.
---------------------------------------------------------------------------

    Were the agencies to use the Whitefoot and Skerlos methodology 
(e.g., methods to simulate manufacturers' potential decisions to 
increase vehicle footprint) with the actual inputs to the MYs 2012-2016 
rules, the agencies would likely obtain different findings. Underlining 
the potential uncertainty, the authors obtained a wide range of results 
in their analyses. Insofar as Whitefoot and Skerlos found, for some 
scenarios, that manufacturers might respond to footprint-based 
standards by deliberately increasing vehicle footprint, these findings 
are attributable to a combination of (a) the assumed baseline market 
characteristics, (b) the assumed cost and fuel economy impacts involved 
in increasing vehicle footprint, (c) the footprint-based fuel economy 
targets, and (d) the assumed consumer preference for vehicle size. 
Changes in any of these assumptions could yield different analytic 
results, and potentially result in different technical implications for 
agency action. As the authors note when interpreting their results: 
``Designing footprint-based fuel-economy standards in practice such 
that manufacturers have no incentive to adjust the size of their 
vehicles appears elusive at best and impossible at worst.''
    Regarding the cost impacts of footprint increases, that authors 
make an ad hoc assumption that changes in footprint would incur costs 
linearly, such that a 1% change in footprint would entail a 1% increase 
in production costs. The authors refer to this as a conservative 
assumption, but present no supporting evidence. The agencies have not 
attempted to estimate the engineering cost to increase vehicle 
footprint, but we expect that it would be considerably nonlinear, with 
costs increasing rapidly once increases available through small 
incremental changes--most likely in track width--have been exhausted. 
Moreover, we expect that were a manufacturer to deliberately increase 
footprint in order to ease compliance burdens, it would confine any 
significant changes to coincide with vehicle redesigns, and engaging in 
multiyear planning, would consider how the shifts would impact 
compliance burdens and consumer desirability in ensuing model years. 
With respect to the standards promulgated today, the standards become 
flatter over time, thereby diminishing any ``reward'' for deliberately 
increasing footprint beyond normal market expectations.
    Regarding the fuel economy impacts of footprint increases, the 
authors present a regression analysis based on which increases in 
footprint are estimated to entail increases in weight which are, in 
turn, estimated to entail increases in fuel consumption. However, this 
relationship was not the relationship the agencies used to develop the 
MY 2014 standards the authors examine in that study. Where the target 
function's slope is similar to that of the tendency for fuel 
consumption to increase with footprint, fuel economy should tend to 
decrease approximately in parallel with the fuel economy target, 
thereby obviating the ``benefit'' of deliberate increases in vehicle 
footprint. The agencies' analysis supporting today's final rule 
indicates relatively wide ranges wherein the relationship between fuel 
consumption and footprint may reasonably be specified.
    As part of the mid-term evaluation and future NHTSA rulemaking, the 
agencies plan to further investigate methods to estimate the potential 
that standards might tend to induce changes in the footprint. The 
agencies will also continue to closely monitor trends in footprint (and 
technology penetration) as manufacturers come into compliance with 
increasing levels of the footprint standards.
b. What methodologies and data did the agencies consider in developing 
the MYs 2017-2025 curves?
    In considering how to address the various policy concerns discussed 
in the previous sections, the agencies revisited the data and performed 
a number of analyses using different combinations of the various 
statistical methods, weighting schemes, adjustments to the data and the 
addition of technologies to make the fleets less technologically 
heterogeneous. As discussed above, in the agencies' judgment, there is 
no single ``correct'' way to estimate the relationship between 
CO2 or fuel consumption and footprint--rather, each 
statistical result is based on the underlying assumptions about the 
particular functional form, weightings and error structures embodied in 
the representational approach. These assumptions are the subject of the 
following discussion. This process of performing many analyses using 
combinations of statistical methods generates many possible outcomes, 
each embodying different potentially reasonable combinations of 
assumptions and each thus reflective of the data as viewed through a 
particular lens. The choice of a proposed standard developed by a given 
combination of these statistical methods was consequently a decision 
based upon the agencies' determination of how, given the policy 
objectives for this rulemaking and the agencies' MY 2008-based forecast 
of the market through MY 2025, to appropriately reflect the current 
understanding of the evolution of automotive technology and costs, the 
future prospects for the vehicle market, and thereby establish curves 
(i.e., standards) for cars and light trucks. As discussed below, for 
today's final rule, the agencies used updated information to repeat 
these analyses, found that results were generally similar and spanned a 
similarly wide range, and found that the curves underlying the

[[Page 62693]]

proposed standards were well within this range.
c. What information did the agencies use to estimate a relationship 
between fuel economy, CO2 and footprint?
    For each fleet, the agencies began with the MY 2008-based market 
forecast developed to support the proposal (i.e., the baseline fleet), 
with vehicles' fuel economy levels and technological characteristics at 
MY 2008 levels.\196\ For today's final rule, the agencies made minor 
corrections to this market forecast, and also developed a MY 2010-based 
market forecast. The development, scope, and content of these market 
forecasts are discussed in detail in Chapter 1 of the joint Technical 
Support Document supporting the rulemaking.
---------------------------------------------------------------------------

    \196\ While the agencies jointly conducted this analysis, the 
coefficients ultimately used in the slope setting analysis are from 
the CAFE model.
---------------------------------------------------------------------------

d. What adjustments did the agencies evaluate?
    The agencies believe one possible approach is to fit curves to the 
minimally adjusted data shown above (the approach still includes sales 
mix adjustments, which influence results of sales-weighted 
regressions), much as DOT did when it first began evaluating potential 
attribute-based standards in 2003.\197\ However, the agencies have 
found, as in prior rulemakings, that the data are so widely spread 
(i.e., when graphed, they fall in a loose ``cloud'' rather than tightly 
around an obvious line) that they indicate a relationship between 
footprint and CO2 and fuel consumption that is real but not 
particularly strong. Therefore, as discussed below, the agencies also 
explored possible adjustments that could help to explain and/or reduce 
the ambiguity of this relationship, or could help to support policy 
outcomes the agencies judged to be more desirable.
---------------------------------------------------------------------------

    \197\ 68 FR 74920-74926.
---------------------------------------------------------------------------

i. Adjustment to Reflect Differences in Technology
    As in prior rulemakings, the agencies consider technology 
differences between vehicle models to be a significant factor producing 
uncertainty regarding the relationship between CO2/fuel 
consumption and footprint. Noting that attribute-based standards are 
intended to encourage the application of additional technology to 
improve fuel efficiency and reduce CO2 emissions, the 
agencies, in addition to considering approaches based on the unadjusted 
engineering characteristics of MY 2008 vehicle models, therefore also 
considered approaches in which, as for previous rulemakings, technology 
is added to vehicles for purposes of the curve fitting analysis in 
order to produce fleets that are less varied in technology content.
    The agencies adjusted the baseline fleet for technology by adding 
all technologies considered, except for the most advanced high-BMEP 
(brake mean effective pressure) gasoline engines, diesel engines, ISGs, 
strong HEVs, PHEVs, EVs, and FCVs. The agencies included 15 percent 
mass reduction on all vehicles.\198\
---------------------------------------------------------------------------

    \198\ As described in the preceding paragraph, applying 
technology in this manner helps to reduce the effect of technology 
differences across the vehicle fleet. The particular technologies 
used for the normalization were chosen as a reasonable selection of 
technologies which could potentially be used by manufacturers over 
this time period.
---------------------------------------------------------------------------

ii. Adjustments Reflecting Differences in Performance and ``Density''
    For the reasons discussed above regarding revisiting the shapes of 
the curves, the agencies considered adjustments for other differences 
between vehicle models (i.e., inflating or deflating the fuel economy 
of each vehicle model based on the extent to which one of the vehicle's 
attributes, such as power, is higher or lower than average). 
Previously, NHTSA had rejected such adjustments because they imply that 
a multi-attribute standard may be necessary, and the agencies judged 
most multi-attribute standards to be more subject to gaming than a 
footprint-only standard.199,200 Having considered this issue 
again for purposes of this rulemaking, NHTSA and EPA conclude the need 
to accommodate in the target curves the challenges faced by 
manufacturers of large pickups currently outweighs these prior 
concerns. Therefore, the agencies also evaluated curve fitting 
approaches through which fuel consumption and CO2 levels 
were adjusted with respect to weight-to-footprint alone, and in 
combination with power-to-weight. While the agencies examined these 
adjustments for purposes of fitting curves, the agencies are not 
promulgating a multi-attribute standard; the proposed fuel economy and 
CO2 targets for each vehicle are still functions of 
footprint alone. No adjustment will be used in the compliance process.
---------------------------------------------------------------------------

    \199\ For example, in comments on NHTSA's 2008 NPRM regarding MY 
2011-2015 CAFE standards, Porsche recommended that standards be 
defined in terms of a ``Summed Weighted Attribute'', wherein the 
fuel economy target would be calculated as follows: target = f(SWA), 
where target is the fuel economy target applicable to a given 
vehicle model and SWA = footprint + torque1/1.5 + weight 
1/2.5. (NHTSA-2008-0089-0174.)
    \200\ 74 FR 14359.
---------------------------------------------------------------------------

    For the proposal, the agencies also examined some differences 
between the technology-adjusted car and truck fleets in order to better 
understand the relationship between footprint and CO2/fuel 
consumption in the agencies' MY 2008 based forecast. The agencies 
investigated the relationship between HP/WT and footprint in the 
agencies' MY 2008-based market forecast. On a sales weighted basis, 
cars tend to become proportionally more powerful as they get larger. In 
contrast, there is a minimally positive relationship between HP/WT and 
footprint for light trucks, indicating that light trucks become only 
slightly more powerful as they get larger.
    This analysis, presented in chapter 2.4.1.2 of the joint TSD, 
indicated that vehicle performance (power-to-weight ratio) and 
``density'' (curb weight divided by footprint) are both correlated to 
fuel consumption (and CO2 emission rate), and that these 
vehicle attributes are also both related to vehicle footprint. Based on 
these relationships, the agencies explored adjusting the fuel economy 
and CO2 emission rates of individual vehicle models based on 
deviations from ``expected'' performance or weight/footprint at a given 
footprint; the agencies inflated fuel economy levels of vehicle models 
with higher performance and/or weight/footprint than the average of the 
fleet would indicate at that footprint, and deflated fuel economy 
levels with lower performance and/or weight. While the agencies 
considered this technique for purposes of fitting curves, the agencies 
are not promulgating a multi-attribute standard, as the proposed fuel 
economy and CO2 targets for each vehicle are still functions 
of footprint alone. No adjustment will be used in the compliance 
process.
    For today's final rule, the agencies repeated the above analyses, 
using the corrected MY 2008-based market forecast and, separately, the 
MY 2010-based market forecasts. As discussed in section 2.6 of the 
joint TSD and further detailed in a memorandum available at Docket No. 
NHTSA-2010-0131-0325, doing so produced results similar to the analysis 
used in the proposal.
    The agencies sought comment on the appropriateness of the 
adjustments described in Chapter 2 of the joint TSD, particularly 
regarding whether these adjustments suggest that standards should be 
defined in terms of other attributes in addition to footprint, and 
whether they may encourage changes other than encouraging the 
application of technology to improve fuel economy

[[Page 62694]]

and reduce CO2 emissions. The agencies also sought comment 
regarding whether these adjustments effectively ``lock in'' through MY 
2025 relationships that were observed in MY 2008.
    ACEEE objected to the agencies' adjustments to the truck curves, 
arguing that if the truck slope needs to be adjusted for ``density,'' 
then that suggests that the MY 2008-based market forecast used to build 
up the reference fleet must be ``incorrect and show * * * 
unrealistically low pickup truck fuel consumption, due to the 
overstatement of the benefits of certain technologies.'' \201\ ACEEE 
stated that ``If that is the case, the agencies should revisit the 
adjustments made to generate the reference fleet and remove 
technologies from pickups that are not suited to those trucks,'' which 
``would be a far more satisfactory approach than the speculative and 
non-quantitative approach of adjusting for vehicle density.'' \202\
---------------------------------------------------------------------------

    \201\ ACEEE comments, Docket No. EPA-HQ-OAR-2010-0799-9528 at 3-
4.
    \202\ Id.
---------------------------------------------------------------------------

    ACEEE further stated that ``the fuel consumption trend that the 
density adjustment is meant to correct appears in the unadjusted fleet 
as well as the technology-adjusted fleet of light trucks (TSD Figures 
2-1 and 2-2),'' which they argued is evidence that ``the flattening of 
fuel consumption at higher footprints is not a byproduct of unrealistic 
technology adjustments, but rather a reflection of actual fuel economy 
trends in today's market.'' \203\ ACEEE stated that therefore it did 
not make sense to adjust the fuel consumption of ``low-density'' trucks 
upwards before fitting the curve.\204\ ACEEE pointed out that it would 
appear that trucks' HP-to-weight ratio should be higher than the 
agencies' analysis indicated, and stated that the weight-based EU 
CO2 standard curves are adjusted for HP-to-weight, which 
resulted in flatter curves, and which are intended to avoid 
incentivizing up-weighting.\205\ ACEEE argued that by not choosing this 
approach and by adjusting for density, along with using sales-weighting 
and an OLS method instead of MAD, the proposed curves encourage vehicle 
upsizing.\206\
---------------------------------------------------------------------------

    \203\ Id.
    \204\ Id.
    \205\ Id.
    \206\ Id.
---------------------------------------------------------------------------

    Thus, ACEEE stated, the deviations from the analytical approach 
previously adopted were not justified with data provided in the NPRM, 
and the resulting ``ad hoc adjustments'' to the curve-fitting process 
detracted from the agencies' argument for the proposals. ACEEE further 
commented that increasing the slope of the truck curve would be 
``counter-productive'' from a policy perspective as well, implying that 
challenging light truck standards have helped manufacturers of light 
trucks to recover from the recent downturn in the light vehicle 
market.\207\ The Sierra Club and CBD also opposed increasing the slope 
of the truck curve for MYs 2017 and beyond as compared to the MY 2016 
truck curve, on the basis that it would encourage upsizing and reduce 
fuel economy and CO2 emissions improvements.\208\
---------------------------------------------------------------------------

    \207\ Id. at 6
    \208\ Sierra Club et al. comments, Docket No. EPA-HQ-OAR-2010-
0799-9549 at 6.
---------------------------------------------------------------------------

    Conversely, the UAW strongly supported the agencies' balancing of 
``the challenges of adding fuel-economy improving technologies to the 
largest light trucks with the need to maintain the full functionality 
of these vehicles across a wide range of applications'' \209\ through 
their approach to curve fitting. The Alliance also expressed support 
for the agencies' analyses (including the consideration of different 
weightings), and the selected relationships between the fuel 
consumption and footprint for MYs 2017-2021.\210\ Both ACEEE and the 
Alliance urged the agencies to revisit the estimation and selection of 
curves during the mid-term evaluation, and the agencies plan to do so.
---------------------------------------------------------------------------

    \209\ UAW comments, Docket No. EPA-HQ-OAR-2010-0799-9563, at 2.
    \210\ Alliance comments, Docket No. EPA-HQ-OAR-2010-0799-9487, 
at 86.
---------------------------------------------------------------------------

    In response, the agencies maintain that the adjustments (including 
no adjustments) considered in the NPRM are all reasonable to apply for 
purposes of developing potential fuel economy and GHG target curves, 
and that it is left to policy makers to determine an appropriate 
perspective involved in selecting weights (if any) to be applied, and 
to interpret the consequences of various alternatives. As described 
above and in Chapter 2 of the TSD, the agencies believe that the 
adjustments made to the truck curve are appropriate because work trucks 
provide utility (towing and load-carrying capability) that requires 
more torque and power, more cooling and braking capability, and more 
fuel-carrying capability (i.e., larger fuel tanks) than would be the 
case for other vehicles of similar size and curb weight. Continuing the 
2016 truck curve would disadvantage full-line manufacturers active in 
this portion of the fleet disproportionately to the rest of the trucks. 
The agencies do not include power to weight, density, towing, or 
hauling, as a technology. Neither does the agency consider them as part 
of a multi-attribute standard. Considering these factors, the agencies 
believe that the ``density'' adjustment, as applied to the data 
developed for the NPRM, provided a reasonable basis to develop curves 
for light trucks. Having repeated our analysis using a corrected MY 
2008-based market forecast and, separately, a new MY 2010-based market 
forecast, we obtained results spanning ranges similar to those covered 
by the analysis we performed for the NPRM. See section 2.6 of the Joint 
TSD. In the agencies' judgment, considering the above comments (and 
others), the curves proposed in the NPRM strike a sound balance between 
the legitimate policy considerations discussed in section II.C. 2--the 
interest in discouraging manufacturers from responding to standards by 
reducing vehicle size in ways that might compromise highway safety, the 
interest in more equitably balancing compliance burdens among limited- 
and full-line manufacturers, and the interest in avoiding excessive 
risk that projected energy and environmental benefits might be less 
than expected due to regulation-incented increases in vehicle size.
    Regarding ACEEE's specific comments about the application of these 
adjustments to the light truck fleet, we disagree with the 
characterization of the adjustments as ad hoc. Choosing from among a 
range of legitimate possibilities based on relevant policy and 
technical considerations is not an arbitrary, ad hoc exercise. 
Throughout multiple rulemaking analyses, NHTSA (more recently, with 
EPA) has applied normalization to adjust for differences in 
technologies. Also, while the agencies have previously considered and 
declined to apply normalizations to reflect differences in other 
characteristics, such as power, our judgment that some such 
normalizations could be among the set of technically reasonable 
approaches was not ad hoc, but in fact based on further technical 
analysis and reconsideration. Moreover, that reconsideration occurred 
with respect to passenger cars as well as light trucks. Still, we 
recognize that results of the different methods we have examined depend 
on inputs that are subject to uncertainty; for example, normalization 
to adjust for differences in technology depend on uncertain estimates 
of technology efficacy, and sales-weighted regressions depend on 
uncertain forecasts of future market volumes. Such uncertainties 
support the agencies' strong preference to avoid permanently ``locking 
in'' any particular curve estimation technique.

[[Page 62695]]

e. What statistical methods did the agencies evaluate?
    For the NPRM, the above approaches resulted in three data sets each 
for (a) vehicles without added technology and (b) vehicles with 
technology added to reduce technology differences, any of which may 
provide a reasonable basis for fitting mathematical functions upon 
which to base the slope of the standard curves: (1) Vehicles without 
any further adjustments; (2) vehicles with adjustments reflecting 
differences in ``density'' (weight/footprint); and (3) vehicles with 
adjustments reflecting differences in ``density,'' and adjustments 
reflecting differences in performance (power/weight). Using these data 
sets, the agencies tested a range of regression methodologies, each 
judged to be possibly reasonable for application to at least some of 
these data sets. Beginning with the corrected MY 2008-based market 
forecast and the MY 2010-based market forecast developed for today's 
final rule, the above approaches resulted in six data sets--three for 
each of the two market forecasts.
i. Regression Approach
    In the MYs 2012-2016 final rules, the agencies employed a robust 
regression approach (minimum absolute deviation, or MAD), rather than 
an ordinary least squares (OLS) regression.\211\ MAD is generally 
applied to mitigate the effect of outliers in a dataset, and thus was 
employed in that rulemaking as part of our interest in attempting to 
best represent the underlying technology. NHTSA used OLS in early 
development of attribute-based CAFE standards, but NHTSA (and then 
NHTSA and EPA) subsequently chose MAD instead of OLS for both the MY 
2011 and the MYs 2012-2016 rulemakings. These decisions on regression 
technique were made both because OLS gives additional emphasis to 
outliers \212\ and because the MAD approach helped achieve the 
agencies' policy goals with regard to curve slope in those 
rulemakings.\213\ In the interest of taking a fresh look at appropriate 
regression methodologies as promised in the 2012-2016 light duty 
rulemaking, in developing this rule, the agencies gave full 
consideration to both OLS and MAD. The OLS representation, as 
described, uses squared errors, while MAD employs absolute errors and 
thus weights outliers less.
---------------------------------------------------------------------------

    \211\ See 75 FR 25359.
    \212\ Id. at 25362-63.
    \213\ Id. at 25363.
---------------------------------------------------------------------------

    As noted, one of the reasons stated for choosing MAD over least 
square regression in the MYs 2012-2016 rulemaking was that MAD reduced 
the weight placed on outliers in the data. However, the agencies have 
further considered whether it is appropriate to classify these vehicles 
as outliers. Unlike in traditional datasets, these vehicles' 
performance is not mischaracterized due to errors in their measurement, 
a common reason for outlier classification. Being certification data, 
the chances of large measurement errors should be near zero, 
particularly towards high CO2 or fuel consumption. Thus, 
they can only be outliers in the sense that the vehicle designs are 
unlike those of other vehicles. These outlier vehicles may include 
performance vehicles, vehicles with high ground clearance, 4WD, or boxy 
designs. Given that these are equally legitimate on-road vehicle 
designs, the agencies concluded that it would appropriate to reconsider 
the treatment of these vehicles in the regression techniques.
    Based on these considerations as well as the adjustments discussed 
above, the agencies concluded it was not meaningful to run MAD 
regressions on gpm data that had already been adjusted in the manner 
described above. Normalizing already reduced the variation in the data, 
and brought outliers towards average values. This was the intended 
effect, so the agencies deemed it unnecessary to apply an additional 
remedy to resolve an issue that had already been addressed, but we 
sought comment on the use of robust regression techniques under such 
circumstances. ACEEE stated that either MAD (i.e., one robust 
regression technique) or OLS was ``technically sound,'' \214\ and other 
stakeholders that commented on the agencies' analysis supporting the 
selection of curves did not comment specifically on robust regression 
techniques. On the other hand, ACEEE did suggest that the application 
of multiple layers of normalization may provide tenuous results. For 
this rulemaking, we consider the range of methods we have examined to 
be technically reasonable, and our selected curves fall within those 
ranges. However, all else being equal, we agree that simpler or more 
stable methods are likely preferable to more complex or unstable 
methods, and as mentioned above, we agree with ACEEE and the Alliance 
that revisiting the selection of curves would be appropriate as part of 
the required future NHTSA rulemaking and mid-term evaluation.
---------------------------------------------------------------------------

    \214\ ACEEE comments, Docket No. EPA-HQ-OAR-2010-0799-9528 at 4.
---------------------------------------------------------------------------

ii. Sales Weighting
    Likewise, the agencies reconsidered employing sales-weighting to 
represent the data. As explained below, the decision to sales weight or 
not is ultimately based upon a choice about how to represent the data, 
and not by an underlying statistical concern. Sales weighting is used 
if the decision is made to treat each (mass produced) unit sold as a 
unique physical observation. Doing so thereby changes the extent to 
which different vehicle model types are emphasized as compared to a 
non-sales weighted regression. For example, while total General Motors 
Silverado (332,000) and Ford F-150 (322,000) sales differed by less 
than 10,000 in the MY 2021 market forecast (in the MY 2008-based 
forecast), 62 F-150s models and 38 Silverado models were reported in 
the agencies baselines. Without sales-weighting, the F-150 models, 
because there are more of them, were given 63 percent more weight in 
the regression despite comprising a similar portion of the marketplace 
and a relatively homogenous set of vehicle technologies.
    The agencies did not use sales weighting in the MYs 2012-2016 
rulemaking analysis of the curve shapes. A decision to not perform 
sales weighting reflects judgment that each vehicle model provides an 
equal amount of information concerning the underlying relationship 
between footprint and fuel economy. Sales-weighted regression gives the 
highest sales vehicle model types vastly more emphasis than the lowest-
sales vehicle model types thus driving the regression toward the sales-
weighted fleet norm. For unweighted regression, vehicle sales do not 
matter. The agencies note that the MY 2008-based light truck market 
forecast shows MY 2025 sales of 218,000 units for Toyota's 2WD Sienna, 
and shows 66 model configurations with MY 2025 sales of fewer than 100 
units. Similarly, the agencies' MY 2008-based market forecast shows MY 
2025 sales of 267,000 for the Toyota Prius, and shows 40 model 
configurations with MY2025 sales of fewer than 100 units. Sales-
weighted analysis would give the Toyota Sienna and Prius more than a 
thousand times the consideration of many vehicle model configurations. 
Sales-weighted analysis would, therefore, cause a large number of 
vehicle model configurations to be virtually ignored in the 
regressions.\215\ The MY 2010-based market forecast includes similar 
examples of extreme disparities in production volumes, and therefore, 
degree of influence over sales-

[[Page 62696]]

weighted regression results. Moreover, unlike unweighted approaches, 
sales-weighted approaches are subject to more uncertainties surrounding 
sales volumes. For example, in the MY 2008-based market forecast, 
Chrysler's production volumes are projected to decline significantly 
through MY 2025, in stark contrast to the prediction for that company 
in the MY 2010-based market forecast. Therefore, under a sales-weighted 
approach, Chrysler's vehicle models have considerably less influence on 
regression results for the MY 2008-based fleet than for the MY 2010-
based fleet.
---------------------------------------------------------------------------

    \215\ 75 FR 25362 and n. 64.
---------------------------------------------------------------------------

    However, the agencies did note in the MYs 2012-2016 final rules 
that, ``sales weighted regression would allow the difference between 
other vehicle attributes to be reflected in the analysis, and also 
would reflect consumer demand.'' \216\ In reexamining the sales-
weighting for this analysis, the agencies note that there are low-
volume model types account for many of the passenger car model types 
(50 percent of passenger car model types account for 3.3 percent of 
sales), and it is unclear whether the engineering characteristics of 
these model types should equally determine the standard for the 
remainder of the market. To expand on this point, low volume cars in 
the agencies' MY 2008 and 2010 baseline include specialty vehicles such 
as the Bugatti Veyron, Rolls Royce Phantom, and General Motors Funeral 
Coach Hearse. These vehicle models all represent specific engineering 
designs, and in a regression without sales weighting, they are given 
equal weighting to other vehicles with single models with more 
relevance to the typical vehicle buyer including mass market sedans 
like the Toyota Prius referenced above. Similar disparities exist on 
the truck side, where small manufacturers such as Roush manufacturer 
numerous low sale vehicle models that also represent specific 
engineering designs. Given that the curve fit is ultimately used in 
compliance, and compliance is based on sales-weighted average 
performance, although the agencies are not currently attempting to 
estimate consumer responses to today's standards, sales weighting could 
be a reasonable approach to fitting curves.
---------------------------------------------------------------------------

    \216\ 75 FR 25632/3.
---------------------------------------------------------------------------

    In the interest of taking a fresh look at appropriate methodologies 
as promised in the last final rule, in developing the proposal, the 
agencies gave full consideration to both sales-weighted and unweighted 
regressions.
iii. Analyses Performed
    For the NPRM, we performed regressions describing the relationship 
between a vehicle's CO2/fuel consumption and its footprint, 
in terms of various combinations of factors: Initial (raw) fleets with 
no technology, versus after technology is applied; sales-weighted 
versus non-sales weighted; and with and without two sets of normalizing 
factors applied to the observations. The agencies excluded diesels and 
dedicated AFVs because the agencies anticipate that advanced gasoline-
fueled vehicles are likely to be dominant through MY 2025, based both 
on our own assessment of potential standards (see Sections III.D and 
IV.G below) as well as our discussions with large number of automotive 
companies and suppliers. Supporting today's final rule, we repeated all 
of this analysis twice--once for the corrected MY 2008-based market 
forecast, and once for the MY 2010-based market forecast. Doing so 
produced results generally similar to those documented in the joint TSD 
supporting the NPRM. See section 2.6 of the joint TSD and the docket 
memo.
    Thus, the basic OLS regression on the initial data (with no 
technology applied) and no sales-weighting represents one perspective 
on the relation between footprint and fuel economy. Adding sales 
weighting changes the interpretation to include the influence of sales 
volumes, and thus steps away from representing vehicle technology 
alone. Likewise, MAD is an attempt to reduce the impact of outliers, 
but reducing the impact of outliers might perhaps be less 
representative of technical relationships between the variables, 
although that relationship may change over time in reality. Each 
combination of methods and data reflects a perspective, and the 
regression results simply reflect that perspective in a simple 
quantifiable manner, expressed as the coefficients determining the line 
through the average (for OLS) or the median (for MAD) of the data. It 
is left to policy makers to determine an appropriate perspective and to 
interpret the consequences of the various alternatives.
    We sought comments on the application of the weights as described 
above, and the implications for interpreting the relationship between 
fuel efficiency (or CO2) and footprint. As discussed above, 
ACEEE questioned adjustment of the light truck data. The Alliance, in 
contrast, generally supported the weightings applied by the agencies, 
and the resultant relationships between fuel efficiency and footprint. 
Both ACEEE and the Alliance commented that the agencies should revisit 
the application of weights--and broader aspects of analysis to develop 
mathematical functions--in the future. We note that although ACEEE 
expressed concern regarding the outcomes of the application of the 
weight/footprint adjustment, ACEEE did not indicate that all adjustment 
would be problematic, rather, they endorsed the method of adjusting 
fuel economy data based on differences in vehicle models' levels of 
applied technology. As we have indicated above, considering the policy 
implications, the agencies have selected curves that fall within the 
range spanned by the many methods we have evaluated and consider to be 
technically reasonable. We disagree with ACEEE that we have selected 
curves that are, for light trucks, too steep. However, recognizing 
uncertainties in the estimates underlying our analytical results, and 
recognizing that our analytical results span a range of technically 
reasonable outcomes, we agree with ACEEE and the Alliance that 
revisiting the curve shape would be appropriate as part of the required 
future NHTSA rulemaking and planned mid-term evaluation.
f. What results did the agencies obtain and why were the selected 
curves reasonable?
    For both the NPRM and today's final rule, both agencies analyzed 
the same statistical approaches. For regressions against data including 
technology normalization, NHTSA used the CAFE modeling system, and EPA 
used EPA's OMEGA model. The agencies obtained similar regression 
results, and have based today's joint rule on those obtained by NHTSA. 
Chapter 2 of the joint TSD contains a large set of illustrative figures 
which show the range of curves determined by the possible combinations 
of regression technique, with and without sales weighting, with and 
without the application of technology, and with various adjustments to 
the gpm variable prior to running a regression.
    For the curves presented in the NPRM and finalized today, the 
choice among the alternatives presented in Chapter 2 of the draft Joint 
TSD was to use the OLS formulation, on sales-weighted data developed 
for the NPRM (with some errors not then known to the agencies), using a 
fleet that has had technology applied, and after adjusting the data for 
the effect of weight-to-footprint, as described above. The agencies 
believe that this represented a technically reasonable approach for 
purposes of developing target curves to define the proposed standards, 
and that

[[Page 62697]]

it represented a reasonable trade-off among various considerations 
balancing statistical, technical, and policy matters, which include the 
statistical representativeness of the curves considered and the 
steepness of the curve chosen. The agencies judge the application of 
technology prior to curve fitting to have provided a reasonable means--
one consistent with the rule's objective of encouraging manufacturers 
to add technology in order to increase fuel economy--of reducing 
variation in the data and thereby helping to estimate a relationship 
between fuel consumption/CO2 and footprint.
    Similarly, for the agencies' MY 2008-based market-forecast and the 
agencies' current estimates of future technology effectiveness, the 
inclusion of the weight-to-footprint data adjustment prior to running 
the regression also helped to improve the fit of the curves by reducing 
the variation in the data, and the agencies believe that the benefits 
of this adjustment for the proposed rule likely outweigh the potential 
that resultant curves might somehow encourage reduced load carrying 
capability or vehicle performance (note that we are not suggesting that 
we believe these adjustments will reduce load carrying capability or 
vehicle performance). In addition to reducing the variability, the 
truck curve is also steepened, and the car curve flattened compared to 
curves fitted to sales weighted data that do not include these 
normalizations. The agencies agreed with manufacturers of full-size 
pick-up trucks that in order to maintain towing and hauling utility, 
the engines on pick-up trucks must be more powerful, than their low 
``density'' nature would statistically suggest based on the agencies' 
current MY 2008-based market forecast and the agencies' current 
estimates of the effectiveness of different fuel-saving technologies. 
Therefore, it may be more equitable (i.e., in terms of relative 
compliance challenges faced by different light truck manufacturers) to 
have adjusted the slope of the curve defining fuel economy and 
CO2 targets.
    Several comments were submitted subsequent to the NPRM with regard 
to the non-homogenous nature of the truck fleet, and the ``unique'' 
attributes of pickup trucks. As noted above, Ford described the 
attributes of these vehicles, noting that ``towing capability generally 
requires increased aerodynamic drag caused by a modified frontal area, 
increased rolling resistance, and a heavier frame and suspension to 
support this additional capability.'' \217\ Ford further noted that 
these vehicles further require auxiliary transmission oil coolers, 
upgraded radiators, trailer hitch connectors and wiring harness 
equipment, different steering ratios, upgraded rear bumpers and 
different springs for heavier tongue load (for upgraded towing 
packages), body-on-frame (vs. unibody) construction (also known as 
ladder frame construction) to support this capability and an aggressive 
duty cycle, and lower axle ratios for better pulling power/capability. 
ACEEE, as discussed above, objected to the adjustments to the truck 
curves.
---------------------------------------------------------------------------

    \217\ Ford comments, Docket No. EPA-HQ-OAR-2010-0799-9463 at 5-
6.
---------------------------------------------------------------------------

    In the agencies' judgment, the curves and cutpoints defining the 
light truck standards appropriately account for engineering differences 
between different types of vehicles. For example, the agencies' 
estimates of the applicability, cost, and effectiveness of different 
fuel-saving technologies differentiate between small, medium, and large 
light trucks. While we acknowledge that uncertainties regarding 
technology efficacy affect the outcome of methods including 
normalization to account for differences in technology, the other 
normalizations we have considered are not intended to somehow 
compensate for this uncertainty, but rather to reflect other analytical 
concepts that could be technically reasonable for purposes of 
estimating relationships between footprint and fuel economy. 
Furthermore, we agree with Ford that pickup trucks have distinct 
attributes that warrant consideration of slopes other than the flattest 
within the range spanned by technically reasonable options. We also 
note that, as documented in the joint TSD, even without normalizing 
light truck fuel economy values for any differences (even technology), 
unweighted MAD and OLS yielded slopes close to or steeper than those 
underlying today's light truck standards. We will revisit the 
estimation and selection of these curves as part of NHTSA's future 
rulemaking and the mid-term evaluation.
    As described above, however, other approaches are also technically 
reasonable, and also represent a way of expressing the underlying 
relationships. The agencies revisited the analysis for the final rule, 
having corrected the underlying 2008-based market forecast, having 
developed a MY 2010-based market forecast, having updated estimates of 
technology effectiveness, and having considered relevant public 
comments. In addition, the agencies updated the technology cost 
estimates, which altered the NPRM analysis results, but not the balance 
of the trade-offs being weighed to determine the final curves.
    As discussed above, based in part on the Whitefoot/Skerlos paper 
and its findings regarding the implied potential for vehicle upsizing, 
some commenters, such as NACAA and Center for Biological Diversity, 
considered the slopes for both the car and truck curves to be too 
steep, and ACEEE, Sierra Club, Volkswagen, Toyota, and Honda more 
specifically commented that the truck slope was too steep. On the other 
hand, the UAW, Ford, GM, and Chrysler supported the slope of both the 
car and truck curves. ICCT commented, as they have in prior 
rulemakings, that the car and the truck curve should be identical, and 
UCS commented that the curves should be adjusted to minimize the 
``gap'' in target stringency in the 45 ft\2\ (+/- 3 ft\2\) range to 
avoid giving manufacturers an incentive to classify CUVs as trucks 
rather than as cars.\218\
---------------------------------------------------------------------------

    \218\ UCS comments, Docket No. EPA-HQ-OAR-2010-0799-9567 at 9.
---------------------------------------------------------------------------

    As also discussed above, the agencies continue to believe that the 
slopes for both the car and the truck curves finalized in this 
rulemaking remain appropriate. There is also good reason for the slopes 
of the car and truck curves potentially to be distinct from one 
another--for one, our analysis produces different results for these 
fleets based on their different characteristics, and more importantly 
for NHTSA, EPCA/EISA requires that standards for passenger cars and 
light trucks be established separately. The agencies agree with Ford 
(and others) that the properties of cars and trucks are different. The 
agencies agree with Ford's observation (and illustration) that ``* * * 
cars and trucks have different functional characteristics, even if they 
have the same footprint and nearly the same base curb weights. For 
example, the Ford Edge and the Ford Taurus have the same footprint, but 
vastly different capabilities with respect to cargo space and towing 
capacity. Some of the key features incorporated on the Edge that enable 
the larger tow capability include an engine oil cooler, larger radiator 
and updated cooling fans. This is just one of the many examples that 
show the functional difference between cars and trucks * * *'' \219\ On 
balance, given the agencies' analysis, and all of the issues the 
agencies have taken into account, we believe that the slopes of cars 
and trucks have been

[[Page 62698]]

selected with proper consideration and represent a reasonable and 
appropriate balance of technical and policy factors.
---------------------------------------------------------------------------

    \219\ Ford comment, Docket No. EPA-HQ-OAR-2010-0799-9463 at 5.
---------------------------------------------------------------------------

g. Implications of the slope compared to MY 2016
    The slope has several implications relative to the MY 2016 curves, 
with the majority of changes on the truck curve. For the NPRM, the 
agencies selected a car curve slope similar to that finalized in the 
MYs 2012-2016 final rulemaking (4.7 g/mile-ft\2\ in MY 2016, vs. 4.5 g/
mile-ft\2\ proposed in MY 2017). By contrast, the selected truck curve 
is steeper in MY 2017 than in MY 2016 (4.0 g/mile-ft\2\ in MY 2016 vs. 
4.9 g/mile-ft\2\ in MY 2017). As discussed previously, a steeper slope 
relaxes the stringency of targets for larger vehicles relative to those 
for smaller vehicles, thereby shifting relative compliance burdens 
among manufacturers based on their respective product mix.
5. Once the agencies determined the slope, how did the agencies 
determine the rest of the mathematical function?
    The agencies continue to believe that without a limit at the 
smallest footprints, the function--whether logistic or linear--can 
reach values that would be unfairly burdensome for a manufacturer that 
elects to focus on the market for small vehicles; depending on the 
underlying data, an unconstrained form could result in stringency 
levels that are technologically infeasible and/or economically 
impracticable for those manufacturers that may elect to focus on the 
smallest vehicles. On the other side of the function, without a limit 
at the largest footprints, the function may provide no floor on 
required fuel economy. Also, the safety considerations that support the 
provision of a disincentive for downsizing as a compliance strategy 
apply weakly, if at all, to the very largest vehicles. Limiting the 
function's value for the largest vehicles thus leads to a function with 
an inherent absolute minimum level of performance, while remaining 
consistent with safety considerations.
    Just as for slope, in determining the appropriate footprint and 
fuel economy values for the ``cutpoints,'' the places along the curve 
where the sloped portion becomes flat, the agencies took a fresh look 
for purposes of this rule, taking into account the updated market 
forecast and new assumptions about the availability of technologies. 
The next two sections discuss the agencies' approach to cutpoints for 
the passenger car and light truck curves separately, as the policy 
considerations for each vary somewhat.
a. Cutpoints for Passenger Car Curve
    The passenger car fleet upon which the agencies based the target 
curves proposed for MYs 2017-2025 was derived from MY 2008 data, as 
discussed above. In MY 2008, passenger car footprints ranged from 36.7 
square feet, the Lotus Exige 5, to 69.3 square feet, the Daimler 
Maybach 62. In that fleet, several manufacturers offer small, sporty 
coupes below 41 square feet, such as the BMW Z4 and Mini, Honda S2000, 
Mazda MX-5 Miata, Porsche Carrera and 911, and Volkswagen New Beetle. 
Because such vehicles represent a small portion (less than 10 percent) 
of the passenger car market, yet often have performance, utility, and/
or structural characteristics that could make it technologically 
infeasible and/or economically impracticable for manufacturers focusing 
on such vehicles to achieve the very challenging average requirements 
that could apply in the absence of a constraint, EPA and NHTSA again 
proposed to cut off the sloped portion of the passenger car function at 
41 square feet, consistent with the MYs 2012-2016 rulemaking. The 
agencies recognized that for manufacturers who make small vehicles in 
this size range, putting the cutpoint at 41 square feet creates some 
incentive to downsize (i.e., further reduce the size, and/or increase 
the production of models currently smaller than 41 square feet) to make 
it easier to meet the target. Putting the cutpoint here may also create 
the incentive for manufacturers who do not currently offer such models 
to do so in the future. However, at the same time, the agencies believe 
that there is a limit to the market for cars smaller than 41 square 
feet--most consumers likely have some minimum expectation about 
interior volume, among other things. The agencies thus believe that the 
number of consumers who will want vehicles smaller than 41 square feet 
(regardless of how they are priced) is small, and that the incentive to 
downsize to less than 41 square feet in response to this rule, if 
present, will be at best minimal. On the other hand, the agencies note 
that some manufacturers are introducing mini cars not reflected in the 
agencies MY 2008-based market forecast, such as the Fiat 500, to the 
U.S. market, and that the footprint at which the curve is limited may 
affect the incentive for manufacturers to do so.
    Above 56 square feet, the only passenger car models present in the 
MY 2008 fleet were four luxury vehicles with extremely low sales 
volumes--the Bentley Arnage and three versions of the Rolls Royce 
Phantom. The MY 2010 fleet was similar, with three BMW models, the 
Maybach 57S, the Rolls Royce Ghost, and four versions of the Rolls 
Royce Phantom in this size range. As in the MYs 2012-2016 rulemaking, 
NHTSA and EPA therefore proposed again to cut off the sloped portion of 
the passenger car function at 56 square feet.
    While meeting with manufacturers prior to issuing the proposal, the 
agencies received comments from some manufacturers that, combined with 
slope and overall stringency, using 41 square feet as the footprint at 
which to cap the target for small cars would result in unduly 
challenging targets for small cars. The agencies do not agree. No 
specific vehicle need meet its target (because standards apply to fleet 
average performance), and maintaining a sloped function toward the 
smaller end of the passenger car market is important to discourage 
unsafe downsizing, the agencies thus proposed to again ``cut off'' the 
passenger car curve at 41 square feet, notwithstanding these comments.
    The agencies sought comment on setting cutpoints for the MYs 2017-
2025 passenger car curves at 41 square feet and 56 square feet. IIHS 
expressed some concern regarding the ``breakpoint'' of the fuel economy 
curve at the lower extreme where footprint is the smallest-that is, the 
leveling-off point on the fuel economy curve where the fuel economy 
requirement ceases to increase as footprint decreases.\220\ IIHS stated 
that moving this breakpoint farther to the left so that even smaller 
vehicles have increasing fuel economy targets would reduce the chance 
that manufacturers would downsize the lightest vehicles for further 
fuel economy credits.\221\
---------------------------------------------------------------------------

    \220\ IIHS comments, Docket No. NHTSA-2010-0131-0222, at 1.
    \221\ Id.
---------------------------------------------------------------------------

    The agencies agree with IIHS that moving the 41 square foot 
cutpoint to an even smaller value would additionally discourage 
downsizing of the smallest vehicles--that is, the vehicles for which 
downsizing would be most likely to compromise occupant protection. 
However, in the agencies' judgment, notwithstanding narrow market 
niches for some types vehicles (exemplified by, e.g., the Smart 
Fortwo), consumer preferences are likely to remain such that 
manufacturers will be unlikely to deliberately respond to today's 
standards by downsizing the smallest vehicles. However, the agencies 
will monitor developments in the passenger car market and revisit this 
issue as part of NHTSA's future rulemaking to establish final MYs 2022-
2025

[[Page 62699]]

standards and the concurrent mid-term evaluation process.
b. Cutpoints for Light Truck Curve
    The light truck fleet upon which the agencies based the proposed 
target curves for MYs 2017-2025, like the passenger car fleet, was 
derived from MY 2008 data, as discussed in Section 2.4 above. In MY 
2008, light truck footprints ranged from 41.0 square feet, the Jeep 
Wrangler, to 77.5 square feet, the Toyota Tundra. For consistency with 
the curve for passenger cars, the agencies proposed to cut off the 
sloped portion of the light truck function at the same footprint, 41 
square feet, although we recognized that no light trucks are currently 
offered below 41 square feet. With regard to the upper cutpoint, the 
agencies heard from a number of manufacturers during the discussions 
leading up to the proposal of the MY 2017-2025 standards that the 
location of the cutpoint in the MYs 2012-2016 rules, 66 square feet, 
resulted in challenging targets for the largest light trucks in the 
later years of that rulemaking. See 76 FR 74864-65. Those manufacturers 
requested that the agencies extend the cutpoint to a larger footprint, 
to reduce targets for the largest light trucks which represent a 
significant percentage of those manufacturers light truck sales. At the 
same time, in re-examining the light truck fleet data, the agencies 
concluded that aggregating pickup truck models in the MYs 2012-2016 
rule had led the agencies to underestimate the impact of the different 
pickup truck model configurations above 66 square feet on 
manufacturers' fleet average fuel economy and CO2 levels (as 
discussed immediately below). In disaggregating the pickup truck model 
data, the impact of setting the cutpoint at 66 square feet after model 
year 2016 became clearer to the agencies.
    In the agencies' view, there was legitimate basis for these 
comments. The agencies' MY 2008-based market forecast supporting the 
NPRM included about 24 vehicle configurations above 74 square feet with 
a total volume of about 50,000 vehicles or less during any MY in the 
2017-2025 time frame. While a relatively small portion of the overall 
truck fleet, for some manufacturers, these vehicles are a non-trivial 
portion of sales. As noted above, the very largest light trucks have 
significant load-carrying and towing capabilities that make it 
particularly challenging for manufacturers to add fuel economy-
improving/CO2-reducing technologies in a way that maintains 
the full functionality of those capabilities.
    Considering manufacturer CBI and our estimates of the impact of the 
66 square foot cutpoint for future model years, the agencies determined 
to adopt curves that transition to a different cut point. While noting 
that no specific vehicle need meet its target (because standards apply 
to fleet average performance), we believe that the information provided 
to us by manufacturers and our own analysis supported the gradual 
extension of the cutpoint for large light trucks in the proposal from 
66 square feet in MY 2016 out to a larger footprint square feet before 
MY 2025.
BILLING CODE 6560-50-P
[GRAPHIC] [TIFF OMITTED] TR15OC12.008

[[Page 62700]]

    The agencies proposed to phase in the higher cutpoint for the truck 
curve in order to avoid any backsliding from the MY 2016 standard. A 
target that is feasible in one model year should never become less 
reasonable in a subsequent model year--manufacturers should have no 
reason to remove fuel economy-improving/CO2-reducing 
technology from a vehicle once it has been applied. Put another way, 
the agencies proposed to not allow ``curve crossing'' from one model 
year to the next. In proposing MYs 2011-2015 CAFE standards and 
promulgating MY 2011 standards, NHTSA proposed and requested comment on 
avoiding curve crossing, as an ``anti-backsliding measure.'' \222\ The 
MY 2016 2-cycle test curves are therefore a floor for the MYs 2017-2025 
curves. For passenger cars, which have minimal change in slope from the 
MY 2012-2016 rulemakings and no change in cut points, there were no 
curve crossing issues in the proposed (or final) standards.
---------------------------------------------------------------------------

    \222\ 74 FR 14370 (Mar. 30, 2009).
---------------------------------------------------------------------------

    The agencies received some comments on the selection of these 
cutpoints. ACEEE commented that the extension of the light truck 
cutpoint upward from 66 square feet to 74 square feet. would reduce 
stringency for large trucks even though there is no safety-related 
reason to discourage downsizing of these trucks.\223\ Sierra Club \224\ 
and Volkswagen commented that moving this cutpoint could encourage 
trucks to get larger and may be detrimental to societal fatalities, and 
the Sierra Club suggested that the agencies could mitigate this risk by 
providing an alternate emissions target for light trucks of 60 square 
feet or more that exceed the sales projected in the rule in the year 
that sales exceed the projection.\225\ ACEEE similarly suggested that 
the agencies include a provision to fix the upper bound for the light 
truck targets at the 66 square foot target once sales of trucks larger 
than that in a given year reach the level of MY 2008 sales, to 
discourage upsizing.\226\ Global Automakers commented that the cutpoint 
for the smallest light trucks should be set at approximately ten 
percent of sales (as for passenger cars) rather than at 41 square 
feet.\227\ Conversely, IIHS commented that, for both passenger cars and 
light trucks, the 41 square foot cutpoint should be moved further to 
the left (i.e., to even smaller footprints), to reduce the incentive 
for manufacturers to downsize the lightest vehicles.\228\
---------------------------------------------------------------------------

    \223\ ACEEE, Docket No. EPA-HQ-OAR-2010-0799-9528 at 4-5.
    \224\ Sierra Club et al., Docket No. EPA-HQ-OAR-2010-0799-9549 
at 6.
    \225\ Sierra Club et al., Docket No. EPA-HQ-OAR-2010-0799-9549 
at 6.
    \226\ ACEEE, Docket No. EPA-HQ-OAR-2010-0799-9528 at 7.
    \227\ Global Automakers, Docket No. NHTSA-2010-0131-0237, at 4.
    \228\ IIHS, Docket No. NHTSA-2010-0131-0222, at 1.
---------------------------------------------------------------------------

    The agencies have considered these comments regarding the cutpoint 
applied to the high footprint end of the target function for light 
trucks, and we judge there to be minimal risk that manufacturers would 
respond to this upward extension of the cutpoint by deliberately 
increasing the size of light trucks that are already at the upper end 
of marketable vehicle sizes. Such vehicles have distinct size, 
maneuverability, fuel consumption, storage, and other characteristics 
as opposed to the currently more popular vehicles between 43 and 48 
square feet, and are likely not suited for all consumers in all usage 
scenarios. Further, larger vehicles typically also have additional 
production costs that make it unlikely that these vehicles will become 
the predominant vehicles in the fleet. Therefore, we remain concerned 
that not to extend this cutpoint to 74 square feet would fail to take 
into adequate consideration the challenges to improving fuel economy 
and CO2 emissions to the levels required by this final rule 
for vehicles with footprints larger than 66 square feet, given their 
increased utility. As noted above, because CAFE and GHG standards are 
based on average performance, manufacturers need not ensure that every 
vehicle model meets its CAFE and GHG targets. Still, the agencies are 
concerned that standards with stringent targets for large trucks would 
unduly burden full-line manufacturers active in the market for full-
size pickups and other large light trucks, as discussed earlier, and 
evidenced by the agencies' estimates of differences between compliance 
burdens faced by OEMs active and not active in the market for full-size 
pickups. While some manufacturers have recently indicated \229\ that 
buyers are currently willing to pay a premium for fuel economy 
improvements, the agencies are concerned that disparities in long-term 
regulatory requirements could lead to future market distortions 
undermining the economic practicability of the standards. Absent an 
upward extension of the cutpoint, such disparities would be even 
greater. For these reasons, the agencies do not expect that gradually 
extending the cutpoint to 74 square feet will create incentives to 
upsize large trucks and, thus, believe there will be no adverse effects 
on societal safety. Therefore, we are promulgating standards that, as 
proposed, gradually extend the cutpoint to 74 square feet We have also 
considered the above comments by Global Automakers and IIHS on the 
cutpoints for the smallest passenger cars and light trucks. In our 
judgment, placing these cutpoints at 41 square feet continues to strike 
an appropriate balance between (a) not discouraging manufacturers from 
introducing new small vehicle models in the U.S. and (b) not 
encouraging manufacturers to downsize small vehicles.
---------------------------------------------------------------------------

    \229\ For example, in its June 11, 2012 edition, Automotive News 
quoted a Ford sales official saying that ``fuel efficiency continues 
to be a top purchaser driver.'' (``More MPG--ASAP'', Automotive 
News, Jun 11, 2012.)
---------------------------------------------------------------------------

    We have considered the Sierra Club and ACEEE suggestion that the 
agencies provide an alternate emissions target for light trucks larger 
than 60 square feet (Sierra Club) or 66 square feet (ACEEE) that exceed 
the sales projected in the rule in the year that sales exceed the 
projection. Doing so would effectively introduce sales volume as a 
second ``attribute''; in our judgment, this would introduce additional 
uncertainty regarding outcomes under the standards, and would not 
clearly be within the scope of notice provided by the NPRM.
6. Once the Agencies Determined the Complete Mathematical Function 
Shape, How Did the Agencies Adjust the Curves To Develop the Proposed 
Standards and Regulatory Alternatives?
    The curves discussed above all reflect the addition of technology 
to individual vehicle models to reduce technology differences between 
vehicle models before fitting curves. This application of technology 
was conducted not to directly determine the proposed standards, but 
rather for purposes of technology adjustments, and set aside 
considerations regarding potential rates of application (i.e., phase-in 
caps), and considerations regarding economic implications of applying 
specific technologies to specific vehicle models. The following 
sections describe further adjustments to the curves discussed above, 
that affected both the shape of the curve, and the location of the 
curve, that helped the agencies determine curves that defined the 
proposed standards.
    The minimum stringency determination was done using the two cycle 
curves. Stringency adjustments for air conditioning and other credits 
were calculated after curves that did not cross were determined in two 
cycle space. The year over year increase in these

[[Page 62701]]

adjustments cause neither the GHG nor CAFE curves (with A/C) to contact 
the 2016 curves when charted.
a. Adjusting for Year Over Year Stringency
    As in the MYs 2012-2016 rules, the agencies developed curves 
defining regulatory alternatives for consideration by ``shifting'' 
these curves. For the MYs 2012-2016 rules, the agencies did so on an 
absolute basis, offsetting the fitted curve by the same value (in gpm 
or g/mi) at all footprints. In developing the proposal for MYs 2017-
2025, the agencies reconsidered the use of this approach, and concluded 
that after MY 2016, curves should be offset on a relative basis--that 
is, by adjusting the entire gpm-based curve (and, equivalently, the 
CO2 curve) by the same percentage rather than the same 
absolute value. The agencies' estimates of the effectiveness of these 
technologies are all expressed in relative terms--that is, each 
technology (with the exception of A/C) is estimated to reduce fuel 
consumption (the inverse of fuel economy) and CO2 emissions 
by a specific percentage of fuel consumption without the technology. It 
is, therefore, more consistent with the agencies' estimates of 
technology effectiveness to develop standards and regulatory 
alternatives by applying a proportional offset to curves expressing 
fuel consumption or emissions as a function of footprint. In addition, 
extended indefinitely (and without other compensating adjustments), an 
absolute offset would eventually (i.e., at very high average 
stringencies) produce negative (gpm or g/mi) targets. Relative offsets 
avoid this potential outcome. Relative offsets do cause curves to 
become, on a fuel consumption and CO2 basis, flatter at 
greater average stringencies; however, as discussed above, this outcome 
remains consistent with the agencies' estimates of technology 
effectiveness. In other words, given a relative decrease in average 
required fuel consumption or CO2 emissions, a curve that is 
flatter by the same relative amount should be equally challenging in 
terms of the potential to achieve compliance through the addition of 
fuel-saving technology.
    On this basis, and considering that the ``flattening'' occurs 
gradually for the regulatory alternatives the agencies have evaluated, 
the agencies tentatively concluded that this approach to offsetting the 
curves to develop year-by-year regulatory alternatives neither re-
creates a situation in which manufacturers are likely to respond to 
standards in ways that compromise highway safety, nor undoes the 
attribute-based standard's more equitable balancing of compliance 
burdens among disparate manufacturers. The agencies invited comment on 
these conclusions, and on any other means that might avoid the 
potential outcomes--in particular, negative fuel consumption and 
CO2 targets--discussed above. As indicated earlier, ACEEE 
\230\ and the Alliance \231\ both expressed support for the application 
of relative adjustments in order to develop year-over-year increases in 
the stringency of fuel consumption and CO2 targets, although 
the Alliance also commented that this approach should be revisited as 
part of the mid-term evaluation. EPCA/EISA requires NHTSA to establish 
the maximum feasible passenger car and light truck standards separately 
in each specific model year--a requirement that is not necessarily 
compatible with any predetermined approach to year-over-year changes in 
stringency. As part of the future NHTSA rulemaking to finalize 
standards for MYs 2022-2025 and the concurrent mid-term evaluation, the 
agencies plan to reexamine potential approaches to developing 
regulatory options for successive model years.
---------------------------------------------------------------------------

    \230\ ACEEE, Docket No. EPA-HQ-OAR-2010-0799-9528 at 6.
    \231\ Alliance, Docket No. NHTSA-2010-0131-0262, at 86.
---------------------------------------------------------------------------

b. Adjusting for Anticipated Improvements to Mobile Air Conditioning 
Systems
    The fuel economy values in the agencies' market forecasts are based 
on the 2-cycle (i.e., city and highway) fuel economy test and 
calculation procedures that do not reflect potential improvements in 
air conditioning system efficiency, refrigerant leakage, or refrigerant 
Global Warming Potential (GWP). Recognizing that there are significant 
and cost effective potential air conditioning system improvements 
available in the rulemaking timeframe (discussed in detail in Chapter 5 
of the draft joint TSD), the agencies are increasing the stringency of 
the target curves based on the agencies' assessment of the capability 
of manufacturers to implement these changes. For the proposed CAFE 
standards and alternatives, an offset was included based on air 
conditioning system efficiency improvements, as these improvements are 
the only improvements that effect vehicle fuel economy. For the 
proposed GHG standards and alternatives, a stringency increase was 
included based on air conditioning system efficiency, leakage and 
refrigerant improvements. As discussed above in Chapter 5 of the joint 
TSD, the air conditioning system improvements affect a vehicle's fuel 
efficiency or CO2 emissions performance as an additive 
stringency increase, as compared to other fuel efficiency improving 
technologies which are multiplicative. Therefore, in adjusting target 
curves for improvements in the air conditioning system performance, the 
agencies adjusted the target curves by additive stringency increases 
(or vertical shifts) in the curves.
    For the GHG target curves, the offset for air conditioning system 
performance is being handled in the same manner as for the MYs 2012-
2016 rules. For the CAFE target curves, NHTSA for the first time is 
accounting for potential improvements in air conditioning system 
performance. Using this methodology, the agencies first use a 
multiplicative stringency adjustment for the sloped portion of the 
curves to reflect the effectiveness on technologies other that air 
conditioning system technologies, creating a series of curve shapes 
that are ``fanned'' based on two-cycle performance. Then the curves 
were offset vertically by the air conditioning improvement by an equal 
amount at every point.
    While the agencies received many comments regarding the provisions 
for determining adjustments to reflect improvements to air 
conditioners, the agencies received no comments regarding how curves 
developed considering 2-cycle fuel economy and CO2 values 
should be adjusted to reflect the inclusion of A/C adjustments in fuel 
economy and CO2 values used to determine compliance with 
corresponding standards. For today's final rule, the agencies have 
maintained the same approach as applied for the NPRM.

D. Joint Vehicle Technology Assumptions

    For the past five years, the agencies have been working together 
closely to follow the development of fuel consumption- and GHG-reducing 
technologies, which continue to evolve rapidly. We based the proposed 
rule on the results of two major joint technology analyses that EPA and 
NHTSA had recently completed--the Technical Support Document to support 
the MYs 2012-2016 final rule and the 2010 Technical Analysis Report 
(which supported the 2010 Notice of Intent and was also done in 
conjunction with CARB). For this final rule, we relied on our joint 
analyses for the proposed rule, as well as new information and 
analyses, including information we

[[Page 62702]]

received during the public comment period.
    In the proposal, we presented our assessments of the costs and 
effectiveness of all the technologies that we believe manufacturers are 
likely to use to meet the requirements of this rule, including the 
latest information on several quickly-changing technologies. The 
proposal included new estimates for hybrid costs based on a peer-
reviewed ANL battery cost model. We also presented in the proposal new 
cost data and analyses relating to several technologies based on a 
study by FEV: an 8-speed automatic transmission replacing a 6-speed 
automatic transmission; an 8-speed dual clutch transmission replacing a 
6-speed dual clutch transmission; a power-split hybrid powertrain with 
an I4 engine replacing a conventional engine powertrain with V6 engine; 
a mild hybrid with stop-start technology and an I4 engine replacing a 
conventional I4 engine; and the Fiat Multi-Air engine technology. Also 
in the proposal, we presented an updated assessment of our estimated 
costs associated with mass reduction.
    As would be expected given that some of our cost estimates were 
developed several years ago, we have also updated all of our base 
direct manufacturing costs to put them in terms of more recent dollars 
(2010 dollars are used in this final rule while 2009 dollars were used 
in the proposal). As proposed, we have also updated our methodology for 
calculating indirect costs associated with new technologies since 
completing both the MYs 2012-2016 final rule and the TAR. We continue 
to use the indirect cost multiplier (ICM) approach used in those 
analyses, but have made important changes to the calculation 
methodology--changes done in response to ongoing staff evaluation and 
public input.
    Since the MYs 2012-2016 rule and TAR, the agencies have updated 
many of the technologies' effectiveness estimates largely based on new 
vehicle simulation work conducted by Ricardo Engineering. This 
simulation work provides the effectiveness estimates for a number of 
the technologies most heavily relied on in the agencies' analysis of 
potential standards for MYs 2017-2025. Additionally for the final rule, 
NHTSA conducted a vehicle simulation project with Argonne National 
Laboratory (ANL), as described in NHTSA's FRIA, that performed 
additional analyses on mild hybrid technologies and advanced 
transmissions to help NHTSA develop effectiveness values better 
tailored for the CAFE model's incremental structure. The effectiveness 
values for the mild hybrid vehicles were applied by both agencies for 
the final rule.\232\ Additionally, NHTSA updated the effectiveness 
values of advanced transmissions coupled with naturally-aspirated 
engines for the final rule.\233\
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    \232\ EPA's lumped parameter model gave similar results as ANL's 
model for three of five vehicle classes, which served as a valuable 
validation to the tool. However EPA used the same ANL effectiveness 
values for mild hybrids to be harmonized with NHTSA's inputs.
    \233\ The Ricardo simulations did not include this technology 
combination, and EPA did not include this combination in their 
packages.
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    The agencies also reviewed the findings and recommendations in the 
updated NAS report ``Assessment of Fuel Economy Technologies for Light-
Duty Vehicles'' that was completed and issued after the MYs 2012-2016 
final rule.\234\ NHTSA's sensitivity analysis examining the impact of 
using some of the NAS cost and effectiveness estimates on the proposed 
standards is presented in NHTSA's final RIA.
---------------------------------------------------------------------------

    \234\ ``Assessment of Fuel Economy Technologies for Light-Duty 
Vehicles'', National Research Council of the National Academies, 
June 2010.
---------------------------------------------------------------------------

    The agencies received comments to the proposal on some of these 
assessments as discussed further below. Also, since the time of the 
proposal, in some cases we have been able to improve on our earlier 
assessments. We note these comments and the improvements made in the 
assessments in the discussion of each technology, below. However, the 
agencies did not receive comments for most of the technical and cost 
assessments presented in the proposal, and the agencies have concluded 
the assessments in the proposal remain valid for this final rule.
    Key changes in the final rule relative to the proposal are the use 
of 2010 dollars rather than 2009 dollars, updates to all battery pack 
and non-battery costs for hybrids, plug-in hybrids and full electric 
vehicles (because an updated version of the Argonne National Labs 
BatPaC model was available which more appropriately included a battery 
discharge safety system in the costs), and the inclusion of a mild 
hybrid technology that was not included in the proposal. NHTSA updated 
the effectiveness values of advanced transmissions coupled with 
naturally-aspirated engines based on ANL's simulation work. We describe 
these changes below and in Chapter 3 of the Joint TSD. We next provide 
a brief summary of the technologies that we considered for this final 
rule; Chapter 3 of the Joint TSD presents our assessments of these 
technologies in much greater detail.
1. What technologies did the agencies consider?
    The agencies conclude that manufacturers can add a variety of 
technologies to each of their vehicle models and/or platforms in order 
to improve the vehicles' fuel economy and GHG performance. In order to 
analyze a variety of regulatory alternative scenarios, it was essential 
to have a thorough understanding of the technologies available to the 
manufacturers. As was the case for the proposal, the analyses we 
performed for this final rule included an assessment of the cost, 
effectiveness, availability, development time, and manufacturability of 
various technologies within the normal redesign and refresh periods of 
a vehicle line (or in the design of a new vehicle). As we describe in 
the Joint TSD, the point in time when we project that a technology can 
be applied affects our estimates of the costs as well as the technology 
penetration rates (``phase-in caps'').
    The agencies considered dozens of vehicle technologies that 
manufacturers could use to improve the fuel economy and reduce 
CO2 emissions of their vehicles during the MYs 2017-2025 
timeframe. Many of the technologies we considered are available today, 
are in production of some vehicles, and could be incorporated into 
vehicles more widely as manufacturers make their product development 
decisions. These are ``near-term'' technologies and are identical or 
very similar to those anticipated in the agencies' analyses of 
compliance strategies for the MYs 2012-2016 final rule. For this 
rulemaking, given its time frame, we also considered other technologies 
that are not currently in production, but that are beyond the initial 
research phase, and are under development and expected to be in 
production in the next 5-10 years. Examples of these technologies are 
downsized and turbocharged engines operating at combustion pressures 
even higher than today's turbocharged engines, and an emerging hybrid 
architecture combined with an 8-speed dual clutch transmission, a 
combination that is not available today. These are technologies that 
the agencies believe that manufacturers can, for the most part, apply 
both to cars and trucks, and that we expect will achieve significant 
improvements in fuel economy and reductions in CO2 emissions 
at reasonable costs in the MYs 2017 to 2025 timeframe. The agencies did 
not consider technologies that are currently in an initial stage of 
research because of the uncertainty involved in the availability and 
feasibility of

[[Page 62703]]

implementing these technologies with significant penetration rates for 
this analysis. The agencies recognize that due to the relatively long 
time frame between the date of this final rule and 2025, it is very 
possible that new and innovative technologies will make their way into 
the fleet, perhaps even in significant numbers, that we have not 
considered in this analysis. We expect to reconsider such technologies 
as part of the mid-term evaluation, as appropriate, and manufacturers 
may be able to use them to generate credits under a number of the 
flexibility and incentive programs provided in this final rule.
    The technologies that we considered can be grouped into four broad 
categories: engine technologies; transmission technologies; vehicle 
technologies (such as mass reduction, tires and aerodynamic 
treatments); and electrification technologies (including hybridization 
and changing to full electric drive).\235\ We discuss the specific 
technologies within each broad group below. The list of technologies 
presented below and in the proposal is nearly identical to that 
presented in both the MYs 2012-2016 final rule and the 2010 TAR, with 
the following new technologies added to the list since the last final 
rule: the P2 hybrid, a newly emerging hybridization technology that was 
also considered in the 2010 TAR; mild hybrid technologies that were not 
included in the proposal; continued improvements in gasoline engines, 
with greater efficiencies and downsizing; continued significant 
efficiency improvements in transmissions; and ongoing levels of 
improvement to some of the seemingly more basic technologies such as 
lower rolling resistance tires and aerodynamic treatments, which are 
among the most cost effective technologies available for reducing fuel 
consumption and GHGs. Not included in the list below are technologies 
specific to air conditioning system improvements and off-cycle 
controls, which are presented in Section II.F of this preamble and in 
Chapter 5 of the Joint TSD.
---------------------------------------------------------------------------

    \235\ NHTSA's analysis considers these technologies in five 
groups rather than four--hybridization is one category, and 
``electrification/accessories'' is another.
---------------------------------------------------------------------------

    Few comments were received specific to these technologies. The 
Alliance emphasized the agencies should examine the progress in the 
development of powertrain improvements as part of the mid-term 
evaluation and determine if researchers are making the kind of 
breakthroughs anticipated by the agencies for technologies like high-
efficiency transmissions. VW cautioned the agencies about the 
uncertainties with high BMEP engines, including the possible costs due 
to increased durability requirements and questioned the potential 
benefit for this type of engine of engine technology. VW commented that 
additional development is necessary to overcome the significant 
obstacles of these types of engines. ICCT emphasized that many of the 
powertrain effectiveness values, derived by Ricardo, were too 
conservative as technology in this area is expected to improve at a 
faster pace during the rulemaking period. As described in the joint 
TSD, the agencies relied on a number of technical sources for this 
engine technology. Additionally as described in the Ricardo report, 
Ricardo was tasked with extrapolating technologies to their expected 
performance and efficiency levels in the 2020-2025 timeframe to account 
for future improvements. The agencies continue to believe that the 
modeling and simulation conducted by Ricardo is robust, as they have 
built prototypes of these engines and used their knowledge to help 
inform the modeling. The agencies will, of course, continue to watch 
the development of this key technology in the future. For transparency 
purposes and full disclosure, it is important to note the ICCT 
partially funded the Ricardo study.
a. Types of Engine Technologies Considered
    Low-friction lubricants including low viscosity and advanced low 
friction lubricant oils are now available with improved performance. If 
manufacturers choose to make use of these lubricants, they may need to 
make engine changes and conduct durability testing to accommodate the 
lubricants. The costs in our analysis consider these engine changes and 
testing requirements. This level of low friction lubricants is expected 
to exceed 85 percent penetration by MY 2017 and reach nearly 100 
percent in MY 2025.\236\
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    \236\ The penetration rates shown in this section are general 
results applicable to either the NHTSA or EPA analysis, to either 
the 2008 based or the 2010 based fleet projection.
---------------------------------------------------------------------------

    Reduction of engine friction losses (first level) can be achieved 
through low-tension piston rings, roller cam followers, improved 
material coatings, more optimal thermal management, piston surface 
treatments, and other improvements in the design of engine components 
and subsystems that improve the efficiency of engine operation. This 
level of engine friction reduction is expected to exceed 70 percent 
penetration by MY 2017
    Advanced low friction lubricants and reduction of engine friction 
losses (second level) are new for our analysis for the proposal and 
this final rule. As technologies advance in the coming years, we expect 
that there will be further development in both low friction lubricants 
and engine friction reductions. The agencies grouped the development in 
these two related areas into a single technology and applied them for 
MY 2017 and beyond.
    Cylinder deactivation disables the intake and exhaust valves and 
prevents fuel injection into some cylinders during light-load 
operation. The engine runs temporarily as though it were a smaller 
engine which substantially reduces pumping losses.
    Variable valve timing alters the timing of the intake valves, 
exhaust valves, or both, primarily to reduce pumping losses, increase 
specific power, and control residual gases.
    Discrete variable valve lift increases efficiency by optimizing air 
flow over a broader range of engine operation, which reduces pumping 
losses. This is accomplished by controlled switching between two or 
more cam profile lobe heights.
    Continuous variable valve lift is an electromechanical or electro-
hydraulic system in which valve timing is changed as lift height is 
controlled. This yields a wide range of opportunities for optimizing 
volumetric efficiency and performance, including enabling the engine to 
be valve-throttled.
    Stoichiometric gasoline direct-injection technology injects fuel at 
high pressure directly into the combustion chamber to improve cooling 
of the air/fuel charge as well as combustion quality within the 
cylinder, which allows for higher compression ratios and increased 
thermodynamic efficiency.
    Turbocharging and downsizing increases the available airflow and 
specific power level, allowing a reduced engine size while maintaining 
performance. Engines of this type use gasoline direct injection (GDI) 
and dual cam phasing. This reduces pumping losses at lighter loads in 
comparison to a larger engine. We continue to include an 18 bar brake 
mean effective pressure (BMEP) technology (as in the MYs 2012-2016 
final rule) and are also including both 24 bar BMEP and 27 bar BMEP 
technologies. The 24 bar BMEP technology would use a single-stage, 
variable geometry turbocharger which would provide a higher intake 
boost pressure available across a broader

[[Page 62704]]

range of engine operation than conventional 18 bar BMEP engines. The 27 
bar BMEP technology would require higher boost levels and thus would 
use a two-stage turbocharger, necessitating use of cooled exhaust gas 
recirculation (EGR) as described below. The 18 bar BMEP technology is 
applied with 33 percent engine downsizing, 24 bar BMEP is applied with 
50 percent engine downsizing, and 27 bar BMEP is applied with 56 
percent engine downsizing.
    Cooled exhaust-gas recirculation (EGR) reduces the incidence of 
knocking combustion with additional charge dilution and obviates the 
need for fuel enrichment at high engine power. This allows for higher 
boost pressure and/or compression ratio and further reduction in engine 
displacement and both pumping and friction losses while maintaining 
performance. Engines of this type use GDI and both dual cam phasing and 
discrete variable valve lift. The EGR systems considered in this 
assessment would use a dual-loop system with both high and low pressure 
EGR loops and dual EGR coolers. For the proposal and this final rule, 
cooled EGR is considered to be a technology that can be added to a 24 
bar BMEP engine and is an enabling technology for 27 bar BMEP engines.
    Diesel engines have several characteristics that give superior fuel 
efficiency, including reduced pumping losses due to lack of (or greatly 
reduced) throttling, high pressure direct injection of fuel, a 
combustion cycle that operates at a higher compression ratio, and a 
very lean air/fuel mixture relative to an equivalent-performance 
gasoline engine. This technology requires additional enablers, such as 
a NOX adsorption catalyst system or a urea/ammonia selective 
catalytic reduction system for control of NOX emissions 
during lean (excess air) operation.
b. Types of Transmission Technologies Considered
    Improved automatic transmission controls optimize the shift 
schedule to maximize fuel efficiency under wide ranging conditions and 
minimizes losses associated with torque converter slip through lock-up 
or modulation. This technology is included because it exists in the 
baseline fleets, but its penetration is expected to decrease over time 
as it is replaced by other more efficient technologies.
    Shift optimization is a strategy whereby the engine and/or 
transmission controller(s) emulates a CVT by continuously evaluating 
all possible gear options that would provide the necessary tractive 
power and selecting the best gear ratio that lets the engine run in the 
most efficient operating zone.
    Six-, seven-, and eight-speed automatic transmissions are optimized 
by changing the gear ratio span to enable the engine to operate in a 
more efficient operating range over a broader range of vehicle 
operating conditions. While a six speed transmission application was 
most prevalent for the MYs 2012-2016 final rule, eight speed 
transmissions are expected to be readily available and applied in the 
MYs 2017 through 2025 timeframe.
    Dual clutch or automated shift manual transmissions are similar to 
manual transmissions, but the vehicle controls shifting and launch 
functions. A dual-clutch automated shift manual transmission (DCT) uses 
separate clutches for even-numbered and odd-numbered gears, so the next 
expected gear is pre-selected, which allows for faster and smoother 
shifting. The MYs 2012-2016 final rule limited DCT applications to a 
maximum of 6 speeds. For the proposal and this final rule, we have 
considered both 6-speed and 8-speed DCT transmissions.
    Continuously variable transmission commonly uses V-shaped pulleys 
connected by a metal belt rather than gears to provide ratios for 
operation. Unlike manual and automatic transmissions with fixed 
transmission ratios, continuously variable transmissions can provide 
fully variable and an infinite number of transmission ratios that 
enable the engine to operate in a more efficient operating range over a 
broader range of vehicle operating conditions. The CVT is maintained 
for existing baseline vehicles and not considered for future vehicles 
in this rule due to the availability of more cost effective 
transmission technologies.
    Manual 6-speed transmission offers an additional gear ratio, often 
with a higher overdrive gear ratio, than a 5-speed manual transmission.
    High Efficiency Gearbox (automatic, DCT or manual) represents 
continuous improvement in seals, bearings and clutches; super finishing 
of gearbox parts; and development in the area of lubrication--all aimed 
at reducing frictional and other parasitic load in the system for an 
automatic or DCT type transmission.
c. Types of Vehicle Technologies Considered
    Lower-rolling-resistance tires have characteristics that reduce 
frictional losses associated with the energy dissipated mainly in the 
deformation of the tires under load, thereby improving fuel economy and 
reducing CO2 emissions. For the proposal and final rule, we 
considered two levels of lower rolling resistance tires that reduce 
frictional losses even further. The first level of low rolling 
resistance tires would have 10 percent rolling resistance reduction 
while the 2nd level would have 20 percent rolling resistance reduction 
compared to 2008 baseline vehicle. This second level of development 
marks an advance over low rolling resistance tires considered during 
the MYs 2014-2018 medium- and heavy- duty vehicle greenhouse gas 
emissions and fuel efficiency rulemaking, see 76 FR 57207, 57229.) The 
first level of lower rolling resistance tires is expected to exceed 90 
percent penetration by the 2017.
    Low-drag brakes reduce the sliding friction of disc brake pads on 
rotors when the brakes are not engaged, because the brake pads are 
pulled away from the rotors.
    Front or secondary axle disconnect for four-wheel drive systems 
provides a torque distribution disconnect between front and rear axles 
when torque is not required for the non-driving axle. This results in 
the reduction of associated parasitic energy losses.
    Aerodynamic drag reduction can be achieved via two approaches, 
either reducing the drag coefficients or reducing vehicle frontal area. 
To reduce the drag coefficient, skirts, air dams, underbody covers, and 
more aerodynamic side view mirrors can be applied. In addition to the 
standard aerodynamic treatments, the agencies have included a second 
level of aerodynamic technologies, which could include active grill 
shutters, rear visors, and larger under body panels. We estimate that 
the first level of aerodynamic drag improvement will reduce aerodynamic 
drag by 10 percent relative to the baseline 2008 vehicle while the 
second level would reduce aerodynamic drag by 20 percent relative to 
2008 baseline vehicles. The second level of aerodynamic technologies 
was not considered in the MYs 2012-2016 final rule.
    Mass Reduction can be achieved through either substitution of lower 
density and/or higher strength materials, or changing the design to use 
less material. With design optimization, part consolidation, and 
improved manufacturing processes, these strategies can be applied while 
maintaining the performance attributes of the component, system, or 
vehicle. The agencies applied mass reduction of up to 20 percent 
relative to MY 2008 levels in this final rule compared to only 10 
percent in the MYs 2012-2016 final rule. The agencies also determined 
effectiveness values for hybrid, plug-in

[[Page 62705]]

and electric vehicles based on net mass reduction, or the difference 
between the applied mass reduction (capped at 20 percent) and the added 
mass of electrification components. In assessing compliance strategies 
and in structuring the standards, the agencies only considered levels 
of vehicle mass reduction that, in our estimation, would not adversely 
affect overall fleet safety. An extensive discussion of mass reduction 
technologies and their associated costs is provided in Chapter 3 of the 
Joint TSD, and the discussion on safety is in Section II.G of the 
Preamble.
d. Types of Electrification/Accessory and Hybrid Technologies 
Considered
    Electric power steering (EPS)/Electro-hydraulic power steering 
(EHPS) is an electrically-assisted steering system that has advantages 
over traditional hydraulic power steering because it replaces the 
engine-driven and continuously operated hydraulic pump, thereby 
reducing parasitic losses from the accessory drive. Manufacturers have 
informed the agencies that full EPS systems are being developed for all 
light-duty vehicles, including large trucks. However, lacking data 
about when these transitions will occur, the agencies have applied the 
EHPS technology to large trucks and the EPS technology to all other 
light-duty vehicles.
    Improved accessories (IACC) may include high efficiency alternators 
and electrically driven (i.e., on-demand) water pumps and cooling fans. 
This excludes other electrical accessories such as electric oil pumps 
and electrically driven air conditioner compressors. New for this rule 
is a second level of IACC (IACC2), which consists of the IACC 
technologies with the addition of a mild regeneration strategy and a 
higher efficiency alternator. The first level of IACC improvements is 
expected to be at more than 50 percent penetration by the 2017MY.
    12-volt Stop-Start, sometimes referred to as idle-stop or 12-volt 
micro hybrid, is the most basic hybrid system that facilitates idle-
stop capability. These systems typically incorporate an enhanced 
performance battery and other features such as electric transmission 
and cooling pumps to maintain vehicle systems during idle-stop.
    Higher Voltage Stop-Start/Belt Integrated Starter Generator (BISG) 
sometimes referred to as a mild hybrid, provides idle-stop capability 
and uses a higher voltage battery with increased energy capacity over 
typical automotive batteries. The higher system voltage allows the use 
of a smaller, more powerful electric motor. This system replaces a 
standard alternator with an enhanced power, higher voltage, higher 
efficiency starter-alternator that is belt driven and that can recover 
braking energy while the vehicle slows down (regenerative braking). 
This technology was mentioned but not included in the proposal because 
the agencies had incomplete information at that time. Since the 
proposal, the agencies have obtained better data on the costs and 
effectiveness of this technology (see Chapter 3.4.3 of the joint TSD). 
Therefore, the agencies have revised their technical analysis on both 
the cost and effectiveness and found that the technology is now 
competitive with the others in NHTSA's technology decision trees and 
EPA's technology packages. EPA and NHTSA are providing incentives to 
encourage this and other hybrid technologies on full-size pick-up 
trucks, as described in Section II.F.3.
    Integrated Motor Assist (IMA)/Crank integrated starter generator 
(CISG) provides idle-stop capability and uses a high voltage battery 
with increased energy capacity over typical automotive batteries. The 
higher system voltage allows the use of a smaller, more powerful 
electric motor and reduces the weight of the wiring harness. This 
system replaces a standard alternator with an enhanced power, higher 
voltage and higher efficiency starter-alternator that is crankshaft 
mounted and can recover braking energy while the vehicle slows down 
(regenerative braking). The IMA technology is not included by either 
agency as an enabling technology in the analysis supporting this rule 
because we believe that other technologies provide better cost 
effectiveness, although it is included as a baseline technology because 
it exists in our 2008 and 2010 baseline fleets.
    P2 Hybrid is a newly emerging hybrid technology that uses a 
transmission integrated electric motor placed between the engine and a 
gearbox or CVT, much like the IMA system described above except with a 
wet or dry separation clutch which is used to decouple the motor/
transmission from the engine. In addition, a P2 hybrid would typically 
be equipped with a larger electric machine. Disengaging the clutch 
allows all-electric operation and more efficient brake-energy recovery. 
Engaging the clutch allows efficient coupling of the engine and 
electric motor and, when combined with a DCT transmission, provides 
similar efficiency at lower cost than power-split or 2-mode hybrid 
systems.
    2-Mode Hybrid is a hybrid electric drive system that uses an 
adaptation of a conventional stepped-ratio automatic transmission by 
replacing some of the transmission clutches with two electric motors 
that control the ratio of engine speed to vehicle speed, while clutches 
allow the motors to be bypassed. This improves both the transmission 
torque capacity for heavy-duty applications and reduces fuel 
consumption and CO2 emissions at highway speeds relative to 
other types of hybrid electric drive systems. The 2-mode hybrid 
technology is not included by either agency as an enabling technology 
in the analysis supporting this rule because we believe that other 
technologies provide better cost effectiveness, although it is included 
as a baseline technology because it exists in our 2008 and 2010 
baseline fleets.
    Power-split Hybrid is a hybrid electric drive system that replaces 
the traditional transmission with a single planetary gearset and two 
motor/generators. One motor/generator uses the engine to either charge 
the battery or supply additional power to the drive motor. A second, 
more powerful motor/generator is permanently connected to the vehicle's 
final drive and always turns with the wheels. The planetary gear splits 
engine power between the first motor/generator and the drive motor to 
either charge the battery or supply power to the wheels. The power-
split hybrid technology is not included by either agency as an enabling 
technology in the analysis supporting this rule because we believe that 
other technologies provide better cost effectiveness, although it is 
included as a baseline technology because it exists in our 2008 
baseline fleet.
    Plug-in hybrid electric vehicles (PHEV) are hybrid electric 
vehicles with the means to charge their battery packs from an outside 
source of electricity (usually the electric grid). These vehicles have 
larger battery packs with more energy storage and a greater capability 
to be discharged than other hybrid electric vehicles. They also use a 
control system that allows the battery pack to be substantially 
depleted under electric-only or blended mechanical/electrical operation 
and batteries that can be cycled in charge-sustaining operation at a 
lower state of charge than is typical of other hybrid electric 
vehicles. These vehicles are sometimes referred to as Range Extended 
Electric Vehicles (REEV). In this MYs 2017-2025 analysis, the agencies 
have included PHEVs with several all-electric ranges as potential 
technologies. EPA's analysis includes a 20-mile and 40-mile range 
PHEVs, while NHTSA's analysis only includes a 30-mile PHEV.

[[Page 62706]]

    Electric vehicles (EV) are equipped with all-electric drive and 
with systems powered by energy-optimized batteries charged primarily 
from grid electricity. For this rule, the agencies have included EVs 
with several ranges--75 miles, 100 miles, and 150 miles--as potential 
technologies.
e. Technologies Considered but Deemed ``Not Ready'' in the MYs 2017-
2025 Timeframe
    Fuel cell electric vehicles (FCEVs) utilize a full electric drive 
platform but consume electricity generated by an on-board fuel cell and 
hydrogen fuel. Fuel cells are electro-chemical devices that directly 
convert reactants (hydrogen and oxygen via air) into electricity, with 
the potential of achieving more than twice the efficiency of 
conventional internal combustion engines. Most automakers that 
currently have FCEVs under development use high-pressure gaseous 
hydrogen storage tanks. The high-pressure tanks are similar to those 
used for compressed gas storage in more than 10 million CNG vehicles 
worldwide, except that they are designed to operate at a higher 
pressure (350 bar or 700 bar vs. 250 bar for CNG). While we expect 
there will be some limited introduction of FCEVs into the marketplace 
in the time frame of this rule, we expect the total number of vehicles 
produced with this technology will be relatively small. Thus, the 
agencies did not consider FCEVs in the modeling analysis conducted for 
this rule.
    There are a number of other potential technologies available to 
manufacturers in meeting the 2017-2025 standards that the agencies have 
evaluated but have not considered in our final analyses. These include 
HCCI, ``multi-air'', and camless valve actuation, and other advanced 
engines currently under development.
2. How did the agencies determine the costs of each of these 
technologies?
    As noted in the introduction to this section, most of the direct 
cost estimates for technologies carried over from the MYs 2012-2016 
final rule and subsequently used in this final rule are fundamentally 
unchanged since the MYs 2012-2016 final rule analysis and/or the 2010 
TAR. We say ``fundamentally'' unchanged since the basis of the direct 
manufacturing cost estimates have not changed; however, the costs have 
been updated to more recent dollars, our estimated learning effects 
have resulted in further cost reductions for some technologies, the 
indirect costs are calculated using a modified methodology, and the 
impact of long-term ICMs is now present during the rulemaking 
timeframe. Besides these changes, there are also some other notable 
changes to the costs used in previous analyses. We highlight these 
changes in Section II.D.2.a, below. We highlight the changes to the 
indirect cost methodology and adjustments to more recent dollars in 
Sections II.D.2.b and c. Lastly, we present some updated terminology 
used for our approach to estimating learning effects in an effort to 
eliminate confusion with our past terminology. This is discussed in 
Section II.D.2.d, below.
    New for the final rule relative to the proposal are the use of 2010 
dollars rather than 2009 dollars, updates to all battery pack and non-
battery costs for hybrids, plug-in and full electric vehicles because 
an updated version of the ANL BatPaC model was available and because we 
wanted to include a battery discharge safety system in the costs, and 
the inclusion of a mild hybrid technology that was not included in the 
proposal. We describe these changes below and in Chapter 3 of the Joint 
TSD.
    The agencies note that the technology costs included in this final 
rule take into account those associated with the initial build of the 
vehicle. We received comments on the proposal for this rule suggesting 
that there could be additional maintenance required with some new 
technologies, and that additional maintenance costs could occur as a 
result because ``the technology will be more complicated and time 
consuming for mechanics to repair.'' \237\ For this final rule, the 
agencies have estimated such maintenance costs. The maintenance costs 
are not included as new vehicle costs and are not, therefore, used in 
either agency's modeling work. However, the maintenance costs are 
included when estimating costs to society in each agency's benefit-cost 
analyses. We discuss these maintenance costs briefly in section II.D.5 
below, and in detail in Chapter 3 of the final Joint TSD and in 
sections III and IV of this preamble.
---------------------------------------------------------------------------

    \237\ See NADA (OAR-2009-0472-7182.1, p.10) and Dawn Brooks 
(OAR-2009-0472-3851, pp.1-2).
---------------------------------------------------------------------------

a. Direct Manufacturing Costs (DMC)
    For direct manufacturing costs (DMC) related to turbocharging, 
downsizing, gasoline direct injection, transmissions, as well as non-
battery-related costs on hybrid, plug-in hybrid, and electric vehicles, 
the agencies have relied on costs derived from ``tear-down'' studies 
(see below). For battery-related DMC for HEVs, PHEVs, and EVs, the 
agencies have relied on the BatPaC model developed by Argonne National 
Laboratory for the Department of Energy. For mass reduction DMC, the 
agencies have relied on several studies as described in detail in 
Chapter 3 of the Joint TSD. We discuss each of these briefly here and 
in more detail in the Joint TSD. For the majority of the other 
technologies considered in this rule and described above, and where no 
new data were available, the agencies have relied on the MYs 2012-2016 
final rule and sources described there for estimates of DMC.
i. Costs From Tear-Down Studies
    As a general matter, the agencies believe that the best method to 
derive technology cost estimates is to conduct studies involving tear-
down and analysis of actual vehicle components. A ``tear-down'' 
involves breaking down a technology into its fundamental parts and 
manufacturing processes by completely disassembling actual vehicles and 
vehicle subsystems and precisely determining what is required for its 
production. The result of the tear-down is a ``bill of materials'' for 
each and every part of the relevant vehicle systems. This tear-down 
method of costing technologies is often used by manufacturers to 
benchmark their products against competitive products. Historically, 
vehicle and vehicle component tear-down has not been done on a large 
scale by researchers and regulators due to the expense required for 
such studies. While tear-down studies are highly accurate at costing 
technologies for the year in which the study is intended, their 
accuracy, like that of all cost projections, may diminish over time as 
costs are extrapolated further into the future because of uncertainties 
in predicting commodities (and raw material) prices, labor rates, and 
manufacturing practices. The projected costs may be higher or lower 
than predicted.
    Over the past several years, EPA has contracted with FEV, Inc. and 
its subcontractor Munro & Associates, to conduct tear-down cost studies 
for a number of key technologies evaluated by the agencies in assessing 
the feasibility of future GHG and CAFE standards. The analysis 
methodology included procedures to scale the tear-down results to 
smaller and larger vehicles, and also to different technology 
configurations. EPA documented FEV's methodology in a report published 
as part of the MYs 2012-2016 rulemaking, detailing the costing of the 
first tear-down conducted in this work (1 in the list 
below).\238\

[[Page 62707]]

This report was peer reviewed by experts in the industry, who focused 
especially on the methodology used in the tear-down study, and revised 
by FEV in response to the peer review comments.\239\ EPA documented 
subsequent tear-down studies (2-5 in the list below) 
using the peer reviewed methodology in follow-up FEV reports made 
available in the public docket for the MYs 2012-2016 rulemaking, 
although the results for some of these additional studies were not peer 
reviewed.\240\
---------------------------------------------------------------------------

    \238\ U.S. EPA, ``Light-Duty Technology Cost Analysis Pilot 
Study,'' Contract No. EP-C-07-069, Work Assignment 1-3, December 
2009, EPA-420-R-09-020, Docket EPA-HQ-OAR-2009-0472-11282.
    \239\ FEV pilot study response to peer review document November 
6, 2009, is at EPA-HQ-OAR-2009-0472-11285.
    \240\ U.S. EPA, ``Light-duty Technology Cost Analysis--Report on 
Additional Case Studies,'' EPA-HQ-OAR-2009-0472-11604.
---------------------------------------------------------------------------

    Since then, FEV's work under this contract has continued. 
Additional cost studies have been completed and are available for 
public review.\241\ The most extensive study, performed after the MYs 
2012-2016 final rule, involved whole-vehicle tear-downs of a 2010 Ford 
Fusion power-split hybrid and a conventional 2010 Ford Fusion. (The 
latter served as a baseline vehicle for comparison.) In addition to 
providing power-split HEV costs, the results for individual components 
in these vehicles were subsequently used by FEV/Munro to estimate the 
cost of another hybrid technology, the P2 hybrid, which employs similar 
hardware. This approach to costing P2 hybrids was undertaken because P2 
HEVs were not yet in volume production at the time of hardware 
procurement for tear-down. Finally, an automotive lithium-polymer 
battery was torn down to provide supplemental battery costing 
information to that associated with the NiMH battery in the Fusion. FEV 
has extensively documented this HEV cost work, including the extension 
of results to P2 HEVs, in a new report.\242\ Because of the complexity 
and comprehensive scope of this HEV analysis, EPA commissioned a 
separate peer review focused exclusively on the new tear down costs 
developed for the HEV analysis. Reviewer comments generally supported 
FEV's methodology and results, while including a number of suggestions 
for improvement, many of which were subsequently incorporated into 
FEV's analysis and final report. The peer review comments and responses 
are available in the rulemaking docket.243,244
---------------------------------------------------------------------------

    \241\ FEV, Inc., ``Light-Duty Technology Cost Analysis, Report 
on Additional Transmission, Mild Hybrid, and Valvetrain Technology 
Case Studies'', November 2011.
    \242\ FEV, Inc., ``Light-Duty Technology Cost Analysis, Power-
Split and P2 HEV Case Studies'', EPA-420-R-11-015, November 2011.
    \243\ ICF, ``Peer Review of FEV Inc. Report Light Duty 
Technology Cost Analysis, Power-Split and P2 Hybrid Electric Vehicle 
Case Studies'', EPA-420-R-11-016, November 2011.
    \244\ FEV and EPA, ``FEV Inc. Report `Light Duty Technology Cost 
Analysis, Power-Split and P2 Hybrid Electric Vehicle Case Studies', 
Peer Review Report--Response to Comments Document'', EPA-420-R-11-
017, November 2011.
---------------------------------------------------------------------------

    Over the course of this contract, teardown-based studies have been 
performed thus far on the technologies listed below. These completed 
studies provide a thorough evaluation of the new technologies' costs 
relative to their baseline (or replaced) technologies.
    1. Stoichiometric gasoline direct injection (SGDI) and 
turbocharging with engine downsizing (T-DS) on a DOHC (dual overhead 
cam) I4 engine, replacing a conventional DOHC I4 engine.
    2. SGDI and T-DS on a SOHC (single overhead cam) on a V6 engine, 
replacing a conventional 3-valve/cylinder SOHC V8 engine.
    3. SGDI and T-DS on a DOHC I4 engine, replacing a DOHC V6 engine.
    4. 6-speed automatic transmission (AT), replacing a 5-speed AT.
    5. 6-speed wet dual clutch transmission (DCT) replacing a 6-speed 
AT.
    6. 8-speed AT replacing a 6-speed AT.
    7. 8-speed DCT replacing a 6-speed DCT.
    8. Power-split hybrid (Ford Fusion with I4 engine) compared to a 
conventional vehicle (Ford Fusion with V6). The results from this tear-
down were extended to address P2 hybrids. In addition, costs from 
individual components in this tear-down study were used by the agencies 
in developing cost estimates for PHEVs and EVs.
    9. Mild hybrid with stop-start technology (Saturn Vue with I4 
engine), replacing a conventional I4 engine. New for this final rule, 
the agencies have used portions of this tear-down study in estimating 
mild hybrid costs.
    10. Fiat Multi-Air engine technology. (Although results from this 
cost study are included in the rulemaking docket, they were not used by 
the agencies in this rulemaking's technical analyses because the 
technology is under a very recently awarded patent and we have chosen 
not to base our analyses on its widespread use across the industry in 
the 2017-2025 timeframe.)
    Items 6 through 10 in the list above are new since the MYs 2012-
2016 final rule.
    In addition, FEV and EPA extrapolated the engine downsizing costs 
for the following scenarios that were based on the above study cases:
    1. Downsizing a SOHC 2 valve/cylinder V8 engine to a DOHC V6.
    2. Downsizing a DOHC V8 to a DOHC V6.
    3. Downsizing a SOHC V6 engine to a DOHC 4 cylinder engine.
    4. Downsizing a DOHC 4 cylinder engine to a DOHC 3 cylinder engine.
    The agencies have relied on the findings of FEV for estimating the 
cost of the technologies covered by the tear-down studies.
ii. Costs of HEVs, EVs & PHEVs
    The agencies have also reevaluated the costs for HEVs, PHEVs, and 
EVs since we issued the MYs 2012-2016 final rule and the 2010 TAR. In 
the proposal, we noted that electrified vehicle technologies were 
developing rapidly and the agencies sought to capture results from the 
most recent analysis. Further, we noted that the MYs 2012-2016 rule 
employed a single $/kWh estimate and did not consider the specific 
vehicle and technology application for the battery when we estimated 
the cost of the battery. Specifically, batteries used in HEVs (high 
power density applications) versus EVs (high energy density 
applications) need to be considered appropriately to reflect the design 
differences, the chemical material usage differences, and differences 
in $/kWh as the power to energy ratio of the battery varies for 
different applications.
    To address those issues for the proposal, the agencies did two 
things. First, EPA developed a spreadsheet tool \245\ that the agencies 
used to size the motor and battery based on the different road loads of 
various vehicle classes. Second, the agencies used a battery cost model 
developed by Argonne National Laboratory (ANL) for the Vehicle 
Technologies Program of the Office of Energy Efficiency and Renewable 
Energy (U.S. Department of Energy (DOE)).\246\ The model developed by 
ANL allows users to estimate unique battery pack costs using user 
customized input sets for different hybridization applications, such as 
strong hybrid, PHEV and EV. The DOE has established long term industry 
goals and targets for advanced battery systems as it does for many 
energy efficient technologies. ANL was funded by DOE to provide an 
independent assessment of Li-ion battery costs because of ANL's 
expertise in the field as one of the primary DOE National Laboratories 
responsible for basic and applied battery

[[Page 62708]]

energy storage technologies for future HEV, PHEV and EV applications. 
Since publication of the 2010 TAR, ANL's battery cost model underwent 
peer-review and ANL subsequently updated the model and documentation to 
incorporate suggestions from peer-reviewers, such as including a 
battery management system, a battery disconnect unit, a thermal 
management system, and other changes.\247\
---------------------------------------------------------------------------

    \245\ See ``LDGHG 2017-2025 Cost Development Files,'' CD in 
Docket No. EPA-HQ-OAR-2010-0799.
    \246\ ANL BatPac model Docket number EPA-HQ-OAR-2010-0799.
    \247\ Nelson, P.A., Santini, D.J., Barnes, J. ``Factors 
Determining the Manufacturing Costs of Lithium-Ion Batteries for 
PHEVs,'' 24th World Battery, Hybrid and Fuel Cell Electric Vehicle 
Symposium and Exposition EVS-24, Stavenger, Norway, May 13-16, 2009 
(www.evs24.org).
---------------------------------------------------------------------------

    Subsequent to the proposal for this rule, the agencies requested 
changes to the BatPaC model. These requests were that an option be 
added to select between liquid or air thermal management and that 
adequate surface area and cell spacing be determined accordingly. Also, 
the agencies requested a feature to allow battery packs to be 
configured as subpacks in parallel or modules in parallel, as 
additional options for staying within voltage and cell size limits for 
large packs. ANL added these features in a version of the model 
distributed March 1, 2012. This version of the model is used for the 
battery cost estimates in the final rule.
    The agencies have chosen to use the ANL model as the basis for 
estimating the cost of large-format lithium-ion batteries for this 
assessment for several reasons. The model was developed by scientists 
at ANL who have significant experience in this area. Also, the model 
uses a bill of materials methodology for developing cost estimates. The 
ANL model appropriately considers the vehicle application's power and 
energy requirements, which are two of the fundamental parameters when 
designing a lithium-ion battery for an HEV, PHEV, or EV. The ANL model 
can estimate production costs based on user defined inputs for a range 
of production volumes. The ANL model's cost estimates, while generally 
lower than the estimates we received from the OEMs, are generally 
consistent with the supplier cost estimates that EPA received from 
large-format lithium-ion battery pack manufacturers. This includes data 
the EPA received during on-site visits in the 2008-2011 time frame. 
Finally, the agencies chose to use the ANL model because it has been 
described and presented in the public domain and does not rely upon 
confidential business information (which could not be reviewed by the 
public).
    The potential for future reductions in battery cost and 
improvements in battery performance relative to current batteries will 
play a major role in determining the overall cost and performance of 
future PHEVs and EVs. The U.S. Department of Energy manages major 
battery-related R&D programs and partnerships, and has done so for many 
years, including the ANL model utilized in this report. DOE has 
reviewed the updated BatPaC model and supports its use in this final 
rule.
    As we did in the proposal, we have also estimated the costs 
(hardware and labor) associated with in-home electric vehicle charging 
equipment, which we expect to be necessary for PHEVs and EVs, and their 
installation. New for the final rule are costs associated with an on-
vehicle battery discharge system. These battery discharge systems allow 
the batteries in HEVs, PHEVs and EVs to be discharged safely at the 
site of an accident prior to moving affected vehicles to storage or 
repair facilities. Charging equipment and battery discharge system 
costs are covered in more detail in Chapter 3 of the Joint TSD.
iii. Mass Reduction Costs
    The agencies have revised the costs for mass reduction from the MYs 
2012-2016 rule and the 2010 Technical Assessment Report. For this rule, 
the agencies are relying on a wide assortment of sources from the 
literature as well as data provided from a number of OEMs. Based on 
this review, the agencies have estimated a new cost curve such that the 
costs increase as the levels of mass reduction increase. Both agencies 
have mass reduction feasibility and cost studies that were completed in 
time for the final rule. However the results from these studies were 
not employed in the rulemaking analysis because the peer reviews had 
not been completed and changes to the studies based on the peer reviews 
were not completed. Both have since been completed. For the primary 
analyses, both agencies use the same mass reduction costs as were used 
in the proposal, although they have been updated to 2010 dollars. All 
of these studies are discussed in Chapter 3 of the Joint TSD as well as 
in the respective publications. The use of the new cost results from 
the studies would have made little difference to the final rule cost 
analysis for two reasons:
    (1) The NPRM (+/- 40%) sensitivity analysis conducted by the 
agencies showed little difference in overall costs due to the change in 
mass reduction costs;
    (2) The agencies project even less mass reduction levels in the 
final rule compared to the NPRM based on the use of revised fatality 
coefficients from NHTSA's updated study of the effects on vehicle mass 
and size on highway safety, which is discussed in section II.G of this 
preamble.
b. Indirect Costs (IC)
i. Markup Factors To Estimate Indirect Costs
    As done in the proposal, the agencies have estimated the indirect 
costs by applying indirect cost multipliers (ICM) to direct cost 
estimates. EPA derived ICMs a basis for estimating the impact on 
indirect costs of individual vehicle technology changes that would 
result from regulatory actions. EPA derived separate ICMs for low-, 
medium-, and high-complexity technologies, thus enabling estimates of 
indirect costs that reflect the variation in research, overhead, and 
other indirect costs that can occur among different technologies. The 
agencies also applied ICMs in our MYs 2012-2016 rulemaking.
    Prior to the development of the ICM methodology,\248\ EPA and NHTSA 
both applied a retail price equivalent (RPE) factor to estimate 
indirect costs. RPEs are estimated by dividing the total revenue of a 
manufacturer by the direct manufacturing costs. As such, it includes 
all forms of indirect costs for a manufacturer and assumes that the 
ratio applies equally for all technologies. ICMs are based on RPE 
estimates that are then modified to reflect only those elements of 
indirect costs that would be expected to change in response to a 
regulatory-induced technology change. For example, warranty costs would 
be reflected in both RPE and ICM estimates, while marketing costs might 
only be reflected in an RPE estimate but not an ICM estimate for a 
particular technology, if the new regulatory-induced technology change 
is not one expected to be marketed to consumers. Because ICMs 
calculated by EPA are for individual technologies, many of which are 
small in scale, they often reflect a subset of RPE costs; as a result, 
for low complexity technologies, the RPE is typically higher than the 
ICM. This is not always the case, as ICM estimates for particularly 
complex technologies, specifically hybrid technologies (for

[[Page 62709]]

near term ICMs), and plug-in hybrid battery and full electric vehicle 
technologies (for near term and long term ICMs), reflect higher than 
average indirect costs, with the resulting ICMs for those technologies 
equaling or exceeding the averaged RPE for the industry.
---------------------------------------------------------------------------

    \248\ The ICM methodology was developed by RTI International, 
under contract to EPA. The results of the RTI report were published 
in Alex Rogozhin, Michael Gallaher, Gloria Helfand, and Walter 
McManus, ``Using Indirect Cost Multipliers to Estimate the Total 
Cost of Adding New Technology in the Automobile Industry.'' 
International Journal of Production Economics 124 (2010): 360-368.
---------------------------------------------------------------------------

    There is some level of uncertainty surrounding both the ICM and RPE 
markup factors. The ICM estimates used in this rule group all 
technologies into four broad categories in terms of complexity and 
treat them as if individual technologies within each of the categories 
(``low'', ``medium'', ``high1'' and ``high2'' complexity) will have the 
same ratio of indirect costs to direct costs. This simplification means 
it is likely that the direct cost for some technologies within a 
category will be higher and some lower than the estimate for the 
category in general. More importantly, the ICM estimates have not been 
validated through a direct accounting of actual indirect costs for 
individual technologies. Rather, the ICM estimates were developed using 
adjustment factors developed in two separate occasions: the first, a 
consensus process, was reported in the RTI report; the second, a 
modified Delphi method, was conducted separately and reported in an EPA 
memo.\249\ Both of these processes were carried out by panels composed 
of EPA staff members with previous background in the automobile 
industry; the memberships of the two panels overlapped but were not 
identical.\250\ The panels evaluated each element of the industry's RPE 
estimates and estimated the degree to which those elements would be 
expected to change in proportion to changes in direct manufacturing 
costs. The method used in the RTI report were peer reviewed by three 
industry experts and subsequently by reviewers for the International 
Journal of Production Economics.
---------------------------------------------------------------------------

    \249\ Helfand, Gloria, and Sherwood, Todd. ``Documentation of 
the Development of Indirect Cost Multipliers for Three Automotive 
Technologies.'' Memorandum, Assessment and Standards Division, 
Office of Transportation and Air Quality, U.S. Environmental 
Protection Agency, August 2009.
    \250\ NHTSA staff participated in the development of the process 
for the second, modified Delphi panel, and reviewed the results as 
they were developed, but did not serve on the panel.
---------------------------------------------------------------------------

    RPEs themselves are inherently difficult to estimate because the 
accounting statements of manufacturers do not neatly categorize all 
cost elements as either direct or indirect costs. Hence, each 
researcher developing an RPE estimate must apply a certain amount of 
judgment to the allocation of the costs. Since empirical estimates of 
ICMs are ultimately derived from the same data used to measure RPEs, 
this affects both measures. However, the value of RPE has not been 
measured for specific technologies, or for groups of specific 
technologies. Thus applying a single average RPE to any given 
technology by definition overstates costs for very simple technologies, 
or understates them for advanced technologies.
    In every recent GHG and fuel economy rulemaking proposal, we have 
requested comment on our ICM factors and whether it is most appropriate 
to use ICMs or RPEs. We have generally received little to no comment on 
the issue specifically, other than basic comments that the ICM values 
are too low. In addition, in the June 2010 NAS report, NAS noted that 
the under the initial ICMs, no technology would be assumed to have 
indirect costs as high as the average RPE. NRC found that ``RPE factors 
certainly do vary depending on the complexity of the task of 
integrating a component into a vehicle system, the extent of the 
required changes to other components, the novelty of the technology, 
and other factors. However, until empirical data derived by means of 
rigorous estimation methods are available, the committee prefers to use 
average markup factors.'' \251\ The committee also stated that ``The 
EPA (Rogozhin et al., 2009), however, has taken the first steps in 
attempting to analyze this problem in a way that could lead to a 
practical method of estimating technology-specific markup factors'' 
where ``this problem'' spoke to the issue of estimating technology-
specific markup factors and indirect cost multipliers.\252\
---------------------------------------------------------------------------

    \251\ NRC, Finding 3-2 at page 3-23.
    \252\ NRC at page 3-19.
---------------------------------------------------------------------------

    As EPA has developed its ICM approach to indirect cost estimation, 
the agency has publicly discussed and responded to comment on its 
approach during the MYs 2012-2016 light-duty GHG rule, and also in the 
more recent heavy-duty GHG rule (see 76 FR 57106) and in the 2010 TAR. 
The agency published its work in the Journal of Production Economics 
\253\ and has also published a memorandum furthering the development of 
ICMs.\254\ As thinking has matured, we have adjusted our ICM factors 
such that they are slightly higher and, importantly, we have changed 
the way in which the factors are applied. For the proposal for this 
rule, EPA concluded that ICMs are fully developed for regulatory 
purposes and used these factors in developing the indirect costs 
presented in the proposal.
---------------------------------------------------------------------------

    \253\ Alex Rogozhin, Michael Gallaher, Gloria Helfand, and 
Walter McManus, ``Using Indirect Cost Multipliers to Estimate the 
Total Cost of Adding New Technology in the Automobile Industry.'' 
International Journal of Production Economics 124 (2010): 360-368.
    \254\ Helfand, Gloria, and Sherwood, Todd. ``Documentation of 
the Development of Indirect Cost Multipliers for Three Automotive 
Technologies.'' Memorandum, Assessment and Standards Division, 
Office of Transportation and Air Quality, U.S. Environmental 
Protection Agency, August 2009.
---------------------------------------------------------------------------

    The agencies received comments on the approach used to estimate 
indirect costs in the proposal. One commenter (NADA) argued that the 
ICM approach was not valid and an RPE approach was the only appropriate 
approach.\255\ Further, that commenter argued that the RPE factor 
should be 2.0 times direct costs rather than the 1.5 factor that is 
supported by filings to the Securities and Exchange Commission. Another 
commenter (ICCT) commented positively on the new ICM approach as 
presented in the proposal, but argued that sensitivity analyses 
examining the impact of using an RPE should be deleted from the final 
rule.\256\ Both agencies have conducted thorough analysis of the 
comments received on the RPE versus ICM approach. Regarding NADA's 
concerns about the accuracy of ICMs, although the agencies recognize 
that there is uncertainty regarding the impact of indirect costs on 
vehicle prices, they have retained ICMs for use in the central analysis 
because it offers advantages of focusing cost estimates on only those 
costs impacted by a regulatory imposed change, and it provides a 
disaggregated approach that better differentiates among technologies. 
The agencies disagree with NADA's contention that the correct factor to 
reflect the RPE should be 2.0, and we cite data in Chapter 3 of the 
joint TSD that demonstrates that the overall RPE should average about 
1.5. Regarding ICCTs contention that NHTSA should delete sensitivity 
analyses examining the impact of using an RPE, NHTSA rejects this 
proposal. OMB Circular No. A-94 establishes guidelines for conducting 
benefit-cost analysis of Federal programs and recommends sensitivity 
analyses to address uncertainty and imprecision in both underlying data 
and modeling assumptions. The agencies have addressed uncertainty in 
separate sensitivity analyses, with NHTSA examining uncertainty 
stemming from the shift away from the use of the RPE and EPA examining 
uncertainty around the ICM values. Further analysis of NADA's comments 
is summarized in

[[Page 62710]]

Chapter 3 of the Joint TSD and in Chapter 7 of NHTSA's FRIA and in 
EPA's Response to Comments document. NHTSA's full response to ICCT is 
also presented in chapter 7 of NHTSA's FRIA. For this final rule, each 
agency is using an ICM approach with ICM factors identical to those 
used in the proposal. The impact of using an RPE rather than ICMs to 
calculate indirect costs is examined in sensitivity and uncertainty 
analyses in chapters 7, 10, and 12 of NHTSA's FRIA where NHTSA shows 
that even under the higher cost estimates that result using the RPE, 
the rulemaking is highly cost beneficial. The impact of alternate ICMs 
is examined in Chapter 3 of EPA's RIA.
---------------------------------------------------------------------------

    \255\ NADA, Docket No. NHTSA-2010-0131-0261, at 4.
    \256\ ICCT, Docket No. NHTSA-2010-0131-0258, at 19-20.
---------------------------------------------------------------------------

    Note that our ICM, while identical to those used in the proposal, 
have changed since the MYs 2012-2016 rule. The first change--increased 
ICM factors--was done as a result of further thought among EPA and 
NHTSA that the ICM factors presented in the original RTI report for low 
and medium complexity technologies should no longer be used and that we 
should rely solely on the modified-Delphi values for these complexity 
levels. For that reason, we eliminated the averaging of original RTI 
values with modified-Delphi values and instead are relying solely on 
the modified-Delphi values for low and medium complexity technologies. 
The second change was a re-evaluation by agency staff of the complexity 
classification of each of the technologies that were not directly 
examined in the RTI and modified Delphi studies. As a result, more 
technologies have been classified as medium complexity and fewer as low 
complexity. The third change--the way the factors are applied--resulted 
in the warranty portion of the indirect costs being applied as a 
multiplicative factor (thereby decreasing going forward as direct 
manufacturing costs decrease due to learning), and the remainder of the 
indirect costs being applied as an additive factor (thereby remaining 
constant year-over-year and not being reduced due to learning). This 
third change has a comparatively large impact on the resultant 
technology costs and, we believe, more appropriately estimates costs 
over time. In addition to these changes, a secondary-level change was 
made as part of this ICM recalculation. That change was to revise 
upward the RPE level reported in the original RTI report from an 
original value of 1.46 to 1.5, to reflect the long term average RPE. 
The original RTI study was based on 2008 data. However, an analysis of 
historical RPE data indicates that, although there is year to year 
variation, the average RPE has remained roughly constant at 1.5. ICMs 
are applied to future years' data and, therefore, NHTSA and EPA staffs 
believed that it would be appropriate to base ICMs on the historical 
average rather than a single year's result. Therefore, ICMs were 
adjusted to reflect this average level. These changes to the ICMs since 
the MYs 2012-2016 rule and the methodology are described in greater 
detail in Chapter 3 of the Joint TSD. NHTSA also has further discussion 
of ICMs in Chapter 7 of NHTSA's FRIA.
ii. Stranded Capital
    Because the production of automotive components is capital-
intensive, it is possible for substantial capital investments in 
manufacturing equipment and facilities to become ``stranded'' (where 
their value is lost, or diminished). This would occur when the capital 
is rendered useless (or less useful) by some factor that forces a major 
change in vehicle design, plant operations, or manufacturer's product 
mix, such as a shift in consumer demand for certain vehicle types. It 
can also be caused by new standards that phase in at a rate too rapid 
to accommodate planned replacement or redisposition of existing capital 
to other activities. The lost value of capital equipment is then 
amortized in some way over production of the new technology components.
    It is difficult to quantify accurately any capital stranding 
associated with new technology phase-ins under the standards in this 
final rule because of the iterative dynamic involved--that is, the new 
technology phase-in rate strongly affects the potential for additional 
cost due to stranded capital, but that additional cost in turn affects 
the degree and rate of phase-in for other individual competing 
technologies. In addition, such an analysis is very company-, factory-, 
and manufacturing process-specific, particularly in regard to finding 
alternative uses for equipment and facilities. Nevertheless, in order 
to account for the possibility of stranded capital costs, the agencies 
asked FEV to perform a separate analysis of potential stranded capital 
costs associated with rapid phase-in of technologies due to new 
standards, using data from FEV's primary teardown-based cost 
analyses.\257\
---------------------------------------------------------------------------

    \257\ FEV, Inc., ``Potential Stranded Capital Analysis on EPA 
Light-Duty Technology Cost Analysis'', Contract No. EP-C-07-069 Work 
Assignment 3-3. November 2011.
---------------------------------------------------------------------------

    The assumptions made in FEV's stranded capital analysis with 
potential for major impacts on results are:
     All manufacturing equipment was bought brand new when the 
old technology started production (no carryover of equipment used to 
make the previous components that the old technology itself replaced).
     10-year normal production runs: Manufacturing equipment 
used to make old technology components is straight-line depreciated 
over a 10-year life.
     Factory managers do not optimize capital equipment phase-
outs (that is, they are assumed to routinely repair and replace 
equipment without regard to whether or not it will soon be scrapped due 
to adoption of new vehicle technology).
     Estimated stranded capital is amortized over 5 years of 
annual production at 450,000 units (of the new technology components). 
This annual production is identical to that assumed in FEV's primary 
teardown-based cost analyses. The 5-year recovery period is chosen to 
help ensure a conservative analysis; the actual recovery would of 
course vary greatly with market conditions.
    The stranded capital analysis was performed for three transmission 
technology scenarios, two engine technology scenarios, and one hybrid 
technology scenario. The methodology used by EPA in applying the 
results to the technology costs is described in Chapter 3.8.7 and 
Chapter 5.1 of EPA's RIA. The methodology used by NHTSA in applying the 
results to the technology costs is described in NHTSA's RIA section V.
    In their written comments on the proposal, the Center for 
Biological Diversity and the International Council on Clean 
Transportation argued that the long lead times being provided for the 
phase-in of new standards, stretching out as they do over two complete 
redesign cycles, will virtually eliminate any capital stranding, making 
it inappropriate to carry over what they consider to be a ``relic'' 
from shorter-term rulemakings. As discussed above, it is difficult to 
quantify accurately any capital stranding associated with new 
technology phase-ins, especially given the projected and unprecedented 
deployment of technologies in the rulemaking timeframe. The FEV 
analysis attempted to define the possible stranded capital costs, for a 
select set of technologies, using the above set of assumptions. Since 
the direct manufacturing costs developed by FEV assumed a 10 year 
production life (i.e., capital costs amortized over 10 years) the 
agencies applied the FEV

[[Page 62711]]

derived stranded capital costs whenever technologies were replaced 
prior to being utilized for the full 10 years. The other option would 
be to assume a 5 year product life (i.e., capital costs amortized over 
5 years), which would have increased the direct manufacturing costs. It 
seems only reasonable to account for stranded capital costs in the 
instances where the fleet modeling performed by the agencies replaced 
technologies before the capital costs were fully amortized. The 
agencies did not derive or apply stranded capital costs to all 
technologies only the ones analyzed by FEV. While there is uncertainty 
about the possible stranded capital costs (i.e., understated or 
overstated), their impact would not call into question the overall 
results of our cost analysis or otherwise affect the stringency of the 
standards, since costs of stranded capital are a relatively minor 
component of the total estimated costs of the rules.
c. Cost Adjustment to 2010 Dollars
    This simple change from the earlier analyses and from the proposal 
is to update any costs presented in earlier analyses to 2010 dollars 
using the GDP price deflator as reported by the Bureau of Economic 
Analysis on January 27, 2011. The factors used to update costs from 
2007, 2008 and 2009 dollars to 2010 dollars are shown below.

                            Table II-17--GDP Price Deflators Used in This Final Rule
----------------------------------------------------------------------------------------------------------------
                                                       2007            2008            2009            2010
----------------------------------------------------------------------------------------------------------------
Price Index for Gross Domestic Product..........          106.2           108.6           109.7           111.0
Factor applied to convert to 2010 dollars.......            1.04            1.02            1.01            1.00
----------------------------------------------------------------------------------------------------------------
Source: Bureau of Economic Analysis, Table 1.1.4. Price Indexes for Gross Domestic Product, downloaded 2/9/2012,
  last revised 1/27/2012.

d. Cost Effects Due to Learning
    The agencies have not changed the approach to manufacturer learning 
since the proposal. For many of the technologies considered in this 
rulemaking, the agencies expect that the industry should be able to 
realize reductions in their costs over time as a result of ``learning 
effects,'' that is, the fact that as manufacturers gain experience in 
production, they are able to reduce the cost of production in a variety 
of ways. For this rule, the agencies continue to apply learning effects 
in the same way as we did in both the MYs 2012-2016 final rule and in 
the 2010 TAR. However, in the proposal, we employed some new 
terminology in an effort to eliminate some confusion that existed with 
our old terminology. (This new terminology was described in the recent 
heavy-duty GHG final rule (see 76 FR 57320)). Our old terminology 
suggested we were accounting for two completely different learning 
effects--one based on volume production and the other based on time. 
This was not the case since, in fact, we were actually relying on just 
one learning phenomenon, that being the learning-by-doing phenomenon 
that results from cumulative production volumes.
    As a result, the agencies have also considered the impacts of 
manufacturer learning on the technology cost estimates by reflecting 
the phenomenon of volume-based learning curve cost reductions in our 
modeling using two algorithms depending on where in the learning cycle 
(i.e., on what portion of the learning curve) we consider a technology 
to be--``steep'' portion of the curve for newer technologies and 
``flat'' portion of the curve for more mature technologies. The 
observed phenomenon in the economic literature which supports 
manufacturer learning cost reductions are based on reductions in costs 
as production volumes increase with the highest absolute cost reduction 
occurring with the first doubling of production. The agencies use the 
terminology ``steep'' and ``flat'' portion of the curve to distinguish 
among newer technologies and more mature technologies, respectively, 
and how learning cost reductions are applied in cost analyses.
    Learning impacts have been considered on most but not all of the 
technologies expected to be used because some of the expected 
technologies are already used rather widely in the industry and, 
presumably, quantifiable learning impacts have already occurred. The 
agencies have applied the steep learning algorithm for only a handful 
of technologies considered to be new or emerging technologies such as 
PHEV and EV batteries which are experiencing heavy development and, 
presumably, rapid cost declines in coming years. For most technologies, 
the agencies have considered them to be more established and, hence, 
the agencies have applied the lower flat learning algorithm. For more 
discussion of the learning approach and the technologies to which each 
type of learning has been applied the reader is directed to Chapter 3 
of the Joint TSD. NHTSA has further discussion in Chapter 7 of the 
NHTSA FRIA. Note that, since the agencies had to project how learning 
will occur with new technologies over a long period of time, we request 
comments on the assumptions of learning costs and methodology. In 
particular, we are interested in input on the assumptions for advanced 
27-bar BMEP cooled exhaust gas recirculation (EGR) engines, which are 
currently still in the experimental stage and not expected to be 
available in volume production until 2017. For our analysis, we have 
based estimates of the costs of this engine on current (or soon to be 
current) production technologies (e.g., gasoline direct injection fuel 
systems, engine downsizing, cooled EGR, 18-bar BMEP capable 
turbochargers), and assumed that, since learning (and the associated 
cost reductions) begins in 2012 for them that it also does for the 
similar technologies used in 27-bar BMEP engines.
    The agencies did not receive comments on the issue of manufacturer 
learning.
3. How did the agencies determine the effectiveness of each of these 
technologies?
    For this final rule, EPA has conducted another peer reviewed study 
with the global engineering consulting firm, Ricardo, Inc., adding to 
and refining the results of the 2007 study, consistent with a longer-
term outlook through model years MYs 2017-2025. The 2007 study was a 
detailed, peer reviewed vehicle simulation project to quantify the 
effectiveness of a multitude of technologies for the MYs 2012-2016 rule 
(as well as the 2010 NOI) published in 2008. The extent of the new 
study was vast, including hundreds of thousands of vehicle simulation 
runs. The results were, in turn, employed to calibrate and update EPA's 
lumped parameter model, which is used to quantify the synergies and 
dis-synergies associated with combining technologies together for the 
purposes of generating

[[Page 62712]]

inputs for the agencies respective OMEGA and CAFE modeling.
    Additionally, there were a number of technologies that Ricardo did 
not model explicitly. For these, the agencies relied on a variety of 
sources in the literature. A few of the values are identical to those 
presented in the MYs 2012-2016 final rule, while others were updated 
based on the newer version of the lumped parameter model. More details 
on the Ricardo simulation, lumped parameter model, as well as the 
effectiveness for supplemental technologies are described in Chapter 3 
of the Joint TSD.
    The agencies note that the effectiveness values estimated for the 
technologies considered in the modeling analyses may represent average 
values, and do not reflect the virtually unlimited spectrum of possible 
values that could result from adding the technology to different 
vehicles. For example, while the agencies have estimated an 
effectiveness of 0.6 to 0.8 percent for low-friction lubricants, 
depending on the vehicle class, each vehicle could have a unique 
effectiveness estimate depending on the baseline vehicle's oil 
viscosity rating. Similarly, the reduction in rolling resistance (and 
thus the improvement in fuel economy and the reduction in 
CO2 emissions) due to the application of low rolling 
resistance tires depends not only on the unique characteristics of the 
tires originally on the vehicle, but on the unique characteristics of 
the tires being applied, characteristics that must be balanced between 
fuel efficiency, safety, and performance. Aerodynamic drag reduction is 
much the same--it can improve fuel economy and reduce CO2 
emissions, but it is also highly dependent on vehicle-specific 
functional objectives. For purposes of this rule, NHTSA and EPA believe 
that employing average values for technology effectiveness estimates, 
as adjusted depending on vehicle class, is an appropriate way of 
recognizing the potential variation in the specific benefits that 
individual manufacturers (and individual vehicles) might obtain from 
adding a fuel-saving technology.
    As discussed in the proposal, the U.S. D.O.T. Volpe Center entered 
into a contract with Argonne National Laboratory (ANL) to provide full 
vehicle simulation modeling support for this MYs 2017-2025 rulemaking. 
While modeling was not complete in time for use in the NPRM, the ANL 
results were available for the final rule and were used to define the 
effectiveness of mild hybrids for both agencies, and NHTSA used the 
results to update the effectiveness of advanced transmission 
technologies coupled with naturally-aspirated engines for the CAFE 
analysis, as discussed in the Joint TSD and more fully in NHTSA's RIA. 
This simulation modeling was accomplished using ANL's full vehicle 
simulation tool called ``Autonomie,'' which is the successor to ANL's 
Powertrain System Analysis Toolkit (PSAT) simulation tool, and that 
includes sophisticated models for advanced vehicle technologies. The 
ANL simulation modeling process and results are documented in multiple 
reports and are peer reviewed. Both the ANL reports and peer review 
report can be found in NHTSA's docket.\258\
---------------------------------------------------------------------------

    \258\ Docket No: NHTSA-2010-0131.
---------------------------------------------------------------------------

4. How did the agencies consider real-world limits when defining the 
rate at which technologies can be deployed?
a. Refresh and Redesign Schedules
    During MYs 2017-2025 manufacturers are expected to go through the 
normal automotive business cycle of redesigning and upgrading their 
light-duty vehicle products, and in some cases introducing entirely new 
vehicles not in the market today. The MYs 2017-2025 standards timeframe 
allows manufacturers the time needed to incorporate GHG reduction and 
fuel-saving technologies into their normal business cycle while 
considering the requirements of the MYs 2012-2016 standards. This is 
important because it has the potential to avoid the much higher costs 
that could occur if manufacturers need to add or change technology at 
times other than their scheduled vehicle redesigns. This time period 
also provides manufacturers the opportunity to plan for compliance 
using a multi-year time frame, again consistent with normal business 
practice. Over these 9 model years, and the 5 prior model years that 
make up the MYs 2012-2016 standards, there will be an opportunity for 
manufacturers to evaluate, presumably, every one of their vehicle 
platforms and models and add technology in a cost effective way to 
control GHG emissions and improve fuel economy. This includes all the 
technologies considered here and the redesign of the air conditioner 
systems in ways that will further reduce GHG emissions and improve fuel 
economy.
    Because of the complexities of the automobile manufacturing 
process, manufacturers are generally only able to add new technologies 
to vehicles on a specific schedule; just because a technology exists in 
the marketplace or is made available, does not mean that it is 
immediately available for applications on all of a manufacturer's 
vehicles. In the automobile industry there are two terms that describe 
when technology changes to vehicles occur: redesign and refresh (i.e., 
freshening). Vehicle redesign usually refers to significant changes to 
a vehicle's appearance, shape, dimensions, and powertrain. Redesign is 
traditionally associated with the introduction of ``new'' vehicles into 
the market, often characterized as the ``next generation'' of a 
vehicle, or a new platform. Across the industry, redesign of models 
generally takes place about every 5 years. However, while 5 years is a 
typical design period, there are many instances where redesign cycles 
can be longer or shorter. For example, it has generally been the case 
that pickup trucks and full size vans have longer redesign cycles 
(e.g., 6 to 7 years), while high-volume cars have shorter redesign 
cycles in order to remain competitive in the market. There are many 
other factors that can also affect redesign such as availability of 
capital and engineering resources and the extent of platform and 
component sharing between models, or even manufacturers.
    We have a more detailed discussion in Chapter 3.4 of the joint TSD 
that describes how refresh and redesign cycles play into the modeling 
each agency has done in support of the final standards.
b. Vehicle Phase-In Caps
    GHG-reducing and fuel-saving technologies for vehicle applications 
vary widely in function, cost, effectiveness and availability. Some of 
these attributes, like cost and availability vary from year to year. 
New technologies often take several years to become available across 
the entire market. The agencies use phase-in caps to manage the maximum 
rate that the CAFE and OMEGA models can apply new technologies.
    Phase-in caps are intended to function as a proxy for a number of 
real-world limitations in deploying new technologies in the auto 
industry. These limitations can include but are not limited to, 
engineering resources at the OEM or supplier level, restrictions on 
intellectual property that limit deployment, and/or limitations in 
material or component supply as a market for a new technology develops. 
Without phase-in caps, the models may apply technologies at rates that 
are not representative of what the industry is actually capable of 
producing, which would suggest that more stringent standards might be 
feasible than actually would be.

[[Page 62713]]

    EPA applies the caps on an OEM vehicle platform basis for most 
technologies. For a given technology with a cap of x%, this means that 
x% of a vehicle platform can receive that technology. On a fleet 
average basis, since all vehicle platforms can receive x% of this 
technology, x% of a manufacturer's fleet can also receive that 
technology. EVs and PHEVs are an exception to this rule as the agencies 
limit the availability of these technologies to some subclasses. Unlike 
other technologies, in order to maintain utility, EPA only allows non-
towing vehicle types to be electrified in the OMEGA model. As a result, 
the PHEV and EV cap was applied so that the average manufacturer could 
produce to the cap levels. As would be expected, manufacturers that 
make more non-towing vehicles can have a higher fraction of their fleet 
converted to EVs and PHEVs, while those that make fewer non-towing 
vehicles have a lower potential maximum limit on EV and PHEV 
production.
    NHTSA applies phase-in caps in addition to refresh/redesign cycles 
used in the CAFE model, which constrain the rate of technology 
application at the vehicle level so as to ensure a period of stability 
following any modeled technology applications, Unlike vehicle-level 
cycle settings, phase-in caps, defined on a percent per year basis, 
constrain technology application at the OEM level. As discussed above 
phase-in caps are intended to reflect a manufacturer's overall resource 
capacity available for implementing new technologies (such as 
engineering and development personnel and financial resources) thereby 
ensuring that resource capacity is accounted for in the modeling 
process. At a high level, phase-in caps and refresh/redesign cycles 
work in conjunction with one another to avoid the CAFE modeling process 
out-pacing an OEM's limited pool of available resources during the 
rulemaking time frame, especially in years where many models may be 
scheduled for refresh or redesign. This helps to ensure technological 
feasibility and economic practicability in determining the stringency 
of the standards.
    We have a more detailed discussion of phase-in caps in Chapter 3.4 
of the joint TSD.
5. Maintenance and Repair Costs Associated With New Technologies
    In the proposal, we requested comment on maintenance, repair, and 
other operating-costs and whether these might increase or decrease with 
the new technologies. (See 76 FR 74925) We received comments on this 
topic from NADA. These comments stated that the agencies should include 
maintenance and repair costs in estimates of total cost of ownership 
(i.e., in our payback analyses).\259\ NADA proffered their Web site 
\260\ as a place to find information on operating costs that might be 
used in our final analyses. This Web site tool is meant to help 
consumers quantify the cost of ownership of a new vehicle. The tool 
includes estimates for depreciation, fees, financing, insurance, fuel 
maintenance, opportunity costs and repairs for the first five years of 
ownership. The agencies acknowledge that the tool may be useful for 
consumers; however, there is no information provided on how these 
estimates were determined. Without documentation of the basis for 
estimates, the Web site information is of limited use in this 
rulemaking where the agencies document the source and basis for each 
factual assertion. There are also evident substantive anomalies in the 
Web site information.\261\ For these reasons, the agencies have 
performed an independent analysis to quantify maintenance costs.
---------------------------------------------------------------------------

    \259\ See NADA (EPA-HQ-OAR-2010-0799-0639, p.10).
    \260\ http://www.nadaguides.com/Cars/Cost-to-Own.
    \261\ For example, comparing the 2012 Hyundai Sonata showed the 
same cost for fuel ($11,024) regardless of whether it is a hybrid 
option or not. The HEV fuel economy rating is 35/40 mpg City/Highway 
for the HEV and 2.4L non HEV rating is 24/35. Another example is the 
2012 Ford Fusion SEL: the front wheel drive and the all-wheel drive 
versions have identical fuel cost despite having different fuel 
economies.
---------------------------------------------------------------------------

    For the first time in CAFE and GHG rulemaking, both agencies now 
include maintenance costs in their benefit-cost analyses and in their 
respective payback analyses. This analysis is presented in Chapter 3.6 
of the joint TSD and the maintenance intervals and costs per 
maintenance event used by both agencies are summarized in Table II-18. 
For information on how each agency has folded the maintenance costs 
into their respective final analyses, please refer to each agency's 
respective RIA (Chapter 5 of EPA's RIA, Chapter VIII of NHTSA's FRIA).

                                Table II-18--Maintenance Event Costs & Intervals
                                                 [2010 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                     Cost per       Maintenance
                New technology                           Reference case             maintenance      interval
                                                                                       event          (mile)
----------------------------------------------------------------------------------------------------------------
Low rolling resistance tires level 1..........  Standard tires..................           $6.44          40,000
Low rolling resistance tires level 2..........  Standard tires..................           43.52          40,000
Diesel fuel filter replacement................  Gasoline vehicle................           49.25          20,000
EV oil change.................................  Gasoline vehicle................          -38.67           7,500
EV air filter replacement.....................  Gasoline vehicle................          -28.60          30,000
EV engine coolant replacement.................  Gasoline vehicle................          -59.00         100,000
EV spark plug replacement.....................  Gasoline vehicle................          -83.00         105,000
EV/PHEV battery coolant replacement...........  Gasoline vehicle................          117.00         150,000
EV battery health check.......................  Gasoline vehicle................           38.67          15,000
----------------------------------------------------------------------------------------------------------------
Note: Negative values represent savings due to the EV not needing the maintenance required of the gasoline
  vehicle; EPA applied a battery coolant replacement cost to PHEVs and EVs, while NHTSA applied it to EVs only.

E. Joint Economic and Other Assumptions

    The agencies' analysis of CAFE and GHG standards for the model 
years covered by this final rule rely on a range of forecast 
information, estimates of economic variables, and input parameters. 
This section briefly describes the sources of the agencies' estimates 
of each of these values. These values play a significant role in 
assessing the benefits of both CAFE and GHG standards.
    In reviewing these variables and the agencies' estimates of their 
values for purposes of this final rule, NHTSA and EPA considered 
comments received in

[[Page 62714]]

response to the proposed rule, and also reviewed newly available 
literature. For this final rule, we made several changes to the 
economic assumptions used in our proposed rule, including revised 
technology costs to reflect more recently available data; updated 
values of the cost of owning a vehicle based on new data; updated fuel 
price and transportation demand forecasts that reflect the Annual 
Energy Outlook (AEO) 2012 Early Release; and changes to vehicle miles 
travelled (VMT) schedules, survival rates, and projection methods. The 
final values summarized below are discussed in greater detail in 
Chapter 4 of the joint TSD and elsewhere in the preamble and in the 
agencies' respective RIAs.
     Costs of fuel economy-improving technologies--These inputs 
are discussed in summary form in Section II.D above and in more detail 
in the agencies' respective sections of this preamble, in Chapter 3 of 
the joint TSD, and in the agencies' respective RIAs. The direct 
manufacturing cost estimates for fuel economy improving and GHG 
emissions reducing technologies that are used in this analysis are 
intended to represent manufacturers' direct costs for high-volume 
production of vehicles equipped with these technologies in the year for 
which we state the cost is considered ``valid.'' Technology direct 
manufacturing cost estimates are the same as those used to analyze the 
proposed rule, with the exception of those for hybrid electric 
vehicles, plug-in hybrid electric vehicle (PHEV) and electric vehicle 
(EV) battery costs which have been updated using an updated version of 
Argonne National Laboratory's (ANL's) BatPaC model.\262\ Indirect costs 
are accounted for by applying near-term indirect cost multipliers 
ranging from 1.24 to 1.77 to the estimates of vehicle manufacturers' 
direct costs for producing or acquiring each technology, depending on 
the complexity of the technology and the time frame over which costs 
are estimated. These values are reduced to 1.19 to 1.50 over the long 
run as some aspects of indirect costs decline. As explained at 
proposal, the indirect cost markup factors have been revised from the 
MYs 2012-2016 rulemaking and the Interim Joint TAR to reflect the 
agencies current thinking regarding a number of issues. The final rules 
use the same factors the agencies used at proposal. These factors are 
discussed in detail in Section II.D.2 of this preamble and in Chapter 3 
of the joint TSD, where we also discuss comments received on the 
proposal and our response to them. Details of the agencies' technology 
cost assumptions and how they were derived can be found in Chapter 3 of 
the joint TSD. We did not receive specific comments on our estimated 
technology direct manufacturing costs.
---------------------------------------------------------------------------

    \262\ Technology direct manufacturing cost estimates for most 
technologies are fundamentally unchanged from those used by the 
agencies in the MYs 2012-2016 final rule, the heavy-duty truck rule 
(to the extent relevant), and TAR, although the agencies have 
revised costs for mass reduction, transmissions, and a few other 
technologies from those used in these earlier regulatory actions and 
analyses.
---------------------------------------------------------------------------

     Potential opportunity costs of improved fuel economy--This 
issue addresses the possibility that achieving the fuel economy 
improvements required by alternative CAFE or GHG standards would 
require manufacturers to compromise the performance, carrying capacity, 
safety, or comfort of their vehicle models. If this were the case, the 
resulting sacrifice in the value of these attributes to consumers would 
represent an additional cost of achieving the required improvements, 
and thus of manufacturers' compliance with stricter standards. 
Currently the agencies assume that these vehicle attributes will not 
change as a result of these rules. Section II.C above and Chapter 2 of 
the joint TSD describe how the agencies carefully selected an 
attribute-based standard to minimize manufacturers' incentive to reduce 
vehicle capabilities. While manufacturers may choose to do this for 
other reasons, the agencies continue to believe that the rules 
themselves will not result in such changes. Importantly, EPA and NHTSA 
have sought to include the cost of maintaining these attributes as part 
of the cost and effectiveness estimates for technologies that are 
included in the analysis for this final rule. For example, downsized 
engines are assumed to be turbocharged, so that they provide the same 
performance and utility even though they are smaller, and the costs of 
turbocharging and downsizing are included in the agencies' cost 
estimates.\263\ The two instances where the rules might result in loss 
of vehicle utility, as described in Section III.D.3, III.H.1.b, and 
Section IV.G, involve cases where vehicles are converted to hybrid or 
full electric vehicles (EVs) and some buyers may experience a loss of 
welfare due to the reduced range of driving on a single charge compared 
to the range of an otherwise similar gasoline vehicle. However, in such 
cases, we believe that sufficient options would exist for consumers 
concerned about the possible loss of this utility (e.g., they could 
purchase the non-hybridized version of the vehicle or not buy an EV) 
that the agencies do not attribute a welfare loss for these vehicles 
resulting from the final rules. Though some comments raised concerns 
over consumer acceptance of EVs, other comments expressed optimism that 
consumer interest in EVs would be sufficient for the low levels of 
adoption projected in these rules to be used for compliance with the 
standards. The agencies maintain their assumption that purchasers of 
EVs will not incur welfare losses given that they will have sought out 
vehicles with these properties. Moreover, given the modest levels of EV 
penetration which the agencies project as a compliance strategy for 
manufacturers, the agencies likewise do not project any general loss of 
societal welfare since many other compliance alternatives remain 
available to manufacturers and thus to vehicle purchasers.
---------------------------------------------------------------------------

    \263\ The modeling work underlying the agencies' estimates of 
technology effectiveness build in the need to maintain vehicle 
performance (utility). See chapter 3.2 of the Joint TSD for details 
behind these effectiveness estimates. Our technology costs include 
all costs of implementing the technologies required to achieve these 
effectiveness values while maintaining performance and other 
utility. Thus, the costs of maintaining performance and other 
utility are an inherent element of the agencies' cost estimation 
process. The agencies consequently believe it reasonable to conclude 
that there will be no loss of vehicle utility as a direct result of 
these final rules. The agencies also do not believe that adding 
fuel-saving technology should preclude future improvements in 
performance, safety, or other attributes, though it is possible that 
the costs of these additions may be affected by the presence of 
fuel-saving technology.
---------------------------------------------------------------------------

    Consumer vehicle choice modeling is a method to understand and 
predict what vehicles consumers might buy. In principle these models 
can be used to estimate the effects of these rules on vehicle sales and 
fleet mix. In practice, though, past analyses using such models have 
not produced consistent estimates of how buyers might respond to 
improved fuel economy, and it is difficult to decide whether one data 
source, model specification, or estimation procedure is clearly 
preferable over another. Thus, for these final rules, the agencies 
continue to use forecasts of total industry sales, the share of total 
sales accounted for by passenger cars, and the market shares of 
individual models for all years between 2010 and 2025 that do not vary 
among regulatory alternatives.
    The agencies requested comment on how to estimate explicitly the 
changes in vehicle buyers' choices and welfare from the combination of 
higher prices for new vehicle models, increases in their fuel economy, 
and any accompanying changes in vehicle attributes such as performance, 
passenger- and cargo-carrying capacity, or other dimensions of utility. 
Some

[[Page 62715]]

commenters considered vehicle choice models too uncertain for use in 
this rulemaking, while another requested that we conduct explicit 
consumer vehicle choice modeling (although without providing a 
justification as to which models to use or why any particular modeling 
approach is likely to generate superior estimates). Because the 
agencies have not yet developed sufficient confidence in their vehicle 
choice modeling efforts, we believe it is premature to use them in this 
rulemaking. The agencies have continued to explore the possible use of 
these models, as discussed in Sections III.H.1.a and IV.G.6, below.
     The on-road fuel economy ``gap'' -- Actual fuel economy 
levels achieved by light-duty vehicles in on-road driving fall somewhat 
short of their levels measured under the laboratory test conditions 
used by EPA to establish compliance with CAFE and GHG standards (and 
which is mandated by statute for measuring compliance with CAFE 
passenger car standards) \264\. The modeling approach in this final 
rule is consistent with the proposal, and also follows the MYs 2012-
2016 final rule and the Interim Joint TAR. In calculating benefits of 
the program, the agencies estimate that actual on-road fuel economy 
attained by light-duty models that operate on liquid fuels will be 20 
percent lower than their fuel economy ratings as measured for purposes 
of CAFE fuel economy testing. For example, if the measured CAFE fuel 
economy value of a light truck is 20 mpg, the on-road fuel economy 
actually achieved by a typical driver of that vehicle is expected to be 
16 mpg (20*.80).\265\ Based on manufacturer confidential business 
information, as well as data derived from the 2006 EPA fuel economy 
label rule, the agencies use a 30 percent gap for consumption of wall 
electricity for electric vehicles and plug-in hybrid electric 
vehicles.\266\ The U.S. Coalition for Advanced Diesel Cars suggested 
that the on-road gap used in the proposal was overly conservative at 
20%, and that advanced technology vehicles may have on-road gaps that 
are larger than current vehicles. The agencies recognize the potential 
for future changes in driver behavior or vehicle technology to change 
the on-road gap to be either larger or smaller. The agencies continue 
to use the same estimates of the on-road gap as in the proposed rule 
for estimating fuel savings and other impacts, and will monitor the EPA 
fuel economy database as these future model year vehicles enter the 
fleet.
---------------------------------------------------------------------------

    \264\ 49 U.S.C. 32904(c).
    \265\ U.S. Environmental Protection Agency, Final Technical 
Support Document, Fuel Economy Labeling of Motor Vehicle Revisions 
to Improve Calculation of Fuel Economy Estimates, EPA420-R-06-017, 
December 2006. (Docket No. EPA-HQ-OAR-2010-0799-1125).
    \266\ See 71 FR 77887, and U.S. Environmental Protection Agency, 
Final Technical Support Document, Fuel Economy Labeling of Motor 
Vehicle Revisions to Improve Calculation of Fuel Economy Estimates, 
EPA420-R-06-017, December 2006 for general background on the 
analysis. See also EPA's Response to Comments (EPA-420-R-11-005, 
Docket No. EPA-HQ-OAR-2010-0799-1113) to the 2011 labeling rule, 
page 189, first paragraph, specifically the discussion of the 
derived five cycle equation and the non-linear adjustment with 
increasing MPG.
---------------------------------------------------------------------------

     Fuel prices and the value of saving fuel--Projected future 
fuel prices are a critical input into the preliminary economic analysis 
of alternative standards, because they determine the value of fuel 
savings both to new vehicle buyers and to society, and fuel savings 
account for the majority of the rule's estimated benefits. For these 
rules, the agencies are using the most recent fuel price projections 
from the U.S. Energy Information Administration's (EIA) Annual Energy 
Outlook (AEO) 2012 Early Release reference case. The projections of 
fuel prices reported in EIA's AEO 2012 Early Release extend through 
2035. Fuel prices beyond the time frame of AEO's forecast were 
estimated by applying the average growth rate for the years 2017-2035 
for each year after 2035. This is the same general methodology used by 
the agencies in the analysis for the proposed rule, as well as in the 
MYs 2012-2016 rulemaking, in the heavy duty truck and engine rule (76 
FR 57106), and in the Interim Joint TAR. For example, the AEO 2012 
Early Release projections of gasoline fuel prices (in constant 2010$) 
are $3.63 per gallon in 2017, $3.76 in 2020, and $4.09 in 2035. 
Extrapolating as described above, retail gasoline prices are projected 
to reach $4.57 per gallon in 2050 (measured in constant 2010 dollars). 
Several commenters (Volkwagen, Consumer Federation of America, 
Environmental Defense Fund, Consumer's Union, National Resources 
Defense Council, Union of Concerned Scientists) stated that the EIA AEO 
2011 future fuel price projections used in the proposal were similar to 
current prices, and thus were modest, or lower than expected. The 
agencies note that if a higher fuel prices projection were used, it 
would increase the value of the fuel savings from the rule, while a 
lower fuel price projection would decrease the value of the fuel 
savings from the rule. Another commenter noted the uncertainty 
projecting automotive fuel prices during this extended time period 
(National Auto Dealers' Association). As discussed in Chapter 4 of the 
Joint TSD, while the agencies believe that EIA's AEO reference case 
generally represents a reasonable forecast of future fuel prices for 
use in our analysis of the benefits of this rule, we recognize that 
there is a great deal of uncertainty in future fuel prices. However, 
given that no commenters offered alternative sources for fuel price 
projections, and the agencies have found no better source since the 
NPRM, in this final rulemaking the agencies continue to rely upon EIA 
projections of future gasoline and diesel prices.
     Consumer cost of ownership and payback period--The 
agencies provide, in Sections III.H.3 and IV.G.4, estimates of the 
impacts of these rules on the net costs of owning new vehicles, as well 
as the time period necessary for the fuel savings to outweigh the 
expected increase in prices for the new vehicles (i.e., the payback 
period). These analyses focus specifically on the buyers' perspectives, 
and therefore take into account the effect of the rule on insurance 
premiums, sales tax, and finance charges. From a social perspective, 
these are transfers of money from one group to another, rather than net 
gains or losses, and thus have no net effect on the net benefits of the 
rules. For instance, a sales tax is a cost to a vehicle buyer, but the 
money does not represent economic resources that are consumed; instead, 
it goes to finance state and local government activities, such as 
schools or roads. The role of finance charges is to spread payments 
over time, taking into account the opportunity cost of financing; this 
is just a reversal of the process of discounting, and thus does not 
affect the present value of the vehicle cost. Though the net benefits 
analysis is not affected by these payments, from the buyers' viewpoint, 
these are additional costs. In the NPRM, EPA included these factors in 
its payback period analysis and asked for comment on them; no comments 
were received. The agencies have updated these values for these final 
rules; the details of the estimation of these factors are found in TSD 
Chapter 4.2.13. Though the agencies use these common values for their 
respective cost of ownership and payback period analyses, each agency's 
estimates for the cost of ownership and the payback period differ due 
to somewhat different estimates for vehicle cost increases and fuel 
savings. Some comments encouraged our inclusion of maintenance and 
repair costs in these calculations and the agencies have responded by 
including maintenance costs in that analysis of the final rule.

[[Page 62716]]

The potential effects of the rule on maintenance and repair costs are 
discussed in Sections III.H.2, IV.C.2, and Chapter 3.6 of the Joint 
TSD. When a new vehicle is destroyed in an accident, the higher costs 
of the replacement vehicle are already accounted for in the technology 
costs of new vehicles sold, since some of these are purchased to 
replace vehicles destroyed in accidents.\267\
---------------------------------------------------------------------------

    \267\ The agencies do not have information to estimate the 
effect of the rule on repair costs for vehicles that are damaged but 
not destroyed. Some repairs, such as minor dents, may be unaffected 
by changes in vehicles; others may be more or less expensive. 
Insurance premiums in principle could provide insight into the costs 
of damages associated with more expensive vehicles, but, because 
insurance premiums include costs for destroyed vehicles, which are 
already implicitly covered in the sales estimates, it is not 
possible to separately estimate the costs for repairs from insurance 
data. See Joint TSD Chapter 3.6 for further discussion of this 
issue.
---------------------------------------------------------------------------

     Vehicle sales assumptions--The first step in estimating 
lifetime fuel consumption by vehicles produced during a model year is 
to calculate the number of vehicles that are expected to be produced 
and sold. The agencies relied on the AEO 2011 and AEO 2012 Early 
Release Reference Cases for forecasts of total vehicle sales, while the 
baseline market forecast developed by the agencies (discussed in 
Section II.B and in Chapter 1 of the TSD) divided total projected sales 
into sales of cars and light trucks.
     Vehicle lifetimes and survival rates--As in the analysis 
for the proposed rule (and as in the MYs 2012-2016 final rule and 
Interim Joint TAR), we apply updated values of age-specific survival 
rates for cars and light trucks to the adjusted forecasts of passenger 
car and light truck sales to determine the number of these vehicles 
expected to remain in use during each year of their lifetimes. Since 
the proposal, these values were updated using the same methodology with 
which the original estimates were developed, together with recent 
vehicle registration data obtained from R.L. Polk. No comments were 
received on the vehicle lifetime and survival rates in the proposal.
     Vehicle miles traveled (VMT)--We calculated the total 
number of miles that cars and light trucks produced in each model year 
will be driven during each year of their lifetimes using estimates of 
annual vehicle use by age tabulated from the Federal Highway 
Administration's 2009 National Household Travel Survey (NHTS).\268\ In 
order to insure that the resulting mileage schedules imply reasonable 
estimates of future growth in total car and light truck use, we 
calculated the rate of future growth in annual mileage at each age that 
would be necessary for total car and light truck travel to meet the 
levels projected in the AEO 2012 Early Release Reference Case. The 
growth rate in average annual car and light truck use produced by this 
calculation is approximately 0.6 percent per year, and is applied in 
the agencies' modeling through 2050. We applied this growth rate to the 
mileage figures derived from the 2009 NHTS to estimate annual mileage 
by vehicle age during each year of the expected lifetimes of MY 2017-
2025 vehicles. A generally similar approach to estimating future 
vehicle use was used in the MYs 2012-2016 final rules and Interim Joint 
TAR, but the future growth rates in average vehicle use have been 
revised for this rule. No substantive technical comments were received 
on this approach.
---------------------------------------------------------------------------

    \268\ For a description of the Survey, see http://www.bts.gov/programs/national_household_travel_survey/ (last accessed Sept. 
9, 2011).
---------------------------------------------------------------------------

     Accounting for the fuel economy rebound effect--The fuel 
economy rebound effect refers to the increase in vehicle use (VMT) that 
results if an increase in fuel economy lowers the cost of driving. The 
agencies are continuing to use a 10 percent fuel economy rebound 
effect, consistent with the proposal, in their analyses of fuel savings 
and other benefits from more stringent standards. This value is also 
consistent with that used in the MYs 2012-2016 light-duty vehicle 
rulemaking and the Interim Joint TAR. That is, we assume that a 10 
percent decrease in fuel cost per mile resulting from our standards 
would result in a 1 percent increase in the annual number of miles 
driven at each age over a vehicle's lifetime. We received comments 
recommending values both higher and lower than our proposed value of 10 
percent for the fuel economy rebound effect, as well as comments 
maintaining that there were indirect rebound effects for which the 
agencies should account. The agencies discuss comments on this topic in 
more detail in sections III.H.4 and IV.C.3 of the preamble. The 
agencies do not regard any of these comments as providing new data or 
analysis that justify revising the 10 percent value. In Chapter 4 of 
the joint TSD, we provide a detailed explanation of the basis for our 
fuel economy rebound estimate, including a summary of new literature 
published since the MYs 2012-2016 rulemaking that lends further support 
to the 10 percent rebound estimate. We also refer the reader to 
Chapters X and XII of NHTSA's RIA and Chapter 4 of EPA's RIA for 
sensitivity and uncertainty analyses of alternative fuel economy 
rebound assumptions.
     Benefits from increased vehicle use--The increase in 
vehicle use from the rebound effect results from vehicle buyers' 
decisions to make more frequent trips or travel farther to reach more 
desirable destinations. This additional travel provides benefits to 
drivers and their passengers by improving their access to social and 
economic opportunities away from home. The analysis estimates the 
economic benefits from increased rebound-effect driving as the sum of 
the fuel costs they incur during that additional travel, plus the 
consumer surplus drivers receive from the improved accessibility their 
travel provides. No comments were received on this particular issue. As 
in the analysis for the proposed rule (and as in the MYs 2012-2016 
final rule) we estimate the economic value of this consumer surplus 
using the conventional approximation, which is one half of the product 
of the decline in operating costs per vehicle-mile and the resulting 
increase in the annual number of miles driven.
     Added costs from congestion, accidents, and noise--
Although it provides benefits to drivers as described above, increased 
vehicle use associated with the fuel economy rebound effect also 
contributes to increased traffic congestion, motor vehicle accidents, 
and highway noise. Depending on how the additional travel is 
distributed over the day and where it takes place, additional vehicle 
use can contribute to traffic congestion and delays by increasing the 
number of vehicles using facilities that are already heavily traveled. 
These added delays impose higher costs on drivers and other vehicle 
occupants in the form of increased travel time and operating expenses. 
At the same time, this additional travel also increases costs 
associated with traffic accidents and vehicle noise. No comments were 
received on the specific economic assumptions employed in the proposal. 
The agencies are using the same methodology as used in the analysis for 
the proposed rule, relying on estimates of congestion, accident, and 
noise costs imposed by automobiles and light trucks developed by the 
Federal Highway Administration to estimate these increased external 
costs caused by added driving.\269\ This method is also

[[Page 62717]]

consistent with the MYs 2012-2016 final rules.
---------------------------------------------------------------------------

    \269\ These estimates were developed by FHWA for use in its 1997 
Federal Highway Cost Allocation Study; http://www.fhwa.dot.gov/policy/hcas/final/index.htm (last accessed July 8, 2012).
---------------------------------------------------------------------------

     Petroleum consumption and import externalities--U.S. 
consumption of imported petroleum products imposes costs on the 
domestic economy that are not reflected in the market price for crude 
oil, or in the prices paid by consumers of petroleum products such as 
gasoline (often referred to as ``energy security'' costs). These costs 
include (1) higher prices for petroleum products resulting from the 
effect of increased U.S. demand for imported oil on the world oil price 
(the ``monopsony effect''); (2) the expected costs associated with the 
risk of disruptions to the U.S. economy caused by sudden reductions in 
the supply of imported oil to the U.S. (often referred to as 
``macroeconomic disruption and adjustment costs''); and (3) expenses 
for maintaining a U.S. military presence to secure imported oil 
supplies from unstable regions, and for maintaining the strategic 
petroleum reserve (SPR) to cushion the U.S. economy against the effects 
of oil supply disruptions (i.e., ``military/SPR costs'').\270\ While 
the agencies received a number of comments regarding these energy 
security costs, particularly the treatment of military costs, we 
continue to use the same methodology from the proposal. Further 
discussion of these comments and the agencies' responses can be found 
in Sections III.H.8 and IV.3.
---------------------------------------------------------------------------

    \270\ See, e.g., Bohi, Douglas R. and W. David Montgomery 
(1982). Oil Prices, Energy Security, and Import Policy Washington, 
DC: Resources for the Future, Johns Hopkins University Press; Bohi, 
D. R., and M. A. Toman (1993). ``Energy and Security: Externalities 
and Policies,'' Energy Policy 21:1093-1109; and Toman, M. A. (1993). 
``The Economics of Energy Security: Theory, Evidence, Policy,'' in 
A. V. Kneese and J. L. Sweeney, eds. (1993). Handbook of Natural 
Resource and Energy Economics, Vol. III. Amsterdam: North-Holland, 
pp. 1167-1218.
---------------------------------------------------------------------------

     Monopsony Component--The energy security analysis 
conducted for this rule estimates that the world price of oil will fall 
modestly in response to lower U.S. demand for refined 
fuel.271,272 Although the reduction in the global price of 
crude oil and refined petroleum products due to decreased demand for 
fuel in the U.S. resulting from this rule represents a benefit to the 
U.S. economy, it simultaneously represents an economic loss to sellers 
of crude petroleum and refined products from other countries. 
Recognizing the redistributive nature of this ``monopsony effect'' when 
viewed from a global perspective (which is consistent with the 
agencies' use of a global estimate for the social cost of carbon to 
value reductions in CO2 emissions), the energy security 
benefits estimated to result from this program exclude the value of 
this monopsony effect.
---------------------------------------------------------------------------

    \271\ Leiby, Paul. Oak Ridge National Laboratory. ``Approach to 
Estimating the Oil Import Security Premium for the MY 2017-2025 
Light Duty Vehicle Rule'' 2012, EPA Docket EPA-HQ-OAR-2010-0799-
41789.
    \272\ Note that this change in world oil price is not reflected 
in the AEO fuel price projections described earlier in this section.
---------------------------------------------------------------------------

     Macroeconomic Disruption Component: In contrast to 
monopsony costs, the macroeconomic disruption and adjustment costs that 
arise from sudden reductions in the supply of imported oil to the U.S. 
do not have offsetting impacts outside of the U.S., so we include the 
estimated reduction in their expected value stemming from reduced U.S. 
petroleum imports in our energy security benefits estimated for this 
program.
     Military and SPR Component: We recognize that there may be 
significant (if unquantifiable) benefits in improving national security 
by reducing U.S. oil imports, and public comments supported the 
agencies inclusion of such benefits. Quantification of military 
security benefits is challenging because attribution to particular 
missions or activities is difficult and because it is difficult to 
anticipate the impact of reduced U.S. oil imports on military spending. 
The agencies do not have a robust way to calculate these benefits at 
this time, and thus exclude U.S. military costs from the analysis.
    Similarly, since the size of the SPR, or other factors affecting 
the cost of maintaining the SPR, historically have not varied in 
response to changes in U.S. oil import levels, we exclude changes in 
the cost of maintaining the SPR from the estimates of the energy 
security benefits of the program. The agencies continue to examine 
appropriate methodologies for estimating the impacts on military and 
SPR costs as U.S. oil imports are reduced.
    To summarize, the agencies have included only the macroeconomic 
disruption and adjustment costs portion of potential energy security 
benefits to estimate the monetary value of the total energy security 
benefits of this program. The energy security premium values in this 
final rule have been updated since the proposal to reflect the AEO2012 
Early Release Reference Case projection of future world oil prices. 
Otherwise, the methodology for estimating the energy security benefits 
is consistent with that used in the proposal. Based on an update of an 
earlier peer-reviewed Oak Ridge National Laboratory study that was used 
in support of the both the MYs 2012-2016 light duty vehicle and the MYs 
2014-2018 medium- and heavy-duty vehicle rulemakings, we estimate that 
each gallon of fuel saved will reduce the expected macroeconomic 
disruption and adjustment costs of sudden reductions in the supply of 
imported oil to the U.S. economy by $0.197 (2010$) in 2025. Each gallon 
of fuel saved as a consequence of higher standards is anticipated to 
reduce total U.S. imports of crude oil or refined fuel by 0.95 
gallons.\273\
---------------------------------------------------------------------------

    \273\ Each gallon of fuel saved is assumed to reduce imports of 
refined fuel by 0.5 gallons, and the volume of fuel refined 
domestically by 0.5 gallons. Domestic fuel refining is assumed to 
utilize 90 percent imported crude petroleum and 10 percent 
domestically-produced crude petroleum as feedstocks. Together, these 
assumptions imply that each gallon of fuel saved will reduce imports 
of refined fuel and crude petroleum by 0.50 gallons + 0.50 gallons * 
90 percent = 0.50 gallons + 0.45 gallons = 0.95 gallons.
---------------------------------------------------------------------------

     Air pollutant emissions--
     Impacts on criteria air pollutant emissions--Criteria air 
pollutants emitted by vehicles, during fuel production and 
distribution, and during electricity generation include carbon monoxide 
(CO), hydrocarbon compounds (usually referred to as ``volatile organic 
compounds,'' or VOC), nitrogen oxides (NOX), fine 
particulate matter (PM2.5), and sulfur oxides 
(SOX). Although reductions in domestic fuel refining and 
distribution that result from lower fuel consumption will reduce U.S. 
emissions of these pollutants, additional vehicle use associated with 
the rebound effect, and additional electricity generation to power 
PHEVs and EVs will increase emissions. Thus the net effect of more 
stringent GHG and fuel economy standards on emissions of each criteria 
pollutant depends on the relative magnitudes of reduced emissions from 
fuel refining and distribution, and increases in emissions resulting 
from added vehicle use. The agencies' analysis assumes that the per-
mile criteria pollutant emission rates for cars and light trucks 
produced during the model years affected by the rule will remain 
constant at the levels resulting from EPA's Tier 2 light duty vehicle 
emissions standards. The agencies' approach to estimating criteria air 
pollutant emissions is consistent with the method used in the proposal 
and in the MYs 2012-2016 final rule (where the agencies received no 
significant adverse comments), although the agencies employ a more 
recent version of the EPA's MOVES (Motor Vehicle Emissions Simulator) 
model, as well as new estimates of the emission rates from electricity 
generation. No comments were received on the use of the MOVES model. 
The agencies analyses of

[[Page 62718]]

emissions from electric power plants are discussed in EPA RIA chapter 
4, NHTSA RIA chapter VIII and NHTSA's EIS.
     Economic value of reductions in criteria pollutant 
emissions--To evaluate benefits from reducing emissions of criteria 
pollutants over the lifetimes of MY 2017-2025 vehicles, EPA and NHTSA 
estimate the economic value of the human health impacts associated with 
reducing population exposure to PM2.5 using a ``dollar-per-
ton'' method. These PM2.5-related dollar-per-ton estimates 
provide the total monetized impacts to human health (the sum of changes 
in the incidence of premature mortality and morbidity) that result from 
eliminating or adding one ton of directly emitted PM2.5, or 
one ton of PM2.5 precursor (such as NOX, 
SOX, and VOCs, which are emitted as gases but form 
PM2.5 as a result of atmospheric reactions), from a 
specified source. These unit values remain unchanged from the proposal. 
Note that the agencies' joint analysis of criteria air pollutant 
impacts over the model year lifetimes of 2017-2025 vehicles includes no 
estimates of the direct health or other impacts associated with 
emissions of criteria pollutants other than PM2.5 (as 
distinguished from their indirect effects as precursors to 
PM2.5). The agencies did receive comments arguing that the 
agencies should have included these impacts in their analyses, however, 
no ``dollar-per-ton'' method exists for ozone or toxic air pollutants 
due to complexity associated with atmospheric chemistry (for ozone and 
toxics) and a lack of economic valuation data and methods (for air 
toxics).
    For the final rule, however, EPA and NHTSA also conducted full 
scale, photochemical air quality modeling to estimate the change in 
ambient concentrations of ozone, PM2.5 and air toxics (i.e., 
hazardous air pollutants listed in section 112(b) of the Clean Air Act) 
for the year 2030, and used these results as the basis for estimating 
the human health impacts and their economic value of the rule in 2030. 
However, the agencies have not conducted such modeling over the 
complete life spans of the vehicle model years subject to this 
rulemaking, due to timing and resource limitations. Section III.H.7 
below and Appendix E of NHTSA's Final EIS present these impact 
estimates.
     Impacts on greenhouse gas (GHG) emissions--NHTSA estimates 
reductions in emissions of carbon dioxide (CO2) from 
passenger car and light truck use by multiplying the estimated 
reduction in consumption of fuel (gasoline and diesel) by the quantity 
or mass of CO2 emissions released per gallon of fuel 
consumed. EPA directly calculates reductions in total CO2 
emissions from the projected reductions in CO2 emissions by 
each vehicle subject to these rules.\274\ Both agencies also calculate 
the impact on CO2 emissions that occur during fuel 
production and distribution resulting from lower fuel consumption, as 
well as the emission impacts due to changes in electricity production. 
Although CO2 emissions account for nearly 95 percent of 
total GHG emissions that result from fuel combustion during vehicle 
use, emissions of other GHGs are potentially significant as well 
because of their higher ``potency'' as GHGs than that of CO2 
itself. EPA and NHTSA therefore also estimate the changes in emissions 
of non-CO2 GHGs that occur during fuel production, 
electricity use, and vehicle use due to their respective 
standards.\275\ The agencies approach to estimating GHG emissions is 
consistent with the method used at proposal (and in the MYs 2012-2016 
final rule and the Interim Joint TAR). No comments were received on the 
method for calculating impacts on greenhouse gas emissions, although 
several commenters discussed the emission factors used for electricity 
generation. These comments are discussed in section III.C and IV.X.
---------------------------------------------------------------------------

    \274\ The weighted average CO2 content of 
certification gasoline is estimated to be 8,887 grams per gallon, 
while that of diesel fuel is estimated to be approximately 10,180 
grams per gallon.
    \275\ There is, however, an exception. NHTSA does not and cannot 
claim benefit from reductions in downstream emissions of HFCs 
because they do not relate to fuel economy, while EPA does because 
all GHGs are relevant for purposes of EPA's Clean Air Act standards.
---------------------------------------------------------------------------

     Economic value of reductions in CO2 emissions--
EPA and NHTSA assigned a dollar value to reductions in CO2 
emissions, consistent with the proposal, using recent estimates of the 
``social cost of carbon'' (SCC) developed by a federal interagency 
group that included representatives from both agencies and reported the 
results of its work in February 2010. As that group's report observed, 
``The SCC is an estimate of the monetized damages associated with an 
incremental increase in carbon emissions in a given year. It is 
intended to include (but is not limited to) changes in net agricultural 
productivity, human health, property damages from increased flood risk, 
and the value of ecosystem services due to climate change.'' \276\ 
Published estimates of the SCC, as well as those developed by the 
interagency group, vary widely as a result of uncertainties about 
future economic growth, climate sensitivity to GHG emissions, 
procedures used to model the economic impacts of climate change, and 
the choice of discount rates.\277\ The SCC Technical Support Document 
(SCC TSD) provides a complete discussion of the methods used by the 
federal interagency group to develop its SCC estimates. Several 
commenters expressed support for using SCC to value reductions in 
CO2 emissions and provided detailed recommendations directed 
at improving the estimates. One commenter disagreed with the use of 
SCC. However, as discussed in III.H.6 and IV.C.3 of the preamble, the 
SCC estimates were developed using a reasonable set of input 
assumptions that are supported by published literature. As noted in the 
SCC TSD, the U.S. government intends to revise these estimates over 
time, if appropriate, taking into account new research findings that 
were not available in 2010.
---------------------------------------------------------------------------

    \276\ SCC TSD, see page 2. Docket ID EPA-HQ-OAR-2010-0799-0737, 
Technical Support Document: Social Cost of Carbon for Regulatory 
Impact Analysis Under Executive Order 12866, Interagency Working 
Group on Social Cost of Carbon, 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 (February 2010). Also available 
at http://epa.gov/otaq/climate/regulations.htm.
    \277\ SCC TSD, see pages 6-7.
---------------------------------------------------------------------------

    Several commenters also recommended presenting monetized estimates 
of the benefits of reductions in non-CO2 GHG emissions 
(i.e., methane, nitrous oxides, and hydrofluorocarbons) expected to 
result from the final rule. Although the agencies are not basing their 
primary analyses on this suggested approach, they have conducted 
sensitivity analyses of the final rule's monetized non-CO2 
GHG impacts in preamble section III.H.6 and Chapter X of NHTSA's FRIA. 
Preamble sections III.H.6 and IV.C.3 also provide a more detailed 
discussion about the response to comments on SCC.
     The value of changes in driving range--By reducing the 
frequency with which drivers typically refuel their vehicles and by 
extending the upper limit of the range they can travel before requiring 
refueling, improving fuel efficiency provides additional benefits to 
vehicle owners. The primary benefits from reducing the required 
frequency of refueling are the value of time saved by drivers and other 
vehicle occupants, as well as the value of the minor savings in fuel 
that would have been consumed during refueling trips that are no longer

[[Page 62719]]

required. Using recent data on vehicle owners' refueling patterns 
gathered from a survey conducted by the National Automotive Sampling 
System (NASS), NHTSA was able to more accurately estimate the 
characteristics of refueling trips. NASS data provided NHTSA with the 
ability to estimate the average time required for a refueling trip, the 
average time and distance drivers typically travel out of their way to 
reach fueling stations, the average number of adult vehicle occupants 
during refueling trips, the average quantity of fuel purchased, and the 
distribution of reasons given by drivers for refueling. From these 
estimates, NHTSA constructed a revised set of assumptions to update 
those used in the MYs 2012-2016 FRM for calculating refueling-related 
benefits. The MYs 2012-2016 FRM discussed NHTSA's intent to utilize the 
NASS data on refueling trip characteristics in future rulemakings. 
While the NASS data improve the precision of the inputs used in the 
analysis of benefits resulting from less frequent refueling, the 
framework of the analysis remains essentially the same as in the MYs 
2012-2016 final rule. Note that this topic and associated benefits were 
not covered in the Interim Joint TAR. No comments were received on the 
refueling analysis presented in the NPRM. Detailed discussion and 
examples of the agencies' approaches are provided in Chapter VIII of 
NHTSA's FRIA and Chapter 7 of EPA's RIA.
     Discounting future benefits and costs--Discounting future 
fuel savings and other benefits is intended to account for the 
reduction in their value to society when they are deferred until some 
future date, rather than received immediately.\278\ The discount rate 
expresses the percent decline in the value of these future fuel-savings 
and other benefits--as viewed from today's perspective--for each year 
they are deferred into the future. In evaluating the non-climate 
related benefits of the final standards, the agencies have employed 
discount rates of both 3 percent and 7 percent, consistent with the 
proposal. One commenter (UCS) agreed with the agencies' use of 3 and 7 
percent discount rates, while another (API) stated that the Energy 
Information Administration (EIA) uses a 15 percent ``consumer-relevant 
discount rate when evaluating the economic cost-effectiveness of new 
vehicle efficiency technology,'' which it noted would affect the 
agencies' assumptions of benefits if employed. The agencies have 
continued to employ the 3 and 7 percent discount rate values for the 
final rule analysis, as discussed further below in section IV.C.3 and 
in Chapter 4 of the Joint TSD.
---------------------------------------------------------------------------

    \278\ Because all costs associated with improving vehicles' fuel 
economy and reducing CO2 emissions are assumed to be 
incurred at the time they are produced, these costs are already 
expressed in their present values as of each model year affected by 
the rule, and require discounting only for the purpose of expressing 
them as present values as of a common year (2012 for the Calendar 
Year analysis; the first year of production for each MY vehicle--
2017 through 2025--for the Model Year analysis).
---------------------------------------------------------------------------

    For the reader's reference, Table II-19 and Table II-20 below 
summarize the values used by both agencies to calculate the impacts of 
the final standards. The values presented in these tables are summaries 
of the inputs used for the models; specific values used in the 
agencies' respective analyses may be aggregated, expanded, or have 
other relevant adjustments. See the Joint TSD, Chapter 4, and each 
agency's respective RIA for details.
    A wide range of estimates is available for many of the primary 
inputs that are used in the agencies' CAFE and GHG emissions models. 
The agencies recognize that each of these values has some degree of 
uncertainty, which the agencies further discuss in the Joint TSD. The 
agencies tested the sensitivity of their estimates of costs and 
benefits to a range of assumptions about each of these inputs, and 
found that the magnitude of these variations would not have changed the 
final standards. For example, NHTSA conducted separate sensitivity 
analyses for, among other things, discount rates, fuel prices, the 
social cost of carbon, the fuel economy rebound effect, consumers' 
valuation of fuel economy benefits, battery costs, mass reduction 
costs, energy security costs, and the indirect cost markup factor. This 
list is similar in scope to the list that was examined in the proposal, 
but includes post-warranty repair costs and transmission shift 
optimizer effectiveness as well. NHTSA's sensitivity analyses are 
contained in Chapter X of NHTSA's RIA.
    Similarly, EPA conducted sensitivity analyses on discount rates, 
the social cost of carbon, the rebound effect, battery costs, mass 
reduction costs, the indirect cost markup factor and on the cost 
learning curves used in this analysis. These analyses are found in 
Chapters 3, 4, and 7 of the EPA RIA. In addition, NHTSA performed a 
probabilistic uncertainty analysis examining simultaneous variation in 
the major model inputs including technology costs, technology benefits, 
fuel prices, the rebound effect, and military security costs. This 
information is provided in Chapter XII of NHTSA's RIA.

     Table II-19--Economic Values for Benefits Computations (2010$)
------------------------------------------------------------------------
        Rebound effect                            10%
------------------------------------------------------------------------
``Gap'' between test and on-   20%.
 road MPG for liquid-fueled
 vehicles.
``Gap'' between test and on-   30%.
 road electricity consumption
 for electric and plug-in
 hybrid electric vehicles.
Annual growth in average       0.6.
 vehicle use.
------------------------------------------------------------------------
                 Fuel Prices (2017-50 average, $/gallon)
------------------------------------------------------------------------
Retail gasoline price........  $4.13.
Pre-tax gasoline price.......  3.78.
------------------------------------------------------------------------
         Economic Benefits from Reducing Oil Imports ($/gallon)
------------------------------------------------------------------------
``Monopsony'' Component......  $ 0.0.0.
Macroeconomic Disruption        0.197 in 2025.
 Component.
Military/SPR Component.......   0.00.
    Total Economic Costs ($/    0.197 in 2025.
     gallon).
------------------------------------------------------------------------
       Emission Damage Costs (2020, $/short ton, 3% discount rate)
------------------------------------------------------------------------
Carbon monoxide..............  $ 0.

[[Page 62720]]

 
Nitrogen oxides (NOX)--         5,600.
 vehicle use.
Nitrogen oxides (NOX)--fuel     5,400.
 production and distribution.
Particulate matter (PM2.5)--    310,000.
 vehicle use.
Particulate matter (PM2.5)--    250,000.
 fuel production and
 distribution.
Sulfur dioxide (SO2).........   33,000.
Annual CO2 Damage Cost (per    Variable, depending on discount rate and
 metric ton).                   year (see Table II-20 for 2017
                                estimate).
------------------------------------------------------------------------
     External Costs from Additional Automobile Use ($/vehicle-mile)
------------------------------------------------------------------------
Congestion...................  $ 0.056.
Accidents....................   0.024.
Noise........................   0.001.
                              ------------------------------------------
    Total External Costs.....  $ 0.081.
------------------------------------------------------------------------
     External Costs from Additional Light Truck Use ($/vehicle-mile)
------------------------------------------------------------------------
Congestion...................  $0.050.
Accidents....................  0.027.
Noise........................  0.001.
                              ------------------------------------------
    Total External Costs.....  0.078.
Discount Rates Applied to      3%, 7%.
 Future Benefits.
------------------------------------------------------------------------

                          Table II-20--Social Cost of CO2 ($/metric ton), 2017 (2010$)
----------------------------------------------------------------------------------------------------------------
                  Discount rate                         5%              3%             2.5%             3%
----------------------------------------------------------------------------------------------------------------
Source of Estimate..............................             Mean of Estimated Values                       95th
                                                                                                      percentile
                                                                                                       estimate.
----------------------------------------------------------------------------------------------------------------
2017 Estimate...................................              $6             $26             $41            $79.
----------------------------------------------------------------------------------------------------------------

F. CO2 Credits and Fuel Consumption Improvement Values for Air 
Conditioning Efficiency, Off-Cycle Reductions, and Full-Size Pickup 
Trucks

    For the MYs 2012-2016 rule, EPA provided an option for 
manufacturers to generate credits for complying with GHG standards by 
incorporating efficiency-improving vehicle technologies that would 
reduce CO2 and fuel consumption from air conditioning (A/C) 
operation. EPA also provided another credit generating option for 
vehicle operation that is not captured by the Federal Test Procedure 
(FTP) and Highway Fuel Economy Test (HFET), also collectively known as 
the ``two-cycle'' test procedure. EPA referred to these credits as 
``off-cycle credits.'' See 76 FR 74937, 74998, 75020.
    EPA proposed to continue these credit mechanisms in the MYs 2017-
2025 GHG program, and is finalizing these proposals in this notice. EPA 
also proposed that certain of the A/C credits and the off-cycle credits 
be included under the CAFE program. See id. and 76 FR 74995-998. For 
this rule, under EPA's EPCA authority, EPA is allowing manufacturers to 
generate fuel consumption improvement values for purposes of CAFE 
compliance based on the use of A/C efficiency and the other off-cycle 
technologies. These fuel consumption improvement values will not apply 
to compliance with the CAFE program for MYs 2012-2016. Also, reductions 
in direct A/C emissions resulting from leakage of HFCs from air 
conditioning systems, which are generally unrelated to fuel consumption 
reductions, will not apply to compliance with the CAFE program. Thus, 
as discussed below, credits for refrigerant leakage emission reductions 
will continue to apply only to the EPA GHG program.
    The agencies expect that, because of the significant credits and 
fuel consumption improvement values available for improvements to the 
efficiency of A/C systems (up to 5.0 g/mi for cars and 7.2 g/mi for 
trucks which is equivalent to a fuel consumption improvement value of 
0.000563 gal/mi for cars and 0.000810 gal/mi for trucks), manufacturers 
will take technological steps to maximize these benefits. Since we 
project that all manufacturers will adopt these A/C improvements to 
their maximum extent, EPA has adjusted the stringency of the two-cycle 
tailpipe CO2 standards in order to account for this 
projected widespread penetration of A/C credits (as described more 
fully in Section III.C),\279\ and NHTSA has also accounted for expected 
A/C efficiency improvements in determining the maximum feasible CAFE 
standards. The agencies discuss these CO2 credits and fuel 
consumption improvement values below and in more detail in Chapter 5 of 
the Joint TSD. We also discuss below how other (non-A/C) off-cycle 
improvements in CO2 and fuel consumption may be eligible to 
apply towards compliance with the GHG and CAFE standards; however, with 
two exceptions (for the two-cycle benefits of stop-start and active 
aerodynamic improvements--technologies which EPA expects manufacturers 
to adopt widely and whose benefits can be reliably quantified), these 
off-cycle improvements are not incorporated in the stringency of the 
standards Finally, EPA discusses in Section III.C below the

[[Page 62721]]

GHG A/C leakage credits that are exclusive to the GHG standards.
---------------------------------------------------------------------------

    \279\ Similarly, the MYs 2012-2016 GHG standards reflect direct 
and indirect A/C improvements. See 75 FR 25371, May 7, 2010.
---------------------------------------------------------------------------

    EPA, in coordination with NHTSA, is also introducing for MYs 2017-
2025 a new incentive for certain advanced technologies used in full-
sized pickup trucks. Under its EPCA authority for CAFE and under its 
CAA authority for GHGs, EPA is establishing GHG credits and fuel 
economy improvement values for manufacturers that hybridize a 
significant quantity of their full size pickup trucks, or that use 
other technologies that significantly reduce CO2 emissions 
and fuel consumption from these full-sized pickup trucks.
    We discuss each of these types of credits and incentives, in detail 
below and throughout Chapter 5 of the Joint TSD. We also discuss and 
respond to the key comments throughout this section.
1. Air Conditioning Efficiency Credits and Fuel Consumption Improvement 
Values
    After detailed consideration of the comments and other available 
information, the agencies are finalizing a program of A/C efficiency 
credits and fuel consumption improvement values. Although the agencies 
are making some minor changes for the final rule, as described below, 
we are finalizing the program establishing efficiency credits and fuel 
consumption improvement values largely in its proposed form. 
Specifically, efficiency credits will continue to be calculated from a 
technology ``menu'' once manufacturers qualify for eligibility to 
generate A/C efficiency credits through specified A/C CO2 
emissions testing.
    The efficiency credits and fuel consumption improvement values in 
this rule reflect an understanding of the relationships between A/C 
technologies and CO2 emissions and fuel consumption that is 
improved from the MYs 2012-2016 rulemaking. Much of this understanding 
results from the use of a new vehicle simulation tool that EPA has 
developed and that the agencies used for the proposal and for this 
final rulemaking. EPA designed this model to simulate, in an integrated 
way, the dynamic behavior of the several key systems that affect 
vehicle efficiency: The engine, electrical, transmission, and vehicle 
systems. The simulation model is supported by data from a wide range of 
sources, and no comments were received raising concerns about the model 
or its use in this rule. Chapter 2 of the EPA Regulatory Impact 
Analysis discusses the development of this model in more detail.
    The agencies have identified several technologies related to 
improvements in A/C efficiency. Most of these technologies already 
exist on current vehicles, but manufacturers can improve the energy 
efficiency of the technology designs and operation. For example, most 
of the additional air conditioning related load on an engine is due to 
the compressor, which pumps the refrigerant around the system loop. The 
less the compressor operates, the less load the compressor places on 
the engine, resulting in less fuel consumption and CO2 
emissions. Thus, optimizing compressor operation to align with cabin 
demand by using more sophisticated sensors and control strategies is 
one path to improving the overall efficiency of the A/C system. See 
generally section 5.1.3 of Joint TSD Chapter 5.
    A broad range of stakeholders submitted general comments expressing 
support for the overall proposed program for A/C efficiency credits and 
fuel consumption improvement values as an appropriate method of 
encouraging efficiency-improving technologies. One commenter, Center 
for Biological Diversity, stated that ``[t]echnology that will be 
available during the rulemaking period and can be incorporated in an 
economically feasible manner should be built into the standard and not 
merely used as an `incentive'.'' In fact, all of these A/C improvements 
(for both indirect and direct A/C improvements) are reflected in the 
standard stringency.\280\ See section II.C.7.b above. Moreover, we have 
every expectation that manufacturers will use most if not all of these 
technologies--precisely because of their ready availability and 
relatively low cost.
---------------------------------------------------------------------------

    \280\ As explained in section I.B above, one reason the CAFE and 
GHG standards are not the same in miles-per-gallon space is that 
direct leakage A/C improvements are reflected in the GHG standards.
---------------------------------------------------------------------------

    Automaker and auto supplier commenters broadly supported the 
agencies' assessments of likely A/C efficiency-improving technologies 
and the credit values assigned to them. Several commenters suggested 
relatively minor changes in these assessments. One commenter, ICCT, 
suggested an approach that would attempt to vary A/C efficiency credits 
based on the degree to which other off-cycle improvements--specifically 
solar load reductions--may have independently reduced the demand for A/
C cooling. ICCT's suggestion was to address what the commenter viewed 
as a potential for `double-counting.' EPA agrees with the observation 
that A/C efficiency improvements and solar load improvements are 
related technically. However, we believe that the added complexity of 
scaling the established credit values for A/C technologies according to 
solar load improvements would not be warranted, given relatively small 
change in the overall credit values that would likely result. We are 
thus finalizing separate treatment of A/C efficiency and other off-
cycle improvements, as proposed. (We summarize and discuss comments on 
A/C efficiency test procedures below.)
    As described in Chapter 5.1.3.2 of the Joint TSD, EPA calculated 
the total eligible A/C efficiency credits from an analysis of the 
average impact of air conditioning on tailpipe CO2 
emissions. This methodology differs from the one used for the MYs 2012-
2016 rule, though it does give similar values. In the MYs 2012-2016 
rule, the total impact of A/C on tailpipe emissions was estimated to be 
3.9% of total GHG emissions, or approximately 14.3 g/mi. Largely based 
on an SAE feasibility study,\281\ EPA assumed that 40% of those 
emissions could be reduced through advanced technologies and controls. 
Thus, EPA calculated a maximum credit of 5.7 g/mi (for both cars and 
trucks) from efficiency improvements. EPA also assumed that there would 
be 85% penetration of these technologies when setting the standard, and 
consequently made the standard more stringent by 5.0 g/mi. For the MYs 
2017-2025 proposal, EPA recalculated the A/C tailpipe impact using its 
vehicle simulation tool. Based on these simulations, it was determined 
that trucks should have a higher impact than cars, and the total 
emissions due to A/C was calculated to be 11.9g/mi for cars and 17.1 g/
mi for trucks. In the proposal, the feasible level of control was 
increased slightly from the MYs 2012-2016 final rule to 42% (within the 
uncertainty bounds of the studies cited). Thus the maximum credit 
became 5.0 for cars and 7.2 for trucks, and the proposed stringency of 
the standards reflected these new levels as the penetrations increased 
from 85% in MY 2016 to 100% in MY 2017 (for car) and 2019 (for truck). 
Volkswagen commented that the change in split in the maximum car/truck 
efficiency credit from the previous rule changed the context for their 
compliance plans for cars. The agencies understand that a slightly 
lower maximum credit level could have a modest effect on compliance 
plans. We note that the level of stringency for cars due to A/C has not 
changed from the value we used

[[Page 62722]]

for MY 2016, as this was assumed to be 5.0 g/mi in the previous rule as 
well as in the more recent proposal. We also believe that it is 
appropriate that the program evolve as our understanding of the 
inventory of in-use GHG emission inventories improves--as is the case 
in this instance. Having said this, the levels of the credits did not 
change significantly for cars and thus should not significantly affect 
A/C related GHG credit and fuel consumption improvement value 
calculations. We are therefore, finalizing the 5.0 and 7.2 g/mi maximum 
credits for cars and trucks respectively as proposed. This represents 
an improvement in current A/C related CO2 and fuel 
consumption of 42% (again, as proposed) and the agencies are using this 
level of improvement to represent the maximum efficiency credit 
available to a manufacturer. This degree of improvement is reflected in 
the stringency of the final standards.
---------------------------------------------------------------------------

    \281\ Society of Automotive Engineers, ``IMAC Team 2--Improved 
Efficiency, Final Report,'' April 2006 (EPA Docket  EPA-HQ-
OAR-2010-0799).
---------------------------------------------------------------------------

    Specific components and control strategies that are available to 
manufacturers to reduce the air conditioning load on the engine are 
listed in Table II-21 below and are discussed in more detail in Chapter 
5 of the joint TSD.
a. A/C Idle Test
    Demonstrating the degree of efficiency improvement that a 
manufacturer's air conditioning systems achieve--thus quantifying the 
appropriate GHG credit and CAFE fuel consumption improvement value that 
the manufacturer is eligible for--would ideally involve a performance 
test. That is, manufacturers would use a test that would directly 
measure CO2 (and thus allow calculation of fuel consumption) 
before and after the incorporation of the improved technologies. A 
performance test would be preferable to a predetermined menu value 
because it could--potentially--provide a more accurate assessment of 
the efficiency improvements of differently designed A/C systems. 
Progress toward such a test (or tests) continues. As mentioned in the 
introduction to this section, the primary vehicle emissions and fuel 
consumption test, the Federal Test Procedure (FTP) or ``two-cycle'' 
test, does not require or simulate air conditioning usage through the 
test cycle. The existing SC03 test, which is used for developing the 
fuel economy and environment label values, is designed to identify any 
effect that the air conditioning system has on other emissions when it 
is operating under extreme temperature and solar conditions, but that 
test is not designed to measure the relatively small differences in 
tailpipe CO2 due to different A/C efficiency technologies.
    At the time of the final rule for the MYs 2012-2016 GHG program, 
EPA concluded that a practical, performance-based test procedure 
capable of quantifying efficiency credits was not yet available. 
Instead, EPA adopted a specialized new procedure for the more limited 
purpose of demonstrating that the design improvements for which a 
manufacturer was earning credits produced actual efficiency 
improvements. That is, passing the test was a precondition to 
generating A/C efficiency credits, but the test was not used in 
measuring the amount of those credits. See 76 FR 74938. EPA's test is 
fairly simple, performed while the vehicle is at idle, and thus named 
the A/C Idle Test, or just Idle Test. Beginning with the 2014 model 
year, manufacturers are required to achieve a certain CO2 
level on the Idle Test in order to then be able to use the technology-
based lookup table (``menu'') and thus quantify the appropriate number 
of GHG efficiency credits that the vehicle can generate. See 75 FR 
25427-31.
    In meetings since the MYs 2012-2016 final rule was published and 
during the public comment period for this rule, several manufacturers 
provided data that raise questions about the ability of the Idle Test 
to completely fulfill its intended purpose. Especially for smaller, 
lower-powered vehicles, the data show that it can be difficult to 
achieve a degree of test-to-test repeatability that manufacturers 
believe is necessary in order to comply with the Idle Test requirement 
and generate credits. Similarly, manufacturers and others have stated 
that the Idle Test does not accurately or sufficiently capture the 
improvements from many of the technologies listed in the menu. While 
two commenters (Hyundai and Kia) supported retaining the Idle Test for 
the purpose of generating A/C credits, most commenters strongly opposed 
any use of the Idle Test. In some cases, although they recommended that 
EPA abandon the Idle Test, several manufacturers suggested changes to 
the test if it is to remain as a part of the program. Specifically, 
these manufacturers supported the EPA proposals to scale the Idle Test 
results by engine size and to broaden the ambient temperature and 
humidity specifications for the Idle Test.
    EPA noted many of these concerns in the preamble to the proposed 
rule, and proposed certain changes to the A/C Idle Test as a result. 
See 76 FR 74938. EPA also notes that the Idle Test was never meant to 
directly quantify the credits generated and we acknowledge that it is 
inadequate to that task. The Idle Test was meant simply to set a 
threshold in order to access the menu to generate credits (and in some 
cases to adjust the menu values for partial credit). EPA also discussed 
that it had developed a more rigorous (albeit more complicated and 
expensive to perform) test--the AC17 test--which includes the SC03 
driving cycle, the fuel economy highway cycle, a preconditioning cycle, 
and a solar peak period. EPA proposed that the AC17 test would be 
mandatory in MYs 2017 and following model years, but that the AC Idle 
Test would continue to be used in MYs 2014-2016 (with the AC17 test 
used as a report-only alternative in those earlier model years).\282\ 
Under the proposal, the AC17 test (unlike the AC Idle Test) would be 
used in fixing the amount of available credit. Specifically, if the 
AC17 test result, compared to a baseline AC17 test of a previous model 
year vehicle without the improved technology, equaled or surpassed the 
amount of menu credit, the manufacturer would receive the full menu 
credit amount. If the AC17 test result was less than the menu value, 
the manufacturer would receive the amount of credit corresponding to 
the AC17 test result.\283\
---------------------------------------------------------------------------

    \282\ 76 FR 74940.
    \283\ 76 FR 74940.
---------------------------------------------------------------------------

    Since proposal, EPA has continued to carefully evaluate the 
concerns and suggestions relating to the Idle Test. The agency 
recognizes that there are technical shortcomings as well as advantages 
to this relatively simple and inexpensive test. EPA has concluded that, 
given that a more sophisticated A/C is now available, the most 
appropriate course is to maintain the availability of the AC Idle Test 
through MY 2016, but to also allow manufacturers the option of using 
the AC17 test to demonstrate that A/C components are indeed functioning 
effectively. This use of the AC17 test as an alternative to the Idle 
Test will be allowed, commencing with MY 2014. Thus, for MYs 2014, 
2015, and 2016, manufacturers will be able to generate A/C efficiency 
credits from the technology menu by performing and reporting results 
from the AC17 test in lieu of passing the Idle Test. During these model 
years, the level of credit and fuel consumption improvement value 
manufacturers can generate from the menu will be based on the design of 
the A/C system. In MYs 2017-2019, eligibility for AC efficiency credits 
will be determined solely by performing and reporting AC17 test 
results. During this time, the process for determining the

[[Page 62723]]

level of credit and fuel consumption improvement value will be the same 
as during MYs 2014, 2015, and 2016. Finally, starting in MY 2020, AC17 
test results will be used both to determine eligibility for AC 
efficiency credits and to play a role in determining the amount of the 
credit, as proposed. In order to determine the amount of credit or fuel 
consumption improvement value after MY 2020, an A to B comparison will 
be required. The credit and fuel consumption improvement menu will 
continue to be used. Because of the general technical support for the 
AC17 test, and in light of several important clarifications and changes 
that EPA is implementing to minimize the AC17 testing burden on 
manufacturers, EPA believes that most if not all manufacturers wishing 
to generate efficiency credits will choose to perform the AC17 test. 
Specifically, EPA is modifying the proposed AC17 test procedure to 
reduce the number of vehicles requiring testing, so that many fewer 
vehicles will need to be tested on the AC17 than on the Idle Test. 
Further discussion of the AC17 test appears below in this section of 
the preamble and in Chapter 5.1.3.6 of the Joint TSD.
    However, EPA is continuing to allow the Idle Test as a testing 
option through MY 2016. In addition, EPA is finalizing the 
modifications that we proposed to the Idle Test, making the threshold 
for access to the menu a function of engine displacement an option 
instead of the flat threshold, as well as adjusting the temperature and 
humidity specifications in the AC Idle Test. We are also finalizing the 
proposed modification that would allow a partial credit if the Idle 
Test performance is better than typical performance, based on historic 
EPA results from Idle Testing. Chapter 5.1.3.5 of the Joint TSD further 
describes the adjustments that EPA is making to the Idle Test for MYs 
2014-2016.
b. AC17 Test
    As mentioned above, EPA, working in a joint collaboration with 
manufacturers (through USCAR) and CARB, has made significant progress 
in developing a more robust A/C-related emissions test. As noted above, 
the AC17 test is a four-part performance test, which combines the 
existing SC03 driving cycle, the fuel economy highway cycle, as well as 
a pre-conditioning cycle and a solar soak period. As proposed, and as 
discussed below, EPA will allow manufacturers choosing to generate 
efficiency credits to report the results of the AC17 test in lieu of 
the Idle Test requirements for MYs 2014-2016, and will require them to 
use the AC17 test after MY 2016. Until MY 2019, as for MYs 2014-2016, 
manufacturers will need to report the results from AC17 testing, but 
not to achieve a specific CO2 emissions reduction in order 
to access the menu. However, beginning with MY 2020, they will need to 
compare the test results to those of a baseline vehicle to demonstrate 
a measureable improvement in A/C CO2 emissions and fuel 
consumption as a precondition to generating AC efficiency credits from 
the A/C credit and fuel consumption improvement menu; in the event that 
the improvement is less than the menu value, the amount of credit would 
be determined by the AC17 test result.
    EPA is making several technical and programmatic changes to the 
proposed AC17 test to minimize the number of vehicles that 
manufacturers will need to test, and to further streamline each test in 
order to minimize the testing burden. Since the appropriateness of the 
AC17 test for actually quantifying absolute A/C efficiency improvements 
(as opposed to demonstrating a relative improvement) is still being 
evaluated, manufacturers wishing to generate A/C efficiency credits 
will continue to use the technology menu to quantify the amount of 
CO2 credits and fuel consumption improvement values for 
compliance with the GHG and CAFE programs. A number of commenters, 
including the Alliance, Ford, The Global Automakers, and others 
suggested that further work with the industry on the test should occur 
before implementing its use. However, we believe that the general 
robustness of the test, combined with the technical and programmatic 
improvements that EPA is incorporating in this final rule (as discussed 
below), and the de facto phase-in of the test in MYs 2014-2016 as well 
as MYs 2017-2019, support our decision to implement the test.
i. AC17 Technical Issues
    Commenters universally agreed that in most technical respects the 
AC17 test represents an improvement over the Idle Test. A few 
commenters suggested specific technical changes, which EPA has 
considered. Several auto industry commenters suggested that the 
proposed temperature and humidity tolerances of the test cell 
conditions may result in voided tests, due to the difficulty they see 
in maintaining these conditions throughout a 4-hour test interval. 
However, as discussed in more detail in Chapter 5 of the joint TSD, we 
are allowing manufacturers to utilize a 30-second moving average for 
the test chamber temperature; we have concluded that these tolerances 
are achievable with this revision, and that widening these tolerances 
would negatively affect the accuracy and repeatability of the test. As 
a result, we are finalizing the tolerances as originally proposed. 
Also, one commenter (Enhanced Protective Glass Automotive Association 
or EPGAA) suggested that for manual A/C systems, the A/C temperature 
control settings for the test be based on actual cabin temperatures 
rather than on the duration of lapsed time of the test, as proposed. 
EPA does not disagree in theory with the purpose of such a change--to 
attempt to better align the control requirements for a manual A/C 
system with those for an automatic system. However, the effect on test 
results of the slightly different control requirements is not large, 
and we believe that it would be impractical for the technician/driver 
to monitor cabin temperature and adjust the system accordingly during 
the test. We are therefore finalizing the automatic and manual A/C 
system control requirements as proposed.
    In several cases, commenters suggested other technical changes to 
the AC17 test that EPA agrees will make performance of the test more 
efficient, with no appreciable effect on test accuracy. The relatively 
minor technical changes that we are finalizing include provisions 
relating to: the points during the test when cell solar lamps are 
turned on; establishing a specification for test cell wind speed; and a 
simplification of the placement requirements for ambient temperature 
sensors in the passenger cabin. See joint TSD section 5.1.3.5 
explaining these changes more fully.
    Overall, EPA has concluded that the AC17 test as proposed, with the 
improvements described above, is a technically robust method for 
demonstrating differences in A/C system efficiency as manufacturers 
progressively apply new efficiency-improving technologies.
ii. AC17 Program Issues
    Beyond technical issues related to the AC17 test itself, many 
commenters expressed concerns about several related program issues--
i.e., how the agency proposed to use the test as a part of determining 
eligibility for A/C efficiency credits. First, many manufacturers and 
their trade associations stated that some characteristics of the AC17 
test unnecessarily add to the burden on manufacturers of performing 
each individual test. For example, the roughly 4-hour duration of the 
AC17 test limits the number of tests that can be performed in a given 
facility over a period of time. Also, the test requires the use of 
relatively costly SC03 test

[[Page 62724]]

chambers, and manufacturers say that they have, or have access to, only 
a limited number of these chambers.
    Most of these concerns, however, are direct results of necessary 
design characteristics of the test. Specifically, the impacts on 
vehicle efficiency of improved A/C technologies are relatively small 
compared to total vehicle CO2 emissions and fuel 
consumption. Similarly, the relative contributions of various A/C-
related components, systems, and controls can be difficult to isolate 
from one another. For these reasons, the joint government and industry 
collaborators designed the test to accurately and repeatably measure 
small differences in the efficiency of the entire vehicle related to A/
C operation. The result has been that the AC17 test takes a fairly long 
time to perform (about 4 hours) and requires the special climate-
controlled capability of an SC03 chamber, as well as relatively tight 
test parameters.
    As discussed above, EPA believes that the AC17 represents a major 
step toward the eventual goal of performance-based testing that could 
be used to directly quantify the very significant A/C efficiency 
credits and fuel consumption improvement values that are available to 
eligible manufacturers under this program. In this context, EPA 
believes that the characteristics of the AC17 test identified by the 
manufacturers in their comments generally tend to be inherent aspects 
needed for a robust test, and in most respects we are finalizing the 
requirements for the use of the AC17 as proposed.
    In addition to concerns about the effort required to perform each 
AC17 test, manufacturers also commented on what they understood as a 
requirement to run an unreasonable number of tests in order to qualify 
for efficiency credits and improvement values. On the other hand, ICCT 
commented that they believe that given the frequent changes in A/C 
technology, one or two tests per year for a manufacturer is too few, 
and that ``each significantly changed model should be tested.'' In 
response to these concerns, EPA has taken several steps in this final 
rule to clarify how a manufacturer will be able to use the AC17 to 
demonstrate the effectiveness of its different A/C systems and 
technologies while minimizing the number of tests that it will need to 
perform. In general, EPA believes that it is appropriate to limit the 
number of vehicles a manufacturer must test in any given model year to 
no more than one vehicle from each platform that generates credits (and 
CAFE improvement values) during each model year. For the purpose of the 
AC17 test and generating efficiency credits, EPA will use a definition 
for ``platform'' that allows a manufacturer to include several 
generally similar vehicle models in a single ``platform'' and to 
generate credits (or improvement values) for all of the vehicles with 
that platform based on a limited number of AC17 tests, as described 
below. This definition is slightly modified from the proposed 
definition, primarily by making clear that manufacturers need not 
necessarily associate vehicles that have different powertrains with 
different platforms for A/C credit purposes. The modified definition 
follows:
    ``Platform'' means a segment of an automobile manufacturer's 
vehicle fleet in which the vehicles have a degree of commonality in 
construction (primarily in terms of body and chassis design). Platform 
does not consider the model name, brand, marketing division, or level 
of decor or opulence, and is not generally distinguished by such 
characteristics as powertrain, roof line, or number of doors, seats, or 
windows. A platform may include vehicles from various fuel economy 
classes, including both light-duty vehicles and light-duty trucks/
medium-duty passenger vehicles.
    At the same time, EPA believes that if only a limited number of 
vehicles in a platform are to be tested on the AC17 in any given model 
year, it is important that vehicles in that platform with substantially 
different air conditioning designs be included in that testing over 
time. Thus, manufacturers with vehicles in a platform that are 
generating credits will need to choose a different vehicle model each 
year for AC17 testing. Testing will begin with the model that is 
expected to have highest sales. In the following model year, the 
manufacturer will choose the model in that platform representing the 
next-highest expected sales not already tested, and so on. This process 
will continue either until all vehicles in that platform that are 
generating credits have been tested (in which case the previous test 
data can be carried over) or until the platform experiences a major 
redesign (at which point the AC17 testing process will start over.) We 
believe that by clarifying the definition of ``platform'' and more 
clearly limiting testing to one test per platform per year, we have 
addressed the manufacturers' concerns about unreasonable test burdens.
    Finally, in order to further minimize the number of tests that will 
be required for A/C efficiency credit purposes, instead of requiring 
replicate testing in all cases, EPA will allow a manufacturer to submit 
data from as few as one AC17 test for each instance in which testing is 
required. A manufacturer concerned about the variability of its testing 
program may at its option choose to perform additional replicate tests 
and use of the AC17 test in MYs 2014-2016 is for reporting only) 
because the data from these initial years will form the basis on which 
future credits are measured as described below, and a more robust 
confirmation of test-to-test consistency may be in their interest.
    As mentioned above, for MYs 2019 and earlier (including optional 
AC17 testing prior to MY 2017), AC17 testing will only require 
reporting of results (and system characteristics) for manufacturers to 
be eligible to generate credits and improvement values from the 
technology menu. Beginning in MY 2020, manufacturers will also need to 
use AC17 testing to demonstrate that the A/C efficiency-improving 
technologies or systems on which the desired credits are based are 
indeed reducing CO2 emissions and fuel consumption. EPA 
proposed to have the manufacturer identify an appropriate comparison 
``baseline'' vehicle that did not incorporate the new technology, and 
generate CO2 emissions data on both vehicles. The 
manufacturer would be eligible for credits and fuel consumption 
improvement values to the extent that the test results showed an 
improvement over the earlier version of the vehicle without the 
improved technology. If the test result with the new technology 
demonstrated an emission reduction that is greater than or equal to the 
menu-based credit potential of those technologies, the manufacturer 
would generate the appropriate credit based on the menu. However, if 
the test result did not demonstrate the full menu-based potential of 
the technology, partial credit could still be earned, in proportion to 
how far away the result was from the expected menu-based credit amount.
    In their comments, auto manufacturers raised concerns about the 
potential difficulty of identifying and testing an acceptable baseline 
vehicle. EPA has considered these comments, and continues to believe 
that identifying and testing a baseline vehicle will not be overly 
burdensome in most cases. However, we agree that establishing an 
appropriate baseline vehicle can be difficult in some cases, including 
when the manufacturer has made major technological improvements to the 
vehicle, beyond the A/C technology improvements in question. Some 
manufacturers recommended that because of this difficulty and the other 
issues discussed above, the AC17 test should only be used in a 
``research'' role to validate credit values on the credit

[[Page 62725]]

menu, rather than in a regulatory compliance role. However, EPA 
believes that with the adjustments in its use described below, the AC17 
can appropriately serve as a part of the GHG and CAFE compliance 
programs. One such adjustment is to allow the manufacturer to compare 
vehicles from different ``generations'' of design (i.e., from earlier 
major design cycles), which expands the universe of potentially 
appropriate comparative baseline vehicles. Further, if cases arise 
where no appropriate baseline comparison vehicles are available, 
manufacturers will instead be able to submit an engineering analysis 
that describes why a comparison to a baseline vehicle is neither 
available nor appropriate, and also justifies the generating of credits 
and improvement values, in lieu of a baseline vehicle test result. EPA 
would evaluate these submissions as part of the vehicle certification 
process. EPA discusses such an engineering analysis in Chapter 5 
(Section 5.5.2.8) of the Joint TSD. Other than these adjustments, this 
final rule adopts the AC17 testing of certification vehicles and 
comparative baseline vehicles beginning in MY 2020, as proposed. Thus, 
starting in MY 2020, the AC17 test will be used not only to establish 
eligibility for generating credits, but will also play a role in 
determining the amount of the credit.
    EPA discusses the revised AC17 test in more detail in Chapter 5 
(section 5.1.3.8) of the joint TSD, including a graphical flow-chart 
designed to illustrate how the AC17 test will be used at various points 
during the implementation of the GHG (and from MY 2017 on, CAFE) 
programs.
    c. Technology ``Menu'' for Quantifying A/C Efficiency Credits and 
Fuel Consumption Improvement Values
    EPA believes that more testing and development will be necessary 
before the AC17 test could be used to measure absolute CO2 
and fuel consumption performance with sufficient accuracy to completely 
replace the technology menu as the method for quantifying efficiency 
credits and fuel consumption improvement values. As EPA did in the MYs 
2012-2016 rule, the agencies have used a design-based ``menu'' approach 
for the actual quantification of efficiency credits (upon which fuel 
consumption improvement values are also based) for this final rule. The 
menu established today is very similar to that of the earlier rule, 
both in terms of the technologies included in the lookup table and the 
effectiveness values assigned to each technology. As in the earlier 
rule, the agencies assign an appropriate amount of CO2 
credit to each efficiency-improving air conditioning technology that 
the manufacturer incorporates into a vehicle model. The sum of these 
values for all of the technologies used on a vehicle will be the amount 
of CO2 credit generated by that vehicle, up to a maximum of 
5.0 g/mi for cars and 7.2 g/mi for trucks. As stated above, these 
maximum values are equivalent to fuel consumption improvement values of 
0.000563 gallons/mi for cars and 0.000810 gallons/mi for trucks. (If 
amendments to the menu values are made in the future, EPA will consult 
with NHTSA on the amount of fuel consumption improvement value 
manufacturers may factor into their CAFE calculations.)
    Several comments addressed the technology menu and its use. The 
Alliance of Automobile Manufacturers said that they believe that 
projected A/C CO2 emissions--and thus the maximum potential 
reductions against which credits can be generated--are actually higher 
than EPA had projected. We have reassessed this issue since the MYs 
2012-2017 rulemaking, including the question of how much time vehicles 
spend in a ``compressor on'' mode, and on balance we continue to 
believe that our projected A/C CO2 emissions values--and 
thus the potential credits from the technology menu--are appropriate. 
We discuss the development of the maximum efficiency credit values in 
more detail in Chapter 5 (section 5.5.2.1) of the Joint TSD.
    Honeywell recognized that a performance-based test procedure for 
quantifying credits is not yet available, but asked EPA to be open to 
using such a test if one is developed. EPA agrees, and we are making 
clear that the off-cycle technology provisions discussed in the next 
section can be applied to A/C technologies if all criteria are met. We 
will also continue to monitor the quality of A/C efficiency testing 
procedures as they develop and consider specific revisions to the AC17 
as appropriate. Finally, ICCT proposed accounting for any efficiency 
impact of alternative refrigerants in quantifying efficiency credits. 
However, because the effect on efficiency of the most likely future 
alternative refrigerant, HFO-1234yf, is only minimal when the A/C 
system design is optimized for its use, we are finalizing the 
technology menu with no adjustments for the use of alternative 
refrigerants. Here too, however, EPA will monitor the development and 
use of alternative refrigerants and any data on their impact on A/C 
efficiency, and consider adjustments in the future as appropriate.
    Table II-21 presents the A/C efficiency credits and estimated CAFE 
fuel consumption improvement values being finalized in this rule for 
each of the efficiency-improving air conditioning technologies. We 
provide more detail on the agencies' development of the A/C efficiency 
credits and CAFE fuel consumption improvement values in Chapter 5 of 
the Joint TSD. In addition, that Chapter 5 presents very specific 
definitions of each of the technologies in the table below, definitions 
intended to ensure that the A/C technologies used by manufacturers 
correspond with the technologies we used to derive the credits and fuel 
consumption improvement values.

                   Table II-21--A/C Efficiency Credits and Fuel Consumption Improvement Values
----------------------------------------------------------------------------------------------------------------
                                     Estimated
                                  reduction in A/                                     Car A/C        Truck A/C
                                       C CO2          Car A/C        Truck A/C      efficiency      efficiency
     Technology description        emissions and    efficiency      efficiency         fuel            fuel
                                       fuel        credit (g/mi    credit (g/mi     consumption     consumption
                                    consumption        CO2)            CO2)         improvement     improvement
                                     (percent)                                      (gallon/mi)     (gallon/mi)
----------------------------------------------------------------------------------------------------------------
Reduced reheat, with externally-              30             1.5             2.2        0.000169        0.000248
 controlled, variable-
 displacement compressor........
Reduced reheat, with externally-              20             1.0             1.4        0.000113        0.000158
 controlled, fixed-displacement
 or pneumatic variable
 displacement compressor........

[[Page 62726]]

 
Default to recirculated air with              30             1.5             2.2        0.000169        0.000248
 closed-loop control of the air
 supply (sensor feedback to
 control interior air quality)
 whenever the outside ambient
 temperature is 75 [deg]F or
 higher (although deviations
 from this temperature are
 allowed based on additional
 analysis)......................
Default to recirculated air with              20             1.0             1.4        0.000113        0.000158
 open-loop control of the air
 supply (no sensor feedback)
 whenever the outside ambient
 temperature is 75 [deg]F or
 higher (although deviations
 from this temperature are
 allowed if accompanied by an
 engineering analysis)..........
Blower motor controls that limit              15             0.8             1.1        0.000090        0.000124
 wasted electrical energy (e.g.
 pulse width modulated power
 controller)....................
Internal heat exchanger (or                   20             1.0             1.4        0.000113        0.000158
 suction line heat exchanger)...
Improved evaporators and                      20             1.0             1.4        0.000113        0.000158
 condensers (with engineering
 analysis on each component
 indicating a COP improvement
 greater than 10%, when compared
 to previous design)............
Oil Separator (internal or                    10             0.5             0.7        0.000056        0.000079
 external to compressor)........
----------------------------------------------------------------------------------------------------------------

    For the CAFE program, EPA will determine fleet average fuel 
consumption improvement values in a manner consistent with the way 
fleet average CO2 credits will be determined. EPA will 
convert the metric tons of CO2 credits for air conditioning 
(as well as for other off-cycle technologies and for full size pick-up 
trucks) into fleet-wide fuel consumption improvement values, consistent 
with the way EPA would convert the improvements in CO2 
performance to metric tons of credits. Section III.C discusses this 
methodology in more detail. There will be separate improvement values 
for each type of credit, calculated separately for cars and for trucks. 
These improvement values are subtracted from the manufacturer's two-
cycle-based fleet fuel consumption value to yield a final new fleet 
fuel consumption value, which would be inverted to determine a final 
fleet fuel CAFE value.
2. Off-Cycle CO2 Credits
    Although EPA employs a five-cycle test methodology to evaluate fuel 
economy for fuel economy labeling purposes, EPA uses the established 
two-cycle (city, highway or correspondingly FTP, HFET) test methodology 
for GHG and CAFE compliance.\284\ EPA recognizes that there are 
technologies that provide real-world GHG benefits to consumers, but 
that the benefit of some of these technologies is not represented on 
the two-cycle test. For MYs 2012-2016, EPA provided an option for 
manufacturers to generate adjustments (credits) for employing new and 
innovative technologies that achieve CO2 reductions which 
are not reflected on current 2-cycle test procedures if, after 
application to EPA, EPA determined that the credits were technically 
appropriate.
---------------------------------------------------------------------------

    \284\ As noted earlier, use of the two-cycle test is mandated by 
statute for passenger car CAFE standards.
---------------------------------------------------------------------------

    During meetings with vehicle manufacturers prior to the proposal of 
the MY 2017-2025 standards, manufacturers raised concerns that the 
approval process in the MYs 2012-2016 rule for generating off-cycle 
credits was complicated and did not provide sufficient certainty on the 
amount of credits that might be approved. Commenters also maintained 
that it is impractical to measure small incremental improvements on top 
of a large tailpipe measurement, similar to comments received related 
to quantifying air conditioner efficiency improvements. These same 
manufacturers believed that such a process could stifle innovation and 
fuel efficient technologies from penetrating into the vehicle fleet.
    In the MYs 2017-2025 proposal, EPA, in coordination with NHTSA, 
proposed to extend the off-cycle credit program to MY 2017 and later, 
and to apply the off-cycle credits and equivalent fuel consumption 
improvement values to both the CAFE and GHG programs.\285\ The proposal 
to extend the off-cycle credits program to CAFE was a change from the 
MYs 2012-2016 final rule where EPA provided the off-cycle credits only 
for the GHG program. In addition, in response to the concerns noted 
above, EPA proposed to substantially streamline the off-cycle credit 
program process by establishing means of obtaining credits without 
having to prove case-by-case that such credits are justified. 
Specifically, EPA proposed a menu with a number of technologies that 
the agency believed would show real-world CO2 and fuel 
consumption benefits not measured, or not fully measured, by the two-
cycle test procedures, which benefits could be reasonably quantified by 
the agencies at this time. For each of the preapproved technologies in 
the menu, EPA proposed a quantified default value that would be 
available without additional testing. Manufacturers would thus have to 
demonstrate that they were in fact using the menu technology but would 
not have to do testing to quantify the technology's effects unless they 
wished to receive a credit larger than the default value. This list is 
conceptually similar to the menu-driven approach just described for A/C 
efficiency credits.
---------------------------------------------------------------------------

    \285\ 76 FR 74941-944.
---------------------------------------------------------------------------

    The proposed default values for these off-cycle credits were 
largely determined from research, analysis, and simulations, rather 
than from full vehicle testing, which would have been both cost and 
time prohibitive. EPA believed that these predefined estimates were 
somewhat conservative to avoid the potential for windfall credits.\286\ 
If

[[Page 62727]]

manufacturers believe their specific off-cycle technology achieves 
larger improvement, they could apply for greater credits and fuel 
consumption improvement values with supporting data using the case-by-
case demonstration approach. For technologies not listed on the menu, 
EPA proposed to continue the case-by-case demonstration approach from 
the MYs 2012-2016 rule but with important modifications to streamline 
the decision-making process. Comments to the proposal (addressed at the 
end of this preamble section) were largely supportive. In the final 
rule, EPA is continuing the off-cycle credit program established in the 
MYs 2012-2016 rule (but with some significant procedural changes), as 
proposed. EPA is also finalizing a list of pre-approved technologies 
and credit values. The pre-defined list, with credit values and CAFE 
fuel consumption improvement values, is shown in Table II-21 below. 
Fuel consumption improvement values under the CAFE program based on 
off-cycle technology would be equivalent to the off-cycle credit 
allowed by EPA under the GHG program, and these amounts would be 
determined using the same procedures and test methods for use in EPA's 
GHG program, as proposed.
---------------------------------------------------------------------------

    \286\ While many of the assumptions made for the analysis were 
``conservative'', others were ``central''. For example, in some 
cases an average vehicle was selected on which the analysis was 
conducted. In this case, a smaller vehicle may presumably be 
deserving of fewer credits whereas a larger vehicle may be deserving 
of more. Where the estimates are central, it would obviously be 
inappropriate for the Agencies to grant greater credit for the 
larger vehicles since this value is already balanced by the smaller 
vehicles in the fleet. The agency will take these matters into 
consideration when applications are submitted to modify credits on 
the menu.
---------------------------------------------------------------------------

    In the NPRM, EPA proposed capping the amount of credits a 
manufacturer may generate using the defined technology list to 10 g/
mile per year on a combined car and truck fleet-wide average basis. EPA 
also proposed to require minimum penetration rates for several of the 
listed technologies as a condition for generating credit from the list 
as a way to further encourage their significant adoption by MY 2017 and 
later. Based on comments and consideration on the amount of data that 
are available, we are finalizing the cap of 10 g/mile per year on a 
combined car and truck fleet-wide average basis. The fleetwide cap is 
being finalized because the default credit values are based on limited 
data, and also because EPA recognizes that some uncertainty is 
introduced when credits are provided based on a general assessment of 
off-cycle performance as opposed to testing on the individual vehicle 
models. However, we are not finalizing the minimum penetration rates 
applicable to certain technologies, primarily based the agencies' 
agreement with commenters stating that penetration caps might stifle 
the introduction of fuel economy and GHG improving technologies 
particularly in cases where manufacturers would normally introduce the 
technologies because manufacturing capacities are limited or low 
initial volume reduces risk if consumer acceptance is uncertain. 
Allowing credits for lower production volumes may encourage 
manufacturers to introduce more off-cycle technologies and then over 
several years increase production volumes thereby bringing more of 
these technologies into the mainstream. These program details are 
discussed in further in Section III.C.5.b.i.
    For the final rule analysis, the agencies have developed estimates 
for the cost and effectiveness of two off-cycle technologies, active 
aerodynamics and stop-start. The agencies assumed that these two 
technologies are available to manufacturers for compliance with the 
standards, similar to all of the other fuel economy improving 
technologies that the analysis assumes are available. EPA and NHTSA's 
modeling and other final rule analyses use the 2-cycle effectiveness 
values for these technologies and include the additional off-cycle 
adjustment that reflects the real world effectiveness of the 
technologies. Therefore, NHTSA has included the assessment of these two 
off-cycle technologies in the assessment of maximum feasible standards 
for this final rulemaking. Including these technologies that are on the 
pre-defined menu recognizes that these technologies have a higher 
degree of effectiveness in the real-world than reflected in 2-cycle 
testing. EPA likewise considered the 2-cycle benefits of these 
technologies in determining the stringency of the final standards. The 
agencies note that they did not consider the availability of other off-
cycle technologies in their modeling analyses for the proposal or for 
the final rule. There are two reasons for this. First, the agencies 
have virtually no data on the cost, development time necessary, 
manufacturability, etc. of these other technologies. The agencies thus 
cannot project the degree of emissions reduction and fuel economy 
improvements properly attributable to these technologies within the MYs 
2017-2025 timeframe. Second, the agencies have no data on what the 
penetration rates for these technologies would be during the rule 
timeframe, even assuming their feasibility. See 76 FR 74944 (agencies 
need information on ``effectiveness, cost, and availability'' before 
considering inclusion of off-cycle technology benefits in determining 
the standards).
    This section provides an overview of the pre-defined technology 
list being finalized and the key comments the agencies received 
regarding the technologies on the list and the proposed credit values. 
Provisions regarding how the pre-defined list fits into the overall 
off-cycle credit program are discussed in section III.C.5, including 
the MY 2014 start date for using the list, the 10 g/mile credit cap for 
the list, and the proposed penetration thresholds for listed 
technologies. In addition, a detailed discussion of the comments the 
agencies received regarding the technical details of individual 
technologies and how the credit values were derived is provided in 
Chapter 5 of the joint TSD.
    In the proposal, the agencies requested comments on all aspects of 
the off-cycle credit menu technologies and derivations. EPA and NHTSA 
received many comments and, in addition, several stakeholders including 
Denso, Enhanced Protective Glass Automotive Association (EPGAA), ICCT 
and Honda, requested meetings and met with the agencies. Overall, there 
was general support for the menu based approach and the technologies 
included in the proposed list, but there were also suggestions to re-
evaluate the definition of some of the technologies included in the 
menu, the calculation and/or test methods for determining the credits 
values, and recommendations to periodically re-evaluate the menu as 
technologies emerge or become pervasive.
    For most of the listed technologies, the agencies proposed single 
fixed credit values and for other technologies a step-function (e.g., x 
amount of credit for y amount of reduction or savings).\287\ The 
agencies received comments requesting a scalable calculation method for 
some technologies rather than the proposed fixed value or step-function 
approach. Some commenters requested that the credits for active 
aerodynamics, high efficiency exterior lighting, waste heat recovery 
(proposed as ``engine heat recovery'' but revised based on comments to 
the proposal) and solar panels (proposed as ``solar roof panels'' but 
also revised based on comments) be scalable (variable based on system 
capability) rather than an ``all-or-

[[Page 62728]]

nothing'' single value approach proposed.\288\ The agencies agree with 
the commenters and are allowing scaling of these credits. In some 
cases, this created issues with the simplified methodology for 
determining the default values used for the proposal. Therefore, the 
proposed methodology required revision in order to calculate the 
default values for the technologies with scalable credits. The revised 
calculation methodology for each scalable technology is discussed in 
detail in Chapter 5 of the TSD. Notably, the calculation method for the 
solar panel credit has been changed, to provide scalability of the 
credit and a better estimate the benefits of solar panels for HEVs, 
PHEVs, and EVs.
---------------------------------------------------------------------------

    \287\ In the Proposal (76 FR 74943/1), we described the engine 
heat recovery and solar roof panel credits as `scalable', however 
this was an error. The engine heat recovery did allow 0.7g/mi credit 
per 100W generated step-function, however the solar panels were not 
scalable. In actuality, glazing was the only continuously scalable 
credit on the proposed off-cycle menu.
    \288\ For example, in the proposal, a manufacturer had to 
install high efficiency lighting on all systems in order to get the 
1.1 g/mi credit.
---------------------------------------------------------------------------

    Although we are allowing scaling of the credits, we are not 
accepting a request or granting credit for any level of credit less 
than 0.05 g/mi CO2. We are requiring reporting 
CO2 values to the nearest tenth and, therefore, anything 
below 0.05 g/mi of CO2 would be rounded down to zero. 
Therefore, for any credit requested as part of the off-cycle credit 
program (e.g., scalable or fixed; via the pre-defined technology list 
or alternate method approval process), only credit values equal to 0.05 
g/mi or greater will be accepted and approved.
    In addition to supporting the off-cycle credit program in the MYs 
2017-2025 program, comments received from the National Resources 
Defense Council (NRDC) and ICCT urged the agencies to ensure that off-
cycle credits are verifiable via actual testing or reflect real-world 
in-use data from a statistically representative fleet. These comments 
also expressed concern that some of the proposed menu technologies 
would not achieve appreciably greater reductions than measured over the 
2-cycle tests, that the off-cycle credit process had not fully assured 
that there would be component and/or system durability and had not 
accounted for in-use degradation. These commenters' ultimate concern is 
that the off-cycle credit flexibility could create windfall credits or 
avoid cost-effective 2-cycle improvements.
    The agencies believe that the off-cycle credit program, as proposed 
and finalized, legitimately accounts for real-world emission reductions 
and fuel consumption improvements not measured, or not fully measured, 
under the two-cycle test methodologies. The off-cycle technologies on 
the defined list have been assessed by the agencies using the best 
available data and information at the time of this action to 
appropriately assign default credit values. The agencies conducted 
extensive reviews of the proposed credit values and technologies and, 
based on comments (such as those from ICCT) and analysis, did adjust 
some credit values and technology descriptions. In addition, the 
comments from the Alliance of Automobile Manufacturers provided data 
that aligned with and supported some of the estimated credit default 
values (discussed in greater detail in Chapter 5 of the joint TSD). As 
with the proposal and further refinement in these final rules, the 
agencies have structured the off-cycle credit program extension for MYs 
2017-2025 to employ conservative calculation methodologies and 
estimates for the credit values on the defined technology list. In 
addition, the agencies will continue, as proposed, to apply a 10 g/mi 
cap to the total amount of available off-cycle credits to help address 
issues of uncertainty and potential windfalls. Based on review of the 
technologies and credits provided for those technologies, the cap 
balances the goal of providing a streamlined pathway for the 
introduction of off-cycle technologies while controlling potential 
environmental risk from the uncertainty inherent with the estimated 
level of credits being provided. Manufacturers would need to use 
several listed technologies across a very large portion of their fleet 
before they would reach the cap. Based on manufacturer comments 
regarding the proposed sales thresholds, discussed below, the agencies 
are not anticipating widespread adoption of these technologies, at 
least not in the early years of the program. Also, the cap is not an 
absolute limitation because manufacturers have the option of submitting 
data and applying for credits which would not be subject to the 10 g/
mile credit limit as discussed in III.C.5. Therefore, we are confident 
in the underlying analysis and default values for the identified off-
cycle credit technologies, and are finalizing the defined list of off-
cycle credit technologies, and associated default values, with minimal 
changes in this final rule as discussed below.
    For off-cycle technologies not on the pre-defined technology list, 
or to obtain a credit greater than the default value for a menu pre-
defined technology, a manufacturer would be required to demonstrate the 
benefits of the technology via 5-cycle testing or via an alternate 
methodology that would be subject to a public review and comment 
process. Further, a manufacturer must certify the in-use durability of 
the technology for the full useful life of the vehicle for any 
technologies submitted for off-cycle credit application to ensure 
enforceability of the credits granted.
    The agencies proposed an additive approach where manufacturers 
could add the credit values for all of the listed technologies employed 
on a vehicle model (up to the 10 g/mile cap, as discussed in III.C.5). 
The agencies received comments from ICCT recommending a multiplicative 
approach where the credit values for each technology on the list is 
determined by taking the total amount of available credits for off-
cycle technologies and distributing it based on each technology's 
percent contribution to the overall off-cycle benefit (e.g., percent 
benefit of technology A, B, * * * n x total available credit equals the 
off-cycle credit for technology A, B, * * * n).
    EPA understands ICCT's recommendation, as this is similar how to 
the calculation methods employed in the EPA Lumped Parameter Model 
combine the effectiveness of some technologies when the interaction of 
differing technologies does not yield the combined absolute fuel 
consumption improvement for each technology, but rather the actual 
effectiveness is a fractional value of each technology's effectiveness 
(often described as ``synergies''). The agencies carefully evaluated 
these comments and, as stated previously, held a meeting with ICCT at 
their request to discuss the comments fully.\289\ Overall, the agencies 
believe the recommended multiplicative approach is inherently difficult 
since the fractional contribution of each technology to the overall 
off-cycle benefit must be determined, and then the combined synergistic 
effectiveness would also require accurate and robust determination. 
This would require extensive iterative testing to determine the 
synergistic affects for every possible combination of off-cycle 
technology included on each vehicle. In addition, this would be highly 
dependent on the base design of the vehicle and, therefore, would need 
to be determined for each unique vehicle content combination.
---------------------------------------------------------------------------

    \289\ The ICCT also submitted a number of additional detailed 
comments on the credit magnitude of certain off-cycle technologies 
which are discussed in Chapter 5 of the Joint TSD.
---------------------------------------------------------------------------

    The agencies agree there may be synergistic (or non-synergistic) 
affects, but believe the combination of employing conservative credit 
value estimates and a 10 g/mi cap to the total amount of available off-
cycle credits

[[Page 62729]]

will achieve nearly the same overall effect of limiting the additive 
effect of multiple off-cycle technologies to a vehicle. Therefore, we 
are finalizing the calculation approach as defined in this final rule.
    As discussed above, the agencies are allowing scaling of the credit 
values in lieu of fixed values based on the comments received for the 
following technologies on the menu: high efficiency exterior lighting, 
waste heat recovery, solar panels and active aerodynamics. In the case 
of waste heat recovery and active aerodynamics, this did not change the 
numerical credit values we proposed. For waste heat recovery, 0.7 g/mi 
CO2 per 100 watts serves as the basis for scaling the 
credit. For active aerodynamics, we used the value of 0.6 g/mi for cars 
and 1.0 g/mi for trucks based on a 3% aerodynamic drag improvement from 
the table of values in the NPRM TSD. The comments simply asked to use 
this entire range of values rather than just using the credit values 
corresponding to 3% aerodynamic drag improvement. These scaling factors 
were calculated using both the Ricardo simulation results (described in 
Chapter 3 of the TSD) and the EPA full vehicle simulation tool 
(described in Chapter 2 of the EPA's RIA).
    In contrast, for high efficiency exterior lighting and solar 
panels, this required a revision in the methodology to allow for proper 
scaling. For high efficiency exterior lighting, the comments also 
requested credit allowance for high efficiency lighting on individual 
lighting elements rather than on all lighting elements. In the NPRM, 
our methodology assumed a package approach where each lighting element 
was weighted based on contribution to the overall electrical load 
savings, and then this was scaled by our base load reduction estimate 
for 5-cycle testing (e.g., 3.2 g/mile per 100 watts saved; see TSD 
5.2.2). Using this package approach, it is difficult to de-couple the 
grams per mile CO2 contribution of individual lighting 
elements. Therefore, we revised our approach by accounting for the gram 
per mile CO2 credit for each individual high efficiency 
lighting element separately.
    The agencies are finalizing the pre-defined technology list for 
off-cycle credits fundamentally as proposed with the exception of six 
technologies, primarily in response to the comments received: engine 
idle start-stop, electric heater circulation pump, high efficiency 
exterior lighting, solar panels, and active transmission and active 
engine warm-up.
    First, the pre-defined credit values for engine idle start-stop are 
revised in response to comments questioning some vehicle operation and 
VMT assumptions and some methods for calculating the pre-defined credit 
values. More details on these changes can be found in Chapter 5 of the 
Joint TSD.
    Second, the proposed stand-alone credit for an electric heater 
circulation pump is incorporated into the pre-defined credit for engine 
stop-start, thus aligning with the integrated nature of these two 
technologies. As the agencies re-evaluated the pre-defined credit 
values for engine idle start-stop, we recognized that a substantive 
amount of the off-cycle benefit attributed to engine stop-start would 
not be achievable in cold temperature conditions (e.g., temperatures 
below 40 deg F) without a technology that performs a similar function 
to the electric heater circulation pump as defined in the NPRM. The 
agencies believe that a mechanism allowing heat transfer to continue, 
even after the engine has shut-off, is necessary in order to maintain 
basic comfort in the cabin especially in colder ambient temperatures. 
This could occur, for example, when a vehicle is stopped at a multiple 
lane intersection controlling high traffic volumes. This technology can 
be an electric heater circulation pump, or some other cabin heat 
exchanger. Without this technology, the engine would need to continue 
operating and, therefore, circulating warm engine coolant through the 
HVAC system to continue providing heat to the cabin. Therefore, two 
credit values are being finalized for stop-start systems: a higher 
value (similar to the credits proposed) for systems with an electric 
heater circulation pump and a lesser value for stop-start systems 
without a pump or heat transfer mechanism.
    Third, the agencies have revised the proposed pre-defined credit 
values for high-efficiency exterior lighting after evaluation of the 
numerous industry data provided via comments. The fundamental impetus 
for the revisions resulted from the research study cited as a basis for 
many pre-defined values as described in Chapter 5 of the TSD. When 
reviewing the additional data, the agencies concluded the initially 
referenced research study (Schoettle, et al.\290\) provided current 
draw values for high-efficiency low beam lighting that were too high 
when compared to traditional incandescent lighting, resulting in a 
reduced projected benefit. Data from the automakers showed a much lower 
power demand for high-efficiency low beam lighting and, consequently, a 
much larger benefit than projected in the draft TSD.\291\ Therefore, 
the agencies increased the overall amount of credit for high-efficiency 
exterior lighting on the menu to reflect the additional analysis based 
on the data received via comment.
---------------------------------------------------------------------------

    \290\ Schoettle, B., et al., ``LEDS and Power Consumption of 
Exterior Automotive Lighting: Implications for Gasoline and Electric 
Vehicles,'' University of Michigan Transportation Research 
Institute, October, 2008.
    \291\ Alliance, Docket No. NHTSA-2010-0131-0262, page 27 of 93; 
Appendix 2, page 2 of 19.
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    Fourth, as discussed above, the need for scaling the credit value 
resulted in a new methodology for solar panels, and, consequently, 
adjusted credit values. For the NPRM, we assumed a fixed solar panel 
power output and scaled this according to our base load estimate (e.g., 
3.2 g/mile per 100 watts saved; see TSD 5.2.2). However, the rated 
solar panel power output depends on several factors including the size 
and efficiency of the panel, and the energy that the panel is able to 
capture and convert to useful power. Therefore, these factors need to 
be considered when scaling, and our new methodology takes these factors 
into account. The agencies also accounted for the possibility of 
combining solar panels for both energy storage and active ventilation 
in the scaling algorithm.
    Finally, we discuss active transmission and active engine warm-up 
together (although they are listed separately) since the methodology 
for them is the same. Chrysler commented that there should be separate 
car and truck credits for active transmission and active engine warm-
up, as formulated for other advanced load reduction technologies (e.g., 
engine idle start-stop, electric heater circulation pump). In the NPRM, 
we used the credit value corresponding to a mid-size car to arrive at 
1.8 g/mi. After considering these comments, we re-analyzed (using the 
Ricardo data) the credit values for active transmission and active 
engine warm-up using expanded vehicle classes on a sales-weighted 
basis. As a result, there was a clear disparity between the credit 
values for active transmission and active engine warm-up on cars and 
trucks. Accordingly, we now have separate car (1.5 g/mi) and truck (3.2 
g/mi) active transmission and active engine warm-up credits.
    There were no other changes to the off-cycle credit defined 
technology list other than the expansion or clarification of 
definitions for certain technologies as discussed in Chapter 5 of the 
TSD. Many commenters advocated for the inclusion of additional 
technologies on the off-cycle credit defined technology

[[Page 62730]]

list. Some commenters suggested that technologies should be added such 
as high efficiency alternators (Alliance, Denso, VW, Porsche, Ford), 
electric cooling fans (Bosch), HVAC eco-modes, transmission cooler 
bypass valves (Ford), navigation systems (Garmin), separate credits for 
congestion mitigation/crash avoidance systems (Daimler), engine block 
heaters (Honda), and an ``integral'' approach utilizing a combination 
of technologies (Global Automakers).
    Some commenters were opposed to adding any technologies to the menu 
(CBD) and others suggested some of the proposed values should be re-
evaluated (ICCT) or that the values should be based on real test data, 
not simulation modeling (NRDC).
    After reviewing and considering the comments, in general, we did 
not see evidence at this time to add any of these technologies to the 
pre-defined technology list. In many cases, there are no consistent, 
established methods or supporting data to determine the appropriate 
level of credit. Consequently, there is no reasonable basis or 
verifiable method for the agencies to substantiate or refute the 
performance claims used to support a request for pre-assigned, default 
credit values for such technologies, particularly for systems requiring 
driver intervention or action.
    Therefore, we are not adding any of these technologies we were 
asked to consider to the pre-defined technology list. In the case of 
crash avoidance technologies, we are prohibiting off-cycle credits for 
these technologies under any circumstances. In the case of the other 
technologies for consideration, we are allowing manufacturers to use 
the alternate demonstration methods for technologies not on the pre-
defined technology list menu as discussed in Section III.C. (see 
``Demonstration not based on 5-cycle testing'') to request credit. We 
respond below to the comments urging the agencies to add further 
technologies to the pre-defined list. Additional responses are found in 
TSD Chapter 5 and Section 7 of EPA's Response to Comment Document.
    In addition, there were substantial comments regarding allowing 
credits for glazing. Specifically, the comments expressed concerns 
about incentivizing the use of metallic glazing which may impact 
signals emanating from within the passenger compartment and the desire 
for a separate credit for polycarbonate (PC) glazing. This is discussed 
below as well.
a. High Efficiency Alternators
    Several commenters from the automobile industry associations, 
individual manufacturers, and suppliers urged the agencies to include 
high efficiency alternators on the off-cycle defined technology list.
    The Alliance of Automobile Manufacturers stated that the test 
cycles are performed with the accessories off but that ``actual real 
world driving has average higher loads due to accessory use.'' They 
cited GM testing comparing three different alternators on four vehicles 
with efficiencies ranging from 61% to 70% using the Verband der 
Automobilindustrie (VDA; the trade association representing German 
automobile manufacturers) test procedure that demonstrated a savings of 
1.0 grams per mile CO2 on average for an alternator with an 
efficiency of 68% VDA. Volkswagen and Porsche supported the comments 
from the Alliance of Automobile Manufacturers, however Porsche felt 
that a default credit of 1.6 grams per mile CO2 was possible 
based on their independent analysis. The Global Automakers echoed the 
comments above regarding real-world versus test cycle accessory usage 
but did not supply supporting data.
    Two suppliers, Bosch and Denso, also supported adding high 
efficiency alternators to the defined technology list. Bosch cited 
testing on a General Motors 2.4 liter 4 cylinder gasoline engine with 
an increased alternator efficiency from 65%, the level of efficiency 
assumed in the NPRM, to 75% showed the potential for an increase of 
0.7% in fuel economy by increasing alternator efficiency by 10%. Bosch 
also stated that increases in efficiency up to 82% are possible using 
existing and new technologies. Denso used performed a similar analysis 
by simulating an increase in alternator efficiency of 10% (65% to 75%). 
Using our NPRM values for CO2 emissions reductions of 3.0 
grams per mile CO2 on the 2-cycle and 3.7 grams per mile 
CO2 on the 5-cycle tests, they calculated a potential credit 
of 2.8 grams per mile CO2.
    In response, we agree that high efficiency alternators have the 
potential to reduce electrical load, resulting in lower fuel 
consumption and CO2 emissions. However, the problem with 
including this technology on the defined technology list is assigning 
an appropriate default credit value due to the lack of supporting data 
across a range of vehicle categories and range of implementation 
strategies.
    First, we appreciate commenters submitting data but we would need 
to have similar data from the range of available vehicle categories. 
With the exception of the data from the Alliance of Automobile 
Manufacturers that included a Cadillac SRX with, most recently, a 3.6 
liter V6 engine, most of the data is from smaller displacement 
vehicles. Therefore, the range of data would need to be expanded to the 
mid-size and large car, and large truck to even begin to develop a 
default credit value.
    Second, similar to high efficiency exterior lighting, the type of 
and number of electrical accessories on the vehicle may cause 
significant variability in the base electrical load and, consequently, 
the level of reduction and associated benefit of high efficiency 
alternator technology. However, unlike high efficiency exterior 
lighting with a limited amount of components, the vehicle components 
and accessories that affect high efficiency alternator load are 
seemingly unlimited. As the information from Denso suggests, there are 
some typical standard components but the list of standard versus 
optional components changes depending on manufacturer, nameplate and 
trim level (e.g., optional accessories on a lower trim level vehicle 
may be standard on a upper/luxury trim level vehicle). This makes it 
difficult to develop a default value given this level of variability.
    Third, high efficiency alternators present the opportunity for 
manufacturers to add vehicle content that does not contribute to 
reducing fuel consumption or CO2 emissions. Due to the extra 
electrical capacity resulting from using the high efficiency 
alternator, other content (e.g., seat heaters/coolers, cup holder 
cooler/warmers, higher amplification sound system) can be added that 
may increase consumer value, however, that consumer value is unrelated 
to reducing fuel consumption or CO2 emissions. This 
potential for electrical load ``backsliding'' can counteract the 
benefits of a high efficiency alternator, and can also potentially 
affect mass reduction depending on the mass of the added content.
    A good example of a beneficial use of additional electrical load is 
the synergy between solar panels and active cabin ventilation. The 
solar panel can be used to power active cabin ventilation system motors 
but the amount of power produced by the panel may exceed the motor 
power requirements. Moreover, the active cabin ventilation system is 
only effective for the hot/sunny summer portion of the year. Rather 
than directing this excess power to other

[[Page 62731]]

non-fuel consumption related content (or wasting it), we are 
incentivizing manufacturers to use this excess power for battery 
charging to drive the wheels, and thus displace fuel and CO2 
emissions.
    However, unlike a solar panel, the high efficiency alternator 
supplies power to many vehicle features, and the EPA does not wish to 
directly regulate the electrical usage on vehicles in order to prevent 
``load backsliding''. This load backsliding could convert a fuel 
efficient technology into one that is detrimental to CO2 
emissions reductions and fuel economy improvements. Because of this 
uncertainty the agencies are not adding high efficiency alternators to 
the defined technology list. However, manufacturers may request credits 
for high-efficiency alternators using the case-by-case procedures for 
technologies not on the defined technology list. There are two general 
issues, at a minimum, which a manufacturer would need to consider and 
address in such a request. First, the manufacturer would need to 
consider the level of alternator efficiency improvement. As stated by 
the Alliance of Automobile Manufacturers, current alternator 
efficiencies are in the range of ``60% to 64%, with high efficiency 
models having ratings above 68% VDA.'' Therefore, any request for high 
efficiency alternator credit should significantly exceed current 
alternator technology efficiency. The 68% VDA number stated by the 
Alliance of Automobile Manufacturers seems to be an appropriate 
starting point given current technology although EPA would make a 
specific determination as to the amount of needed improvement when 
evaluating a specific off-cycle credit application, and so is not 
making any final determination here. Second, manufacturers should 
ensure proper accounting of vehicle components and accessories and 
associated loads. A good example of this is Table 1 in the comments 
from Denso that identifies the content loads and their occurrence on 
the 2-cycle test versus real world. The manufacturer may need to 
perform this type of comparison on an annual basis so that there is a 
clear assessment of load content adjustments over time to minimize 
electrical load ``backsliding'' (i.e., adding more content due to the 
availability of additional load capacity) as discussed above.
b. Transmission Oil Cooler Bypass Valve
    The transmission oil cooler is used on vehicles to cool the 
transmission fluid under heavy loads, especially by large trucks during 
towing or large payload operations. As stated by the Alliance, one of 
the drawbacks is that this system operates continuously even under 
conditions where faster warm-up, such as cold conditions, would be 
beneficial. Therefore, the Alliance comments suggested that we add 
bypass valves for transmission oil coolers to the pre-defined 
technology list since ``a bypass valve for the transmission oil cooler 
allows the oil flow to be controlled to provide maximum fuel economy 
under a wide variety of operating conditions.'' They suggested a credit 
of 0.3 g/mi CO2 based on General Motors (GM) engineering 
development and that this credit could be additive with active 
transmission warm up strategy.
    The reason we are not including this technology on the pre-defined 
technology list is lack of available data and multiple methodologies 
for implementation that make determining an appropriate credit value 
difficult. As stated by the Alliance, ``bypass valves are not currently 
commonly used with transmission oil coolers.'' As a result, there is 
very limited data on the performance of such systems other than the 
engineering data cited by the Alliance. Also, the bypass valve could be 
implemented passively (e.g., viscosity based), actively (e.g., valve 
controllers based on temperature or viscosity), or by some other smart 
design. Consequently, depending on the implementation method, the 
credit value may not correspond effectively to the level of 
performance.
    However, this technology can be demonstrated using 5-cycle or 
alternate demonstration methods. Therefore, we recommend that 
manufacturers seeking credit for this technology separately or in 
conjunction with active transmission warm-up credits explore this 
approach.
c. Electronic Thermostat
    Porsche stated in their comments that there is ``potential GHG 
benefit for electronic thermostat * * * in configurations which do not 
include an electric water pump.'' In lieu of a traditional mechanical 
water pump, an electric water pump facilitates engine coolant flow 
without the penalty of using an energy-sapping belt driven system. 
However, for systems that use a mechanical water pump, an electronic 
thermostat could be used in lieu of an electric water pump to optimally 
control the flow of coolant (e.g., close off coolant flow to the 
radiator when the engine is cold). Porsche requested that the agencies 
allow credit for this technology irrespective of the other cooling 
system specifics (e.g., mechanical or electric water pump).
    This technology is not on the pre-defined technology list, nor does 
this appear to be the intent of Porsche's comments. As such, the 
electronic thermostat can be demonstrated using 5-cycle or alternate 
demonstration methods. Therefore, we agree with Porsche and, if a 
benefit for the electronic thermostat regardless of the type of water 
pump used can be demonstrated, the electronic thermostat would be 
eligible under the procedures for evaluating technologies not on the 
pre-defined technology list.
d. Other Vehicle Relays
    Honda requested that we consider allowing credit for other 
electrical relays on the vehicle such as those used for power windows, 
wiper motors, power tailgate, defroster, and seat heaters. However, 
Honda states that they are unsure of how to measure the impact 
suggesting that lifetime usage data might be a basis to support the 
credit granted.
    In response, we feel that granting credits for other vehicle relays 
is best considered using the demonstration methods for evaluating 
technologies not on the predefined technology list.
    The confounding issue, as Honda points out in their comments, is 
how to quantify the benefit and, further, how to directly relate this 
benefit to fuel consumption savings. The complexity of identifying 
single and multiple relay impact is a daunting task and must be 
considered when pursuing this path. Further, the use of lifetime usage 
data only captures activity but does not couple this activity with a 
gram-per-mile CO2 benefit, thus falling short of 
demonstrating direct savings. Therefore, although the granting of 
credit is possible, these issues, and any others, would need to be 
addressed before credit is granted for other vehicle relays.
e. Brushless Motor Technology for Engine Cooling Fans
    The comments from Bosch advocated for adding brushless motor 
technology for engine cooling fans to the pre-defined technology list. 
In their comments, Bosch stated that the current baseline technology is 
series-parallel brushed motors requiring 149 watts to operate. By 
switching to a brushless engine cooling fan motor, the wattage 
requirement is reduced to 68 watts for a savings of 87 watts, according 
to Bosch. Bosch reduced this number further to 81.2 watts since they 
considered a range of series-parallel brushed motors with varying 
wattage values. Based on this savings and Bosch's assumption that 
reducing electrical load by 30 watts saves 0.1 mile per gallon, Bosch 
projected a fuel

[[Page 62732]]

savings of 0.27 miles per gallon. Using our load reduction assumption 
of reducing 100 watts saves 0.7 gram per mile of CO2, this 
equates to a credit of 0.56 gram per mile of CO2.
    After consideration of Bosch's comments and the data provided 
showing potential benefits, it is not clear from the data provided if 
this would be the actual benefit once this technology is implemented. 
Absent real-world vehicle data, it is difficult to determine what the 
baseline and, consequently, the resulting benefit would be. In 
addition, it is likely that some or all of the benefit of brushless 
motor technology for engine cooling fans is captured on the 2-cycle 
test procedures.
    Consequently, we are not adding brushless motor technology for 
engine cooling fans to the pre-defined technology list due to 
insufficient data on real-world, power requirements, activity profiles, 
and test data demonstrating the 2-cycle versus 5-cycle benefits. These 
factors prevent us from determining a default credit value necessary 
for addition to the off-cycle technology menu. A manufacturer that 
believes its engine cooling fan brushless motor merits credit can 
request it using the demonstration methods for technologies not on the 
predefined technology list.
f. Integral Fuel Saving Technologies and Advanced Combustion Concepts
    The Global Automakers and Ford Motor Company encouraged the 
agencies to consider granting credit for integral fuel saving 
technologies and advanced combustion concepts (e.g., camless engines, 
variable compression ratio engines, micro air/hydraulic launch assist 
devices, advanced transmissions) using demonstration methods for 
technologies that are not on the predefined technology list. Both 
parties took issue with our statements in the NPRM Preamble (see 76 FR 
75024):

``EPA proposes that technologies integral or inherent to the basic 
vehicle design including engine, transmission, mass reduction, passive 
aerodynamic design, and base tires would not be eligible for credits. 
EPA believes that it would be difficult to clearly establish an 
appropriate A/B test (with and without technologies) for technologies 
so integral to the basic vehicle design. EPA proposes to limit the off-
cycle program to technologies that can be clearly identified as add-on 
technologies conducive to A/B testing.''

    These commenters urged EPA to allow demonstration of benefits using 
some alternative testing or analytical method, or to provide an 
opportunity to perform some type of demonstration, for integral fuel 
saving technologies and advance combustion concepts.
    In response, since these methods are integral to basic vehicle 
design, there are fundamental issues as to whether they would ever 
warrant off-cycle credits. Being integral, there is no need to provide 
an incentive for their use, and (more important), these technologies 
would be incorporated regardless. Granting credits would be a windfall. 
As we stated in the NPRM Preamble (see 76 FR 75024), these technologies 
are included in the base vehicle design to meet the standard and it is 
consequently inappropriate for these types of technologies to receive 
off-cycle credits. EPA (in coordination with NHTSA) will continue to 
track the progress of these technologies and attempt to collect data on 
their effectiveness and use.
g. Congestion Avoidance Devices, Other Interactive, Driver-Based 
Technologies and Driver-Selectable Features
    As mentioned above, many commenters advocated for the inclusion of 
additional technologies on the off-cycle credit defined technology list 
such as congestion avoidance, interactive/driver-based technologies, 
which provide information to the driver that the driver may use to 
alter his/her driving route or technique, and driver-selectable 
technologies, which cause the vehicle to operate in a different manner.
    Daimler commented that the agencies should provide ``congestion 
mitigation credits based on crash avoidance technologies,'' because 
crash avoidance technologies can potentially reduce traffic congestion 
associated with motor vehicle collisions and thus, ``similar to off-
cycle technologies,'' provide ``significant CO2 and fuel 
consumption benefits.'' \292\ Daimler argued that doing so was within 
both agencies' authority, referring to the authority under which the 
agencies had proposed off-cycle credits.\293\ Daimler provided a menu 
of suggested congestion reduction credit values of 1.0 g/CO2 
per mile for its ``Primary Longitudinal Assistance Package'' (comprised 
of forward collision warning plus adaptive brake assist) and an 
additional 0.5 g/CO2 per mile for its ``Advanced 
Longitudinal Assistance Package'' (the primary package plus autonomous 
emergency braking and adaptive cruise control), based on calculations 
using figures from its own analysis of the effectiveness of these 
technologies and from a German insurance institute,\294\ along with 
values for other congestion mitigation technologies such as driver 
attention monitoring and adaptive forward lighting.\295\
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    \292\ Daimler, EPA Docket  EPA-HQ-OAR-2010-0799-9483, 
at 10.
    \293\ Id. at 11, 17.
    \294\ Id. at 13-14.
    \295\ Id. at 14-16.
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    In addition to requesting that the agencies create a new category 
of credits, the comment further addressed means of evaluating and 
approving applications for such credits. Daimler suggested that NHTSA 
require manufacturers to submit data ``specific to [their] product 
offerings showing that [their] technology is effective in reducing 
vehicle collisions,'' and that ``NHTSA may approve the application and 
determine the amount of the credit'' and determine whether the 
technology is ``robust and effective in terms of crash avoidance and 
the consequent fuel savings.'' \296\ Daimler suggested that NHTSA's 
review process for such information could be considerably less 
stringent than that for ``regulation to mandate new technology and/or 
to link technology directly to fatalities or injuries,'' because 
fatalities and injuries would not be at issue for congestion mitigation 
credits.\297\ Instead, Daimler stated that ``technologies [should be] 
appropriate if they can reasonably be shown to avoid accidents, and 
thereby reduce congestion and its associated fuel consumption and 
CO2 emissions.'' \298\
---------------------------------------------------------------------------

    \296\ Id. at 15.
    \297\ Id.
    \298\ Id.
---------------------------------------------------------------------------

    The agencies agree that there is a clear nexus between congestion 
mitigation and fuel/CO2 savings for the entire on-road 
fleet. It is less clear, however, whether there is a calculable 
relationship between congestion mitigation and fuel/CO2 
savings directly attributable to individual vehicles produced by a 
manufacturer, or even to a manufacturer's fleet of vehicles. Daimler 
argued that emissions of 6.0 gCO2/mi could be averted if all 
accidents were avoided. However, even assuming such a result were 
achievable, Daimler agreed that attributing those fuel consumption/
CO2 benefits from reduced traffic congestion to specific 
individual technologies on specific vehicles would be difficult.
    NHTSA has extensive familiarity with the safety technologies 
usually associated with crash avoidance, having required some (most 
notably, electronic stability control) as standard equipment on all 
newly manufactured light vehicles, and being deeply engaged in research 
on others, including the

[[Page 62733]]

braking technologies mentioned in Daimler's comment. When NHTSA's 
research indicates sufficient maturity of a crash avoidance technology, 
the agency may either promote its use through its New Car Assessment 
Program (NCAP) or mandate its use by issuing a Federal Motor Vehicle 
Safety Standard (FMVSS) requiring the technology on all or some 
categories of new vehicles.
    Under the NCAP program, NHTSA tests new vehicles to determine how 
well they protect drivers and passengers during a crash, and how well 
they resist rollovers. These vehicles are then rated using a 5-star 
safety rating system. Five stars indicate the highest safety rating; 
one star, the lowest. In addition, NHTSA began in model year 2011 
identifying on its Web site, www.SaferCar.gov, new vehicles equipped 
with any of three recommended advanced crash avoidance technologies 
that meet the agency's established requirements. These technologies, 
Electronic Stability Control, Forward Collision Warning, and Lane 
Departure Warning, can help drivers avoid crashes.
    Additional technologies may be added to the NCAP list of crash 
avoidance technologies when there is sufficient information and 
analysis to confirm their safety value. NHTSA, for example, is 
carefully analyzing advanced braking systems of the type discussed in 
Daimler's comments and could decide in the near future that they are 
ripe for inclusion in NCAP. Alternatively, NHTSA may conclude that such 
technologies are sufficiently developed, their safety benefits 
sufficiently clear, and relevant test procedures sufficiently defined 
that they should be the subject of a mandatory safety standard. NHTSA 
could not render a determination on such a request without thoroughly 
testing the technology as applied in that specific model and developing 
a specialized benefits analysis. The agency's higher priority would 
clearly have to be analyzing the technologies it found to offer great 
safety promise on a broader basis and developing standardized tests for 
those technologies. Therefore the agencies believe that evaluation of 
crash avoidance technologies is better addressed under NHTSA's vehicle 
safety authority than under a case-by-case off-cycle credit process.
    Furthermore, the A/C efficiency, off-cycle, and pickup truck credit 
provisions being finalized by the agencies are premised on the 
installation of specific technologies that directly reduce the fuel 
consumption and CO2 emissions of the specific vehicles in 
which they are installed. For all of these credits, the amount of GHG 
emission reduction and fuel economy improvement attributable to the 
technology being credited can be reliably determined, and those 
improvements can be directly attributed to the improved fuel economy 
performance of the vehicle on which the technology is installed. Thus, 
for a technology to be ``counted'' under the credit provisions, it must 
make direct improvements to the performance of the specific vehicle to 
which it is applied. The agencies have never considered indirect 
improvements \299\ for the fleet as a whole, and did not discuss that 
possibility in the proposal. The agencies believe that there is a very 
significant distinction between technologies providing direct and 
reliably quantifiable improvements to fuel economy and GHG emission 
reductions, and technologies which provide those improvements by 
indirect means, where the improvement is not reliably quantifiable, and 
may be speculative (or in many instances, non-existent), or may provide 
benefit to other vehicles on the road more than for themselves. As the 
agencies have reiterated, and many commenters have likewise maintained, 
credits should be available only for technologies providing real-world 
improvements, the improvements must be verifiable, and the process by 
which credits are granted and implemented must be transparent.
---------------------------------------------------------------------------

    \299\ i.e. improvements that improve the fuel economy or GHG 
emissions of other vehicles on the road.
---------------------------------------------------------------------------

    None of these factors would be satisfied for credits for these 
types of indirect technologies used for crash avoidance systems, 
safety-critical systems, or other technologies that may reduce the 
frequency of vehicle crashes. The agencies are consequently not 
providing off-cycle credits potentially attributable to crash avoidance 
systems, safety-critical systems, or technologies that may reduce the 
frequency of vehicle crashes. . Therefore, the agencies are not 
providing off-cycle credits for technologies and systems including, but 
not limited to, Electronic Stability Control, Tire Pressure Monitoring 
System, Forward Collision Warning, Lane Departure Warning and/or 
Intervention, Collision Imminent Braking, Dynamic Brake Support, 
Adaptive Lighting, Blind Spot Detection, Adaptive Cruise Control, Curve 
Speed Warning, Fatigue Warning, systems that reduce driver distraction, 
and any other technologies that may reduce the likelihood of crashes.
    Thus, manufacturers will not receive credits or fuel economy 
improvement adjustments for installing these technologies. If a 
manufacturer has an off-cycle technology that is not included on this 
list and brings it to the agencies for assessment, NHTSA will determine 
whether it is ineligible for a credit or adjustment by reason of the 
agency's judgment that it is related to crash avoidance systems, is 
related to motor vehicle safety within the meaning of the National 
Traffic and Motor Vehicle Safety act, as amended, or may otherwise 
reduce the possibility and or frequency of vehicle crashes.
    The agencies believe that the advancement of crash avoidance 
systems specifically is best left to NHTSA's exercise of its vehicle 
safety authority. NHTSA looks forward to working with manufacturers and 
other interested parties on creating opportunities to encourage the 
general introduction of these technologies in the context of the NCAP 
program and possible safety standards. To that end, the agency would 
welcome relevant data and analysis from interested parties.
    The agencies also received comments related to other technologies 
that may reduce CO2 emissions and fuel consumption by 
reducing traffic congestion or that provide information to the driver 
with which the driver may change his or her driving technique or the 
route driven (more direct route or traffic avoidance \300\). All 
commenters addressing these issues acknowledged the difficulty of 
quantifying benefits associated with congestion mitigation and driver-
selectable technologies.\301\ Commenters generally noted that the off-
cycle credit provisions in the MYs 2012-2016 GHG rule, and the off-
cycle credit provisions proposed in this rulemaking did not appear to 
cover technologies such as in-dash GPS navigation systems, driver 
coaching and feedback systems (such as ``eco modes''), vehicle 
maintenance alerts and reminders, and ``other automatic and driver-
initiated location content-

[[Page 62734]]

based technologies that have been shown to reduce fuel consumption.'' 
\302\ These commenters requested the opportunity to work with the 
agencies at developing such procedures.\303\ With regard to EPA's 
request for comment on whether the regulatory text should clarify how 
EPA treats driver-selectable modes,\304\ the Alliance stated that it 
believed there was no need to clarify regulatory text, but that EPA 
should simply update or refine informal guidance as necessary to 
address issues as they develop.\305\ MEMA stated that there was 
``precedent for providing CAFE credits based on a projected usage 
factor of a fuel saving device,'' citing EPA letters regarding the 
impact of a shift indicator light on fuel economy.\306\
---------------------------------------------------------------------------

    \300\ Agencies distinguish between congestion mitigation and 
congestion avoidance. Congestion mitigation affects the fuel economy 
and GHG emissions mainly of other vehicles on the road, whereas 
congestion avoidance affects the fuel economy mainly of the single 
vehicle with the technology.
    \301\ Alliance, Docket No. NHTSA-2010-0131-0262, at 11 (stating 
that it did not seem like there is sufficient information at this 
time to define specific credit opportunities); Ford, Docket No. 
NHTSA-2010-0131-0235, at 16 (stating that ``quantifying the benefit 
is an acknowledged challenge''); MEMA, Docket No. NHTSA-2010-0131-
[fill in], at 9 (stating that the benefits from these technologies 
``cannot be quantified literally* * *'').
    \302\ See, e.g., MEMA at 9; Ford at 16; Garmin, Docket No. 
NHTSA-2010-0131-0245, at 2-3 (requesting an alternate way for 
manufacturers to prove the real-world fuel economy and 
CO2 benefits of in-dash GPS navigation systems (with or 
without traffic avoidance) to the agencies besides the ways laid out 
in the off-cycle credit approval provisions at 40 CFR 86.1866-
12(d)(2) and (d)(3)).
    \303\ Alliance at 11, Ford at 16, MEMA at 9.
    \304\ See 76 FR 75025.
    \305\ Id. at 90.
    \306\ MEMA at 9.
---------------------------------------------------------------------------

    At proposal, EPA addressed the possibility of evaluating 
applications for off-cycle credits for technologies involving driver 
interaction, indicating that ``driver interactive technologies face the 
highest demonstration hurdle because manufacturers would need to 
provide actual real-world usage data on driver response rates.'' 76 FR 
75025. The agencies still believe it to be highly unlikely that off-
cycle credits could be justified for these non-safety technologies. 
This issue is addressed in detail in section III.C.5.ii below. These 
technologies do not improve the fuel efficiency of the vehicle under 
any given operating condition, but rather provide information the 
driver may use to change the driving cycle over which the vehicle 
overrates which, in turn, may improve the real-world fuel economy 
(miles driven per gallon consumed)/CO2 emissions (per mile 
driven) compared to what the fuel economy and CO2 emissions 
per mile would have been had the driver not used the information or if 
the technology was not on the vehicle. The agencies believe, for 
example, there would be a number of specific challenges to quantifying 
the effect on fuel economy and CO2 emissions per mile driven 
of GPS/real time traffic navigation systems. First, given that the 
systems available today are available through subscription services, 
the manufacturer would need to prove that the vehicle operators will 
pay for such a service for the useful life of the vehicle or the 
manufacturer would have to provide the service at no cost to vehicle 
operators over the useful life of the vehicle. Second, there would need 
to be an extensive data collection program to show that drivers were 
using the system and that they were taking alternate routes that 
actually improved fuel economy. It would be necessary to determine the 
level of fuel economy improvement as well as to show evidence that this 
level of improvement would be expected to be achieved by vehicle 
operators over the useful life of the vehicle. In addition, it would be 
necessary to show the sampling is representative, the effects are 
statistically significant, and the results are reproducible. Third, the 
real time traffic information must be proven to be accurate and 
assurances provided that the level of accuracy would be maintained over 
the useful life of the vehicle. Inaccurate information might lead to 
poorer fuel economy. Fourth, anecdotal information indicates that 
navigations systems are most often used to direct the driver using the 
shortest temporal path. The agencies believe that only rarely would a 
driver choose the route that achieves the highest fuel economy over one 
that takes the least time--especially if the time savings would be 
significant. In addition, other factors may need to be demonstrated, 
such as the effect of these technologies in differing geographical 
regions with various road and traffic patterns and the effect of these 
technologies during different parts of the day (e.g., rush hour vs. 
mid-day). It is for these reasons that the agencies believe that 
meeting the burden of proof for these class of technologies will be 
extremely difficult. Other ``driver interactive'' off-cycle 
technologies will present similar challenges. These may include, but 
are not limited to, in-dash GPS navigation systems, driver coaching and 
feedback systems such as ``eco modes,'' fuel economy performance 
displays and indicators, or haptic devices such as, for example, 
throttle pedal feedback systems, vehicle maintenance alerts and 
reminders, and other automatic or driver-initiated location content-
based technologies that may improve fuel economy.
    Finally, the agencies requested comments on the treatment of driver 
selectable technologies as stated in 76 FR 75089: ``EPA is requesting 
comments on whether there is a need to clarify in the regulations how 
EPA treats driver selectable modes (such as multi-mode transmissions 
and other user-selectable buttons or switches) that may impact fuel 
economy and GHG emissions.'' If we did not receive comments to the 
contrary, we also stated that ``EPA would apply the same approach to 
testing for compliance with the in-use CO2 standard, so 
testing for the CO2 fleet average and testing for compliance 
with the in-use CO2 standard would be consistent.''
    The current EPA policy on select-shift transmissions (SSTs) and 
multimode transmissions (MMT), and shift indicator lights (SILs) is 
under Manufacturer Guidance Letter CISD-09-19 (December 3, 2009) and 
supersedes several previous letters on both of these topics. For, SSTs 
and MMTs, the manufacturer must determine the predominant mode (e.g., 
75% of the drivers will have at least 90% of vehicle shift operation 
performed in one mode, and, on average, 75% of vehicle shift operation 
is performed in that mode), using default criteria in the guidance 
letter or a driver survey. If the worst-case mode is determined to be 
the predominant mode, the manufacturer must test in this mode and use 
the results with no benefit from the driver-selectable technology 
reflected in the fuel economy values. If the best-case mode is 
determined to be the predominant mode, the manufacturer may test in 
this mode and use the results with the full benefit of the driver-
selectable technology reflected in the fuel economy values. If the 
predominant mode is not discernible, the manufacturer must test in all 
modes and harmonically average the results (Note: in most cases, there 
are only two modes so this becomes a 50/50 average between best- and 
worst-case modes). Based on the EPA decision process under CISD-09-19, 
both the label and CAFE/GHG could reflect 0, 50, or 100% of the benefit 
of a driver-selectable device. However, when calculating CAFE, only the 
2-cycle test results (e.g., Federal Test Procedure (FTP) and Highway 
Fuel Economy test (HWFET)) are used. Thus, the higher fuel economy 
results would only affect the 2-cycle testing values for CAFE purposes. 
For SILs, the manufacturer must perform an instrumented vehicle survey 
on a prototype vehicle to determine the appropriate shift schedule to 
optimize fuel economy. Previous guidance for SILs contained the option 
for A-B testing with and without the SIL. This has been eliminated in 
the latest guidance, allowing only an instrumented vehicle survey as 
the basis for determining SIL related fuel economy improvements. 
However, for purposes of determining CAFE compliance reporting values, 
the 2-cycle test results (e.g., Federal Test Procedure

[[Page 62735]]

(FTP) and Highway Fuel Economy test (HWFET)) are used to align 
statutory provisions allowing for these two test cycles when 
determining program compliance. Therefore, only fuel economy 
improvement values identified on during the FTP and HWFET test cycles 
would be applicable to the CAFE program.
    In response to EPA's request for comment on whether the regulatory 
text should clarify how EPA treats driver-selectable modes, the 
Alliance stated that it believed there was no need to clarify 
regulatory text, but that EPA should simply update or refine informal 
guidance as necessary to address issues as they develop.\307\ MEMA 
stated that there was ``precedent for providing CAFE credits based on a 
projected usage factor of a fuel saving device,'' citing EPA letters 
regarding the impact of a shift indicator light on fuel economy.\308\ 
Finally, the Alliance provided data from General Motors on their HVAC 
Eco-Mode button based on On-Star data from in-use vehicles (n=3,500; 
50.3% of the drivers use the system 90% of the time or greater, 57.4% 
use it 50% of the time or greater, and 34% never use it). Based on the 
data supplied, they anticipate a benefit of 1.8 g/mi and, with 50% of 
the people using the HVAC Eco-Mode, a credit of 0.9 g/mi is warranted 
(i.e., 1.8 x 0.5).
---------------------------------------------------------------------------

    \307\ Id. at 90.
    \308\ MEMA at 9.
---------------------------------------------------------------------------

    On the comments from the Alliance that there is no need to clarify 
regulatory text and the informal guidance should be updated or refined 
as necessary, we agree that the current regulations and the latest 
guidance letter, CISD-09-19, appropriately supersedes previous guidance 
letters and addresses select-shift transmissions (SSTs) and multimode 
transmissions, and shift indicator lights (SILs). Therefore, we will 
not attempt to clarify the regulatory text and we will continue to 
update our guidance as necessary.
    Regarding the comment from MEMA that there is ``precedent for 
providing CAFE credits based on a projected usage factor of a fuel 
saving device,'' citing EPA letters regarding the impact of a shift 
indicator light on fuel economy, the manufacturer guidance letters 
referenced by MEMA (CD-82-10 (LD) and CD-83-10(LD)) have been 
superseded by CISD-09-19. Thus, the procedures in CISD-09-19 would be 
the applicable guidance for comparison. As previously mentioned, CISD-
09-19 requires the manufacturer to 1) determine the potential benefit 
of a driver selectable feature and 2) discern the predominant mode in-
use. This process is very similar and consistent with the process we 
proposed for demonstrating technologies not on the defined technology 
list. Therefore, we agree with MEMA that there is a precedent within 
our current policy to consider the influence of driver-selectable 
features on test cycle results.
    For the comments from the Alliance on the HVAC Eco-Mode \309\, as 
discussed above, the existing policy in CISD-09-19 requires using 
instrumented vehicle survey data to determine the predominant mode and 
test the vehicle in this mode to determine the fuel economy benefits. 
This is very similar to the process we are using for alternate method 
demonstrations under the off-cycle credit program. Therefore, this 
further supports our previous assertion for addressing driver-
selectable technologies under our alternate method demonstration 
process.
---------------------------------------------------------------------------

    \309\ Alliance, Docket No. NHTSA-2010-0131-0262, page 38 of 93; 
Appendix 2, page 13 of 19.
---------------------------------------------------------------------------

    However, we want to emphasize that although we acknowledge the 
similarities between the procedures under the existing policy in CISD-
09-19 and the procedures used in the off-cycle program, our discussion 
of driver-selectable devices is completely limited to their potential 
impact on off-cycle credits. The procedures used to conduct FTP and 
HFET testing for the purpose of determining CAFE and GHG values for a 
model type are not at issue here. Following our request for comments on 
how we handle these devices when testing on the FTP and HFET, comments 
suggested no changes to existing guidance are needed. We agree and will 
continue to handle these devices on a case-by-case basis consistent 
with the existing policy in CISD-09-19. In addition, the existing 
guidance and FTP/HFET testing policy in CISD-09-19 is not applicable in 
the context of the off-cycle program since driver-selectable 
technologies will always require the need for estimates of real-world 
customer usage to receive off-cycle credit. Therefore, in summary we 
believe that there is a precedent set by the existing policy in CISD-
09-19 to determine a usage in-use but that the existing policy in CISD-
09-19 has no bearing on the credit determinations in the off-cycle 
program, and the converse (i.e., the off-cycle credit program affecting 
existing policy in CISD-09-19). Specifically, the section entitled 
``Alternative Methods for Determination of Usage Rates'' in CISD-09-19 
that allows an instrumented vehicle survey or on-board data collection 
are most consistent with the procedures for the off-cycle program as 
discussed in III.C.5.iii. and 40 CFR Sec.  86.1869-12(c).
    In the context of the off-cycle program, the test values applicable 
to a vehicle's fuel economy label value are mostly independent from 
those generated for the CAFE compliance; where the 2-cycle results for 
compliance and the combination of all 5-cycle test results are used for 
the fuel economy label. However, as indicated with other technologies 
included in the finalized pre-defined technology menu, fuel economy 
improvements are reflected in the 2-cycle test result values used for 
CAFE compliance revealing the need to account for the improved 2-cycle 
test results when considering off-cycle credits for driver-selectable 
technologies. Therefore, if a manufacturer is requesting off-cycle 
credit but has previously used the improved fuel economy test results 
under the existing policy in CISD-09-19 for a driver-selectable 
technology, the manufacturer must use the 2-cycle results determined 
under CISD-09-19 for both the A and B values of the FTP and HWFET A-B 
tests to determine the potential benefit of the driver selectable 
technology when requesting off-cycle credit. This approach effectively 
negates the 2-cycle results and benefits, and which is consistent with 
the treatment for the other off-cycle technologies where credit is not 
granted for improvements reflected on current 2-cycle test procedures.
    Accordingly, we are allowing driver-selectable technologies to be 
eligible for credit in the off-cycle credit program using procedures 
and processes demonstrating technologies not on the defined technology 
list using alternative methods and the public process. Under these 
provisions, the manufacturer must determine the benefit of the driver-
selectable technology using approved methodologies and a usage factor 
for the technology using an instrumented vehicle survey, and applying 
this factor to the measured benefit to estimate and request credit. As 
discussed above, if a manufacturer has previously received some fuel 
economy improvement as a result of the decision process under CISD-09-
19, the manufacturer must use the 2-cycle results from that decision 
process as the A and B values for the 2-cycle A-B tests to estimate the 
off-cycle credit. Consequently, if a manufacturer uses 5-cycle testing 
to demonstrate the benefit of a driver selectable technology, the 
manufacturer must use the previously determined 2-cycle test values for 
the FTP and HWFET A-B tests, which effectively only captures the 
benefit from the remaining three cycles of 5-cycle testing (i.e., US06,

[[Page 62736]]

SC03, Cold FTP). The usage factor would then be applied to these 5-
cycle results (or any other approved methodology for non-5-cycle test 
methodologies). For driver-selectable technologies, the manufacturers 
must adhere to all criteria and requirements as discussed below in 
III.C.5.iii. and 40 CFR Sec.  86.1869-12(b) and (c).
    While we are allowing credit for driver-selectable and driver 
interactive technologies (including congestion avoidance), the agencies 
believe that applicants would face formidable burdens of showing that 
improvements over baseline are legitimate, reliably quantifiable, 
certain, and transparently demonstrable as described above. As 
identified in CISD-09-19, there will need to be an extensive data 
collection program to show that drivers are using the technology and to 
generate a reliable usage factor, if this has not previously been 
established. In addition, the usage factor applied to the benefit from 
the driver-selectable technology will tend to lower the amount of 
credit unless a manufacturer can demonstrate 100% usage of a driver-
selectable technology. Therefore, depending on the level of benefit, 
the amount of resulting credit could be minimal compared the effort to 
generate the necessary, supporting data, and manufacturers should 
consider this before undertaking this process.
    In summary, the agencies are not adding driver-selectable or 
driver-interactive features to the defined technology list. However, 
driver-selectable and driver-interactive features are eligible for off-
cycle credits using procedures and processes for demonstrating 
technologies not on the defined technology list under the off-cycle 
program as discussed above.
h. Credit for Glass and Glazing Technologies: Concerns With Metallic 
Glazing and Request for Separate Polycarbonate Glazing Credit
    Multiple comments were received with concerns regarding the use of 
metallic glazing from the Crime Victims Unit of California (CVUC), 
California State Sheriffs, Garmin, Honda and TechAmerica. Many 
commenters raised concerns the credit for glazing may unintentionally 
create incentives to use metallic films or small metallic particles to 
achieve reduced vehicle solar heat loading and access the off-cycle 
credit. The commenters indicated this type of metallic glazing can 
potentially interfere with signals for global positioning systems 
(GPS), cell phones, cellular signal based prisoner tracking systems, 
emergency and/or electronic 911 (E911) calls or other signals emanating 
from within or being transmitted to a vehicle's passenger compartment/
cabin. In addition, some commenters cited this concern as the reason 
that the California Air Resources Board (CARB) removed their mandate 
for metallic glazing from the ``Cool Cars'' Regulation in California.
    To address these concerns, the agencies met with the Enhanced 
Protective Glass Automotive Association (EPGAA), which represents 
automotive glass manufacturers and suppliers. The meeting included 
representatives from the automotive glass suppliers Pittsburgh Glass 
Works LLC (PGW), Guardian Industries, and Asahi Glass Company (AGC) to 
discuss the potential concerns with metallic glazing, signal 
interference and/or radio frequency (RF) attenuation (details of this 
meeting are available in EPA docket  EPA-HQ-OAR-2010-0799-
41752 and docket NHTSA-2010-0131). At this meeting, EPGAA provided data 
to the agencies that showed: In general, any glazing material can 
create signal interference and RF attenuation, and depending on the 
situation, RF attenuation and signal interference can occur without the 
presence of metallic glazing material; there was no statistically-
significant increase in signal interference and RF attenuation when 
metallic glazing was used. Furthermore, many vehicles in production 
today are designed with metallic solar control deletion areas or zones 
around the window edges and/or defined areas in either the front 
windshield of rear backlight to minimize signal interference and RF 
attenuation. Following the meeting, EPGAA representatives provided a 
list of vehicles currently utilizing metallic glazing demonstrating to 
the agencies that this technology is currently in-use without 
significant signal interference/RF attenuation issues being raised. 
EPGAA representatives indicated the technology is especially prevalent 
in Europe and with no significant consumer complaints.
    In addition, the agencies received comments from the California Air 
Resources Board (CARB) in response to the specific comments submitted 
to the proposal regarding the California Cool Cars Regulation 
indicating the program was withdrawn as a result of the metallic solar 
glazing concerns (see EPA docket EPA-HQ-OAR-2010-0799). CARB 
stated the mandate for metallic glazing in the Cool Cars Regulation was 
withdrawn was primarily related to the timing of when the concerns 
regarding metallic glazing were raised in relation to the proposed 
mandate's targeted finalization than to substantive concerns. CARB also 
clarified that they were not requiring a specific type of glazing and 
that a performance-based approach ultimately adopted in the Advanced 
Clean Cars Regulation accomplished the same objectives as proposed 
under the Cool Cars Regulation without the need for a mandate. In 
addition, CARB performed testing of signal interference and RF 
attenuation by CARB (see test results in EPA docket  EPA-HQ-
OAR-2010-0799-41752) echoing the findings of the automotive glass 
industry that there is ``[n]o effect of reflective glazing observed on 
monitoring ankle bracelets or cell phones'' and that any ``[e]ffects on 
GPS navigation devices [are] completely mitigated by use of [the] 
deletion window'' placing either the device or the external antennae in 
this area''. CARB urged EPA to finalize the proposed credit values for 
glass and glazing as proposed. Finally, CARB issued a formal memorandum 
\310\ confirming the timing related reasons for withdrawing the Cool 
Cars mandate and its test results regarding signal interference and RF 
attenuation, and urging the agencies to finalize the proposed credit 
values for glass and glazing as proposed.
---------------------------------------------------------------------------

    \310\ CARB memorandum available at EPA docket EPA-HQ-
OAR-2010-0799 and NHTSA docket NHTSA-2010-0131.
---------------------------------------------------------------------------

    Based on this information, the agencies are finalizing the proposed 
credit values and calculation procedures for solar control glazing. EPA 
and NHTSA note further the off-cycle credit is performance-based and 
not a mandate for vehicle manufacturers. Manufacturers have options to 
choose from a variety of glazing technologies that meet their desired 
performance for rejecting vehicle cabin solar loading. We reiterate 
that the rule is technology neutral and that none of these potential 
glazing technologies are foreclosed. Second, we did not see evidence 
contravening the information that the automotive glass industry and 
CARB presented showing that there would not be significant adverse 
effects on signal interference and RF attenuation by any of the 
recognized glazing technologies. However, to address the concerns of 
other commenters, we will emphasize to manufacturers that they should 
evaluate the potential for signal interference and RF attenuation when 
requesting the solar control glazing credit to ensure that their 
designs do not cause any interference.
i. Summary of Off-Cycle Credit Values
    As proposed, EPA is finalizing that a CAFE improvement value for 
off-cycle improvements be determined at the fleet

[[Page 62737]]

level by converting the CO2 credits determined under the EPA 
program (in metric tons of CO2) for each fleet (car and 
truck) to a fleet fuel consumption improvement value. This improvement 
value would then be used to adjust the fleet's CAFE level upward. See 
the regulations at 40 CFR 600.510-12. Note that although the table 
below presents fuel consumption values equivalent to a given 
CO2 credit value, these consumption values are presented for 
informational purposes and are not meant to imply that these values 
will be used to determine the fuel economy for individual vehicles.
    Finally, the agencies proposed that the pre-approved menu list of 
off-cycle technologies and default credit values would be predicated on 
a certain minimum percentage of technology penetration in a 
manufacturer's domestic fleet. 76 FR 75381. Commenters persuasively 
argued that such a requirement would discourage introduction and 
utilization of beneficial off-cycle technologies. They pointed out that 
new technologies are often introduced on limited model lines or 
platforms both to gauge consumer acceptance and to gain additional 
experience with the technology before more widespread introduction. 
Requiring levels of technology penetration such as the 10 percent 
proposed for many of the menu technologies could thus create a negative 
rather than positive incentive to deploy off-cycle technologies. The 
agencies agree, and note further that having an aggressive penetration 
rate requirement also raises issues of sufficiency of lead time in the 
early years of the program. The agencies are therefore not adopting 
minimum penetration requirements as a prerequisite to claim default 
credits from the preapproved technology menu.
    Table II-22 shows the list of off-cycle technologies and credits 
and equivalent fuel consumption improvement values for cars and trucks 
that the agencies are finalizing in today's action. The credits and 
fuel consumption improvement values for active aerodynamics, high-
efficiency exterior lighting, waste heat recovery and solar roof panels 
are scalable, depending on the amount of respective improvement these 
systems can generate for the vehicle. The Solar/Thermal control 
technologies are varied and are limited to a total of 3.0 and 4.3 g/mi 
(car and truck respectively) The various pre-defined solar/thermal 
control technologies eligible for off-cycle credit are shown in Table 
II-22 below.

 Table II-22--Off-Cycle Technologies and Credits and Equivalent Fuel Consumption Improvement Values for Cars and
                                                  Light Trucks
----------------------------------------------------------------------------------------------------------------
                                                       Adjustments for cars           Adjustments for trucks
                   Technology                    ---------------------------------------------------------------
                                                       g/mi         gallons/mi         g/mi          gallons/mi
----------------------------------------------------------------------------------------------------------------
+ High Efficiency Exterior Lights* (at 100 watt              1.0        0.000113             1.0        0.000113
 savings).......................................
+ Waste Heat Recovery (at 100W).................             0.7        0.000079             0.7        0.000079
+ Solar Panels (based on a 75 watt solar
 panel)**;
    Battery Charging Only.......................             3.3        0.000372             3.3        0.000372
    Active Cabin Ventilation and Battery                     2.5        0.000282             2.5        0.000282
     Charging...................................
+ Active Aerodynamic Improvements (for a 3%                  0.6        0.000068             1.0        0.000113
 aerodynamic drag or Cd reduction)..............
Engine Idle Start-Stop;
    w/ heater circulation system #..............             2.5        0.000282             4.4        0.000496
    w/o heater circulation system...............             1.5        0.000169             2.9        0.000327
Active Transmission Warm-Up.....................             1.5        0.000169             3.2        0.000361
Active Engine Warm-up...........................             1.5        0.000169             3.2        0.000361
Solar/Thermal Control...........................       Up to 3.0        0.000338       Up to 4.3       0.000484
----------------------------------------------------------------------------------------------------------------
* High efficiency exterior lighting credit is scalable based on lighting components selected from high
  efficiency exterior lighting list (see Joint TSD Section 5.2.3, Table 5-21).
** Solar Panel credit is scalable based on solar panel rated power, (see Joint TSD Section 5.2.4). This credit
  can be combined with active cabin ventilation credits.
# In order to receive the maximum engine idle start stop, the heater circulation system must be calibrated to
  keep the engine off for 1 minute or more when the external ambient temperature is 30 deg F and when cabin heat
  is demanded (see Joint TSD Section 5.2.8.1).
+ This credit is scalable; however, only a minimum credit of 0.05 g/mi CO[ihel2] can be granted.

    Table II-23--Off-Cycle Technologies and Credits for Solar/Thermal
             Control Technologies for Cars and Light Trucks
------------------------------------------------------------------------
                                            Credit (g CO2/mi)
  Thermal control technology   -----------------------------------------
                                        Car                 Truck
------------------------------------------------------------------------
Glass or Glazing..............  Up to 2.9..........  Up to 3.9
Active Seat Ventilation.......  1.0................  1.3
Solar Reflective Paint........  0.4................  0.5
Passive Cabin Ventilation.....  1.7................  2.3
Active Cabin Ventilation*.....  2.1................  2.8
------------------------------------------------------------------------
* Active cabin ventilation has potential synergies with solar panels as
  described in Chapter 5.2 of the joint TSD.

j. Vehicle Simulation Tool
    Chapter 2 of EPA's RIA provides a detailed description of the 
vehicle simulation tool that EPA had developed and has used for the 
final rule. This tool is capable of simulating a wide range of 
conventional and advanced engine, transmission, and vehicle 
technologies over various driving cycles. It evaluates technology 
package effectiveness while taking into account synergy (and dis-
synergy) effects among vehicle components and estimates GHG emissions 
for various combinations of

[[Page 62738]]

technologies. For the MYs 2017 to 2025 GHG rule, this simulation tool 
was used to assist estimating the amount of GHG credits for improved A/
C systems and off-cycle technologies. EPA sought public comment on this 
approach of using the tool for generating some of the credits. The 
agency received no specific comment on the model itself or on the 
documentation of the model. However, based on the comments described in 
the previous section (particularly on allowing scalable credits on off-
cycle technologies), EPA modified and fine-tuned the vehicle simulation 
tool in order to properly capture the amount of scalable GHG reductions 
provided by off-cycle technologies. More specifically, based on the 
comments from the Auto Alliance, EPA used the simulation tool to 
generate scalable credits for the active aerodynamic technology. For 
this final rule, EPA utilized the simulation tool in order to quantify 
the (scalable) credits for Active Aerodynamics, High Efficiency 
Exterior Lights, Solar Panel, and Waste Heat Recovery \311\ more 
accurately. The details of this analysis are presented in Chapter 5.2 
of the Joint TSD.
---------------------------------------------------------------------------

    \311\ This technology was termed `engine heat recovery' at 
proposal.
---------------------------------------------------------------------------

    There are other technologies that would result in additional GHG 
reduction benefits that cannot be fully captured on the combined FTP/
Highway cycle test. These technologies typically reduce engine loads by 
utilizing advanced engine controls, and they range from enabling the 
vehicle to turn off the engine at idle, to reducing cabin temperature 
and thus A/C compressor loading when the vehicle is restarted. Examples 
include Engine Start-Stop, Electric Heater Circulation Pump, Active 
Engine/Transmission Warm-Up, and Solar Control. For these types of 
technologies, the overall GHG reduction largely depends on the control 
and calibration strategies of individual manufacturers and vehicle 
types. EPA utilized the simulation tool to estimate the default credit 
values for the engine start-stop technology. Details of the analysis 
are provided in the chapter 5.2.8.1 of Joint TSD. However, the current 
vehicle simulation tool does not have the capability to properly 
simulate the vehicle behaviors that depend on thermal conditions of the 
vehicle and its surroundings, such as Active Engine/Transmission Warm-
Up and Solar Control. Therefore, the vehicle simulation cannot provide 
full benefits of these technologies on the GHG reductions. For this 
reason, the agency did not use the simulation tool to generate the 
default GHG credits for these technologies, though future versions of 
the model may be more capable of quantifying the efficacy of these off-
cycle technologies as well. As described in Chapter 5 of the Joint TSD, 
the Active Engine/Transmission Warm-up credits were estimated using the 
results from the Ricardo vehicle simulation results.
    In summary, for the MYs 2017 to 2025 GHG final rule, EPA used the 
simulation tool to quantify the amount of GHG emissions reduced by 
improvements in A/C systems and to determine the default credit values 
for some of the off-cycle technologies such as active aerodynamics, 
electrical load reduction, and engine start-stop. Details of the 
analysis and values of these scalable credits are described in Chapter 
5 of Joint TSD. This simulation tool will not be officially used for 
credit compliance purposes (as proposed) because EPA has already made 
several of the credits scalable for the purposes of this final rule. 
However, EPA may use the tool as part of the case-by-case of off-cycle 
credit determination process. EPA encourages manufacturers to use this 
simulation tool in order to estimate the credits values of their off-
cycle technologies.
3. Advanced Technology Incentives for Full-Size Pickup Trucks
    The agencies recognize that the standards for MYs 2017-2025 will be 
challenging for large vehicles, including full-size pickup trucks that 
are often used for commercial purposes and have generally higher 
payload and towing capabilities than other light-duty vehicles. Section 
II.C and Chapter 2 of the joint TSD describe the adjustments made to 
the slope of the truck curve compared to the MYs 2012-2016 rule, 
reflecting these considerations. Sections III.B and IV.E describe the 
progression of the stringency of the truck standards. Large pick-up 
trucks represent are a significant portion of the overall light-duty 
vehicle fleet and generally have higher levels of fuel consumption and 
GHG emissions than most other light-duty vehicles. Improvements in the 
fuel economy and GHG emissions of these vehicles can have significant 
impact on overall light-duty fleet fuel use and GHG emissions. The 
agencies believe that offering incentives in the earlier years of this 
program that encourage the deployment of technologies that can 
significantly improve the efficiency of these vehicles and that also 
will foster production of those technologies at levels that will help 
achieve economies of scale, will promote greater fuel savings overall 
and make these technologies more cost effective and available in the 
later model years of this rulemaking to assist in compliance with the 
standards.
    The agencies are therefore finalizing the proposed approach to 
encourage penetration of these technologies both through the standards 
themselves, but also through various provisions providing regulatory 
incentives for advanced technology use in full-size pick-up trucks. The 
agencies' goal is to incentivize the penetration into the marketplace 
of ``game changing'' technologies for these pickups, including the 
marketing of hybrids. For that reason, EPA, in coordination with NHTSA, 
proposed and is adopting provisions for credits and corresponding 
equivalent fuel consumption improvement values for manufacturers that 
hybridize a significant number of their full-size pickup trucks, or use 
other technologies that significantly reduce CO2 emissions 
and fuel consumption.\312\
---------------------------------------------------------------------------

    \312\ Note that EPA's calculation methodology in 40 CFR 600.510-
12 does not use vehicle-specific fuel consumption adjustments to 
determine the CAFE increase due to the various incentives allowed 
under the program. Instead, EPA will convert the total 
CO2 credits due to each incentive program from metric 
tons of CO2 to a fleetwide CAFE improvement value. The 
fuel consumption values are presented here to show the relationship 
between CO2 and fuel consumption improvements.
---------------------------------------------------------------------------

    Most of the commenters on this issue supported the large truck 
credit concept. Some OEM commenters argued that it should be extended 
to other vehicles such as SUVs and minivans. ICCT, Volkswagen, and CBD 
opposed adopting the proposed incentive, arguing that this vehicle 
segment is not especially challenged by the proposed standards, that 
hybrid systems would readily transfer to it from other vehicle classes, 
and that the credit essentially amounts to an economic advantage for 
manufacturers of large trucks. CBD also commented that this credit 
should be eliminated, since they believe hybrid technology should be 
forced by aggressive standards rather than encouraged through 
regulatory incentives. Other environmental group commenters also 
expressed concern about the real-world impacts of offering this credit, 
and suggested various ways to tailor it to ensure that fuel savings and 
emissions reductions associated with it are genuine.
    We believe that extending the large truck credit to other light-
duty trucks such as SUVs and minivans would greatly expand, and 
therefore dilute, the intended credit focus. The agencies do not 
believe that providing such incentives for hybridization in these 
additional categories is necessary, or that the performance levels 
required of

[[Page 62739]]

non-hybrid technologies eligible for credits are of such stringency 
that extending credits to all or most light-duty trucks would amount to 
anything more than a de facto lowering of overall program stringency. 
Although commenters rightly pointed out that some of these non-truck 
vehicles do have substantial towing capacity, most are not used as 
towing vehicles, in contrast to full-size pickup trucks that often 
serve as work vehicles. Moreover, the smaller footprint trucks fall on 
the lower part of the truck curve, which have a higher rate of 
improvement (in stringency) than the larger trucks, thus making them 
more comparable to cars in terms of technology access and effectiveness 
(as well as not having access to these credits).
    Arguments made by commenters for not adopting the large truck 
technology credit are not convincing. Although there may not be 
inherent reasons for a lack of hybrid technology migration to large 
trucks, it is clear that this migration has nevertheless been slow to 
materialize for practical/economic reasons, including in-use duty 
cycles and customer expectations. These issues still need to be 
addressed by the designers of large pickups to successfully introduce 
these technologies in these trucks, and we believe that assistance in 
the form of a focused, well-defined incentive program is warranted. See 
section III.D.6 and 7 for further discussion of EPA's justification for 
this credit program in the context of the stringency of the truck 
standards.
    Volkswagen commented that any HEV or performance-based credits 
generated by large trucks should not be transferable to other vehicle 
segments, arguing that if compliance for the large truck segment is 
really as challenging as predicted, there should be no excess of 
credits to transfer anyway. This may be the case, but we do not agree 
that it argues for restricting the use of large pickup truck credits. 
We think the sizeable technology hurdle involved and the limited model 
years in which credits are available preclude the potential for credit 
windfalls. Furthermore, neither the size of the large truck market nor 
the size of the per-vehicle credit are so substantial that they could 
lead to a large pool of credits capable of skewing the competition in 
the lighter vehicle market. As described in Section III.D of this 
preamble, EPA will continue to monitor the net level of credit 
transfers from cars to trucks and vice versa in the MYs 2017-2025 
timeframe.
    As proposed, the agencies are defining a full-size pickup truck 
based on minimum bed size and hauling capability, as detailed in 
86.1866-12(e) of the regulations being adopted. This definition is 
meant to ensure that the larger pickup trucks, which provide 
significant utility with respect to bed access and payload and towing 
capacities, are captured by the definition, while smaller pickup trucks 
with more limited capacities are not covered. A full-size pickup truck 
is defined as meeting requirements (1) and (2) below, as well as either 
requirement (3) or (4) below. A more detailed discussion can be found 
in section III.C.3.
    (1) Bed Width--The vehicle must have an open cargo box with a 
minimum width between the wheelhouses of 48 inches. And--
    (2) Bed Length--The length of the open cargo box must be at least 
60 inches. And--
    (3) Towing Capability--the gross combined weight rating (GCWR) 
minus the gross vehicle weight rating (GVWR) must be at least 5,000 
pounds. Or--
    (4) Payload Capability--the GVWR minus the curb weight (as defined 
in 40 CFR 86.1803) must be at least 1,700 pounds.
    EPA sought comment on extending these credits to smaller pickup 
trucks, specifically to those with narrower beds, down to 42 inches, 
but still with towing capability comparable to large trucks. This 
request for comment produced mixed reactions among truck manufacturers, 
and some argued that EPA should go further and drop the bed size limit 
entirely. ICCT and CBD strongly opposed any extension of credits, 
arguing that adopting the 42'' bed width criterion would allow 
virtually all pickup trucks to qualify, thereby distorting technology 
requirements and reducing the benefits of the rule. None of the 
commenters argued convincingly in favor of the extension and so we are 
adopting the 48'' minimum requirement as proposed. Chrysler commented 
that the proposed payload and towing capability minimums are too 
restrictive, making a sizeable number of Ram 1500 configurations 
ineligible to earn credits. However, the company provided no sales 
information to enable the agencies to reassess this issue. Moreover, 
the agencies did not premise the proposed incentive on every full-size 
truck configuration being eligible. Manufacturers typically offer a 
variety of truck options to suit varied customer needs in the work and 
recreational truck markets, and the fact that one manufacturer (or 
more) markets to applications lacking the towing and payload demands of 
the core group of vehicles in this segment does not, in the agencies' 
view, justify a revision of the hauling requirements that were a 
fundamental consideration in establishing the credit.
    The agencies also sought comment on the definitions of mild and 
strong hybrids based on energy capture on braking (brake regeneration). 
Minor modifications to these definitions were made based on these 
comments as well as new testing performed by the EPA. Due to the 
detailed nature of these comments, these responses and the description 
of the testing are included in section 5.3.3 of the Joint TSD.
    The program requirements and incentive amounts differ somewhat for 
mild and strong HEV pickup trucks. As proposed, mild HEVs will be 
eligible for a per-vehicle credit of 10 g/mi (equivalent to 0.0011 
gallon/mile for a gasoline-fueled truck) during MYs 2017-2021. 
Eligibility also requires that the technology be used on a minimum 
percentage of a company's full size pickups, beginning with at least 
20% of a company's full-size pickup production in 2017 and ramping up 
to at least 80% in MY 2021. These minimum percentages are lower in MYs 
2017 and 2018 than proposed (20% and 30%, respectively, compared to the 
proposed 30% and 40%), based on our assessment of the comments arguing 
reasonably that the proposed percentages were too demanding, especially 
in the initial model years when there is the least lead time. Strong 
HEV pickup trucks will be eligible for a 20 g/mi CO2 credit 
(0.0023 gallon/mile) during MYs 2017-2025 if the technology is used on 
at least 10% of the company's full-size pickups. The technology 
penetration thresholds and their basis, as well as comments received on 
our proposal for them, are discussed in more detail in section III.C 
below. Because of their importance in assigning credit amounts, EPA is 
adopting explicit regulatory definitions for mild and strong HEVs. 
These definitions and the relevant comments we received are discussed 
in section III.C.3 and in section 5.3.3 of the Joint TSD.
    Because there are other, non-HEV, advanced technologies that can 
provide significant reductions in pickup truck GHG emissions and fuel 
consumption (e.g., hydraulic hybrid), EPA is also adopting the 
proposed, more generalized, credit provisions for full-size pickup 
trucks that achieve emissions levels significantly below their 
applicable CO2 targets. This performance-based credit will 
be 10 g/mi CO2 (equivalent to 0.0011 gal/mi for the CAFE 
program) or 20 g/mi CO2 (0.0023 gal/mi) for full-size 
pickups achieving 15 or 20%, respectively,

[[Page 62740]]

better CO2 than their footprint-based targets in a given 
model year. The basis for our choice of the 15 and 20% over-compliance 
targets is explained in Section 5.3.4 of the Joint TSD.
    These performance-based credits have no specific technology or 
design requirements; automakers can use any technology or set of 
technologies as long as the vehicle's CO2 performance is at 
least 15 or 20% below its footprint-based target. However, a vehicle 
cannot receive both HEV and performance-based credits. Because the 
footprint target curve has been adjusted to account for A/C-related 
credits, the CO2 level to be compared with the target will 
also include any A/C-related credits generated by the vehicles.
    The 10 g/mi performance-based credit will be available for MYs 2017 
to 2021. In recognition of the nature of automotive redesign sequence, 
a vehicle model meeting the requirements in a model year will receive 
the credit in subsequent model years through MY 2021, unless its 
CO2 level increases or its production drops below the 
penetration threshold described below, even if the year-by-year 
reduction in standards levels causes the vehicle to fall short of the 
15% over-compliance threshold. The 10 g/mi credit is not available 
after MY 2021 because the post-2021 standards quickly overtake designs 
that were originally 15% over-compliant, making the awarding of credits 
to them inappropriate. The 20 g/mi CO2 performance-based 
credit will be available for a maximum of five consecutive model years 
within the 2017 to 2025 model year period, provided the vehicle model's 
CO2 level does not increase from the level determined in its 
first qualifying model year, and subject to the penetration requirement 
described below. A qualifying vehicle model that subsequently undergoes 
a major redesign can requalify for the credit for an additional period 
starting in the redesign model year, not to exceed five model years and 
not to extend beyond MY 2025.
    As with the HEV incentives, eligibility for the performance-based 
credit and fuel consumption improvement value requires that the 
technology be used on a minimum percentage of a manufacturer's full-
size pickup trucks. That minimum percentage for the 10 g/mi 
CO2 credit (0.0011 gal/mi) is 15% in MY 2017, with a ramp up 
to 40% in MY 2021. The minimum percentage for the 20 g/mi credit 
(0.0023 gal/mi) is 10% in each year over the model years 2017-2025. The 
technology penetration thresholds and their basis, as well as comments 
received on our proposal for them, are discussed in more detail in 
section III.C.
    ICCT opposed allowing vehicle models that earn performance-based 
credits in one year to continue receiving them in subsequent years as 
the increasingly more stringent standards progressively diminish the 
vehicle's performance margin compared to the standard. We view the 
incentive over the longer term, as a multi-year package, intending it 
to encourage investment in lasting technology shifts. The fact that it 
is somewhat easier to exceed performance by 15 or 20% in the earlier 
years, when the bar is set lower, and, once earned, to retain that 
benefit for a fixed number of years (provided sales remain strong), 
works to focus the credit as intended--on incentivizing the 
introduction of new technology as early in the program as possible.

G. Safety Considerations in Establishing CAFE/GHG Standards

1. Why do the Agencies consider safety?
    The primary goals of CAFE and GHG standards are to reduce fuel 
consumption and GHG emissions from the on-road light-duty vehicle 
fleet, but in addition to these intended effects, the agencies also 
consider the potential of the standards to affect vehicle safety.\313\ 
As a safety agency, NHTSA has long considered the potential for adverse 
safety consequences when establishing CAFE standards,\314\ and under 
the CAA, EPA considers factors related to public health and human 
welfare, including safety, in regulating emissions of air pollutants 
from mobile sources.\315\ Safety trade-offs associated with fuel 
economy increases have occurred in the past, particularly before NHTSA 
CAFE standards were attribute-based,\316\ and the agencies must be 
mindful of the possibility of future ones. These past safety trade-offs 
may have occurred because manufacturers chose at the time, partly in 
response to CAFE standards, to build smaller and lighter vehicles, 
rather than adding more expensive fuel-saving technologies while 
maintaining vehicle size and safety, and the smaller and lighter 
vehicles did not fare as well in crashes as larger and heavier 
vehicles. Historically, as shown in FARS data analyzed by NHTSA, the 
safest cars generally have been heavy and large, while the cars with 
the highest fatal-crash rates have been light and small. The question, 
then, is whether past is necessarily prologue when it comes to 
potential changes in vehicle size (both footprint and ``overhang'') and 
mass in response to the more stringent future CAFE and GHG standards. 
Manufacturers have stated that they will reduce vehicle mass as one of 
the cost-effective means of increasing fuel economy and reducing 
CO2 emissions in order to meet the standards, and the 
agencies have incorporated this expectation into our modeling analysis 
supporting the standards. Because the agencies discern a historical 
relationship between vehicle mass, size, and safety, it is reasonable 
to assume that these relationships will continue in the future. The 
agencies are encouraged by comments to the NPRM from the Alliance of 
Automotive Manufacturers reflecting a commitment to safety stating 
that, while improving the fuel efficiency of the vehicles, the vehicle 
manufacturers are ``mindful that such improvements must be implemented 
in a manner that does not compromise the rate of safety improvement 
that has been achieved to date.'' The question of whether vehicle 
design can mitigate the adverse effects of mass reduction is discussed 
below.
---------------------------------------------------------------------------

    \313\ In this rulemaking document, ``vehicle safety'' is defined 
as societal fatality rates per vehicle miles traveled (VMT), which 
include fatalities to occupants of all the vehicles involved in the 
collisions, plus any pedestrians.
    \314\ This practice is recognized approvingly in case law. As 
the United States Court of Appeals for the D.C. Circuit stated in 
upholding NHTSA's exercise of judgment in setting the 1987-1989 
passenger car standards, ``NHTSA has always examined the safety 
consequences of the CAFE standards in its overall consideration of 
relevant factors since its earliest rulemaking under the CAFE 
program.'' Competitive Enterprise Institute v. NHTSA (``CEI I''), 
901 F.2d 107, 120 at n. 11 (D.C. Cir. 1990).
    \315\ As noted in Section I.D above, EPA has considered the 
safety of vehicular pollution control technologies from the 
inception of its Title II regulatory programs. See also NRDC v. EPA, 
655 F. 2d 318, 332 n. 31 (D.C. Cir. 1981). (EPA may consider safety 
in developing standards under section 202(a) and did so 
appropriately in the given instance).
    \316\ National Research Council, ``Effectiveness and Impact of 
Corporate Average Fuel Economy (CAFE) Standards,'' National Academy 
Press, Washington, DC (2002), Finding 2, p. 3, Available at http://www.nap.edu/openbook.php?isbn=0309076013 (last accessed Aug. 2, 
2012).
---------------------------------------------------------------------------

    Manufacturers are less likely than they were in the past to reduce 
vehicle footprint in order to reduce mass for increased fuel economy. 
The primary mechanism in this rulemaking for mitigating the potential 
negative effects on safety is the application of footprint-based 
standards, which create a disincentive for manufacturers to produce 
smaller-footprint vehicles (see Section II.C.1 above). This is because, 
as footprint decreases, the corresponding fuel economy/GHG emission 
target becomes more stringent. We also believe that the shape of the 
footprint curves themselves is approximately ``footprint-

[[Page 62741]]

neutral,'' that is, that it should neither encourage manufacturers to 
increase the footprint of their fleets, nor to decrease it. Upsizing 
footprint is also discouraged through the curve ``cut-off'' at larger 
footprints.\317\ However, the footprint-based standards do not 
discourage downsizing the portions of a vehicle in front of the front 
axle and to the rear of the rear axle, or of other areas of the vehicle 
outside the wheels. The crush space provided by those portions of a 
vehicle can make important contributions to managing crash energy. 
Additionally, simply because footprint-based standards minimize 
incentive to downsize vehicles does not mean that some manufacturers 
will not downsize if doing so makes it easier for them to meet the 
overall CAFE/GHG standard in a cost-efficient manner, as for example if 
the smaller vehicles are so much lighter (or de-contented) that they 
exceed their targets by much greater amounts. On balance, however, we 
believe the target curves and the incentives they provide generally 
will not encourage down-sizing (or up-sizing) in terms of footprint 
reductions (or increases).\318\ Consequently, all of our analyses are 
based on the assumption that this rulemaking, in and of itself, will 
not result in any differences in the sales weighted distribution of 
vehicle sizes.
---------------------------------------------------------------------------

    \317\ The agencies recognize that at the other end of the curve, 
manufacturers who make small cars and trucks below 41 square feet 
(the small footprint cut-off point) have some incentive to downsize 
their vehicles to make it easier to meet the constant target. That 
cut-off may also create some incentive for manufacturers who do not 
currently offer models that size to do so in the future. However, at 
the same time, the agencies believe that there is a limit to the 
market for cars and trucks smaller than 41 square feet: most 
consumers likely have some minimum expectation about interior 
volume, for example, among other things. Additionally, vehicles in 
this segment are the lowest price point for the light-duty 
automotive market, with several models in the $10,000-$15,000 range. 
Manufacturers who find themselves incentivized by the cut-off will 
also find themselves adding technology to the lowest price segment 
vehicles, which could make it challenging to retain the price 
advantage. Because of these two reasons, the agencies believe that 
the incentive to increase the sales of vehicles smaller than 41 
square feet due to this rulemaking, if any, is small. See Section 
II.C.1 above and Chapter 1 of the Joint TSD for more information on 
the agencies' choice of ``cut-off'' points for the footprint-based 
target curves.
    \318\ This statement makes no prediction of how consumer choices 
of vehicle size will change in the future, independent of this 
proposal.
---------------------------------------------------------------------------

    Given that we expect manufacturers to reduce vehicle mass in 
response to the final rule, and do not expect manufacturers to reduce 
vehicle footprint in response to the final rule, the agencies must 
attempt to predict the safety effects, if any, of the final rule based 
on the best information currently available. This section explained why 
the agencies consider safety; the following section discusses how the 
agencies consider safety.
2. How do the Agencies consider safety?
    Assessing the effects of vehicle mass reduction and size on 
societal safety is a complex issue. One part of estimating potential 
safety effects involves trying to understand better the relationship 
between mass and vehicle design. The extent of mass reduction that 
manufacturers may be considering to meet more stringent fuel economy 
and GHG standards may raise different safety concerns from what the 
industry has previously faced. The principal difference between the 
heavier vehicles, especially truck-based LTVs, and the lighter 
vehicles, especially passenger cars, is that mass reduction has a 
different effect in collisions with another car or LTV. When two 
vehicles of unequal mass collide, the change in velocity (delta V) is 
higher in the lighter vehicle, similar to the mass ratio proportion. As 
a result of the higher change in velocity, the fatality risk may also 
increase. Removing more mass from the heavier vehicle than in the 
lighter vehicle by amounts that bring the mass ratio closer to 1.0 
reduces the delta V in the lighter vehicle, possibly resulting in a net 
societal benefit. This was reinforced by comments to the proposal from 
Volvo which stated ``Everything else being equal, several of the 
studies presented indicate a significant increase, up to a factor ten, 
in the fatality risk for the occupants in the lighter vehicle for a 
two-to-one weight ratio between the colliding vehicles in a head-on 
crash.''\319\
---------------------------------------------------------------------------

    \319\ Docket No. NHTSA-2010-0131-0243; Section: Safety 
Consideration.
---------------------------------------------------------------------------

    Another complexity is that if a vehicle is made lighter, 
adjustments must be made to the vehicle's structure such that it will 
be able to manage the energy in a crash while limiting intrusion into 
the occupant compartment. To maintain an acceptable occupant 
compartment deceleration, the effective front-end stiffness has to be 
managed such that the crash pulse does not increase as lighter yet 
stiffer materials are utilized. If the energy is not well managed, the 
occupants may have to ``ride down'' a more severe crash pulse, putting 
more burdens on the restraint systems to protect the occupants. There 
may be technological and physical limitations to how much the restraint 
system may mitigate these effects.
    The agencies must attempt to estimate now, based on the best 
information currently available to us for analyzing these CAFE and GHG 
standards, how the assumed levels of mass reduction without additional 
changes (i.e. footprint, performance, functionality) might affect the 
safety of vehicles, and how lighter vehicles might affect the safety of 
drivers and passengers in the entire on-road fleet. The agencies seek 
to ensure that the standards are designed to encourage manufacturers to 
pursue a path toward compliance that is both cost-effective and safe.
    To estimate the possible safety effects of the MY 2017-2025 
standards, then, the agencies have undertaken research that approaches 
this question from several angles. First, we are using a statistical 
approach to study the effect of vehicle mass reduction on safety 
historically, as discussed in greater detail in section C below. 
Statistical analysis is performed using the most recent historical 
crash data available, and is considered as the agencies' best estimate 
of potential mass-safety effects. The agencies recognize that negative 
safety effects estimated based on the historical relationships could 
potentially be tempered with safety technology advances in the future, 
and may not represent the current or future fleet. Second, we are using 
an engineering approach to investigate what amount of mass reduction is 
affordable and feasible while maintaining vehicle safety and 
functionality such as durability, drivability, NVH, and acceleration 
performance. Third, we are also studying the new challenges these 
lighter vehicles might bring to vehicle safety and potential 
countermeasures available to manage those challenges effectively. 
Comments to the proposal from the Alliance of Automakers supported 
NHTSA's approach of using both engineering and statistical analyses to 
assess the effects of the standards on safety, stating ``The Alliance 
supports NHTSA's intention to examine safety from the perspective of 
both the historical field crash data and the engineering analysis of 
potential future Advanced Materials Concept vehicles. NHTSA's planned 
analysis rightly looks backward and forward.'' \320\ DRI furnished 
alternative statistical analyses in which the significant fatality 
increase seen for mass reduction in cars weighing less than 3,106 
pounds in Kahane's analysis tapers off to a non-significant or near-
zero level. Other commenters (including ICCT, Center for Biological 
Diversity (CBD), Consumers Union, NRDC, and the Aluminum Association), 
in contrast, stated that

[[Page 62742]]

mass reduction can be implemented safely and there should be no safety 
impacts associated with the CAFE/GHG standards. Some commenters argued 
that safety of future vehicles will be solely a function of vehicle 
design and not of weight or size, while others argued that better 
material usage, better design, and stronger materials will improve 
vehicle safety if vehicle size is maintained. More specifically, 
comments from ICCT stated that reducing vehicle weight through the use 
of strong lightweight materials, while maintaining size can reduce 
intrusion, as the redesigned vehicle can reduce crash forces with 
equivalent crush space. ICCT further stated that ``this also supports 
that size-based standards that encourage the use of lightweight 
materials should reduce intrusion and, hence, fatalities.'' \321\ The 
American Iron and Steel Institute indicated that steel structures are 
particularly effective in absorbing energy during a collision over the 
engineered crush space (or crumple zone), and further indicated that 
new advanced high-strength steel technology has already demonstrated 
its ability to reduce mass and maintain or improve test crashworthiness 
performance all within the same vehicle footprint, although 
acknowledging that these comments did not necessarily reflect crash 
performance with vehicles of different sizes and masses.
---------------------------------------------------------------------------

    \320\ Alliance comments, Docket No. NHTSA-2010-0131, at pg 5.
    \321\ ICCT comments, Docket No. EPA-HQ-OAR-2010-0799, Document 
ID: 9512, at pg 13.
---------------------------------------------------------------------------

    The agencies have looked closely at these issues, and we believe 
that our approach of using both statistical analyses of historical data 
to assess societal safety effects, and design studies to assess the 
ability of individual designs to comply with the FMVSS and perform well 
on NCAP and IIHS tests responds to these concerns.
    The sections below discuss more specifically the state of the 
research on the mass-safety relationship, and how the agencies have 
integrated that research into our assessment of the safety effects of 
the MY 2017-2025 CAFE and GHG standards.
3. What is the current state of the research on statistical analysis of 
historical crash data?
a. Background
    Researchers have been using statistical analysis to examine the 
relationship of vehicle mass and safety in historical crash data for 
many years, and continue to refine their techniques over time. In the 
MY 2012-2016 final rule, the agencies stated that we would conduct 
further study and research into the interaction of mass, size and 
safety to assist future rulemakings, and start to work collaboratively 
by developing an interagency working group between NHTSA, EPA, DOE, and 
CARB to evaluate all aspects of mass, size and safety. The team would 
seek to coordinate government supported studies and independent 
research, to the greatest extent possible, to help ensure the work is 
complementary to previous and ongoing research and to guide further 
research in this area.
    The agencies also identified three specific areas to direct 
research in preparation for future CAFE/GHG rulemaking in regards to 
statistical analysis of historical data.
    First, NHTSA would contract with an independent institution to 
review the statistical methods that NHTSA and DRI have used to analyze 
historical data related to mass, size and safety, and to provide 
recommendations on whether the existing methods or other methods should 
be used for future statistical analysis of historical data. This study 
would include a consideration of potential near multicollinearity in 
the historical data and how best to address it in a regression 
analysis. The 2010 NHTSA report was also peer reviewed by two other 
experts in the safety field--Charles Farmer (Insurance Institute for 
Highway Safety) and Anders Lie (Swedish Transport Administration).\322\
---------------------------------------------------------------------------

    \322\ All three of the peer reviews are available in Docket No. 
NHTSA-2010-0152. You can access the docket at http://www.regulations.gov/#!home by typing `NHTSA-2010-0152' where it says 
``enter keyword or ID'' and then clicking on ``Search.''
---------------------------------------------------------------------------

    Second, NHTSA and EPA, in consultation with DOE, would update the 
MY 1991-1999 database on which the safety analyses in the NPRM and 
final rule are based with newer vehicle data, and create a common 
database that could be made publicly available to help address concerns 
that differences in data were leading to different results in 
statistical analyses by different researchers.
    And third, in order to assess if the design of recent model year 
vehicles that incorporate various mass reduction methods affect the 
relationships among vehicle mass, size and safety, the agencies sought 
to identify vehicles that are using material substitution and smart 
design, and to try to assess if there is sufficient crash data 
involving those vehicles for statistical analysis. If sufficient data 
exists, statistical analysis would be conducted to compare the 
relationship among mass, size and safety of these smart design vehicles 
to vehicles of similar size and mass with more traditional designs.
    Significant progress has been made on these tasks since the MY 
2012-2016 final rule: The independent review of recent and updated 
statistical analyses of the relationship between vehicle mass, size, 
and crash fatality rates has been completed. NHTSA contracted with the 
University of Michigan Transportation Research Institute (UMTRI) to 
conduct this review, and the UMTRI team led by Paul Green evaluated 
over 20 papers, including studies done by NHTSA's Charles Kahane, Tom 
Wenzel of the U.S. Department of Energy's Lawrence Berkeley National 
Laboratory, Dynamic Research, Inc., and others. UMTRI's basic findings 
will be discussed below. Some commenters in recent CAFE rulemakings, 
including some vehicle manufacturers, suggested that the designs and 
materials of more recent model year vehicles may have weakened the 
historical statistical relationships between mass, size, and safety. 
The agencies agree that the statistical analysis would be improved by 
using an updated database that reflects more recent safety 
technologies, vehicle designs and materials, and reflects changes in 
the overall vehicle fleet, and an updated database was created and 
employed for assessing safety effects in this final rule. The agencies 
also believe, as UMTRI also found, that different statistical analyses 
may have produced different results because they each used slightly 
different datasets for their analyses. In order to try to mitigate this 
issue and to support the current rulemaking, NHTSA has created a 
common, updated database for statistical analysis that consists of 
crash data of model years 2000-2007 vehicles in calendar years 2002-
2008, as compared to the database used in prior NHTSA analyses which 
was based on model years 1991-1999 vehicles in calendar years 1995-
2000. The new database is the most up-to-date possible, given the 
processing lead time for crash data and the need for enough crash cases 
to permit statistically meaningful analyses. NHTSA made the preliminary 
version of the new database, which was the basis for NHTSA's 2011 
report, available to the public in May 2011, and an updated version in 
April 2012,\323\ enabling other researchers to analyze the same data 
and hopefully minimizing discrepancies in the results that would have 
been due to inconsistencies across databases.\324\ The agencies 
recognize, however, that the updated database may not represent the 
future fleet, because vehicles have continued and will

[[Page 62743]]

continue to change. NHTSA published a preliminary report with the NPRM 
in November 2011, which has subsequently been revised based on peer 
review comments. The final report is being published concurrently with 
this rulemaking.\325\
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    \323\ The new databases are available at ftp://ftp.nhtsa.dot.gov/CAFE/.
    \324\ 75 FR 25324 (May 7, 2010); the discussion of planned 
statistical analyses is on pp. 25395-25396.
    \325\ The final report can be found in Docket No. NHTSA-2010-
0131.
---------------------------------------------------------------------------

    The agencies are aware that several studies have been initiated 
using the 2011 version or the 2012 version of NHTSA's newly established 
safety database. In addition to new Kahane studies, which are discussed 
in section II.G.3.d, other on-going studies include two by Wenzel at 
Lawrence Berkeley National Laboratory (LBNL) under contract with the 
U.S. DOE, and one by Dynamic Research, Inc. (DRI) contracted by the 
International Council on Clean Transportation (ICCT). These studies 
take somewhat different approaches to examine the statistical 
relationship between fatality risk, vehicle mass and size. In addition 
to a detailed assessment of the NHTSA 2011 report, Wenzel considers the 
effect of mass and footprint reduction on casualty risk per crash, 
using data from thirteen states. Casualty risk includes both fatalities 
and serious or incapacitating injuries. Both LBNL studies were peer 
reviewed and subsequently revised and updated. DRI used models that 
separate the effect of mass reduction on two components of fatality 
risk, crash avoidance and crashworthiness. The LBNL and DRI studies are 
available in the docket for this final rule.\326\ The database is 
available for download to the public from NHTSA's Web site.
---------------------------------------------------------------------------

    \326\ Wenzel, T. (2011a). Assessment of NHTSA's Report 
``Relationships Between Fatality Risk, Mass, and Footprint in Model 
Year 2000-2007 Passenger Cars and LTVs--Draft Final Report.'' 
(Docket No. NHTSA-2010-0152-0026). Berkeley, CA: Lawrence Berkeley 
National Laboratory; Wenzel, T. (2011b). An Analysis of the 
Relationship between Casualty Risk Per Crash and Vehicle Mass and 
Footprint for Model Year 2000-2007 Light-Duty Vehicles--Draft Final 
Report.'' (Docket No. NHTSA-2010-0152-0028). Berkeley, CA: Lawrence 
Berkeley National Laboratory; Wenzel, T. (2012a). Assessment of 
NHTSA's Report ``Relationships Between Fatality Risk, Mass, and 
Footprint in Model Year 2000-2007 Passenger Cars and LTVs--Final 
Report.'' (To appear in Docket No. NHTSA-2010-0152). Berkeley, CA: 
Lawrence Berkeley National Laboratory; Wenzel, T. (2012b). An 
Analysis of the Relationship between Casualty Risk Per Crash and 
Vehicle Mass and Footprint for Model Year 2000-2007 Light-Duty 
Vehicles--Final Report.'' (To appear in Docket No. NHTSA-2010-0152). 
Berkeley, CA: Lawrence Berkeley National Laboratory; Van Auken, 
R.M., and Zellner, J. W. (2012a). Updated Analysis of the Effects of 
Passenger Vehicle Size and Weight on Safety, Phase I. Report No. 
DRI-TR-11-01. (Docket No. NHTSA-2010-0152-0030). Torrance, CA: 
Dynamic Research, Inc.; Van Auken, R.M., and Zellner, J. W. (2012b). 
Updated Analysis of the Effects of Passenger Vehicle Size and Weight 
on Safety, Phase II; Preliminary Analysis Based on 2002 to 2008 
Calendar Year Data for 2000 to 2007 Model Year Light Passenger 
Vehicles to Induced-Exposure and Vehicle Size Variables. Report No. 
DRI-TR-12-01, Vols. 1-3. (Docket No. NHTSA-2010-0152-0032). 
Torrance, CA: Dynamic Research, Inc.; Van Auken, R.M., and Zellner, 
J. W. (2012c). Updated Analysis of the Effects of Passenger Vehicle 
Size and Weight on Safety, Phase II; Preliminary Analysis Based on 
2002 to 2008 Calendar Year Data for 2000 to 2007 Model Year Light 
Passenger Vehicles to Induced-Exposure and Vehicle Size Variables. 
Report No. DRI-TR-12-01, Vols. 4-5. (Docket No. NHTSA-2010-0152-
0033). Torrance, CA: Dynamic Research, Inc.; Van Auken, R.M., and 
Zellner, J. W. (2012d). Updated Analysis of the Effects of Passenger 
Vehicle Size and Weight on Safety; Sensitivity of the Estimates for 
2002 to 2008 Calendar Year Data for 2000 to 2007 Model Year Light 
Passenger Vehicles to Induced-Exposure and Vehicle Size Variables. 
Report No. DRI-TR-12-03. (Docket No. NHTSA-2010-0152-0034). 
Torrance, CA: Dynamic Research, Inc.
---------------------------------------------------------------------------

    Finally, EPA and NHTSA with DOT's Volpe Center, part of DOT's 
Research and Innovative Technology Administration, attempted to 
investigate the implications of ``Smart Design,'' by identifying and 
describing the types of ``Smart Design'' and methods for using ``Smart 
Design'' to result in vehicle mass reduction, selecting analytical 
pairs of vehicles, and using the appropriate crash database to analyze 
vehicle crash data. The analysis identified several one-vehicle and 
two-vehicle crash datasets with the potential to shed light on the 
issue, but the available data for specific crash scenarios was 
insufficient to produce consistent results that could be used to 
support conclusions regarding historical performance of ``smart 
designs.'' This study is also available in the docket for this final 
rule.\327\
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    \327\ Brewer, John. An Assessment of the Implications of ``Smart 
Design'' on Motor Vehicle Safety. 2011. Docket No. NHTSA-2010-0131.
---------------------------------------------------------------------------

    Undertaking these tasks has helped the agencies come closer to 
resolving some of the ongoing debates in statistical analysis research 
of historical crash data. We intend to apply these conclusions going 
forward in the midterm review and future rulemakings, and we believe 
that the public discussion of the issues will be facilitated by the 
research conducted. The following sections discuss the findings from 
these studies and others in greater detail, to present a more nuanced 
picture of the current state of the statistical research.
b. NHTSA Workshop on Vehicle Mass, Size and Safety
    On February 25, 2011, NHTSA hosted a workshop on mass reduction, 
vehicle size, and fleet safety at the Headquarters of the U.S. 
Department of Transportation in Washington, DC.\328\ The purpose of the 
workshop was to provide the agencies with a broad understanding of 
current research in the field and provide stakeholders and the public 
with an opportunity to weigh in on this issue. NHTSA also created a 
public docket to receive comments from interested parties that were 
unable to attend.
---------------------------------------------------------------------------

    \328\ A video recording, transcript, and the presentations from 
the NHTSA workshop on mass reduction, vehicle size and fleet safety 
is available at http://www.nhtsa.gov/fuel-economy (look for ``NHTSA 
Workshop on Vehicle Mass-Size-Safety on Feb. 25.'')
---------------------------------------------------------------------------

    The speakers included Charles Kahane of NHTSA, Tom Wenzel of 
Lawrence Berkeley National Laboratory, R. Michael Van Auken of Dynamic 
Research Inc. (DRI), Jeya Padmanaban of JP Research, Inc., Adrian Lund 
of the Insurance Institute for Highway Safety, Paul Green of the 
University of Michigan Transportation Research Institute (UMTRI), 
Stephen Summers of NHTSA, Gregg Peterson of Lotus Engineering, Koichi 
Kamiji of Honda, John German of the International Council on Clean 
Transportation (ICCT), Scott Schmidt of the Alliance of Automobile 
Manufacturers, Guy Nusholtz of Chrysler, and Frank Field of the 
Massachusetts Institute of Technology.
    The wide participation in the workshop allowed the agencies to hear 
from a broad range of experts and stakeholders. The contributions were 
particularly relevant to the agencies' analysis of the effects of mass 
reduction for this final rule. The presentations were divided into two 
sessions that addressed the two expansive sets of issues: statistical 
evidence of the roles of mass and size on safety, and engineering 
realities regarding structural crashworthiness, occupant injury and 
advanced vehicle design.
    The first session focused on previous and ongoing statistical 
studies of crash data that attempt to identify the relative recent 
historical effects of vehicle mass and size on fleet safety. There was 
consensus that there is a complicated relationship with many 
confounding influences in the data. Wenzel summarized a recent study he 
conducted comparing four types of risk (fatality or casualty risk, per 
vehicle registration-years or per crash) using police-reported crash 
data from five states. This study was updated and finalized in March of 
2012.\329\ He showed that the trends in risk for various classes of 
vehicles--e.g., non-sports car passenger cars, vans, SUVs,

[[Page 62744]]

crossover utility vehicles (CUV), pickups--were similar regardless of 
what risk was being measured (fatality or casualty) or what exposure 
metric was used (e.g., registration years, police-reported crashes, 
etc.). In general, most trends showed that societal risk tends to 
decrease as car or CUV size increases, while societal risk tends to 
increase as pickup or SUV size increases.
---------------------------------------------------------------------------

    \329\ Wenzel, T.P. (2012). Analysis of Casualty Risk per Police-
Reported Crash for Model Year 2000 to 2004 Vehicles, Using Crash 
Data from Five States, March 2012, LBNL-4897E, available at: http://energy.lbl.gov/ea/teepa/pdf/lbnl-4897e.pdf (last accessed Jun. 18, 
2012).
---------------------------------------------------------------------------

    Although Wenzel's analysis was focused on differences in the four 
types of risk on the relative risk by vehicle type, he cautioned that, 
when analyzing casualty risk per crash, analysts should control for 
driver age and gender, crash location (urban vs. rural), and the state 
in which the crash occurred (to account for crash reporting biases).
    Several participants pointed out that analyses must also control 
for individual technologies with significant safety effects (e.g., 
Electronic Stability Control, airbags). It was not always conclusive 
whether a specialty vehicle group (e.g., sports cars, two-door cars, 
early crossover SUVs) were outliers that confound the trend or unique 
datasets that isolate specific vehicle characteristics. Unfortunately, 
specialty vehicle groups are usually adopted by specific driver groups, 
often with outlying vehicle usage or driver behavior patterns. Green, 
who conducted an independent review of 18 previous statistical 
analyses, suggested that evaluating residuals will give an indication 
of whether or not a data subset can be legitimately removed without 
inappropriately affecting the analytical results.
    It was recognized that the physics of a two-vehicle crash require 
that the lighter vehicle experience a greater change in velocity, 
which, all else being equal, often leads to disproportionately more 
injury risk. Lund noted persistent historical trends that, in any time 
period, occupants of the smallest and lightest vehicles had, on 
average, fatality rates approximately twice those of occupants of the 
largest and heaviest vehicles, but also predicted that ``the sky will 
not fall'' as the fleet downsizes, insofar as we will not see an 
increase in absolute injury risk because smaller cars will become 
increasingly protective of their occupants. Padmanaban also noted in 
her research of the historical trends that mass ratio and vehicle 
stiffness are significant predictors with mass ratio consistently the 
dominant parameter when correlating harm. Reducing the mass of any 
vehicle may have competing societal effects as it increases the injury 
risk in the lightened vehicle and decreases them in the partner 
vehicle.
    The separation of key parameters was also discussed as a challenge 
to the analyses, as vehicle size has historically been highly 
correlated with vehicle mass. Presenters had varying approaches for 
dealing with the potential multicollinearity between these two 
variables. Van Auken of DRI stated that there was disagreement on what 
value of Variance Inflation Factor (VIF, a measure of 
multicollinearity) that would call results into question, and suggested 
that a large value of VIF for curb weight might imply ``perhaps the 
effect of weight is too small in comparison to other factors.'' Green, 
of UMTRI, stated that highly correlated variables may not be 
appropriate for use in a predictive model and that ``match[ing] on 
footprint'' (i.e., conducting multiple analyses for data subsets with 
similar footprint values) may be the most effective way to resolve the 
issue.
    There was no consensus on whether smaller, lighter vehicles 
maneuver better, and thus avoid more crashes, than larger, heavier 
vehicles. German noted that lighter vehicles should have improved 
handling and braking characteristics and ``may be more likely to avoid 
collisions.'' Lund presented crash involvement data that implied that, 
among vehicles of similar function and use rates, crash risk does not 
go down for more ``nimble'' vehicles. Several presenters noted the 
difficulties of projecting past data into the future as new 
technologies will be used that were not available when the data were 
collected. The advances in technology through the decades have 
dramatically improved safety for all weight and size classes. A video 
of IIHS's 50th anniversary crash test of a 1959 Chevrolet Bel Air and 
2009 Chevrolet Malibu graphically demonstrated that stark differences 
in design and technology can possibly mask the discrete mass effects, 
while videos of compatibility crash tests between smaller, lighter 
vehicles and contemporary larger, heavier vehicles graphically showed 
the significance of vehicle mass and size.
    Kahane presented results from his 2010 report \330\ that found that 
a scenario which took some mass out of heavier vehicles but little or 
no mass out of the lightest vehicles did not impact safety in absolute 
terms. Kahane noted that if the analyses were able to consider the mass 
of both vehicles in a two-vehicle crash, the results may be more 
indicative of future crashes. There is apparent consistency with other 
presentations (e.g., Padmanaban, Nusholtz) that reducing the overall 
ranges of masses and mass ratios seems to reduce overall societal harm. 
That is, the effect of mass reduction exclusively does not appear to be 
a ``zero sum game'' in which any increase in harm to occupants of the 
lightened vehicle is precisely offset by a decrease in harm to the 
occupants of the partner vehicle. If the mass of the heavier vehicle is 
reduced by a larger percentage than that of its lighter crash partner, 
the changes in velocity from the collision are more nearly equal and 
the injuries suffered in the lighter vehicle are likely to be reduced 
more than the injuries in the heavier vehicle are increased. 
Alternatively, a fixed absolute mass reduction (say, 100 pounds) in all 
vehicles could increase societal harm whereas a fixed percentage mass 
reduction is more likely to be neutral.
---------------------------------------------------------------------------

    \330\ Kahane, C. J. (2010). ``Relationships Between Fatality 
Risk, Mass, and Footprint in Model Year 1991-1999 and Other 
Passenger Cars and LTVs,'' Final Regulatory Impact Analysis: 
Corporate Average Fuel Economy for MY 2012-MY 2016 Passenger Cars 
and Light Trucks. Washington, DC: National Highway Traffic Safety 
Administration, pp. 464-542, available at http://www.nhtsa.gov/staticfiles/rulemaking/pdf/cafe/CAFE_2012-2016_FRIA_04012010.pdf.
---------------------------------------------------------------------------

    Padmanaban described a series of studies conducted in recent years. 
She included numerous vehicle parameters including bumper height and 
several measures of vehicle size and stiffness and also commented on 
previous analyses that using weight and wheelbase together in a 
logistic regression model distorts the estimates, resulting in high 
variance inflation factors with wrong signs and magnitudes in the 
results. Her results consistently showed that the ratio between the 
masses of two vehicles involved in a two-vehicle crash was a more 
important parameter than variables describing vehicle geometry or 
stiffness. Her ultimate conclusion was that removing mass (e.g., 100 
lbs.) from all passenger cars would cause an overall increase in 
fatalities in truck-to-car crashes while removing the same amount from 
light trucks would cause an overall decrease in fatalities.
c. Report by Green et al., UMTRI--``Independent Review: Statistical 
Analyses of Relationship Between Vehicle Curb Weight, Track Width, 
Wheelbase and Fatality Rates,'' April 2011
    As explained above, NHTSA contracted with the University of 
Michigan Transportation Research Institute (UMTRI) to conduct an 
independent review \331\ of a set of

[[Page 62745]]

statistical analyses of relationships between vehicle curb weight, the 
footprint variables (track width, wheelbase) and fatality rates from 
vehicle crashes. The purpose of this review was to examine analysis 
methods, data sources, and assumptions of the statistical studies, with 
the objective of identifying the reasons for any differences in 
results. Another objective was to examine the suitability of the 
various methods for estimating the fatality risks of future vehicles.
---------------------------------------------------------------------------

    \331\ The review is independent in the sense that it was 
conducted by an outside third party without any interest in the 
reported outcome.
---------------------------------------------------------------------------

    UMTRI reviewed a set of papers, reports, and manuscripts provided 
by NHTSA (listed in Appendix A of UMTRI's report, which is available in 
the docket to this rulemaking) that examined the statistical 
relationships between fatality or casualty rates and vehicle properties 
such as curb weight, track width, wheelbase and other variables.
    It is difficult to summarize a study of that length and complexity 
for purposes of this discussion, but fundamentally, the UMTRI team 
concluded the following:
     Differences in data may have complicated comparisons of 
earlier analyses, but if the methodology is robust, and the methods 
were applied in a similar way, small changes in data should not lead to 
different conclusions. The main conclusions and findings should be 
reproducible. The database created by Kahane appears to be an 
impressive collection of files from appropriate sources and the best 
ones available for answering the research questions considered in this 
study.
     In statistical analysis simpler models generally lead to 
improved inference, assuming the data and model assumptions are 
appropriate. In that regard, the disaggregate logistic regression model 
used by NHTSA in the 2003 report \332\ seems to be the most appropriate 
model, and valid for the analysis in the context that it was used: 
finding general associations between fatality risk and mass--and the 
general directions of the reported associations are correct.
---------------------------------------------------------------------------

    \332\ Kahane, C. J. (2003). Vehicle Weight, Fatality Risk and 
Crash Compatibility of Model Year 1991-99 Passenger Cars and Light 
Trucks, NHTSA Technical Report. DOT HS 809 662. Washington, DC: 
National Highway Traffic Safety Administration, http://www-nrd.nhtsa.dot.gov/Pubs/809662.PDF.
---------------------------------------------------------------------------

     The two-stage logistic regression model in combination 
with the two-step aggregate regression used by DRI seems to be more 
complicated than is necessary based on the data being analyzed, and 
summing regression coefficients from two separate models to arrive at 
conclusions about the effects of reductions in weight or size on 
fatality risk seems to add unneeded complexity to the problem.
     One of the biggest issues regarding the various 
statistical analyses is the historical correlation between curb weight, 
wheelbase, and track width. Including three variables that are highly 
correlated in the same model can have adverse effects on the fit of the 
model, especially with respect to the parameter estimates, as discussed 
by Kahane. UMTRI makes no conclusions about multicollinearity, other 
than to say that inferences made in the presence of multicollinearity 
should be judged with great caution. At the NHTSA workshop on size, 
safety and mass, Paul Green suggested that a matched analysis, in which 
regressions are run on the relationship between mass reduction and risk 
separately for vehicles of similar footprint, could be undertaken to 
reduce the effect of multicollinearity between vehicle mass and size. 
Kahane has combined wheelbase and track width into one variable 
(footprint) to compare with curb weight. NHTSA believes that the 2012 
Kahane analysis has done all it can to lessen concerns about 
multicollinearity, but a concern still exists.

 In considering other studies provided by NHTSA for evaluation 
by the UMTRI team:
     Papers by Wenzel, and Wenzel and Ross, addressing 
associations between fatality risk per vehicle registration-year, 
weight, and size by vehicle model contribute to understanding some of 
the relationships between risk, weight, and size. However, least 
squares linear regression models, without modification, are not 
exposure-based risk models and inferences drawn from these models tend 
to be weak since they do not account for additional differences in 
vehicles, drivers, or crash conditions that could explain the variance 
in risk by vehicle model.
     A 2009 J.P. Research paper focused on the difficulties 
associated with separating out the contributions of weight and size 
variables when analyzing fatality risk properly recognized the problem 
arising from multicollinearity and included a clear explanation of why 
societal fatality risk in two-vehicle crashes is expected to increase 
with increasing mass ratio. UMTRI concluded that the increases in 
fatality risk associated with a 100-pound reduction in weight allowing 
footprint to vary with weight as estimated by Kahane and JP Research, 
are broadly more convincing than the 6.7 percent reduction in fatality 
risk associated with mass reduction while holding footprint constant, 
as reported by DRI.
     A paper by Nusholtz et al. focused on the question of 
whether vehicle size can reasonably be the dominant vehicle factor for 
fatality risk, and finding that changing the mean mass of the vehicle 
population (leaving variability unchanged) has a stronger influence on 
fatality risk than corresponding (feasible) changes in mean vehicle 
dimensions, concluded unequivocally that reducing vehicle mass while 
maintaining constant vehicle dimensions will increase fatality risk. 
UMTRI concluded that if one accepts the methodology, this conclusion is 
robust against realistic changes that may be made in the force vs. 
deflection characteristics of the impacting vehicles.
     Two papers by Robertson, one a commentary paper and the 
other a peer-reviewed journal article, were reviewed. The commentary 
paper did not fit separate models according to crash type, and included 
passenger cars, vans, and SUVs in the same model. UMTRI concluded that 
some of the claims in the commentary paper appear to be overstated, and 
intermediate results and more documentation would help the reader 
determine if these claims are valid. The second paper focused largely 
on the effects of electronic stability control (ESC), but generally 
followed on from the first paper except that fuel economy is used as a 
surrogate for curb weight.
    The UMTRI study provided a number of useful suggestions that Kahane 
considered in updating his 2011 analysis, and that have been 
incorporated into the safety effects estimates for the current 
rulemaking.
d. Two Reports by Dr. Charles Kahane, NHTSA titled ``Relationships 
Between Fatality Risk, Mass, and Footprint in Model Year 2000-2007 
Passenger Cars and LTVs'': Preliminary Report, November 2011 and Final 
Report, August 2012
    The relationship between a vehicle's mass, size, and fatality risk 
is complex, and varies in different types of crashes. NHTSA, along with 
others, has been examining this relationship for over a decade. The 
safety chapter of NHTSA's April 2010 final regulatory impact analysis 
(FRIA) of CAFE standards for

[[Page 62746]]

MYs 2012-2016 passenger cars and light trucks included a statistical 
analysis of relationships between fatality risk, mass, and footprint in 
MY 1991-1999 passenger cars and LTVs (light trucks and vans), based on 
calendar year (CY) 1995-2000 crash and vehicle-registration data.\333\ 
The 2010 analysis used the same data as the 2003 analysis, but included 
vehicle mass and footprint in the same regression model.
---------------------------------------------------------------------------

    \333\ Kahane (2010).
---------------------------------------------------------------------------

    The principal findings of NHTSA's 2010 analysis were that mass 
reduction in lighter cars, even while holding footprint constant, would 
significantly increase societal fatality risk, whereas mass reduction 
in the heavier LTVs would significantly reduce net societal fatality 
risk, because it would reduce the fatality risk of occupants in lighter 
vehicles which collide with the heavier LTVs. NHTSA concluded that, as 
a result, any reasonable combination of mass reductions while holding 
footprint constant in MYs 2012-2016 vehicles--concentrated, at least to 
some extent, in the heavier LTVs and limited in the lighter cars--would 
likely be approximately safety-neutral; it would not significantly 
increase fatalities and might well decrease them.
    NHTSA's 2010 report partially agreed and partially disagreed with 
analyses published during 2003-2005 by Dynamic Research, Inc. (DRI). 
NHTSA and DRI both found a significant protective effect for footprint, 
and that reducing mass and footprint together (downsizing) on smaller 
vehicles was harmful. DRI's analyses estimated a significant overall 
reduction in fatalities from mass reduction in all light-duty vehicles 
if wheelbase and track width were maintained, whereas NHTSA's report 
showed overall fatality reductions only in the heavier LTVs, and 
benefits only in some types of crashes for other vehicle types. Much of 
NHTSA's 2010 report, as well as recent work by DRI, involved 
sensitivity tests on the databases and models, which generated a range 
of estimates somewhere between the initial DRI and NHTSA results.\334\
---------------------------------------------------------------------------

    \334\ Van Auken, R. M., and Zellner, J. W. (2003). A Further 
Assessment of the Effects of Vehicle Weight and Size Parameters on 
Fatality Risk in Model Year 1985-98 Passenger Cars and 1986-97 Light 
Trucks. Report No. DRI-TR-03-01. Torrance, CA: Dynamic Research, 
Inc.; Van Auken, R. M., and Zellner, J. W. (2005a). An Assessment of 
the Effects of Vehicle Weight and Size on Fatality Risk in 1985 to 
1998 Model Year Passenger Cars and 1985 to 1997 Model Year Light 
Trucks and Vans. Paper No. 2005-01-1354. Warrendale, PA: Society of 
Automotive Engineers; Van Auken, R. M., and Zellner, J. W. (2005b). 
Supplemental Results on the Independent Effects of Curb Weight, 
Wheelbase, and Track on Fatality Risk in 1985-1998 Model Year 
Passenger Cars and 1986-97 Model Year LTVs. Report No. DRI-TR-05-01. 
Torrance, CA: Dynamic Research, Inc.; Van Auken, R.M., and Zellner, 
J. W. (2011).2012a). Updated Analysis of the Effects of Passenger 
Vehicle Size and Weight on Safety, Phase I. Report No. DRI-TR-11-01. 
(Docket No. NHTSA-2010-0152-0030). Torrance, CA: Dynamic Research, 
Inc.
---------------------------------------------------------------------------

    In April 2010, NHTSA, working closely with EPA and the Department 
of Energy (DOE), commenced a new statistical analysis of the 
relationships between fatality rates, mass and footprint, updating the 
crash and exposure databases to the latest available model years, 
refining the methodology in response to peer reviews of the 2010 report 
and taking into account changes in vehicle technologies. The previous 
databases of MYs 1991-1999 vehicles in CYs 1995-2000 crashes had become 
outdated as new safety technologies, vehicle designs and materials were 
introduced. The new databases are comprised of MYs 2000-2007 vehicles 
in CY 2002-2008 crashes with the most up-to-date possible data, given 
the processing lead time for crash data and the need for enough crash 
cases to permit statistically meaningful analyses. NHTSA made the first 
version of the new databases available to the public in May 2011 and an 
updated version in April 2012,\335\ enabling other researchers to 
analyze the same data and hopefully minimizing discrepancies in the 
results due to inconsistencies across the data used.\336\
---------------------------------------------------------------------------

    \335\ http://www.nhtsa.gov/fuel-economy.
    \336\ 75 FR 25324 (May 7, 2010); the discussion of planned 
statistical analyses is on pp. 25395-25396.
---------------------------------------------------------------------------

    One way to estimate these effects is the use of statistical 
analyses of societal fatality rates per vehicle miles traveled (VMT), 
by vehicles' mass and footprint, for the current on-road vehicle fleet. 
The basic analytical method used for the 2011-2012 NHTSA reports is the 
same as in NHTSA's 2010 report: cross-sectional analyses of the effect 
of mass and footprint reductions on the societal fatality rate per 
billion vehicle miles of travel (VMT), while controlling for driver age 
and gender, vehicle type, vehicle safety features, crash times and 
locations, and other factors. Separate logistic regression models are 
run for three types of vehicles and nine types of crashes. Societal 
fatality rates include occupants of all vehicles in the crash, as well 
as non-occupants, such as pedestrians and cyclists. NHTSA's 2011-2012 
reports\337\ analyze MYs 2000-2007 cars and LTVs in CYs 2002-2008 
crashes. Fatality rates were derived from FARS data, 13 State crash 
files, and registration and mileage data from R.L. Polk.
---------------------------------------------------------------------------

    \337\ Kahane, C. J. (2011). ``Relationships Between Fatality 
Risk, Mass, and Footprint in Model Year 2000-2007 Passenger Cars and 
LTVs--Preliminary Report,'' is available in the NHTSA docket, NHTSA-
2010-0152 as item no. 0023. Kahane, C. J. (2012). ``Relationships 
Between Fatality Risk, Mass, and Footprint in Model Year 2000-2007 
Passenger Cars and LTVs--Final Report,'' is also in that docket. You 
can access the docket at http://www.regulations.gov/#!home by typing 
``NHTSA-2010-0152'' where it says ``enter keyword or ID'' and then 
clicking on ``Search.''
---------------------------------------------------------------------------

    The most noticeable change in MYs 2000-2007 vehicles from MYs 1991-
1999 has been the increase in crossover utility vehicles (CUV), which 
are SUVs of unibody construction, sometimes built upon a platform 
shared with passenger cars. CUVs have blurred the distinction between 
cars and trucks. The new analyses treat CUVs and minivans as a separate 
vehicle class, because they differ in some respects from pickup-truck-
based LTVs and in other respects from passenger cars. In the 2010 
report, the many different types of LTVs were combined into a single 
analysis. NHTSA believes that this may have made the analyses too 
complex and might have contributed to some of the uncertainty in the 
results.
    The new database has more accurate VMT estimates than NHTSA's 
earlier databases, derived from a file of odometer readings by make, 
model, and model year recently developed by R.L. Polk and purchased by 
NHTSA.\338\ For the 2011-2012 reports, the relative distribution of 
crash types has been changed to reflect the projected distribution of 
crashes during the period from 2017 to 2025, based on the estimated 
effectiveness of electronic stability control (ESC) in reducing the 
number of fatalities in rollover crashes and crashes with a stationary 
object. The annual target population of fatalities or the annual 
fatality distribution baseline \339\ was not decreased in the period 
between 2017 and 2025 for the safety statistics analysis, but is taken 
into account later in the Volpe model analysis, since all light-duty 
vehicles manufactured on or after September 1, 2011 are required to be 
equipped with ESC.\340\
---------------------------------------------------------------------------

    \338\ In the 1991-1999 data base, VMT was estimated only by 
vehicle class, based on NASS CDS data.
    \339\ MY 2004-2007 vehicles with fatal crashes occurred in CY 
2004-2008 are selected as the annual fatality distribution baseline 
in the Kahane analysis.
    \340\ In the Volpe model, NHTSA assumed that the safety trend 
would result in 12.6 percent reduction between 2007 and 2020 due to 
the combination of ESC, new safety standard, and behavior changes 
anticipated.
---------------------------------------------------------------------------

    For the 2011-2012 reports, vehicles are now grouped into five 
classes rather than four: passenger cars (including both 2-door and 4-
door cars) are split in half by median weight; CUVs and minivans; and 
truck-based LTVs, which

[[Page 62747]]

are also split in half by median weight of the model year 2000-2007 
vehicles. Table II-24 presents the 2011 preliminary report's estimated 
percent increase in U.S. societal fatality risk per ten billion VMT for 
each 100-pound reduction in vehicle mass, while holding footprint 
constant, for each of the five classes of vehicles.

 Table II-24--Results of 2011 NHTSA Preliminary Report: Fatality Increase (%) per 100-Pound Mass Reduction While
                                           Holding Footprint Constant
----------------------------------------------------------------------------------------------------------------
                                                     Fatality increase (%) per 100-pound mass reduction while
                                                                    holding footprint constant
           MY 2000-2007  CY 2002-2008           ----------------------------------------------------------------
                                                   Point estimate               95% confidence bounds
----------------------------------------------------------------------------------------------------------------
Cars = 3,106 pounds...........................                .47  -.58 to +1.52
CUVs and minivans..............................               -.46  -1.75 to +.83
Truck-based LTVs = 4,594 pounds...............               -.39  -1.06 to +.27
----------------------------------------------------------------------------------------------------------------

    Charles Farmer, Paul E. Green, and Anders Lie, who reviewed NHTSA's 
2010 report, again peer-reviewed the 2011 preliminary report.\341\ In 
preparing its 2012 final report, NHTSA also took into account Wenzel's 
assessment of the preliminary report and its peer reviews, DRI's 
analyses published early in 2012, and public comments such as those by 
ICCT.\342\ These comments prompted supplementary analyses, especially 
sensitivity tests, discussed below. However, the basic analysis of the 
2012 final report is almost unchanged from the 2011 preliminary report, 
differing only in the addition of some crash data that became available 
in the interim and a minor change in the formula for estimating annual 
VMT. Table II-25 presents the 2012 final report's estimated percent 
increase in U.S. societal fatality risk per ten billion VMT for each 
100-pound reduction in vehicle mass, while holding footprint constant, 
for each of the five classes of vehicles.
---------------------------------------------------------------------------

    \341\ Items 0035 (Lie), 0036 (Farmer) and 0037 (Green) in Docket 
No. NHTSA-2010-0152.
    \342\ Item 0258 in Docket No. NHTSA-2010-0131.

    Table II-25--Results of 2012 NHTSA Final Report: Fatality Increase (%) per 100-Pound Mass Reduction While
                                           Holding Footprint Constant
----------------------------------------------------------------------------------------------------------------
                                                     Fatality increase (%) per 100-pound mass reduction While
                                                                    holding footprint constant
           MY 2000-2007 CY 2002-2008            ----------------------------------------------------------------
                                                   Point estimate               95% confidence bounds
----------------------------------------------------------------------------------------------------------------
Cars = 3,106 pounds...........................                .51  -.59 to +1.60
CUVs and minivans..............................               -.37  -1.55 to +.81
Truck-based LTVs = 4,594 pounds...............               -.34  -.97 to +.30
----------------------------------------------------------------------------------------------------------------

    Only the 1.56 percent risk increase in the lighter-than-average 
cars is statistically significant. There are nonsignificant increases 
in the heavier-than-average cars and the lighter-than-average truck-
based LTVs, and non-significant societal benefits for mass reduction in 
CUVs, minivans, and the heavier-than-average truck-based LTVs. The 
report concludes that judicious combinations of mass reductions that 
maintain footprint and are proportionately higher in the heavier 
vehicles are likely to be safety-neutral--i.e., they are unlikely to 
have a societal effect large enough to be detected by statistical 
analyses of crash data. The primarily non-significant results are not 
due to a paucity of data, but because the societal effect of mass 
reduction while maintaining footprint, if any, is small.
    MY 2000-2007 vehicles of all types are heavier and larger than 
their MY 1991-1999 counterparts. The average mass of passenger cars 
increased by 5 percent from 2000 to 2007 and the average mass of pickup 
trucks increased by 19 percent. Other types of vehicles became heavier, 
on the average, by amounts within this range. There are several reasons 
for these increases: During this time, some of the lighter make-models 
were discontinued; many models were redesigned to be heavier and 
larger; and consumers more often selected stretched versions such as 
crew cabs in their new-vehicle purchases.
    It is interesting to compare the new results to NHTSA's 2010 
analysis of MY 1991-1999 vehicles in CY 1995-2000, especially the new 
point estimate to the ``actual regression result scenario'' in the 2010 
report:

  Table II-26--2010 Report: MY 1991-1999, CY 1995-2000 Fatality Increase (%) per 100-Pound Mass Reduction While
                                           Holding Footprint Constant
----------------------------------------------------------------------------------------------------------------
                                          Actual regression
                                           result scenario      Upper-estimate scenario  Lower-estimate scenario
----------------------------------------------------------------------------------------------------------------
Cars = 2,950 pounds.................                     0.90                     0.90                     0.44
LTVs = 3,870 pounds.................                    -1.90                    -0.62                    -0.73
----------------------------------------------------------------------------------------------------------------

  Table II-27--Fatality Increase (%) per 100-Pound Mass Reduction While
                       Holding Footprint Constant
------------------------------------------------------------------------
                                                     NHTSA       NHTSA
                                                    (2010)      (2012)
                                                   (percent)   (percent)
------------------------------------------------------------------------
Lighter cars....................................        2.21        1.56
Heavier cars....................................        0.90        0.51
Lighter LTVs....................................       0.17*        0.52
Heavier LTVs....................................      -1.90*       -0.34
CUV/minivan.....................................  ..........       -0.37
------------------------------------------------------------------------
* Includes CUV/minivan

    The new results are directionally similar to the 2010 results: 
Fatality increase in the lighter cars, safety benefit in the heavier 
LTVs. But the effects may have become weaker at both ends. (NHTSA does 
not consider this conclusion to be definitive because of the relatively 
wide confidence bounds of the estimates.) The fatality increase in the 
lighter cars tapered off from 2.21 percent to 1.56 percent while the 
societal fatality-reduction benefit of mass reduction in the heaviest 
LTVs diminished from 1.90 percent to 0.34 percent and is no longer 
statistically significant.
    The agencies believe that the changes may be due to a combination 
of the characteristics of newer vehicles and revisions to the analysis. 
NHTSA believes, above all, that several light, small car models with 
poor safety performance were discontinued by 2000 or during MYs 2000-
2007. Also, the tendency of light, small vehicles to be driven in a 
manner that results in high crash rates is not as strong as it used to 
be.\343\ Both agencies believe that at the other end of the weight/size 
spectrum, blocker beams and other voluntary compatibility improvements 
in LTVs, as well as compatibility-related self-protection improvements 
to cars, have made the heavier LTVs less aggressive in collisions with 
lighter vehicles (although the effect of mass disparity remains). This 
report's analysis of CUVs and minivans as a separate class of vehicles 
may have relieved some inaccuracies in the 2010 regression results for 
LTVs. Interestingly, the new actual-regression results are quite close 
to the previous report's ``lower-estimate scenario,'' which was an 
attempt to adjust for supposed inaccuracies in some regressions and for 
a seemingly excessive trend toward higher crash rates in smaller and 
lighter cars.
---------------------------------------------------------------------------

    \343\ Kahane (2012), pp. 30-36.
---------------------------------------------------------------------------

    The principal difference between the heavier vehicles, especially 
truck-based LTVs, and the lighter vehicles, especially passenger cars, 
is that mass reduction has a different effect depending on whether the 
crash partner is another car or LTV (34 percent of fatalities occurred 
in crashes involving two light-duty vehicles, and another 6 percent 
occurred in crashes involving a light-duty vehicle and a heavy-duty 
vehicle) When two vehicles of unequal mass collide, the delta V is 
higher in the lighter vehicle, in the same proportion as the mass 
ratio. As a result, the fatality risk is also higher. Removing some 
mass from the heavy vehicle reduces delta V in the lighter vehicle, 
where fatality risk is higher, resulting in a large benefit, offset by 
a small penalty because delta V increases in the heavy vehicle, where 
fatality risk is low--adding up to a net societal benefit. Removing 
some mass from the lighter vehicle results in a large penalty offset by 
a small benefit--adding up to net harm. These considerations drive the 
overall result: Fatality increase in the lighter cars, reduction in the 
heavier LTVs, and little effect in the intermediate groups. However, in 
some types of crashes, especially first-event rollovers and impacts 
with fixed objects (which, combined, accounted for 23 percent of 
fatalities), mass reduction is usually not harmful and often 
beneficial, because the lighter vehicles respond more quickly to 
braking and steering. Offsetting this beneficial, is the continuing 
historical tendency of lighter and smaller vehicles to be driven less 
well--although it continues to be unknown why that is so, and to what 
extent, if any, the lightness or smallness of the vehicle contributes 
to people driving it less safely.\344\
---------------------------------------------------------------------------

    \344\ Ibid., pp. 27-30.
---------------------------------------------------------------------------

    The estimates in Table II-25 of the model are formulated for each 
100-pound reduction in mass; in other words, if risk increases by 1 
percent for 100 pounds reduction in mass, it would increase by 2 
percent for a 200-pound reduction, and 3 percent for a 300-pound 
reduction (more exactly, 2.01 percent and 3.03 percent, because the 
effects work like compound interest). Confidence bounds around the 
point estimates will grow wider by the same proportions.
    The regression results are best suited to predict the effect of a 
small change in mass, leaving all other factors, including footprint, 
the same. With each additional change from the current environment, the 
model may become somewhat less accurate and it is difficult to assess 
the sensitivity to additional mass reduction greater than 100 pounds. 
The agencies recognize that the light-duty vehicle fleet in the MYs 
2017-2025 timeframe will be different from the MYs 2000-2007 fleet 
analyzed for this study. Nevertheless, one consideration provides some 
basis for confidence in applying the regression results to estimate the 
effects of mass reductions larger than 100 pounds or over longer time 
periods. This is NHTSA's fourth evaluation of the effects of mass 
reduction and/or downsizing, comprising databases ranging from MYs 1985 
to 2007. The results of the four studies are not identical, but they 
have been consistent up to a point. During this time period, many makes 
and models have increased substantially in mass, sometimes as much as 
30-40 percent.\345\ If the statistical analysis has, over the past 
years, been able to accommodate mass increases of this magnitude, 
perhaps it will also succeed in modeling the effects of mass reductions 
on the order of 10-20 percent, if they occur in the future.
---------------------------------------------------------------------------

    \345\ For example, one of the most popular models of small 4-
door sedans increased in curb weight from 1,939 pounds in MY 1985 to 
2,766 pounds in MY 2007, a 43 percent increase. A high-sales mid-
size sedan grew from 2,385 to 3,354 pounds (41%); a best-selling 
pickup truck from 3,390 to 4,742 pounds (40%) in the basic model 
with 2-door cab and rear-wheel drive; and a popular minivan from 
2,940 to 3,862 pounds (31%).
---------------------------------------------------------------------------

    NHTSA's 2011 preliminary report acknowledged another source of 
uncertainty, namely that the baseline statistical model can be varied 
by choosing different control variables or redefining the vehicle 
classes or crash types, for example. Alternative models produce 
different point estimates.

[[Page 62749]]

NHTSA believed it was premature to address that in the preliminary 
report. ``The potential for variation will perhaps be better understood 
after the public and other agencies have had an opportunity to work 
with the new database.'' \346\ Indeed, the principal comments on the 
2011 preliminary report were suggestions or demonstrations of other 
ways to analyze NHTSA's database, especially by Farmer and Green in 
their peer reviews, Van Auken (DRI) in his most recent analyses, and 
Wenzel in his assessment of NHTSA's report. The analyses and findings 
of Wenzel's and Van Auken's reports are summarized in Sections 
II.G.3.e, II.G.3.f, and II.G.3.g, below. These reports, among other 
analyses, define and run specific alternative regression models to 
analyze NHTSA's 2011 or 2012 databases.\347\
---------------------------------------------------------------------------

    \346\ Kahane (2011), p. 81.
    \347\ Wenzel (2012a), Van Auken and Zellner (2012b, 2012c, 
2012d).
---------------------------------------------------------------------------

    From these suggestions and demonstrations, NHTSA garnered 11 more 
or less plausible alternative techniques that could be construed as 
sensitivity tests of the baseline model.\348\ The models use NHTSA's 
databases and regression-analysis approach, but differ from the 
baseline model in one or more terms or assumptions. All of them try to 
control for fundamentally the same driver, vehicle, and crash factors, 
but differ in how they define these factors or how much detail or 
emphasis they provide for some of them. NHTSA applied the 11 techniques 
to the latest databases to generate alternative estimates of the 
societal effect of 100-pound mass reductions in the five classes of 
vehicles. The range of estimates produced by the sensitivity tests 
gives an idea of the uncertainty inherent in the formulation of the 
models, subject to the caveat that these 11 tests are, of course, not 
an exhaustive list of conceivable alternatives. Below are the baseline 
and alternative results, ordered from the lowest to the highest 
estimated increase in societal risk for cars weighing less than 3,106 
pounds:
---------------------------------------------------------------------------

    \348\ See Kahane (2012), pp. 14-16 and 109-128 for a further 
discussion of the alternative models and the rationales behind them.

   Table II-28--Societal Fatality Increase (%) per 100-Pound Mass Reduction While Holding Footprint * Constant
----------------------------------------------------------------------------------------------------------------
                                                                      CUVs &       LTVs [dagger]   LTVs [dagger]
                                   Cars = 3,106     minivans         = 4,594
----------------------------------------------------------------------------------------------------------------
Baseline estimate...............            1.56             .51           - .37             .52           - .34
95% confidence bounds (sampling
 error):
    Lower.......................             .39           - .59          - 1.55           - .45           - .97
    Upper.......................            2.73            1.60             .81            1.48             .30
----------------------------------------------------------------------------------------------------------------
                                              11 Alternative Models
----------------------------------------------------------------------------------------------------------------
1. Track width/wheelbase w.                  .25           - .89           - .13           - .09           - .97
 stopped veh data...............
2. With stopped -vehicle State               .97           - .62           - .33             .35           - .80
 data...........................
3. By track width & wheelbase...             .97             .24           - .24           - .07           - .58
4. W/O CY control variables.....            1.53             .43             .04            1.20             .30
5. CUVs/minivans weighted by                1.56             .51             .53             .52           - .35
 2010 sales.....................
6. W/O non - significant control            1.64             .68           - .46             .35           - .54
 variables......................
7. Incl. muscle/police/AWD cars/            1.81             .49           - .37             .49           - .76
 big vans.......................
8. Control for vehicle                      1.91             .75            1.64             .68           - .13
 manufacturer...................
9. Control for veh manufacturer/            2.07            1.82            1.31             .66           - .13
 nameplate......................
10. Limited to drivers with                 2.32            1.06           - .19             .86           - .58
 BAC=0..........................
11. Limited to good drivers                 3.00            1.62            -.00            1.09           - .30
 [Dagger].......................
----------------------------------------------------------------------------------------------------------------
* While holding track width and wheelbase constant in alternative model nos. 1 and 3.
[dagger] Excluding CUVs and minivans.
[Dagger] Blood alcohol content = 0, no drugs, valid license, at most 1 crash and 1 violation during the past 3
  years.

    For example, in cars weighing less than 3,106 pounds, the baseline 
estimate associates 100minus;pound mass reduction, while holding 
footprint constant, with a 1.56 percent increase in societal fatality 
risk. The corresponding estimates for the 11 sensitivity tests range 
from a 0.25 to a 3.00 percent increase. The sensitivity tests 
illustrate both the fragility and the robustness of the baseline 
estimate. On the one hand, the variation among the alternative 
estimates is quite large relative to the baseline estimate: In the 
preceding example of cars = 4,594 
pounds. None of these models suggest mass reduction in small cars would 
be beneficial. All suggest mass reduction in heavy LTVs would be 
beneficial or, at least, close to neutral. In general, any judicious 
combination of mass reductions that maintain footprint and are 
proportionately higher in the heavier vehicles is unlikely to have a 
societal effect large enough to be detected by statistical analyses of 
crash data. NHTSA has conducted a sensitivity analysis to estimate the 
fatality impact of the alternative models using the coefficients for 
these 11 test

[[Page 62750]]

cases. The results for these sensitivity runs can be found in Table IX-
6 of NHTSA's FRIA.
    Four additional comments on NHTSA's 2011 report are addressed in 
the 2012 report. ICCT noted that DRI's latest analyses are two-stage 
analyses that subdivide the effect of mass reduction into a fatalities-
per-crash component (called ``effect on crashworthiness'') and a 
crashes-per-VMT component (called ``effect on crash avoidance''). ICCT 
believes it counterintuitive that DRI's two-stage analysis using the 
same independent variables as NHTSA's basic model shows mass reduction 
harms ``crash avoidance''; thus, ICCT prefers DRI's alternative models 
(using different independent variables) that do not show mass reduction 
harming crash avoidance. NHTSA's response is that DRI's estimates of 
separate fatalities-per-crash and crashes-per-VMT components appear to 
be valid, but, in NHTSA's opinion, these components do not necessarily 
correspond to the intuitive concepts of ``crashworthiness'' and ``crash 
avoidance.'' Specifically, the fatalities-per-crash component is 
affected not only by the crashworthiness of the vehicles, but also by 
how severe their crashes are: a crash-avoidance issue. Farmer 
recommended that, in the analyses of crashes between two light 
vehicles, NHTSA estimate the effect of mass reduction in the case 
vehicle separately for the occupants of that vehicle and for the 
occupants of the other vehicle. The analysis shows that mass reduction 
consistently and substantially increases risk for the vehicle's own 
occupants and substantially lowers it for the occupants of the partner 
vehicle. Several commenters suggested that NHTSA consider logistic 
ridge regression as a tool for addressing multicollinearity; NHTSA was 
unable to acquire software for logistic ridge regression now, but will 
attempt to acquire it for future analyses. Lie requested--and NHTSA 
added--a comparison of the estimated safety effects of mass reduction 
to the effects of safety technologies and the differences in risk 
between vehicles with good and poor test ratings.
e. Report by Tom Wenzel, LBNL, ``An Assessment of NHTSA's Report 
`Relationships Between Fatality Risk, Mass, and Footprint in Model Year 
2000-2007 Passenger Cars and LTVs' '', 2011
    DOE contracted with Tom Wenzel of Lawrence Berkeley National 
Laboratory to conduct an assessment of NHTSA's updated 2011 study of 
the effect of mass and footprint reductions on U.S. fatality risk per 
vehicle miles traveled (LBNL Phase 1 report), and to provide an 
analysis of the effect of mass and footprint reduction on casualty risk 
per police-reported crash, using independent data from thirteen states 
(LBNL Phase 2 report). Both reports have been reviewed by NHTSA, EPA, 
and DOE staff, as well as by a panel of reviewers.\349\ The final 
versions of the reports reflect responses to comments made in the 
formal review process, as well as changes made to the VMT weights 
developed by NHTSA for the final rule, and inclusion of 2008 data for 
six states that were not available for the analyses in the draft final 
versions included in the NPRM docket.
---------------------------------------------------------------------------

    \349\ EPA sponsored the peer review of the LBNL Phase 1 and 2 
Reports.
---------------------------------------------------------------------------

    The LBNL Phase 1 report replicates Kahane's analysis for NHTSA, 
using the same data and methods, and in many cases using the same SAS 
programs, in order to confirm NHTSA's results. The LBNL report confirms 
NHTSA's 2012 finding that mass reduction is associated with a 
statistically significant 1.55% increase in fatality risk per vehicle 
miles travelled (VMT) for cars weighing less than 3,106 pounds; for 
other vehicle types, mass reduction is associated with a smaller 
increase, or even a small decrease, in risk. Wenzel tested the 
sensitivity of these estimates to changes in the measure of risk and 
the control variables and data used in the regression models. Wenzel 
also concluded that there is a wide range in fatality risk by vehicle 
model for models that have comparable mass or footprint, even after 
accounting for differences in drivers' age and gender, safety features 
installed, and crash times and locations. This section summarizes the 
results of the Wenzel assessment of the most recent NHTSA analysis.
    The LBNL Phase 1 report notes that many of the control variables 
NHTSA includes in its logistic regressions are statistically 
significant, and have a much larger estimated effect on fatality risk 
than vehicle mass. For example, installing torso side airbags, 
electronic stability control, or an automated braking system in a car 
is estimated to reduce fatality risk by about 10%; cars driven by men 
are estimated to have a 40% higher fatality risk than cars driven by 
women; and cars driven at night, on rural roads, or on roads with a 
speed limit higher than 55 mph are estimated to have a fatality risk 
over 100 times higher than cars driven during the daytime on low-speed 
non-rural roads. While the estimated effect of mass reduction may 
result in a statistically-significant increase in risk in certain 
cases, the increase is small and is overwhelmed by other known vehicle, 
driver, and crash factors.
    NHTSA notes these findings are additional evidence that estimating 
the effect of mass reduction is a complex statistical problem, given 
the presence of other factors that have large effects. The findings do 
not propose future technologies that could neutralize the potentially 
deleterious effects of mass reduction. Indeed, the preceding examples 
are limited to technologies emerging in the 2002-2008 timeframe of the 
crash database but that will be in all model year 2017-2025 vehicles 
(side airbags, electronic stability control) or factors that are simply 
unchangeable circumstances in the crash environment outside the control 
of CAFE or other vehicle regulations (for example, that about half of 
the drivers are males and that much driving is at night or on rural 
roads).
    Sensitivity tests: LBNL tested the sensitivity of the NHTSA 
estimates of the relationship between vehicle weight and risk using 19 
different regression analyses that changed the measure of risk, the 
control variables used, or the data used in the regression models.

Table II-29--Societal Fatality Increase (%) per 100-Pound Mass Reduction While Holding Footprint * Constant From
                                                  Wenzel Study
----------------------------------------------------------------------------------------------------------------
                                                                                                   LTVS[dagger]
                                   Cars  = 3,106      CUVS &       LTVS[dagger]      >= 4,594
                                                                     minivans         drugs..................
12. Excluding crashes with                  2.32            1.19           -0.01            1.01           -0.11
 alcohol/drugs or bad drivers...
13. Accounting for median                   1.20            0.16           -0.44            0.68           -0.30
 household income...............
14. Including sports, squad, AWD            1.79            0.49           -0.38            0.49           -0.77
 cars and fullsize vans.........
15. Stopped instead of non-                 0.97           -0.63           -0.33            0.35           -0.80
 culpable vehicles for induced
 exposure.......................
16. Including track width and               0.95            0.24           -0.25           -0.07           -0.58
 wheelbase instead of footprint.
17. Using stopped vehicles and              0.26           -0.90           -0.14           -0.10           -0.97
 track width/wheelbase..........
18. Reweighting CUVs and                    1.55            0.51            0.55            0.52           -0.34
 minivans by 2010 sales.........
19. Excluding non-significant               1.63            0.69           -0.46            0.35           -0.54
 control variables..............
----------------------------------------------------------------------------------------------------------------
* While holding track width and wheelbase constant in alternative model nos. 1 and 3.
[dagger] Excluding CUVs and minivans.

    For all five vehicle types, the range in estimates from the 
nineteen alternative models spanned zero, with the individual estimated 
effects of a 100-pound mass reduction in Table II-28 ranging from a 
1.45 percent fatality reduction (cars >= 3,106 pounds, alternative 5) 
up to an increase in risk of 2.74 percent (cars = 4,594 pounds, only one of the 
19 alternatives estimated an increase in fatality risk, namely the 
model without CY variables (alternative 10).
    NHTSA notes that all of these models suggest mass reduction in 
small cars would be harmful or, at best, close to neutral; all suggest 
mass reduction in heavy LTVs would be beneficial or, at worst, close to 
neutral. The range on these 19 sensitivity tests is similar to the 
range in the 11 tests included in the Kahane write-up.
    Multicollinearity issues (from LBNL study): Using two or more 
variables that are strongly correlated in the same regression model 
(referred to as multicollinearity) can lead to inaccurate results. 
However, the correlation between vehicle mass and footprint may not be 
strong enough to cause serious concern. The Pearson correlation 
coefficient r between vehicle mass and footprint ranges from 0.90 for 
four-door sedans and SUVs, to just under 0.50 for minivans. The 
variance inflation factor (VIF) is a more formal measure of 
multicollinearity of variables included in a regression model. Allison 
\350\ ``begins to get concerned'' with VIF values greater than 2.5, 
while Menard \351\ suggests that a VIF greater than 5 is a ``cause for 
concern'', while a VIF greater than 10 ``almost certainly indicates a 
serious collinearity problem''; however, O'Brien \352\ suggests that 
``values of VIF of 10, 20, 40 or even higher do not, by themselves, 
discount the results of regression analyses.'' When both weight and 
footprint are included in the regression models, the VIF associated 
with weight exceeds 5 for four-door cars, small pickups, SUVs, and 
CUVs, and exceeds 2.5 for two-door cars and large pickups; the VIF 
associated with weight is only 2.1 for minivans. NHTSA included several 
analyses to address possible effects of the near-multicollinearity 
between mass and footprint.
---------------------------------------------------------------------------

    \350\ Allison, P.D.. Logistic Regression Using SAS, Theory and 
Application. SAS Institute Inc., Cary NC, 1999.
    \351\ Menard, S. Applied Logistic Regression Analysis, Second 
Edition. Sage Publications, Thousand Oaks, CA 2002.
    \352\ O'Brien, R.M. ``A Caution Regarding Rules of Thumb for 
Variance Inflation Factors,'' Quality and Quantity, (41) 673-690, 
2007.
---------------------------------------------------------------------------

    First, NHTSA ran a sensitivity case where footprint is not held 
constant, but rather allowed to vary as mass varies (i.e., NHTSA ran a 
regression model which includes mass but not footprint.\353\ If the 
multicollinearity was so great that including both variables in the 
same model gave misleading results, removing footprint from the model 
would give much different results than keeping it in the model. NHTSA's 
sensitivity test estimates that when footprint is allowed to vary with 
mass, the effect of mass reduction on risk increases from 1.55% to 
2.74% for cars weighing less than 3,106 pounds, from a non-significant 
0.51% to a statistically-significant 1.95% for cars weighing more than 
3,106 pounds, and from a non-significant 0.38% decrease to a 
statistically-significant 0.60% increase in risk for CUVs and minivans; 
however, the effect of mass reduction on light trucks is unchanged.
---------------------------------------------------------------------------

    \353\ Kahane (2012), pp. 93-94.
---------------------------------------------------------------------------

    Second, NHTSA conducted a stratification analysis of the effect of 
mass reduction on risk by dividing vehicles into deciles based on their 
footprint, and running a separate regression model for each vehicle and 
crash type, for each footprint decile (3 vehicle types times 9 crash 
types times

[[Page 62752]]

10 deciles equals 270 regressions).\354\ This analysis estimates the 
effect of mass reduction on risk separately for vehicles with similar 
footprint. The analysis indicates that reducing vehicle mass does not 
consistently increase risk across all footprint deciles for any 
combination of vehicle type and crash type. Risk increases with 
decreasing mass in a majority of footprint deciles for 12 of the 27 
crash and vehicle combinations, but few of these increases are 
statistically significant. On the other hand, risk decreases with 
decreasing mass in a majority of footprint deciles for 5 of the 27 
crash and vehicle combinations; in some cases these risk reductions are 
large and statistically significant.\355\ If reducing vehicle mass 
while maintaining footprint inherently leads to an increase in risk, 
the coefficients on mass reduction should be more consistently 
positive, and with a larger R\2\, across the 27 vehicle/crash 
combinations, than shown in the analysis. These findings are consistent 
with the conclusion of the basic regression analyses; namely, that the 
effect of mass reduction while holding footprint constant, if any, is 
small.
---------------------------------------------------------------------------

    \354\ Ibid., pp. 73-78.
    \355\ And in 10 of the 27 crash and vehicle combinations, risk 
increased in 5 deciles and decreased in 5 deciles with decreasing 
vehicle mass.
---------------------------------------------------------------------------

    One limitation of using logistic regression to estimate the effect 
of mass reduction on risk is that a standard statistic to measure the 
extent to which the variables in the model explain the range in risk, 
equivalent to the R\2\ statistic in a linear regression model, does not 
exist. (SAS does generate a pseudo-R\2\ value for logistic regression 
models; in almost all of the NHTSA regression models this value is less 
than 0.10). For this reason LBNL conducted an analysis of risk versus 
mass by vehicle model. LBNL used the results of the NHTSA logistic 
regression model to predict the number of fatalities expected after 
accounting for all vehicle, driver, and crash variables included in the 
NHTSA regression model except for vehicle weight and footprint. LBNL 
then plotted expected fatality risk per VMT by vehicle model against 
the mass of each model, and analyzed the change in risk as mass 
increases, as well as how much of the change in risk was explained by 
all of the variables included in the model.
    The analysis indicates that, after accounting for all the control 
variables except vehicle mass and footprint, risk does decrease as mass 
increases; however, risk and mass are not strongly correlated, with the 
R\2\ ranging from 0.32 for CUVs to less than 0.13 for all other vehicle 
types (as shown in Figure II-2). This means that, on average, risk 
decreases as mass increases, but the variation in risk among individual 
vehicle models is stronger than the trend in risk from light to heavy 
vehicles. For full-size (i.e. \3/4\- and 1-ton) pickups, societal risk 
increases as mass increases, with an R\2\ of 0.45; this is consistent 
with NHTSA's basic regression results for light trucks weighing more 
than 4,594 pounds, with societal risk decreasing as mass decreases. 
LBNL also examined the relationship between vehicle mass and residual 
risk, that is, the remaining unexplained risk after accounting for all 
other vehicle, driver and crash variables, and found similarly poor 
correlations. This implies that the remaining factors not included in 
the regression model that account for the observed range in risk by 
vehicle model also are not correlated with mass. (LBNL found similar 
results when the analysis compared risk to vehicle footprint.)
    Figure II-2 indicates that some vehicles on the road today have the 
same, or lower, fatality risk than models that weigh substantially 
more, and are substantially larger in terms of footprint. After 
accounting for differences in driver age and gender, safety features 
installed, and crash times and locations, there are numerous examples 
of different models with similar weight and footprint yet widely 
varying fatality risk. The variation of fatality risk among individual 
models may reflect differences in vehicle design, differences in the 
drivers who choose such vehicles (beyond what can be explained by 
demographic variables such as age and gender), and statistical 
variation of fatality rates based on limited data for individual 
models.
    The figure shows that when the data are aggregated at the make-
model level, the combination of differences in vehicle design, vehicle 
selection, and statistical variations has more influence than mass on 
fatality rates. The figure perhaps also suggests that, to the extent 
these variations in fatality rates are due to differences in vehicle 
design rather than vehicle selection or statistical variations, there 
is potential for lowering fatality rates through improved vehicle 
design. This is consistent with NHTSA's opinion that some of the 
changes in its regression results between the 2003 study and the 2011 
study are due to the redesign or removal of certain smaller and lighter 
models of poor design.

[[Page 62753]]

[GRAPHIC] [TIFF OMITTED] TR15OC12.009

f. Report by Tom Wenzel, LBNL, ``An Analysis of the Relationship 
Between Casualty Risk per Crash and Vehicle Mass and Footprint for 
Model Year 2000-2007 Light-Duty Vehicles'', 2012 (LBNL Phase 2 Report)
    LBNL compared the logistic regression results of NHTSA's analysis 
of U.S. fatality risk per VMT, replicated in the LBNL Phase 1 report, 
with an independent analysis of 13-state fatality risk and casualty 
risk per crash (LBNL Phase 2 report). The LBNL Phase 2 analysis differs 
from the NHTSA analysis in two respects: first, it analyzes risk per 
crash, using data on all police-reported crashes from thirteen states, 
rather than risk per estimated VMT; and second, it analyzes casualty 
(fatality plus serious injury) risk, as opposed to just fatality risk. 
There are several good reasons to investigate the effect of mass and 
footprint reduction on casualty risk per crash. First, risk per VMT 
includes two components that influence whether a person is killed or 
seriously injured in a crash: how well a vehicle can be (based on its 
handling, acceleration, and braking capabilities), or actually is, 
driven to avoid being involved in a serious crash (crash avoidance), 
and, once a serious crash has occurred, how well a vehicle protects its 
occupants from fatality or serious injury (crashworthiness) as well as 
the occupants of any crash partner (compatibility). By encompassing 
both of these aspects of vehicle design, risk per VMT gives a complete 
picture of how vehicle design can promote, or reduce, road user safety. 
On the other hand, risk per crash isolates the second of these two 
safety effects, crashworthiness/compatibility, by examining the 
relationship between mass or footprint and how well a vehicle protects 
its occupants and others once a crash occurs.
    Second, estimating risk on a per crash basis only requires using 
data on police-reported crashes from states, and does not require 
combining them with data from other sources, such as vehicle 
registration data and VMT information, as in NHTSA's 2012 analysis. 
Only 16 states currently record the vehicle identification number of 
vehicles involved in police-reported crashes, which is necessary to 
determine vehicle characteristics, and only 13 states also report the 
posted speed limit of the roadway on which the crash occurred. Given 
the limited number of fatality cases in 13 States, extending the 
analysis to casualties (fatalities plus serious/incapacitating 
injuries; i.e., level ``K'' and ``A'' injuries in police reports, a 
substantially larger number of cases than fatalities alone) reduces the 
statistical uncertainty of the results. Finally, a serious 
incapacitating injury can be just as traumatic to the victim and his or 
her family, and costly from an economic perspective, as a fatality. 
Limiting the analysis to the risk of fatality, which is a relatively 
rare event, ignores the effect vehicle design may have on reducing the 
large number of incapacitating injuries that occur each year on the 
nation's roadways. All risks in the report are societal risk, including 
fatalities and serious injuries in the case vehicle and any crash 
partners, and include not only driver but passenger casualties as well 
as non-occupant casualties such as pedestrians.
    NHTSA notes that casualty severity is identified by public safety 
officers at the crash scene prior to examination by medical 
professionals, and therefore reported casualty severity will inherently 
have a degree of subjectivity.\356\
---------------------------------------------------------------------------

    \356\ NHTSA notes that police-reported ``A'' injuries do not 
necessarily correspond to life-threatening or seriously disabling 
injuries as defined by medical professionals. In 2000-2008 CDS data, 
59% of the injuries that were coded ``A'' injuries were in fact 
medically minor (AIS 0-1), while 39% of serious (AIS 3) and 27% of 
life-threatening (AIS 4-5) injuries are not coded ``A.'' NHTSA does 
not include serious casualties in its analysis of the effects of 
vehicle mass and size on societal safety because of these 
inaccuracies.

---------------------------------------------------------------------------

[[Page 62754]]

    The LBNL Phase 2 report estimates that mass reduction increases 
crash frequency (columns B and E) in all five vehicle types, with 
larger estimated increases in lighter-than-average cars and light-duty 
trucks. As a result, mass reduction is estimated to have a more 
beneficial effect on casualty risk per crash (column F) than on 
casualty risk per VMT (column G), and on fatality risk per crash 
(column C) than on fatality risk per VMT (column D). Mass reduction is 
associated with decreases in casualty risk per crash (column F) in all 
vehicles except cars weighing less than 3,106 pounds; in two of the 
four cases these estimated reductions are statistically significant, 
albeit small. For cars and light trucks, lower mass is associated with 
a more beneficial effect on fatality risk per crash (column C) than on 
casualty risk per crash (column F); for CUVs/minivans we estimate the 
opposite: lower mass is associated with a more beneficial effect on 
casualty risk than fatality risk per crash.

 Table II-30--Estimated Effect of Mass or Footprint Reduction on two Components of 13-State Fatality and Casualty Risk per VMT: Crash Frequency (Crashes
                                               per VMT) and Crashworthiness/Compatibility (Risk per Crash)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 A. NHTSA
                                                                   U.S.     B. 13-state  C. 13-state  D. 13-state  E. 13-state  F. 13-state  G. 13-state
              Variable                   Case vehicle type      fatalities  crashes per   fatalities   fatalities  crashes per   casualties   casualties
                                                                 per VMT        VMT       per crash     per VMT        VMT       per crash     per VMT
                                                                (percent)    (percent)    (percent)    (percent)    (percent)    (percent)    (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Mass Reduction......................  Cars  3106 lbs........         0.51         1.50        -2.39        -1.07         1.50        -0.77         0.73
                                      LTs  4594 lbs.........        -0.34         0.94        -1.25        -0.34         0.94        -0.62        -0.04
                                      CUV/minivan............        -0.38         0.95         0.98         1.60         0.95        -0.16         0.10
Footprint Reduction.................  Cars...................         1.87         0.64         0.92         2.11         0.64         0.23         1.54
                                      LTs....................        -0.07         1.04         0.48         1.64         1.04        -0.25         0.94
                                      CUV/minivan............         1.72        -0.55        -1.67        -1.24        -0.55         0.56         1.54
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Based on NHTSA's estimation of uncertainty using a jack-knife method, only mass reduction in cars less than 3,106 pounds has a statistically
  significant effect on U.S. fatality risk.
Estimates that are statistically significant at the 95% level are shown in italics.

    It is unclear why lower vehicle mass is associated with higher 
crash frequency, but lower risk per crash, in the regression models. It 
is possible that including variables that more accurately account for 
important differences among vehicles and driver behavior would reverse 
this relationship. For example, adding vehicle purchase price as a 
control variable reduces the estimated increase in crash frequency as 
vehicle mass decreases, for all five vehicle types; in the case of cars 
weighing more than 3,106 pounds, controlling for purchase price even 
reverses the sign of the relationship: mass reduction is estimated to 
slightly decrease crash frequency.\357\ It also appears that, in model 
year 2000-2007 vehicles, the effect of mass reduction on casualties per 
crash is simply very small, if any (estimated effects in Table II-30, 
column F are under 1% per 100-pound reduction in all five vehicle 
groups).
---------------------------------------------------------------------------

    \357\ Wenzel (2012b), pp. 59-60, especially Figure 4-10.
---------------------------------------------------------------------------

    The association of mass reduction with 13-state casualty risk per 
VMT (column G) is quite consistent with that NHTSA estimated for U.S. 
fatality risk per VMT in its 2012 report (column A), although LBNL 
estimated the effects on casualty risk to be more detrimental than the 
effects on fatality risk, for all vehicle types. In contrast with 
NHTSA's estimates of U.S. fatality risk per VMT (column A), mass 
reduction is estimated to reduce casualty risk per crash (column F) for 
four of the five vehicle types, with two of these four reductions 
estimated to be statistically significant. Mass reduction is associated 
with a small but insignificant increase in casualty risk per crash for 
cars weighing less than 3,106 pounds.
    As in the LBNL Phase 1 study, replicating NHTSA methodology, many 
of the control variables included in the logistic regressions are 
statistically significant, and have a large effect on fatality or 
casualty risk per crash, in some cases one to two orders of magnitude 
larger than those estimated for mass or footprint reduction. However, 
the estimated effect of these variables on risk per crash is not as 
large as their estimated effect on fatality risk per VMT. LBNL 
concludes that the estimated effect of mass reduction on casualty risk 
per crash is small and is overwhelmed by other known vehicle, driver, 
and crash factors.
    NHTSA notes that to estimate the effect of mass reduction on safety 
requires careful examination of how to model the covariant effects of 
vehicle, driver, and crash factors.
    LBNL states that regarding the control variables, there are several 
results that, at first glance, would not be expected: side airbags in 
light trucks and CUVs/minivans are estimated to reduce crash frequency; 
ESC and ABS, crash avoidance technologies, are estimated to reduce risk 
once a crash has occurred; and AWD and brand new vehicles are estimated 
to increase risk once a crash has occurred. In addition, male drivers 
are estimated to have essentially no effect on crash frequency, but are 
associated with a statistically significant increase in fatality risk 
once a crash occurs. And driving at night, on high-speed or rural 
roads, are associated with higher increases in risk per crash than on 
crash frequency. A possible explanation for these unexpected results is 
that important control variables are not being included in the 
regression models. For example, crashes involving male drivers, in 
vehicles equipped with AWD, or that occur at night on rural or high-
speed roads, may not be more frequent but rather more severe than other 
crashes, and thus lead to greater fatality or casualty risk. And 
drivers who select vehicles with certain safety features may tend to 
drive more carefully, resulting in vehicle safety features designed to 
improve

[[Page 62755]]

crashworthiness or compatibility, such as side airbags, being also 
associated with lower crash frequency.
    As with NHTSA's analysis of fatality risk per VMT, lower mass is 
not consistently associated with increased casualty risk per crash 
across all footprint deciles for any combination of vehicle type and 
crash type. Lower mass is associated with increased casualty risk per 
crash in a majority of footprint deciles for 9 of the 27 crash and 
vehicle combinations, but few of these increases are statistically 
significant. On the other hand, lower mass is associated with decreased 
risk in a majority of footprint deciles for 12 of the 27 crash and 
vehicle combinations.
    The correlation between mass and the casualty risk per crash by 
vehicle model is very low, after accounting for all of the control 
variables in the logistic regression model except for vehicle mass and 
footprint. Furthermore, when casualty rates are aggregated at the make-
model level, there is no significant correlation between the residual, 
unexplained risk and vehicle weight. Even after accounting for many 
vehicle, driver, and crash factors, the variation in casualty risk per 
crash by vehicle model is quite large and unrelated to vehicle weight. 
That parallels the LBNL Phase 1 report, which found similar variation 
in fatality rates per VMT at the make-model level. The variations among 
individual models may reflect differences in vehicle design, 
differences in the drivers who choose such vehicles, and statistical 
variation due to the limited data for individual models. To the extent 
the variations are due to differences in vehicle design rather than 
vehicle selection or statistical variations, there is potential for 
lowering fatality or casualty rates through improved vehicle design. To 
the extent that the variations are due to differences in what drivers 
choose what vehicles, it is possible that including variables that 
account for these factors in the regression models would change the 
estimated relationship between mass or footprint and risk.
    NHTSA notes that the statistical variation due to the limited data 
for individual models is an additional source of uncertainty inherent 
in the technique of aggregating the data by make and model, a technique 
whose primary goal is not the estimation of the effect of mass 
reduction on safety.
g. Reports by Van Auken & Zellner, DRI--``Updated Analysis of the 
Effects of Passenger Vehicle Size and Weight on Safety,'' 2012
    The International Council on Clean Transportation (ICCT), the 
Energy Foundation, and American Honda Motor Co. contracted Mike Van 
Auken and John Zellner of Dynamic Research Institute (DRI) to conduct a 
study to update the analysis of the effects of passenger vehicle size 
and weight on safety, based on the newly released NHTSA 2011 database. 
As noted earlier, DRI reports its study in three parts: Phase I,\358\ 
II,\359\ and Supplement.\360\ This study was not complete in time for 
the NPRM, but was finished in time to be submitted to the docket as 
part of ICCT's public comments. The study has not yet been peer 
reviewed.
---------------------------------------------------------------------------

    \358\ Van Auken and Zellner (2012a).
    \359\ Van Auken and Zellner (2012b), Van Auken and Zellner 
(2012c).
    \360\ Van Auken and Zellner (2012d).
---------------------------------------------------------------------------

    Phase I, which analyzed CY 1995-2000 fatalities in MY 1991-1999 
vehicles to replicate the NHTSA 2003 and 2010 studies, has already been 
discussed and responded to above. The purpose of Phase II was to extend 
and refined the analytical methods used by DRI in the Phase I of this 
program to the more recent model year and calendar year data used in 
the Kahane (2011) analysis, in order to confirm the Kahane (2011) 
results and to estimate the effects of vehicle weight and size 
reduction on fatalities per 100 reported crash involvements and 
reported crash involvements per VMT (which DRI calls, respectively, 
``effect on crashworthiness/crash compatibility'' and ``effect on crash 
avoidance'').
    The Phase II study was accomplished by updating the regression 
analysis tools to use the newer databases for 2000 through 2007 model 
year light passenger vehicles in the 2002 through 2008 calendar years. 
The fatal and induced exposure databases were compiled by NHTSA from 
the U.S. DOT FARS database and accident data files from 13 U.S. States. 
In addition, police reported accident data files were obtained from 10 
states. These 10 states were a subset of the 13 induced-exposure data 
states which NHTSA used. Data for the other three states were not 
available to non-government researchers at the time of this analysis.
    The main results of the DRI Phase II analyses are as follows:
     The DRI one-stage analysis was able to reproduce NHTSA's 
baseline results very closely. However, in these analyses, DRI, like 
NHTSA, defines the induced-exposure cases to be the non-culpable 
vehicles involved in two-vehicle crashes. Later, in its supplemental 
report, DRI considers limiting the induced-exposure cases to stopped 
vehicles.
     The DRI two-stage analysis was able to replicate the DRI 
and NHTSA one stage results.
     The DRI Phase II two-stage results, which used more recent 
data were directionally similar to the DRI Phase I two-stage results. 
They showed an increase in reported crash involvements per VMT for 
lighter and smaller vehicles, but reductions of fatalities per 100 
reported crash involvements. The DRI results for crash avoidance are 
also similar to those of Wenzel Phase 2 (2011b).
     The two-stage results for passenger cars weighing less 
than 3,106 pounds indicated that the increase in fatalities attributed 
to mass reduction was due to an increase in the number of crashes per 
exposure, more than offsetting a reduction in the number of fatalities 
per crash. The underlying reasons for these offsetting effects are 
unknown at this time, but could involve driver, vehicle, environment or 
accident factors that have not been controlled for in the current 
analyses. These results are similar to those obtained in Wenzel Phase 2 
(2011b).
    The overall results from DRI Phase II indicated very close 
agreement between the DRI and NHTSA one-stage results using the same 
methods and data. The results also indicate that the DRI one-stage and 
two-stage results are similar but have some differences due to the 
number of stages in the regression analysis. It may be possible to 
reduce these differences in the future by updating the state accident 
data for the 2008 calendar year, and adding ``internal control 
variables.''
    The DRI Supplemental report discusses in further detail two 
previous key assumptions that were used in the Kahane (2011), Wenzel 
(2011b), and DRI (2012b) reports, and describes two alternative 
assumptions. The previous key assumptions were that the effects of 
vehicle weight and size can be best modeled by curb weight and 
footprint; and that the crash exposure is best represented by non-
culpable vehicle induced-exposure data. The alternative assumptions are 
that the weight and size can be best modeled by curb weight, wheelbase, 
and track width; and that the crash exposure is best represented by 
stopped-vehicle induced-exposure data (because non-culpable vehicle 
data may underrepresent vehicles and drivers that are better at 
avoiding crashes, even if they would have been non-culpable in those 
crashes). Some of the potential advantages and disadvantages of the 
previous assumptions and these alternative assumptions are described in 
the DRI supplemental report.

[[Page 62756]]

    The results in the DRI Supplemental report indicate a range of 
estimates for the effects of a 100 pound curb mass reduction based on 
the type of induced-exposure data that is used and the candidate 
vehicle weight and size model. These results indicate:
     The estimated effects of mass reduction on fatalities are 
not statistically significant for any vehicle category, if the 
wheelbase and track model is used with the non-culpable vehicle 
induced-exposure data. (This assumes the width of confidence bounds is 
similar to those seen in the Kahane (2011) analyses.)
     The estimated effects of mass reduction on fatalities 
either result in a statistically significant decrease in fatalities 
(for truck-based LTVs weighing 4,594 lbs or more), or are not 
statistically significant (for all other vehicle categories), if the 
stopped-vehicle induced-exposure data is used (irrespective of the two 
candidate size models, e.g., the footprint model, or the wheelbase and 
track width model).
     The estimated effect of curb mass reduction for passenger 
cars weighing less than 3,106 pounds is a statistically significant 
increase in fatalities (when compared to the jackknife based confidence 
intervals) only if the curb weight and footprint model is used with the 
non-culpable vehicle induced-exposure data.
     All other estimated effects of mass reduction on 
fatalities are not statistically significant when compared to the 
jackknife based confidence intervals.
    In addition, the variance inflation factors are approximately the 
same when modeling the independent effects of curb weight, wheelbase 
and track width as when modeling curb weight and footprint, which 
suggests there is no adverse effect for modeling with track width and 
wheelbase in the context of potential overparameterization and 
excessive multicollinearity. In addition, wheelbase and track width 
would be expected to have separate, different, physics-based effects on 
vehicle crash avoidance and crashworthiness/compatibility, which 
effects are confounded when they are combined into a single variable, 
footprint.
    DRI further recommended that the final version of the Kahane (2011) 
report include models based on curb weight, wheelbase and track width; 
and also include results based on non-culpable stopped-vehicle induced-
exposure data as well as non-culpable vehicle induced-exposure. DRI 
concludes that the latter could be addressed by averaging the estimates 
from both the stopped-vehicle induce-exposure and the non-culpable 
vehicle induced-exposure, and incorporate the range of estimates into 
the reported uncertainty in the results (i.e., confidence intervals).
    DRI also recommended that NHTSA provide the following additional 
variables in the current publicly available induced-exposure dataset so 
that other researchers can reproduce the sensitivity to the induced-
exposure definition:
     An additional variable indicating whether each induced-
exposure vehicle was moving or stopped at the time of the initial 
impact. This variable could then be used to derive a non-culpable 
stopped-vehicle induced-exposure dataset from the non-culpable vehicle 
induced-exposure dataset.
     Add accident case identifiers to the induced-exposure 
dataset that are suitable for linking to the original state accident 
data files, but do not otherwise disclose any private information. This 
would assist researchers with access to the original accident data in 
better understanding the induced-exposure data.
    As noted in the preceding discussion of the Kahane (2012) and 
Wenzel (2012a) reports, NHTSA and LBNL have added models based on track 
width and wheelbase and/or stopped-vehicle induced exposure to the 
report. Table II-28 (test nos. 1, 2, and 3) and Table II-29 (tests nos. 
15, 16, and 17) show results for those models. NHTSA has also made 
available to the public an induced-exposure database limited to stopped 
vehicles.
h. DOT Summary and Response to Recent Statistical Studies
    The preceding sections reviewed three groups of reports issued in 
2012 that estimated the effect of mass reduction on societal fatality 
or casualty risk, based on statistical analyses of crash and exposure 
data for model year 2000-2007 vehicles: NHTSA/Kahane's report and LBNL/
Wenzel's Phase 1 report analyze fatality rates per VMT. DRI/Van Auken's 
reports likewise estimate the overall effect of mass reduction on 
fatalities per VMT, but they also provide separate sub-estimates of the 
effect on fatalities per 100 reported crash involvements and on 
reported crash involvements per VMT (which Van Auken calls ``effect on 
crashworthiness/compatibility'' and ``effect on crash avoidance''). 
Wenzel's Phase 2 report analyzes casualty rates per VMT, including sub-
estimates of the effects on casualties per 100 crash involvements and 
crashes per VMT. ``Casualties'' include fatalities and the highest 
police-reported level of nonfatal injury (usually called level ``A'').
    For the final regulatory analysis, like the preliminary analysis, 
NHTSA and EPA rely on the coefficients in the NHTSA/Kahane study for 
estimating the potential safety effects of the CAFE and GHG standards 
for MYs 2017-2025. NHTSA takes this opportunity to summarize and 
compare the reports and also explain why we continue to rely on the 
results of our own study in projecting safety effects.
    The important common feature of these 2012 reports is that they all 
support the same principal conclusions--in NHTSA's words:
     The societal effect of mass reduction while maintaining 
footprint, if any, is small.\361\
---------------------------------------------------------------------------

    \361\ Kahane (2012), p. 1.
---------------------------------------------------------------------------

     Any judicious combination of mass reductions that maintain 
footprint and are proportionately higher in the heavier vehicles is 
[likely to be safety-neutral--i.e., it is] unlikely to have a societal 
effect large enough to be detected by statistical analyses of crash 
data.\362\
---------------------------------------------------------------------------

    \362\ Ibid., p. 16.
---------------------------------------------------------------------------

    This greatly contrasts with the disagreement in 2004-2005, based on 
earlier fatality databases, when DRI estimated a decrease of 1,518 
fatalities per 100-pound mass reduction in all vehicles while 
maintaining wheelbase and track width \363\ while NHTSA estimated a 
1,118-fatality increase for downsizing all vehicles by 100 pounds (with 
commensurate reductions in wheelbase and track width).\364\ In 
comparison, the estimates from 11 sensitivity tests using the current 
database only range from a 211-fatality reduction to an increase of 
486, only 25 percent of the earlier range, and basically down to the 
level of statistical uncertainty typically inherent in this type of 
analysis.\365\ NHTSA believes two or possibly three conditions may have 
contributed to the extensive convergence of the results. One is the 
extensive dialogue and cooperation among researchers, including the 
agreement to use NHTSA's database and discussions that led to 
consistent definitions of control variables or shared analysis 
techniques. The second is the real change in the new-vehicle fleet and 
perhaps also in driving patterns over the

[[Page 62757]]

past decade, which appears to have attenuated some of the stronger 
effects of mass reduction and footprint reduction. A third possible 
factor is that multicollinearity may somehow have become less of an 
issue with the new database and with the new technique of treating CUVs 
and minivans as a separate class of vehicles.
---------------------------------------------------------------------------

    \363\ Van Auken and Zellner (2005b), sum of 836 for passenger 
cars (Table 2, p. 27) and 682 for LTVs (Table 5, p. 36).
    \364\ Kahane, C.J. (2003), Vehicle Weight, Fatality Risk and 
Crash Compatibility of Model Year 1991-99 Passenger Cars and Light 
Trucks, NHTSA Technical Report. DOT HS 809 662. Washington, DC: 
National Highway Traffic Safety Administration, http://www-nrd.nhtsa.dot.gov/Pubs/809662.PDF. sum of 71 and 234 on p. ix, 216 
and 597 on p. xi.
    \365\ Kahane (2012), p. 113, scenario 3 in Table 4-2.
---------------------------------------------------------------------------

    Even though the studies now agree more than they disagree, there 
are still qualitative differences among the results. The baseline NHTSA 
findings indicate a statistically significant fatality increase for 
mass reduction in cars weighing less than 3,106 pounds. The NHTSA 
results do not encourage mass reduction in the lightest cars, at least 
for the foreseeable future, as long as so many heavy cars and LTVs 
remain on the road. But DRI's two analyses substituting track width and 
wheelbase for footprint or stopped-vehicle induced exposure for non-
culpable vehicles each reduce the estimate fatality-increasing effect 
of mass reduction in lighter-than-average cars to a statistically non-
significant level, while the simultaneous application of both 
techniques reduces the effect close to zero.
    DRI suggests that track width and wheelbase have more intuitive 
relationships with crash and fatality risk than footprint and do not 
aggravate multicollinearity issues, as evidenced by variance inflation 
factors; and that stopped-vehicle induced-exposure data may be 
preferable because non-culpable vehicle data may underrepresent 
vehicles and drivers that are good at avoiding crashes. NHTSA finds 
DRI's argument plausible and has now included both techniques among the 
sensitivity tests in its 2012 report. But these sensitivity tests have 
not replaced NHTSA's baseline analysis. In the regressions for cars and 
LTVs, wheelbase often did not have the expected relationships with risk 
and added little information (In the regressions for CUVs and minivans, 
it was track width that had little relationship with risk). Limiting 
the induced-exposure data to stopped vehicles is a technique that 
earlier peer reviewers criticized, eliminates 75 percent of the 
induced-exposure cases (even more on high-speed roads), and may 
underrepresent older drivers. Furthermore, Table II-28 shows that some 
of the other sensitivity tests increase the fatality-increasing effect 
of mass reduction in light cars to about the same extent that these 
techniques diminish it. On the whole, NHTSA does not now see adequate 
justification for mass reduction in light cars, but additional analysis 
may be considered as the vehicle fleet changes.\366\
---------------------------------------------------------------------------

    \366\ Ibid., pp. 115-119.
---------------------------------------------------------------------------

    Another analysis strategy of DRI and also of Wenzel's Phase 2 
report is to obtain separate estimates of the effect of mass reduction 
on fatalities [or casualties] per reported crash and reported crashes 
per VMT, as well as the composite estimate of its effect on fatalities 
per VMT. Van Auken and Wenzel both call the first estimate the ``effect 
on crashworthiness/compatibility'' and the second, the ``effect on 
crash avoidance.'' NHTSA believes the separate estimates are 
computationally valid, but these names are inaccurate characterizations 
that can lead to misunderstandings. For example, ICCT argues that the 
relationship between mass reduction and crash avoidance observed in the 
DRI and LBNL Phase 2 studies (i.e., that crash frequency increases as 
mass decreases) is counterintuitive.\367\ NHTSA believes the metric of 
fatalities per reported crash takes into account not just 
crashworthiness but also certain important aspects of crash avoidance, 
namely the severity of a crash. In addition, it could be influenced by 
how often crashes are reported or not reported, which varies greatly 
from State to State and depending on local circumstances. As Wenzel 
notes, these analyses produced unexpected results, such as a reduction 
in crash frequency with side air bags, or an increase in fatalities per 
crash when the driver is male (when, in fact, males are less vulnerable 
than females, given the same physical insult \368\) or when it is 
nighttime. The fatality rates are higher for male drivers and at night 
because the crashes are more severe, not primarily because of 
crashworthiness issues. By the same token, the effect of mass reduction 
on fatalities or casualties per crash need not be purely an effect on 
``crashworthiness and compatibility'' but may also comprise some 
aspects of crash avoidance.
---------------------------------------------------------------------------

    \367\ Docket No. NHTSA-2010-0131-0258, p. 10.
    \368\ Evans, L. (1991). Traffic Safety and the Driver. New York: 
Van Nostrand Reinhold, pp. 22-28.
---------------------------------------------------------------------------

    Wenzel's Phase 1 and Phase 2 reports show that when fatality or 
casualty rates are aggregated at the make-model level, differences 
between the models ``overwhelm'' the effect of mass. Likewise, in the 
basic regression analyses, the effects of many control variables are 
much stronger than the effect of mass. NHTSA does not dispute the 
validity of these analyses or disagree with the findings, but they must 
not be misinterpreted. Specifically, it would be wrong to conclude that 
the effect of mass reduction should not be estimated at all because 
other ambient effects are considerably stronger. Researchers must often 
measure a weak effect in the presence of strong effects--for example: 
Studying the light from faraway galaxies despite the presence of much 
stronger light from nearby stars; evaluating a dietary additive based 
on a sample of test subjects who vary greatly in age, weight, and 
eating habits. Furthermore, the technique of aggregating the rates by 
make-model, while useful for graphically depicting the effect of mass 
relative to other factors, is no substitute for regression analyses on 
the full database in terms of directly estimating the effects of mass 
reduction on safety; at best, the analysis aggregated by make-model can 
indirectly generate less precise estimates of these effects. NHTSA 
believes the sensitivity tests in Table II-28 and Table II-29 are 
useful for addressing the effects of other factors, since most of these 
tests consist of alternative ways to quantify those factors. The tests 
showed two consistent trends: almost all (18 of Wenzel's 19 and all 11 
of Kahane's) estimated a fatality increase for mass reduction in cars 
weighing less than 3,106 pounds and almost all (18 of Wenzel's and 10 
of Kahane's) estimated a societal benefit if mass is reduced in the 
LTVs weighing 4,594 pounds or more.
    Wenzel's Phase 2 report on casualty risk introduces one more source 
of data-driven uncertainty. To achieve adequate sample size, it must 
rely on the injury data in State crash files, specifically the highest 
reported level of nonfatal injury, usually called level ``A.'' But the 
coding of injury in police-reported crash databases is usually not 
based on medical records. ``A'' injuries do not necessarily correspond 
to life-threatening or seriously disabling injuries as defined by 
medical professionals. In 2000-2008 National Automotive Sampling System 
data, 59% of ``A'' injuries were in fact medically minor (levels 0 or 1 
on the Abbreviated Injury Scale, based on subsequently retrieved 
medical records), while 39% of the serious (AIS 3) and 27% of life-
threatening (AIS 4-5) injuries were not coded ``A.'' Despite this, 
Wenzel's composite results for casualties per VMT show about the same 
effects for mass reduction as Kahane's analyses of fatalities per VMT--
e.g., in the lighter cars, the estimated effect of a 100-pound mass 
reduction is slightly more detrimental for casualties per VMT (1.86% 
increase\369\) than for fatalities

[[Page 62758]]

(1.56% increase \370\). NHTSA concurs with analyzing casualties per 
VMT, but, given that so many of the ``A'' injuries are minor while 
quite a few disabling injuries are not ``A,'' does not believe the 
results are as critical as the fatality analyses.
---------------------------------------------------------------------------

    \369\ Wenzel (2012b), p. v, Table ES.1, column G.
    \370\ Kahane (2012), p. 12.
---------------------------------------------------------------------------

    i. Based on this information, what do the Agencies consider to be 
the current state of statistical research on vehicle mass and safety?
    The agencies believe that statistical analysis of historical crash 
data continues to be an informative and important tool in assessing the 
potential safety impacts of the proposed standards. The effect of mass 
reduction while maintaining footprint is a complicated topic and there 
are open questions whether future vehicle designs will reduce the 
historical correlation between weight and size. It is important to note 
that while the updated database represents more current vehicles with 
technologies more representative of vehicles on the road today, that 
database cannot fully represent what vehicles will be on the road in 
the MYs 2017-2025 timeframe. The vehicles manufactured in the 2000-2007 
timeframe were not subject to footprint-based fuel economy standards. 
As explained earlier, the agencies expect that the attribute-based 
standards will likely facilitate the design of vehicles such that 
manufacturers may reduce mass while maintaining footprint. Therefore, 
it is possible that the analysis for MYs 2000-2007 vehicles may not be 
fully representative of the vehicles that will be on the road in 2017 
and beyond.
    We recognize that statistical analysis of historical crash data may 
not be the only way to think about the future relationship between 
vehicle mass and safety. However, we recognize that other assessment 
methods are also subject to uncertainties, which makes statistical 
analysis of historical data an important starting point if employed 
mindfully and recognized for how it can be useful and what its 
limitations may be.
    NHTSA funded an independent review of statistical studies and held 
a mass-safety workshop in February 2011 in order to help the agencies 
sort through the ongoing debates over how statistical analysis of the 
historical relationship between mass and safety should be interpreted. 
Previously, the agencies have assumed that differences in results were 
due in part to inconsistent databases. By creating the updated common 
database and making it publicly available, we are hopeful that this 
aspect of the problem has been resolved. Moreover, the independent 
review of 18 statistical reports by UMTRI suggested that differences in 
data were probably less significant than the agencies may have thought. 
UMTRI stated that statistical analyses of historical crash data should 
be examined more closely for potential multicollinearity issues that 
exist in some of the current analyses. The agencies will continue to 
monitor issues with multicollinearity in our analyses, and hope that 
outside researchers will do the same. And finally, based on the 
findings of the independent review, the agencies continue to be 
confident that Kahane's analysis is one of the best for the purpose of 
analyzing potential safety effects of future CAFE and GHG standards. 
UMTRI concluded that Kahane's approach is valid, and Kahane has 
continued and refined that approach for the current analysis. The NHTSA 
2012 statistical fatality report finds directionally similar but fewer 
statistically significant relationships between vehicle mass, size, and 
footprint, as discussed above. Based on these findings, the agencies 
believe that in the future, fatalities due to mass reduction will be 
best reduced if mass reduction is concentrated in the heaviest 
vehicles. NHTSA considers part of the reason that more recent 
historical data shows a dampened effect in the relationship between 
mass reduction and safety is that all vehicles, including traditionally 
lighter ones, grew heavier during that timeframe (2000s). As lighter 
vehicles might become more prevalent in the fleet again over the next 
decade, it is possible that the trend could strengthen again. On the 
other hand, extensive use of new lightweight materials and optimized 
vehicle design may weaken the relationship. As the Alliance mentioned 
in its comments noted above, future updated analyses will be necessary 
to determine how the effect of mass reduction on safety changes over 
time.
    Both agencies agree that there are several identifiable safety 
trends already in place or expected to occur in the foreseeable future 
that are not accounted for in the study, since they were not in effect 
at the time that the vehicles in question were manufactured. For 
example, there are two important new safety standards that have already 
been issued and have been phasing in after MY 2008. FMVSS No. 126 (49 
CFR Sec.  571.126) requires electronic stability control in all new 
vehicles by MY 2012, and the upgrade to FMVSS No. 214 (Side Impact 
Protection, 49 CFR Sec.  571.214) will likely result in all new 
vehicles being equipped with head-curtain air bags by MY 2014. 
Additionally, based on historical trends, we anticipate continued 
improvements in driver (and passenger) behavior, such as higher safety 
belt use rates. All of these may tend to reduce the absolute number of 
fatalities. Moreover, as crash avoidance technology improves, future 
statistical analysis of historical data may be complicated by a lower 
number of crashes. In summary, the agencies have relied on the 
coefficients in the Kahane 2012 study for estimating the potential 
safety effects of the CAFE and GHG standards for MYs 2017-2025, based 
on our assumptions regarding the amount of mass reduction that could be 
used to meet the standards in a cost-effective way without adversely 
affecting safety. Section II.G.5.a below discusses the methodology used 
by the agencies in more detail. While the results of the safety effects 
analysis are less statistically significant than the results in the MYs 
2012-2016 final rule, the agencies still believe that any statistically 
significant results warrant careful consideration of the assumptions 
about appropriate levels of mass reduction, and have acted accordingly 
in developing the final standards.
4. How do the Agencies think technological solutions might affect the 
safety estimates indicated by the statistical analysis?
    As mass reduction becomes a more important technology option for 
manufacturers in meeting future CAFE and GHG standards, manufacturers 
will invest more and more resources in developing increasingly 
lightweight vehicle designs that meet their needs for manufacturability 
and the public's need for vehicles that are also safe, useful, 
affordable, and enjoyable to drive. There are many different ways to 
reduce mass, as discussed in Chapter 3 of this TSD and in Sections II, 
III, and IV of the preamble, and a considerable amount of information 
is available today on lightweight vehicle designs currently in 
production and that may be able to be put into production in the 
rulemaking timeframe. Discussion of lightweight material designs from 
NHTSA's workshop is presented below.
    Besides ``lightweighting'' technologies themselves, though, there 
are a number of considerations when attempting to evaluate how future 
technological developments might affect the safety estimates indicated 
by the historical statistical analysis. As discussed in the first part 
of this section, for example, careful changes in design and/or 
materials used might mitigate some of the potential increased risk from 
mass reduction for vehicle self-protection,

[[Page 62759]]

through improved distribution of crash pulse energy, etc. At the same 
time, these lightweighting techniques can sometimes lead to other 
problems, such as increased crash forces on vehicle occupants that have 
to be mitigated, or greater aggressivity against other vehicles in 
crashes. Manufacturers may develop new and better restraints--air bags, 
seat belts, etc.--to protect occupants in lighter vehicles in crashes, 
but NHTSA's current safety standards for restraint systems are designed 
based on the current fleet, not the yet-unknown future fleet. The 
agency will need to monitor trends in the crash data to see whether 
changes to the safety standards (or new safety standards) become 
advisable. Manufacturers are also increasingly investigating a variety 
of crash avoidance technologies--ABS, electronic stability control 
(ESC), lane departure warnings, vehicle-to-vehicle (V2V) 
communications--that, as they become more prevalent in the fleet, are 
expected to reduce the number of overall crashes, and thus crash 
fatalities. Until these technologies are present in the fleet in 
greater numbers, however, it will be difficult to assess whether they 
can mitigate the observed relationship between vehicle mass and safety 
in the historical data.
    Along with the California Air Resources Board (CARB), the agencies 
have completed several technical/engineering projects described below 
to estimate the maximum potential for advanced materials and improved 
designs to reduce mass in the MY 2017-2021 timeframe, while continuing 
to meet safety regulations and maintain functionality and affordability 
of vehicles. Another NHTSA-sponsored study will estimate the effects of 
these design changes on overall fleet safety. The detailed discussions 
about these studies can be found in the Joint TSD section 3.3.5.5.
    A. NHTSA awarded a contract in December 2010 to Electricore, with 
EDAG and George Washington University (GWU) as subcontractors, to study 
the maximum feasible amount of mass reduction of a mid-size car--
specifically, a Honda Accord--while maintaining the functionality of 
the baseline vehicle. The project team was charged to maximize the 
amount of mass reduction with the technologies that are considered 
feasible for 200,000 units per year production volume during the time 
frame of this rulemaking while maintaining the retail price in parity 
(within 10% variation) with the baseline vehicle. When 
selecting materials, technologies and manufacturing processes, the 
Electricore/EDAG/GWU team utilized, to the extent possible, only those 
materials, technologies and design which are currently used or planned 
to be introduced in the near term (MY 2012-2015) on low-volume 
production vehicles. This approach, commonly used in the automotive 
industry, is employed by the team to make sure that the technologies 
used in the study will be feasible for mass production for the time 
frame of this rulemaking. The Electricore/EDAG/GWU team took a ``clean 
sheet of paper'' approach and adopted collaborative design, engineering 
and CAE process with built-in feedback loops to incorporate results and 
outcomes from each of the design steps into the overall vehicle design 
and analysis. The team tore down and benchmarked 2011 Honda Accord and 
then undertook a series of baseline design selections, new material 
selections, new technology selections and overall vehicle design 
optimization. Vehicle performance, safety simulation and cost analyses 
were run in parallel to the design and engineering effort to help 
ensure that the design decisions are made in-line with the established 
project constrains.
    While the project team worked within the constraint of maintaining 
the baseline Honda Accord's exterior size and shape, the body structure 
was first redesigned using topology optimization with six load cases, 
including bending stiffness, torsion stiffness, IIHS frontal impact, 
IIHS side impact, FMVSS pole impact, FMVSS rear impact and FMVSS roof 
crush cases. The load paths from topology optimization were analyzed 
and interpreted by technical experts and the results were then fed into 
low fidelity 3G (Gauge, Grade and Geometry) optimization programs to 
further optimize for material properties, material thicknesses and 
cross-sectional shapes while trying to achieve the maximum amount of 
mass reduction. The project team carefully reviewed the optimization 
results and built detailed CAD/CAE models for the body structure, 
closures, bumpers, suspension, and instrumentation panel. The vehicle 
designs were also carefully reviewed to ensure that they can be 
manufactured at high volume production rates,
    Multiple materials were used for this study. The body structure was 
redesigned using a significant amount of high strength steel. The 
closures and suspension were designed using a significant amount of 
aluminum. Magnesium was used for the instrument panel cross-car beam. A 
limited amount of composite material was used for the seat structure.
    Safety performance of the light-weighted design was compared to the 
safety rating of the baseline MY2011 Honda Accord for seven consumer 
information and federal safety crash tests using LS-DYNA.\371\ These 
seven tests are the NCAP frontal test, NCAP lateral MDB test, NCAP 
lateral pole test, IIHS roof crush, IIHS lateral MDB, IIHS front offset 
test, and FMVSS No. 301 rear impact tests. These crash simulation 
analyses did not include use of a dummy model. Therefore only the crash 
pulse and intrusion were compared with the baseline vehicle test 
results. The vehicle achieved equivalent safety performance in all 
seven self-protection tests comparing to MY 2011 Honda Accord with no 
damage to the fuel tank. Vehicle handling is evaluated using MSC/ADAMS 
\372\ modeling on five maneuvers, fish-hook test, double lane change 
maneuver, pothole test, 0.7G constant radius turn test and 0.8G forward 
braking test. The results from the fish-hook test show that the light-
weighted vehicle can achieve a five-star rating for rollover, same as 
baseline vehicle. The double lane change maneuver tests show that the 
chosen suspension geometry and vehicle parameter of the light-weighted 
design are within acceptable range for safe high speed maneuvers.
---------------------------------------------------------------------------

    \371\ LS-DYNA is a software developed by Livermore Software 
Technologies Corporation used widely by industry and researchers to 
perform highly non-linear transient finite element analysis.
    \372\ MSC/ADAMS: Macneal-Schwendler Corporation/Automatic 
Dynamic Analysis of Mechanical Systems.
---------------------------------------------------------------------------

    Overall the complete light weight vehicle achieved a total weight 
savings of 22 percent (332kg) relative to the baseline vehicle (1480 
kg). The study has been peer reviewed by three technical experts from 
the industry, academia and a DOE national lab. The project team 
addressed the peer review comments in the report and also composed a 
response to peer review comment document. The final report, CAE model 
and cost model are published in docket NHTSA-2010-0131 and can also be 
found on NHTSA's Web site.\373\ The peer review comments with responses 
to peer review comments can also be found at the same docket and Web 
site.
---------------------------------------------------------------------------

    \373\ Final report, CAE model and cost model for NHTSA's light 
weighting study can be found at NHTSA's Web site: http://www.nhtsa.gov/fuel-economy.
---------------------------------------------------------------------------

    B. EPA, along with ICCT, funded a contract with FEV, with 
subcontractors EDAG (CAE modeling) and Munro & Associates, Inc. 
(component technology research) to study the feasibility, safety and 
cost of 20% mass reduction on a 2017-2020 production ready mid-size

[[Page 62760]]

CUV (crossover utility vehicle) specifically, a Toyota Venza while 
trying to achieve the same or lower cost. The EPA report is entitled 
``Light-Duty Vehicle Mass-Reduction and Cost Analysis--Midsize 
Crossover Utility Vehicle''. \374\ This study is a Phase 2 study of the 
low development design in the 2010 Lotus Engineering study ``An 
Assessment of Mass Reduction Opportunities for a 2017-2020 Model Year 
Vehicle Program'',\375\ herein described as ``Phase 1''.
---------------------------------------------------------------------------

    \374\ FEV, ``Light-Duty Vehicle Mass-Reduction and Cost 
Analysis--Midsize Crossover Utility Vehicle''. July 2012, EPA 
Docket: EPA-HQ-OAR-2010-0799.
    \375\ Systems Research and Application Corporation, ``Peer 
Review of Demonstrating the Safety and Crashworthiness of a 2020 
Model-Year, Mass-Reduced Crossover Vehicle (Lotus Phase 2 Report)'', 
February 2012, EPA docket: EPA-HQ-OAR-2010-0799.
---------------------------------------------------------------------------

    The original 2009/2010 Phase 1 effort by Lotus Engineering was 
funded by Energy Foundation and ICCT to generate a technical paper 
which would identify potential mass reduction opportunities for a 
selected vehicle representing the crossover utility segment, a 2009 
Toyota Venza. Lotus examined mass reduction for two scenarios--a low 
development (20% MR and 2017 production with technology readiness of 
2014) and high development (40% MR and 2020 production with technology 
readiness of 2017). Lotus disassembled a 2009 Toyota Venza and created 
a bill of materials (BOM) with all components. Lotus then investigated 
emerging/current technologies and opportunities for mass reduction. The 
report included the BOM for full vehicle, systems, sub-systems and 
components as well as recommendations for next steps. The potential 
mass reduction for the low development design includes material changes 
to portions of the body in white (underfloor and body, roof, body side, 
etc.), seats, console, trim, brakes, etc. The Phase 1 project achieved 
19% (without the powertrain), 246 kg, at 99% of original cost at full 
phase-in after peer review comments taken into 
consideration.376,377 This was calculated to be -$0.45/kg 
utilizing information from Lotus.
---------------------------------------------------------------------------

    \376\ The original powertrain was changed to a hybrid 
configuration.
    \377\ Cost estimates were given in percentages--no actual cost 
analysis was presented for it was outside the scope of the study, 
though costs were estimated by the agency based on the report.
---------------------------------------------------------------------------

    The peer reviewed Lotus Phase 1 study created a good foundation for 
the next step of analyses of CAE modeling for safety evaluations and 
in-depth costing (these steps were not within the scope of the Phase 1 
study) as noted by the peer reviewer recommendations.\378\
---------------------------------------------------------------------------

    \378\ RTI International,``Peer Review of Lotus Engineering 
Vehicle Mass Reduction Study'' EPA-HQ-OAR-2010-0799-0710, November 
2010.
---------------------------------------------------------------------------

    Similar to Lotus Phase 1 study, the EPA Phase 2 study begins with 
vehicle tear down and BOM development. FEV and its subcontractors tore 
down a MY 2010 Toyota Venza in order to create a BOM as well as 
understand the production methods for each component. Approximately 140 
coupons from the BIW were analyzed in order to understand the full 
material composition of the baseline vehicle. A baseline CAE model was 
created based on the findings of the vehicle teardown and analysis. The 
model's results for static bending, static torsion, and modal frequency 
simulations (NVH) were obtained and compared to actual results from a 
Toyota Venza vehicle. After confirming that the results were within 
acceptable limits, this model was then modified to create light-
weighted vehicle models. EDAG reviewed the Lotus Phase 1 low 
development BIW ideas and found redesign was needed to achieve the full 
set of acceptable NVH characteristics. EDAG utilized a commercially 
available computerized optimization tool called HEEDS MDO to build the 
optimization model. The model consisted of 484 design variables, 7 load 
cases (2 NVH + 5 crash), and 1 cost evaluation. The outcome of EDAG's 
lightweight design optimization included the optimized vehicle assembly 
and incorporated the following while maintaining the original BIW 
design: Optimized gauge and material grades for body structure parts, 
laser welded assembly at shock towers, rocker, roof rail, and rear 
structure subassemblies, aluminum material for front bumper, hood, and 
tailgate parts, TRBs on B-pillar, A-pillar, roof rail, and seat cross 
member parts, design change on front rail side members. EDAG achieved 
13% mass reduction in the BIW including closure. If aluminum doors were 
included then an additional decrease of 28 kg could be achieved for a 
total of 18% mass reduction from the body structure. All other systems 
within the vehicle were examined for mass reduction, including the 
powertrain (engine, transmission, fuel tank, exhaust, etc.). FEV and 
Munro incorporated the Lotus Phase 1 low development concepts into 
their own idea matrix. Each component and sub-system chosen for mass 
reduction was scaled to the dimensions of the baseline vehicle, trying 
to maximize the amount of mass reduction with cost effective 
technologies and techniques that are considered feasible and 
manufacturable in high volumes in MY2017. FEV included a full 
discussion of the chosen mass reduction options for each component and 
subsystem.
    Safety performance of the baseline and light-weighted designs 
(Lotus Phase 1 low development and the final EPA Phase 2 design) were 
evaluated by EDAG through their constructed detailed CAD/CAE vehicle 
models. Five federal safety crash tests were performed, including FMVSS 
flat frontal crash, side impact, rear impact and roof crush (using IIHS 
resistance requirements) as well as Euro NCAP/IIHS offset frontal 
crash. Criteria including the crash pulse, intrusion and visual crash 
information were evaluated to compare the results of the light weighted 
models to the results of the baseline model. The light weighted vehicle 
achieved equivalent safety performance in all tests to the baseline 
model with no damage to the fuel tank. In addition, CAE was used to 
evaluate the BIW vibration modes in torsion, lateral bending, rear end 
match boxing, and rear end vertical bending, and also to evaluate the 
BIW stiffness in bending and torsion.
    The Phase 2 study 2010 Toyota Venza light weight vehicle achieved, 
with powertrain, a total weight savings of 18 percent (312 kg) relative 
to the baseline vehicle (1710 kg) at -$0.43/kg, and the cost figure is 
near zero at 20 percent. The study report and models have been peer 
reviewed by four technical experts from a material association, 
academia, DOE, and a National Laboratory. The peer review comments for 
this study were generally complimentary, and concurred with the ideas 
and methodology of the study. A few of the comments required further 
investigation, which were completed for the final report. The project 
team addressed the peer review comments in the report and also composed 
a response to peer review comment document. Changes to the BIW CAE 
models resulted in minimal differences. The final report is published 
in EPA's docket EPA-HQ-OAR-2010-0799 and the CAE LS DYNA model files 
and overview cost model files are found on EPA's Web site http://www.epa.gov/otaq/climate/publications.htm#vehicletechnologies. The peer 
review comments with responses to peer review comments can also be 
found at the same docket and Web site.
    C. The California Air Resources Board (CARB) funded a study with 
Lotus Engineering to further develop the high development design from 
Lotus' 2010 Toyota Venza work (``Phase 1''). The CARB-sponsored Lotus 
``Phase 2'' study

[[Page 62761]]

provides the updated design, crash simulation results, detailed 
costing, and analysis of the manufacturing feasibility of the BIW and 
closures. Based on the safety validation work, Lotus strengthened the 
design with a more aluminum-intensive BIW (with less magnesium). In 
addition to the increased use of advanced materials, the new design by 
Lotus included a number of instances in which multiple parts were 
integrated, resulting in a reduction in the number of manufactured 
parts in the lightweight BIW. The Phase 2 study reports that the number 
of parts in the BIW was reduced from 419 to 169. The BIW was analyzed 
for torsional stiffness and crash test safety with Computer-Aided 
Engineering (CAE). The new design's torsional stiffness was 32.9 kNm/
deg, which is higher than the baseline vehicle and comparable to more 
performance-oriented models. The research supported the conclusion that 
the lightweight vehicle design could pass standard FMVSS 208 frontal 
impact, FMVSS 210 seatbelt anchorages, FMVSS child restraint anchorage, 
FMVSS 214 side impact and side pole, FMVSS 216 roof crush (with 3xcurb 
weight), FMVSS 301 rear impact, IIHS low speed front, and IIHS low 
speed rear. Crash tests simulated in CAE showed results that were 
listed as acceptable for all crash tests analyzed. No comparisons or 
conclusions were made if the vehicle performed better or worse than the 
baseline Venza. For FMVSS 208 frontal impact, Lotus based its CAE crash 
test analyses on vehicle crash acceleration data rather than occupant 
injury as is done in the actual vehicle crash. The report from the 
study stated that accelerations were within acceptable levels compared 
to current production vehicle acceleration results and it should be 
possible to tune the occupant restraint system to handle the specific 
acceleration pulses of the Phase 2 high development vehicle. FMVSS 210 
seatbelt anchorages is concerned with seatbelt retention and certain 
dimensional constraints for the relationship between the seatbelts and 
the seats. Overall both the front and rear seatbelt anchorages met the 
requirements specified in the standard. FMVSS 214 side impact show the 
energy is effectively managed. Since dummy injury criteria was not used 
in the CAE modeling, a maximum intrusion tolerance level of 300 mm was 
instituted which is the typical distance between the door panel and 
most outboard seating positions. For example, the Phase 2 design was 
measured at 115mm for the crabbed barrier test. The side pole test 
resulted in 120 mm intrusion for the 5th percentile female and 
intrusion was measured at 190 mm for the 50th percentile male. The 
report stated FMVSS 216 roof crush simulation shows the Phase 2 high 
development vehicle will meet roof crush performance requirements under 
the specified load case of 3 times the vehicle weight. For the FMVSS 
rear impact, results show plastic strain in the fuel tank/system 
components to be less than 3.5%, which is less than the 10% strain 
allowed in the test. The pressure change in the fuel tank is less than 
2% so risk of tank splitting is minimal. The IIHS low speed front and 
rear show no body structural issues, however styling adjustments should 
be made to improve the rear bumper low speed performance.
    The Lotus design achieved a 37% (141 kg) mass reduction in the body 
structure, a 38% (484kg) mass reduction in the vehicle excluding the 
powertrain, and a 32% (537 kg) mass reduction in the entire vehicle 
including the powertrain. The report was peer reviewed by a cross 
section of experts and the comments were addressed by Lotus in the peer 
review documents. The comments requiring modification were incorporated 
into the final document. The documents can be found on EPA's Web site 
http://www.epa.gov/otaq/climate/publications.htm#vehicletechnologies.
    D. NHTSA has contracted with GWU to build a fleet simulation model 
to study the impact and relationship of light-weighted vehicle design 
with injuries and fatalities. This study will also include an 
evaluation of potential countermeasures to reduce any safety concerns 
associated with lightweight vehicles in the second phase. NHTSA has 
included three light-weighted vehicle designs in this study: the one 
from Electricore/EDAG/GWU mentioned above, one from Lotus Engineering 
funded by California Air Resource Board for the second phase of the 
study, evaluating mass reduction levels around 35 percent of total 
vehicle mass, and one funded by EPA and the International Council on 
Clean Transportation (ICCT). In addition to the lightweight vehicle 
models, these projects also created CAE models of the baseline 
vehicles. To estimate the fleet safety implications of light-weighting, 
CAE crash simulation modeling was conducted to generate crash pulse and 
intrusion data for the baseline and three light-weighted vehicles when 
they crash with objects (barriers and poles) and with four other 
vehicle models (Chevy Silverado, Ford Taurus, Toyota Yaris and Ford 
Explorer) that represent a range of current vehicles. The simulated 
acceleration and intrusion data were used as inputs to MADYMO occupant 
models to estimate driver injury. The crashes were conducted at a range 
of speeds and the occupant injury risks were combined based on the 
frequency of the crash occurring in real world data. The change in 
driver injury risk between the baseline and light-weighed vehicles will 
provide insight into the safety performance these light-weighting 
design concepts. This is a large and ambitious project involves several 
stages over several years. NHTSA and GWU have completed the first stage 
of this study. The frontal crash simulation part of the study is being 
finished and will be peer reviewed. The report for this study will be 
available in NHTSA-2010-0131. Information for this study can also be 
found at NHTSA's Web site.\379\
---------------------------------------------------------------------------

    \379\ Web site for fleet study can be found at http://www.nhtsa.gov/fuel-economy.
---------------------------------------------------------------------------

    The countermeasures section of the study is expected to be finished 
in early 2013. This phase of the study is expected to provide 
information about the relationship of light-weighted vehicle design 
with injuries and fatalities and to provide the capability to evaluate 
the potential countermeasures to safety concerns associated with light-
weighted vehicles. NHTSA plans to include the following items in future 
phases of the study to help better understanding the impact of mass 
reduction on safety.
     Light-weighted concept vehicle to light-weighted concept 
vehicle crash simulation;
     Additional crash configurations, such as side impact, 
oblique and rear impact tests;
     Risk analysis for elderly and vulnerable occupants;
     Safety of light-weighted concept vehicles for different 
size occupants.
     Partner vehicle protection in crashes with other light-
weighted concept vehicles;
    While this study is expected to provide information about the 
relationship of light-weighted vehicle design with injuries and 
fatalities and to provide meaningful information to NHTSA on potential 
countermeasures to reduce any safety concerns associated with 
lightweight vehicles, because this study cannot incorporate all of the 
variations in vehicle crashes that occur in the real world, it is 
expected to provide trend information on the effect of potential future 
designs on highway safety, but is not expected to provide information 
that can be used to modify the coefficients derived by Kahane that 
relate mass reduction to highway crash fatalities. Because the 
coefficients from

[[Page 62762]]

the Kahane study are used in the agencies' assessment of the amount of 
mass reduction that may be implemented with a neutral effect on highway 
safety, the fact that the fleet simulation modeling study is not 
complete does not affect the agencies' assessment of the amount of mass 
reduction that may be implemented with a neutral effect on safety.
    Global Automakers commented that lightweighting strategies ``should 
be based on real world experience and in reliance upon laboratory test 
data.'' \380\ The agencies continue to believe that reasonable 
conclusions regarding the safety implication of mass reduction can be 
drawn from CAE simulations. As ICCT stated in their comments, CAE 
simulations are powerful tools that have improved rapidly over the 
years in terms of their ability to optimize vehicle designs and predict 
material and vehicle behavior in real life. Use of these highly 
sophisticated CAE tools has become standard industry practice in 
helping to verify and validate designs before real parts and vehicles 
are built. As the Alliance stated, however, CAE capabilities for 
conventional materials, such as steel and aluminum, are more mature 
than those of advanced materials, such as magnesium and composites. 
Steel and aluminum are the major materials used in some of the studies, 
such as EPA's and NHTSA's light-weighting studies that determined that 
a baseline vehicle's mass could be reduced by approximately 20 percent 
while maintaining safety comparable to the baseline vehicle.
---------------------------------------------------------------------------

    \380\ Global Automakers comments, Docket No. NHTSA-2010-0131, at 
pg 3.
---------------------------------------------------------------------------

    Thus, even though CAE tools are used heavily, the agencies 
acknowledge the concerns the Alliance raised in its comments about CAE 
capabilities for some potential advanced materials for crashworthiness, 
and have been mindful of this issue in developing our studies. NHTSA's 
study took a similar approach in vehicle body structure design as the 
FutureSteelVehicle, but with less aggressive material usage (e.g., 
using thicker gauges of steel). Only those materials, technologies and 
design which are currently used or planned to be introduced in the near 
term (MY 2012-2015) on low-volume production vehicles are used in 
NHTSA's concept design. This approach is employed by the team to make 
sure that the technologies used in the study will be feasible for mass 
production for the time frame of this rulemaking. Even though NHTSA's 
study is not directly based on laboratory testing of the light-weighted 
design as Global Automaker suggested, the materials, designs and 
approaches used in the study are currently employed in mass production 
vehicles, which gives NHTSA confidence that results from its study are 
practical and feasible in the rulemaking timeframe. EPA's study used a 
similar approach. It includes a baseline model which was run through 
crash simulations and the results were comparable to physical crash 
data of the vehicle in the same tests. For the light weighted design, 
the BIW was maintained while various components were lightened through 
incorporation of high strength steels whose properties reflect those 
materials commonly used today. The light weighted CAE model crash 
results were then compared to those from the baseline CAE model crash 
results. The model run results from the light weighted vehicle had 
equal or better performance on intrusion, acceleration, etc. The 
materials, designs and approaches used in the study are currently 
employed in mass production vehicles, which gives EPA confidence that 
results from its study are practical, feasible and reasonable in the 
rulemaking timeframe.
a. NHTSA Workshop on Vehicle Mass, Size and Safety
    As stated above in section C.2, on February 25, 2011, NHTSA hosted 
a workshop on mass reduction, vehicle size, and fleet safety at the 
headquarters of the U.S. Department of Transportation in Washington, 
DC. The purpose of the workshop was to provide the agencies with a 
broad understanding of current research in the field and provide 
stakeholders and the public with an opportunity to weigh in on this 
issue. The agencies also created a public docket to receive comments 
from interested parties that were unable to attend. The presentations 
were divided into two sessions that addressed the two expansive sets of 
issues. The first session explored statistical evidence of the roles of 
mass and size on safety, and is summarized in section C.2. The second 
session explored the engineering realities of structural 
crashworthiness, occupant injury and advanced vehicle design, and is 
summarized here. The speakers in the second session included Stephen 
Summers of NHTSA, Gregg Peterson of Lotus Engineering, Koichi Kamiji of 
Honda, John German of the International Council on Clean Transportation 
(ICCT), Scott Schmidt of the Alliance of Automobile Manufacturers, Guy 
Nusholtz of Chrysler, and Frank Field of the Massachusetts Institute of 
Technology.
    The second session explored what degree of mass reduction and 
occupant protection are feasible from technical, economic, and 
manufacturing perspectives. Field emphasized that technical feasibility 
alone does not constitute feasibility in the context of vehicle mass 
reduction. Sufficient material production capacity and viable 
manufacturing processes are essential to economic feasibility. Both 
Kamiji and German noted that both good materials and good designs will 
be necessary to reduce fatalities. For example, German cited the 
examples of hexagonally structured aluminum columns, such as used in 
the Honda Insight, that can improve crash absorption at lower mass, and 
of high-strength steel components that can both reduce weight and 
improve safety. Kamiji made the point that widespread mass reduction 
will reduce the kinetic energy of all crashes which should produce some 
beneficial effect.
    Summers described NHTSA's plans for a model to estimate fleet wide 
safety effects based on an array of vehicle-to-vehicle computational 
crash simulations of current and anticipated vehicle designs. In 
particular, three computational models of lightweight vehicles are 
under development. They are based on current vehicles that have been 
modified or redesigned to substantially reduce mass. The most ambitious 
was the ``high development'' derivative of a Toyota Venza developed by 
Lotus Engineering and discussed by Mr. Peterson. The Lotus light-
weighted Venza structure contains about 75% aluminum, 12% magnesium, 8% 
steel, and 5% advanced composites. Peterson expressed confidence that 
the design had the potential to meet federal safety standards. Nusholtz 
emphasized that computational crash simulations involving more advanced 
materials were less reliable than those involving traditional metals 
such as aluminum and steel.
    Nusholtz presented a revised data-based fleet safety model in which 
important vehicle parameters were modeled based on trends from current 
NCAP crash tests. For example, crash pulses and potential intrusion for 
a particular size vehicle were based on existing distributions. Average 
occupant deceleration was used to estimate injury risk. Through a range 
of simulations of modified vehicle fleets, he was able to estimate the 
net effects of various design strategies for lighter weight vehicles, 
such as various scaling approaches for vehicle stiffness or intrusion. 
The approaches were selected based on engineering requirements for 
modified vehicles. Transition from the current fleet was considered. He 
concluded that protocols resulting in safer transitions

[[Page 62763]]

(e.g., removing more mass from heavier vehicles with appropriate 
stiffness scaling according to a \3/2\ power law) were not generally 
consistent with those that provide the greatest reduction in GHG 
production: i.e., that the most effective mass reduction in terms of 
reducing GHG emissions was not necessarily the safest.
    German discussed several important points on the future of mass 
reduction. Similar to Kahane's discussion of the difficulties of 
isolating the impact of mass reduction, German stated that other 
important variables, such as vehicle design and compatibility factors, 
must be held constant in order for size or weight impacts to be 
quantified in statistical analyses. He presented results that the 
safety impacts of size and weight are small and difficult to quantify 
when compared to driver, driving influences, and vehicle design 
influences. He noted that several scenarios, such as rollovers, greatly 
favored the occupants of smaller and lighter cars once a crash 
occurred. He pointed out that if size and design are maintained, lower 
weight should translate into a lower total crash force. He thought that 
advanced material designs have the potential to ``decouple'' the 
historical correlation between vehicle size and weight, and felt that 
effective design and driver attributes may start to dominate size and 
weight issues in future vehicle models.
    Other presenters noted industry's perspective of the effect of 
incentivizing mass reduction. Field highlighted the complexity of 
institutional changes that may be necessitated by mass reduction, 
including redesign of material and component supply chains and 
manufacturing infrastructure. Schmidt described an industry perspective 
on the complicated decisions that must be made in the face of 
regulatory change, such as evaluating goals, gains, and timing.
    Field and Schmidt noted that the introduction of technical 
innovations is generally an innate development process involving both 
tactical and strategic considerations that balance desired vehicle 
attributes with economic and technical risk. In the absence of 
challenging regulatory requirements, a substantial technology change is 
often implemented in stages, starting with lower volume pilot 
production before a commitment is made to the infrastructure and supply 
chain modifications which are necessary for inclusion on a high-volume 
production model. Joining, damage characterization, durability, repair, 
and significant uncertainty in final component costs are also concerns. 
Thus, for example, the widespread implementation of high-volume 
composite or magnesium structures might be problematic in the short or 
medium term when compared to relatively transparent aluminum or high 
strength steel implementations. Regulatory changes will affect how 
these tradeoffs are made and these risks are managed.
    Koichi Kamiji presented data showing in increased use of high 
strength steel in their Honda product line to reduced vehicle mass and 
increase vehicle safety. He stated that mass reduction is clearly a 
benefit in 42% of all fatal crashes because absolute energy is reduced. 
He followed up with slides showing the application of certain optimized 
designs can improve safety even when controlling for weight and size.
    A philosophical theme developed that explored the ethics of 
consciously allowing the total societal harm associated with mass 
reduction to approach the anticipated benefits of enhanced safety 
technologies. Although some participants agreed that there may 
eventually be specific fatalities that would not have occurred without 
downsizing, many also agreed that safety strategies will have to be 
adapted to the reality created by consumer choices, and that ``We will 
be ok if we let data on what works--not wishful thinking--guide our 
strategies.''
5. How have the Agencies estimated safety effects for the final rule?
a. What was the Agencies' methodology for estimating safety effects for 
the final rule?
    As explained above, the agencies consider the latest 2012 
statistical analysis of historical crash data by NHTSA to represent the 
best estimates of the potential relationship between mass reduction and 
fatality increases in the future fleet. This section discusses how the 
agencies used NHTSA's 2012 analysis to calculate specific estimates of 
safety effects of the final rule, based on the analysis of how much 
mass reduction manufacturers might use to meet the final rule.
    The CAFE/GHG standards do not mandate mass reduction, or require 
that mass reduction occur in any specific manner. However, mass 
reduction is one of the technology applications available to the 
manufacturers and a degree of mass reduction is used by both agencies' 
models to determine the capabilities of manufacturers and to predict 
both cost and fuel consumption/emissions impacts of more stringent 
CAFE/GHG standards. To estimate the amount of mass reduction to apply 
in the rulemaking analysis, the agencies considered fleet safety 
effects for mass reduction. As shown in Table II-24 and Table II-25, 
both the Kahane 2011 preliminary report and the Kahane 2012 final 
report show that applying mass reduction to CUVs and light duty trucks 
will generally decrease societal fatalities, while applying mass 
reduction to passenger cars will increase fatalities. The CAFE model 
uses coefficients from the Kahane study along with the mass reduction 
level applied to each vehicle model to project societal fatality 
effects in each model year. NHTSA used the CAFE model and conducted 
iterative modeling runs varying the maximum amount of mass reduction 
applied to each subclass in order to identify a combination that 
achieved a high level of overall fleet mass reduction while not 
adversely affecting overall fleet safety. These maximum levels of mass 
reduction for each subclass were then used in the CAFE model for the 
rulemaking analysis. The agencies believe that mass reduction of up to 
20 percent is feasible on light trucks, CUVs and minivans as discussed 
in the Joint TSD Section 3.3.5.5. Thus, the amount of mass reduction 
selected for this rulemaking is based on our assumptions about how much 
is technologically feasible without compromising safety. While we are 
confident that manufacturers will build safe vehicles and meet (or 
surpass) all applicable federal safety standards, we cannot predict 
with certainty that they will choose to reduce mass in exactly the ways 
that the agencies have analyzed in response to the standards. In the 
event that manufacturers ultimately choose to reduce mass and/or 
footprint in ways not analyzed or anticipated by the agencies, the 
safety effects of the rulemaking may likely differ from the agencies' 
estimates.
    In this final rule analysis, NHTSA utilized the 2012 Kahane study 
relationships between weight and safety, expressed as percent changes 
in fatalities per 100-pound mass reduction while holding footprint 
constant. However, as mentioned previously, there are several 
identifiable safety trends already occurring, or expected to occur in 
the foreseeable future, which are not accounted for in the study. For 
example, the two important new safety standards that were discussed 
above for electronic stability control and side curtain airbags, have 
already been issued and began phasing in after MY 2008. The recent 
shifts in market shares from pickups and SUVs to cars and CUVs may 
continue, or grow, if gasoline

[[Page 62764]]

prices remain high, or rise further. The growth in vehicle miles 
travelled may continue to stagnate if the economy does not improve, or 
gasoline prices remain high. And improvements in driver (and passenger) 
behavior, such as higher safety belt use rates, may continue. All of 
these will tend to reduce the absolute number of fatalities in the 
future. The agencies estimated the overall change in fatalities by 
calendar year after adjusting for ESC, Side Impact Protection, and 
other Federal safety standards and behavioral changes projected through 
this time period. The smaller percent changes in risk from mass 
reduction (from both the Kahane 2011prelimirary analysis and the Kahane 
2012 final analysis), coupled with the reduced number of baseline 
fatalities, results in smaller absolute increases in fatalities than 
those predicted in the MYs 2012-2016 rulemaking.
    NHTSA examined the impacts of identifiable safety trends over the 
lifetime of the vehicles produced in each model year from 2007 through 
2020. An estimate of these impacts was contained in a previous agency 
report that examined the impact of both safety standards and behavioral 
safety trends on fatality rates.\381\ In the NPRM analysis, based on 
these projections, we estimated a 12.6 percent reduction in fatality 
levels between the 2007 fatality base year and 2020 for the combination 
of safety standards and behavioral changes anticipated in this study 
(such as electronic stability control, head-curtain air bags, and 
increased belt use). See 76 FR 74959. The estimates derived from 
applying NHTSA fatality percentages to a baseline of 2007 fatalities 
were multiplied by 0.874 to account for changes that NHTSA believes 
will take place in passenger car and light truck safety between the 
2007 baseline on-road fleet used for this particular safety analysis 
and year 2020. Using this same methodology, for the final rule 
analysis, which is based on a 2010 baseline fleet, we estimated a 9.6 
percent reduction in fatality level between 2010 and 2020 for the 
anticipated combination of safety standards and behavioral changes that 
will occur during that time frame.\382\ The estimates derived from 
applying NHTSA fatality percentages to a baseline of 2010 fatalities 
were multiplied by 0.904 to account for changes that NHTSA believes 
will take place in passenger car and light truck safety between the 
2010 baseline on-road fleet and year 2020.
---------------------------------------------------------------------------

    \381\ Blincoe, L. and Shankar, U, ``The Impact of Safety 
Standards and Behavioral Trends on Motor Vehicle Fatality Rates,'' 
DOT HS 810 777, January 2007. See Table 5 comparing 2020 to 2007 
(37,906/43,363 = 0.874 or a reduction of 12.6% (100%-87.4% = 12.6%). 
Since 2008 was a recession year, it did not seem appropriate to use 
that as a baseline, so 2007 was used as the baseline for fatalities 
in the NPRM. Note that additional improvements may occur between 
2020 and 2025. However, since current research only projected the 
impact of changes through 2020, only those improvements could have 
been applied to that analysis.
    \382\ Blincoe, L. and Shankar, U, ``The Impact of Safety 
Standards and Behavioral Trends on Motor Vehicle Fatality Rates,'' 
DOT HS 810 777, January 2007. See Table 5 comparing 2020 to 2010 
(37,906/41,945 = 0.904 or a reduction of (100%-90.4% = 9.6%). Note 
that additional improvements may occur between 2020 and 2025. 
However, since current research only projected the impact of changes 
through 2020, only those improvements could be applied to this 
analysis.
---------------------------------------------------------------------------

    To estimate the amount of mass reduction to apply in the rulemaking 
analysis, the agencies considered fleet safety effects for mass 
reduction. As previously discussed the agencies believe that mass 
reduction of up to 20 percent is feasible on light trucks, CUVs and 
minivans, \383\ but that less mass reduction should be implemented on 
other vehicle types to avoid increases in societal fatalities. For the 
NPRM analysis, NHTSA used the mass reduction levels shown in Table II-
31 with the fatality coefficients derived in Kahane 2011 preliminary 
study.
---------------------------------------------------------------------------

    \383\ When applying mass reduction, NHSTA capped the maximum 
amount of mass reduction to 20 percent for any individual vehicle 
class. The 20 percent cap is the maximum amount of mass reduction 
the agencies believe to be feasible in MYs 2017-2025 time frame.

                             Table II-31--Mass Reduction Levels To Achieve Safety Neutral Results in the CAFE NPRM Analysis
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Subcompact and
                                                            Subcompact      Compact and   Midsize PC and   Large PC and     Minivan LT    Small, Midsize
                   Absolute (percent)                        Perf. PC      Compact Perf.   Midsize Perf.  Large Perf. PC     (percent)     and Large LT
                                                             (percent)     PC  (percent)   PC  (percent)     (percent)                       (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
MR1*....................................................             0.0             2.0             1.5             1.5             1.5             1.5
MR2.....................................................             0.0             0.0             5.0             7.5             7.5             7.5
MR3.....................................................             0.0             0.0             0.0            10.0            10.0            10.0
MR4.....................................................             0.0             0.0             0.0             0.0            15.0            15.0
MR5.....................................................             0.0             0.0             0.0             0.0            20.0            20.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
*MR1-MR5: different levels of mass reduction used in CAFE model.

    In order to find a safety neutral compliance path for use in the 
agencies' final rulemaking analysis given the coefficients from the 
Kahane 2012 study, the maximum amount of mass reduction applied in the 
final rule analysis has been modified from the NPRM levels for compact 
passenger cars and midsize passenger cars as shown in Table II-32. 
Specifically, the maximum amount of mass reduction for compact 
passenger cars and compact performance passenger cars is reduced in the 
agencies' respective models from 2% as used in the NPRM to 0% in the 
final rule analysis, while for midsize passenger cars and midsize 
performance passenger cars, it is reduced from 5% as used in the NPRM 
to 3.5% in the final rule analysis.

                             Table II-32--Mass Reduction Levels To Achieve Safety Neutral Results in the Final Rule Analysis
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Subcompact and
                                                            subcompact      Compact and   Midsize PC and   Large PC and     Minivan LT    Small, midsize
                      Absolute (%)                           Perf. PC      compact Perf.   midsize Perf.  large Perf. PC     (percent)     and large LT
                                                             (percent)     PC (percent)    PC (percent)      (percent)                       (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
MR1*....................................................             0.0             0.0             1.5             1.5             1.5             1.5

[[Page 62765]]

 
MR2.....................................................             0.0             0.0             3.5             7.5             7.5             7.5
MR3.....................................................             0.0             0.0             0.0            10.0            10.0            10.0
MR4.....................................................             0.0             0.0             0.0             0.0            15.0            15.0
MR5.....................................................             0.0             0.0             0.0             0.0            20.0            20.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
*MR1-MR5: different levels of mass reduction used in CAFE model

    For the CAFE model, these percentages apply to a vehicle's total 
weight, including the powertrain. Table II-33 shows the amount of mass 
reduction in pounds for these percentage mass reduction levels for a 
typical vehicle weight in each subclass.

   Table II-33--Examples of Mass Reduction (in Pounds) for Different Vehicle Subclasses Using the Percentage Information As Defined in Table II-32 for
                                                                   Final Rule Analysis
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Subcom-pact
                                                      and      Compact and   Midsize PC    Large PC
              Mass Reduction  (lbs)                Subcompact    Compact    and Midsize   and Large    Minivan LT    Small LT    Midsize LT    Large LT
                                                    Perf. PC     Perf. PC     Perf. PC     Perf. PC
--------------------------------------------------------------------------------------------------------------------------------------------------------
Typical Vehicle Weight (lbs)....................         2795         3359         3725         4110         4250         3702         4260         5366
MR1 (lbs).......................................            0            0           56           62           64           56           64           80
MR2 (lbs).......................................            0            0          130          308          319          278          320          402
MR3 (lbs).......................................            0            0            0          411          425          370          426          537
MR4 (lbs).......................................            0            0            0            0          638          555          639          805
MR5 (lbs).......................................            0            0            0            0          850          740          852         1073
--------------------------------------------------------------------------------------------------------------------------------------------------------

    These maximum amounts of mass reduction discussed above were 
applied in the technology input files for the CAFE model. Within some 
of the light truck classes, additional limitations were placed on the 
maximum amount of mass reduction for some of the vehicles based on 
which Kahane study safety class the vehicles were in, as is explained 
below. By way of background, NHTSA divides vehicles into classes for 
purposes of applying technology in the CAFE model in a way that differs 
from the Kahane study which divides vehicles into classes for purposes 
of determining safety coefficients. These differences require that the 
``safety class'' coefficients be applied to the appropriate vehicles in 
the CAFE ``technology subclasses.'' For the reader's reference, for 
purposes of this final rule, the safety classes and the technology 
subclasses relate \384\ as shown in Table II-34.
---------------------------------------------------------------------------

    \384\ This is not to say that all vehicles within a technology 
subclass will necessarily fall within a single safety class--as the 
chart shows, some technology subclasses are divided among safety 
classes.

   Table II-34--Mapping Between Safety Classes and Technology Classes
------------------------------------------------------------------------
            Safety class                       Technology class
------------------------------------------------------------------------
PC (Passenger Car)..................  Subcompact PC.
                                      Subcompact Perf. PC.
                                      Compact PC.
                                      Compact Perf. PC.
                                      Midsize PC.
                                      Midsize Perf. PC.
                                      Large PC.
                                      Large Perf. PC.
LT (Light Truck)....................  Small LT.
                                      Midsize LT.
                                      Large LT.
CM (CUV and Minivan)................  Subcompact PC.
                                      Subcompact Perf. PC.
                                      Large PC.
                                      Large Perf. PC.
                                      Minivan.
                                      Small LT.
                                      Midsize LT.
                                      Large LT.
------------------------------------------------------------------------

    In the NPRM analysis, the maximum amount of mass reduction for 
vehicles that would fall into the light truck safety class and would 
also fall into the small and midsize light truck technology subclasses 
was limited to 10%, as shown in Table II-35. In the final rule 
analysis, in order to find a safety-neutral compliance path using the 
new safety coefficients, for vehicles in the light truck safety class 
that also fall into the SmallLT technology subclass, mass reduction was 
limited to a maximum of 1.5%, as shown in Table II-36. For vehicles in 
the light truck safety class that also fall into the MidsizeLT 
technology subclass, the amount of mass reduction applied depends on 
vehicle mass: if the vehicle curb weight is greater than or equal to 
4,000 pounds, the maximum amount of mass reduction allowed is 7.5%; if 
the vehicle curb weight is less than 4,000 pounds, the maximum amount 
is 1.5%. Small and midsize light truck (SmallLT and MidsizeLT) that 
fall in the CUV and Minivan (CM) safety class are allowed up to 20% 
mass reduction. These changes from the NPRM analysis were incorporated 
in order to maximize the amount of overall fleet mass reduction in a 
way that achieved a safety neutral result with the updated coefficients 
from the Kahane 2012 study.

[[Page 62766]]

  Table II-35--Maximum Amount of Mass Reduction Limits for Light Truck
          Safety Vehicle Class for the NPRM CAFE Model Analysis
------------------------------------------------------------------------
 NRPM--2008 Market input file                  Tech class
------------------------------------------------------------------------
         Safety Class                 Small LT            Midsize LT
------------------------------------------------------------------------
LT............................  Apply MR3 at 10%...  Apply MR3 at 10%
CM *..........................  MR5 (20%)..........  MR5 (20%)
------------------------------------------------------------------------
* CM = CUV and MiniVan.

  Table II--36--Maximum Amount of Mass Reduction Limits for Light Truck
       Safety Vehicle Class for the Final Rule CAFE Model Analysis
------------------------------------------------------------------------
Final rule--2008 & 2010 market                 Tech class
          input file           -----------------------------------------
-------------------------------
         Safety Class                 Small LT            Midsize LT
------------------------------------------------------------------------
LT............................  Apply MR1 at 1.5%..  Vehicle Weight >=
                                                      4000, apply MR2 at
                                                      7.5%; Vehicle
                                                      Weight >= 4000,
                                                      apply MR1 at 1.5%.
CM............................  MR5 (20%)..........  MR5 (20%)
------------------------------------------------------------------------

    Table II-37 shows CAFE model results for societal safety for each 
model year based on the application of the above mass reduction 
limits.\385\ These are the estimated increases or decreases in 
fatalities over the lifetime of the model year fleet. A positive number 
means that fatalities are projected to increase, a negative number 
(indicated by parentheses) means that fatalities are projected to 
decrease. The results are significantly affected by the mass reduction 
limitations used in the CAFE model, which allow more mass reduction in 
the heavy LTVs, CUVs, and minivans than in other vehicles. As the 
negative coefficients only appear for LTVs greater than 4,594 lbs., 
CUVs, and minivans, a statistically significant improvement in safety 
can only occur if more weight is taken out of these vehicles than out 
of passenger cars or smaller light trucks. Combining passenger car and 
light truck safety estimates for the final rule results in a decrease 
in fatalities over the lifetime of the nine model years of MY 2017-2025 
of 8 fewer fatalities with the 2010 baseline and of 107 fewer 
fatalities with the 2008 baseline. Broken up into passenger car and 
light truck categories, there is an increase of 135 fatalities in 
passenger cars and a decrease of 143 fatalities in light trucks with 
the 2010 baseline, and there is an increase of 78 fatalities in 
passenger cars and a decrease of 185 fatalities in light trucks with 
the 2010 baseline. NHTSA also analyzed the results for different 
regulatory alternatives in Chapter IX of its FRIA; the difference in 
the results by alternative depends upon how much mass reduction is used 
in that alternative and the types and sizes of vehicles that the mass 
reduction applies to.
---------------------------------------------------------------------------

    \385\ NHTSA has changed the definitions of a passenger car and 
light truck for fuel economy purposes between the time of the Kahane 
2003 analysis and the NPRM (as well as this final rule). About 1.4 
million 2 wheel drive SUVs have been redefined as passenger cars 
instead of light trucks. The Kahane 2011 and 2012 analyses continue 
to use the definitions used in the Kahane 2003 analysis.

Table II-37--NHTSA Calculated Mass-Safety-Related Fatality Impacts of the Final Rule Over the Lifetime of the Vehicles Produced in each Model Year Using
                                                                 2008 and 2010 Baseline
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Baseline
          Fatalities              fleet      MY 2017    MY 2018    MY 2019    MY 2020    MY 2021    MY 2022    MY 2023    MY 2024    MY 2025     Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger Cars...............  2010.......  3-.......  7-.......  13-......  12-......  18-......  19-......  23-......  22-......  19-......  135-
                               2008.......  2........  5........  13.......  12.......  13.......  10.......  11.......  9........  1........  78
Light Trucks.................  2010.......  (5)-.....  (9)-.....  0-.......  (5)-.....  (18)-....  (21)-....  (24)-....  (30)-....  (31)-....  (143)-
                               2008.......  (5)......  (13).....  (17).....  (29).....  (27).....  (27).....  (27).....  (29).....  (11).....  (185)
                              --------------------------------------------------------------------------------------------------------------------------
    Total....................  2010.......  (2)-.....  (3)-.....  13-......  7-.......  (1)-.....  (2)-.....  (2)-.....  (8)-.....  (12)-....  (8)-
                               2008.......  (3)......  (8)......  (3)......  (17).....  (14).....  (17).....  (16).....  (20).....  (10).....  (107)
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Using the same coefficients from the 2012 Kahane study, EPA used 
the OMEGA model to conduct a similar analysis. After applying these 
percentage increases to the estimated mass reductions per vehicle size 
by model year assumed in the Omega model, Table II-38 shows the results 
of EPA's safety analysis separately for each model year. These are 
estimated increases or decreases in fatalities over the lifetime of the 
model year fleet. A positive number means that fatalities are projected 
to increase; a negative number means that fatalities are projected to 
decrease. For details, see the EPA RIA Chapter 3.

[[Page 62767]]

Table II-38--EPA Calculated Mass-Safety-Related Fatality Impacts of the Proposed Standards Over the Lifetime of the Vehicles Produced in Each Model Year
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                MY 2017  MY 2018  MY 2019  MY 2020  MY 2021  MY 2022  MY 2023  MY 2024  MY 2025   Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars................................................        5        9       14       20       26       30       35       40       45      223
Light trucks..................................................       -5      -11      -16      -22      -29      -40      -52      -64      -77     -317
                                                               -----------------------------------------------------------------------------------------
    Total.....................................................       -1       -1       -2       -2       -3      -10      -18      -25      -32      -94
--------------------------------------------------------------------------------------------------------------------------------------------------------

b. Why might the real-world effects be less than or greater than what 
the Agencies have calculated?
    As discussed above, the ways in which future technological advances 
could potentially mitigate the safety effects estimated for this 
rulemaking include the following: lightweight vehicles could be 
designed to be both stronger and not more aggressive; restraint systems 
could be improved to deal with higher crash pulses in lighter vehicles; 
crash avoidance technologies could reduce the number of overall 
crashes; roofs could be strengthened to improve safety in rollovers. As 
also stated above, however, while we are confident that manufacturers 
will strive to build safe vehicles, it will be difficult for both the 
agencies and the industry to know with certainty ahead of time how 
crash trends will change in the future fleet as light-weighted vehicles 
become more prevalent. Going forward, we will continue to monitor the 
crash data as well as changes in vehicle mass and conduct analyses to 
understand the interaction of vehicle mass and size on safety.
    Additionally, we note that the total amount of mass reduction used 
in the agencies' analysis for this rulemaking was chosen based on our 
assumptions about how much is technologically feasible without 
compromising safety. Again, while we are confident that manufacturers 
are motivated to build safe vehicles, we cannot predict with certainty 
that they will choose to reduce mass in exactly the ways or amounts 
that the agencies have analyzed in response to the standards. In the 
event that manufacturers ultimately choose to reduce mass and/or 
footprint in ways not analyzed by the agencies, the safety effects of 
the rulemaking may likely differ from the agencies' estimates.
    As discussed in Chapter 2 of the Joint TSD, the agencies note that 
the standard is flat for vehicles smaller than 41 square feet and that 
downsizing in this category could help achieve overall compliance, if 
the vehicles are desirable to consumers. The agencies note that fewer 
than 10 percent of MY 2008 passenger cars were below 41 square feet, 
and due to the overall lower level of utility of these vehicles, and 
the engineering challenges involved in ensuring that these vehicles 
meet all applicable federal motor vehicle safety standards (FMVSS), we 
do not expect a significant increase in this segment of the market. 
Please see Chapter 2 of the Joint TSD for additional discussion.
    The agencies acknowledge that this final rule does not prohibit 
manufacturers from redesigning vehicles to change wheelbase and/or 
track width (footprint). However, as NHTSA explained in promulgating 
the MY 2008-2011 light truck CAFE standards and the MY 2011 passenger 
car and light truck CAFE standards, and as the agencies jointly 
explained in promulgating the MYs 2012-2016 CAFE and GHG standards and 
the proposal for this final rule, we believe that such engineering 
changes are significant enough to be unattractive as a measure to 
undertake solely to reduce compliance burdens. Similarly, the agencies 
acknowledge that a manufacturer could, without actually reengineering 
specific vehicles to increase footprint, shift production toward those 
that perform well with respect to their footprint-based targets. 
However, NHTSA and EPA have previously explained, because such 
production shifts could run counter to market demands, they could also 
be competitively unattractive. We sought comment on the appropriateness 
of the overall analytic assumption that the attribute-based aspect of 
the proposed standards will have no effect on the overall distribution 
of vehicle footprints. Detailed responses to the comments that the 
agencies received on this topic can be found in preamble Section II.C. 
Notwithstanding the agencies' current judgment that such deliberate 
reengineering or production shifts are unlikely as pure compliance 
strategies, both agencies are considering the potential future 
application of vehicle choice models, and anticipate that doing so 
could result in estimates that market shifts induced by changes in 
vehicle prices and fuel economy levels could lead to changes in fleet's 
footprint distribution. However, neither agency is currently able to 
include vehicle choice modeling in our analysis. So, based on the 
regulatory design, the analysis assumes this final rule will not have 
the effects described above. The agencies will monitor the vehicle 
fleet going forward to see if there are changes in vehicle footprint, 
weight, or if there are shifts in the production volumes of models that 
are produced, and consistent with confidentiality and other 
requirements, the agencies intend to make these data publicly available 
when they are compiled and will use that information to inform the mid-
term review.
c. What are the Agencies' plans going forward?
    The agencies will closely be monitoring the visible effects of 
CAFE/GHG standards on vehicle safety as these standards are 
implemented, and will conduct a full analysis of safety impacts as part 
of NHTSA's future rulemaking to establish final MYs 2022-2025 standards 
and the mid-term evaluation. We are mindful of the comments submitted 
by the Alliance and Volvo that there are many uncertainties associated 
with the agencies' safety analysis in this rulemaking, including the 
course of development of vehicle technologies (including, but not 
limited to, light-weighting technologies) to achieve these standards 
given the timeframe covered by this rulemaking, the composition of the 
future fleet mix with respect to vehicle weight, vehicle size, vehicle 
compatibility/incompatibility that could result in response to the 
standards set in this rulemaking, the continued development of 
alternative drive trains and their penetration and how those changes 
interact with changes in vehicle weight, the new development of safety 
technologies (both active and passive), and the vehicle turn-over rate, 
which is driven by many factors outside of the agencies' or 
manufacturers' control. As the Alliance stated in its comments, 
``Achieving the proposed CAFE and GHG standards will rely on the 
availability of commercially viable emerging technologies for 
manufacturers to adopt. Should these technologies fail to mature as

[[Page 62768]]

anticipated, greater reliance on mass reduction and downsizing in order 
to achieve these standards could occur.'' \386\ The agencies emphasize 
that the final standards are premised almost entirely on increased 
penetration of technologies which already exist, or which are expected 
to be in commercial application in the early model years of the 
standards. See Joint TSD section 3.1. (explaining, technology-by-
technology, which are already in use and their effectiveness, and which 
are considered available for purposes of the analyses underlying this 
rulemaking). The Alliance also stressed that the agencies should 
``continuously update the safety analysis'' going forward, and that 
updating the safety analysis as part of the mid-term evaluation was 
``critical'' ``to reflect the most recent crash data and revised 
projections regarding mass reduction scenarios,'' because ``the 
proposed mid-term evaluation is essential in order to assure that the 
maximum feasible fuel economy benefits are obtained in a cost-effective 
and safety neutral manner.'' \387\ With respect to NHTSA's looking-
ahead approach \388\ in assessing the feasible amount of mass reduction 
and the evaluation of concept vehicles, the Alliance stated that ``it 
is not sufficient to only consider regulatory and consumer information 
crash tests. A comprehensive evaluation of vehicle safety must also 
take into account real-world impact scenarios and the special 
requirements of vulnerable populations (e.g., children and elderly). 
These must also be adequately accounted for in any agency policy 
decisions.'' NHTSA does its best in the fleet simulation study to 
consider as many real world crash scenarios as possible. In the fleet 
simulation study, NHTSA is including risk functions for different 
populations. All of the crash results are weighted for their actual 
occurrence rates. As stated in NHTSA's 2011-2013 research and 
rulemaking priority plan,\389\ the agency currently has programs 
looking into the areas of safety for vulnerable occupants. NHTSA will 
monitor the performance of these vulnerable occupants in the context of 
the changing fleet in response to the fuel economy program.
---------------------------------------------------------------------------

    \386\ Alliance comments, Docket No. NHTSA-2010-0131, at pg 5.
    \387\ Id., at pg 6.
    \388\ Alliance categorized NHTSA's studies for feasible amount 
of mass reduction and fleet simulation as ``looking-ahead'' approach 
versus the statistical analysis as ``looking-back'' approach which 
investigates the historical data.
    \389\ http://www.nhtsa.gov/staticfiles/rulemaking/pdf/2011-2013_Vehicle_Safety-Fuel_Economy_Rulemaking-Research_Priority_Plan.pdf.
---------------------------------------------------------------------------

    NHTSA acknowledges these concerns and will closely monitor the 
safety data, the trends in vehicle weight and size, the trends in 
vehicle mass reduction, as well as the trend for the active and passive 
vehicle safety during the period between the release of this final rule 
and the future rulemaking to establish final CAFE standards for MYs 
2022-2025 and the mid-term evaluation. Consistent with confidentiality 
and other requirements, NHTSA intends to make these data publicly 
available when they are compiled. We agree with the comments by Global 
Automakers that ``with sufficient lead-time, the implementation of 
vehicle lightweighting strategies can be phased in, making it possible 
to observe the safety implications in comparison with vehicles in the 
existing fleet.'' \390\ The lead-time incorporated into these standards 
will help the agencies and manufacturers monitor these trends and take 
appropriate action. NHTSA will also continue and finish its study for 
estimating fleet safety impacts due to lightweighting using the CAE 
models available to the agency. NHTSA will also make appropriate 
updates to the statistical study of historical data on the effects on 
mass and size societal safety on an ongoing basis. At the same time, 
NHTSA will continue to assess its analytical methods for assessing the 
effects of vehicle mass and size on societal safety and make 
appropriate updates if necessary.
---------------------------------------------------------------------------

    \390\ Global Automakers comments, Docket No. NHTSA-2010-0131, at 
pg 3.
---------------------------------------------------------------------------

III. EPA MYs 2017-2025 Light-Duty Vehicle Greenhouse Gas Emissions 
Standards

A. Overview of EPA Rule

1. Introduction
    The U.S. Environmental Protection Agency (EPA) is finalizing 
greenhouse gas (GHG) emissions standards for light-duty vehicles, 
light-duty trucks, and medium-duty passenger vehicles (hereafter light-
duty vehicles) for MYs 2017 through 2025. These vehicle categories, 
which include cars, sport utility vehicles, minivans, and pickup trucks 
used for personal transportation, are currently responsible for almost 
60% of all U.S. transportation related GHG emissions.
    This rule is the second EPA rule to regulate light-duty vehicle GHG 
emissions under the Clean Air Act (CAA), building upon the GHG 
emissions standards for MYs 2012-2016 that were established in 
2010,\391\ and the third rule to regulate GHG emissions from the 
transportation sector.\392\ Combined with the standards already in 
effect for MYs 2012-2016, these standards will result in MY 2025 light-
duty vehicles emitting approximately one-half of the GHG emissions of 
MY 2010 light duty vehicles and represent the most significant federal 
action ever taken to reduce GHG emissions (and improve fuel economy) in 
this country's history.
---------------------------------------------------------------------------

    \391\ 75 FR 25324 (May 7, 2010).
    \392\ 76 FR 57106 (September 15, 2011) established GHG emission 
standards for heavy-duty vehicles and engines for model years 2014-
2018.
---------------------------------------------------------------------------

    Soon after the completion of the successful MYs 2012-2016 
rulemaking in May 2010, the President, with support from the auto 
manufacturers and the United Auto Workers, requested that EPA and NHTSA 
work to extend the National Program to MYs 2017-2025 light duty 
vehicles. The agencies were requested by the President to develop ``a 
coordinated national program under the CAA (Clean Air Act) and the EISA 
(Energy Independence and Security Act of 2007) to improve fuel 
efficiency and to reduce greenhouse gas emissions of passenger cars and 
light-duty trucks of model years 2017-2025.'' \393\ EPA's standards are 
a result of our work with NHTSA and CARB in developing such a 
continuation of the National Program. This final rule provides 
important benefits to society and consumers in the form of reduced GHG 
emissions and reduced consumption of oil, and significant fuel savings 
for consumers. It provides the automobile industry with the important 
certainty and lead time needed to implement the technology changes that 
will achieve these benefits, as part of a harmonized set of federal 
requirements. Acting now to address the standards for MYs 2017-2025 
allows for the important continuation of the National Program that 
started with MYs 2012-2016, and ensures that automakers will be able to 
continue producing and selling a single fleet of vehicles across the 
U.S.
---------------------------------------------------------------------------

    \393\ The Presidential Memorandum is found at http://www.whitehouse.gov/the-press-office/presidential-memorandum-regarding-fuel-efficiency-standards.
---------------------------------------------------------------------------

    From a societal standpoint, the GHG emissions standards are 
projected to save approximately 2 billion metric tons of GHG emissions 
and 4 billion barrels of oil over the lifetimes of those light-duty 
vehicles sold in MYs 2017-2025. These savings come on top of savings 
that would already be achieved through the continuation of EPA's MYs 
2012-2016 standards.\394\ EPA estimates that

[[Page 62769]]

fuel savings will far outweigh higher vehicle costs, and that the net 
benefits to society will be in the range of $326 billion (7% discount 
rate) to $451 billion (3% discount rate) over the lifetimes of those 
vehicles sold in MYs 2017-2025. Just in calendar year 2040 alone, after 
the on-road vehicle fleet has largely turned over to vehicles sold in 
MY 2025 and later, EPA projects GHG emissions savings of 455 million 
metric tons, oil savings of 2.5 million barrels per day, and net 
benefits of $158 billion using the $22/ton CO2 social cost 
of carbon value. Cumulative net benefits, for calendar years 2017 
through 2050 and expressed as a net present value in 2012, are 
projected to be $616 billion (7% discount rate) to $1.4 trillion (3% 
discount rate).
---------------------------------------------------------------------------

    \394\ The cost and benefit estimates provided here are only for 
the MYs 2017-2025 rulemaking. EPA and DOT's rulemakings establishing 
standards for MYs 2012-2016, and DOT's MY 2011 rulemaking, are 
already part of the baseline for this analysis. See EPA Regulatory 
Impact Analysis 7.4 for the combined cost and benefit projections 
for the MYs 2012-2016 and 2017-2025 rulemakings.
---------------------------------------------------------------------------

    These standards will save consumers significant monies over time. 
The new technology that will be necessary to meet the CO2 
standards is projected to add $1800 to the cost of a new MY 2025 
vehicle. These costs come on top of costs that would already be imposed 
through the continuation of EPA's MYs 2012-2016 standards. But those 
consumers who drive their MY 2025 vehicle for its entire lifetime will 
save, on average, $5700 (7% discount rate) to $7400 (3% discount rate) 
in fuel savings, for a net lifetime savings of $3400 (7% discount rate) 
to $5000 (3% discount rate).
    For those consumers who purchase a new MY 2025 vehicle with cash, 
the discounted fuel savings will offset the higher vehicle cost (plus 
sales tax and higher insurance and maintenance costs up to that time) 
in about 3.2 years (3% discount rate), i.e., that is the ``break-even'' 
point and after that ongoing fuel savings will greatly exceed the small 
increases in insurance and maintenance costs. Those consumers that buy 
a new MY 2025 vehicle with a 5-year loan (assuming a 5.35% interest 
rate) will benefit from a positive monthly cash flow of about $12 (or 
$140 per year), on average, as the monthly fuel savings more than 
offsets the higher monthly payment.
    EPA projects even more favorable payback and monthly cash flow for 
used vehicle buyers, as most of the incremental technology cost is paid 
for by the initial buyer due to depreciation. A consumer who pays cash 
for a 5 or 10-year old used vehicle will typically reach payback in 
approximately one year, while the monthly cash flow savings for a 
credit purchase (assuming a 9.35% interest rate) will typically be 
around $20 per month.
    The standards are designed to allow full consumer choice, in that 
they are footprint-based, i.e., larger vehicles have higher absolute 
GHG emissions targets and smaller vehicles have lower absolute GHG 
emissions targets. While the GHG emissions targets become more 
stringent each year, the emissions targets have been selected to allow 
compliance by vehicles of all sizes and with current levels of vehicle 
attributes such as utility, size, safety, and performance. Accordingly, 
these standards are projected to allow consumers to choose from the 
same mix of vehicles that are currently in the marketplace.
    Section I above provides a comprehensive overview of the joint EPA/
NHTSA rule including the history and rationale for a National Program 
that allows manufacturers to build a single fleet of light-duty 
vehicles that can satisfy all federal and state requirements for GHG 
emissions and fuel economy, the level and structure of the GHG 
emissions and corporate average fuel economy (CAFE) standards, the 
compliance flexibilities available to manufacturers, the mid-term 
evaluation, and a summary of the costs and benefits of the GHG and CAFE 
standards based on a ``model year lifetime analysis.''
    In this Section III, EPA provides more detailed information about 
EPA's GHG emissions standards. After providing an overview of key 
information in this section (III.A), EPA discusses the standards 
(III.B); the vehicles covered by the standards, various compliance 
flexibilities available to manufacturers, and a mid-term evaluation 
(III.C); the feasibility of the standards (III.D); provisions for 
certification, compliance, and enforcement (III.E); the projected 
reductions in GHG emissions due to the standards and the associated 
effects of these reductions (III.F); the impact of the rule on non-GHG 
emissions and their associated effects (III.G); the estimated cost, 
economic, and other impacts of the rule (III.H); and various statutory 
and executive order issues (III.I).
2. Why is EPA establishing MYs 2017-2025 standards for light-duty 
vehicles?
a. Light Duty Vehicle Emissions Contribute to Greenhouse Gases and the 
Threat of Climate Change
    Greenhouse gases (GHGs) are gases in the atmosphere that 
effectively trap some of the Earth's heat that would otherwise escape 
to space. GHGs are both naturally occurring and anthropogenic. The 
primary GHGs of concern that are directly emitted by human activities 
include carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, 
perfluorocarbons, and sulfur hexafluoride.
    These gases, once emitted, remain in the atmosphere for decades to 
centuries. They become well mixed globally in the atmosphere and their 
concentrations accumulate when emissions exceed the rate at which 
natural processes remove GHGs from the atmosphere. The heating effect 
caused by the human-induced buildup of GHGs 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 observed to date and 
projected to occur in the future include, but are not limited to, more 
frequent and intense heat waves, more severe wildfires, degraded air 
quality, heavier and more frequent downpours and flooding, increased 
drought, greater sea level rise, more intense storms, harm to water 
resources, continued ocean acidification, harm to agriculture, and harm 
to wildlife and ecosystems. All of these findings were recently 
affirmed by the D.C. Circuit in Coalition for Responsible Regulation v. 
EPA (No. 09-1322, June 26, 2012 (D.C. Circuit)).\395\ A more in depth 
explanation of observed and projected changes in GHGs and climate 
change, and the impact of climate change on public health, welfare, 
society, and the environment, is included in Section III.F below.
---------------------------------------------------------------------------

    \395\ See slip op. p. 30 (upholding all of EPA's findings and 
stating ``EPA had before it substantial record evidence that 
anthropogenic emissions of greenhouse gases `very likely' caused 
warming of the climate over the last several decades. EPA further 
had evidence of current and future effects of this warming on public 
health and welfare. Relying again upon substantial scientific 
evidence, EPA determined that anthropogenically induced climate 
change threatens both public health and public welfare. It found 
that extreme weather events, changes in air quality, increases in 
food- and water-borne pathogens, and increases in temperatures are 
likely to have adverse health effects. The record also supports 
EPA's conclusion that climate change endangers human welfare by 
creating risk to food production and agriculture, forestry, energy, 
infrastructure, ecosystems, and wildlife. Substantial evidence 
further supported EPA's conclusion that the warming resulting from 
the greenhouse gas emissions could be expected to create risks to 
water resources and in general to coastal areas as a result of 
expected increase in sea level.'')
---------------------------------------------------------------------------

    Mobile sources represent a significant share of U.S. GHG emissions 
and include light-duty vehicles, light-duty trucks, medium-duty 
passenger vehicles, heavy-duty trucks, airplanes, railroads, marine 
vessels and a variety of other sources. In 2010, mobile sources emitted 
30% of all U.S. GHGs, and have been the source of the largest absolute 
increase in U.S. GHGs since

[[Page 62770]]

1990. Transportation sources, which do not include certain off highway 
sources such as farm and construction equipment, account for 27% of 
U.S. GHG emissions, and motor vehicles (CAA section 202(a)), which 
include light-duty vehicles, light-duty trucks, medium-duty passenger 
vehicles, heavy-duty trucks, buses, and motorcycles, account for 23% of 
total U.S. GHGs.
    Light-duty vehicles emit carbon dioxide, methane, nitrous oxide and 
hydrofluorocarbons. Carbon dioxide (CO2) is the end product 
of fossil fuel combustion. During combustion, the carbon stored in the 
fuels is oxidized and emitted as CO2 and smaller amounts of 
other carbon compounds. Methane (CH4) emissions are a 
function of the methane content of the motor fuel, the amount of 
hydrocarbons passing uncombusted through the engine, and any post-
combustion control of hydrocarbon emissions (such as catalytic 
converters). Nitrous oxide or N2O (and nitrogen oxide or 
NOX) emissions from vehicles and their engines are closely 
related to air-fuel ratios, combustion temperatures, and the use of 
pollution control equipment. For example, some types of catalytic 
converters installed to reduce motor vehicle NOX, carbon 
monoxide (CO) and hydrocarbon (HC) emissions can promote the formation 
of N2O. Hydrofluorocarbons (HFC) are progressively replacing 
chlorofluorocarbons (CFC) and hydrochlorofluorocarbons (HCFC) in 
vehicle air conditioning systems as CFCs and HCFCs are being phased out 
under the Montreal Protocol and Title VI of the CAA. There are multiple 
emissions pathways for HFCs with emissions occurring during charging of 
cooling and refrigeration systems, during operations, and during 
decommissioning and disposal.
b. Basis for Action Under the Clean Air Act
    Section 202(a)(1) of the Clean Air Act (CAA) states that ``the 
Administrator shall by regulation prescribe (and from time to time 
revise) * * * standards applicable to the emission of any air pollutant 
from any class or classes of new motor vehicles * * *, which in his 
judgment cause, or contribute to, air pollution which may reasonably be 
anticipated to endanger public health or welfare.'' The Administrator 
has found that the elevated concentrations of a group of six GHGs in 
the atmosphere may reasonably be anticipated to endanger public health 
and welfare, and that emissions of GHGs from new motor vehicles and new 
motor vehicle engines contribute to this air pollution.
    As a result of these findings, section 202(a) requires EPA to issue 
standards applicable to GHG emissions, and authorizes EPA to revise 
them from time to time. See Coalition for Responsible Regulation v. EPA 
(No. 09-1322, June 26, 2012 (D.C. Circuit)) holding that under section 
202(a), EPA has a mandatory duty to issue standards controlling 
emissions of greenhouse gases from new motor vehicles once it made a 
positive endangerment determination, and rejecting all arguments to the 
contrary as inconsistent with ``[b]oth the plain text of Section 202(a) 
and precedent'' (slip op. p. 40). This preamble describes the revisions 
to the current standards to control emissions of CO2 and 
HFCs from new light-duty motor vehicles.\396\ For further discussion of 
EPA's authority under section 202(a), see Section I.D.
---------------------------------------------------------------------------

    \396\ EPA is not amending the substantive standards adopted in 
the 2012-2016 light-duty vehicle rule for N2O and 
CH4, but is revising the options that manufacturers have 
in meeting the N2O and CH4 standards, and to 
the timeframe for manufacturers to begin measuring N2O 
emissions. See Section III.B below.
---------------------------------------------------------------------------

c. EPA's Endangerment and Cause or Contribute Findings for Greenhouse 
Gases Under Section 202(a) of the Clean Air Act
    On December 15, 2009, EPA published its findings that elevated 
atmospheric concentrations of GHGs are reasonably anticipated to 
endanger the public health and welfare of current and future 
generations, and that emissions of GHGs from new motor vehicles 
contribute to this air pollution. Further information on these findings 
may be found at 74 FR 66496 (December 15, 2009) and 75 FR 49566 (Aug. 
13, 2010). As noted, the D.C. Circuit rejected all industry and State 
challenges to the endangerment finding, holding that EPA's endangerment 
determination was supported by ``substantial scientific evidence''. 
Coalition for Responsible Regulation v. EPA (No. 09-1322, June 26, 2012 
(D.C. Circuit)) slip op. p. 30.
3. What is EPA finalizing?
a. Light-Duty Vehicle, Light-Duty Truck, and Medium-Duty Passenger 
Vehicle Greenhouse Gas Emission Standards and Projected Emissions 
Levels
    This section provides an overview of EPA's final rule. The key 
public comments are discussed in the sections that follow, which 
provide the details of the program. A fuller discussion of comments is 
in EPA's separate Response to Comments document.
    The major elements of EPA's final rule are being finalized as 
proposed, including overall stringency and timing, and the 
CO2-footprint target curves. With respect to the key program 
design elements, a few changes have been made subsequent to the 
proposal, in response to public comment, including the addition of 
multiplier incentives for dedicated and dual fuel CNG vehicles for MYs 
2017-2021, temporary lead time provisions for intermediate volume 
manufacturers, and some relatively minor changes in the off-cycle 
credit and hybrid pick-up truck incentive programs.
    EPA is finalizing new tailpipe carbon dioxide (CO2) 
emissions standards for cars and light trucks based on the 
CO2 emissions-footprint curves for cars and light trucks 
that are shown above in Section I.B.3 and below in Section III.B.\397\ 
These curves establish different CO2 emissions targets for 
each unique car and truck footprint value. Generally, the larger the 
vehicle footprint, the higher the corresponding vehicle CO2 
emissions target. Vehicle CO2 emissions will be measured 
over the EPA city and highway tests. Under this rule, various 
incentives and credits are available for manufacturers to demonstrate 
compliance with the standards. See Section I.B for a comprehensive 
overview of both the CO2 emissions-footprint standard curves 
and the various compliance flexibilities that are available to the 
manufacturers in meeting the tailpipe CO2 standards.
---------------------------------------------------------------------------

    \397\ EPA is not changing the 0.010 gram per mile N2O 
or 0.030 gram per mile CH4 standards which were 
established in the MYs 2012-2016 rulemaking. See Section III.B for a 
discussion of the N2O and CH4 standards.
---------------------------------------------------------------------------

    EPA projects that the tailpipe CO2 standards will yield 
a fleetwide average light vehicle CO2 emissions compliance 
target level in MY 2025 of 163 grams per mile,\398\ which represents an 
average fleetwide reduction of 35 percent relative to the projected 
average light vehicle CO2 level in MY 2016. On average, car 
CO2 emissions would be reduced by about 5 percent per year, 
while light truck CO2 emissions would be reduced by about 
3.5 percent per year from MYs 2017 through 2021, and by about 5 percent 
per year from MYs 2022 through 2025.
---------------------------------------------------------------------------

    \398\ This translates to 54.5 mpg if met exclusively with fuel 
economy technologies.
---------------------------------------------------------------------------

    The following three tables, Table III-1 through Table III-3, 
summarize EPA's projections of what the standards mean in terms of 
CO2 emissions reductions for passenger cars, light trucks, 
and the overall fleet combining passenger cars and light trucks for MYs 
2017-2025. It is important to emphasize that these

[[Page 62771]]

projections are based on technical assumptions by EPA about various 
matters, including the mix of cars and trucks, as well as the mix of 
vehicle footprint values, in the fleet in varying years. It is possible 
that the actual CO2 emissions values, as well as the actual 
utilization of incentives and credits, will be either higher or lower 
than the EPA projections.\399\
---------------------------------------------------------------------------

    \399\ All EPA projections in the preamble are relative to a 
2008-based reference fleet; see the EPA Regulatory Impact Analysis 
for projections relative to a 2010-based reference fleet.
---------------------------------------------------------------------------

    In each of these tables, the column ``Projected CO2 
Compliance Target'' represents our projected fleetwide average 
CO2 compliance target value based on the CO2-
footprint curve standards as well as the projected mixes of cars and 
trucks and vehicle footprint distributions.
    The columns under ``Incentives'' represent the projected emissions 
impact of the advanced technology multiplier incentives,\400\ as well 
as the pickup truck incentives. Also shown under incentives is the 
projected impact of the flexibilities provided to intermediate volume 
manufacturers. These incentives allow manufacturers to meet their 
compliance targets with CO2 emissions levels slightly higher 
than they would otherwise have to be, but do not reflect actual real-
world CO2 emissions reductions. As such they reduce the 
emissions reductions that the CO2 standards would be 
expected to achieve.
---------------------------------------------------------------------------

    \400\ The advanced technology multiplier incentive applies to 
EVs, PHEVs, FCVs, and CNG vehicles. The projections reflect EPA 
projections of the use of EVs and PHEVs for MYs 2017-2021. It is, of 
course, possible that there will be FCVs and CNG vehicles during 
this timeframe as well.
---------------------------------------------------------------------------

    The column ``Projected Achieved CO2'' is the sum of the 
CO2 Compliance Target and the values in the ``Incentive'' 
columns. This Achieved CO2 value is a better reflection of 
the CO2 emissions benefits of the standards, since it 
accounts for the incentive programs.
    One incentive that is not reflected in these tables is the 0 gram 
per mile compliance value for EV/PHEV/FCVs. The 0 gram per mile value 
accurately reflects the tailpipe CO2 gram per mile achieved 
by these vehicles; however, fuel use from these vehicles will impact 
the overall GHG reductions associated with the standards due to fuel 
production and distribution-related upstream GHG emissions which are 
projected to be greater than the upstream GHG emissions associated with 
gasoline from oil. The combined impact of the 0 gram per mile 
compliance value for EV/PHEV/FCVs and the advanced technology 
multiplier on overall program GHG emissions is discussed in more detail 
below in Section III.C.2.d.
    The columns under ``Credits'' quantify the projected CO2 
emissions credits that we project manufacturers will achieve through 
improvements in air conditioner refrigerants and efficiency, as well as 
certain off-cycle technologies. These credits reflect real world 
emissions reductions, so they do not raise the levels of the Achieved 
CO2 values, but they do allow manufacturers to meet their 
compliance targets with 2-cycle test CO2 emissions values 
higher than otherwise. For the off-cycle credit program, values are 
projected for two technologies--active aerodynamics and stop-start 
systems--EPA is not quantifying the use of additional off-cycle 
technologies at this time because of a lack of information with respect 
to the likely use of additional off-cycle technologies.
    In the MYs 2012-2016 rule, we estimated the impact of the Temporary 
Leadtime Allowance Alternative Standards credit in MY 2016 to be 0.1 
gram/mile. Due to the small magnitude, we have not included this in the 
following tables for the MY 2016 base year.
    The column ``Projected 2-cycle CO2'' is the projected 
fleetwide 2-cycle CO2 emissions values that manufacturers 
would have to achieve in order to be able to comply with the standards. 
This value is the sum of the projected fleetwide credit, incentive, and 
Compliance Target values.

                    Table III-1--EPA Projections for Fleetwide Tailpipe Emissions Compliance With CO2 Standards--Passenger Cars \401\
                                                                    [Grams per mile]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Incentives \402\                                    Credits
                                               Projected  ----------------------------  Projected  -----------------------------------------
                 Model year                       CO2        Advanced    Intermediate    achieved                                            Projected 2-
                                               compliance   technology      volume         CO2       Off cycle        A/C           A/C       cycle CO2
                                                 target     multiplier    provisions                   credit     refrigerant   efficiency
--------------------------------------------------------------------------------------------------------------------------------------------------------
2016 (base).................................    225 \403\           0               0          225          0.4           5.4           4.8          235
2017........................................          212           0.6           0.1          213          0.5           7.8           5.0          226
2018........................................          202           1.1           0.3          203          0.6           9.3           5.0          218
2019........................................          191           1.6           0.1          193          0.7          10.8           5.0          210
2020........................................          182           1.5           0.1          183          0.8          12.3           5.0          201
2021........................................          172           1.2           0.0          173          0.8          13.8           5.0          193
2022........................................          164           0.0           0.0          164          0.9          13.8           5.0          184
2023........................................          157           0.0           0.0          157          1.0          13.8           5.0          177
2024........................................          150           0.0           0.0          150          1.1          13.8           5.0          170
2025........................................          143           0.0           0.0          143          1.4          13.8           5.0          163
--------------------------------------------------------------------------------------------------------------------------------------------------------

     
---------------------------------------------------------------------------

    \401\ Projected results using 2008-based fleet projection 
analysis. These values differ slightly from those shown in the 
proposal because of revisions to the MY 2008-based fleet and updates 
to the analysis.
    \402\ An incentive not reflected in this table is the 0 gram per 
mile compliance value for EV/PHEV/FCVs. See text for explanation.
    \403\ The projected compliance levels for 2016 are different 
than those which were projected in the MYs 2012-2016 rule. Our 
assessment for this rule is based on a predicted 2016 compliance 
target of 224 for cars, 297 for trucks, and 252 for the fleet. This 
is because the standards are footprint based and the fleet 
projections, hence the footprint distributions, change slightly with 
each update of our projections, as described below. In addition, the 
actual fleet compliance levels for any model year will not be known 
until the end of that model year based on actual vehicle sales.

[[Page 62772]]

                     Table III-2--EPA Projections for Fleetwide Tailpipe Emissions Compliance with CO2 Standards--Light Trucks \404\
                                                                    [Grams per mile]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Incentives \405\                                    Credits
                                               Projected  ----------------------------  Projected  -----------------------------------------
                 Model  year                      CO2       Pickup mild  Intermediate    achieved                                            Projected 2-
                                               compliance  HEV + strong     volume         CO2       Off cycle        A/C           A/C       cycle CO2
                                                 target         HEV       provisions                   credit     refrigerant   efficiency
--------------------------------------------------------------------------------------------------------------------------------------------------------
2016 (base).................................    \406\ 298           0             0.0          298          0.7           6.6           4.8          310
2017........................................          295           0.1           0.2          295          0.9           7             5            308
2018........................................          286           0.2           0.3          287          1.0          11             5            304
2019........................................          277           0.3           0.2          278          1.2          13.4           7.2          299
2020........................................          269           0.4           0.2          270          1.4          15.3           7.2          294
2021........................................          249           0.5           0.0          250          1.5          17.2           7.2          276
2022........................................          237           0.6           0.0          238          2.2          17.2           7.2          264
2023........................................          225           0.6           0.0          226          2.9          17.2           7.2          253
2024........................................          214           0.7           0.0          214          3.6          17.2           7.2          242
2025........................................          203           0.8           0.0          204          4.3          17.2           7.2          233
--------------------------------------------------------------------------------------------------------------------------------------------------------
\404\ Projected results using 2008-based fleet projection analysis. These values differ slightly from those shown in the proposal because of revisions
  to the MY 2008-based fleet and updates to the analysis.
\405\ An incentive not reflected in this table is the 0 gram per mile compliance value for EV/PHEV/FCVs. See text for explanation.
\406\ The projected compliance levels for 2016 are different than those which were projected in the MYs 2012-2016 rule. Our assessment for this rule is
  based on a predicted 2016 compliance target of 224 for cars, 297 for trucks, and 252 for the fleet. This is because the standards are footprint based
  and the fleet projections, hence the footprint distributions, change slightly with each update of our projections, as described below. In addition,
  the actual fleet compliance levels for any model year will not be known until the end of that model year based on actual vehicle sales.

       Table III-3--EPA Projections for Fleetwide Tailpipe Emissions Compliance With CO2 Standards--Combined Passenger Cars and Light Trucks \407\
                                                                    [Grams per mile]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Incentives \408\                                        Credits
                                       Projected  ------------------------------------------  Projected -------------------------------------  Projected
             Model year                   CO2        Advanced     Pickup mild  Intermediate   achieved                                          2-cycle
                                       compliance   technology   HEV + strong      volume        CO2      Off cycle      A/C          A/C         CO2
                                         target     multiplier        HEV        provision                 credit    refrigerant  efficiency
--------------------------------------------------------------------------------------------------------------------------------------------------------
2016 (base).........................     \409\250           0             0    ............         250         0.5          5.8         4.8         261
2017................................          243           0.4           0.0          0.1          243         0.6          7.5         5.0         256
2018................................          232           0.7           0.1          0.3          234         0.8          9.9         5.0         249
2019................................          222           1.0           0.1          0.1          223         0.9         11.7         5.8         242
2020................................          213           1.0           0.1          0.1          214         1.0         13.4         5.8         234
2021................................          199           0.8           0.2  ............         200         1.1         15.0         5.8         222
2022................................          190           0.0           0.2  ............         190         1.4         15.0         5.8         212
2023................................          180           0.0           0.2  ............         181         1.7         15.0         5.8         203
2024................................          171           0.0           0.2  ............         172         1.9         14.9         5.7         194
2025................................          163           0.0           0.3  ............         163         2.3         14.9         5.7         186
--------------------------------------------------------------------------------------------------------------------------------------------------------
\407\ Projected results using 2008-based fleet projection analysis. These values differ slightly from those shown in the proposal because of revisions
  to the MY 2008-based fleet and updates to the analysis.
\408\ The one incentive not reflected in this table is the 0 gram per mile compliance value for EV/PHEV/FCVs. See text for explanation.
\409\ The projected compliance levels for 2016 are different than those which were projected in the MYs 2012-2016 rule. Our assessment for this rule is
  based on a predicted 2016 compliance target of 224 for cars, 297 for trucks, and 252 for the fleet. This is because the standards are footprint based
  and the fleet projections, hence the footprint distributions, change slightly with each update of our projections, as described below. In addition,
  the actual fleet compliance levels for any model year will not be known until the end of that model year based on actual vehicle sales.

    Table III-4 shows the projected real world CO2 emissions 
and fuel economy values associated with the CO2 standards. 
These real world estimates, similar to values shown on new vehicle 
labels, reflect the fact that the way cars and trucks are operated in 
the real world generally results in higher CO2 emissions and 
lower fuel economy than laboratory test results used to determine 
compliance with the standards, which are performed under tightly 
controlled conditions. There are many assumptions that must be made for 
these projections and real world CO2 emissions and fuel 
economy performance can vary based on many factors.
    The real world tailpipe CO2 emissions projections in 
Table III-4 are calculated starting with the projected 2-cycle 
CO2 emissions values in Table III-1 through Table III-3, 
subtracting the air conditioner efficiency and off-cycle credits,\410\ 
and then multiplying by a factor of 1.25. The 1.25 factor is an 
approximation of the ratio of real world CO2 emissions to 2-
cycle test CO2 emissions for the fleet in the recent past. 
It is not possible to know the appropriate factor for future vehicle 
fleets, as this factor will depend on many factors such as technology

[[Page 62773]]

performance, driver behavior, climate conditions, fuel composition, 
congestion, etc. Issues associated with future projections of this 
factor are discussed in TSD 4. The real world fuel economy value is 
calculated by dividing 8887 grams of CO2 per gallon of 
gasoline by the real world tailpipe CO2 emissions 
value.\411\
---------------------------------------------------------------------------

    \410\ Air conditioner efficiency and off-cycle credits are 
subtracted from the Projected 2-cycle CO2 values (which 
include the air conditioner efficiency and off-cycle credits) 
because they will decrease real world CO2 emissions and 
increase real world fuel economy. The same results can be obtained 
from starting with the Projected Achieved CO2 values in 
Tables III-1 through Table III-3 and adding the A/C Refrigerant 
values.
    \411\ So this value will be different if there is significant 
use of diesel fuel.

      Table III-4--EPA Projections for the Average, Real World Fleetwide Tailpipe CO2 Emissions and Fuel Economy Associated With the CO2 Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Real world tailpipe CO2  (grams per mile)      Real World Fuel Economy  (miles per gallon)
                       Model year                        -----------------------------------------------------------------------------------------------
                                                               Cars           Trucks       Cars + trucks       Cars           Trucks       Cars + trucks
--------------------------------------------------------------------------------------------------------------------------------------------------------
2016 (base).............................................             287             381             320            30.9            23.3            27.8
2017....................................................             276             378             313            32.2            23.5            28.4
2018....................................................             266             373             304            33.5            23.9            29.2
2019....................................................             255             363             294            34.8            24.5            30.2
2020....................................................             244             357             284            36.4            24.9            31.3
2021....................................................             234             334             269            38.0            26.6            33.1
2022....................................................             223             318             256            39.9            27.9            34.7
2023....................................................             215             304             244            41.3            29.3            36.4
2024....................................................             205             289             233            43.4            30.8            38.1
2025....................................................             196             277             223            45.4            32.1            40.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As discussed both in Section I and later in Section III, EPA is 
finalizing provisions for averaging, banking, and trading of credits, 
that allow annual credits for a manufacturer's over-compliance with its 
unique fleet-wide average standard, carry-forward and carry-backward of 
credits, the ability to transfer credits between a manufacturer's car 
and truck fleets, and credit trading between manufacturers. EPA is also 
finalizing a one-time provision allowing credits generated in MYs 2012-
2016 to be carried forward through MY 2021. These provisions are not 
expected to change the emissions reductions achieved by the standards, 
but should reduce the cost of achieving those reductions. The tables 
above do not reflect the year to year impact of these provisions. For 
example, car-to-truck or truck-to-car credit transfers could affect the 
projected values in Table III-1 and Table III-2, but such credit 
transfers between cars and trucks would not be expected to change the 
results for the combined fleet, reflected in Table III-3.
    The rule also exempts from the standards a limited set of vehicles: 
emergency and police vehicles, and (as in the MYs 2012-2016 GHG 
standards) vehicles manufactured by small businesses. As discussed in 
Section III.B below, these exclusions have a very limited impact on the 
total GHG emissions reductions from the light-duty vehicle fleet. We 
also do not anticipate significant impacts on total GHG emissions 
reductions from the provisions allowing small volume manufacturers to 
petition EPA for alternative standards. See Section III.B.5 below.
b. Environmental and Economic Benefits and Costs of EPA's Greenhouse 
Gas Emissions Standards
i. Model Year Lifetime Analysis
    Section I.C provides a comprehensive discussion of the projected 
benefits and costs associated with MYs 2017-2025 GHG and CAFE standards 
based on a ``model year lifetime'' analysis, i.e., the benefits and 
costs associated with the lifetime operation of the new vehicles sold 
in these nine model years. It is important to note that while the 
incremental vehicle technology costs associated with MY 2017 vehicles 
will in fact occur in calendar year 2017, the benefits associated with 
MY 2017 vehicles will be split among all the calendar years from 2017 
through the calendar year during which the last MY 2017 vehicle is 
retired.
    Table III-5 provides a summary of the GHG emissions and oil savings 
associated with the lifetime operation of all the vehicles sold in each 
model year. Cumulatively, for the nine model years from 2017 through 
2025, the standards are projected to save approximately 2 billion 
metric tons of GHG emissions and nearly 4 billion barrels of oil. These 
savings come on top of savings that would already be achieved through 
the continuation of EPA's MYs 2012-2016 standards.\412\
---------------------------------------------------------------------------

    \412\ The cost and benefit estimates provided here are only for 
the MYs 2017-2025 rulemaking. EPA and DOT's rulemakings establishing 
standards for MYs 2012-2016, and DOT's MY 2011 rulemaking, are 
already part of the baseline for this analysis.
---------------------------------------------------------------------------

    Table III-6 provides a summary of the most important projected 
economic impacts of the GHG emissions standards based on this model 
year lifetime analytical approach. These monetized dollar values are 
all discounted to the first year of each model year, and then are 
summed up across all model years. With a 3% discount rate, cumulative 
incremental vehicle program costs for MYs 2017-2025 vehicles are $150 
billion (with $136 billion of that being new technology and $14 billion 
being increased maintenance), fuel savings are $475 billion, other 
monetized benefits are $126 billion, and program net benefits are 
projected to be $451 billion. Using a 7% discount rate, the projected 
program net benefits are $326 billion.

                         Table III-5--Summary of GHG Emissions and Oil Savings for Model Year Lifetime Analysis of CO2 Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                             Cumulative
                                                   MY 2017   MY 2018   MY 2019   MY 2020   MY 2021   MY 2022   MY 2023   MY 2024   MY 2025  MY 2017-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
GHG Savings (MMT)...............................     30.5      69.6     108       149       216       270       320       371       423         1,956

[[Page 62774]]

 
Oil Savings (Billion Barrels)...................      0.06      0.13      0.20      0.28      0.41      0.53      0.64      0.75      0.86          3.87
--------------------------------------------------------------------------------------------------------------------------------------------------------

  Table III-6--Summary of Key Projected Economic Impacts, on a Lifetime
   Present Value Basis, \413\ for Model Year Lifetime Analysis of CO2
                                Standards
                       [Billions of 2010 dollars]
------------------------------------------------------------------------
                                                        3%         7%
                                                     discount   discount
                                                       rate       rate
------------------------------------------------------------------------
Incremental Vehicle Program Cost..................       $150       $144
Societal Fuel Savings \414\.......................        475        364
Other Benefits....................................        126        106
Program Net Benefits..............................        451        326
------------------------------------------------------------------------
\413\ Present value discounts all values to the first year of each MY,
  then susms those present values across MYs, in 2010 dollars.

ii. Calendar Year Analysis
    In addition to the model year lifetime analysis projections 
summarized above, EPA also performs a ``calendar year'' analysis that 
projects the environmental and economic impacts associated with the 
tailpipe CO2 standards during specific calendar years out to 
2050. This calendar year approach reflects the timeframe when the 
benefits would be achieved and the costs incurred. Because the EPA 
CO2 emissions standards will remain in effect unless and 
until they are changed, the projected impacts in this calendar year 
analysis beyond calendar year 2025 reflect vehicles sold in model years 
after 2025 (e.g., most of the benefits in calendar year 2040 would be 
due to vehicles sold after MY 2025).
---------------------------------------------------------------------------

    \414\ All fuel impacts are calculated with pre-tax fuel prices 
of $3.22 per gallon in calendar year 2017, rising to $3.49 per 
gallon in calendar year 2025, and $3.88 per gallon in calendar year 
2040, and electricity prices of $0.09 per kWh in 2017 and $0.10 in 
2025, and $0.11 per kWh in 2040, all in 2010 dollars.
---------------------------------------------------------------------------

    Table III-7 provides a summary of the most important projected 
benefits and costs of the EPA GHG emissions standards based on this 
calendar year analysis. In calendar year 2025, EPA projects GHG savings 
of 140 million metric tons and oil savings of 0.76 million barrels per 
day. These would grow to 569 million metric tons of GHG savings and 3.2 
million barrels of oil per day by calendar year 2050. Program net 
benefits are projected to be $19.3 billion in calendar year 2025, 
growing to $217 billion in calendar year 2050. Program net benefits 
over the 34-year period from 2017 through 2050 are projected to have a 
net present value in 2012 of $616 billion (7% discount rate) to $1.4 
trillion (3% discount rate).
    More details associated with this calendar year analysis of the GHG 
standards are presented in Sections III.F (including projected annual 
GHG savings for CYs 2017-2050) and III.H (including projected annual 
oil savings for CYs 2017-2050).

                               Table III-7--Summary of Key Projected Impacts for CO2 Standards--Calendar Year Analysis 415
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             CY 2017-2050  Net Present
                                                                                                                                   Value in 2012
                                                         CY 2017    CY 2020    CY 2025    CY 2030    CY 2040    CY 2050  -------------------------------
                                                                                                                            3% discount     7% discount
--------------------------------------------------------------------------------------------------------------------------------------------------------
GHG Savings (MMT per Year)............................       2.4       27.0      140         271        455        569    ..............  ..............
Oil Savings (Million Barrels per Year)................       4.7       51.2      277         547        926      1,161    ..............  ..............
Oil Savings (Million Barrels per Day).................       0.01       0.14       0.76        1.5        2.5        3.2  ..............  ..............
Incremental Vehicle Program Cost (billions of 2010$)..     -$2.47     -$9.19    -$32.9      -$35.9     -$41.0     -$46.5           -$561           -$247
Societal Fuel Savings (billions of 2010$) \416\.......      $0.65      $7.4      $41.7       $86.4     $155       $212            $1,600            $607
Other Benefits (billions of 2010$)....................      $0.14      $1.59      $9.28      $21.2      $40.0      $47.2            $395            $256
Program Net Benefits (billions of 2010$) \417\........     -$1.65      $0.15     $19.3       $73.9     $158       $217            $1,430            $616
--------------------------------------------------------------------------------------------------------------------------------------------------------

iii. Consumer Analysis
    The model year lifetime and calendar year analytical approaches 
discussed above aggregate the environmental and economic impacts across 
the nationwide light vehicle fleet. EPA has also projected the average 
impact of the CO2 emissions standards on individual 
consumers who own and drive MY 2025 light-duty vehicles.
---------------------------------------------------------------------------

    \415\ Values in columns 2 through 7 are undiscounted annual 
values, values in columns 8 and 9 are discounted to a net present 
value in 2012.
    \416\ All fuel impacts are calculated with pre-tax fuel prices 
of $3.22 per gallon in calendar year 2017, rising to $3.49 per 
gallon in calendar year 2025, and $3.88 per gallon in calendar year 
2040, and electricity prices of $0.09 per kWh in 2017, rising to 
$0.10 in 2025, and $0.11 per kWh in 2040, all in 2010 dollars.
    \417\ Assuming the 3% average SCC value and other benefits of 
the program not presented in this table.
---------------------------------------------------------------------------

    Table III-8 projects, on average, several key consumer impacts 
associated with the tailpipe CO2 emissions standards for MY 
2025 vehicles. Some of these factors are dependent on the assumed 
discount factors, and this table uses the same 3% and 7% discount 
factors used throughout this preamble. EPA uses AEO2012 early release 
fuel price projections of $3.63 per gallon in calendar year 2017, 
rising to $3.87 per gallon in calendar year 2025 and $4.24 per gallon 
in calendar year 2040 (all fuel prices include taxes).
    EPA projects that the new technology necessary to meet the MY 2025 
tailpipe emissions standards would add, on average, an extra $1800 
(including markup) to the sticker price of a new

[[Page 62775]]

MY 2025 light-duty vehicle. Including higher vehicle sales taxes, and 
first-year insurance and maintenance costs, the projected incremental 
first-year cost to the consumer is about $2000 on average. The 
projected incremental lifetime vehicle cost to the consumer, reflecting 
higher maintenance costs and insurance premiums over the life of the 
vehicle, is, on average, about $2400 (3% discount rate) or $2300 (7% 
discount rate). For consumers who drive MY 2025 light-duty vehicles 
over the full vehicle lifetimes, the final standards are projected to 
yield a net savings of $3,400 (7% discount rate) to $5,000 (3% 
discount) over the lifetime of the vehicle, as the discounted lifetime 
fuel savings of $5,700-$7,400 (7% and 3% discount rates, respectively) 
is 2.5-3.1 times greater than the incremental lifetime vehicle cost to 
the consumer.
    Of course, many vehicles are owned by more than one consumer. The 
payback period and monthly cash flow approaches are two ways to 
evaluate the economic impact of the MY 2025 standard on those new car 
buyers who do not own the vehicle for its entire lifetime. Projected 
payback periods of 3.2-3.4 years means that, for a consumer that buys a 
new MY 2025 vehicle with cash, the discounted fuel savings for that 
consumer would more than offset the total incremental vehicle costs 
(including technology, sales tax, insurance and maintenance), up to 
that time, in about 3.3 years. If the consumer owns the vehicle beyond 
this payback period, the vehicle will save money for the consumer as 
the ongoing fuel savings greatly exceed the small ongoing incremental 
insurance and maintenance costs. For a consumer that buys a new MY 2025 
vehicle with a 5-year loan, the average monthly cash flow savings of 
$11 (7% discount rate) or $13 (3% discount rate), or annual savings of 
$130-$150, shows that the consumer would benefit immediately as the 
discounted monthly fuel savings more than offsets the higher monthly 
costs from higher incremental loan payments, plus insurance and 
maintenance costs.
    The consumer impacts are even more favorable for used vehicle 
buyers, as most of the incremental technology cost is paid for by the 
original purchaser. EPA projects that the payback period would be 1.1 
years for a 5-year old used vehicle, and about 6 months for a 10-year 
old used vehicle. Consumers that buy a used 5-year old vehicle with a 
3-year loan would realize monthly cash flow savings of about $21-23 per 
month, and these savings would be $23-24 for a buyer of a 10-year old 
vehicle with a 3-year loan.
    The final entries in Table III-8 show the CO2 and oil 
savings that would be associated with the MY 2025 vehicles on average, 
both on a lifetime basis and in the first full year of operation. On 
average, a consumer who owns a MY 2025 vehicle for its entire lifetime 
is projected to emit 21 fewer metric tons of CO2 and consume 
2,300 fewer gallons of gasoline due to the tailpipe CO2 
emissions standards.

 Table III-8--Summary of Key Projected Consumer Impacts for MY 2025 CO2
                            Standards 418 419
------------------------------------------------------------------------
                                3% Discount  rate     7% Discount  rate
------------------------------------------------------------------------
Incremental Vehicle                             $1800.
 Technology Cost.
------------------------------------------------------------------------
Incremental First-Year                          $2000.
 Vehicle Cost to Consumer
 \420\.
------------------------------------------------------------------------
Incremental Lifetime Vehicle  $2400...............  $2300.
 Cost to Consumer \421\.
------------------------------------------------------------------------
Lifetime Consumer Fuel        $7400...............  $5700.
 Savings \422\.
------------------------------------------------------------------------
Lifetime Consumer Net         $5000...............  $3400.
 Savings \423\.
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Payback Period-New Vehicle-   3.2 years...........  3.4 years.
 Cash Purchase.
------------------------------------------------------------------------
Payback Period-Used 5 Year    1.1 years...........  1.1 years.
 Old Vehicle-Cash Purchase.
------------------------------------------------------------------------
Payback Period-Used 10 Year   0.5 years...........  0.5 years.
 Old Vehicle-Cash Purchase.
------------------------------------------------------------------------
Monthly Cash Flow Savings-    $13.................  $11.
 New Vehicle-5 Year Loan.
------------------------------------------------------------------------
Monthly Cash Flow Savings-    $23.................  $21.
 Used 5 Year Old Vehicle-3
 Year Loan.
------------------------------------------------------------------------
Monthly Cash Flow Savings-    $24.................  $23.
 Used 10 Year Old Vehicle-3
 Year Loan.
------------------------------------------------------------------------
 
------------------------------------------------------------------------
First Year CO2 Savings \424\               1.6 metric tons.
------------------------------------------------------------------------
Lifetime CO2 Savings........                21 metric tons.
------------------------------------------------------------------------
First Year Gasoline/Oil                      180 gallons.
 Savings.
------------------------------------------------------------------------
Lifetime Gasoline/Oil                        2300 gallons.
 Savings.
------------------------------------------------------------------------
------------------------------------------------------------------------

[[Page 62776]]

4. Basis for the GHG Standards under Section 202(a)
    EPA has significant discretion under section 202(a) of the Act in 
how to structure the standards that apply to the emission of the air 
pollutant at issue here, the aggregate group of six GHGs, as well as to 
the content of such standards. See generally 74 FR 49464-65. EPA 
statutory authority under section 202(a)(1) of the Clean Air Act (CAA) 
is discussed in more detail in Section I.D of the preamble. In this 
rulemaking, EPA is adopting a CO2 tailpipe emissions 
standard that provides for credits based on reductions of HFCs, as the 
appropriate way to issue standards applicable to emissions of the 
single air pollutant, the aggregate group of six GHGs. EPA is not 
changing the methane and nitrous oxide emissions standards already in 
place (although EPA is changing some compliance mechanisms for these 
standards as explained in Section III.B below). EPA is not setting any 
standards for perfluorocarbons or sulfur hexafluoride, as they are not 
emitted by motor vehicles. The following is a summary of the basis for 
the GHG emissions standards under section 202(a), which is discussed in 
more detail in the following portions of Section III.
---------------------------------------------------------------------------

    \418\ Average impact of all MY 2025 light-duty vehicles, 
excluding VMT rebound effect.
    \419\ Most values have been rounded to two significant digits in 
this summary table and therefore may be slightly different than 
tables elsewhere.
    \420\ Incremental First-Year Vehicle Cost to Consumer includes 
the incremental vehicle technology cost, average nationwide sales 
tax, first-year increased insurance premiums, and first-year 
increased maintenance costs.
    \421\ Incremental Lifetime Vehicle Cost to Consumer includes the 
incremental vehicle technology cost, average nationwide sales tax, 
and the discounted costs associated with incremental lifetime 
insurance premiums and maintenance costs.
    \422\ All fuel impacts are calculated with fuel prices, 
including fuel taxes, of $3.87 per gallon in calendar year 2025, 
rising to $4.24 per gallon in calendar year 2040, and electricity 
prices of $0.10 per kWh 2025, and $0.11 per kWh in 2040, all in 2010 
dollars.
    \423\ Lifetime Consumer Fuel Savings minus Incremental Lifetime 
Vehicle Cost to Consumer.
    \424\ CO2 and gasoline savings reflect vehicle 
tailpipe-only and do not include CO2 and oil savings 
associated with fuel production and distribution.
---------------------------------------------------------------------------

    With respect to CO2 and HFCs, EPA is setting attribute-
based light-duty car and truck standards that achieve large and 
important emissions reductions of GHGs. EPA has evaluated the 
technological feasibility of the standards, and the information and 
analysis performed by EPA indicates that these standards are feasible 
in the lead time provided. EPA and NHTSA have carefully evaluated the 
effectiveness of individual technologies as well as the interactions 
when technologies are combined. EPA projects that manufacturers will be 
able to meet the standards by employing a wide variety of technologies 
that are already commercially available, as well as some emerging 
technologies. EPA's analysis also takes into account certain 
flexibilities that will facilitate compliance. These flexibilities 
include averaging, banking, and trading of various types of credits. 
For a few very small volume manufacturers, EPA is allowing 
manufacturers to petition EPA to develop a manufacturer-specific 
standard in lieu of the main standard.
    EPA, as a part of its joint technology analysis with NHTSA, has 
performed what we believe is the most comprehensive federal vehicle 
technology analysis in history. We carefully considered the cost to 
manufacturers of meeting the standards, estimating costs for all 
candidate technologies including direct manufacturing costs, cost 
markups to account for manufacturers' indirect costs, and manufacturer 
cost reductions attributable to learning. In estimating manufacturer 
costs, EPA took into account manufacturers' own practices such as 
making major changes to vehicle technology packages during a planned 
redesign cycle. EPA then projected the average cost across the industry 
to employ this technology, as well as manufacturer-by-manufacturer 
costs. EPA considers the per-vehicle costs estimated by this analysis 
to be within a reasonable range in light of the emissions reductions 
and benefits achieved. EPA also projects that the fuel savings over the 
life of the vehicles will more than offset the increase in cost 
associated with the technology used to meet the standards.
    EPA recognizes that most of the technologies that we are 
considering for purposes of setting standards under section 202(a) are 
commercially available and already being utilized to at least a limited 
extent across the fleet, or will soon be commercialized by one or more 
major manufacturers. As discussed in Section III.D.7, after accounting 
for expected improvements in air conditioning systems, many MY 2012 and 
MY 2013 vehicles would already be able to meet GHG emissions targets 
for MY 2017 without additional changes in powertrain technology, and 
some vehicles could meet GHG emissions targets for some later model 
years as well. The vast majority of the emission reductions that would 
result from this rule would result from the increased use of currently 
available technologies such as engines with direct injection, 
turbocharging, and cooled exhaust gas recirculation, stop-start 
systems, advanced transmissions with more gears and more efficient 
gearing mechanisms, and improved tires, aerodynamics, and accessories. 
Various combinations of these technologies can work for different 
vehicle models, and typically there are multiple technology paths for 
achieving compliance for a given model. EPA also recognizes that this 
rule would enhance the development and commercialization of more 
advanced technologies, such as PHEVs and EVs and strong hybrids as 
well. In this technological context, there is no clear cut line that 
indicates that only one projection of technology penetration could 
potentially be considered feasible for purposes of section 202(a), or 
only one standard that could potentially be considered a reasonable 
balancing of the factors relevant under section 202(a). EPA therefore 
evaluated several alternative standards, some more stringent than the 
promulgated standards and some less stringent. Less stringent standards 
would forego emission reductions which are feasible, cost effective, 
and cost feasible, with short consumer payback periods. More stringent 
standards would increase cost--both to manufacturers and to consumers--
with the potential for overly aggressive penetration rates for advanced 
technologies, especially in the face of unknown degree of consumer 
acceptance of both the increased costs and the technologies themselves. 
See Section III.D.6 for EPA's analysis of alternative GHG emissions 
standards.
    EPA has also evaluated the impacts of these standards with respect 
to reductions in GHGs and reductions in oil usage. For the lifetime of 
the MYs 2017-2025 vehicles we estimate GHG reductions of approximately 
2 billion metric tons and fuel reductions of nearly 4 billion barrels 
of oil. These savings come on top of savings that would already be 
achieved through the continuation of EPA's MYs 2012-2016 
standards.\425\ These are important and significant reductions. EPA has 
also analyzed a variety of other impacts of the standards, ranging from 
the standards' effects on emissions of non-GHG pollutants, impacts on 
noise, energy, safety and congestion. EPA has also quantified the cost 
and benefits of the standards, to the extent practicable. Our analysis 
indicates that the overall

[[Page 62777]]

quantified benefits of the standards far outweigh the projected costs. 
We estimate the total net social benefits (lifetime present value 
discounted to the first year of the model year) over the life of MYs 
2017-2025 vehicles to be $451 billion with a 3% discount rate and $326 
billion with a 7% discount rate.
---------------------------------------------------------------------------

    \425\ The cost and benefit estimates provided here are only for 
the MYs 2017-2025 rulemaking. EPA and DOT's rulemakings establishing 
standards for MYs 2012-2016, and DOT's MY 2011 rulemaking, are 
already part of the baseline for this analysis.
---------------------------------------------------------------------------

    Under section 202(a), EPA is called upon to set standards that 
provide adequate lead time for the development and application of 
technology to meet the standards. EPA's standards satisfy this 
requirement given the present existence of the technologies on which 
the rule is predicated and the substantial lead times afforded under 
the proposal (which by MY 2025 allow for multiple vehicle redesign 
cycles and so affords opportunities for adding technologies in the most 
cost efficient manner, see 75 FR 25407). In setting the standards, EPA 
is called upon to weigh and balance various factors, and to exercise 
judgment in setting standards that are a reasonable balance of the 
relevant factors. In this case, EPA has considered many factors, such 
as cost, impacts on emissions (both GHG and non-GHG), impacts on oil 
conservation, impacts on noise, energy, safety, and other factors, and 
has where practicable quantified the costs and benefits of the rule. In 
summary, given the technical feasibility of the standard, the cost per 
vehicle in light of the savings in fuel costs over the lifetime of the 
vehicle, the very significant reductions in emissions and in oil usage, 
and the significantly greater quantified benefits compared to 
quantified costs, EPA is confident that the standards are an 
appropriate and reasonable balance of the factors to consider under 
section 202(a). See Husqvarna AB v. EPA, 254 F. 3d 195, 200 (D.C. Cir. 
2001) (great discretion to balance statutory factors in considering 
level of technology-based standard, and statutory requirement ``to 
[give appropriate] consideration to the cost of applying * * * 
technology'' does not mandate a specific 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 numbers 
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).
5. Other Related EPA Motor Vehicle Regulations
a. EPA's Heavy-Duty GHG Emissions Rulemaking
    In August 2011, EPA and NHTSA completed a joint rulemaking to 
establish a comprehensive Heavy-Duty National Program that will reduce 
greenhouse gas emissions and fuel consumption for on-road heavy-duty 
vehicles beginning in MY 2014 (76 FR 57106 (September 15, 2011)). EPA's 
final carbon dioxide (CO2), nitrous oxide (N2O), 
and methane (CH4) emissions standards, along with NHTSA's 
final fuel consumption standards, are tailored to each of three 
regulatory categories of heavy-duty vehicles: (1) Combination Tractors; 
(2) Heavy-duty Pickup Trucks and Vans; and (3) Vocational Vehicles. The 
rules include separate standards for the engines that power combination 
tractors and vocational vehicles. EPA also set hydrofluorocarbon 
standards to control leakage from air conditioning systems in 
combination tractors and heavy-duty pickup trucks and vans.
    The agencies estimate that the combined standards will reduce 
CO2 emissions by approximately 270 million metric tons and 
save 530 million barrels of oil over the life of vehicles sold during 
the 2014 through 2018 model years, providing $49 billion in net 
societal benefits when private fuel savings are considered. See 76 FR 
57125-27.
b. EPA's Plans for Further Standards for Light-Duty Vehicle Criteria 
Pollutants and Gasoline Fuel Quality
    In the May 21, 2010 Presidential Memorandum, in addition to 
addressing GHGs and fuel economy, the President also requested that EPA 
examine its broader motor vehicle air pollution control program. The 
President requested that ``[t]he Administrator of the EPA review for 
adequacy the current non-greenhouse gas emissions regulations for new 
motor vehicles, new motor vehicle engines, and motor vehicle fuels, 
including tailpipe emissions standards for nitrogen oxides and air 
toxics, and sulfur standards for gasoline. If the Administrator of the 
EPA finds that new emissions regulations are required, then I request 
that the Administrator of the EPA promulgate such regulations as part 
of a comprehensive approach toward regulating motor vehicles.'' \426\ 
EPA has been conducting an assessment of the potential need for 
additional controls on light-duty vehicle non-GHG emissions and 
gasoline fuel quality. EPA has been actively engaging in technical 
conversations with the automobile industry, the oil industry, 
nongovernmental organizations, the states, and other stakeholders on 
the potential need for new regulatory action, including the areas that 
are specifically mentioned in the Presidential Memorandum. EPA is also 
coordinating with the State of California.
---------------------------------------------------------------------------

    \426\ The Presidential Memorandum is found at: http://www.whitehouse.gov/the-press-office/presidential-memorandum-regarding-fuel-efficiency-standards.
---------------------------------------------------------------------------

    Based on this assessment, in the near future, EPA expects to 
propose a separate program that would, in general, affect the same set 
of new vehicles on approximately the same timeline as would the new 
light-duty vehicle GHG emissions standards. It would be designed to 
primarily address air quality problems with ozone and PM, which 
continue to be serious problems in many parts of the country, and 
light-duty vehicles continue to contribute to these problems.
    EPA expects that this program, called ``Tier 3'' vehicle and fuel 
standards, would among other things propose tailpipe and evaporative 
standards to reduce non-GHG pollutants from light-duty vehicles, 
including volatile organic compounds, nitrogen oxides, particulate 
matter, and air toxics. EPA's intent, based on extensive interaction to 
date with the automobile manufacturers and other stakeholders, is to 
propose a Tier 3 program that would allow manufacturers to proceed with 
coordinated future product development plans with a full understanding 
of the major regulatory requirements they will be facing over the long 
term. This regulatory approach would give manufacturers certainty in 
planning given the long time period and would allow manufacturers to 
design their future vehicles so that any technological challenges 
associated with meeting both the GHG and Tier 3 standards could be 
efficiently addressed.
    It should be noted that under EPA's current regulations, GHG 
emissions and CAFE compliance testing for gasoline vehicles is 
conducted using a defined fuel that does not include any amount of 
ethanol.\427\ If the certification test fuel is changed to include 
ethanol through a future rulemaking, EPA would be required under EPCA 
to address the need for a test procedure adjustment to preserve the 
level of stringency of the

[[Page 62778]]

CAFE standards.\428\ EPA is committed to doing so in a timely manner to 
ensure that any change in certification fuel will not affect the 
stringency of future GHG emission standards.
---------------------------------------------------------------------------

    \427\ See 40 CFR Sec.  86.113-94(a).
    \428\ EPCA requires that CAFE tests be determined from the EPA 
test procedures in place as of 1975, or procedures that give 
comparable results. 49 U.S.C. 32904(c).
---------------------------------------------------------------------------

B. Model Year 2017-2025 GHG Standards for Light-duty Vehicles, Light-
duty Trucks, and Medium duty Passenger Vehicles

    EPA is establishing standards to control the emissions of 
greenhouse gases (GHGs) from MY 2017 and later light-duty vehicles. 
Carbon dioxide (CO2) is the primary greenhouse gas resulting 
from the combustion of vehicular fuels, and the amount of 
CO2 emitted is directly correlated to the amount of fuel 
consumed. The standards regulate CO2 on a gram per mile (g/
mile) basis, and are separately applied to a manufacturer's car and 
truck fleets. Under these standards, industry-wide average emissions 
for the light-duty fleet are projected to be 163 g/mile of 
CO2 in model year 2025.\429\ EPA will conduct a mid-term 
evaluation of the GHG standards and other requirements for MYs 2022-
2025, as further discussed in Section III.B.3 below. EPA is not 
changing the averaging, banking, and trading program elements from the 
MY 2012-2016 rule, as discussed in Section III.B.4, with the exception 
of a one-time carry-forward of any credits generated in MYs 2010-2016 
to be used anytime through MY 2021. The standards described herein 
apply to passenger cars, light-duty trucks, and medium-duty passenger 
vehicles (MDPVs). As an overall group, they are referred to in this 
preamble as light-duty vehicles or simply as vehicles. In this preamble 
section, passenger cars may be referred to simply as ``cars'', and 
light-duty trucks and MDPVs as ``light trucks'' or ``trucks.''
---------------------------------------------------------------------------

    \429\ The reference to CO2 here refers to 
CO2 equivalent reductions, as this level includes some 
reductions in emissions of greenhouse gases other than 
CO2, from refrigerant leakage, as one part of the AC 
related reductions.
---------------------------------------------------------------------------

    EPA is also establishing provisions for small and intermediate-
sized manufacturers. For small volume manufacturers with less than 
5,000 vehicles, EPA is finalizing its proposal to allow these 
manufacturers to petition EPA for alternative standards, which would be 
established on a case-by-case basis (see Section III.B. 5). For 
intermediate-sized limited line manufacturers, EPA had requested 
comment on whether there is a need for additional lead time, and after 
considering public comments on this topic, is finalizing provisions 
providing additional lead time until MY 2021 for manufacturers with 
sales of less than 50,000 vehicles (see Section III.B.6). As with the 
MY 2012-2016 light-duty vehicle standards, EPA is exempting 
manufacturers that meet the Small Business Administration's definition 
of a small business from the standards (see section III.B. 7). EPA is 
also finalizing its proposal to exempt police and emergency vehicles 
from the GHG standards, beginning in MY 2012, consistent with how these 
vehicles are treated under the CAFE program (see section III.B.8).
    The MY 2012-2016 rule established several program elements that 
will remain in place, without change. EPA is not changing the 
CH4 and N2O emissions standards from the MY 2012-
2016 rule, but is making revisions to a manufacturer's options for 
meeting the CH4 and N2O standards, and to the 
date when N2O emissions must be measured rather than 
estimated using engineering judgment (see section III.B.9). These 
revisions are not intended to change the stringency of the 
CH4 and N2O standards, but are aimed at 
addressing implementation concerns regarding the standards.
    The opportunity to earn credits toward the fleet-wide average 
CO2 standards for improvements to air conditioning systems 
will remain in place for MY 2017 and later, including improvements to 
address both hydrofluorocarbon (HFC) refrigerant direct losses (i.e., 
system ``leakage'') and indirect CO2 emissions related to 
the increased load on the engine (also referred to as ``A/C 
efficiency'' related emissions). The overall maximum number of credits 
available for reducing the effects of A/C system leakage (including 
shifting to alternative refrigerants) and for improving A/C efficiency 
remain the same as those in the MY 2012-2016 rule, although we are 
incorporating a new test procedure for measuring A/C efficiency 
improvements and making several minor program revisions, as discussed 
in section III.C.1 and chapter 5.1 of the joint TSD. The CO2 
standards take into account EPA's projection of the average amount of 
air conditioner credits expected to be generated across the industry.
    As discussed in section III.C, EPA is finalizing several provisions 
that allow manufacturers to generate credits for use in complying with 
the standards or that provide additional incentives for use of advanced 
technologies. These include credits for technologies that reduce 
CO2 emissions during off-cycle operation that are not 
reasonably accounted for by the 2-cycle tests used for compliance 
purposes. Compared to the promulgated MY 2012-2016 program, EPA is 
streamlining the process by which off-cycle credits can be documented 
and approved. The streamlining includes establishing a pre-defined list 
of off-cycle technologies and associated credits which may be utilized 
by manufacturers without prior approval by EPA. The pre-defined list 
will be available beginning in MY 2014. EPA proposed the pre-defined 
list for MYs 2017 and later, but has revised the start date in response 
to comments, as discussed in III.C.5. In addition, EPA is establishing 
incentives for the use of certain types of alternate fueled vehicles or 
advanced GHG control technologies. Thus, EPA is adopting multipliers 
for EVs, PHEVs, and FCVs, whereby these vehicles count as more than one 
vehicle in a manufacturer's compliance calculation. In addition, in 
response to comments, EPA is also finalizing a multiplier for 
compressed natural gas (CNG) vehicles. The multiplier incentives are 
described in section III.C.2. EPA is also adopting specified g/mile 
credits for full size pick-up trucks that meet various efficiency 
performance criteria and/or include hybrid technology at a minimum 
level of production volumes. These full-size pick-up credits and 
incentives for advanced ``game changing'' technologies are described in 
section III.C.3.
1. What fleet-wide emissions levels correspond to the CO2 
standards?
    Consistent with the proposal, EPA is establishing standards that 
are projected to meet an industry-wide average for the light-duty fleet 
of 163 g/mile of CO2 in model year 2025. The level of 163 g/
mile CO2 would be equivalent on a mpg basis to 54.5 mpg, if 
this level was achieved solely through improvements in fuel 
efficiency.430 431 EPA continues to have separate standards 
for cars and light trucks, and to have identical definitions of cars 
and trucks as NHTSA, in order to harmonize with CAFE standards. For 
passenger cars, the footprint curves call for reducing CO2 
by 5 percent per year on average from the model year 2016 passenger car 
standard through model year 2025. In recognition of the challenges 
manufacturers of full-

[[Page 62779]]

size pickup trucks face in reducing the GHG emissions while preserving 
the utility (e.g., towing and payload capabilities) of those vehicles, 
EPA is setting standards requiring a lower annual rate of improvement 
for light-duty trucks in the early years of the program. For light-duty 
trucks, the footprint curves call for reducing CO2 by 3.5 
percent per year on average from the model year 2016 truck standard 
through model year 2021. EPA is also changing the slopes of the 
CO2-footprint curves for light-duty trucks from those in the 
MY 2012-2016 rule, in a manner that effectively means that the annual 
rate of improvement for smaller light-duty trucks in model years 2017 
through 2021 would be higher than 3.5 percent, and the annual rate of 
improvement for larger light-duty trucks over the same time period 
would be lower than 3.5 percent to account for the special challenges 
for improving the GHG of large light trucks while maintaining cargo 
hauling and towing utility. For model years 2022 through 2025, EPA is 
setting a rate of CO2 reduction for light-duty trucks of 5 
percent per year, starting from the model year 2021 truck standard.
---------------------------------------------------------------------------

    \430\ In comparison, the MY 2016 CO2 standard was 
projected (in the previous rule) to achieve a national fleet-wide 
average, covering both cars and trucks, of 250 g/mile.
    \431\ Real-world CO2 is typically 25 percent higher 
and real-world fuel economy is typically 20 percent lower than the 
CO2 and CAFE values discussed here. Also, the fuel 
economy equivalent assumes gasoline fuel is primary; diesel fuels 
(for example) would give a different fuel economy equivalent.
---------------------------------------------------------------------------

    EPA's standards include EPA's projection of average industry wide 
CO2-equivalent emission reductions from A/C improvements, 
where the footprint curve is made more stringent by an amount 
equivalent to this projection of A/C credits. This projection of A/C 
credits builds on the projections from MYs 2012-2016, with the 
increases in credits mainly due to the full penetration of low GWP 
alternative refrigerant by MY 2021.
    The tables below show overall fleet average levels for both cars 
and light trucks that are projected over the phase-in period of these 
standards. The actual fleet-wide average g/mile level that would be 
achieved in any year for cars and trucks will depend on the actual 
production for that year, as well as the use of the various credit and 
averaging, banking, and trading provisions. For example, in any year, 
manufacturers would be able to generate credits from cars and use them 
for compliance with the truck standard, or vice versa. Such transfer of 
credits between cars and trucks is not reflected in the table below. In 
Section III.F, EPA discusses the year-by-year estimate of emissions 
reductions that are projected to be achieved by the standards.
    In general, the schedule of standards allows an incremental phase-
in to the MY 2025 level, and reflects consideration of the appropriate 
lead-time and engineering redesign cycles for each manufacturer to 
implement emission reductions technology across its product line. Note 
that MY 2025 is the final model year in which the standards become more 
stringent. The MY 2025 CO2 standards would remain in place 
for later model years, unless and until revised by EPA in a future 
rulemaking.
    EPA has estimated the overall fleet-wide CO2-equivalent 
emission levels that correspond with the attribute-based standards, 
based on the projections of the composition of each manufacturer's 
fleet in each year of the program. As noted above, EPA estimates that, 
on a combined fleet-wide national basis, the 2025 MY standards would 
require a level of 163 g/mile CO2. The derivation of the 163 
g/mile estimate is described in section III.B.2. Tables Table III-9 and 
Table III-10 provide these estimates for each manufacturer. The values 
in the tables presented in this section utilize the 2008-based fleet 
projection as described in section II.B of the preamble. For an 
analysis of the standards using the 2010-based projection, refer to 
chapter 10 of EPA's RIA (Regulatory Impact Analysis).

                           Table III-9--Estimated Fleet CO2-Equivalent Levels Corresponding to the Standards for Cars (G/Mile)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  2017      2018      2019      2020      2021      2022      2023      2024      2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Aston Martin..................................................       210       200       190       180       171       163       156       149       142
BMW...........................................................       216       205       195       185       175       168       160       153       146
Chrysler/Fiat.................................................       218       207       196       187       176       168       161       153       146
Daimler.......................................................       221       211       200       190       180       172       164       157       150
Ferrari.......................................................       222       211       201       191       181       173       165       158       150
Ford..........................................................       218       207       196       187       177       169       162       154       147
Geely-Volvo...................................................       220       209       198       188       178       170       163       155       148
General Motors................................................       215       204       193       184       174       166       159       151       144
Honda.........................................................       211       200       190       180       171       163       156       149       142
Hyundai.......................................................       211       200       190       180       171       163       156       149       142
Kia...........................................................       207       197       186       177       167       160       153       146       139
Lotus.........................................................       195       185       175       166       157       150       143       137       131
Mazda.........................................................       208       198       187       178       169       161       154       147       140
Mitsubishi....................................................       207       197       187       177       168       160       153       146       139
Nissan........................................................       214       204       193       183       174       166       159       152       145
Porsche.......................................................       195       185       175       166       157       150       143       137       131
Spyker-Saab...................................................       207       197       187       177       168       160       153       146       139
Subaru........................................................       199       189       180       170       161       154       147       140       134
Suzuki........................................................       196       186       177       167       158       151       144       138       132
Tata-JLR......................................................       237       225       214       203       193       184       176       168       161
Tesla.........................................................       195       185       175       166       157       150       143       137       131
Toyota........................................................       210       199       189       179       170       162       155       148       141
Volkswagen....................................................       205       194       185       175       166       158       151       144       138
--------------------------------------------------------------------------------------------------------------------------------------------------------

                      Table III-10--Estimated Fleet CO2-Equivelent Levels Corresponding to the Standards for Light Trucks (G/Mile)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  2017      2018      2019      2020      2021      2022      2023      2024      2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Aston Martin..................................................       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A
BMW...........................................................       283       272       264       255       236       225       214       204       194
Chrysler/Fiat.................................................       293       283       275       266       246       234       223       212       201
Daimler.......................................................       299       289       280       272       253       241       229       218       208

[[Page 62780]]

 
Ferrari.......................................................       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A
Ford..........................................................       304       294       287       281       261       248       236       223       212
Geely-Volvo...................................................       278       266       258       250       231       220       209       199       189
General Motors................................................       309       299       291       283       262       249       236       224       213
Honda.........................................................       280       270       262       253       234       223       212       201       191
Hyundai.......................................................       277       266       258       249       231       219       209       198       188
Kia...........................................................       289       279       271       262       243       231       220       209       199
Lotus.........................................................       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A
Mazda.........................................................       272       259       252       244       227       216       206       196       186
Mitsubishi....................................................       266       254       246       238       220       209       199       189       180
Nissan........................................................       293       283       275       266       248       236       224       212       202
Porsche.......................................................       286       274       266       257       238       226       215       205       195
Spyker-Saab...................................................       278       265       258       249       230       219       208       198       188
Subaru........................................................       252       240       233       225       207       197       187       178       169
Suzuki........................................................       269       257       249       240       222       211       201       191       181
Tata-JLR......................................................       270       258       250       241       223       212       202       191       182
Tesla.........................................................       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A
Toyota........................................................       292       282       274       266       247       235       223       211       201
Volkswagen....................................................       295       284       276       267       248       236       225       214       203
--------------------------------------------------------------------------------------------------------------------------------------------------------
Companies with ``N/A'' do not presently have trucks in their fleet.

    These estimates were aggregated based on projected production 
volumes into the fleet-wide averages for cars, trucks, and the entire 
fleet, shown in Table III-11.\432\ The combined fleet estimates are 
based on the assumption of a fleet mix of cars and trucks that vary 
over the MY 2017-2025 timeframe. This fleet mix distribution can be 
found in Section II.B of this preamble and Chapter 1 of the joint TSD.
---------------------------------------------------------------------------

    \432\ Due to rounding during calculations, the estimated fleet-
wide CO2-equivalent levels may vary by plus or minus 1 
gram.

             Table III-11--Estimated Fleet-Wide CO2-Equivalent Levels Corresponding to the Standards
----------------------------------------------------------------------------------------------------------------
                                                                   Cars CO2 (g/   Trucks CO2 (g/   Fleet CO2 (g/
                           Model year                                  mile)           mile)           mile)
----------------------------------------------------------------------------------------------------------------
2017............................................................             212             295             243
2018............................................................             202             285             232
2019............................................................             191             277             222
2020............................................................             182             269             213
2021............................................................             172             249             199
2022............................................................             164             237             190
2023............................................................             157             225             180
2024............................................................             150             214             171
2025 and later..................................................             143             203             163
----------------------------------------------------------------------------------------------------------------

    As shown in Table III-11, fleet-wide CO2-equivalent 
emission levels for cars under the approach are projected to decrease 
from 212 to 143 g/mile between MY 2017 and MY 2025. Similarly, fleet-
wide CO2-equivalent emission levels for trucks are projected 
to decrease from 295 to 203 g/mile. These numbers do not reflect the 
effects of flexibilities and credits in the program.\433\ The estimated 
achieved values can be found in Chapter 3 of the RIA.
---------------------------------------------------------------------------

    \433\ Nor do they reflect ABT (Averaging Banking and Trading).
---------------------------------------------------------------------------

    As noted above, EPA is establishing standards that set increasingly 
stringent levels of CO2 control from MY 2017 though MY 2025. 
Applying the CO2 footprint curves applicable in each model 
year to the vehicles (and their footprint distributions) expected to be 
sold in each model year produces progressively more stringent estimates 
of fleet-wide CO2 emission standards. Manufacturers can 
achieve the standards' important CO2 emissions reductions 
through the application of feasible control technology at reasonable 
cost. The standards provide manufacturers with the needed lead time for 
this program and reflect appropriate consideration of manufacturer 
product redesign cycles. EPA places important weight on the fact that 
the rule provides a long planning horizon to achieve the very 
challenging emissions standards being established, and provides 
manufacturers with certainty when planning future products. The time-
frame and levels for the standards are expected to provide 
manufacturers the time needed to develop and incorporate technology 
that will achieve GHG reductions, and to do this as part of the normal 
vehicle redesign process. EPA's full discussion of lead time and the 
feasibility of the final standards, including our response to these 
comments, can be found in Section III.D.
    In the MY 2012-2016 final rule, EPA established several provisions 
which will continue to apply for the MY 2017-2025 standards. Consistent 
with the requirement of CAA section 202(a)(1) that standards be 
applicable to vehicles ``for their useful life,'' the MY 2017-2025 
vehicle standards will apply for the useful life of the vehicle. Under 
section 202(i) of the Act, which

[[Page 62781]]

authorized the Tier 2 standards, EPA established a useful life period 
of 10 years or 120,000 miles, whichever first occurs, for all light-
duty vehicles and light-duty trucks.\434\ This useful life applies to 
the MY 2012-2016 GHG standards and EPA is adopting it as well for MYs 
2017-2025. As with the MY 2012-2016 standards, the in-use emission 
standard is 10% higher for a model than the emission levels used for 
certification and compliance with the fleet average standards based on 
the footprint curves. This difference in the in-use standard reflects 
issues of production variability and test-to-test variability. The in-
use standard is discussed in section III.E. Finally, EPA is not making 
any changes to the test procedures over which emissions are measured 
and weighted to determine compliance with the standards. These 
procedures are the Federal Test Procedure (FTP or ``city'' test) and 
the Highway Fuel Economy Test (HFET or ``highway'' test).
---------------------------------------------------------------------------

    \434\ See 65 FR 6698 (February 10, 2000).
---------------------------------------------------------------------------

    EPA has analyzed the feasibility of achieving the CO2 
standards, based on projections of the technology and technology 
penetration rates to reduce emissions of CO2, during the 
normal redesign process for cars and trucks, taking into account the 
effectiveness and cost of the technology. The results of the analysis 
are discussed in detail in Section III.D below and in the RIA. EPA also 
presents the overall estimated costs and benefits of the car and truck 
CO2 standards in section III.H. In developing the rule, EPA 
has evaluated the kinds of technologies that could be utilized by the 
automobile industry, as well as the associated costs for the industry 
and fuel savings for the consumer, the magnitude of the GHG and oil 
reductions that may be achieved, and other factors relevant under 
section 202(a) of the CAA.
    The vast majority of public comments expressed strong support for 
the stringency levels proposed in the 2017-2025 National Program. 
Stakeholders in support included environmental NGO's, consumer groups, 
automakers, automotive suppliers, labor unions, veterans groups and 
national security organizations, and many private citizens. Notably, 
there was broad support for the proposed standards by auto 
manufacturers including BMW, Chrysler, Ford, GM, Honda, Hyundai, Kia, 
Jaguar/Land Rover, Mazda, Mitsubishi, Nissan, Tesla, Toyota, Volvo as 
well as the Alliance of Automobile Manufacturers and the Global 
Automakers.
    Several environmental organizations and consumer groups (Center for 
Biological Diversity, Union of Concerned Scientists, Northeast States 
for Coordinated Air Use Management, Consumers Union, and American 
Council for an Energy-Efficient Economy, International Council on Clean 
Transportation) suggested that alternatives evaluated by the EPA with 
higher penetration rates of advanced technologies were technically 
feasible. A description of the EPA's statutory authority under the CAA 
as it related to the application of technology-based standards to 
achieve emissions reductions are provided in Section I.D.2. A 
discussion of the feasibility of this rulemaking and that of 
alternative scenarios evaluated can be found in III.D.
    Some manufacturers that supported the proposed standards noted 
various challenges in achieving them. Chrysler noted challenges of 
meeting the standard within the timeframe of product development 
cycles, BMW suggested that prior adoption of advanced technologies 
results in fewer options available for compliance, and Nissan expressed 
concern regarding the uncertainty projecting cost-effective and 
feasible technologies so far into the future. These comments are 
addressed in Section III.D.
    Porsche, Jaguar Land Rover, and Suzuki raised concerns about 
feasibility and adequate lead time for intermediate volume, limited 
line manufacturers. As discussed in section III.B.6, EPA is providing 
intermediate volume manufacturers with additional lead time in response 
to these comments. Aston Martin, Lotus and McLaren, three manufacturers 
who currently qualify as small volume manufacturers under the MY 2012-
2016 program, commented in support of EPA's proposal to allow SVMs to 
petition for manufacturer-specific alternative standards. These 
manufacturers stressed the unique challenges they would face in meeting 
the MY 2017-2025 standards due to their extremely limited ability to 
average across small volume fleets and their disadvantage in the 
marketplace due to the lack of economies of scale. EPA is finalizing 
the proposal to allow SVMs to petition EPA for alternative 
CO2 standards based on a demonstration of significant 
feasibility and lead-time difficulties in meeting the primary standards 
(see section III.B.5). Ferrari, several Ferrari dealers, and Global 
Automakers raised significant feasibility concerns regarding the 
proposed standards and commented in strong support of provisions which 
would allow a manufacturer to establish SVM status by showing that it 
is operationally independent of other companies. As discussed in 
section III.B.5, EPA is finalizing provisions allowing manufacturers 
with sales of less than 5,000 vehicles owned by a larger manufacturer 
to make a demonstration that they are operationally independent from 
their parent company and thus allow these manufacturers to be eligible 
for SVM alternative standards.
2. What are the CO2 attribute-based standards?
    As with the MY 2012-2016 standards, for MYs 2017-2025 EPA is 
establishing separate car and truck standards; that is, vehicles 
defined as cars have one set of footprint-based curves, and vehicles 
defined as trucks have a different set. In general, for a given 
footprint, the CO2 g/mile target \435\ for trucks is less 
stringent than for a car with the same footprint. EPA's approach for 
establishing the footprint curves for model years 2017 and later, 
including changes from the approach used for the MY 2012-2016 footprint 
curves, is discussed in Section II.C and Chapter 2 of the joint TSD. 
The curves are described mathematically by a family of piecewise linear 
functions (with respect to vehicle footprint) that gradually and 
continually ramp down from the MY 2016 curve established in the 
previous rule. As Section II.C describes, EPA has modified the curves 
from MY 2016, particularly for trucks. To make this modification, we 
wanted to ensure that starting from the 2016 curve, there is a gradual 
transition to the new slopes and cut point out to 74 sq ft (rather than 
66 sq ft as in the curves for the MY 2012-2016 standards). The 
transition is also designed to prevent the curve from one year from 
crossing the previous year's curve.
---------------------------------------------------------------------------

    \435\ Because compliance is based on the full range of vehicles 
in a manufacturer's car and truck fleets, with lower emitting 
vehicles compensating for higher emitting ones, the emission levels 
of specific vehicles within the fleet are referred to as targets, 
rather than standards.
---------------------------------------------------------------------------

    Written in mathematic notation, the function is as follows: \436\
---------------------------------------------------------------------------

    \436\ See Regulatory text for the official coefficients and 
equation. The information presented here is a summary.
---------------------------------------------------------------------------

BILLING CODE 6560-50-P

[[Page 62782]]

                                                 Passenger Car Target = min (b,max(a, c * footprint+d))
--------------------------------------------------------------------------------------------------------------------------------------------------------
                          Coefficient                             2017      2018      2019      2020      2021      2022      2023      2024      2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
A.............................................................     194.7     184.9     175.3     166.1     157.2     150.2     143.3     136.8     130.5
B.............................................................     262.7     250.1     238.0     226.2     214.9     205.5     196.5     187.8     179.5
C.............................................................      4.53      4.35      4.17      4.01      3.84      3.69      3.54      3.40      3.26
D.............................................................       8.9       6.5       4.2       1.9      -0.4      -1.1      -1.8      -2.5      -3.2
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                  Light Truck Target = min(min (b,max(a, c * footprint+d)),min(f,max(e, g*footprint+h)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                          Coefficient                             2017      2018      2019      2020      2021      2022      2023      2024      2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
A.............................................................     238.1     226.8     219.5     211.9     195.4     185.7     176.4     167.6     159.1
B.............................................................     347.2     341.7     338.6     336.7     334.8     320.8     305.6     291.0     277.1
C.............................................................      4.87      4.76      4.68      4.57      4.28      4.09      3.91      3.74      3.58
D.............................................................      38.3      31.6      27.7      24.6      19.8      17.8      16.0      14.2      12.5
E.............................................................     246.4     240.9     237.8     235.9     234.0     234.0     234.0     234.0     234.0
F.............................................................     347.4     341.9     338.8     336.9     335.0     335.0     335.0     335.0     335.0
G.............................................................      4.04      4.04      4.04      4.04      4.04      4.04      4.04      4.04      4.04
H.............................................................      80.5      75.0      71.9      70.0      68.1      68.1      68.1      68.1      68.1
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                                                                                                [GRAPHIC] [TIFF OMITTED] TR15OC12.010
                                                                                                                                                

[[Page 62783]]

[GRAPHIC] [TIFF OMITTED] TR15OC12.011

BILLING CODE 6560-50-C
    The MY 2017 car curve is similar to the MY 2016 curve in slope. By 
contrast, the MY 2017 truck curve is steeper relative to the MY 2016 
curve.\437\ Both car and truck curves gradually flatten from year to 
year as increases in stringency are applied consistently across 
footprints; i.e. a constant percentage increase in stringency along the 
entire curve results in greater absolute reductions for larger 
footprints than for smaller ones.\438\ As a further change from the MY 
2012-2016 rule, the truck curve does not reach the ultimate cutpoint of 
74 sq ft until 2022. The gap between the 2020 curve and the 2021 curve 
is indicative of design of the truck standards described earlier, where 
a significant proportion of the increased stringency over the first 
five years occurs between MY 2020 and MY 2021. For further discussion 
of these topics, please see section II.C and chapter 2 of the joint 
TSD.
---------------------------------------------------------------------------

    \437\ Furthermore, curves are constrained so that they do not 
cross the previous year's curve, as described in Chapter 2 of the 
Joint TSD.
    \438\ There is more justification provided in chapter 2.5.3.1 of 
the joint TSD.
---------------------------------------------------------------------------

    There were a number of comments on the relative stringency of the 
car versus truck curves. Several manufacturers noted that the relative 
stringency of car and truck curves was appropriate (Ford, GM). Of the 
larger manufacturers, Volkswagen, Toyota, Honda and Mercedes commented 
that the standards for passenger cars were too stringent relative to 
light trucks. Volkswagen suggested that the difference in stringency 
places manufactures that primarily make passenger cars at a 
disadvantage, and proposed reducing the annual reduction in GHG 
emissions from passenger cars to 4%. Mercedes noted the standards ``are 
extremely aggressive, especially for a company that traditionally sells 
in the luxury car market'', and suggested additional flexibilities 
(off-cycle credits) to account for crash avoidance technologies and to 
allow for trading between the light-duty and heavy-duty fleets.
    Comments from other organizations expressed similar concern that 
the curves favor trucks over cars (American Council for an Energy-
Efficient Economy, Consumers Union, Union of Concerned Scientists). 
Some commenters suggested that the difference between car and truck 
curves would lead to gaming, through the reclassification of less-
efficient cars as trucks (International Council on Clean 
Transportation, Consumers Union).
    There were also a number of comments on the shape of the car and 
truck curves. Several commenters proposed that the curves be modified 
by moving the cutpoints for the smaller vehicles to the left, to 
discourage

[[Page 62784]]

downsizing (Insurance Institute for Highway Safety, Institute for 
Policy Integrity), or to make the curves flatter, to discourage 
upsizing (Whitefoot and Skerlos). The agencies' consideration of these 
and other comments and of the updated technical analyses did not lead 
to changes to the level of the standards nor in the shapes of the 
curves discussed above. These comments and the agencies' response are 
discussed in greater detail in section II.B and III.D of the Preamble, 
as well as Chapter 2 of the joint TSD.
3. Mid-Term Evaluation
    Given the long time frame at issue in implementing standards for 
MY2022-2025, and given NHTSA's obligation to conduct a separate 
rulemaking in order to establish final standards for vehicles for those 
model years, EPA and NHTSA will conduct a comprehensive mid-term 
evaluation and agency decision-making process as described below. No 
changes are being made to the mid-term evaluation that was discussed 
and proposed.
    Up to date information will be developed and compiled for the 
evaluation, through a collaborative, robust and transparent process, 
including public notice and comment. The evaluation will be based on 
(1) A holistic assessment of all of the factors considered by the 
agencies in setting standards, including those set forth in the rule 
and other relevant factors, and (2) the expected impact of those 
factors on the manufacturers' ability to comply, without placing 
decisive weight on any particular factor or projection. The 
comprehensive evaluation process will lead to final agency action by 
both agencies.
    Consistent with the agencies' commitment to maintaining a single 
national framework for regulation of vehicle emissions and fuel 
economy, the agencies fully expect to conduct the mid-term evaluation 
in close coordination with the California Air Resources Board (CARB). 
Moreover, the agencies fully expect that any adjustments to the 
standards will be made with the participation of CARB and in a manner 
that ensures continued harmonization of state and Federal vehicle 
standards. In order to align the agencies proceedings for MYs 2022-2025 
and to maintain a joint national program, EPA and NHTSA will finalize 
their actions related to MYs 2022-2025 standards concurrently.
    EPA will conduct a mid-term evaluation of the later model year 
light-duty GHG standards (MY2022-2025). The evaluation will determine 
whether those standards are appropriate under section 202(a) of the 
Act. Under the regulations adopted today, EPA would be legally bound to 
make a final decision, by April 1, 2018, on whether the MY2022-2025 GHG 
standards are appropriate under section 202(a), in light of the record 
then before the agency.
    EPA, NHTSA and CARB will jointly prepare a draft Technical 
Assessment Report (TAR) to inform EPA's determination on the 
appropriateness of the GHG standards and to inform NHTSA's rulemaking 
for the CAFE standards for MY 2022-2025. The TAR will examine the same 
issues and underlying analyses and projections considered in the 
original rulemaking, including technical and other analyses and 
projections relevant to each agency's authority to set standards as 
well as any relevant new issues that may present themselves. There will 
be an opportunity for public comment on the draft TAR, and appropriate 
peer review will be performed of underlying analyses in the TAR. The 
assumptions and modeling underlying the TAR will be available to the 
public, to the extent consistent with law.
    EPA will also seek public comment on whether the standards are 
appropriate under section 202(a), e.g. comments to affirm or change the 
GHG standards (either more or less stringent). The agencies will 
carefully consider comments and information received and respond to 
comments in their respective subsequent final actions.
    EPA and NHTSA will consult and coordinate in developing EPA's 
determination on whether the MY2022-2025 GHG standards are appropriate 
under section 202(a) and NHTSA's NPRM. In making its determination, EPA 
will evaluate and determine whether the MY2022-2025 GHG standards are 
appropriate under section 202(a) of the CAA based on a comprehensive, 
integrated assessment of all of the results of the review, as well as 
any public comments received during the evaluation, taken as a whole. 
The decision making required of the Administrator in making that 
determination is intended to be as robust and comprehensive as that in 
the original setting of the MY2017-2025 standards.
    In making this determination, EPA will consider information on a 
range of relevant factors, including but not limited to those listed in 
the rule\439\ and below:
---------------------------------------------------------------------------

    \439\ See 40 CFR 86.1818-12(h).
---------------------------------------------------------------------------

    1. Development of powertrain improvements to gasoline and diesel 
powered vehicles.
    2. Impacts on employment, including the auto sector.
    3. Availability and implementation of methods to reduce weight, 
including any impacts on safety.
    4. Actual and projected availability of public and private charging 
infrastructure for electric vehicles, and fueling infrastructure for 
alternative fueled vehicles.
    5. Costs, availability, and consumer acceptance of technologies to 
ensure compliance with the standards, such as vehicle batteries and 
power electronics, mass reduction, and anticipated trends in these 
costs.
    6. Payback periods for any incremental vehicle costs associated 
with meeting the standards.
    7. Costs for gasoline, diesel fuel, and alternative fuels.
    8. Total light-duty vehicle sales and projected fleet mix.
    9. Market penetration across the fleet of fuel efficient 
technologies.
    10. Any other factors that may be deemed relevant to the review.
    If, based on the evaluation, EPA decides that the GHG standards are 
appropriate under section 202(a), then EPA will announce that final 
decision and the basis for EPA's decision. The decision will be final 
agency action which also will be subject to judicial review on its 
merits. EPA will develop an administrative record for that review that 
will be no less robust than that developed for the initial 
determination to establish the standards. In the midterm evaluation, 
EPA will develop a robust record for judicial review that is the same 
kind of record that would be developed and before a court for judicial 
review of the adoption of standards.
    Where EPA decides that the standards are not appropriate, EPA will 
initiate a rulemaking to adopt standards that are appropriate under 
section 202(a), which could result in standards that are either less or 
more stringent. In this rulemaking EPA will evaluate a range of 
alternative standards that are potentially effective and reasonably 
feasible, and the Administrator will propose the alternative that in 
her judgment is the best choice for a standard that is appropriate 
under section 202(a).\440\
---------------------------------------------------------------------------

    \440\ The provisions of CAA section 202(b)(1)(C) are not 
applicable to any revisions of the greenhouse standards adopted in a 
later rulemaking based on the mid-term evaluation. Section 
202(b)(1)(C) refers to EPA's authority to revise ``any standard 
prescribed or previously revised under this subsection,'' and 
indicates that ``[a]ny revised standard'' shall require a reduction 
of emissions from the standard that was previously applicable. These 
provisions apply to standards that are adopted under subsection 
202(b) of the Act and are later revised. These provisions are 
limited by their terms to such standards, and do not otherwise limit 
EPA's general authority under section 202(a) to adopt standards and 
revise them ``from time to time.'' Since the greenhouse gas 
standards are not adopted under subsection 202(b), section 
202(b)(1)(C) does not apply to these standards or any subsequent 
revision of these standards.

---------------------------------------------------------------------------

[[Page 62785]]

    If EPA initiates a rulemaking, it will be a joint rulemaking with 
NHTSA. Any final action taken by EPA at the end of that rulemaking is 
also judicially reviewable. The MY2022-2025 GHG standards will remain 
in effect unless and until EPA changes them by rulemaking. NHTSA 
intends to issue conditional standards for MY2022-2025 in the LDV 
rulemaking being initiated this fall for MY2017 and later model years. 
The CAFE standards for MY2022-2025 will be determined with finality in 
a subsequent, de novo notice and comment rulemaking conducted in full 
compliance with section 32902 of title 49 U.S.C. and other applicable 
law.
    Accordingly, NHTSA's development of its proposal in that later 
rulemaking will include the making of economic and technology analyses 
and estimates that are appropriate for those model years and based on 
then-current information. Any rulemaking conducted jointly by the 
agencies or by NHTSA alone will be timed to provide sufficient lead 
time for industry to make whatever changes to their products that the 
rulemaking analysis deems feasible based on the new information 
available. At the very latest, the three agencies will complete the 
mid-term evaluation process and subsequent rulemaking on the standards 
that may occur in sufficient time to promulgate final standards for 
MY2022-2025 with at least 18 months lead time, but additional lead time 
may be provided.
    EPA understands that California intends to conduct a mid-term 
evaluation of its program that is coordinated with EPA and NHTSA and is 
based on a similar set of factors as outlined above. California 
submitted a waiver request under the Clean Air Act to EPA on June 27, 
2012 for its MYs 2017-2025 standards.\441\ The regulatory package 
submitted to EPA for a waiver includes such a mid-term evaluation. EPA 
understands that California intends to continue promoting harmonized 
state and federal vehicle standards. The waiver request notes 
California's commitment to accept compliance with EPA greenhouse gas 
emission standards, as compliant with California's greenhouse gas 
program.\442\ Therefore, if EPA revises its standards in response to 
the mid-term evaluation, California may need to amend one or more of 
its 2022-2025 MY standards and would submit such amendments to EPA with 
a request for a waiver, or for confirmation that said amendments fall 
within the scope of an existing waiver, as appropriate.
---------------------------------------------------------------------------

    \441\ Letter from Mary D. Nicols, Chairman, California Air 
Resources Board to Lisa P. Jackson, Administrator, U.E. EPA 
requesting the Administrator treat the amended ZEV requirements as 
within the scope of the previously granted waivers for the ZEV 
program or alternatively to grant a new waiver of preemption under 
CAA section 209(b). The waiver request also asks for an expedited 
review prior to the start of its Clean Cars Program. Until the 
waiver is granted, California will not be able to enforce the 
program. The waiver process requires an opportunity for a public 
hearing and a 30 day comment period after the hearing before making 
a determination on the waiver.
    \442\ State of California Air Resources Board. Resolution 12-11, 
January 26, 2012, at 20 incorporated by referenced in Board's March 
22, 2012 final approval action. Available at http://www.arb.ca.gov/regact/2012/cfo2012/res12-11.pdf (last accessed July 9, 2012).
---------------------------------------------------------------------------

Overall Support for Finalizing the Mid-term Evaluation
    Every automaker and associations representing either auto makers or 
suppliers who commented on the proposed mid-term evaluation indicated 
that this evaluation was essential to their support of the proposal and 
urged the agencies to finalize a comprehensive mid-term evaluation. 
These commenters included General Motors, Chrysler, Ford, Nissan, 
Toyota, Hyundai America Technical Center, Mercedes-Benz, Mitsubishi 
Motors, Volvo Car Corporation, Porsche, Ferrari, KIA, the Alliance of 
Auto Manufacturers, the Global Automakers, the Motor & Equipment 
Manufacturers Association (MEMA), National Association of Manufacturers 
(NAM), EcoMotors International, Inc., and Johnson Controls, Inc. Two 
automakers, Chrysler and Nissan, specifically predicated their support 
of the MY2017-2025 National Program on the agencies finalizing the 
proposed mid-term evaluation. In addition, a number of other 
organizations including the United Auto Workers (UAW), the 
International Council on Clean Transportation (ICCT), U.S. Chamber of 
Commerce, Securing America's Future Energy (SAFE), as well as 112 
members of the U.S. House of Representatives (in a letter to both 
agency heads) expressed strong support for finalizing the proposed mid-
term evaluation.
    Many environmental and consumer organizations, as well as many 
private citizens, both at the three public hearings and in written 
comments, expressed concern that the mid-term evaluation might be used 
as an opportunity to weaken the standards or to delay the environmental 
benefits of the National Program. Many stressed the expectation that 
the mid-term should be used as an opportunity to strengthen the MY2017-
2025 standards. These commenters included the Pew Charitable Trust, 
Sierra Club, Union of Concerned Scientists (UCS), American Medical 
Association of California, the National Association of Clean Air 
Agencies (NAACA), the Ecology Center and more than 30,000 individual 
citizens who submitted letters to the docket. The ICCT expressed their 
strong support for the mid-term evaluation and NESCAUM in discussing 
the need to evaluate technology incentives on the overall GHG goals of 
the program indicated their support of the mid-term review for this 
purpose.
    As discussed above, the mid-term evaluation will be a comprehensive 
and robust evaluation of all of the relevant factors. EPA is clear that 
any evaluation of the appropriateness of the standards and any decision 
to go forward with revising the standards will consider making the 
standards more or less stringent, whatever is most appropriate under 
the circumstances at that time. It would be inappropriate to limit 
EPA's consideration to either just increasing or just reducing the 
stringency of the standards. Instead, EPA will determine the 
appropriate course to follow based on all of the information, evidence, 
and views in front of it, including those provided during public notice 
and comment.
    Two commenters opposed finalizing the mid-term evaluation. Natural 
Resources Defense Council (NRDC) stated that it was both unnecessary 
and potentially disruptive to automakers' product planning and would 
add uncertainty to a nine year period. The National Automobile Dealers 
Association (NADA) did not support the mid-term evaluation since it did 
not support the need for the underlying rulemaking ``so soon after 
having set standards for MY2012-2016, and before having had the benefit 
of learning from how those standards work in the real world.'' EPA 
believes that the evaluation process will not be disruptive to the 
automakers product planning. Instead it provides a framework that 
allows manufacturers the certainty to go forward and prepare for these 
standards, as it both adopts them now as final standards and 
establishes a mechanism to evaluate and change them in the future, if 
appropriate. The common support from the manufacturers indicates that 
this is the case. The opposition by NADA is premised on their 
opposition to adopting standards in this rulemaking, which is addressed 
elsewhere.

[[Page 62786]]

Ensuring Coordination of Mid-term Evaluation
    Ford, Toyota, NRDC and the UCS stressed the importance of a 
coordinated mid-term evaluation by EPA and NHTSA that should also 
include the California Air Resources Board (CARB). EPA agrees with this 
comment, as indicated by the discussion above. In adopting their GHG 
standards the California Air Resources Board (CARB), directed CARB's 
Executive Officer to, ``participate in U.S. EPA's mid-term review of 
the 2022 through 2025 model year passenger vehicle greenhouse gas 
standards * * *'' and to also, ``continue collaborating with EPA and 
NHTSA as their standards are finalized and in the mid-term review.'' 
\443\ In addition, the Board directed CARB's Executive Officer that 
``It is appropriate to accept compliance with the 2017 through 2025 
model year National Program as compliance with California's greenhouse 
gas emission standards in the 2017 through 2025 model years, once 
United States Environmental Protection Agency (U.S. EPA) issues their 
final rule on or after its current July 2012 planned release, provided 
that the greenhouse gas reductions set forth in U.S. EPA's December 1, 
2011 Notice of Proposed Rulemaking for 2017 through 2025 model year 
passenger vehicles are maintained, except that California shall 
maintain its own reporting requirements.''\444\
---------------------------------------------------------------------------

    \443\ See California Low-Emission Vehicles (LEV) & GHG 2012 
regulations approved by State of California Air Resources Board, 
Resolution 12-11 (March 22, 2012). Available at http://www.arb.ca.gov/regact/2012/leviiighg2012/leviiighg2012.htm (last 
accessed June 5, 2012).
    \444\ Id., CARB Resolution 12-11 at 20.
---------------------------------------------------------------------------

Clean Air Act Authority To Conduct a Mid-term Evaluation
    A number of auto manufacturers submitted comments agreeing that 
section 202(a) of the Clean Air Act (CAA) authorizes the proposed mid-
term evaluation. Chrysler noted that the EPA had a ``firm legal basis 
to conduct the mid-term evaluation under section 307(d) of the Clean 
Air Act (CAA) and the Administrative Procedures Act to reconsider 
regulations based on new information as well as under section 202(a) of 
the CAA under which EPA proposed the mid-term evaluation.'' The Global 
Automakers stated that a mid-term evaluation was, ``not only 
permissible under the Clean Air Act, but also required because of the 
uncertainties inherent in projecting regulatory requirements nine to 
twelve years into the future,'' continuing that it ``would have been 
arbitrary and capricious for EPA to promulgate GHG emissions standards 
for model years as far into the future as MY2022-2025 without providing 
for a mid-term evaluation.'' Nissan indicated support for the views 
expressed by the Global Automakers and stated further that ``a robust 
and comprehensive mid-term review is legally necessary to ensure that 
the standards for the later model years are supported by substantial 
evidence and are not arbitrary and capricious. (Citing Motor Vehicle 
Mfr's Ass'n v. State Farm, 463 U.S. 29,42 (1983) listing examples of 
arbitrary and capricious agency activity).''
    EPA agrees that section 202(a) provides the agency with ample 
authority to undertake the mid-term evaluation. EPA does not agree that 
the mid-term evaluation is authorized under CAA section 307(d), as the 
mid-term evaluation is not a reconsideration of the standards under 
that provision. Instead the mid-term evaluation will be undertaken 
under EPA's general authority to establish emissions standards under 
section 202(a). EPA does not agree that the mid-term evaluation is 
legally required, or that the standards adopted today would be 
arbitrary and capricious or without substantial evidence to support 
them absent such a mid-term evaluation. The final rule and supporting 
information and analysis amply justify the reasonableness and 
appropriateness of the final GHG standards adopted by EPA, irrespective 
of the provisions for a mid-term evaluation. In any case, that issue is 
not before EPA as EPA is exercising its discretion to adopt provisions 
for a mid-term evaluation, for the reasons discussed above.
    The Center for Biological Diversity (CBD) challenged the basis for 
the mid-term evaluation and specifically argued that any interim 
rulemaking should be based on a presumption that the stringencies of 
the standards will not decrease. As discussed above, the mid-term 
evaluation will be a robust and comprehensive evaluation, and it would 
be inappropriate to limit EPA's consideration to either just increasing 
or just reducing the stringency of the standards. Instead, EPA will 
determine the appropriate course to follow based on all of the 
information, evidence, and views in front of it, including those 
provided during public notice and comment. CBD also raised a concern 
that EPA would be applying a faulty weighting of the statutory factors 
under the CAA. CBD stated that highlighting the manufacturers' ability 
to comply was improper, and instead decisive weighting should be placed 
on energy conservation. EPA disagrees that it is improper to carefully 
consider the impact on manufacturers' ability to comply. When EPA 
conducts the mid-term evaluation, EPA will be evaluating standards that 
have already been adopted and for which manufacturers are required to 
comply. The ability to comply is an important part of determining the 
appropriateness of these standards. For example, ability to comply is 
directly tied to lead time, a factor EPA is required to consider under 
section 202(a). EPA does not agree that it is appropriate to assign 
decisive weighting to any one factor, such as energy conservation. That 
is contrary to conducting a holistic assessment, where EPA carefully 
considers all of the relevant factors under section 202(a) and gives 
them the weight that is appropriate in light of all of the 
circumstances.
Recommendations for Additional ``Check-ins'' or Periodic Status Reports
    Several automakers, auto suppliers and industry associations 
(General Motors, Chrysler, Daimler Automotive Group, Hyundai, Alliance 
of Automobile Manufacturers, Global Automakers, Inc and Johnson 
Controls) suggested that, in addition to the proposed formal mid-term 
evaluation, the agencies should also undertake a series of smaller, 
focused technical evaluations or ``check-ins' leading up to and 
potentially following the mid-term evaluation. Such check-ins, these 
commenters asserted, would allow the agencies to consider the latest 
relevant technical information, as well as other key issues. Several 
environmental organizations (Sierra Club, UCS, NRDC, and CBD) submitted 
comments opposing these focused technical evaluations or ``check-ins,'' 
arguing that these would be time consuming and too premature to judge 
technology readiness for the MY2022-2025 standards, and would undermine 
the intent and effectiveness of the mid-term evaluation. A number of 
environmental organizations also supported periodic updates on 
technology progress and compliance trends. The Sierra Club, while not 
supportive of the ``check-in'' concept, did urge agency transparency 
and access to data that would allow the public to ``effectively and 
timely monitor compliance trends and technology applications.'' The 
ICCT recommended that EPA and NHTSA conduct periodic updates on 
technology progress and consider periodic status reports in advance of 
the mid-term evaluation so that all interested parties could have 
access to key data that would be important in documenting progress in 
technology improvements and implementation.

[[Page 62787]]

    As discussed above, the agencies will conduct a comprehensive mid-
term evaluation and agency decision-making process for the MYs 2022-
2025 standards as described in the proposal. The agencies expect to 
continue ongoing stakeholder dialogue, including in depth technical 
dialogue with automakers on their confidential technology development 
efforts and product plans for MYs 2022-2025. EPA does not believe that 
additional or more frequent reports, as suggested by some commenters 
would be an efficient way to prepare for the mid-term evaluation.
Timeline and Process for Mid-term Evaluation
    Several auto companies including Ford, Toyota and Porsche noted the 
importance of the agencies meeting the proposed November 15, 2017, 
deadline for issuing the draft Technical Assessment Report (TAR) so 
that there is adequate time for a reasonable public comment period 
while still insuring that EPA meet its proposed April 1, 2018 deadline 
for determining whether the standards established for MY2022-2025 are 
appropriate under CAA section 202(a). The Alliance of Automobile 
Manufacturers, Global Automakers, and the National Association of 
Manufacturers also expressed concern with the agencies' proposed 
schedule for undertaking the mid-term evaluation. These commenters 
recommended that additional details be written into the final 
regulatory text to provide more procedural certainty including: a start 
date for the evaluation, a schedule of major milestones, specific 
studies the agencies plan to conduct, and details of the peer review 
process. Toyota, Hyundai and Mercedes-Benz in their comments noted 
their support for these recommendations as well. Mitsubishi urged the 
agency to work with stakeholders well in advance of the mid-term to 
develop a sound review process and framework. Both the Union of 
Concerned Scientists and NRDC stated that the timing of the mid-term 
evaluation should be conducted as close as possible to the beginning of 
MY2022 so that the mid-term evaluation could most accurately capture 
the status of technology and the vehicle market for those model years 
under review.
    EPA acknowledges the timing and other concerns raised by all 
commenters and continues to believe that the approach laid out in the 
proposal provides an appropriate balance between certainty and needed 
flexibility by providing end dates by which it must issue the draft TAR 
(November 15, 2017) and determine whether the MY2022-2025 standards are 
appropriate under section 202(a) of the Clean Air Act (April 1, 2018). 
Additional regulatory details on the timing or content of the mid-term 
evaluation are not needed and would not be an efficient way to prepare 
for and conduct the mid-term evaluation.
Additional Evaluation Factors Should Be Considered
    In its proposal, EPA indicated that it would consider a range of 
relevant factors in conducting the mid-term evaluation, including but 
not limited to those listed in the preamble and proposed regulatory 
text. Quite a few commenters suggested that EPA expand the list of 
these high level factors. The Alliance of Automobile Manufactures 
recommended numerous additions to the list of factors including, 
``current and expected availability of state and Federal incentives/
subsidies for advanced technology vehicles,'' ``the end-of-life costs 
associated with advanced technology vehicles,'' and ``consumer demand 
for and acceptance of fuel-efficient technologies, and consumer 
valuation of fuel savings.'' Honeywell encouraged the agencies to, 
``commit * * * to a detailed review of emerging boosting technologies 
that may considerably advance vehicle emissions and fuel economy 
performance during the later years of the rulemaking.'' The Institute 
for Policy Integrity commented that the agencies ``should amend their 
list of factors to specifically reflect any potential changes to 
benefits estimates, in addition to changes to costs or the state of 
technology.'' Mitsubishi Motors commented that the mid-term factors 
must include an evaluation of the sufficiency of the EV infrastructure, 
including whether there have been any significant industry-wide 
economic setbacks making EVs and other overall fuel economy targets 
impracticable, consumer acceptance of EVs and a thorough evaluation of 
an EV multiplier in MYs 2022 through 2025 in order to continue EV 
market penetration. Also, Mitsubishi noted that the mid-term should 
include consideration of compliance options for OEMs with limited 
product lines. The National Association of Clean Air Agencies (NACAA) 
suggested that EPA evaluate the use of credits by automobile 
manufacturers and the impact of credit use on average fleet 
performance. The Clean Air Association of the Northeast States for 
Coordinated Air Use Management (NESCAUM) noted that it expected EPA to 
monitor upstream emissions from the power grid to determine whether the 
improvements assumed to occur were realized. Finally, the Sierra Club 
recommended that the agencies provide the public with data on credit 
use by manufacturers, technology penetration both overall and by 
manufacturers, and sales by vehicle footprints. The Alliance for 
Automakers also indicated that the agencies should seek expert peer-
reviewed information including the National Academy of Sciences to 
answer a number of questions associated with the Mid-term reviews.
    A number of other commenters, including Ford, the UCS and ICCT 
supported the mid-term evaluation provisions as proposed by EPA. Ford 
commented that they believed the agencies had struck an appropriate 
balance between an exhaustive list and a high-level approach and 
pointed to proposed regulatory language ``including but not limited to 
* * *'' as critical language that should be maintained in final rule. 
Ford further noted that factors that turn out to be most important six 
years from now are not necessarily foreseeable today and not 
necessarily the ones listed in the proposed rule. The ICCT noted that 
``it is impossible to define all the criteria for review at this time * 
* *'' And UCS agreed that ``a holistic assessment of all of the factors 
* * * without placing decisive weight on any particular factor or 
projects'' is the correct approach in conducting the mid-term 
evaluation.''
    EPA is finalizing the list of factors as proposed.\445\ We believe 
these factors are broad enough to encompass all appropriate factors 
that should be considered during the mid-term evaluation, and provide 
the agency with an appropriate balance in that the list identifies 
major factors to consider and includes a clear provision for inclusion 
of other appropriate factors. This avoids trying to identify in detail 
at this time the myriad issues and factors that will be of concern in 
the mid-term evaluation. As in this rulemaking, in the mid-term 
evaluation EPA expects to place primary reliance on peer-reviewed 
studies. Additionally, as NAS reports are published, EPA will give 
careful consideration to reports and their findings as well as any 
reports and findings from other scientific and technical organizations.
---------------------------------------------------------------------------

    \445\ See Sec.  86.1818-12 (h).
---------------------------------------------------------------------------

    As discussed above, the MY2022-2025 GHG standards will remain in 
effect unless and until EPA changes them by rulemaking. The National 
Association of Manufacturers (NAM) commented that EPA should not take 
the default position that the existing 2022-2025 model year standards 
will remain in place unless changed by

[[Page 62788]]

rulemaking. Rather, they argued the existing standards should be 
rescinded immediately upon a determination that they are inappropriate, 
leaving the 2021 standards in effect until the revised standards are 
finalized. Another commenter, Toyota requested that, ``in the event EPA 
does not take final agency action concerning the 2022-2025 model year 
standards by April 1, 2020, the 2021 model year GHG standards remain as 
the `default' standards until such time as EPA does take final agency 
action providing at least 18-months of lead time prior to the 
applicable model year. EPA believes the appropriate approach is what 
was proposed; EPA is adopting the MY2022-2025 GHG standards at this 
time, and they will go into effect unless EPA revises them. The mid-
term evaluation process is an effective and timely way to address any 
concerns that may arise in the future concerning the appropriateness of 
these standards. EPA believes this provides the right degree of 
certainty to the standards that are adopted today, along with a clear 
and effective mechanism for the timely evaluation of the standards and 
their revision if EPA determines in the future that they are no longer 
appropriate based on the circumstances at that time.
4. Averaging, Banking, and Trading Provisions for CO2 
Standards
    In the MY 2012-2016 rule, EPA adopted credit provisions for credit 
carry-back, credit carry-forward, credit transfers, and credit trading. 
These kinds of provisions are collectively termed Averaging, Banking, 
and Trading (ABT), and have been an important part of many mobile 
source programs under CAA Title II, both for fuels programs as well as 
for engine and vehicle programs.\446\ As proposed, EPA is continuing 
essentially the same comprehensive program for averaging, banking, and 
trading of credits as provided in the MY2012-2016 program, which 
together will help manufacturers in planning and implementing the 
orderly phase-in of emissions control technology in their production, 
consistent with their typical redesign schedules. ABT is important 
because it can help to address many issues of technological feasibility 
and lead-time, as well as considerations of cost. ABT is an integral 
part of the standard setting itself, and is not just an add-on to help 
reduce costs. In many cases, ABT resolves issues of cost or technical 
feasibility which might otherwise arise, allowing EPA to set a standard 
that is numerically more stringent. The ABT provisions are integral to 
the fleet averaging approach established in the MY 2012-2016 rule and 
we view them as equally integral to the MY 2017-2025 standards.\447\ As 
proposed, EPA is finalizing a change to the credit carry-forward 
provisions as described below, but the program otherwise would remain 
in place unchanged for model years 2017 and later.
---------------------------------------------------------------------------

    \446\ See 75 FR 25412-413.
    \447\ These reasons likewise underly EPA's decision to adopt 
similar types of ABT provisions in the GHG standards for heavy duty 
vehicles and engines. See 76 FR 57127-29.
---------------------------------------------------------------------------

    As noted above, the ABT provisions consist primarily of credit 
carry-back, credit carry-forward, credit transfers, and credit trading. 
Credit carry-back refers to using credits to offset any deficit in 
meeting the fleet average standards that had accrued in a prior model 
year. A manufacturer may have a deficit at the end of a model year 
(after averaging across its fleet using credit transfers between cars 
and trucks)--that is, a manufacturer's fleet average level may fail to 
meet the required fleet average standard. The credit carry-back 
provisions allow a manufacturer to carry a deficit in its fleet average 
standards for up to three model years. After satisfying any needs to 
offset pre-existing debits within a vehicle category, remaining credits 
may be banked, or saved, for use in future years. This is referred to 
as credit carry-forward. The EPCA/EISA statutory framework for the CAFE 
program includes a 5-year credit carry-forward provision and a 3-year 
credit carry-back provision. In the MYs 2012-2016 program, EPA chose to 
adopt 5-year credit carry-forward and 3-year credit carry-back 
provisions as a reasonable approach that maintained consistency between 
the agencies' provisions. EPA is continuing with this approach for the 
MY 2017-2025 standards. (A further discussion of the ABT provisions can 
be found at 75 FR 25412-14 (May 7, 2010)).
    Although the credit carry-forward and carry-back provisions 
generally remain in place for MY 2017 and later, EPA is finalizing its 
proposal to allow all unused credits generated in MY 2010-2016 (but not 
MY 2009 early credits) to be carried forward through MY 2021. See Sec.  
86.1865-12(k)(6)(ii). This amounts to the normal 5 year carry-forward 
for MY 2016 and later credits, but provides additional carry-forward 
years for credits earned in MYs 2010-2015. Extending the life for MY 
2010-2015 credits provides greater flexibility for manufacturers in 
using the credits they have generated. These credits would help 
manufacturers resolve lead-time issues they might face in the early 
model years of today's program as they transition from the 2016 
standards to the progressively more stringent standards for MY 2017 and 
later. It also provides an additional incentive for manufacturers to 
generate credits earlier, for example in MYs 2014 and 2015, because 
those credits may be used through MY 2021, thereby encouraging the 
earlier use of additional CO2 reducing technology.
    While this provision provides greater flexibility in how 
manufacturers use credits they have generated, it would not change the 
overall CO2 benefits of the National Program, as EPA does 
not expect that any of the credits at issue would otherwise have been 
allowed to expire. Rather, the credits would be used or traded to other 
manufacturers.
    EPA did not propose to allow MY 2009 early credits to be carried 
forward beyond the normal 5 years due to concerns expressed during the 
2012-2016 rulemaking that there may be the potential for large numbers 
of credits that could be generated in MY 2009 for companies that are 
over-achieving on CAFE and that some of these credits could represent 
windfall GHG credits.\448\ In response to these concerns, EPA placed 
restrictions on the use of MY 2009 credits (for example, MY 2009 
credits may not be traded) and did not propose to expand opportunities 
for their utilization.
---------------------------------------------------------------------------

    \448\ 75 FR 25442. Moreover, as pointed out in the earlier 
rulemaking, there can be no legitimate expectation that these 2009 
MY credits could be used as part of a compliance strategy in model 
years after 2014, and thus no reason to carry forward the credits 
past 5 years due to action in reliance by manufacturers.
---------------------------------------------------------------------------

    Transferring credits refers to exchanging credits between the two 
averaging sets, passenger cars and trucks, within a manufacturer. For 
example, credits accrued by over-compliance with a manufacturer's car 
fleet average standard could be used to offset debits accrued due to 
that manufacturer not meeting the truck fleet average standard in a 
given year. Finally, accumulated credits may be traded to another 
manufacturer. EPA is finalizing provisions consistent with MYs 2012-
2016 to allow no limits on the amount of credits that may be 
transferred or traded.
    The averaging, banking, and trading provisions are generally 
consistent with those included in the CAFE program, with a few notable 
exceptions. As with EPA's approach (except for the provision just 
discussed above for a one-time extended carry-forward of MY2010-2016 
credits), under EISA, credits generated in the CAFE program can be 
carried forward for 5 model years

[[Page 62789]]

or back for 3, and can also be transferred between a manufacturer's 
fleets or traded to another manufacturer. Transfers of credits across a 
manufacturer's car and truck averaging sets are also allowed under 
CAFE, 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 under CAFE, and transferred credits may not be used to meet 
the CAFE minimum domestic passenger car standard, also per statute. 
CAFE allows credit trading, but again, traded credits cannot be used to 
meet the minimum domestic passenger car standard.\449\
---------------------------------------------------------------------------

    \449\ See generally 49 U.S.C. Sec.  32903 and section IV below.
---------------------------------------------------------------------------

    EPA received comments from manufacturers, suppliers, and others 
emphasizing the need for flexibility and supporting the credit programs 
in general. Manufacturers supported the proposed approach to the ABT 
program. Manufacturers commented that the one-time carry-forward of 
greenhouse gas reduction credits through the 2021 model year rewards 
early investment and provides better flexibility to account for market 
conditions that may impact year-over-year compliance. NESCAUM commented 
that allowing credit transfers between a manufacturer's passenger car 
and light truck fleet will facilitate compliance without reducing the 
GHG benefits of the program, as do provisions for carry-forward and 
carry-back of generated credits.
    One commenter raised concerns regarding the ABT provisions. CBD 
commented that the proposed one-time carry forward of GHG credits was 
contrary to EISA provisions, and unjustified, and recommended that EPA 
not finalize the provision. CBD further commented similarly that, ``the 
Agencies may not increase the availability of credit transfers between 
the two fleets, passenger vehicles and light trucks. The existence of 
statutory caps for these transfers is a strong indication of 
Congressional disapproval of extending them further, and the Clean Air 
Act's silence on that issue does not override EISA's statutory 
restriction.''
    EPA does not agree with these comments. The extension of the credit 
carry-forward provisions supports the ultimate objectives of CAA 
section 202 (a) by providing flexibility to achieve GHG emission 
reductions at lower cost, and to reduce the lead time needed to do so. 
And although the agencies have worked stringently to harmonize the two 
sets of standards under the different statutory authorities, the 
National Program also properly takes advantage of the additional 
flexibilities afforded by the CAA to achieve reductions of GHGs where 
appropriate to do so. See section I.B and I.D above (noting features 
such as more flexible credit generating and unlimited transferring 
mechanisms, and no option to pay fines in lieu of compliance). Since 
EPA believes that extending the carry-forward provision allows 
additional flexibility, encourages earlier penetration of emission 
reduction technologies sooner than might otherwise occur, and does so 
without reducing the overall effectiveness of the program. EPA is 
therefore extending the credit carry-forward provision as proposed.
    Volkswagen recommended that EPA allow a 5 year carry back of 
debits, but did not provide supporting rationale as to why such a 
change is needed. As noted in section I.B above, EPA is retaining a 3 
year credit carry-back due to concerns that a five year period could 
slow progress toward meeting standards, and could lead to situations 
where some manufacturers find it impossible to make up past year 
deficits. EPA believes that credit carry-back is an important 
flexibility because it allows manufacturers to address situations where 
they fall into a deficit because, for example, their fleet mix at the 
end of the year is not the same as the fleet mix anticipated at the 
beginning of the year. EPA is concerned that a longer period may 
encourage manufacturers to rely on deficits as a primary strategy to 
comply with the program and would slow the rate of progress 
manufacturers would make in reducing emissions.
    Daimler Automotive Group commented that EPA should allow credits 
for Class 2b vehicles (heavy duty pickups and vans) generated in the 
medium duty GHG program to be applied in the light duty truck programs 
as well. Daimler commented that the medium duty GHG program for these 
vehicles has an ABT program which is similar to the light duty program 
and that these similarities should allow credits to be traded between 
them. In response, EPA believes such a change is outside the scope of 
the proposal as EPA did not propose any changes that would affect the 
heavy-duty vehicle standards. EPA believes the suggested approach 
raises significant issues regarding the potential impact on both 
programs, including competitiveness issues, which would need to be 
thoroughly explored through a notice and comment rulemaking process. 
Only a small portion of light-duty vehicle manufacturers produce 
vehicles in the heavy-duty category and EPA believes that it is 
important to maintain a level playing field for light-duty vehicle 
manufacturers not participating in the heavy-duty vehicle market. 
Moreover, the standards for heavy duty pickups and vans are based on a 
different attribute (a work factor attribute which is not determined 
exclusively by footprint) than the standards for light duty trucks, the 
projected technology basis for the standards differ, and the programs' 
model years do not coincide. Furthermore, it is possible that allowing 
credit transfers between heavy-duty and light-duty vehicles could 
impact stringency of both the light and heavy-duty standards. ABT 
provisions are an integral part of establishing appropriate standards 
under Section 202(a) of the Clean Air Act. In order to properly 
evaluate the implications of adopting such credit transfers, a detailed 
analysis would need to be done to assess the potential impacts of these 
types of credit transfers, with an opportunity for public review and 
input, and EPA has not performed such an analysis.\450\ All of these 
factors require careful analysis before any decisions can reasonably be 
made regarding credit transfers between these different vehicle 
sectors.
---------------------------------------------------------------------------

    \450\ In the heavy-duty vehicle and engine final rule, EPA noted 
that it intends to consider whether broader credit transfers are 
appropriate, including transfers between light and heavy-duty 
vehicles, as part of the next phase of the heavy-duty regulations. 
See 76 FR 57128.
---------------------------------------------------------------------------

5. Small Volume Manufacturer Standards
    EPA is finalizing provisions, as proposed, allowing eligible small 
volume manufacturers (SVMs) the option to petition EPA to develop an 
alternative CO2 standard for their company, determined on a 
case-by-case basis in a public process. An SVM utilizing this option 
will be required to submit data and information that the agency would 
use in addition to other available information to establish 
CO2 standards for that specific manufacturer. The detailed 
approach being finalized for the SVM standards and the eligibility 
requirements for these standards, as well as comments received by EPA, 
are described in detail below. EPA is also extending eligibility for 
the SVM GHG provisions to very small manufacturers that are owned by 
large manufacturers but are able to establish that they are 
operationally independent. All of the comments EPA received on these 
issues supported the proposal to allow manufacturer-specific standards 
for SVMs, and also supported extending these provisions to include 
operationally independent manufacturers which are otherwise

[[Page 62790]]

SVMs. There are three manufacturers that meet the definition of SVM 
currently: Aston Martin, Lotus, and McLaren. These manufacturers make 
up much less than one percent of total U.S. vehicles sales, so the 
environmental impact of these alternative standards would be very 
small.
    In the MY 2012-2016 program, EPA recognized that for very small 
volume manufacturers, the CO2 standards adopted for MY 2012-
2016 would be extremely challenging and potentially infeasible for very 
small manufacturers, at least absent purchase of credits from other 
manufacturers. EPA therefore deferred small volume manufacturers (SVMs) 
with annual U.S. sales less than 5,000 vehicles from having to meet 
CO2 standards, and stated that we would establish 
appropriate SVM standards at a later time. See 76 FR 74988. As part of 
establishing eligibility for the exemption from the MY 2012-2016 
standards, manufacturers must make a good faith effort to secure 
credits from other manufacturers, if they are reasonably available, to 
cover the emissions reductions they would have otherwise had to achieve 
under applicable standards.
    EPA continues to believe that these small volume manufacturers face 
a greater challenge in meeting CO2 standards compared to 
large manufacturers because they only produce a few vehicle models, 
mostly focusing on high performance sports cars and luxury vehicles. 
These manufacturers have limited product lines across which to average 
emissions, and the few models they produce often have very high 
CO2 levels. As SVMs noted in comments and discussions 
leading to the proposal, SVMs only produce one or two vehicle types but 
must compete directly with brands that are part of larger manufacturer 
groups that have more resources available to them. There is often a 
time lag in the availability of technologies from suppliers between 
when the technology is supplied to large manufacturers and when it is 
available to small volume manufacturers. Also, incorporating new 
technologies into vehicle designs costs the same or more for small 
volume manufacturers, yet the costs are spread over significantly 
smaller volumes. Therefore, SVMs typically have longer vehicle model 
life cycles in order to recover their investments. SVMs further noted 
that despite constraints facing them, SVMs need to innovate in order to 
differentiate themselves in the market and often lead in incorporating 
technological innovations, particularly lightweight materials.
    Prior to EPA's proposal, the agencies held detailed technical 
discussions with the manufacturers eligible for the exemption under the 
MY 2012-2016 program and reviewed detailed confidential product plans 
of each manufacturer. Based on the information provided and subsequent 
public comments, EPA continues to believe that SVMs would face great 
difficulty meeting the primary CO2 standards and that 
establishing challenging but less stringent SVM standards is 
appropriate given the limited product offerings of SVMs. However, 
selecting a single set of standards that would apply to all SVMs would 
be difficult, if not unreasonable, because each manufacturer's product 
lines vary significantly. Standards that would be appropriate for one 
manufacturer may not be feasible for another, potentially driving them 
from the domestic market. Alternatively, a less stringent standard may 
only cap emissions for some manufacturers, providing little incentive 
for them to reduce emissions. Therefore, EPA is finalizing, as 
proposed, a case-by-case alternative standard approach as a way to 
establish standards that will require SVMs to continue to innovate to 
reduce emissions and do their ``fair share'' under the GHG program.
a. Overview of Existing Case-by-Case Approaches
    A case-by-case approach for establishing standards for SVMs has 
been adopted by NHTSA for CAFE, CARB in their GHG program, and the 
European Union (EU) for European CO2 standards. For the CAFE 
program, EPCA allows manufacturers making less than 10,000 vehicles per 
year worldwide to petition the agency to have an alternative standard 
established for them.\451\ NHTSA has adopted alternative standards for 
some small volume manufacturers under these CAFE provisions and 
continually reviews applications as they are submitted.\452\ Under the 
CAFE program, petitioners must include projections of the most fuel 
efficient production mix of vehicle configurations for a model year and 
a discussion demonstrating that the projections are reasonable. 
Petitioners must include, among other items, annual production data, 
efforts to comply with applicable fuel economy standards, and detailed 
information on vehicle technologies and specifications. The petitioner 
must explain why they have not pursued additional means that would 
allow them to achieve higher average fuel economy. NHTSA publishes a 
proposed decision in the Federal Register and accepts public comments. 
Petitions may be granted for up to three years.
---------------------------------------------------------------------------

    \451\ See 49 U.S.C. 32902(d) and 49 CFR Part 525. Under the CAFE 
program, manufacturers who manufacture less than 10,000 passenger 
cars worldwide annually may petition for an exemption from 
generally-applicable CAFE standards, in which case NHTSA will 
determine what level of CAFE would be maximum feasible for that 
particular manufacturer if the agency determines that doing so is 
appropriate.
    \452\ Alternative CAFE standards are provided in 49 CFR 
531.5(e).
---------------------------------------------------------------------------

    For the California GHG standards for MYs 2009-2016, CARB 
established a process that would start at the beginning of MY2013, 
where small volume manufacturers would identify all MY 2012 vehicle 
models certified by large volume manufacturers that are comparable to 
the SVM's planned MY 2016 vehicle models.\453\ The comparison vehicles 
were to be selected on the basis of horsepower and power to weight 
ratio. The SVM was required to demonstrate the appropriateness of the 
comparison models selected. CARB would then provide a target 
CO2 value based on the emissions performance of the 
comparison vehicles to the SVM for each of their vehicle models to be 
used to calculate a fleet average standard for each test group for 
MY2016 and later. Since CARB provides that compliance with the National 
Program for MYs 2012-2016 will be deemed compliance with the CARB 
program, it has not taken action to set unique SVM standards, but its 
program nevertheless was a useful model to consider. In their LEV III 
rule, CARB adopted SVM alternative CO2 standard provisions 
that are essentially the same as those being finalized by EPA.\454\ 
CARB also adopted provisions for operationally independent 
manufacturers, similar to those described in EPA's request for comments 
in the proposed rule.
---------------------------------------------------------------------------

    \453\ 13 CCR 1961.1(D).
    \454\ Final Regulatory Order, Amendments to Sections 1900, 
1956.8, 1960.1, 1961, 1961.1, 1965, 1968.2, 1968.5, 1976, 1978, 
2037, 2038, 2062, 2112, 2139, 2140, 2145, 2147, 2235, and 2317, and 
Adoption of new Sections 1961.2 and 1961.3, Title 13, California 
Code of Regulations, p. 82.
---------------------------------------------------------------------------

    The EU process allows small manufacturers to apply for a derogation 
from the primary CO2 emissions reduction targets.\455\ 
Applications for 2012 were required to be submitted by manufacturers no 
later than March 31, 2011, and the Commission will assess the 
application within 9 months of the receipt of a complete application. 
Applications for derogations for 2012 have been submitted by several 
manufacturers and non confidential versions are currently available to 
the

[[Page 62791]]

public.\456\ In the EU process, the SVM proposes an alternative 
emissions target supported by detailed information on the applicant's 
economic activities and technological potential to reduce 
CO2 emissions. The application also requires information on 
individual vehicle models such as mass and specific CO2 
emissions of the vehicles, and information on the characteristics of 
the market for the types of vehicles manufactured. The proposed 
alternative emissions standards may be the same numeric standard for 
multiple years or a declining standard, and the alternative standards 
may be established for a maximum period of five years. Where the 
European Commission is satisfied that the specific emissions target 
proposed by the manufacturer is consistent with its reduction 
potential, including the economic and technological potential to reduce 
its specific emissions of CO2, and taking into account the 
characteristics of the market for the type of car manufactured, the 
Commission will grant a derogation to the manufacturer.
---------------------------------------------------------------------------

    \455\ Article 11 of Regulation (EC) No 443/2009 and EU No 63/
2011. See also ``Frequently asked questions on application for 
derogation pursuant to Aticle 11 of Regulation (EC) 443/2009.''
    \456\ http://ec.europa.eu/clima/documentation/transport/vehicles/cars_en.htm
---------------------------------------------------------------------------

b. EPA's Framework for Case-by-Case SVM Standards
    As proposed, SVMs will become subject to the GHG program beginning 
with MY 2017. Starting in MY 2017, SVMs will be required to meet the 
primary program standards unless EPA establishes alternative standards 
for the manufacturer. In addition, since SVMs will no longer be exempt 
from the program, they will no longer be required to seek to purchase 
credits from other manufacturers in order to maintain the exemption. As 
proposed, eligible manufacturers seeking alternative standards must 
petition EPA for alternative standards by July 30, 2013, providing the 
information described below. If EPA finds that the application is 
incomplete, EPA will notify the manufacturer and provide an additional 
30 days for the manufacturer to provide all necessary information. EPA 
will then publish a notice in the Federal Register of the 
manufacturer's petition and recommendations for an alternative 
standard, as well as EPA's proposed alternative standard. Non-
confidential business information portions of the petition will be 
available to the public for review in the docket. After a period for 
public comment, EPA will make a determination on an alternative 
standard for the manufacturer and publish final notice of the 
determination in the Federal Register for the general public as well as 
the applicant. EPA expects the process to establish the alternative 
standard to take about 12 months once a complete application is 
submitted by the manufacturer.
    As proposed, manufacturers may petition for alternative standards 
for up to 5 model years (i.e., MYs 2017-2021) as long as sufficient 
information is available on which to base the alternative standards 
(see application discussion below). This initial round of establishing 
case-by-case standards may be followed by one or more additional rounds 
until standards are established for the SVM for all model years up to 
and including MY 2025. For the later round(s) of standard setting, the 
SVM must submit their petition 36 months prior to the start of the 
first model year for which the standards would apply in order to 
provide sufficient time for EPA to evaluate and set alternative 
standards (e.g., January 1, 2018 for MY 2022). The 36 month requirement 
does not apply to new market entrants, discussed in section III.C.5.e 
below. The subsequent case-by-case standard setting will follow the 
same notice and comment process as outlined above.
    As proposed, if EPA does not establish SVM standards for a 
manufacturer at least 12 months prior to the start of the model year in 
cases where the manufacturer provided all required information by the 
established deadline, the manufacturer may request an extension of the 
alternative standards currently in place, on a model year by model year 
basis. See 76 FR 74989. This provides assurance to manufacturers that 
they will have at least 12 months lead time to prepare for the upcoming 
model year.
    EPA received comments from Aston Martin, Lotus, and McLaren (the 
three manufacturers potentially eligible for SVM standards based on 
their status under the MY2012-2016 program) fully supporting EPA's 
proposed approach to establishing alternative standards through a case-
by-case manufacturer petition process. They commented that this 
approach is not only technically appropriate but that adopting the 
case-by-case SVM GHG mechanism would align EPA's approach with that of 
NHTSA, the EU, and CARB, furthering the desirable objective of 
harmonization.
    EPA received comments from the Global Automakers that the standards 
should be issued at least 18 months prior to the first affected model 
year. Global Automakers did not provide supporting data or rationale 
for their comments and EPA did not receive similar comments directly 
from others, including the SVMs most directly affected. EPA is 
concerned with the timing suggested by the commenter. EPA expects that 
the EPA rulemaking process will take about 12 months, which would 
provide manufacturers with a minimum of 17 months lead time prior to 
the earliest possible start date for MY 2017, if they submit their 
petition by the July 30, 2013 deadline (August 1, 2014 to January 1, 
2016). EPA views this scenario as worst case in terms of lead time 
because manufacturers may petition earlier than July 30, 2014 and also 
may begin their MY 2017 production later than January 1, 2016. EPA 
expects that in most cases, manufacturers will have more than 18 months 
lead time. In addition, lead time will be one of the primary 
considerations in determining the feasibility of potential alternative 
standards. EPA is retaining the 12 month lead time provisions as 
proposed, as EPA views the 12 month period as a reasonable balance 
between the timing constraints of establishing reasonable alternative 
standards prior to MY 2017 and the need to provide adequate lead time 
to manufacturers to meet those standards.
    EPA requested comments on allowing SVMs to comply early with the MY 
2017 SVM alternative standard established for them. As discussed in the 
NPRM, manufacturers may want to certify to the MY 2017 standards in 
earlier model years (e.g., MY 2015 or MY 2016). See 76 FR 74989. Under 
the MY 2012-2016 program, SVMs are eligible for an exemption from the 
CO2 standards, but as part of the exemption are required to 
make a good faith effort to purchase credits from other manufacturers. 
By opting to certify early to the SVM alternative standard in lieu of 
this exemption, manufacturers would avoid having to seek out credits to 
purchase. As noted in the proposal, EPA would not allow certification 
for vehicles already produced by the manufacturer, so the applicability 
of this early opt-in provision would be limited to the later years of 
the MY 2012-2016 program, due to the timing of establishing the SVM 
standards. An early compliance option also may be beneficial for new 
manufacturers entering the market that qualify as SVMs.
    EPA did not receive any critical comments and received supportive 
comments from the SVMs regarding its request for comment regarding 
early optional compliance. Therefore, EPA is including in the final 
program early opt-in provisions for manufacturers, allowing them the 
option of meeting their MY 2017 standard (i.e. the case-by-case 
standard adopted pursuant to the standards and procedures described

[[Page 62792]]

below) in MYs 2015 and 2016. Manufacturers selecting this option will 
not be required to seek to purchase credits from other manufacturers in 
those earlier model years when they choose optional certification.
c. Petition Data and Information Requirements
    As described in detail in section I.D.2, EPA establishes motor 
vehicle standards under section 202(a) that are based on technological 
feasibility, and considering lead time, safety, costs and other impacts 
on consumers, and other factors such as energy impacts associated with 
use of the technology. As proposed, SVMs petitioning EPA for 
alternative standards must submit the data and information listed below 
which EPA will use, in addition to other relevant information, in 
determining an appropriate alternative standard for the SVM. EPA will 
also consider data and information provided by commenters during the 
comment process in determining the final level of the individual SVM's 
standards. EPA did not receive comments on these data requirements.
    SVMs must provide the following information as part of their 
petition for SVM standards:
Vehicle Model and Fleet Information
     MYs that the application covers--up to five MYs. 
Sufficient information must be provided to establish alternative 
standards for each year
 Vehicle models and sales projections by model for each MY
 Description of models (vehicle type, mass, power, footprint, 
expected pricing)
 Description of powertrain
 Production cycle for each model including new vehicle model 
introductions
 Vehicle footprint based targets and projected fleet average 
standard under primary program by model year
Technology Evaluation
 CO2 reduction technologies employed or expected to 
be on the vehicle model(s) for the applicable model years, including 
effectiveness and cost information
--Including A/C and potential off-cycle technologies
 Evaluation of vehicles produced by other manufacturers similar 
to those produced by the petitioning SVM and certified in MYs 2012-2013 
(or latest two MYs for later applications) for each vehicle model 
including CO2 results and any A/C credits generated by the 
models
--Similar vehicles must be selected based on vehicle type, horsepower, 
mass, power-to-weight, vehicle footprint, vehicle price range, and 
other relevant factors as explained by the SVM
 Discussion of CO2 reducing technologies employed on 
vehicles offered by the manufacturer outside of the U.S. market but not 
in the U.S., including why those vehicles/technologies are not being 
introduced in the U.S. market as a way of reducing overall fleet 
CO2 levels
 Evaluation of technologies projected by EPA as technologies 
likely to be used to meet the MYs 2012-2016 and MYs 2017-2025 standards 
that are not projected to be fully utilized by the petitioning SVM and 
explanation of reasons for not using the technologies, including 
relevant cost information \457\
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    \457\ See 75 FR 25444 (Section III.D) for MY 2012-2016 
technologies and Section III.D below for discussion of projected MY 
2017-2025 technologies.
---------------------------------------------------------------------------

SVM Projected Standards
 The most stringent CO2 level estimated by the SVM 
to be feasible and appropriate by model and MY and the technological 
and other basis for the estimate
 For each MY, projection of the lowest fleet average 
CO2 production mix of vehicle models and discussion 
demonstrating that these projections are reasonable
 A copy of any applications submitted to NHTSA for MY 2012 and 
later alternative standards
Eligibility
 U.S. sales for previous three model years and projections for 
production volumes over the time period covered by the application
 Complete information on ownership structure in cases where SVM 
has ties to other manufacturers with U.S. vehicle sales
    As proposed, EPA will weigh several factors in determining what 
CO2 standards are appropriate for a given SVM's fleet. These 
factors will include the level of technology applied to date by the 
manufacturer, the manufacturer's projections for the application of 
additional technology, CO2 reducing technologies being 
employed by other manufacturers including on vehicles with which the 
SVM competes directly and the CO2 levels of those vehicles, 
and the technological feasibility and reasonableness of employing 
additional technology not projected by the manufacturer in the time-
frame for which standards are being established. EPA will also consider 
opportunities to generate A/C and off-cycle credits that are available 
to the manufacturer. Lead time will be a key consideration both for the 
initial years of the SVM standard, where lead time would be shorter due 
to the timing of the notice and comment process to establish the 
standards, and for the later years where manufacturers would have more 
time to achieve additional CO2 reductions.
d. SVM Credits Provisions
    As discussed in Section III.B.4, EPA's program includes a variety 
of credit averaging, banking, and trading provisions. As proposed, 
these provisions will generally apply to SVM standards as well, with 
the exception that SVMs meeting alternative standards will not be 
allowed to trade credits (i.e., sell or otherwise provide) to other 
manufacturers. SVMs will be able to use credits purchased from other 
manufacturers generated in the primary program. Although EPA does not 
expect significant credits to be generated by SVMs due to the 
manufacturer-specific standard setting approach being finalized, SVMs 
will be able to generate and use credits internally, under the credit 
carry-forward and carry-back provisions. Under a case-by-case approach, 
EPA does not view such credits as windfall credits and not allowing 
internal banking could stifle potential innovative approaches for SVMs. 
SVMs will also be able to transfer credits between the car and light 
trucks categories. EPA did not receive any comments regarding the ABT 
provisions as they apply to SVMs meeting alternative standards.
e. SVM Standards Eligibility
i. Current SVMs
    The MY 2012-2016 rulemaking limited eligibility for the SVM 
exemption to manufacturers in the U.S. market in MY 2008 or MY 2009 
with U.S. sales of less than 5,000 vehicles per year. After initial 
eligibility has been established, the SVM remains eligible for the 
exemption if the rolling average of three consecutive model years of 
sales remains below 5,000 vehicles. Manufacturers going over the 5,000 
vehicle rolling average limit would have two additional model years to 
transition to having to meet applicable CO2 standards. Based 
on these eligibility criteria, there are three companies that qualify 
currently as SVMs under the MY2012-2016 standards: Aston Martin, Lotus, 
and McLaren.\458\
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    \458\ Under the MY 2012-2016 program, manufacturers must also 
make a good faith effort to purchase CO2 credits in order 
to maintain eligibility for SVM status.

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[[Page 62793]]

    As proposed, EPA is retaining the 5,000 vehicle cut-point and 
rolling three year average approach which we believe is appropriate as 
a primary criterion for eligibility as an SVM. The 5,000 vehicle sales 
threshold allows for some sales growth by SVMs, as the SVMs in the 
market today typically have annual sales of below 2,000 vehicles. 
Manufacturers with unusually strong sales in a given year would still 
likely remain eligible, based on the three year rolling average. 
However, if a manufacturer expands in the U.S. market on a permanent 
basis such that they consistently sell more than 5,000 vehicles per 
year, they would likely increase their rolling average to above 5,000 
and no longer be eligible. EPA believes a manufacturer will be able to 
consider these provisions, along with other factors, in its planning to 
significantly expand in the U.S. market. EPA did not receive comments 
on these provisions. As discussed below, EPA is not tying eligibility 
to having been in the market in MY 2008 or MY 2009, or in any other 
year, and is instead finalizing eligibility criteria for new SVMs newly 
entering the U.S. market.
ii. New SVMs (New Entrants to the U.S. Market)
    The SVM exemption under the MY 2012-2016 program included a 
requirement that a manufacturer had to have been in the U.S. vehicle 
market in MY 2008 or MY 2009. This provision ensured that a known 
universe of manufacturers would be eligible for the exemption in the 
short term and manufacturers would not be driven from the market as EPA 
proceeded to develop appropriate SVM standards. EPA did not propose to 
include such a provision for the SVM standards eligibility criteria for 
MY 2017-2025. See 76 FR 74991. EPA believes that with SVM standards in 
place, tying eligibility to being in the market in a prior year is no 
longer necessary because SVMs will be required to achieve appropriate 
levels of emissions control. Also, this type of eligibility condition 
could serve as a potential market barrier by hindering new SVMs from 
entering the U.S. market.
    For new market entrants, EPA is finalizing the proposed provision 
allowing a manufacturer the option of applying for an alternative 
standard for MY2017-2025 pursuant to the criteria and process described 
above. The new SVM would not be able to certify their vehicles under 
the alternative standards until those standards are established. As 
discussed in the proposal, EPA would expect the manufacturer to submit 
an application as early as possible but at least 30 months prior to 
when they expect to begin producing vehicles in order to provide enough 
time for EPA to evaluate the application and develop standards using 
the public process just described, and to provide necessary lead-time 
to the manufacturer. EPA received no adverse comments regarding the 
timing of the process contemplated in the proposal. In addition to the 
information and data described below, EPA is requiring new market 
entrants to provide evidence that the company intends to enter the U.S. 
market within the time frame of the MY2017-2025 SVM standards. Such 
evidence would include documentation of work underway to establish a 
dealer network, appropriate financing and marketing plans, and evidence 
the company is working to meet other federal vehicle requirements such 
as other EPA emissions standards and NHTSA vehicle safety standards. 
EPA is concerned about the administrative burden that could be created 
for the agency by companies with no firm plans to enter the U.S. market 
submitting applications in order to see what standard might be 
established for them. This information, in addition to a complete 
application with the information and data outlined above, will provide 
evidence of the applicant's legitimacy. As part of this review, EPA 
reserves the right to not undertake its SVM standards development 
process for companies that do not exhibit a legitimate and documented 
effort to enter the U.S. market.
    As discussed in the proposal, EPA remains concerned about the 
potential for gaming by a manufacturer that sells less than 5,000 
vehicles in the first year, but with plans for significantly larger 
sales volumes in the following years. See 76 FR 74991. EPA believes 
that it would not be appropriate to establish alternative SVM standards 
for a new market entrant that plans a steep ramp-up in U.S. vehicle 
sales. Therefore, as proposed for new entrants, U.S. vehicle sales must 
remain below 5,000 vehicles for the each of its first three years in 
the market. After the initial three years, the manufacturer must 
maintain a three year rolling average below 5,000 vehicles (e.g., the 
rolling average of years 2, 3 and 4, must be below 5,000 vehicles). The 
certificate(s) of conformity for vehicles sold by new entrant SVMs will 
be conditioned on staying within the sales threshold, as provided in 
Sec.  40 CFR 86.1848. If a new market entrant sells more than this 
number of vehicles for the first five years in the market, vehicles 
sold above the 5,000 vehicle threshold will not be covered by the 
alternative standards. In such cases where the resulting fleet average 
is not in compliance with the standards, the manufacturer will be 
subject to enforcement action and the manufacturer will also lose 
eligibility for the SVM standards until it has reestablished three 
consecutive years of sales below 5,000 vehicles.
    By not tying the 5,000 vehicle eligibility criteria to a particular 
model year, it will be possible for a manufacturer already in the 
market that drops below the 5,000 vehicle threshold in a future year to 
attempt to establish eligibility. As proposed, EPA will treat such 
manufacturers as new entrants to the market for purposes of determining 
eligibility for SVM standards. However, the requirements to demonstrate 
that the manufacturer intends to enter the U.S. market obviously would 
not be relevant in this case, and therefore will not apply. EPA did not 
receive comments regarding the above provisions for SVM new market 
entrants.
iii. Corporate Ownership Aggregation Requirements and an Operational 
Independence Concept
    In determining eligibility for the MY 2012-2016 exemption, sales 
volumes must be aggregated across manufacturers 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 equity ownership of two or more firms. 
These are the same aggregation requirements used in other EPA small 
volume manufacturer provisions, such as those for other light-duty 
emissions standards.\459\ As proposed, EPA is generally retaining these 
aggregation provisions as part of the eligibility criteria for the SVM 
standards for MYs 2017-2025.\460\ However, as discussed below, EPA 
requested comment on and is finalizing provisions allowing 
manufacturers that otherwise would not be eligible for the GHG SVM 
provisions due to these aggregation requirements, to demonstrate to the 
Administrator that they are ``operationally independent'' based on the 
criteria described below. If the Administrator determines that a 
manufacturer is operationally

[[Page 62794]]

independent, that manufacturer will be eligible for the alternative SVM 
CO2 standards as well as the remaining years of the MY 2012-
2016 exemption even if the manufacturer is more than 10 percent owned 
by another firm.
---------------------------------------------------------------------------

    \459\ For other programs, the eligibility cut point for SVM 
flexibility is 15,000 vehicles rather than 5,000 vehicles.
    \460\ Manufacturers also retain, no matter their size, the 
option to meet the full set of GHG requirements on their own, and do 
not necessarily need to demonstrate compliance as part of a 
corporate parent company fleet.
---------------------------------------------------------------------------

    As we noted at proposal, Ferrari requested in its comments to the 
proposed 2012-2016 GHG standards that manufacturers be allowed to apply 
to EPA to establish SVM status based on the independence of its 
research, development, testing, design, and manufacturing from another 
firm that has ownership interest in that manufacturer. Ferrari is 
majority owned by Fiat and would be aggregated with other Fiat brands, 
including Chrysler, Maserati, and Alfa Romeo, for purposes of 
determining eligibility for SVM standards; therefore Ferrari does not 
meet the current eligibility criteria for SVM status. However, Ferrari 
believed that it would qualify as ``operationally independent'' under 
appropriate criteria and would qualify as an SVM for the GHG program if 
evaluated independent of the other Fiat brands. In the MY 2012-2016 
final rule, EPA noted that it would further consider the issue of 
operational independence and seek public comments on this concept (see 
75 FR 25420) and EPA pursued the issue further in this proceeding. See 
76 FR 74991-92. Specifically, we sought comment on expanding 
eligibility for the SVM GHG standards and provisions to manufacturers 
who would have U.S. annual sales of less than 5,000 if its own vehicles 
based on a demonstration that they are ``operationally independent'' of 
other companies because it operates its research, design, production, 
and manufacturing independently from the parent company.
    In particular, EPA requested comments regarding the degree to which 
this concept could unnecessarily open up the SVM standards to several 
smaller manufacturers that are integrated into large companies--smaller 
companies that may be capable of and planning to meet the 
CO2 standards as part of the larger manufacturer's fleet. 
EPA also requested comment on the concern that manufacturers could 
change their corporate structure to take advantage of such provisions 
(that is, gaming). EPA requested comment on approaches to narrowly 
define the operational independence criteria to ensure that qualifying 
companies are truly independent and to avoid gaming to meet the 
criteria. EPA also requested comments on the possible implications of 
this approach on market competition. EPA acknowledged that regardless 
of the criteria for operational independence, a small manufacturer 
under the umbrella of a large manufacturer is fundamentally different 
from other SVMs because the large manufacturer has several options 
under the GHG program to bring the smaller subsidiary into compliance, 
including the use of averaging or credit transfer provisions, 
purchasing credits from another manufacturer, or providing technical 
and financial assistance to the smaller subsidiary. Truly independent 
SVMs do not have the potential access to these options, with the 
exception of buying credits from another manufacturer. EPA requested 
comments on the need for and appropriateness of allowing companies to 
apply for less stringent SVM standards based on sales that are not 
aggregated with other companies because of operational independence.
    All of the comments on this issue supported allowing manufacturers 
to qualify for alternative standards based on a showing of operational 
independence. Ferrari commented in full support of the operational 
independence concept and the criteria laid out in the proposal, stating 
that the GHG standards could otherwise severely limit Ferrari in the 
U.S. market. Several Ferrari dealers commented in the support of the 
operational independence provision, citing potential for loss of sales 
and jobs at dealerships if this provision were not finalized. Global 
Automakers also strongly supported the operational independence 
provisions.
    With regard to EPA's request for comments regarding the potential 
for gaming, Ferrari commented that the criteria considered by EPA, 
discussed below, will serve as a sufficient safeguard. Ferrari 
commented that the cost of restructuring a company to separate all 
design, R&D, production and testing facilities from the parent company, 
along with the expense of developing completely new powertrains and 
platforms, would be prohibitively expensive. Ferrari also commented 
that the requirements for a newly spun-off manufacturer to establish 
itself as operationally independent over a two year period, during 
which the company will have to meet the GHG standards in order to 
remain in the U.S. market, will also discourage potential gaming. 
Several Ferrari dealers also commented that the criteria will ensure 
that a manufacturer seeking operational independence is truly 
independent. The Global Automakers commented that the criteria are 
sufficiently stringent and there would be virtually no ability for 
manufacturers to abuse the operational independence provision.
    EPA is finalizing the operational independence criteria listed 
below, which were detailed in the request for comments in the proposal 
(see 76 FR 74992). These criteria are meant to establish that a 
company, though owned by another manufacturer, does not benefit 
operationally or financially from this relationship, and should 
therefore be considered independent for purposes of calculating the 
sales volume for determining eligibility for the GHG SVM program. 
Manufacturers must demonstrate compliance with all of these criteria in 
order to be found to be operationally independent. By ``related 
manufacturers'' below, EPA means all manufacturers that would be 
aggregated together under the 10 percent ownership provisions contained 
in EPA's current small volume manufacturer definition (i.e., the parent 
company and all subsidiaries where there is 10 percent or greater 
ownership).
    As proposed, EPA will determine based on information provided by 
the manufacturer in its application, if the manufacturer currently 
meets the following criteria and has met them for at least 24 months 
preceding the application submittal and is therefore operationally 
independent:
    1. No financial or other support of economic value was provided by 
related manufacturers for purposes of design, parts procurement, R&D 
and production facilities and operation. Any other transactions with 
related manufacturers must be conducted under normal commercial 
arrangements like those conducted with other parties. Any such 
transactions shall be at competitive pricing rates to the manufacturer.
    2. The applicant maintains separate and independent research and 
development, testing, and manufacturing/production facilities.
    3. The applicant does not use any vehicle engines, powertrains, or 
platforms developed or produced by related manufacturers.
    4. Patents are not held jointly with related manufacturers.
    5. The applicant maintains separate business administration, legal, 
purchasing, sales, and marketing departments as well as autonomous 
decision making on commercial matters.
    6. Overlap of Board of Directors is limited to 25 percent with no 
sharing of top operational management, including president, chief 
executive officer (CEO), chief financial officer (CFO), and chief 
operating officer (COO), and provided that no individual overlapping 
director or combination of overlapping directors exercises exclusive 
management control over either or both companies.

[[Page 62795]]

    7. Parts or components supply agreements between related companies 
must be established through open market process and to the extent that 
manufacturer sells parts/components to non-related auto manufacturers, 
it does so through the open market at competitive pricing.
    Volkswagen commented in support of the operational independence 
provision, but raised concerns that the above criteria are too 
prescriptive and difficult to apply across all circumstances of 
captured small volume brands. Volkswagen requested that EPA ``consider 
the operational independence of each manufacturer on an individual 
basis during the petition process. As such the degree of independence 
could be part of the negotiation process for setting standards for a 
particular SVM.'' In response, the criteria were not intended to apply 
to ``all circumstances'' of captured brands. The criteria were written 
narrowly to purposely exclude captured brands that are integrated or 
managed by the parent company in any substantive way. EPA's intention, 
as described in the proposal, is to include only companies that can be 
demonstrated to be completely independent, held at arm's length by the 
parent company without access to the resources of the parent company or 
related manufacturers. Further, EPA is concerned that broadening the 
criteria in ways suggested by the commenter would lead to gaming issues 
EPA is seeking to avoid, as discussed above. EPA believes that it is 
important to retain the above criteria in order to avoid having to make 
determinations regarding ``degrees'' of independence.
    In addition to the criteria listed above, EPA is finalizing the 
following programmatic elements and framework. EPA is requiring the 
manufacturer applying for operational independence to provide an attest 
engagement from an independent auditor verifying the accuracy of the 
information provided in the application.\461\ EPA foresees possible 
difficulty verifying the information in the application, especially if 
the company is located overseas. The principal purpose of the attest 
engagement would be to provide an independent review and verification 
of the information provided. Ferrari submitted supportive comments on 
using the EPA fuel programs as a template for the attest engagement 
provisions. EPA is also requiring that the application be signed by the 
company president or CEO.
---------------------------------------------------------------------------

    \461\ EPA has required attest engagements as part of its fuels 
programs. See 40 CFR Sec.  80.125, 40 CFR Sec.  80.1164 and Sec.  
80.1464.
---------------------------------------------------------------------------

    After EPA approval, the manufacturer will be required to report 
within 60 days any material changes to the information provided in the 
application. A manufacturer will lose eligibility automatically after 
the material change occurs. However, EPA will confirm that the 
manufacturer no longer meets one or more of the criteria and thus is no 
longer considered operationally independent, and will notify the 
manufacturer. In such cases, EPA will provide two full model years lead 
time after the MY in which the manufacturer loses eligibility for the 
manufacturer to transition to the primary program standards. For 
example, if the manufacturer lost eligibility sometime during the 
manufacturer's model year 2018 (based on when the material change 
occurs), the manufacturer would need to meet primary program standards 
in MY 2021. A manufacturer losing eligibility must subsequently meet 
the criteria for three consecutive years before it would be allowed to 
petition to re-establish operational independence.
6. Additional Lead Time for Intermediate Volume Manufacturers
    EPA is finalizing provisions to allow additional lead time for 
intermediate volume manufacturers that sell less than 50,000 vehicles 
per year, for the first four years of the program (MY 2017-2020). The 
2012-2016 GHG vehicle standards include Temporary Lead Time Allowance 
Alternative Standards (TLAAS) which provide alternative standards to 
certain intermediate sized manufacturers (those with U.S. sales between 
5,000 and 400,000 during model year 2009) to accommodate two 
situations: manufacturers which traditionally paid civil penalties 
instead of complying with CAFE standards, and limited line 
manufacturers facing special compliance challenges due to less 
flexibility afforded by averaging, banking and trading. The TLAAS 
includes additional flexibility for manufacturers with MY 2009 sales of 
less than 50,000 vehicles through MY 2016. For manufacturers with sales 
of greater than 50,000 vehicles (but less than 400,000), the program 
ends in MY 2015. See 75 FR 25414-416.
    EPA did not propose to continue the TLAAS program for MYs 2017-
2025. See 76 FR 74994. First, the allowance was premised on the need to 
provide adequate lead time, given the (at the time the rule was 
finalized) rapidly approaching MY 2012 deadline, and given that 
manufacturers were transitioning from a CAFE regime that allows civil 
penalties in lieu of compliance, to a Clean Air Act regime that does 
not. That concern is no longer applicable, given that there is ample 
lead time before the MY 2017 standards begin. More importantly, the 
Temporary Lead Time Allowance was just as the name describes--
temporary--and EPA provided it to allow manufacturers to transition to 
full compliance in later model years. See 75 FR 25416. EPA received one 
comment, from Natural Resources Defense Council, generally supporting 
EPA's decision not to propose an extension of the TLAAS program.
    EPA also requested comment on whether there is a need to provide 
some type of additional lead time for intermediate volume, limited line 
manufacturers. Prior to proposal, one company with U.S. sales on the 
order of 25,000 vehicles per year presented confidential business 
information indicating that it believes that the CO2 
standards for MY2017-2025 would present significant technical 
challenges for their company, due to the relatively small volume of 
products it sells in the U.S., its limited ability to average across 
their limited line fleet, and the performance-oriented nature of its 
vehicles. This firm indicated that absent access, several years in 
advance, to CO2 credits that it could purchase from other 
firms, this firm would need to significantly change the types of 
products they currently market in the U.S. (thus affecting their 
``brand'') beginning in model year 2017, even if it adds substantial 
CO2 reducing technology to its vehicles. EPA noted in its 
request for comments that potential flexibilities could include an 
extension of the TLAAS program for lower volume companies, or a one-to-
three year delay in the applicable model year standard (e.g., the 
proposed MY 2017 standards could be delayed to begin in MY 2018, MY 
2019, or MY 2020). See 76 FR 74995.
    Public comments supported the concept of providing additional 
flexibility for limited line intermediate volume manufacturers. In 
particular, EPA received comments from Jaguar Land Rover, Porsche, and 
Suzuki supporting approaches that would provide intermediate volume 
manufacturers with additional flexibility. These three manufacturers 
are eligible under the MY 2012-2016 program for the expanded TLAAS 
provisions through MY 2016, based on their MY 2009 sales of less than 
50,000 vehicles.
    Jaguar Land Rover (JLR) commented that they will be achieving very 
significant CO2 reductions well in excess of industry 
averages. However,

[[Page 62796]]

JLR further commented that the required rates of reduction implied by 
the proposed curves between MY2016 and MY2017 are very challenging for 
lower volume, limited line manufacturers coming out of the expanded 
TLAAS program. JLR further commented that companies participating in 
the expanded TLAAS program in MY 2016 will start MY 2017 with either no 
CO2 credits banked or CO2 debits carrying 
forward. JLR provided confidential information regarding the companies' 
projected situation in the early years of the MY 2017-2025 program. JLR 
requested in their comments that EPA consider phasing in the MY 2017 
and later program for lower volume, limited line niche manufacturers 
when the expanded TLAAS program ends, starting in MY 2017 and ending 
with MY 2021 production, with full compliance with the primary program 
standards in MY 2022.
    Porsche commented that the transition from TLAAS to the base 
standards is a disproportionate burden for niche carmakers, and that 
the transition cannot be accomplished by gradual incremental 
improvements. Porsche commented that their development costs for new 
technology cannot be spread over a large fleet to take advantage of 
natural economies of scale, and that there is a disproportionate 
financial impact on small manufacturers, due to higher per unit cost. 
Porsche further commented that larger competitors can support sports 
car sales by fleet averaging over a broad range of products, and that 
their smallest competitors (SVMs) can request alternate CO2 
standards. Porsche commented that it cannot utilize either of these 
options. Porsche noted that EPA projected in the NPRM far greater 
penetration of electrification for them than for any other 
manufacturer. For example, EPA projected in the proposal a 30 percent 
HEV and 24 percent PHEV/EV penetration for Porsche in 2021. See 76 FR 
75073. Porsche commented that, in the absence of relief, Porsche would 
face a 25 percent reduction in the GHG standards at the expiration of 
MY 2016, and that the proposed standards would create a hurdle that 
would drive them from the marketplace.
    Porsche recommended three possible approaches to address their 
concerns; a fixed alternative standard with a program like TLAAS, case-
by-case standards setting based on the performance of competitor 
vehicles similar to the approach proposed for SVMs, or an alternative 
phase-in that mitigates the potential 25 percent drop in standards in 
MY 2017 after TLAAS expires.
    Suzuki similarly commented raising concerns that the proposed 
standards did not adequately recognize the lead time concerns of low-
volume, limited line manufacturers like Suzuki. Suzuki commented that 
``when small-volume manufacturers need to develop new technology and 
develop a new model/new engine to make the significant improvements 
necessary to comply with the proposed standards, the per-vehicle cost 
for the special development that is needed specifically for the U.S. 
market is much higher than for manufacturers with larger sales 
volumes.'' Suzuki suggested that EPA provide three years additional 
lead time to manufacturers with average U.S. sales of less than 50,000 
vehicles. Under Suzuki's suggestion, such manufacturers would not be 
required to meet the MY 2017 standards until MY 2020 and would be 
required to meet MY 2018-2025 standards until MY 2021-2028. Suzuki did 
not provide any data or information regarding their fleet or plans for 
technology introduction in support of their comments.
    After reviewing the comments and the feasibility issues potentially 
facing these manufacturers in the early years of the program, EPA is 
finalizing additional lead time provisions for intermediate volume 
manufacturers. The additional lead time will help manufacturers 
transition from the expanded TLAAS program in MY 2016 to the primary 
standards being adopted for MY 2017-2025, by helping to mitigate the 
steep increase in standard stringency that would otherwise occur for 
them in the MY 2016-2017 time frame. As discussed in the feasibility 
section III.D, the standards will be especially challenging for them. 
Also, intermediate volume manufacturers have limited ability to average 
due to their limited product line and will not have credits available 
from their own fleet due to the credit restrictions included in the 
TLAAS program. It is possible that the manufacturers could purchase 
credits from other manufacturers (and eligibility for the expanded 
TLAAS provisions requires manufacturers to exhaust credit purchasing 
opportunities), but the availability of credits is highly uncertain due 
to the competitive nature of the auto industry and the one time carry 
forward credit provision to 2021.
    Manufacturers participating in the expanded TLAAS program in MY 
2016 will be eligible for the additional lead time shown in the table 
below. Manufacturers not eligible for the expanded TLAAS program, 
including new market entrants, will not be eligible for the additional 
lead time.\462\ EPA is structuring eligibility in this way because 
manufacturers meeting the primary program standards in MY 2016 will not 
be facing such a steep change in stringency in the early years of the 
program. As shown in the table below, in MY 2017-2018 intermediate 
volume manufacturers must meet their MY 2016 base standards that would 
have applied in MY 2016 under the primary program (i.e., in the absence 
of TLAAS). In effect, this requires the manufacturers to meet the 
standards that would have applied in MY 2017 absent the new standards 
being set in this MY 2017-2025 rule. By MY 2021, the manufacturer must 
be fully compliant with the primary MY 2021 standards.
---------------------------------------------------------------------------

    \462\ Expanded TLAAS is available only to manufacturers in the 
market in MY 2009 with annual U.S. sales of less than 50,000 
vehicles.

Table III-12--Additional Lead Time for Intermediate Volume Manufacturers
------------------------------------------------------------------------
            Model year              Primary program standards that apply
------------------------------------------------------------------------
2017.............................  MY 2016.
2018.............................  MY 2016.
2019.............................  MY 2018.
2020.............................  MY 2019.
2021.............................  MY 2021 (full compliance).
------------------------------------------------------------------------

    EPA recognizes that the additional lead time being finalized does 
not provide the full level of relaxation recommended by the commenters 
and that the standards remain very challenging for these intermediate 
sized companies. However, EPA believes that the additional lead time 
provided will be sufficient to ease the transition to more stringent 
standards in the early years of the 2017-2025 program that could 
otherwise present a difficult hurdle for them to overcome. In this 
regard, we received comments, consistent with our assessment, 
indicating that additional lead time should be sufficient to allow 
manufacturers to meet the standards. The added lead time will allow 
manufacturers to better plan the introduction of technologies to bring 
them into compliance with the primary standards. Also, EPA is not 
adopting any restrictions on credit banking such as those contained in 
the MYs 2012-2016 TLAAS program, allowing intermediate volume 
manufacturers to bank credits in these years to further help smooth the 
transition from one model year to the next. EPA is, however, 
prohibiting any intermediate volume manufacturer opting to use these 
provisions from trading credits

[[Page 62797]]

generated under the alternative phase-in to another firm for the same 
reasons credit trading cannot be used by small volume manufacturers. 
Furthermore, because EPA believes it is reasonable, based on 
intermediate volume manufacturer comments and on the analysis in 
section III.D.6 below (documenting compliance paths for all 
manufacturers), for these manufacturers to achieve the primary 
standards by MY 2021, EPA does not believe that any further lead time 
is warranted. Since it is important to limit as much as possible the 
loss of emissions reductions associated with the additional flexibility 
provided, EPA is not adopting permanent alternative standards, longer 
phase-ins, or other flexibilities for intermediate volume 
manufacturers.
    Porsche noted that the company submitted comments under the 
assumption that they would remain independent from Volkswagen and that 
if the status of their relationship changed such that a supplement to 
their comments would be in order, Porsche reserved the possibility that 
it may submit such comments. On August 1, 2012, VW completed its 
acquisition of 100 percent of Porsche's automotive business.\463\ It is 
EPA's expectation that Porsche will no longer be eligible for the lead 
time provisions discussed above for MY 2017-2020. EPA expects that 
Porsche's fleet will be absorbed into VW's fleet for purposes of 
determining compliance with the GHG standards. Nevertheless, EPA has 
considered Porsche's comments and recommendations with regard to 
intermediate volume manufacturers.
---------------------------------------------------------------------------

    \463\ ``Volkswagen and Porsche finalize creation of Integrated 
Automotive Group,'' Volkswagen news release, August 1, 2012.
---------------------------------------------------------------------------

7. Small Business Exemption
    EPA is finalizing, as proposed, a provision to exempt small 
businesses from the MY2017-2025 standards, as well as establishing a 
voluntary opt-in provision for those small business manufacturers that 
wish to certify to the GHG standards in order to generate and sell 
credits.\464\ In the MY 2012-2016 rule, EPA exempted entities from the 
GHG emissions standard, if the entity met the Small Business 
Administration (SBA) size criteria of a small business as described in 
13 CFR 121.201. \465\ The small business size criterion for vehicle 
manufacturers is less than 1000 employees. This includes both U.S.-
based and foreign small entities in three distinct categories of 
businesses for light-duty vehicles: small manufacturers, independent 
commercial importers (ICIs), and alternative fuel vehicle converters. 
As proposed, EPA is continuing this exemption for the MY 2017-2025 
standards. EPA did not receive any adverse comments regarding 
continuing the exemption for small businesses, as defined.
---------------------------------------------------------------------------

    \464\ Note that `small businesses' are not the same as small 
volume manufacturers. The potential overlap of these terms is 
discussed later in this preamble sub-section.
    \465\ See final regulations at 40 CFR 86.1801-12(j).
---------------------------------------------------------------------------

    EPA has identified about 24 entities that fit the Small Business 
Administration (SBA) size criterion of a small business. EPA estimates 
there currently are approximately five small manufacturers including 
three electric vehicle small business vehicle manufacturers that have 
recently entered the market, eight ICIs, and eleven alternative fuel 
vehicle converters in the light-duty vehicle market. EPA estimates that 
these small entities comprise less than 0.1 percent of the total light-
duty vehicle sales in the U.S., and therefore the exemption will have a 
negligible impact on the GHG emissions reductions from the standards. 
Further detail regarding EPA's assessment of small businesses is 
provided in Regulatory Flexibility Act Section III.I.3 of this 
preamble, and in RIA Chapter 9.
    At least one small business manufacturer, Fisker Automotive, in 
discussions with EPA prior to proposal, suggested that small businesses 
should have the option of voluntarily opting-in to the GHG standards. 
This manufacturer sells electric vehicles, and sees a potential market 
for selling credits to other manufacturers. As discussed in the 
proposal, EPA believes that there could be several benefits to this 
approach, as it would allow small businesses an opportunity to generate 
revenue to offset their technology investments and to encourage 
commercialization of the innovative technology. There would likewise be 
a benefit to any manufacturer seeking those credits to meet their 
compliance obligations. EPA proposed and is finalizing allowing small 
businesses to waive their small entity exemption and opt-in to the 
primary GHG standards based on this same rationale. This will allow 
small business manufacturers to earn CO2 credits under the 
program, which may be an especially attractive option for the new 
electric vehicle manufacturers entering the market. The small business 
would have to meet the primary standard for its fleet (that is, the 
small business would be allowed to opt-in to the primary program 
standard, but not the small volume manufacturer standards, since SVMs 
that receive approval of alternative standards are not eligible to 
generate credits for trading as explained above). As proposed, 
manufacturers waiving their small entity exemption must meet all 
aspects of the GHG standards and program requirements across their 
entire product line.
    EPA proposed to make the opt-in available starting in MY 2014, as 
the MY 2012, and potentially the MY 2013, certification process will 
have already occurred by the time this rulemaking is finalized. See 76 
FR 74994. EPA proposed this timing to avoid retroactively certifying 
vehicles that have already been produced. EPA proposed, however, that 
manufacturers certifying to the GHG standards for MY 2014 would be 
eligible to generate credits for vehicles sold in MY 2012 and MY 2013 
based on the number of vehicles sold and the manufacturer's footprint-
based standard under the primary program that would have otherwise 
applied to the manufacturer if it were a large manufacturer. This 
approach would be similar to that used by EPA for early credits 
generated in MYs 2009-2011, where manufacturers did not certify 
vehicles to CO2 standards in those years but were able to 
generate credits. See 75 FR 25441.
    EPA received comments from Fisker requesting that EPA reconsider 
the timing of the opt-in provisions. Fisker commented that under EPA's 
proposal, manufacturers would not be able to generate credits until the 
end of MY 2014, even for vehicles that are produced in MYs 2012-2013. 
Fisker commented that this would significantly diminish the revenue 
generating benefit of these credits, particularly during the critical 
early years of their company when potential credit revenues would be of 
most benefit to the company. EPA is persuaded by this reasoning, and 
the final rule therefore provides that the opt-in provisions begin with 
MY 2013. See Sec.  86.1801-12(j)(2)(i). The timing of the final rule 
will allow the GHG requirements to be integrated into the MY 2013 
certification process for these small businesses. Once the small 
business manufacturer opting into the GHG program completes 
certification for MY 2013, the company will be eligible to generate GHG 
credits for their MY 2012 production. Manufacturers will not have to 
wait until the end of MY 2013 to generate MY 2012 credits. EPA believes 
this provision is responsive to the concerns of the commenter while 
still ensuring that the manufacturer is certified under the GHG program 
prior to generating credits.
    EPA also received comments from Vehicle Production Group that small 
business entities are discussed in terms of small volume manufacturers,

[[Page 62798]]

independent commercial importers, and alternative fuel converters, and 
that limited line manufacturers should be added to the list of types of 
small entities affected. EPA is clarifying that, as proposed, 
manufacturers meeting the SBA definition of small business (1,000 
employees) are exempt regardless of their production volume or number 
of vehicle lines produced. Also, not all small volume manufacturers 
qualify as small businesses, and EPA is adopting special provisions for 
SVMs that are non-small business companies. See Section III.B.5. EPA 
did not propose to change the use of the SBA definition for determining 
whether a manufacturer is considered a small business. EPA does not 
believe that using the number of vehicle lines is appropriate to 
determine eligibility for the small business exemption. This approach 
would create a loophole for large manufacturers producing a limited 
product line for the U.S. market and such a manufacturer would 
potentially be capable of selling a large volume of vehicles under such 
an exemption.
8. Police and Emergency Vehicle Exemption From GHG Standards
    EPA is finalizing its proposal to exempt police and other emergency 
vehicles from the GHG standards, starting in MY2012. Under EPCA, 
manufacturers are allowed to exclude police and other emergency 
vehicles from their CAFE fleet and all manufacturers that produce 
emergency vehicles have historically done so. EPA is adopting an 
exemption parallel to the EPCA exemption allowing manufacturers to 
exempt police and emergency vehicles upon sending notification to EPA 
(the same notification that is sent to NHTSA would suffice). EPA 
received comments in the MY 2012-2016 rulemaking that these vehicles 
should be exempt from the GHG emissions standards and EPA committed to 
further consider the issue in a future rulemaking.466,467 
EPA continues to believe it is appropriate to provide an exemption at 
this time for these vehicles because of the unique features of vehicles 
designed specifically for law enforcement and emergency response 
purposes, which have the effect of raising their GHG emissions, as well 
as for purposes of harmonization with the CAFE program. As proposed, 
EPA is exempting vehicles that are excluded under EPCA and NHTSA 
regulations which define emergency vehicle as ``a motor vehicle 
manufactured primarily for use as an ambulance or combination 
ambulance-hearse or for use by the United States Government or a State 
or local government for law enforcement, or for other emergency uses as 
prescribed by regulation by the Secretary of Transportation.'' \468\
---------------------------------------------------------------------------

    \466\ 75 FR 25409
    \467\ Manufacturers may exclude police and emergency vehicles 
from fleet average calculations (both for determining fleet 
compliance levels and fleet standards) starting in MY 2012. Because 
this would have the effect of making the fleet standards easier to 
meet for manufacturers, EPA does not believe there would be lead 
time issues associated with the exemption, even though it would take 
effect well into MY 2012.
    \468\ 49 U.S.C. 32902(e)
---------------------------------------------------------------------------

    EPA received comments from manufacturers supporting the proposed 
emergency vehicle exemption and harmonization with the EPCA exemption. 
Ford further commented that without the exemption, ``manufacturers 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 exiting the market 
altogether, or (3) facing non-compliance with the federal GHG 
standards.'' \469\ EPA also received comments from Pennsylvania 
Department of Environmental Protection that the new technologies to 
generate more horsepower can be used to downsize a vehicle's engine and 
that ``No logical reason seems to exist as to why this new technology 
cannot be used for police and emergency vehicles in order to gain fuel 
efficiency without loss of power. Police and emergency vehicles 
constitute a large fleet in the United States; not including them so 
they can benefit from the same GHG-reducing technology would be 
unfortunate.''
---------------------------------------------------------------------------

    \469\ Ford's comment was originally submitted for the MY 2012-
2016 rulemaking and is incorporated by reference into Ford's 
comments in the MY 2017-2025 rulemaking. See Docket items EPA-HQ-
OAR-2009-0472-7082.1 and EPA-HQ-OAR-2010-0799-9463, respectively.
---------------------------------------------------------------------------

    As discussed in the proposal, the unique features of these vehicles 
result in significant added weight including: heavy-duty suspensions, 
stabilizer bars, heavy-duty/dual batteries, heavy-duty engine cooling 
systems, heavier glass, bullet-proof side panels, and high strength 
sub-frame. Police pursuit vehicles are often equipped with specialty 
steel rims and increased rolling resistance tires designed for high 
speeds, and unique engine and transmission calibrations to allow high-
power, high-speed chases. Police and emergency vehicles also have 
features that tend to reduce aerodynamics, such as emergency lights, 
increased ground clearance, and heavy-duty front suspensions.
    EPA remains concerned that manufacturers may not be able to 
sufficiently reduce the emissions from these vehicles, and absent an 
exemption would be faced with a difficult choice of compromising 
necessary vehicle features or dropping vehicles from their fleets, as 
they may not have credits under the fleet averaging provisions 
necessary to cover the excess emissions from these vehicles as 
standards become more stringent. EPA continues to believe that without 
the exemption, there could be situations where a manufacturer is more 
challenged in meeting the GHG standards simply due to the inclusion of 
these higher emitting emergency vehicles. Technical feasibility issues 
go beyond those of other high-performance vehicles, and vehicles with 
these performance characteristics must continue to be made available in 
the market. Therefore, EPA is finalizing the proposed exemption for 
police and emergency vehicles and thus not including these vehicles in 
the National Program at this time. MY 2012-2016 standards, as well as 
MY 2017 and later standards would be fully harmonized with CAFE 
regarding the treatment of these vehicles.
    EPA received comments from manufacturers that EPA should exempt 
police and emergency vehicles from the CH4 and 
N2O standards as well as the fleet-average CO2 
standards in order to ensure full consistency with CAFE. EPA 
understands that the NPRM was unclear on this point and EPA is 
clarifying that the exemption applies to the overall GHG program 
including the N2O and CH4 standards.
    EPA received comments from Vehicle Production Group that the police 
and emergency vehicle exemption should be expanded to include vehicles 
manufactured ``for the public good,'' which would include vehicles 
manufactured for the specific purpose of transporting wheelchair users. 
EPA is not expanding the police and emergency vehicle exemption to 
include vehicles used ``for the public good'' as this term is not 
defined in current regulations and is not included in the EPCA 
exemption. EPA also does not believe that these other types of vehicles 
are designed for the severe duty cycles that are experienced by police 
and emergency vehicles, and therefore do not face the same potential 
constraints in terms of vehicle design and the application of 
technology.

[[Page 62799]]

9. Nitrous Oxide, Methane, and CO2-Equivalent Approaches
    EPA is not amending the standards for nitrous oxides 
(N2O) or methane (CH4) adopted in the 2012-2016 
light-duty vehicle GHG rules. These standards serve to cap emissions of 
N2O and CH4, and generally ensure that emissions 
of these GHGs will not increase above current levels. The issues 
addressed in this rulemaking relate to means of demonstrating and 
documenting compliance with these standards. As proposed, EPA is 
extending to MY 2017 and later the provisions allowing manufacturers to 
use CO2 credits on a CO2-equivanent basis to 
comply with the standards for N2O and CH4. EPA is 
also finalizing additional lead time for manufacturers to use 
compliance statements in lieu of N2O testing through MY 
2016, as proposed. In addition, in response to comments, EPA is 
allowing the continued use of compliance statements in MYs 2017-2018 in 
cases where manufacturers are not conducting new emissions testing for 
a test group, but rather carrying over certification data from a 
previous year. EPA is also clarifying that manufacturers will not be 
required to conduct in-use testing for N2O in cases where a 
compliance statement has been used for certification. All of these 
provisions are discussed in detail below. The Response to Comments 
document provides a full review of all comments received by EPA on 
issues relating to the standards for N2O and CH4.
a. N2O and CH4 Standards and Flexibility
    For light-duty vehicles, as part of the MY 2012-2016 rulemaking, 
EPA finalized standards for nitrous oxide (N2O) of 0.010 g/
mile and methane (CH4) of 0.030 g/mile for MY 2012 and later 
vehicles. 75 FR 25421-24. The light-duty vehicle standards for 
N2O and CH4 were established to cap emissions of 
these GHGs, where current levels are generally significantly below the 
cap. The cap were intended to prevent future emissions increases, and 
these standards were generally not expected to result in the 
application of new technologies or significant costs for manufacturers 
using current vehicle designs. In the MY 2012-2016 rule, EPA also 
finalized an alternative CO2 equivalent standard option, 
which manufacturers may choose to use in lieu of complying with the 
N2O and CH4 cap standards. The CO2-
equivalent standard option allows manufacturers to fold all 2-cycle 
weighted N2O and CH4 emissions, on a 
CO2-equivalent basis, along with CO2 into their 
CO2 emissions fleet average compliance level.\470\ The 
applicable CO2 fleet average standard is not adjusted to 
account for the addition of N2O and CH4. For 
flexible fueled vehicles, the N2O and CH4 
standards must be met on both fuels (e.g., both gasoline and E-85).
---------------------------------------------------------------------------

    \470\ The global warming potentials (GWP) used in this rule are 
consistent with the 100-year time frame values in the 2007 
Intergovernmental Panel on Climate Change (IPCC) Fourth Assessment 
Report (AR4). At this time, the 100-year GWP values from the 1995 
IPCC Second Assessment Report (SAR) are used in the official U.S. 
GHG inventory submission to the United Nations Framework Convention 
on Climate Change (UNFCCC) per the reporting requirements under that 
international convention. The UNFCCC recently agreed on revisions to 
the national GHG inventory reporting requirements, and will begin 
using the 100-year GWP values from AR4 for inventory submissions in 
the future. According to the AR4, N2O has a 100-year GWP 
of 298 and CH4 has a 100-year GWP of 25.
---------------------------------------------------------------------------

    After the light-duty standards were finalized, manufacturers raised 
concerns that for a few of the vehicle models in their existing fleet 
they were having difficulty meeting the N2O and/or 
CH4 standards, in the near-term. In such cases, 
manufacturers would still have the option of complying using the 
CO2 equivalent alternative. On a CO2 equivalent 
basis, folding in all N2O and CH4 emissions could 
add up to 3-4 g/mile to a manufacturer's overall fleet-average 
CO2 emissions level because the alternative standard must be 
used for the entire fleet, not just for the problem vehicles. The 3-4 
g/mile assumes all emissions are actually at the level of the cap. See 
75 FR 74211. As we noted at proposal, this could be especially 
challenging in the early years of the MY 2012-2016 program for 
manufacturers with little compliance margin because there is very 
limited lead time to develop strategies to address these additional 
emissions. Some manufacturers believe that the CO2-
equivalent fleet-wide option ``penalizes'' manufacturers that choose 
this option, by requiring them to fold in both CH4 and 
N2O emissions for their entire fleet, even if they have 
difficulty meeting the cap on only one vehicle model.
    In response to these concerns, EPA has already amended the MY 2012-
2016 standards (as part of the heavy-duty GHG rulemaking) to allow 
manufacturers to use CO2 credits, on a CO2-
equivalent basis, to meet the light-duty N2O and 
CH4 standards in MYs 2012-2016.\471\ Manufacturers have the 
option of using CO2 credits to meet either or both the 
N2O standard and the CH4 standard on a test group 
basis as needed. In their public comments to the proposal (in the 
heavy-duty rulemaking) on this issue, manufacturers urged EPA to extend 
this flexibility for model years after 2016, as they believed this 
option was more advantageous than the CO2-equivalent fleet 
wide option (discussed previously) already provided in the light-duty 
MY 2012-2016 program, because it allowed manufacturers to address 
N2O and CH4 separately and on a test group basis, 
rather than across their whole fleet. Further, manufacturers believed 
that since this option is allowed under the heavy-duty standards, 
allowing it for post-2016 model years in the light-duty program would 
make the light- and heavy-duty GHG programs more consistent. In the 
final rule for heavy-duty vehicle GHG standards, EPA noted that it 
intended to consider this issue further in the context of new standards 
for MYs 2017-2025, in the then-planned future light-duty vehicle 
rulemaking. 76 FR 57194.
---------------------------------------------------------------------------

    \471\ See 76 FR 57193-94.
---------------------------------------------------------------------------

    Acting on this intention, EPA proposed to extend the option of 
using CO2 credits on a CO2-equivalent basis to 
meet the light-duty vehicle N2O and CH4 standards 
for MYs 2017 and later. EPA is adopting this provision as proposed. EPA 
continues to believe that allowing use of CO2 credits to 
meet CH4 and N2O standards on a CO2 
equivalent basis is a reasonable approach to provide additional 
flexibility without diminishing overall GHG emissions reductions. All 
of the comments on this issue from automakers and others supported 
extending this option beyond MY 2016.\472\
---------------------------------------------------------------------------

    \472\ There likewise was no opposition to EPA's earlier proposal 
to amend the MYs 2012-2016 light-duty GHG standards to allow this 
option.
---------------------------------------------------------------------------

    EPA also requested comment on establishing an adjustment to the 
CO2-equivalent standard for manufacturers selecting the 
CO2-equivalent option. See 76 FR 74993. Under the approach 
described in the proposal, manufacturers would continue to be required 
to fold in all of their CH4 and N2O emissions, 
along with CO2, into their CO2-equivalent levels. 
They would then apply an agency-established adjustment factor to the 
CO2-equivalent standard which would slightly increase the 
amount of allowed fleet average CO2 equivalent emissions for 
the manufacturer's fleet. For example, if the adjustment for 
CH4 and N2O combined was 1 to 2 g/mile CO2 
equivalent (taking into account the GWP of N2O and 
CH4), manufacturers would determine their CO2 
fleet emissions standard and add the 1 to 2 g/mile adjustment factor to 
it to determine their CO2-equivalent standard. The purpose 
of this adjustment would be so manufacturers do not have to offset the 
typical N2O

[[Page 62800]]

and CH4 vehicle emissions, while holding manufacturers 
responsible for higher than average N2O and CH4 
emissions levels reflected by the adjustment factor. EPA did not set 
out in the proposal a specific adjustment value due to a current lack 
of test data on estimated in-use N2O emissions on which to 
base the adjustment value for N2O. EPA requested comment on 
actual N2O data which could be used as the basis for such an 
adjustment.\473\
---------------------------------------------------------------------------

    \473\ See 76 FR 74993.
---------------------------------------------------------------------------

    EPA received comments both in support of and against establishing 
an adjustment factor for the fleet-wide CO2-equivalent 
option. Volkswagen commented in support of an adjustment factor, 
pledging to work with EPA to generate proper data such that an 
appropriate adjustment factor could be established. General Motors (GM) 
disagreed with establishing an adjustment factor, arguing that using an 
average value for all passenger cars and light trucks to establish an 
adjustment factor will inherently and unduly lessen the stringency of 
some manufacturers' fleet average standard while increasing the 
stringency for others. In light of the concerns voiced by GM and a lack 
of data on which to base an adjustment factor for N2O, EPA 
is not adopting such an approach. Thus, the CO2 equivalent 
option as adopted in the MY2012 and later program, and described above, 
remains in effect.
    GM commented that a second approach would be to modify the 
CO2-equivalent equations instead of adjusting the 
CO2 standard. GM commented that currently if a manufacturer 
chooses the option to use the CO2-equivalent carbon related 
exhaust emissions (CREE) equations, it has to include all 
CH4 and N2O emissions which would result in an 
increase of up to approximately 3 g/mile for vehicles that would have 
otherwise been able to meet the N2O and CH4 
emission standards. So, in order to make the CO2-equivalent 
option more appealing, EPA would have to modify the CO2-
equivalent equations in such a fashion as to not penalize a 
manufacturer for meeting the current CH4 and N2O 
emission standards while still including a mechanism that would require 
a manufacturer to account for exceedances of the standards (i.e., fold 
in only CH4 and N2O emissions above their 
respective standards). EPA has considered this suggestion and believes 
it offers essentially the same flexibility that we are adopting in 
today's final rule; allowing CO2 credits on a 
CO2-equivalent basis to be used to offset exceedances of the 
N2O and CH4 standards. Because the suggested 
option is effectively the same as the flexibility already being 
finalized for MYs 2017 and beyond, EPA is not including such an 
approach in this final rule.
    EPA also received comments from Global Automakers regarding the 
CO2-equivalent fleet option provisions which require that 
manufacturers selecting the option use it for both their car and light 
truck fleets, and for both N2O and CH4. Global 
Automakers commented that they would like to see an allowance to use 
different compliance options for CH4 and/or N2O 
and also for passenger car and light truck fleets in the same model 
year. Global Automakers further commented that the restrictions limit 
manufacturers' compliance options without clear environmental benefit. 
In response, EPA is concerned that opening the program to allow 
manufacturers to mix their compliance options in this way would add to 
the complexity of the program in terms of tracking compliance, without 
providing meaningful additional flexibility to the manufacturer not 
already provided by allowing CO2 credits to be used to 
offset exceedances of either the CH4 or N2O 
standards on a vehicle test group basis. Global Automakers did not 
provide comments regarding why this type of flexibility would be useful 
to manufacturers or examples of how it would be used in lieu of other 
compliance options. Therefore, EPA is not adopting these requested 
changes for the fleet-wide CO2-equivalent option.
b. N2O Measurement
    For the N2O standard, EPA finalized provisions in the MY 
2012-2016 rule allowing manufacturers to support an application for a 
certificate by supplying a compliance statement based on good 
engineering judgment, in lieu of N2O test data, through MY 
2014. EPA required N2O testing starting with MY 2015. See 75 
FR 25423. This flexibility provided manufacturers with lead time needed 
to make necessary facilities changes and install N2O 
measurement equipment.
    In the MY 2017-2025 proposal, EPA proposed to extend the ability 
for manufacturers to use compliance statements based on good 
engineering judgment in lieu of test data through MY 2016. See 76 FR 
74994. Prior to proposal, manufacturers raised concerns that the lead-
time provided to begin N2O measurement is not sufficient, as 
their research and evaluation of N2O measurement 
instrumentation had involved a greater level of effort than previously 
expected. EPA evaluated new instruments for N2O measurement 
and discussed in the proposal that newer instruments evaluated since 
the time of the 2012-2016 rulemaking have the potential to provide more 
precise emissions measurement. EPA believed that it would be prudent to 
provide manufacturers with additional time to evaluate, procure, and 
install the new equipment in their test cells.\474\ EPA proposed that 
beginning in MY 2017, manufacturers would be required to measure 
N2O emissions to verify compliance with the standard. This 
approach would provide the manufacturers with two additional years of 
lead-time to evaluate, procure, and install N2O measurement 
systems throughout their certification laboratories.
---------------------------------------------------------------------------

    \474\ ``Data from the evaluation of instruments that measure 
Nitrous Oxide (N2O),'' Memorandum from Chris Laroo to 
Docket EPA-HQ-OAR-2010-0799, October 31, 2011.
---------------------------------------------------------------------------

    EPA is finalizing the additional lead-time for N2O 
testing essentially as proposed. As discussed below, in response to 
comments, EPA is temporarily (for MYs 2017 and 2018) allowing 
manufacturers to continue to use compliance statements for test groups 
certified using carry-over data. EPA is also clarifying, in response to 
comments, that manufacturers will not be required to conduct in-use 
testing for vehicle test groups certified using a compliance statement.
    EPA received several comments from manufacturers regarding 
N2O testing. Manufacturers remain concerned that test 
equipment will not be available in time to provide accurate measurement 
for MY 2017 and some recommended that EPA re-evaluate N2O 
testing as part of the mid-term review. The Alliance commented that 
there is currently no accurate measurement technology available that is 
suitable for high-volume testing and that laser based N2O 
analysis is so new that most of the instruments are still in the 
development stages and hence are prototypes. The Alliance commented 
that it would take 4.5 years to install a new analyzer in a single test 
site and therefore testing would not be ready until MY 2019. Global 
Automakers commented that that the Non-Dispersive Infrared Analyzer 
(NDIR) and Fourier Transform Infrared (FTIR) bag analysis methods 
currently have repeatability, durability and/or practicality concerns. 
Hyundai and Volvo expressed a preference for bag measurement methods to 
minimize testing throughput and also noted that no new equipment is 
available for this type of testing.
    In response, although EPA recognizes manufacturers' concerns about 
the

[[Page 62801]]

challenges associated with the measurement of N2O, we are 
confident that the improvements in N2O measurement 
technology over the past few years, specifically with respect to the 
development of laser source based instruments, has provided an avenue 
for accurate low-level N2O measurement.
    At this time we are aware of four manufactures of laser source 
instruments, and we have evaluated the instruments from three of these 
manufacturers. Horiba's MEXA-1100QL and Sensors' LASAR systems have 
performed very well and are suitable for measurement of N2O 
from light-duty passenger vehicles. We also note that the gas 
chromatograph-electron capture detector (GC-ECD) still remains a viable 
option for low level measurement of N2O.\475\
---------------------------------------------------------------------------

    \475\ ``Data from the evaluation of instruments that measure 
Nitrous Oxide (N2O),'' Memorandum from Chris Laroo to 
Docket EPA-HQ-OAR-2010-0799, March 19, 2012.
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    Our evaluations of these N2O measurement systems have 
shown how measurement technologies have evolved over time. While we 
have acknowledged the challenges associated with measurement using 
photoacoustic spectroscopy (PAS), non-dispersive infrared spectroscopy 
(NDIR), and Fourier transform infrared spectroscopy (FTIR); the laser 
source systems have been shown to be a marked improvement.
    In an initial evaluation of existing N2O measurement 
technologies, EPA found that interference from CO, CO2, and 
H2O was contributing positive error (high bias) for PAS, 
NDIR, and FTIR technologies. It was also thought that a small amount of 
error could be attributed to bag blending error. EPA's subsequent 
evaluations of laser source instruments have shown marked improvement 
in measurement accuracy and elimination of interference, leaving just a 
small amount of measurement error associated with EPA bag blend 
measurements, which is primarily due to blending error.\5\ The Alliance 
points out that our N2O measurements are slightly low, while 
NDIR measurements of CO and CO2 are slightly high. The 
Alliance points to interference as the culprit. We would like to point 
out that our NDIR instruments have internal compensation detectors that 
internally correct for the effects of CO, CO2, and 
H2O interference on the measurement of CO and 
CO2. Thus the error shown in these measurements is not due 
to interference effects, but rather to bag blend errors. These blending 
errors are also responsible for the slight underreporting of 
N2O as measured by the laser instruments, keeping in mind 
that any associated interference would have biased the N2O 
measurements high, not low.
    With respect to timing, we do not see why it would take 4.5 years 
to properly install a new N2O analyzer into a single test 
site. While we understand that some time is needed for manufacturers to 
determine which measurement technology to purchase, we would expect the 
time to evaluate, procure, and install one of these instruments to be 
more like one year, which is the timing EPA has experienced with 
acquiring these instruments at our National Vehicle and Fuels Emissions 
Laboratory.
    The Alliance also recommended that the requirement to measure 
N2O only be applied to new emission certification programs 
that are implemented after the establishment of proper N2O 
measurement instrumentation and procedures. Manufacturers routinely use 
``carryover'' emissions certification and durability data from a 
previous model year in lieu of repeating the same emission tests. The 
Alliance commented that assuming that N2O measurement 
capabilities are not available until the MY 2017, manufacturers would 
be forced to rerun all of their emission durability and certification 
testing in one model year. This would be an unnecessary and unwarranted 
certification burden for that particular model year. EPA believes that 
this recommendation has merit, as it would allow for a more reasonable 
testing workload as manufacturers transition to N2O 
measurement. Therefore, for MYs 2017-2018, EPA is requiring 
N2O testing only for new emission certification programs and 
not in cases where the manufacturer is using carryover emissions data. 
In cases where manufacturers are using carry-over data in MY 2017-2018, 
the manufacturer may continue to provide a compliance statement in lieu 
of measured N2O test data. Applying the new testing 
requirements in this way will allow manufacturers to spread out the new 
testing burden over a number of years. EPA believes this type of phase-
in is appropriate. EPA will no longer accept compliance statements for 
any vehicle test groups starting with MY 2019.
    The Alliance commented that N2O testing should not be 
required for manufacturer in-use testing (IUVP and IUCP) for all model 
years and test groups that certify to the N2O standards via 
a compliance statement. The Alliance commented that ``EPA should not 
hold the manufacturers accountable for measuring N2O 
utilizing a method that will have been established subsequent to 
certification, nor should EPA hold a manufacturer responsible for 
meeting a standard for which accurate measurement methods were not 
available at the time of certification.'' EPA believes this 
recommendation is reasonable and is not requiring manufacturers to 
conduct in-use testing for the IUVP and IUCP programs for test groups 
certified using an N2O compliance statement. This will 
further ease the testing burden in the initial years of the measurement 
program and allow manufacturers to focus on new certification testing. 
EPA notes, however, that manufacturers remain responsible for meeting 
the N2O standard in-use and EPA maintains the discretion to 
conduct its own in-use N2O testing of test groups certified 
using compliance statements.
    EPA also received comments from the Global Automakers that because 
N2O is a small fraction of overall GHGs and should remain 
small, and the testing equipment is expensive, EPA should allow the use 
of compliance statements until such time as there is evidence that 
N2O emissions may be an issue. In response, EPA believes 
that it is important for manufacturers to demonstrate compliance with 
the emissions standard for N2O through testing as soon as it 
is reasonable to do so to ensure that N2O does not increase 
with the introduction of new technologies.
10. Test Procedures
    In the proposal, EPA announced that it is considering revising the 
procedures for measuring fuel economy and calculating average fuel 
economy for the CAFE program, effective beginning in MY 2017, to 
account for three impacts on fuel economy not currently included in 
these procedures--increases in fuel economy because of increases in 
efficiency of the air conditioner; increases in fuel economy because of 
technology improvements that achieve ``off-cycle'' benefits; and 
incentives for use of certain hybrid technologies in full size pickup 
trucks, and for the use of other technologies that help those vehicles 
exceed their targets, in the form of increased values assigned for fuel 
economy. EPA is adopting the proposed changes. As discussed in section 
IV of this Notice, NHTSA has taken these changes into account in 
determining the maximum feasible fuel economy standard, to the extent 
practicable. In this section, EPA discusses the legal framework for 
these changes, and the mechanisms by which these changes will be 
implemented. EPA is adopting this approach as appropriate after

[[Page 62802]]

consideration of all comments on these issues.
    These changes are the same as program elements that are part of 
EPA's greenhouse gas performance standards, discussed in section 
III.B.1 and 2, above. EPA is adopting these changes for A/C efficiency 
and off-cycle technology because they are based on technology 
improvements that affect real world fuel economy, and the incentives 
for light-duty trucks will promote greater use of hybrid technology to 
improve fuel economy in these vehicles. In addition, adoption of these 
changes would lead to greater coordination between the greenhouse gas 
program under the CAA and the fuel economy program under EPCA. As 
discussed below, these three elements would be implemented in the same 
manner as in the EPA's greenhouse gas program--a vehicle manufacturer 
would have the option to generate these fuel economy values for vehicle 
models that meet the criteria for these ``credits,'' and to use these 
values in calculating their fleet average fuel economy.
a. Legal Framework
    EPCA provides that:
    (c) Testing and calculation procedures. The Administrator [of EPA] 
shall measure fuel economy for each model and calculate average fuel 
economy for a manufacturer under testing and calculation procedures 
prescribed by the Administrator. However * * *, the Administrator shall 
use the same procedures for passenger automobiles the Administrator 
used for model year 1975 * * *, or procedures that give comparable 
results. 49 U.S.C. 32904(c)
    Thus, EPA is charged with developing and adopting the procedures 
used to measure fuel economy for vehicle models and for calculating 
average fuel economy across a manufacturer's fleet. While this 
provision provides broad discretion to EPA, it contains an important 
limitation for the measurement and calculation procedures applicable to 
passenger automobiles. For passenger automobiles, EPA has to use the 
same procedures used for model year 1975 automobiles, or procedures 
that give comparable results.\476\ This limitation does not apply to 
vehicles that are not passenger automobiles. The legislative history 
explains that:
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    \476\ For purposes of this discussion, EPA need not determine 
whether the changes relating to A/C efficiency, off-cycle, and 
light-duty trucks involve changes to procedures that measure fuel 
economy or procedures for calculating a manufacturer's average fuel 
economy. The same provisions apply irrespective of which procedure 
is at issue. This discussion generally refers to procedures for 
measuring fuel economy for purposes of convenience, but the same 
analysis applies whether a measurement or calculation procedure is 
involved.
---------------------------------------------------------------------------

    Compliance by a manufacturer with applicable average fuel economy 
standards is to be determined in accordance with test procedures 
established by the EPA Administrator. Test procedures so established 
would be the procedures utilized by the EPA Administrator for model 
year 1975, or procedures which yield comparable results. The words ``or 
procedures which yield comparable results'' are intended to give EPA 
wide latitude in modifying the 1975 test procedures to achieve 
procedures that are more accurate or easier to administer, so long as 
the modified procedure does not have the effect of substantially 
changing the average fuel economy standards. H. R. Rep. No. 94-340, at 
91-92 (1975).\477\
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    \477\ Unlike the House Bill, the Senate bill did not restrict 
EPA's discretion to adopt or revise test procedures. Senate Bill 
1883, section 503(6). However, the Senate Report noted that:
    The fuel economy improvement goals set in section 504 are based 
upon the representative driving cycles used by the Environmental 
Protection Agency to determine automobile fuel economies for model 
year 1975. In the event that these driving cycles are changed in the 
future, it is the intent of this legislation that the numerical 
miles per gallon values of the fuel economy standards be revised to 
reflect a stringency (in terms of percentage-improvement from the 
baseline) that is the same as the bill requires in terms of the 
present test procedures. S. Rep. No. 94-179, at 19 (1975).
    In Conference, the House version of the bill was adopted, which 
contained the restriction on EPA's authority.
---------------------------------------------------------------------------

    EPA measures fuel economy for the CAFE program using two different 
test procedures--the Federal Test Procedure (FTP) and the Highway Fuel 
Economy Test (HFET). These procedures originated in the early 1970s, 
and were intended to generally represent city and highway driving, 
respectively. These two tests are commonly referred to as the ``2-
cycle'' test procedures for CAFE. The FTP is also used for measuring 
compliance with CAA emissions standards for vehicle exhaust. EPA has 
made various changes to the city and highway fuel economy tests over 
the years. These have ranged from changes to dynamometers and other 
mechanical elements of testing, changes in test fuel properties, 
changes in testing conditions, to changes made in the 1990s when EPA 
adopted additional test procedures for exhaust emissions testing, 
called the Supplemental Federal Test Procedures (SFTP).
    When EPA has made changes to the FTP or HFET, we have evaluated 
whether it is appropriate to provide for an adjustment to the measured 
fuel economy results, to comply with the EPCA requirement for passenger 
cars that the test procedures produce results comparable to the 1975 
test procedures. These adjustments are typically referred to as a CAFE 
or fuel economy test procedure adjustment or adjustment factor. In 1985 
EPA evaluated various test procedure changes made since 1975, and 
applied fuel economy adjustment factors to account for several of the 
test procedure changes that reduced the measured fuel economy, 
producing a significant CAFE impact for vehicle manufacturers. 50 FR 
27172 (July 1, 1985). EPA defined this significant CAFE impact as any 
change or group of changes that has at least a one-tenth of a mile per 
gallon impact on CAFE results. Id. at 27173. EPA also concluded in this 
proceeding that no adjustments would be provided for changes that 
removed the manufacturer's ability to take advantage of flexibilities 
in the test procedure and derive increases in measured fuel economy 
values which were not the result of design improvements or marketing 
shifts, and which would not result in any improvement in real world 
fuel economy. EPA likewise concluded that test procedure changes that 
provided manufacturers with an improved ability to achieve increases in 
measured fuel economy based on real world fuel economy improvements 
also would not warrant a CAFE adjustment. Id. at 27172, 27174, 27183. 
EPA adopted retroactive adjustments that had the effect of increasing 
measured fuel economy (to offset test procedure changes that reduced 
the measured fuel economy level) but declined to apply retroactive 
adjustments that reduced fuel economy.
    The D.C. Circuit reviewed two of EPA's decisions on CAFE test 
procedure adjustments. Center for Auto Safety et al. v. Thomas, 806 
F.2d 1071 (1986). First, the Court rejected EPA's decision to apply 
only positive retroactive adjustments, as the appropriateness of an 
adjustment did not depend on whether it increased or decreased measured 
fuel economy results. Second, the Court upheld EPA's decision to not 
apply any adjustment for the change in the test setting for road load 
power. The 1975 test procedure provided a default setting for road load 
power, as well as an optional, alternative method that allowed a 
manufacturer to develop an alternative road load power setting. The 
road load power setting affected the amount of work that the engine had 
to perform during the test, hence it affected the amount of fuel 
consumed during the test and the measured fuel

[[Page 62803]]

economy. EPA changed the test procedure by replacing the alternative 
method in the 1975 procedure with a new alternative coast down 
procedure. Both the original and the replacement alternative procedures 
were designed to allow manufacturers to obtain the benefit of vehicle 
changes, such as changes in aerodynamic design, that improved real 
world fuel economy by reducing the amount of work that the engine 
needed to perform to move the vehicle. The Center for Auto Safety (CAS) 
argued that EPA was required to provide a test procedure adjustment for 
the new alternative coast down procedure as it increased measured fuel 
economy compared to the values measured for the 1975 fleet. In 1975, 
almost no manufacturers made use of the then available alternative 
method, while in later years many manufacturers made use of the option 
once it was changed to the coast down procedure. CAS argued this 
amounted to a change in test procedure that did not achieve comparable 
results, and therefore required a test procedure adjustment. CAS did 
not contest that the coast down method and the prior alternative method 
achieved comparable results.
    The D.C. Circuit rejected CAS' arguments, stating that:
    The critical fact is that a procedure that credited reductions in a 
vehicle's road load power requirements achieved through improved 
aerodynamic design was available for MY1975 testing, and those 
manufacturers, however few in number, that found it advantageous to do 
so, employed that procedure. The manifold intake procedure subsequently 
became obsolete for other reasons, but its basic function, to measure 
real improvements in fuel economy through more aerodynamically 
efficient designs, lived on in the form of the coast down technique for 
measuring those aerodynamic improvements. We credit the EPA's finding 
that increases in measured fuel economy because of the lower road load 
settings obtainable under the coast down method, were increases 
``likely to be observed on the road,'' and were not ``unrepresentative 
artifact[s] of the dynamometer test procedure.'' Such real improvements 
are exactly what Congress meant to measure when it afforded the EPA 
flexibility to change testing and calculating procedures. We agree with 
the EPA that no retroactive adjustment need be made on account of the 
coast down technique. Center for Auto Safety et al. v. EPA, 806 F.2d 
1071, 1077 (D.C. Cir. 1986)
    Some years later, in 1996, EPA adopted a variety of test procedure 
changes as part of updating the emissions test procedures to better 
reflect real world operation and conditions. 61 FR 54852 (October 22, 
1996). EPA adopted new test procedures to supplement the FTP, as well 
as modifications to the FTP itself. For example, EPA adopted a new 
supplemental test procedure specifically to address the impact of air 
conditioner use on exhaust emissions. Since this new test directly 
addressed the impact of A/C use on emissions, EPA removed the specified 
A/C horsepower adjustment that had been in the FTP since 1975. Id. at 
54864, 54873. Later EPA determined that there was no need for CAFE 
adjustments for the overall set of test procedures changes to the FTP, 
as the net effect of the changes was no significant change in CAFE 
results.
    As evidenced by this regulatory history, EPA's traditional approach 
is to consider the impact of potential test procedure changes on CAFE 
results for passenger automobiles and determine if a CAFE adjustment 
factor is warranted to meet the requirement that the test procedure 
produce results comparable to the 1975 test procedure. This involves 
evaluating the magnitude of the impact on measured fuel economy 
results. It also involves evaluating whether the change in measured 
fuel economy reflects real word fuel economy impacts from changes in 
technology or design, or whether it is an artifact of the test 
procedure or test procedure flexibilities such that the change in 
measured fuel economy does not reflect a real world fuel economy 
impact.
    In this case, allowing credits for improvements in air conditioner 
efficiency and off-cycle efficiency for passenger cars would lead to an 
increase (i.e., improvement) in the fuel economy results for the 
vehicle model. The impact on fuel economy and CAFE results clearly 
could be greater than one-tenth of a mile per gallon (the level that 
EPA has previously indicated as having a substantial impact). The 
increase in fuel economy results would reflect real world improvements 
in fuel economy and not changes that are just artifacts of the test 
procedure or changes that come from closing a loophole or removing a 
flexibility in the current test procedure. However, these changes in 
procedure would not have the ``critical fact'' that the CAS Court 
relied upon--the existence of a 1975 test provision that was designed 
to account for the same kind of fuel economy improvements from changes 
in A/C or off-cycle efficiency. Under EPA's traditional approach, these 
changes would appear to have a significant impact on CAFE results, 
would reflect real world changes in fuel economy, but would not have a 
comparable precedent in the 1975 test procedure addressing the impact 
of these technology changes on fuel economy. EPA's traditional approach 
would be expected to lead to a CAFE adjustment factor for passenger 
cars to account for the impact of these changes.
    However, EPA believes a change in approach is appropriate based on 
the existence of similar EPA provisions for the greenhouse gas 
emissions procedures and standards. In the past, EPA has determined 
whether a CAFE adjustment factor for passenger cars would be 
appropriate in a context where manufacturers are subject to a CAFE 
standard under EPCA and there is no parallel greenhouse gas standard 
under the CAA. That is not the case here, as MY2017-2025 passenger cars 
will be subject to both CAFE and greenhouse gas standards. As such, EPA 
believes it is appropriate to consider the impact of a CAFE procedure 
change in this broader context.
    The term ``comparable results'' is not defined in section 32904(c), 
and the legislative history indicates that it is intended to address 
changes in procedure that result in a substantial change in the average 
fuel economy standard. As explained above, EPA has considered a change 
of one-tenth of a mile per gallon as having a substantial impact, based 
in part on the one-tenth of a mile per gallon rounding convention in 
the statute for CAFE calculations. 48 FR 56526, 56528 fn. 14 (December 
21, 1983). A change in the procedure that changes fuel economy results 
to this or a larger degree has the effect of changing the stringency of 
the CAFE standard, either making it more or less stringent. A change in 
stringency of the standard changes the burden on the manufacturers, as 
well as the fuel savings and other benefits to society expected from 
the standard. A CAFE adjustment factor is designed to account for these 
impacts.
    Here, however, there is a companion EPA standard for greenhouse gas 
emissions. In this case, the changes would have an impact on the fuel 
economy results and therefore the stringency of the CAFE standard, but 
would not appear to have a real world impact on the burden placed on 
the manufacturers, as the provisions would be the same as provisions in 
EPA's greenhouse gas standards. Similarly it would not appear to have a 
real world impact on the fuel savings and other benefits of the 
National Program which would remain identical. If that is the case, 
then it would appear reasonable to interpret section 32904(c) in these 
circumstances as not restricting these changes in procedure for 
passenger

[[Page 62804]]

automobiles. EPA considers the fuel economy results to be ``comparable 
results'' to the 1975 procedure as there would not be a substantial 
impact on real world CAFE stringency and benefits, given the changes in 
procedure are the same as provisions in EPA's companion greenhouse gas 
procedures and standards.
    EPA received a limited number of comments on the proposed changes 
to the CAFE procedures discussed above. One commenter noted that there 
are various statutory limitations on the CAFE program as compared to 
the GHG program, including the limitations discussed above on the CAFE 
test procedure for passenger cars. The commenter noted that EPA's 
proposal was a major change from the position EPA and NHTSA took in the 
MY2012-2016 rulemaking. EPA recognizes that the interpretation and 
approach discussed above are a major change from the prior 
interpretation of the statutory limitations on testing and calculation 
procedures for passenger cars. However there has been a significant 
change in circumstances that justifies this change in interpretation. 
As discussed above, EPA is changing its interpretation of when a 
procedure produces results comparable to the 1975 test procedure based 
on the effect of a coordinated and harmonized GHG and CAFE program. 
Because of the National Program, the changes to the CAFE procedures 
would not have a real world impact on the burden placed on the 
manufacturers, as the provisions would be the same as provisions in 
EPA's greenhouse gas standards. Similarly it would not have a real 
world impact on the fuel savings and other benefits of the National 
Program which would remain identical. Under these circumstances it is 
reasonable to interpret section 32904(c) as not restricting adoption of 
these changes in procedure for passenger automobiles.
    Other commenters, largely from the motor vehicle industry, 
supported EPA's proposal to allow for fuel consumption improvements 
credits for increases in efficiency of the air conditioner; increases 
in fuel economy because of technology improvements that achieve ``off-
cycle'' benefits; and incentives for use of certain hybrid technologies 
in full size pickup trucks, where these credits are comparable to the 
GHG emissions credits for these technology improvements. The commenters 
noted that the efficiency improvements are real, they will occur in the 
real world, and the change will further coordinate and harmonize the 
CAFE program and the GHG program. EPA agrees with these points, and 
they support EPA's analysis discussed above.
    The discussion above focuses primarily on the procedures for 
passenger cars, as section 32904(c) only limits changes to the CAFE 
test and calculation procedures for these automobiles. There is no such 
limitation on the procedures for light-trucks. The credit provisions 
for improvements in air conditioner efficiency and off-cycle 
performance would apply to light-trucks as well. In addition, the 
limitation in section 32904(c) does not apply to the provisions for 
credits for use of hybrids in light-trucks, if certain criteria are 
met, as these provisions apply to light-trucks and not passenger 
automobiles.
b. Implementation of This Approach
    As discussed in section IV, NHTSA has taken these changes in 
procedure into account in setting the applicable CAFE standards for 
passenger cars and light-trucks, to the extent practicable. As in EPA's 
greenhouse gas program, the allowance of AC credits for cars and trucks 
results in a more stringent CAFE standard than otherwise would apply 
(although in the CAFE program the AC credits would only be for AC 
efficiency improvements, since refrigerant improvements do not 
generally impact fuel economy). The allowance of off-cycle credits and 
hybrid credits for full size pickup trucks has been considered in 
setting the CAFE standards for passenger car and light-trucks.
    EPA further discusses the criteria and test procedures for 
determining AC credits, off-cycle technology credits, and hybrid/
performance-based credits for full size pickup trucks in Section III.C 
below.

C. Additional Manufacturer Compliance Flexibilities

1. Air Conditioning Related Credits
    Air conditioning (A/C) is virtually standard equipment in new cars 
and trucks today. Over 95% of the new cars and light trucks in the 
United States are equipped with A/C systems. Given the large number of 
vehicles with A/C in use in today's light duty vehicle fleet, their 
impact on the amount of energy consumed and on the amount of 
refrigerant leakage that occurs due to their use is significant.
    In this final rule, EPA is allowing manufacturers to comply with 
their fleetwide average CO2 standards described above by 
generating and using credits for improved A/C systems. Because such 
improved A/C technologies tend to be relatively inexpensive compared to 
other GHG-reducing technologies, EPA expects that most manufacturers 
will choose to generate and use such A/C compliance credits as a part 
of their compliance demonstrations. For this reason, EPA has 
incorporated the projected costs of compliance with A/C related 
emission reductions into the overall cost analysis for the program. As 
discussed in section II.F.1, and III.B.10, EPA, in coordination with 
NHTSA, is also allowing manufacturers to include fuel consumption 
reductions resulting from the use of A/C efficiency improvements in 
their CAFE compliance calculations. Manufacturers will be able to 
generate ``fuel consumption improvement values'' essentially equivalent 
to EPA CO2 credits, for improved fuel efficiency, for use in 
the CAFE program. The changes to the CAFE program to incorporate A/C 
efficiency improvements are discussed below in section III.C.1.b.
    As in the MY's 2012-2016 final rule, EPA is structuring the A/C 
provisions as optional credits for achieving compliance, not as 
separate standards. That is, unlike standards for N2O and 
CH4, there are no separate GHG standards related to A/C-
related emissions. Instead, EPA provides manufacturers the option to 
generate A/C GHG emission reductions that could be used as part of 
their CO2 fleet average compliance demonstrations. As in the 
MY's 2012-2016 final rule, EPA also included projections of A/C credit 
generation in determining the appropriate level of the standards.\478\
---------------------------------------------------------------------------

    \478\ See Section II.F above and Section IV below for more 
information on the use of such credits in the CAFE program.
---------------------------------------------------------------------------

    In the time since the analyses supporting the MY's 2012-2016 FRM 
were completed, EPA has re-assessed its estimates of overall A/C 
emissions and the fraction of those emissions that might be controlled 
by technologies that are or will be available to manufacturers.\479\ As 
discussed in more detail in Chapter 5 of the Joint TSD, the revised 
estimates remain very similar to those of the earlier rule. This 
includes the leakage of refrigerant during the vehicle's useful life, 
as well as the subsequent leakage associated with maintenance and 
servicing, and with disposal at the end of the vehicle's life (also 
called ``direct emissions''). The refrigerant universally used today is 
HFC-134a with a global warming potential (GWP) of 1,430.\480\ Together

[[Page 62805]]

these leakage emissions are equivalent to CO2 emissions of 
13.8 g/mi for cars and 17.2 g/mi for trucks (see Section 5.1.2 of the 
Joint TSD). (Due to the high GWP of HFC-134a, a small amount of leakage 
of the refrigerant has a much greater global warming impact than a 
similar amount of emissions of CO2 or other mobile source 
GHGs). EPA also estimates that A/C efficiency-related emissions (also 
called ``indirect'' A/C emissions), account for CO2-
equivalent emissions of 11.9 g/mi for cars and 17.1 g/mi for 
trucks.\481\ Chapter 5 of the Joint TSD (see Section 5.5.2.2) discusses 
the derivation of these estimates.
---------------------------------------------------------------------------

    \479\ The A/C-related emission inventories presented in this 
paragraph are discussed in Chapter 4 of the RIA.
    \480\ The global warming potentials (GWP) used in this rule are 
consistent with the 100-year time frame values in the 2007 
Intergovernmental Panel on Climate Change (IPCC) Fourth Assessment 
Report (AR4). At this time, the 100-year time frame values in the 
1995 IPCC Second Assessment Report (SAR) are used in the official 
U.S. GHG inventory submission to the United Nations Framework 
Convention on Climate Change (UNFCCC) per the reporting requirements 
under that international convention. The UNFCCC recently agreed on 
revisions to the national GHG inventory reporting requirements, and 
will begin using the 100-year GWP values from AR4 for inventory 
submissions in the future.
    \481\ Indirect emissions are additional CO2 emitted 
due to the load of the A/C system on the engine.
---------------------------------------------------------------------------

    Achieving GHG reductions in the most cost-effective ways is a 
primary goal of the program, and EPA believes that allowing 
manufacturers to comply with the standards by using credits generated 
from incorporating A/C GHG-reducing technologies is a key factor in 
meeting that goal.\482\ EPA accounts for projected reductions from A/C 
related credits in developing the standards (curve targets), and 
includes these emission reductions in estimating the achieved benefits 
of the program. See Section II.C and III.F above.
---------------------------------------------------------------------------

    \482\ The recent GHG standards for medium and heavy duty 
vehicles included separate standards for A/C leakage, rather than a 
credit based approach. EPA did so because the quantity of these 
leakage emissions is small relative to CO2 emissions from 
driving and moving freight, so that a credit does not create 
sufficient incentive to adopt leakage controls. 76 FR 57118; 75 FR 
74211. EPA also did not adopt standards to control A/C leakage from 
vocational vehicles, and did not adopt standards to control indirect 
emissions from any medium or heavy duty vehicle for reasons 
explained at 75 FR 74211 and 74212.
---------------------------------------------------------------------------

    Manufacturers can make very feasible improvements to their A/C 
systems to reduce leakage and increase efficiency. Manufacturers can 
reduce A/C leakage emissions by using components that tend to limit or 
eliminate refrigerant leakage. Also, manufacturers can significantly 
reduce the global warming impact of leakage emissions by adopting 
systems that use an alternative, low-GWP refrigerant, acceptable under 
EPA's Significant New Alternatives Policy (SNAP) program, as discussed 
below, especially if systems are also designed to minimize leakage and 
thus avoid opportunities for owners to recharge the system with less-
expensive--but higher GWP--refrigerant.\483\ Manufacturers can also 
increase the overall efficiency of the A/C system and thus reduce A/C-
related CO2 emissions. This is because the A/C system 
contributes to increased CO2 emissions through the 
additional work required to operate the compressor, fans, and blowers. 
This additional work typically is provided through the engine's 
crankshaft, and delivered via belt drive to the alternator (which 
provides electric energy for powering the fans and blowers) and the A/C 
compressor (which pressurizes the refrigerant during A/C operation). 
The additional fuel used to supply the power through the crankshaft 
necessary to operate the A/C system is converted into CO2 by 
the engine during combustion. This incremental CO2 produced 
from A/C operation can thus be reduced by increasing the overall 
efficiency of the vehicle's A/C system, which in turn will reduce the 
additional load on the engine from A/C operation.
---------------------------------------------------------------------------

    \483\ Refrigerant emissions during service, maintenance, repair, 
and disposal are also addressed by the CAA Title VI stratospheric 
ozone program, as described below.
---------------------------------------------------------------------------

    As with the earlier GHG rule and in the proposal for this one, EPA 
is finalizing two separate credit approaches to address leakage 
reductions and efficiency improvements independently. A leakage 
reduction credit would take into account the various technologies that 
could be used to reduce the GHG impact of refrigerant leakage, 
including the use of an alternative refrigerant with a lower GWP. An 
efficiency improvement credit would account for the various types of 
hardware and control of that hardware available to increase the A/C 
system efficiency. To generate credits toward compliance with the fleet 
average CO2 standard, manufacturers would be required to 
attest to the durability of the leakage reduction and the efficiency 
improvement technologies over the full useful life of the vehicle.
    EPA believes that both reducing A/C system leakage and increasing 
A/C efficiency will be highly cost-effective and technologically 
feasible for light-duty vehicles in the 2017-2025 timeframe. EPA is 
maintaining most of the existing framework for quantifying, generating, 
and using A/C Leakage Credits and Efficiency Credits. EPA expects that 
most manufacturers will choose to use these A/C credit provisions, 
although some may choose not to do so. Consistent with the 2012-2016 
final rule, the standard reflects this projected widespread penetration 
of A/C control technology.
    The following table summarizes the maximum credits that EPA is 
making available in the overall A/C program.

       Table III-13--Summary of Maximum per-Vehicle Credit for A/C
                                [In g/mi]
------------------------------------------------------------------------
                                                    2012-2016  2017-2025
------------------------------------------------------------------------
Direct Max Credit Car Leakage.....................       6.3        6.3
Direct Max Credit Car Alt Refrigerant.............      13.8       13.8
Direct Max Credit Truck Leakage...................       7.8        7.8
Direct Max Credit Truck Alt Refrigerant...........      17.2       17.2
Indirect Max Credit Car...........................       5.7        5
Indirect Max Credit Truck.........................       5.7        7.2
------------------------------------------------------------------------

    The next table shows the credits on a model year basis that EPA 
projects that manufacturers will generate on average (starting with the 
ending values from the MY's 2012-2016 final rule). In the MY's 2012-
2016 rule, the total average car and total average truck credits 
accounted for the difference between the GHG and CAFE standards.

                                                         Table III-14--Projected Average Credits
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                             Fleet avg
                                            Car credit      Car credit       Total car     Truck credit    Truck credit     Total truck    combined  car
                                            leakage avg     efficiency      credit avg      leakage avg     efficiency      credit avg       &  truck
                                                                avg                                             avg                           credit
--------------------------------------------------------------------------------------------------------------------------------------------------------
2016....................................             5.4             4.8            10.2             6.6             4.8            11.5            10.6
2017....................................             7.8             5.0            12.8             7.0             5.0            12.1            12.5
2018....................................             9.3             5.0            14.3            11.0             6.5            17.5            15.5
2019....................................            10.8             5.0            15.8            13.4             7.2            20.6            17.5

[[Page 62806]]

 
2020....................................            12.3             5.0            17.3            15.3             7.2            22.5            19.1
2021....................................            13.8             5.0            18.8            17.2             7.2            24.4            20.7
2022....................................            13.8             5.0            18.8            17.2             7.2            24.4            20.7
2023....................................            13.8             5.0            18.8            17.2             7.2            24.4            20.7
2024....................................            13.8             5.0            18.8            17.2             7.2            24.4            20.7
2025....................................            13.8             5.0            18.8            17.2             7.2            24.4            20.7
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The year-on-year progression of credits was determined as follows. 
The credits are assumed to increase starting from their MY 2016 value 
at a rate approximately commensurate with the increasing stringency of 
the MY's 2017-2025 GHG standards, but not exceeding a 20% penetration 
rate increase in any given year, until the maximum credits are achieved 
by MY 2021. EPA expects that manufacturers would be changing over to 
alternative refrigerants at the time of complete vehicle redesign, 
which occurs about every 5 years. However, in confidential meetings, 
some manufacturers/suppliers have informed EPA that a modification of 
the hardware for some alternative refrigerant systems may be able to be 
installed outside of the redesign cycle, as so could be done more 
rapidly, between redesign periods. Given the significant number of 
credits for using low GWP refrigerants, as well as the variety of 
alternative refrigerants that appear to be available, EPA believes that 
a total phase-in of alternative refrigerants is likely to begin in the 
near future and be completed by no later than MY 2021 (as shown in 
Table III-14 above).
    The progression of the average credits (relative to the maximum) 
also defines the relative year-on-year costs as described in Chapter 5 
of the Joint TSD. The costs are apportioned by the ratio of the average 
credit in any given year to the maximum credit. This is nearly 
equivalent to apportioning costs to technology penetration rates as is 
done for all the other technologies. However, because the maximum 
efficiency credits for cars and trucks have changed since the MY's 
2012-2016 rule, apportioning to the credits provides a more realistic 
and smoother year-on-year sequencing of costs.\484\
---------------------------------------------------------------------------

    \484\ In contrast, the technology penetration rates could have 
anomalous (and unrealistic) discontinuities that would be reflected 
in the cost progressions. This issue is only specific to A/C credits 
and costs and not to any other technology analysis in this rule.
---------------------------------------------------------------------------

    In this section, we discuss the A/C leakage credit program. The A/C 
efficiency credit program is discussed in Section II.F and in Chapter 5 
of the Joint TSD. EPA sought comment on all aspects of the A/C credit 
program, including changes from the current A/C credit program and the 
details in the Joint TSD. We respond to comments received below, in 
Section II.F, in the Joint TSD, and in the Response to Comments 
document.
a. Air Conditioning Leakage (``Direct'') Emissions and Credits
i. Quantifying A/C Leakage Credits for Today's Refrigerant
    As previously discussed, EPA is finalizing the proposed leakage 
credit program, with minor modifications. There was broad support among 
commenters from the auto and refrigerant supply industries, as well as 
from other commenters, for the proposed leakage credit program.
    Although in general EPA continues to prefer performance-based 
standards whenever possible, A/C leakage is very difficult to 
accurately measure in a laboratory test, due to the typical slowness of 
such leaks and the tendency of leakage to develop unexpectedly as 
vehicles age. At this time, no appropriate performance test for 
refrigerant leakage is available. Thus, as in the existing MYs 2012-
2016 program, EPA associates each available leakage-reduction 
technology with associated leakage credit value, which will be added 
together to quantify the overall system credit, up to the maximum 
available credit. EPA's Leakage Credit method is drawn from the SAE 
J2727 method (HFC-134a Mobile Air Conditioning System Refrigerant 
Emission Chart, February 2012 version), which in turn was based on 
results from the cooperative ``IMAC'' study.\485\ EPA has incorporated 
several minor modifications that SAE made to the J2727 method, but 
these do not affect the credit values for the technologies. Chapter 5 
of the joint TSD includes a full discussion of why EPA is continuing to 
use the design-based ``menu'' approach to quantifying Leakage Credits, 
including definitions of each of the technologies associated with the 
values in the menu, and commenters supported continuation of the menu 
approach as well.
---------------------------------------------------------------------------

    \485\ Society of Automotive Engineers, ``IMAC Team 1--
Refrigerant Leakage Reduction, Final Report to Sponsors,'' 2006. 
This document is available in Docket EPA-HQ-OAR-2010-0799.
---------------------------------------------------------------------------

    In addition to the above ``menu'' for vehicles using the current 
high-GWP refrigerant (HFC-134a), EPA also continues to provide the 
leakage credit calculation for vehicles using an alternative, lower-GWP 
refrigerant. This provision was also a part of the MYs 2012-2016 rule. 
As with the earlier rule, the agency is including this provision 
because shifting to lower-GWP alternative refrigerants will 
significantly reduce the climate-change concern about HFC-134a 
refrigerant leakage by reducing the direct climate impacts. Thus, the 
credit a manufacturer can generate by using an alternative refrigerant 
is a function of the degree to which the GWP of an alternative 
refrigerant is less than that of the current refrigerant (HFC-134a).
    In recent years, the global automotive industry has given serious 
attention primarily to three of the alternative refrigerants: HFO-
1234yf, HFC-152a, and carbon dioxide (R-744). Work on additional low 
GWP alternatives continues. HFO1234yf has a GWP of 4, HFC-152a has a 
GWP of 124 and CO2 has a GWP of 1.\486\ (In addition, two 
new potential refrigerants, AC-5 and AC-6, are being researched and 
have GWPs less than that of HFC-134a.) Both HFC-152a and CO2 
are produced

[[Page 62807]]

commercially in large amounts and thus the supply of refrigerant is not 
a significant factor preventing their use.\487\ HFC-152a has been shown 
to be comparable to HFC-134a with respect to cooling performance and 
fuel use in A/C systems.\488\
---------------------------------------------------------------------------

    \486\ The global warming potentials (GWP) used in this rule are 
consistent with the 100-year time frame values in the 2007 
Intergovernmental Panel on Climate Change (IPCC) Fourth Assessment 
Report (AR4). At this time, the 100-year time frame values in the 
1995 IPCC Second Assessment Report (SAR) are used in the official 
U.S. GHG inventory submission to the United Nations Framework 
Convention on Climate Change (UNFCCC) per the reporting requirements 
under that international convention. The UNFCCC recently agreed on 
revisions to the national GHG inventory reporting requirements, and 
will begin using the 100-year GWP values from AR4 for inventory 
submissions in the future.
    \487\ The U.S. has one of the largest industrial quality 
CO2 production facilities in the world (Gale Group, 
2011). HFC-152a is used widely as an aerosol propellant in many 
commercial products and thus potentially available for refrigerant 
use in motor vehicle A/C. Production volume for non-confidential 
chemicals reported under the 2006 Inventory Update Rule. Chemical: 
Ethane, 1,1-difluoro-. Aggregated National Production Volume: 50 to 
http://cfpub.epa.gov/iursearch/index.cfm?s=chem&err=t.
    \488\ United Nations Environment Program, Technology and 
Economic Assessment Panel, ``Assessment of HCFCs and Environmentally 
Sound Alternatives,'' TEAP 2010 Progress Report, Volume 1, May 2010. 
http://www.unep.ch/ozone/Assessment_Panels/TEAP/Reports/TEAP_Reports/teap-2010-progress-report-volume1-May2010.pdf. This document 
is available in Docket EPA-HQ-OAR-2010-0799.
---------------------------------------------------------------------------

    In the MYs 2012-2016 GHG rule, a manufacturer using an alternative 
refrigerant would receive no credit for leakage-reduction technologies. 
At that time, EPA believed that from the perspective of primary climate 
effect, leakage of a very low GWP refrigerant is largely irrelevant. 
However, there is reason to believe that the need for repeated 
recharging (top-off) of A/C systems with another, potentially costly 
refrigerant could lead some consumers and/or repair facilities to 
recharge a system designed for use with an alternative, low GWP 
refrigerant with either HFC-134a or another high GWP refrigerant. 
Depending on the refrigerant, it may still be feasible, although 
inappropriate, for systems designed for a low GWP refrigerant to 
operate on HFC-134a; in particular, the A/C system operating pressures 
for HFO-1234yf and HFC-152a might allow this type of substitution. 
Thus, the need for repeated recharging in use could slow the transition 
away from the high-GWP refrigerant even though recharging with a 
refrigerant different from that already in the A/C system is not 
authorized under current Clean Air Act Title VI regulations.\489\
---------------------------------------------------------------------------

    \489\ See appendix D to 40 CFR part 82, subpart G.
---------------------------------------------------------------------------

    For alternative refrigerant systems, EPA is finalizing as proposed 
a provision that adds to the existing credit calculation approach for 
alternative-refrigerant systems a disincentive for manufacturers if 
systems designed to operate with HFO-1234yf, HFC-152a, R744, or some 
other low GWP refrigerant incorporated fewer leakage-reduction 
technologies. This ``high leak disincentive'' provision will encourage 
manufacturers to continue to use low-leak components that are in 
typical use today even with low-GWP alternative refrigerants. We 
believe that this will help ensure that refrigerant leakage will remain 
low, avoiding opportunities for vehicle owners to recharge a depleted 
system with HFC-134a or another refrigerant with a GWP higher than that 
with which the vehicle was originally equipped (e.g., HFO-1234yf, 
CO2, or HFC-152a). Some stakeholders have suggested that EPA 
take precautions to address the potential for HFC-134a to replace HFO-
1234yf, for example, in vehicles designed for use with the new 
refrigerant (see comment and response section of EPA's SNAP rule on 
HFO-1234yf p. 660 of 1991, 76 FR 17509; March 29, 2011).\490\ In EPA's 
disincentive provision, manufacturers can avoid some or all of a 
deduction in their Leakage Credit of about 2 g/mi by maintaining the 
use of low-leak components after a transition to an alternative 
refrigerant. Specifically, the disincentive will be avoided when 
leakage components in a new alternative refrigerant system, as 
quantified in the leakage credit menu, maintain a target level of 
leakage reduction typical of today's systems, accounting for the fact 
that designing larger systems that are charged with larger volumes of 
refrigerant for low leakage is relatively more challenging than for 
smaller systems.
---------------------------------------------------------------------------

    \490\ Regulations in Appendix D to Subpart G of 40 CFR part 82 
prohibit topping off the refrigerant in a motor vehicle A/C system 
with a different refrigerant.
---------------------------------------------------------------------------

    EPA received a number of comments on this proposed provision. A 
number of automobile manufacturers and a chemical manufacturer, in 
particular, raised concerns that the high-leak disincentive was 
potentially reducing the credits available under the MY's 2012-2016 
rules. These commenters said that this would complicate their ability 
to comply and would penalize early adopters of low GWP refrigerants. 
Further, some automobile manufacturers stated that they were already 
making efforts to prevent the replacement of a low GWP alternative 
refrigerant, such as HFO-1234yf, with the less expensive, high GWP 
refrigerant HFC-134a. Some commenters stated that there are fittings 
unique to HFO-1234yf on the air conditioning system that would not 
allow someone to add HFC-134a into a car designed to use HFO-1234yf. 
Other commenters stated that it was not fair to penalize automobile 
manufacturers for activities taken by others who would refill with HFC-
134a an A/C system containing HFO-1234yf. ICCT supported such an anti-
leak credit, but believed that full credit should be given only where 
manufacturers demonstrate designs that cause the system to fail 
operating when recharged with higher GWP refrigerants.
    In response to these comments, EPA has maintained as proposed the 
general approach of a credit deduction to discourage high leak rates 
for systems designed for use of an alternative, low GWP refrigerant. 
However, the final rule allows greater flexibility so that the 
disincentive would only occur if a manufacturer eliminates a 
significant number of leakage-reduction technologies that are in broad 
use today. Thus, if a manufacturer takes reasonable care to reduce 
leaks and thus reduce the opportunity for the illegal top-off or 
charging of refrigerants not designed for use with low-GWP A/C systems, 
the manufacturer will be able to take full advantage of the credits for 
using a low-GWP alternative refrigerant. EPA discusses the final 
criteria for avoiding the disincentive in Chapter 5.1.2.3.2.5 of the 
Joint TSD.
ii. Issues Raised by a Potential Broad Transition to Alternative 
Refrigerants
    As described previously, use of alternative, lower-GWP refrigerants 
for mobile use reduces the climate effects of leakage or release of 
refrigerant through the entire life-cycle of the A/C system. Because 
the impact of direct emissions of such refrigerants on climate is 
significantly less than that for the current refrigerant HFC-134a, 
release of these refrigerants into the atmosphere through direct 
leakage, as well as release due to maintenance or vehicle scrappage, is 
predictably less of a concern than with the current refrigerant.
    For a number of years, the automotive industry has explored lower-
GWP refrigerants and the systems required for them to operate 
effectively and efficiently, taking into account refrigerant costs, 
toxicity, flammability, environmental impacts, and A/C system costs, 
weight, complexity, and efficiency. European Union regulations require 
a transition to alternative refrigerants with a GWP of 150 or less for 
motor vehicle air conditioning. The European Union's Directive on 
mobile air-conditioning systems (MAC Directive\491\) aims at reducing 
emissions of specific fluorinated greenhouse gases in the air-
conditioning systems fitted to passenger cars (vehicles under EU

[[Page 62808]]

category M1) and light commercial vehicles (EU category N1, class 1).
---------------------------------------------------------------------------

    \491\ 2006/40/EC.
---------------------------------------------------------------------------

    The main objectives of the EU MAC Directive are: to control leakage 
of fluorinated greenhouse gases with a GWP higher than 150 used in this 
sector; and to prohibit by a specified date the use of higher GWP 
refrigerants in MACs. The MAC Directive is part of the European Union's 
overall objectives to meet commitments made under the UNFCCC's Kyoto 
Protocol. This transition calls with new car models starting in 2011 
and continues with a complete transition to manufacturing all new cars 
with low GWP refrigerant by January 1, 2017.
    One alternative refrigerant has generated significant interest in 
the automobile manufacturing industry and it appears likely to be used 
broadly in the near future for this application. This refrigerant, 
called HFO-1234yf, has a GWP of 4. The physical and thermodynamic 
properties of this refrigerant are similar enough to HFC-134a that auto 
manufacturers would need to make relatively minor technological changes 
to their vehicle A/C systems in order to manufacture and market 
vehicles capable of using HFO-1234yf. Although HFO-1234yf is flammable, 
it requires a high amount of energy to ignite, and is expected to have 
flammability risks that are not significantly different from those of 
HFC-134a or other refrigerants found acceptable subject to use 
conditions (see 76 FR 17494-17496, 17507; March 29, 2011).
    There are some drawbacks to the use of HFO-1234yf. Some vehicle 
technological changes, such as the addition of an internal heat 
exchanger in the A/C system and associated packaging issues, may be 
necessary in order to transition to HFO-1234yf. Also, some vehicle 
manufacturers may require changes to the refrigerant charging and 
storage facilities at their vehicle assembly plants to accommodate the 
use of HFO-1234yf. In addition, the anticipated cost of HFO-1234yf is 
several times that of HFC-134a. At the time that EPA's Significant New 
Alternatives Policy (SNAP) program issued its determination allowing 
the use of HFO-1234yf in motor vehicle A/C systems, the agency cited 
estimated costs of $40 to $60 per pound, and stated that this range was 
confirmed by an automobile manufacturer (76 FR 17491; March 29, 2011) 
and a component supplier.\492\ By comparison, recent reported costs for 
HFC-134a range from about $4.50 to $10 per pound.\493\ The higher cost 
of HFO-1234yf is largely because of limited global production 
capability at this time. However, because it is more complicated to 
produce the molecule for HFO-1234yf, it is unlikely that it will ever 
be as inexpensive as HFC-134a is currently. In Chapter 5 of the TSD 
(see Section 5.1.4), the EPA has accounted for this additional cost of 
both the refrigerant as well as the hardware upgrades. (We do not 
include potential costs for manufacturing facility changes to 
accommodate a new refrigerant; some may incur such costs, some may not. 
Commenters did not provide specific data relating to such costs).
---------------------------------------------------------------------------

    \492\ Automotive News, April 18, 2011.21.
    \493\ [generate docket memo from this site: www.r-134a.com.]
---------------------------------------------------------------------------

    Manufacturers have seriously considered other alternative 
refrigerants in recent years. One of these, HFC-152a, has a GWP of 
124.\494\ HFC-152a is produced commercially in large amounts.\495\ HFC-
152a has been shown to be comparable to HFC-134a with respect to 
cooling performance and fuel use in A/C systems.\496\ HFC-152a is 
flammable, listed as A2 by ASHRAE.\497\ Air conditioning systems using 
this refrigerant would require engineering strategies or devices in 
order to reduce flammability risks to acceptable levels (e.g., use of 
release valves or secondary-loop systems). Alternatively, 
CO2 can be used as a refrigerant. It has a GWP of 1, and is 
widely available commercially.\498\ The SNAP program has listed R-744 
as acceptable for motor vehicle A/C systems. (June 6, 2012; 77 FR 
33315). Air conditioning systems using CO2 would require 
different designs than other refrigerants, primarily due to the higher 
operating pressures that are required. Research continues exploring the 
potential for these alternative refrigerants for automotive 
applications. Finally, EPA is aware that the chemical and automobile 
manufacturing industries continue to consider additional refrigerants 
with GWPs less than 150. For example, SAE International is currently 
running a cooperative research program looking at two low GWP 
refrigerant blends, with the program to complete in 2012.\499\ The 
producers of these blends have not to date applied for SNAP approval. 
However, we expect that there may well be additional alternative 
refrigerants available to vehicle manufacturers in the next few years.
---------------------------------------------------------------------------

    \494\ IPCC 4th Assessment Report.
    \495\ HFC-152a is used widely as an aerosol propellant in many 
commercial products and may potentially be available for refrigerant 
use in motor vehicle A/C systems. Aggregated national production 
volume is estimated to be between 50 and 100 million pounds. [US 
EPA; Non-Confidential 2006 Inventory Update Reporting. National 
Chemical Information.]
    \496\ May 2010 TEAP XXI/9 Task Force Report, http://www.unep.ch/ozone/Assessment_Panels/TEAP/Reports/TEAP_Reports/teap-2010-progress-report-volume1-May2010.pdf.
    \497\ A wide range of concentrations has been reported for HFC-
152a flammability where the gas poses a risk of ignition and fire 
(3.7%-20% by volume in air) (Wilson, 2002). EPA finalized a rule in 
2008 listing HFC-152a as acceptable subject to use conditions in 
motor vehicle air-conditioning, one of these restricting refrigerant 
concentrations in the passenger compartment resulting from leaks 
above the lower flammability limit of 3.7% (see 71 FR 33304; June 
12, 2008).
    \498\ The U.S. has one of the largest industrial quality 
CO2 production facilities in the world (Gale Group, 
2011).
    \499\ ``Recent Experiences in MAC System Development: `New 
Alternative Refrigerant Assessment' Technical Update. Enrique Peral-
Antunez, Renault. Presentation at SAE Alternative Refrigerant and 
System Efficiency Symposium. September, 2011. Available online at 
http://www.sae.org/events/aars/presentations/2011/Enrique%20Peral%20Renault%20Recent%20Experiences%20in%20MAC%20System%20Dev.pdf.
---------------------------------------------------------------------------

(1) Related EPA Actions to Date and Potential Actions Concerning 
Alternative Refrigerants
    EPA is addressing potential environmental and human health concerns 
of low-GWP alternative refrigerants through a number of actions. The 
SNAP program has issued final rules regulating the use of HFC-152a and 
HFO-1234yf in order to reduce their potential risks (June 12, 2008, 73 
FR 33304; March 29, 2011, 76 FR 17488; and March 26, 2012, 77 FR 
17344). The SNAP rule for HFC-152a allows its use in new motor vehicle 
A/C systems where proper engineering strategies and/or safety devices 
are incorporated into the system. EPA has also recently issued a final 
rule allowing use of R-744 as a refrigerant in new motor vehicle A/C 
systems subject to use conditions for motor vehicle A/C systems (June 
6, 2012; 77 FR 33315). The SNAP rules for all three alternative 
refrigerants HFC-152a and HFO-1234yf require meeting safety 
requirements of the industry standard SAE J639. With HFO-1234yf and 
HFC-152a, EPA expects that manufacturers conduct and keep on file 
failure mode and effect analysis for the motor vehicle A/C system, as 
stated in SAE J1739. Similarly, for CO2, EPA requires 
manufacturers to keep records of the tests they perform to ensure that 
MVAC systems are designed with devices to avoid concentrations in 
excess of the limits in the final rule.
    Under Section 612(d) of the Clean Air Act, any person may petition 
EPA to add alternatives to or remove them from the list of acceptable 
substitutes for ozone depleting substances. The National Resource 
Defense Council

[[Page 62809]]

(NRDC) submitted a petition on behalf of NRDC, the Institute for 
Governance & Sustainable Development (IGSD), and the Environmental 
Investigation Agency-US (EIA-US) to EPA under Clean Air Act Section 
612(d), requesting that the Agency remove HFC-134a from the list of 
acceptable substitutes and add it to the list of unacceptable 
(prohibited) substitutes for motor vehicle A/C, among other uses.\500\ 
EPA has found this petition complete specifically for use of HFC-134a 
in new motor vehicle A/C systems for use in passenger cars and light 
duty vehicles. EPA intends to initiate a separate notice and comment 
rulemaking in response to this petition in the future.\501\
---------------------------------------------------------------------------

    \500\ NRDC et al. Re: Petition to Remove HFC-134a from the List 
of Acceptable Substitutes under the Significant New Alternatives 
Policy Program (November 16, 2010).
    \501\ EPA received a supplemental petition from the Institute 
for Sustainable Governance, The Environmental Investigation Agency, 
and the National Resources Defense Council to find unacceptable HFC-
134a for other uses in April, 2012.
---------------------------------------------------------------------------

    EPA addresses potential toxicity issues with the use of 
CO2 as a refrigerant in automotive A/C systems in the final 
SNAP rule mentioned above. CO2 has a workplace exposure 
limit of 5000 ppm on an 8-hour time-weighted average, a short-term 
exposure limit (STEL) of 3% over a 15-minute time-weighted average, and 
a ceiling limit of 4.0% CO2 at any time.\502\ EPA has also 
addressed potential toxicity issues with HFO-1234yf through a 
significant new use rule (SNUR) under the Toxic Substances Control Act 
(TSCA) (October 27, 2010; 75 FR 65987). The SNUR for HFO-1234yf allows 
its use as an A/C refrigerant for light-duty vehicles and light-duty 
trucks, and found no significant toxicity issues with that use. As 
mentioned in the NPRM for a VOC exemption for HFO-1234yf, ``The EPA 
considered the results of developmental testing available at the time 
of the final SNUR action to be of some concern, but not a sufficient 
basis to find HFO-1234yf unacceptable under the SNUR determination. As 
a result, the EPA requested additional toxicity testing and issued the 
SNUR for HFO-1234yf. The EPA has received and is presently reviewing 
the results of the additional toxicity testing. The EPA continues to 
believe that HFO-1234yf, when used in new automobile air conditioning 
systems in accordance with the use conditions under the SNAP rule, does 
not result in significantly greater risks to human health than the use 
of other available substitutes.'' (76 FR 64063, October 17, 2011). HFC-
152a is considered relatively low in toxicity and comparable to HFC-
134a, both of which have a workplace environmental exposure limit from 
the American Industrial Hygiene Association of 1000 ppm on an 8-hour 
time-weighted average (73 FR 33304; June 12, 2008).
---------------------------------------------------------------------------

    \502\ The 8-hour time-weighted average worker exposure limit for 
CO2 is consistent with OSHA's PEL-TWA, and ACGIH'S TLV-
TWA of 5,000 ppm (0.5%).
---------------------------------------------------------------------------

    EPA has issued a proposed rule, proposing to exempt HFO-1234yf from 
the definition of ``volatile organic compound'' (VOC) for purposes of 
preparing State Implementation Plans (SIPs) to attain the national 
ambient air quality standards for ozone under Title I of the Clean Air 
Act (October 17, 2011; 76 FR 64059). VOCs are a class of compounds that 
can contribute to ground level ozone, or smog, in the presence of 
sunlight. Some organic compounds do not react enough with sunlight to 
create significant amounts of smog. EPA has already determined that a 
number of compounds, including the current automotive refrigerant, HFC-
134a as well as HFC-152a, are low enough in photochemical reactivity 
that they do not need to be regulated under SIPs. CO2 also 
is not considered a VOC for purposes of preparing SIPs.
(2) Vehicle Technology Requirements for Alternative Refrigerants
    As discussed above, significant hardware changes could be needed to 
allow use of HFC-152a or CO2, because of the flammability of 
HFC-152a and because of the high operating pressure required for 
CO2. In the case of HFO-1234yf, manufacturers have said that 
A/C systems for use with HFO-1234yf would need a limited amount of 
additional hardware to maintain cooling efficiency compared to HFC-
134a. In particular, A/C systems may require an internal heat exchanger 
to use HFO-1234yf, because HFO-1234yf would be less effective in A/C 
systems not designed for its use. Because EPA's SNAP ruling allows for 
use of all three low-GWP alternative refrigerants in new vehicles only, 
we expect that manufacturers would introduce cars using alternative 
refrigerants during complete vehicle redesigns or when introducing new 
models.\503\ This need for complete vehicle redesign limits the 
potential pace of a transition from HFC-134a to alternative 
refrigerants. In meetings with EPA and in their public comments, 
manufacturers have informed EPA that, in the case of HFO-1234yf, for 
example, they would need to upgrade their refrigerant storage 
facilities and charging stations on their assembly lines. During the 
transition period between the refrigerants, some of these assembly 
lines might need to have the infrastructure for both refrigerants 
simultaneously since many lines produce multiple vehicle models. 
Moreover, many of these plants might not immediately have the 
facilities or space for two refrigerant infrastructures, thus likely 
further increasing necessary lead time. EPA took these kinds of factors 
into account in estimating the penetration of alternative refrigerants, 
and the resulting estimated average credits over time shown in Table 
III-14.
---------------------------------------------------------------------------

    \503\ Some suppliers and manufacturers have informed us that 
some vehicles may be able to upgrade A/C systems to use HFO-1234yf 
during a refresh of an existing model (between redesign years). 
However, this is highly dependent on the vehicle, space constraints 
behind the dashboard, and the manufacturing plant, so an upgrade 
between redesign years may be feasible for only a select few models.
---------------------------------------------------------------------------

    Switching to alternative refrigerants in the U.S. market continues 
to be an attractive option for automobile manufacturers because 
vehicles with low GWP refrigerant could qualify for a significantly 
larger leakage credit. Manufacturers have expressed to EPA that they 
would plan to place a significant reliance on, or in some cases believe 
that they would need, alternative refrigerant credits for compliance 
with GHG fleet emission standards starting in MY 2017.
(3) Alternative Refrigerant Supply
    EPA is aware that another practical factor affecting the rate of 
transition to alternative refrigerants is their supply. As mentioned 
above, both HFC-152a and CO2 are being produced commercially 
in large quantities and thus, although their supply chain does not at 
this time include auto manufacturers, it may be easier to increase 
production to meet additional demand that would occur if manufacturers 
adopt either as a refrigerant. However, HFO-1234yf, supply is currently 
limited. There are currently two major producers of HFO-1234yf, DuPont 
and Honeywell that are licensed to produce this chemical for the U.S. 
market. Both companies will likely provide most of their production for 
the next few years from a single overseas facility, as well as some 
production from small pilot plants. The initial emphasis for these 
companies is to provide HFO-1234yf to the European market, where 
regulatory requirements for low GWP refrigerants are already in effect. 
The expected mass production of HFO-1234yf has been delayed until later 
this year. As a result, the European Union has delayed the requirement 
for newly approved types of vehicles to be filled with a refrigerant 
with GWP less than 150 by one year until December 31,

[[Page 62810]]

2012.\504\ The producers of HFO-1234yf have indicated that they plan to 
construct a new facility in the 2014 timeframe. This facility should be 
designed to provide sufficient production volume for a worldwide market 
in coming years. EPA expects that the speed of the transition to 
alternative refrigerants in the U.S. may depend on how rapidly chemical 
manufacturers are able to provide supply to automobile manufacturers 
sufficient to allow most or all vehicles sold in the U.S. to be built 
using the alternative refrigerant.
---------------------------------------------------------------------------

    \504\ April 18, 2012 Note to the Attention of the Members of the 
Technical Committee on Motor Vehicles, ``The supply shortage of an 
essential component in mobile air conditioning systems and its 
impact to the application of Directive 2006/40/EC in the automotive 
industry''. Philippe Jean, Chairman of the Technical Committee--
Motor Vehicles, European Commission Enterprise and Industry 
Directorate-General.
---------------------------------------------------------------------------

    One manufacturer (GM) has announced its intention to begin 
introducing vehicle models using HFO-1234yf as early as MY 2013.\505\ 
According to a commenter, some automobile manufacturers expect to begin 
using HFO-1234yf on some models in 2013. As of spring of 2012, EPA is 
aware of at least two manufacturers already producing vehicles using 
HFO-1234yf--GM and Subaru. As described above, we expect that in most 
cases a change-over to systems designed for alternative refrigerants 
would be limited to vehicle product redesign cycles, typically about 
every 5 years. Because of this, the pace of introduction is likely to 
be limited to about 20% of a manufacturer's fleet per year. In 
addition, the current uncertainty about the availability of supply of 
the new refrigerant in the early years of introduction into vehicles in 
the U.S. vehicles, also discussed above, means that the change-over may 
not occur at every vehicle redesign point. Thus, even with the 
announced intention of these manufacturers to begin early introduction 
of an alternative refrigerant, EPA's analysis of the overall industry 
trend will assume minimal penetration of the U.S. vehicle market before 
MY 2017.
---------------------------------------------------------------------------

    \505\ General Motors Press Release, July 23, 2010. ``GM First to 
Market Greenhouse Gas-Friendly Air Conditioning Refrigerant in 
U.S.''
---------------------------------------------------------------------------

    Table III-14 shows that, starting from MY 2017, EPA projects that 
virtually all of the expected increase in generated credits would be 
due to a gradual increase in penetration of alternative refrigerants. 
In earlier model years, EPA attributes the expected increase in Leakage 
Credits to improvements in low-leak technologies. These projections are 
for analytical purposes, and, as described above, this final rule does 
not in any way require that the auto and refrigerant supply industries 
transition to alternative refrigerants, or to do so according to any 
specified timeline.
(4) Projected Potential Scenarios for Auto Industry Changeover to 
Alternative Refrigerants
    As discussed above, EPA is planning on issuing a proposed SNAP 
rulemaking in the future requesting comment on whether to move HFC-134a 
from the list of acceptable substitutes to the list of unacceptable 
(prohibited) substitutes. However, the agency has not determined the 
specific content of that proposal, and the results of any final action 
are unknowable at this time. EPA recognizes that a major element of 
that proposal will be the evaluation of the time needed for a 
transition for automobile manufacturers away from HFC-134a. Thus, there 
could be multiple scenarios for the timing of a transition considered 
in that future proposed rulemaking. Should EPA finalize a rule under 
the SNAP program that prohibits the use of HFC-134a in new vehicles, 
the agency plans to evaluate the impacts of such a SNAP rule to 
determine whether it would be necessary to consider revisions to the 
availability and use of the compliance credit for MY 2017-2025.
    EPA is basing this final rule on the current status of 
refrigerants, where there are no U.S. regulatory requirements for 
manufacturers to eliminate the use of HFC-134a for newly manufactured 
vehicles. Thus, the agency expects that the market penetration of 
alternatives will proceed based on supply and demand and the strong 
incentives in this final rule. Given the combination of clear interest 
from automobile manufacturers in switching to an alternative 
refrigerant, the interest from the manufacturers of the alternative 
refrigerant HFO-1234yf to expand their capacity to produce and market 
the refrigerant, and current commercial availability of HFC-152a and 
CO2, EPA believes it is reasonable to project that supply 
will be adequate to support the orderly rate of transition to an 
alternative refrigerant described above. As mentioned earlier, at least 
one U.S. manufacturer already has plans to introduce models using the 
alternative refrigerant HFO-1234yf beginning in MY 2013. However, it is 
not certain how widespread the transition to alternative refrigerants 
will be in the U.S., nor how quickly that transition will occur in the 
absence of requirements or strong incentives. (Some commenters stated 
that EPA should not require a phase-out of HFC-134a. This action is 
beyond the scope of this final rule; such comments will be appropriate 
for a future NPRM on that subject.
    There are other factors that could lead to an overall fleet 
changeover from HFC-134a to alternative refrigerants. For example, the 
governments of the U.S., Canada, and Mexico have proposed to the 
Parties to the Montreal Protocol on Substances that Deplete the Ozone 
Layer that production of HFCs be reduced over time. The North American 
Proposal to amend the Montreal Protocol allows the global community to 
make near-term progress on climate change by addressing this group of 
potent greenhouse gases. The proposal would result in lower emissions 
in developed and developing countries through the phase-down of the 
production and consumption of HFCs. If an amendment were adopted by the 
Parties, then switching from HFC-134a to alternative refrigerants would 
likely become an attractive option for decreasing the overall use and 
emissions of high-GWP HFCs, and the Parties would likely initiate or 
expand policies to incentivize suppliers to ramp up the supply of 
alternative refrigerants. Options for reductions would include 
transition from HFCs, moving from high to lower GWP HFCs, and reducing 
charge sizes.
    In February, the Secretary of State Hillary Rodham Clinton and 
Administrator Lisa Jackson announced the Climate and Clean Air 
Coalition to Reduce Short-Lived Climate Pollutants, a new initiative 
seeking to realize benefits by addressing black carbon, HFCs, and 
methane.
2. Incentives for Electric Vehicles, Plug-in Hybrid Electric Vehicles, 
Fuel Cell Vehicles, and Dedicated and Dual Fuel Compressed Natural Gas 
Vehicles
    EPA is finalizing temporary regulatory incentives for electric 
vehicles (EVs), plug-in hybrid electric vehicles (PHEVs), fuel cell 
vehicles (FCVs), and dedicated and dual fuel compressed natural gas 
(CNG) vehicles. This section is divided into four subsections: (a) 
Introductory context, (b) summary overview of the public comments on 
this topic, (c) a detailed topic-by-topic discussion of what EPA 
proposed, major public comments on that proposal, EPA's response to 
comments, and EPA's final decision, and (d) the projected impact of the 
temporary regulatory incentives on GHG emissions reductions.

[[Page 62811]]

a. Context
i. Agency Rationale for Temporary Regulatory Incentives
    EPA believes that these temporary regulatory incentives are 
justified under CAA section 202 (a) as they promote the 
commercialization of technologies that have, or of technologies that 
can be critical facilitators of next-generation technologies that have, 
the potential to transform the light-duty vehicle sector by achieving 
zero or near-zero GHG emissions and oil consumption, but which face 
major near-term market barriers. However, providing temporary 
regulatory incentives for certain advanced technologies will decrease 
the overall GHG emissions reductions associated with the program in the 
near term. EPA believes it is worthwhile to forego modest additional 
emissions reductions in the near term in order to lay the foundation 
for the potential for much larger ``game-changing'' GHG emissions and 
oil reductions in the longer term.\506\ EPA accounts for the higher 
real world GHG emissions and lower GHG emissions reductions associated 
with these temporary regulatory incentives in all of our regulatory 
analyses, e.g., in this section, in Section III.F, and in the 
Regulatory Impact Analysis.
---------------------------------------------------------------------------

    \506\ EPA has adopted this strategy in previous mobile source 
rulemakings, such as its Tier 2 Light-Duty Vehicle, 2007 Heavy-Duty 
Highway, and Tier 4 Nonroad Diesel rulemakings.
---------------------------------------------------------------------------

ii. Light-Duty Vehicle Greenhouse Gas Emissions Standards for MYs 2012-
2016
    The light-duty vehicle greenhouse gas emissions standards for model 
years (MYs) 2012-2016 provide a regulatory incentive for EVs, FCVs, and 
for the electric portion of operation of PHEVs. See generally 75 FR 
25434-438. This is designed to promote advanced technologies that have 
the potential to provide ``game changing'' GHG emissions reductions in 
the future. This incentive is the use of a 0 grams per mile (g/mi) 
compliance value (i.e., a compliance value based on measured vehicle 
tailpipe GHG emissions) up to a cumulative EV/PHEV/FCV production cap 
threshold for individual manufacturers. There is a two-tier cumulative 
EV/PHEV/FCV production cap for MYs 2012-2016: the cap is 300,000 
vehicles for those manufacturers that sell at least 25,000 EV/PHEV/FCVs 
in MY 2012, and the cap is 200,000 vehicles for all other 
manufacturers. For manufacturers that exceed the cumulative production 
cap over MYs 2012-2016, compliance values for those vehicles in excess 
of the cap will be based on a full accounting of the net upstream (fuel 
production and distribution) GHG emissions associated with those 
vehicles relative to the fuel production and distribution GHG emissions 
associated with comparable gasoline vehicles. For an electric vehicle, 
this accounting is based on the vehicle electricity consumption over 
the EPA compliance tests, an eGRID2007 national average power plant GHG 
emissions factor, and multiplicative factors to account for electricity 
grid transmission losses and pre-power plant feedstock GHG related 
emissions.\507\ The accounting for a hydrogen fuel cell vehicle would 
be done in a comparable manner.
---------------------------------------------------------------------------

    \507\ See 40 CFR 600.113-12(m).
---------------------------------------------------------------------------

    The 0 g/mi compliance value decreases the GHG emissions reductions 
associated with the MYs 2012-2016 standards compared to the same 
standards and a compliance value that accounts for the upstream GHG 
emissions associated with these vehicles, compared to conventional 
vehicles. It is impossible to know the precise number of vehicles that 
will utilize this approach in MYs 2012-2016. In the preamble to the 
final rule, EPA projected the decrease in GHG emissions reductions that 
would be associated with a scenario of 500,000 EVs certified with a 
compliance value of 0 g/mi during the MYs 2012-2016 timeframe. This 
likely maximum bounding scenario would result in a projected decrease 
of 25 million metric tons of GHG emissions reductions, or less than 3 
percent of the total projected GHG benefits of the program of 962 
million metric tons. This GHG emissions impact could be smaller or 
larger, of course, based on the actual number of EVs that would certify 
at 0 g/mi.
iii. Proposed Approach for MYs 2017-2025
    EPA proposed the following approach for EVs, PHEVs, and FCVs.\508\ 
For MYs 2017-2021, EPA proposed two incentives: allowing all EVs, PHEVs 
(electric operation), and FCVs to use an uncapped GHG emissions 
compliance value of 0 g/mi; and to use a multiplier for these vehicles 
which would allow each of these vehicles to ``count'' as more than one 
vehicle in a manufacturer's compliance calculation. The proposed 
multipliers varied by model year and by vehicle type, the maximum 
proposed multiplier being 2.0 for EVs and FCVs in MYs 2017-2019, and 
the lowest proposed multiplier being 1.3 for PHEVs in MY 2021.
---------------------------------------------------------------------------

    \508\ These proposals were consistent with the discussion in the 
August 2011 Supplemental Notice of Intent. 76 FR 48758.
---------------------------------------------------------------------------

    For MYs 2022-2025, EPA proposed the 0 g/mi GHG emissions compliance 
treatment for EVs, PHEVs (electric operation), and FCVs up to a per-
company cumulative production threshold for those model years. EPA 
proposed a two-tier, per-company cap based on cumulative production in 
prior years. Thus, for manufacturers that sell 300,000 or more EV/PHEV/
FCVs combined in MYs 2019-2021, the proposed cumulative production cap 
would be 600,000 EV/PHEV/FCVs for MYs 2022-2025. Other manufacturers 
would have a proposed cumulative production cap of 200,000 EV/PHEV/FCVs 
in MYs 2022-2025. EPA did not propose multipliers for these later model 
years. See 76 FR 75012-013.
b. Overview of Comments
    EPA received many comments in response to these proposals. Almost 
exclusively, automakers supported these kinds of regulatory incentives 
for a wide range of advanced technologies, and many automakers 
preferred larger and/or longer-lasting incentives than those that EPA 
proposed. On the other hand, environmental public interest groups 
generally opposed the proposed incentives either out of concern for 
reduced emissions reductions, or to have a program which is technology-
neutral. Electric vehicle advocacy organizations supported incentives 
for EVs and PHEVs, while natural gas advocacy stakeholders supported 
adding incentives for dedicated and dual fuel CNG vehicles. Proponents 
of other fuels often opposed incentives for electric and natural gas 
vehicles. Representative comments will be addressed in the topic-by-
topic discussion below. For a more comprehensive treatment of comments 
on this topic, see the separate EPA Response to Comments document.
c. Final Rule for Light-Duty Vehicle Greenhouse Gas Emissions Standards 
for MYs 2017-2025
i. Appropriateness of Regulatory Incentives
    Every automaker that commented on this topic supported some type of 
regulatory incentives for advanced technologies. Honda's comment is 
illustrative: ``Alternative fuel vehicles and advanced technologies 
face unique challenges in coming to market: developing appropriate 
infrastructure and overcoming initial consumer resistance to new, 
unfamiliar technologies. Incentives that are limited in time and 
appropriately phased-out

[[Page 62812]]

can help accelerate the introduction of these vehicles.'' Nissan also 
strongly supported regulatory incentives: ``[G]overnment incentives and 
support are essential to ensuring manufacturer investment and consumer 
adoption of these technologies * * *. Without the incentives and 
continued focus on tailpipe emissions when calculating GHG emissions * 
* * consumers will be slower to adopt these advanced technologies and 
continue to rely on traditional internal combustion vehicles, which 
will result in higher overall greenhouse gas emissions long term. It is 
not until consumers adopt these technologies that the United States can 
realize the benefits of these transformational, `game changing' vehicle 
technologies.'' Tesla made a direct link between the proposal and the 
business case for EV investment: ``Tesla notes that incentives such as 
credit multipliers not only serve to accelerate the commercialization 
and widespread adoption of advanced technology vehicles like EVs, they 
provide support for the businesses seeking to introduce such technology 
* * *. GHG and CAFE credits earned from the production and sales of EVs 
like the Model S will allow Tesla to generate revenue for more rapid EV 
development and production. This will, in turn, speed the introduction 
of the next generation of EVs at higher volumes and lower price 
points.'' Another dozen or so automakers also supported temporary 
regulatory incentives, as did three organizations that advocate for EV 
issues: Edison Electric Institute, Electric Drive Transportation 
Association, and Securing America's Energy Future. The latter supported 
``incentives to help promote the adoption of electric drive vehicles. 
Further, we believe the incentive is justified because of the critical 
contribution that the technology employed in the qualifying vehicles 
can make in improving our economic and national security. For the 
vehicles to achieve their potential, however, they will need incentives 
of sufficient size and duration for the vehicles to achieve scale, 
reduce costs, and penetrate the mainstream market.'' Pew Charitable 
Trusts supported ``[i]ncentives designed to spur deployment of electric 
and hybrid vehicle technologies in the U.S. light duty fleet [to] 
provide a clear path for auto manufacturers to invest in research, 
development, and production, which can improve the competitiveness of 
U.S. manufacturing and enhance exports to nations with growing 
demand.''
    On the other hand, several commenters expressed opposition to the 
proposed regulatory incentives. The American Petroleum Institute 
stated: ``Regulatory agencies should not be in the business of 
promoting investments and innovations in government-selected 
technologies applied to government-selected vehicle categories. 
Regulators should instead set broad, performance-based targets that 
reward innovation directed at achieving outcomes, not the 
implementation of specific technologies. The market, via consumer 
choice, should then be allowed to select the winners and losers.'' The 
Union of Concerned Scientists ``strongly opposed these incentives 
during the 2012-2016 rulemaking on the grounds that they do not reflect 
real emissions reductions and thus erode the benefits of the National 
Program and that there are other, more effective ways of accelerating 
the market for electric cars (e.g., the California ZEV program, federal 
tax credits, loan guarantees, and other state and local incentives). We 
continue to oppose them here for the same reasons, and express grave 
concern that they, like many auto industry incentives over the years, 
will again be extended and continue to undermine the goals of the 
program they serve.'' The International Council on Clean Transportation 
commented that ``[w]hile the ICCT strongly supports development of 
electric and fuel cell vehicles, one of our core principles is that 
efficiency and greenhouse gas emission standards should be technology 
neutral.'' The Institute for Policy Integrity, New York University 
School of Law, argued that ``subsidization of new technology should be 
neutral with respect to greenhouse gas emissions * * *. By giving 
inflated regulatory incentives to a certain type of technology rather 
than allowing manufacturers to find the most efficient and effective 
solution, EPA will disincentivize other forms of technology that may be 
more cost-effective at reducing greenhouse gas emissions.'' The Center 
for Biological Diversity stated that any incentives beyond actual 
emissions reductions ``are inappropriate'' and ``[w]hile we believe 
that credits may have provided a valuable incentive for electric 
vehicles during the 2012-2016 rulemaking to encourage this relatively 
new technology, such concerns are now misplaced. The 2017-2025 
rulemaking years no longer constitute a start-up period for these 
vehicles.''
    EPA is adopting temporary regulatory incentives for MYs 2017-2025 
similar to those proposed. Critics of the proposal tended to emphasize 
three primary arguments: that regulatory incentives are not technology 
neutral and therefore pick ``winners and losers'' among the advanced 
technologies, that they reduce the GHG benefits of the program, and 
that they are no longer needed for technologies such as EVs. EPA 
believes that the issue of technology neutrality is a much more complex 
issue than some commenters suggest. Given that internal combustion 
engines and petroleum-based fuels have dominated the U.S. light-duty 
vehicle market for 100 years, with massive sunk investments, there are 
major barriers for new vehicle technologies and fuels to be able to 
gain the opportunity to compete on any type of level playing field. In 
this context, temporary regulatory incentives do not so much ``pick 
winners and losers'' (an inefficient or unattractive technology is not 
going to achieve long-term success based on temporary incentives) as to 
give new technologies more of an opportunity to compete with the 
established technologies. The agency recognizes that the temporary 
regulatory incentives will reduce the short-term benefits of the 
program, but as noted above believes that it is worth a limited short-
term loss of benefits to increase the potential for far-greater game-
changing benefits in the longer run. EPA also believes that temporary 
regulatory incentives may help bring some technologies to market more 
quickly than in the absence of incentives. Finally, EPA disagrees that 
such incentives are no longer needed. Although it is true that several 
EVs and PHEVs are now on the U.S. market, sales of EVs and PHEVs 
amounted to less than 0.2% of all sales in 2011.\509\ On the other 
hand, EPA believes there must be limits on the use of the incentives, 
and the Agency is adopting temporary regulatory incentives that we 
believe balance our objectives of achieving GHG emissions reductions 
and promoting game-changing technologies.
---------------------------------------------------------------------------

    \509\ Total 2011 U.S. light-duty vehicle sales were 12.8 million 
(see http://online.wsj.com/article/SB10001424052970203513604577140440852581080.html, last accessed on 
July 10, 2012). Total 2011 U.S. EV/PHEV sales were less than 20,000 
(see http://www.plugincars.com/nissan-leaf-sales-trump-chevy-volt-2011-111308.html, last accessed July 10, 2012, for total Leaf EV 
plus Volt PHEV sales of 17,345).
---------------------------------------------------------------------------

ii. Incentive Multipliers for EV/PHEV/FCVs for MYs 2017-2021
    An incentive multiplier allows a vehicle to ``count'' as more than 
one vehicle in the manufacturer's compliance calculation.\510\ As noted

[[Page 62813]]

above, EPA proposed incentive multipliers for three technologies--EVs, 
PHEVs, and hydrogen FCVs--that have the potential to achieve game-
changing GHG emissions reductions in the future if the electricity and 
hydrogen used by these vehicles are produced from low-GHG emissions 
feedstocks or from fossil fuels with carbon capture and 
sequestration.\511\ Although the Agency rejected an incentive 
multiplier in the MYs 2012-2016 final rule, we proposed a multiplier 
for MYs 2017-2021 because, while advanced technologies were not 
necessary for compliance in MYs 2012-2016, we project that they will be 
necessary, for some manufacturers, to comply with the GHG standards in 
the MYs 2022-2025 timeframe, and we believe that an incentive 
multiplier for MYs 2017-2021 can promote the initial commercialization 
of these advanced technologies that need to be available in later 
years. Table III-15 lists the incentive multipliers that EPA proposed. 
EPA also sought comment on whether there should be a single, fixed 
incentive multiplier for all PHEVs (as proposed) or whether the PHEV 
incentive multiplier should vary based on range or on another PHEV 
metric such as battery capacity or ratio of electric motor power to 
engine or total vehicle power.
---------------------------------------------------------------------------

    \510\ In the extremely unlikely case where an advanced 
technology vehicle might have an overall GHG emissions compliance 
value that is higher than its compliance target, the manufacturer 
can choose not to use the multiplier.
    \511\ EPA did not propose, but is finalizing, incentive 
multipliers for dedicated and dual fuel CNG vehicles. See Section 
III.C.2.c.iv below.

 Table III-15--EV, FCV, and PHEV Incentive Multipliers for MYs 2017-2021
------------------------------------------------------------------------
                                                    EVs and
                  Model year(s)                      FCVs        PHEVs
------------------------------------------------------------------------
2017-2019.......................................        2.0         1.6
2020............................................        1.75        1.45
2021............................................        1.5         1.3
------------------------------------------------------------------------

    Overall, public comments about the incentive multipliers for EV/
PHEV/FCVs mirrored the general comments on regulatory incentives. Every 
automaker supported the concept of a multiplier for these vehicles, 
though some automakers wanted the multiplier to go beyond 2021 
(Mitsubishi and Tesla supported incentive multipliers through 2025) and 
others wanted higher multipliers for some technologies (Mercedes-Benz 
USA suggested a multiplier of 4.0 for FCVs). The United Auto Workers 
also supported the multiplier, as did the EV advocacy stakeholders (the 
Electric Drive Transportation Association also supported extension to 
2025). Some environmental organizations explicitly opposed the 
multipliers, such as the Union of Concerned Scientists and Center for 
Biological Diversity. The Union of Concerned Scientists was 
``particularly disappointed by the agency's proposal on incentive 
multipliers, given its intellectual inconsistency with an EPA 
determination on the very same issue made only a year and a half 
earlier'' when EPA stated that ``the multiplier, in combination with 
the zero grams/mile compliance value, would be excessive.'' \512\ 
Several other environmental groups did not state an explicit position 
on the multipliers, though expressed general opposition to regulatory 
incentives. The multipliers for EV/PHEV/FCVs were also opposed by a 
wide range of non-electricity fuel advocacy groups, as well as by 
several state governmental agencies. The Alliance of Automobile 
Manufacturers was the only commenter to address the issue of a single 
versus a variable multiplier for PHEVs, and it supported a single, 
fixed multiplier for all PHEVs arguing that a variable multiplier could 
have unintended consequences by encouraging the use of battery capacity 
or power that might not be demanded by consumers.
---------------------------------------------------------------------------

    \512\ 75 FR 25436.
---------------------------------------------------------------------------

    EPA is finalizing the multipliers for EV/PHEV/FCVs as proposed. 
Consistent with the general rationale just discussed, EPA believes it 
has struck a reasonable balance in finalizing the multipliers shown in 
Table III-15 for MYs 2017-2021. EPA believes that it is both reasonable 
and appropriate to accept some short-term loss of emissions benefits in 
the short run to increase the potential for far-greater game-changing 
benefits in the longer run. The agency believes that these multipliers 
may help bring some technologies to market more quickly than in the 
absence of incentives. EPA disagrees with the comment by the Union of 
Concerned Scientists of ``intellectual inconsistency'' with the MYs 
2012-2016 standards in that EPA did not project that advanced 
technologies like EVs and PHEVs were necessary to meet the MY 2016 
standards so that no further incentive was needed. In contrast, EPA 
projects here that, for some manufacturers, EVs and PHEVs are in fact 
projected for meeting the much more stringent MY 2025 standards. As EPA 
stated in the proposal, providing multipliers for MYs 2017-2021 can lay 
the foundation for commercialization of these technologies that can 
then contribute toward compliance with standards in MYs 2022-2025. 76 
FR 75012. On the other hand, EPA disagrees with those commenters that 
support higher multipliers and/or multipliers of longer duration, as we 
believe that such incentives could lead to a significant reduction in 
program GHG savings, particularly if EV/PHEV/FCV sales increase 
significantly after MY 2021. In addition, the Agency agrees with the 
Alliance of Automobile Manufacturers about the possible unintended 
consequences of a variable multiplier, and is finalizing a fixed 
multiplier for all PHEVs that meet the eligibility requirements below.
iii. PHEV Eligibility Requirements for Incentive Multiplier
    EPA proposed that, in order for a PHEV to be eligible for the 
multiplier discussed in the previous section, the PHEV be required to 
be able to complete a full EPA highway test (10.2 miles), without using 
any conventional fuel, or alternatively, have a minimum equivalent all-
electric range of 10.2 miles as measured over the EPA highway cycle. 
See 76 FR 75012.
    EPA received only a few comments on this issue. Both the Alliance 
of Automobile Manufacturers and Ford supported the 10.2 mile all-
electric or equivalent all-electric range eligibility requirement. The 
only commenter to suggest an alternative approach was Securing 
America's Future Energy, which recommended that the PHEV eligibility 
requirement be a minimum battery energy storage capacity of 4 kilowatt-
hours, maintaining that this would be simpler to administer and 
consistent with the current minimum battery capacity for the federal 
income tax credit for PHEVs.
    EPA is finalizing, as proposed, the PHEV multiplier eligibility 
requirement of 10.2 miles all-electric or equivalent all-electric 
range. EPA agrees that a 4 kilowatt-hour minimum battery energy storage 
requirement would be a reasonable alternative, but generally prefers 
performance-based metrics over design-based metrics, unless there are 
compelling reasons to prefer the latter. This is because performance-
based metrics typically allow maximum flexibility. In this instance, 
EPA believes that there are no such compelling reasons to prefer a 
design-based approach.
iv. Incentive Multiplier for Dedicated and Dual Fuel CNG Vehicles for 
MYs 2017-2021
    EPA did not propose multipliers for CNG vehicles, but asked for 
comment on the merits of providing multipliers for dedicated and/or 
dual fuel CNG vehicles. See 76 FR 75013.

[[Page 62814]]

    A large majority of the public commenters on this topic supported 
providing regulatory incentives in this rule for both dedicated and 
dual fuel CNG vehicles.
    Most natural gas advocacy groups supported both multipliers for CNG 
vehicles, as well as use of a ``0.15 divisor'' for GHG emissions 
compliance values for CNG vehicles. This value comes from EPCA, where 
it is used to calculate fuel economy for alternative fueled vehicles 
through MY 2019.\513\ Use of this divisor would result in a much lower 
GHG emissions compliance value and hence a much bigger incentive and, 
advocates claimed, would allow GHG emissions compliance to be 
harmonized with a CAFE compliance approach that also uses the 0.15 
divisor.
---------------------------------------------------------------------------

    \513\ See 49 U.S.C. 32905, which deems a gallon equivalent of 
gaseous fuel to contain only 0.15 gallon of fuel. This means that 1 
gallon of alternative fuel is treated as 0.15 gallons of fuel, 
essentially increasing the fuel economy of a vehicle on alternative 
fuel by a factor of 6.67.
---------------------------------------------------------------------------

    The joint America's Natural Gas Alliance/American Gas Association 
comment summarized the perspective of the natural gas advocates: 
``While EPA proposes generous incentives for EVs and PHEVs because they 
represent `potential for game-changing GHG emissions and oil savings in 
the long term,' both dedicated and dual fuel NGVs represent actual 
`game changing GHG emissions and oil savings' right now that justify 
comparable incentives. Moreover, considering NGVs superior cost-benefit 
performance in reducing GHGs compared to EVs, EPA should consider an 
even larger multiplier incentive, perhaps equal to the incentive 
Congress mandated for NGVs based on their oil-displacement performance 
* * *. [A]ny GHG multiplier that is less than the fuel economy one 
essentially negates the Congressional mandate in AMFA to the extent of 
that difference, a result at odds with the very purpose of this joint 
rulemaking. We strongly encourage EPA to take into account the fuel 
economy goals of this joint program in crafting their GHG standards, 
and the fact that NGVs are more cost-effective than EVs in reducing 
GHGs should allow EPA to establish a GHG multiplier incentive 
equivalent to the Congressionally-mandated fuel economy incentive.'' 
This position was echoed by the American Clean Skies Foundation: ``All 
qualified alternative fuel vehicles, including EVs and NGVs, should 
qualify for these incentives which would use a multiplier to give extra 
credit for the emission reduction benefits of such vehicles in 
calculating each manufacturer's fleet averages * * *. Unlike the NHTSA 
rules, the EPA's new GHG standards contain additional EV-only 
incentives. These supplemental incentives arbitrarily and capriciously 
favor EVs over NGVs * * *. EPA's new rules would abolish the benefits 
NGVs gain under the NHTSA standards from the 0.15 `divisor' 
incentive.''
    NGV America echoed these arguments, and also maintained that CNG 
vehicles can serve as a potential bridge to hydrogen FCVs: ``NGVs also 
likely will play an important role in facilitating the market 
penetration of fuel cell electric vehicles (FCEVs) * * *. [t]he 
development of NGVs--and particularly natural gas refueling 
infrastructure--has long been recognized as a key bridge technology on 
a `path to hydrogen.' * * * Due to the chemical and physical 
similarities of these two gases, they share a number of technology 
synergies, so that the proliferation of NGVs and natural gas fueling 
infrastructure will facilitate and accelerate deployment of FCEVs. 
Indeed, the development of the NGV market serves to reduce or eliminate 
all four of the near-term market barriers to FCEV adoption identified 
by the Agencies: low-GHG fuel production and distribution, * * * fuel 
cost, * * * vehicle cost, and * * * consumer acceptance.'' VNG. Co also 
emphasized the bridge-to-hydrogen theme: ``It is critical for the 
Agencies to provide appropriate support for the natural gas-to-hydrogen 
path so that both NGVs and FCEVs will be a viable option for consumers 
and automakers from 2017 to 2025, as well as during the post-2025 
period as emission and fuel economy standards become ever more 
stringent. Keeping this gaseous fuel pathway `open' to automakers is 
particularly important given the Agencies' acknowledged and well-
founded concerns over the consumer acceptance of EV technology due to 
cost as well as range and refueling issues. It is, simply, too soon to 
put all of the Nation's eggs in the EV basket--and it would be a clear 
mistake to overlook the gaseous fuel pathway just as the supplies and 
economics of natural gas in the US are undergoing a historic 
transformation. Ultimately, both EVs and FCEVs will be necessary to 
achieve long-term environmental and energy security goals, and NGVs 
will play an essential role in reducing ICE vehicle emissions as well 
as enabling the transition to hydrogen.''
    Most automakers that commented on this issue also supported CNG 
incentive multipliers. Honda, which markets a dedicated Civic CNG 
vehicle, argued that: ``NGVs have similar environmental and energy 
security benefits compared to EVs and PHEVs, and their marketing 
challenges (infrastructure and consumer acceptance) are similar, as 
well. Honda supports the addition of dedicated NGVs to the group of 
dedicated vehicle multipliers (EVs and FCVs) and bi-fuel NGVs to the 
bi-fuel vehicle multipliers (PHEVs). A differential in the multiplier 
for dedicated and bi-fuel natural gas vehicles is fully justified 
because there is no guarantee that the latter will operate on natural 
gas all of the time.'' Chrysler stated: ``NGVs represent a significant 
opportunity to reduce greenhouse gas emissions and to improve energy 
independence * * *. However, several roadblocks exist to the widespread 
adoption of NGVs. These include limited vehicle availability and a lack 
of public fueling infrastructure * * *. Chrysler recommends that 
dedicated and ``extended range'' natural gas vehicles receive at least 
the same multipliers as electric vehicles, and that dual fuel NGVs 
receive at least the same multipliers as plug-in hybrid electric 
vehicles.'' Chrysler and the Vehicle Production Group were the two 
automakers who also supported the use of the 0.15 divisor for GHG 
emissions compliance, to harmonize with the use of the 0.15 divisor in 
CAFE compliance. A comment from Boyden Gray and Associates also 
supported the use of the 0.15 divisor for GHG emissions compliance.
    Toyota was the one automaker that provided a different view: 
``Toyota believes the primary consideration for including any 
technology in this provision should be its CO2 reduction 
potential. The CAFE regulations already recognize the oil saving 
benefit of CNG vehicles by structuring the fuel economy calculations to 
provide a significant boost in their reported fuel economy. EPA's 
advanced technology provisions should be squarely focused on 
CO2 benefits of a technology.''
    The broad set of comments, briefly summarized above, on CNG 
incentives raises several relevant issues. EPA disagrees with those 
comments that suggest that CNG vehicles provide the same GHG emissions 
reductions as EVs. Table III-16 compares GHG emissions for three MY 
2012 vehicles: a Honda Civic gasoline vehicle, the Honda Civic CNG 
vehicle, and the Nissan Leaf EV (the highest-selling EV in the US 
market). The tailpipe GHG emissions values for all three vehicles are 
taken directly from the EPA GHG emissions certification database. The 
upstream value for the Civic gasoline vehicle was calculated based on a 
gasoline upstream GHG emissions factor of 2478 grams

[[Page 62815]]

upstream GHG emissions per gallon.\514\ The upstream value for the 
Civic CNG vehicle was projected based on natural gas extraction, 
processing and distribution emissions values in GREET, which are based 
in part on the 2011 EPA GHG emissions inventory.\515\ The upstream 
values for the Leaf EV account for electricity feedstock, power plant, 
and distribution related GHG emissions, with the power plant and 
distribution data from EPA's eGRID2012 based on 2009 data.\516\ Two 
upstream values are shown for the Leaf, the higher of which is based on 
U.S. national average electricity (which is relevant if EV sales are 
distributed proportionally throughout the U.S.), and the lower value is 
for California electricity (where initial EV sales have been much 
higher than average, and whose electricity GHG emissions are reasonably 
representative of some of the other areas on the east and west coasts 
where EV sales are higher than average). The ``average'' Leaf has an 
upstream GHG emissions profile somewhere between these two values.
---------------------------------------------------------------------------

    \514\ This gasoline upstream GHG emissions factor is calculated 
from 21,546 grams upstream GHG emissions per million Btu (EPA value 
for future gasoline based on DOE's GREET model modified by EPA 
standards and data; see docket memo to MYs 2012-2016 rulemaking 
titled ``Calculation of Upstream Emissions for the GHG Vehicle 
Rule'') and multiplying by 0.115 million Btu per gallon of gasoline.
    \515\ The upstream value for the Civic CNG vehicle was based on 
data from DOE's GREET model that shows that CNG vehicle upstream GHG 
emissions are 28% higher than current gasoline vehicle upstream GHG 
emissions (see default estimates for target year 2015 using the 
GREET model developed by Argonne National Laboratory, ``GREET 1--
2011'', available at http://greet.es.anl.gov/, last accessed July 
10, 2012). Note that for this table, and to be consistent with 
analyses elsewhere in this document, the Civic gasoline vehicle 
upstream GHG emissions value has been revised to a slightly higher 
value as discussed in the previous footnote. Therefore, in the table 
the upstream GHG emissions value for the Civic CNG vehicle is 16%, 
not 28%, higher than that of the Civic gasoline vehicle.
    \516\ See EPA eGRID2012 at http://www.epa.gov/cleanenergy/energy-resources/egrid/index.html for 2009 national average 
powerplant GHG emissions factor of 0.554 grams/watt-hour and 2009 
California powerplant GHG emissions factor of 300 grams/watt-hour. 
These powerplant values were adjusted upward to account both for 
regional transmission/grid losses from eGRID2012 (6.5% national 
average) and regional feedstock-related GHG emissions from DOE/
Argonne National Laboratory's GREET model (10% national average). 
The total national average electricity upstream GHG value for 
electricity delivered to a wall outlet is 0.654 grams/watt-hour, and 
the total California value is 0.405 grams/watt-hour.

  Table III-16--Tailpipe and Upstream GHG Emissions Comparison--MY 2012 (grams per mile) (values in parentheses
                                         are relative to Civic Gasoline)
----------------------------------------------------------------------------------------------------------------
                                         Civic Gasoline       Civic CNG                    Leaf EV
----------------------------------------------------------------------------------------------------------------
Tailpipe.............................                207                163  0
                                                                     (-21%)  (-100%)
Upstream.............................                 58                 67  96 to 156
                                                                             (CA and US)
Tailpipe + Upstream..................                265                230  96 to 156
                                                                     (-13%)  (-64% to -41%)
----------------------------------------------------------------------------------------------------------------

    The data in Table III-16 support several conclusions. First, CNG 
vehicles provide a reduction in tailpipe GHG emissions relative to 
gasoline vehicles. The data from the two Civics suggest that the 
tailpipe CNG benefit is approximately 20%, primarily due to natural 
gas' more favorable hydrogen-to-carbon ratio relative to gasoline. 
Second, based on the latest EPA data for natural gas extraction, 
processing, and distribution, upstream GHG emissions for a CNG vehicle 
are slightly higher than those for a comparable gasoline vehicle. 
Third, it is clear that the Leaf EV is superior to the Civic CNG in 
terms of both tailpipe only and tailpipe + upstream GHG emissions. 
Although the Leaf's GHG emissions advantage over the Civic CNG is 
largest in California and other cleaner-electricity states, the Leaf 
has demonstrably lower tailpipe + upstream GHG emissions even if EVs 
are assumed to operate on ``national average'' electricity.
    From a vehicle tailpipe perspective, EVs are a game-changing 
technology. However, given the current electricity upstream emissions 
profile, as shown in Table III-16, the full potential for zero or near-
zero GHG emissions from EVs will only be realized if and when the 
electricity sector is transformed so that upstream emissions are lower. 
Current trends, where lower-GHG natural gas is displacing higher-GHG 
coal use, will decrease EV upstream GHG emissions, which means that the 
comparison between the Civic CNG and Leaf EV in Table III-16 above will 
become more favorable for EVs over time as more electricity is produced 
with natural gas and less with coal. However, this is not the ultimate 
pathway for EVs to become a true game-changing technology from a GHG 
emissions perspective.
    EPA agrees with the comment by Toyota that EPA should base its 
decision on this issue by focusing on GHG emissions performance. Based 
on the data above, EPA does not believe that CNG vehicles are a game-
changing technology in terms of GHG emissions.
    Comments raised two other factors relevant to the potential for CNG 
to be a game-changer with respect to GHG emissions. The first is the 
potential for the use of biomethane, or methane produced from non-
fossil sources, that can yield very low lifecycle GHG emissions. EPA 
agrees that there will be some production of biomethane, but we believe 
that biomethane will remain a small part of the overall natural gas 
market for the foreseeable future, particularly given the remarkable 
drop in natural gas prices and the likelihood that natural gas prices 
in the US will remain at relatively low levels for the foreseeable 
future.
    The second is the potential for CNG to be a bridge technology for 
the commercialization of hydrogen FCVs. EPA agrees that CNG investments 
have the potential to facilitate the introduction of hydrogen FCVs in 
several respects. Examples include:
     Innovations with on-board vehicle CNG fuel tanks could 
translate directly to improved on-board hydrogen fuel tanks, since the 
primary challenge with both is the safe and economic storage of 
sufficient gaseous fuel to provide reasonable vehicle range; \517\
---------------------------------------------------------------------------

    \517\ Natural Gas and Hydrogen Infrastructure Opportunities 
Workshop October 18-19, 2011, Argonne National Laboratory, February 
21, 2012, page 18, http://www.transportation.anl.gov/pdfs/AF/812.PDF 
(last accessed August 10, 2012).
---------------------------------------------------------------------------

     synergistic innovations in tube trailer designs could 
apply to the delivery of CNG and hydrogen to end users; \518\
---------------------------------------------------------------------------

    \518\ Hydrogen and Fuel Cell Manufacturing R&D Workshop August 
11-12, 2011, http://www1.eere.energy.gov/hydrogenandfuelcells/pdfs/mfg2011_iv_newhouse.pdf (last accessed August 10, 2012).
---------------------------------------------------------------------------

     engineering innovations to improve the design of natural 
gas compressors

[[Page 62816]]

and/or dispensers that might translate to hydrogen compressors and/or 
dispensers; \519\ and
---------------------------------------------------------------------------

    \519\  Natural Gas and Hydrogen Infrastructure Opportunities 
Workshop October 18-19, 2011, Argonne National Laboratory, February 
21, 2012, page 7, http://www.transportation.anl.gov/pdfs/AF/812.PDF 
(last accessed August 10, 2012).
---------------------------------------------------------------------------

     pipelines, including new fiber reinforced polymer (FRP) 
technology, to natural gas refueling stations could be used for 
hydrogen refueling, either by carrying hydrogen from central production 
facilities (while it is not considered feasible to transport pure 
hydrogen in pipelines designed for natural gas, one active research 
pathway is transporting natural gas/hydrogen blends and separating the 
fuels at the refueling station) or by providing the natural gas 
feedstock for on-site hydrogen production, such as steam methane 
reforming and combined heat, hydrogen and power (CHHP), at the 
refueling station.\520\ So, although EPA does not consider the direct 
CNG vehicle pathway to be a potential GHG emissions game-changer, we do 
consider investments in CNG technology and refueling infrastructure to 
be a valuable, indirect step towards hydrogen FCVs, which can be a 
game-changer in terms of GHG emissions.
---------------------------------------------------------------------------

    \520\  Natural Gas and Hydrogen Infrastructure Opportunities 
Workshop October 18-19, 2011, Argonne National Laboratory, February 
21, 2012, page 19, http://www.transportation.anl.gov/pdfs/AF/812.PDF.
---------------------------------------------------------------------------

    EPA also agrees with those commenters who argued that CNG vehicles 
share some of the market barriers faced by technologies for which EPA 
is providing temporary regulatory incentives; for example, higher 
vehicle cost, lower vehicle range, the need for new refueling 
infrastructure, and consumer acceptance. On the other hand, EPA also 
believes that CNG vehicles do not face the same magnitude of barriers 
with respect to overall consumer acceptance as EVs, which involve a 
completely different consumer refueling paradigm compared to both CNG 
and gasoline vehicles.
    On the basis of the above discussion, EPA believes that it is 
appropriate to provide a temporary regulatory incentive for CNG 
vehicles, but not to the same extent as EVs, PHEVs, and FCVs. Based on 
the considerations just discussed, EPA consequently disagrees with 
comments that distinctions between CNG vehicles and those other 
advanced technology vehicles, for which EPA is providing temporary 
regulatory incentives, are arbitrary.
    EPA is adopting an incentive multiplier, for both dedicated and 
dual fuel CNG vehicles, equal to the multipliers for PHEVs: 1.6 in MYs 
2017-2019, 1.45 in MY 2020, and 1.3 in MY 2021. As discussed above, EPA 
believes these multipliers for CNG vehicles are justified because CNG 
vehicles and infrastructure indirectly support future commercialization 
of hydrogen FCVs, which are a potential game-changing GHG emissions 
technology, and because CNG vehicles face significant market barriers 
such as lack of fueling infrastructure, vehicle cost and range, and 
consumer acceptance. EPA is finalizing the same incentive multiplier 
for both dedicated and dual fuel CNG vehicles, rather than a higher 
multiplier for dedicated vehicles and a lower multiplier for dual fuel 
vehicles, because we believe that most owners of dual fuel CNG vehicles 
will use CNG fuel as much as possible. This is because, once a consumer 
has paid a premium to be able to use CNG fuel, and given the 
expectation that CNG fuel will continue to be much cheaper than 
gasoline, there will be a strong economic motivation for consumers to 
seek out and use CNG fuel. While the CNG incentive multipliers are 
equal to those for PHEVs, the effective value of the CNG multiplier to 
an automaker will be lower relative to most (and possibly all) PHEVs 
because the multipliers will be applied to the vehicles' respective 
tailpipe emissions, and most CNG vehicles will likely have lower 
tailpipe GHG emissions reductions (relative to the footprint-based 
CO2 targets) than most PHEVs.
    EPA is not adopting additional regulatory incentives for dedicated 
and dual fuel CNG vehicles beyond the incentive multipliers for MYs 
2017-2021. EPA disagrees with those commenters that argued that EPA 
should provide the same ``0.15 divisor'' incentive for GHG emissions 
compliance that is used for the calculation of CAFE credits for 
alternative fuel vehicles. Congress provided the 0.15 divisor for CAFE 
compliance because a vehicle that operates on a nonpetroleum fuel (like 
CNG) consumes zero or near-zero petroleum, and petroleum conservation 
is a primary objective of the CAFE program. But, as shown above, the 
tailpipe GHG emissions from CNG vehicles, while approximately 20% lower 
than from comparable gasoline vehicles, are substantial and do not 
reflect game-changing GHG emissions performance. The primary focus of 
the GHG standards is GHG emissions. EPA is not persuaded that adopting 
the divisor is warranted from a GHG standpoint because there would be a 
significant reduction of GHG programmatic benefits that is not 
warranted by these vehicles. As discussed above, the fact that CNG 
technology can be a helpful, indirect step toward hydrogen FCVs does 
justify providing an incentive multiplier, but this same rationale is 
not sufficient to justify a far larger regulatory incentive. We also 
disagree with those commenters who argued that EPA must adopt the 0.15 
divisor in order to not ``negate the Congressional mandate'' for CAFE 
credits. The Congressional mandate still applies for CAFE purposes. 
EPA's GHG program and NHTSA's CAFE program are harmonized in numerous 
ways, but there are a number of instances where the programs diverge 
with respect to incentives and flexibilities. See section I.B.4 above. 
Here, EPA believes that the paramount emission reduction goals of the 
CAA warrant the difference in approach.
v. 0 g/mi Compliance Treatment for EV/PHEV/FCVs with MYs 2022-2025 Per-
Company Cap and Net Upstream GHG Emissions Compliance Beyond Cap
    The tailpipe GHG emissions from EVs, from PHEVs operated on grid 
electricity, and from hydrogen-fueled FCVs are zero, and traditionally 
the emissions of the vehicle itself are all that EPA takes into account 
for purposes of compliance with standards set under Clean Air Act 
section 202(a). Focusing on vehicle tailpipe emissions has not raised 
any issues for criteria pollutants, as upstream criteria emissions 
associated with production and distribution of the fuel are addressed 
by comprehensive regulatory programs focused on the upstream sources of 
those emissions. At this time, however, there is no such comprehensive 
program addressing upstream emissions of GHGs,\521\ and the upstream 
GHG emissions associated with production and distribution of 
electricity are higher, on a national average basis, than the 
corresponding upstream GHG emissions of gasoline or other petroleum 
based fuels.\522\ In the future, if there were a program to 
comprehensively address upstream GHG emissions, then the zero tailpipe 
levels from these vehicles have the potential to contribute to very 
large

[[Page 62817]]

GHG reductions, and to transform the transportation sector's 
contribution to nationwide GHG emissions (as well as oil consumption). 
For a discussion of this issue in the MYs 2012-2016 rule see 75 FR 
25434-438.
---------------------------------------------------------------------------

    \521\ EPA has proposed a New Source Performance Standard for 
greenhouse gas emissions from new electricity generating units, see 
77 FR 22392.
    \522\ There is significant regional variation with upstream GHG 
emissions associated with electricity production and distribution. 
Based on EPA's eGRID2012 database, comprised of 26 regions, the 
average 2009 power plant GHG emissions rates per kilowatt-hour for 
those regions with the highest GHG emissions rates are over 3 times 
higher than those with the lowest GHG emissions rates. See http://www.epa.gov/cleanenergy/energy-resources/egrid/index.html.
---------------------------------------------------------------------------

    Original equipment manufacturers currently offer several EVs and 
PHEVs in the U.S. market. EVs on the market include the Nissan Leaf, 
Mitsubishi MIEV, Ford Focus EV, Tesla S, Honda Fit EV, and Coda Sedan. 
PHEVs on the market include the Chevrolet Volt, Toyota Prius PHEV, and 
Fisker Karma. Some of these models are available nationwide, others are 
available in selected markets. At this time, no original equipment 
manufacturer offers FCVs to the general public except for some limited 
demonstration programs.\523\
---------------------------------------------------------------------------

    \523\ For example, Honda has leased up to 200 Clarity fuel cell 
vehicles in southern California (see Honda.com) and Toyota has 
announced plans for a limited fuel cell vehicle introduction in 2015 
(see Toyota.com).
---------------------------------------------------------------------------

    EVs and FCVs represent some of the most significant changes in 
automotive technology in the industry's history.\524\ Although EVs face 
major consumer barriers such as significantly higher vehicle cost and 
lower range, EPA remains optimistic about consumer acceptance of EVs, 
PHEVs, and FCVs in the long run, but believes that near-term market 
acceptance is less certain. EVs have a completely different consumer 
refueling paradigm, which might appeal to some consumers and discourage 
other consumers. EVs also have attributes that could be attractive to 
consumers: lower and more predictable fuel price, no need for oil 
changes or spark plugs, and reducing one's personal contribution to 
local air pollution, climate change, and oil dependence.\525\
---------------------------------------------------------------------------

    \524\ A PHEV is not such a big change since, if the owner so 
chooses, it can operate on gasoline.
    \525\ PHEVs and FCVs share many of these same challenges and 
opportunities.
---------------------------------------------------------------------------

    One of the most successful new automotive powertrain technologies--
conventional hybrid electric vehicles like the Toyota Prius--
illustrates the challenges involved with consumer acceptance of new 
technologies, even those that do not involve vehicle attribute 
tradeoffs. While conventional hybrids have now been on the U.S. market 
for over a decade, their market share hovers around 2 to 3 percent, 
even though they offer higher vehicle range than their traditional 
gasoline vehicle counterparts, involve no significant consumer 
tradeoffs (other than cost), and have reduced their incremental cost. 
The cost and consumer tradeoffs associated with EVs, PHEVs, and FCVs 
are more significant than those associated with conventional hybrids. 
Given the long leadtimes associated with major transportation 
technology shifts, there is value in providing incentives for these 
potential game-changing technologies today if we want to retain the 
possibility of achieving their major environmental and energy benefits 
in the future.
    In terms of the relative relationship between tailpipe and upstream 
fuel production and distribution GHG emissions, EVs, PHEVs, and FCVs 
are very different than conventional gasoline vehicles. Combining 
vehicle tailpipe and fuel production/distribution sources, gasoline 
vehicles emit about 80 percent of these GHG emissions at the vehicle 
tailpipe with the remaining 20 percent associated with ``upstream'' 
fuel production and distribution GHG emissions.\526\ On the other hand, 
vehicles using electricity and hydrogen emit no GHG emissions at the 
vehicle tailpipe, and therefore all GHG emissions associated with 
powering the vehicle are due to fuel production and distribution.\527\ 
Depending on how the electricity and hydrogen fuels are produced, these 
fuels can have high fuel production/distribution GHG emissions (for 
example, if coal is used with no GHG emissions control) or very low GHG 
emissions (for example, if renewable processes with minimal fossil 
energy inputs are used, or if carbon capture and sequestration is 
used). As shown in Table III-16, today's Nissan Leaf EV would have an 
upstream GHG emissions value of 156 grams per mile based on national 
average electricity, and a value of 96 grams per mile based on the 
average electricity in California, one of the initial major markets for 
the Leaf.
---------------------------------------------------------------------------

    \526\ Fuel production and distribution GHG emissions have 
received much attention because there is the potential for more 
widespread commercialization of transportation fuels that have very 
different GHG emissions characteristics in terms of the relative 
contribution of GHG emissions from the vehicle tailpipe and those 
associated with fuel production and distribution. Other GHG 
emissions source categories include vehicle production, including 
the raw materials used to manufacture vehicle components, and 
vehicle disposal. These categories are less important from an 
emissions inventory perspective, they raise complex accounting 
questions that go well beyond vehicle testing and fuel-cycle 
analysis, and in general there are fewer differences across 
technologies. See section III.G.5.
    \527\ The Agency notes that many other fuels currently used in 
light-duty vehicles, such as diesel from conventional oil, ethanol 
from corn, and compressed natural gas from conventional natural gas, 
have tailpipe GHG and fuel production/distribution GHG emissions 
characteristics fairly similar to that of gasoline from conventional 
oil. See 75 FR 25437. The Agency recognizes that future 
transportation fuels may be produced from renewable feedstocks with 
lower fuel production/distribution GHG emissions than gasoline from 
oil.
---------------------------------------------------------------------------

    Because these upstream GHG emissions values are generally higher 
than the upstream GHG emissions values associated with gasoline 
vehicles, and because there is currently no national program in place 
to reduce GHG emissions from electric power plants, EPA believes it is 
appropriate to consider the incremental upstream GHG emissions 
associated with electricity production and distribution for the model 
years at issue in this rulemaking. But, we also think it is appropriate 
to encourage the initial commercialization of EV/PHEV/FCVs as well, in 
order to retain the potential for game-changing GHG emissions and oil 
savings in the long term.
    As noted above, EPA proposed that, for MYs 2017-2021, all EVs, 
PHEVs (electric operation), and FCVs would have a GHG emissions 
compliance value of 0 grams per mile (g/mi). For MYs 2022-2025, EPA 
proposed a compliance value of 0 g/mi for EVs, PHEVs, and FCVs for that 
vehicle production below a per-company, cumulative production cap 
threshold for those four model years. The proposed cap had two tiers, 
consistent with the two-tier cap approach that was adopted in the 
rulemaking for MYs 2012-2016.\528\ For manufacturers that sell 300,000 
or more EV/PHEV/FCVs combined in MYs 2019-2021, the proposed cumulative 
production cap would be 600,000 EV/PHEV/FCVs for MYs 2022-2025. Other 
automakers would have a proposed cumulative production cap of 200,000 
EV/PHEV/FCVs in MYs 2022-2025. The rationale for this two-tier approach 
was that it would provide an extra incentive to those automakers 
willing to take early leadership in commercializing EV/PHEV/FCVs. In 
other words, a manufacturer would be allowed to continue using a 0 g/mi 
compliance value for EV/PHEV/FCVs during MYs 2022-2025 until its per-
company production cap was exceeded, at which point the manufacturer 
would begin calculating compliance using net upstream GHG emissions 
accounting. See 76 FR 75013. The agency also asked for comments on an 
alternative industry-wide cap design. This would place an industry-wide 
cumulative production cap of 2 million EV/PHEV/FCVs eligible for the 0 
g/mi incentive in MYs 2022-2025. EPA would allocate this 2 million 
vehicle cap to individual automakers in calendar year 2022 based on 
cumulative EV/PHEV/FCV sales in MYs 2019-2021, i.e., if an automaker 
sold X percent of industry-wide EV/

[[Page 62818]]

PHEV/FCV sales in MYs 2019-2021, that automaker would get X percent of 
the 2 million industry-wide cumulative production cap in MYs 2022-2025 
(or possibly somewhat less than X percent, if EPA were to reserve some 
small volumes for those automakers that sold zero EV/PHEV/FCVs in MYs 
2019-2021). See 76 FR 75013.
---------------------------------------------------------------------------

    \528\ 75 FR 25436.
---------------------------------------------------------------------------

    For both the proposed per-company cap and the alternative industry-
wide cap, EPA proposed that, for production beyond the cumulative 
vehicle production cap for a given manufacturer in MYs 2022-2025, 
compliance values would be calculated according to a methodology that 
accounts for the full net increase in upstream GHG emissions relative 
to that of a comparable gasoline vehicle. See Section III.C.2.c.vi 
below for the details of this methodology.
    Finally, EPA also asked for comments on approaches for phasing in 
from a 0 g/mi value to a full net increase value, e.g., an interim 
period when the compliance value might be one-half of the net increase.
    EPA recognized in the proposal that the use of EVs, PHEVs, and FCVs 
in the 2017-2025 timeframe, in conjunction with both the incentive 
multiplier and the 0 g/mi compliance treatment, would decrease the 
overall GHG emissions reductions associated with the program as the 
upstream emissions associated with the generation and distribution of 
national average electricity are higher than the upstream emissions 
associated with production and distribution of gasoline. EPA accounted 
for this difference in projections of the overall program's impacts and 
benefits. In the proposal, EPA projected that, based on plausible 
assumptions about EV/PHEV/FCV sales, the decrease in GHG emissions 
reductions due to the temporary regulatory incentives would likely be 
on the order of 5% or so.\529\ EPA has updated that analysis in Section 
III.C.2.d below and in the Regulatory Impact Analysis.
---------------------------------------------------------------------------

    \529\ 76 FR 75015.
---------------------------------------------------------------------------

    EPA received a large number of comments on the topic of compliance 
treatment for EV/PHEV/FCVs. Two commenters, the Northeast States for 
Coordinated Air Use Management and the National Association of Clean 
Air Agencies, supported the proposal. But the great bulk of commenters 
opposed the proposed treatment, with opponents approximately split on 
whether the proposed EV/PHEV/FCV incentives were too much or too 
little.
    The most addressed issue was the proposed 0 g/mi compliance 
treatment. Almost all automakers strongly supported 0 g/mi as the most 
appropriate compliance value for EV/PHEV/FCVs and that upstream 
emissions should never be factored into vehicle GHG emissions 
compliance values. The Alliance of Automobile Manufacturers summarized 
many of the themes that were repeated by most automakers: ``Automakers 
should not be required to account for utility GHG emissions * * *. 
Clearly automakers have no control over the feedstocks that power 
plants use to create electricity nor do we have control over the 
conversion or transportation processes, or where and when a vehicle 
owner recharges a vehicle. * * * [m]aking vehicle manufacturers 
responsible for emissions over which they have no control is contrary 
to the Clean Air Act. * * * [t]he attribution of upstream emissions 
impacts to grid-powered vehicles alone would be arbitrary, capricious 
and an abuse of discretion * * *. If Americans agree that programs to 
address upstream GHG emissions are appropriate, then such programs 
should be put in place through appropriate regulation of electricity 
generators, not by imposing additional burdens on vehicle 
manufacturers.'' Nissan echoed many of these same themes: ``The 
proposal to focus on tailpipe emissions is consistent with the policy 
objective of fostering electric vehicles and with the fact that 
automobile manufacturers only control tailpipe emissions and have no 
control over the fuel source for electric power * * *. Not only is 
EPA's proposal to measure EVs as zero grams per mile the best policy 
decision to promote EV deployment, it is also legally required * * *. 
Section 202 [of the Clean Air Act] gives EPA discretion to incentivize 
new technologies, but Section 202 does not give EPA the authority to 
consider non-vehicle related emissions when setting compliance 
standards. Doing so would disrupt the careful structure of the CAA * * 
*. Specifically, Title I of the CAA regulates stationary sources, while 
Title II of the CAA regulated mobile sources.'' Several other 
automakers made similar arguments. The United Auto Workers ``believes 
that zero grams per mile are the most faithful representation of the 
tailpipe pollution for a vehicle that in many cases has no tailpipe. 
Accordingly, while the UAW believes that the proposed caps for zero 
gram per mile treatment by the EPA for model years 2022-2025 are likely 
adequate to avoid assigning upstream emissions to large numbers of 
these vehicles, we urge the EPA to reconsider its stance that the 
emissions of electricity producers should be assigned to the products 
that use electricity. The proper place to measure and regulate these 
emissions is of course where the electricity is produced and the grid 
system that distributes electricity.'' Electric vehicle advocates also 
echoed these same themes, and the Edison Electric Institute argued that 
0 g/mi ``is not an `incentive' but a recognition of actual EV emissions 
which are 0.0 g/mile when measured at the tailpipe.''
    Two automakers opposed the use of 0 g/mi. Honda ``believes that EPA 
should separate incentives and credits from the measurement of 
emissions. Honda believes that without accounting for the upstream 
emissions of all fuels, inaccurate comparisons between technologies 
will take place * * *. EPA's regulations need to be comprehensive and 
transparent. By zeroing out the upstream emissions, EPA is conflating 
incentives and credits with proper emissions accounting.'' EcoMotors 
International ``encourages EPA to drop the 0 g/mile tailpipe compliance 
value.'' Environmental advocacy groups also opposed the 0 g/mi 
compliance treatment. The Natural Resources Defense Council claimed 
that 0 g/mi ``undermines'' the pollution and technology benefits of the 
program. Along with other environmental groups, the American Council 
for an Energy Efficient Economy also opposed 0 g/mi, but added that 
``[m]ost important, however, is that a zero-upstream treatment of plug-
in vehicles not be continued indefinitely, and that full upstream 
accounting be applied to these vehicles by a date certain. EPA's 
proposed treatment of EVs largely accomplishes this, so we strongly 
support that aspect of the proposal.'' The American Petroleum Institute 
argued that ``[i]gnoring the significant contribution of (and extensive 
compilation of published literature on) upstream CO2 
emissions from electricity generation, defies principles of 
transparency and sound science and distorts the market for developing 
transportation fuel alternatives. It incentivizes the electrification 
of the vehicle fleet with a pre-defined specific and costly set of 
technologies whose future potential is not measured with the same well-
to-wheels methodology against that of advanced biofuels or other carbon 
mitigation strategies.'' Organizations advocating fuels other than 
electricity also opposed the use of 0 g/mi.
    EPA received many fewer comments on the proposed cap on the number 
of vehicles that would be eligible for the 0 g/mi compliance treatment 
in MYs 2022-2025. The specific questions here are (1) whether the cap 
should be a per-company cap where individual

[[Page 62819]]

companies would have greater advance certainty, but there would be 
greater uncertainty with the overall environmental outcome, or an 
industry-wide cap, where there would be greater environmental certainty 
regarding the maximum number of vehicles that would be eligible for the 
0 g/mi treatment, but where individual manufactures would not know 
their effective per-company caps until some point in the future, and 
(2) the production/sales threshold for the cap. The joint Sierra Club/
Environment America/Safe Climate Campaign/Clean Air Council comment 
recommended ``a floating industry wide cap for number of EV sales 
eligible for zero emissions treatment in 2022-2025 be set at 1 million 
minus cumulative sales in 2017-2021 rather than the 2 million vehicle 
cap in the proposed rule.'' The American Council for an Energy 
Efficient Economy recommended that ``in the 2017-2025 period, the 
number of such EVs should be capped at 2 million.'' The Natural 
Resources Defense Council ``recommends that EPA adopt an industry-wide 
cap following the structure described in the NPRM as the alternative to 
the proposed manufacturer-specific cap. NRDC recommends the industry-
wide cap because it ensures the environmental benefits of the program. 
If set appropriately * * * the industry-wide cap could ensure that no 
more than 5 percent of the program GHG reductions are lost. NRDC 
recommends that the industry-wide cap be set based on cumulative plug-
in electric vehicles produced beginning in 2012 because even these 
early volumes will help pave the way for electric vehicle production 
cost reductions and greater market acceptance * * *. [T]he post 2021 
cap of no more than 2 million vehicles would be lowered by the 
cumulative sales that occurred before 2022 to reflect the technology 
advancement in the early years of the program.''
    Nissan and BMW were the only individual automakers to comment on 
this question. Nissan stated that: ``[a]ny regulatory cap should be 
industry based in order to encourage investment in electric powertrains 
now for use in the coming model years, and the cap should not reserve 
any volume for manufacturers selling zero electric vehicles in MYs 
2019-2021 * * *. The purpose of the proposed incentives is to encourage 
manufacturer investment in potentially game-changing technologies now 
to accelerate their adoption rate. Adopting an industry-wide cap will 
serve that purpose.'' On the other hand, BMW ``prefers company-based 
cap. * * * [as it provides] clear planning certainty in the whole time 
period of the regulation * * * [while the industry-wide cap provides a] 
big advantage for [high] volume manufacturer.'' The Association of 
Global Automakers stated that ``[i]f EPA decides to adopt company-
specific caps, we recommend that it adopt a simple linear function 
based on vehicle sales levels to establish the caps, rather than using 
the proposed two-step approach.'' No other individual automaker 
addressed this issue. EPA recognizes that almost every automaker 
supported the permanent adoption of the 0 g/mi compliance treatment, 
and under that approach the concept of caps is meaningless. Finally, 
the Electric Drive Transportation Association stated that: ``[a]n 
industry-wide cap is especially problematic, because each 
manufacturer's cap would depend on that manufacturer's relative share 
of the market, not its absolute sales volume; a cap based on relative 
share is very difficult for a manufacturer to predict, because it is 
tied to decisions made by other manufacturers.''
    No commenters suggested any alternatives to basing EV/PHEV/FCV GHG 
emissions compliance values, for production beyond the cumulative 
vehicle production cap for a given manufacturer in MY 2022 and later, 
on the full net increase in upstream GHG emissions relative to that of 
a comparable gasoline vehicle.
    The agency received one comment on the question of whether the 
transition from a 0 g/mi compliance treatment to a full net increase in 
upstream GHG emissions, for production beyond the cumulative vehicle 
production cap in MY 2022 and later. Nissan stated that ``[t]he interim 
period between a zero grams per mile compliance value and full net 
increase in upstream emissions value should be equal to the number of 
vehicles each manufacturer can assign a zero grams per mile compliance 
value for MYs 2022-2025, and the interim period compliance value should 
be one-half of the net increase.''
    EPA is finalizing, as proposed, the 0 g/mi compliance treatment for 
EV/PHEV/FCVs with a per-company vehicle production cap in MYs 2022-2025 
and net upstream GHG emissions compliance beyond the cap. As the above 
summary shows, there were strong public comments, on both sides, on the 
proposed approach for the compliance treatment for EV/PHEV/FCVs, 
beginning with 0 g/mi and transitioning to a full net increase in GHG 
upstream emissions if and when a manufacturer exceeds its vehicle 
production cap threshold. But there was no new information or 
rationales provided to EPA that changes the Agency's perspective on 
these matters. EPA disagrees with those commenters who believe that 
compliance values for vehicle GHG emissions standards under section 
202(a) cannot take fuel-related upstream GHG emissions into account, 
and that it is ``arbitrary and capricious'' to do so and ``contrary'' 
to the Clean Air Act. As EPA explained when discussing this issue in 
the MYs 2012-2016 light duty vehicle GHG rulemaking, ``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. 
While the logical place to start is the emissions level measured under 
the test procedure, section 202(a)(1) does not require that EPA limit 
itself to only that level.'' 75 FR 25437. Furthermore, there is a 
reasoned basis for accounting for upstream GHG emissions here because, 
as shown in Table III-16 above, upstream GHG emissions attributable to 
increased electricity production to operate EVs or PHEVs currently 
exceed the upstream GHG emissions attributable to gasoline vehicles. 
EPA thus believes that although section 202(a)(1) of the Clean Air Act 
does not require the inclusion of upstream GHG emissions in these 
regulations, the discretion afforded under this provision allows EPA to 
consider upstream GHG emissions, particularly when such emissions from 
new technologies are higher than those from conventional vehicles. On 
the other hand, EPA also disagrees with those commenters who claim 
that, by allowing a 0 g/mi compliance treatment, the Agency is 
``ignoring'' upstream emissions and ``not being transparent.'' The 
agency has discussed and quantified the upstream GHG emissions 
associated with EVs and PHEVs at length in the rulemaking analyses for 
both the MYs 2012-2016 rule and this rule. EPA also disagrees that the 
0 g/mi compliance treatment ``undermines'' the program, as the Agency 
believes that it will likely lead to only a small percentage loss of 
overall program GHG emissions reductions (see Section III.C.2.d for 
these projections), while creating an important incentive for 
potentially enormous emissions reductions from these vehicles in the 
longer term. The broad discretion to set emissions standards under 
section 202(a)(1) includes authority to structure those standards in a 
way that provides an incentive to promote advances in emissions control 
technology, which includes discretion in how to structure

[[Page 62820]]

a compliance regime so as to promote use of advanced technologies.
    In summary, EPA continues to believe that finalizing the proposed 
compliance treatment for EV/PHEV/FCVs strikes a reasonable balance 
between promoting the commercialization of EV/PHEV/FCVs, which have the 
potential to achieve game-changing GHG emissions reductions in the 
future, and accounting for upstream emissions once such vehicles reach 
a reasonable threshold in the market. The mid-term evaluation will 
provide an opportunity to review the status of advanced vehicle 
technology commercialization, the status of upstream GHG emissions 
control programs, and other relevant factors.
    EPA is also finalizing, as proposed, the per-company vehicle 
production caps for MYs 2022-2025. The cumulative per-company caps for 
MYs 2022-2025 are 600,000 EV/PHEV/FCVs for those manufacturers that 
produce a total of 300,000 or more EV/PHEV/FCVs in MYs 2019-2021, and 
200,000 EV/PHEV/FCVs for all other manufacturers. The central tension 
in the design of a cap relates to certainty and uncertainty with 
respect to both individual automaker caps and the overall number of 
vehicles that may fall under the cap, which determines the maximum 
decrease in GHG emissions reductions. A per-company cap would provide 
clear certainty for individual manufacturers at the time of the final 
rule, but would yield uncertainty about how many vehicles industry-wide 
would take advantage of the 0 g/mi compliance treatment and therefore 
the overall impact on GHG emissions. With an industry-wide cap, EPA 
would establish a finite limit on the total number of vehicles eligible 
for the 0 g/mi incentive, with a method for allocating this industry-
wide cap to individual automakers. An industry-wide cap would provide 
certainty with respect to the maximum number of vehicles and GHG 
emissions impact and would reward those automakers who show early 
leadership. If EPA were to make a specific numerical allocation at the 
time of the final rule, automakers would have certainty, but EPA is 
concerned that we may not have sufficient information to make an 
equitable allocation for a timeframe that is over a decade away. If EPA 
were to adopt an allocation formula in the final rule that was 
dependent on future sales, automakers would have much less certainty 
and leadtime for compliance planning as they would not know their 
individual caps until some point in the future. Public comments on the 
relative merits of per-company and industry-wide caps were mixed. EPA 
has chosen to finalize the per-company cap because of the concern that 
the uncertainty faced by individual automakers about how they would 
fare under an industry-wide cap could, in effect, act as a disincentive 
to pursue advanced vehicle technology commercialization.
    Finally, EPA is finalizing the full net upstream GHG emissions 
approach for the compliance treatment for EV/PHEV/FCVs beyond the per-
company vehicle production threshold caps in MYs 2022-2025. EPA is not 
adopting any type of ``phase-in'', i.e., the compliance value will 
change from 0 g/mi to the full net upstream GHG emissions value once a 
manufacturer exceeds the cap. EPA believes that the levels of the per-
company vehicle production caps in MYs 2017-2025 are high enough to 
provide a sufficient incentive such that any production beyond those 
caps should use the full net upstream GHG emissions accounting.
vi. Methodology for Determining Net Upstream GHG Emissions Compliance 
for EVs Beyond Cap
    EPA proposed a specific methodology for calculating the net 
upstream GHG emissions compliance value for EVs (and the electric 
portion of PHEV operation). This methodology was based on four key 
inputs: (1) The vehicle electricity consumption over EPA city and 
highway compliance tests (under EPA test protocols, this accounts for 
the losses associated in vehicle charging as well), (2) an adjustment 
to account for electricity losses during electricity grid transmission, 
(3) a projected 2025 nationwide average electricity upstream GHG 
emissions rate of 0.574 grams/watt-hour at the power plant, which 
accounts for both power plant and feedstock GHG emissions, and (4) the 
upstream GHG emissions of a comparable gasoline vehicle meeting its MY 
2025 GHG emissions target. See 76 FR 75014.
    The 0.574 grams/watt-hour electricity upstream GHG emissions factor 
that EPA proposed was based on a nationwide average power plant value 
for 2025, based on simulations with the EPA Office of Atmospheric 
Programs' Integrated Planning Model (IPM), and a 1.06 multiplicative 
factor to account for additional upstream GHG emissions associated with 
feedstock extraction, transportation, and processing. EPA recognized in 
the proposal that there were other approaches for projecting a future 
upstream GHG emissions factor for EVs and PHEVs, and that EPA would be 
considering running the IPM model with more detailed vehicle and 
vehicle charging-specific assumptions to generate a more robust 
electricity upstream GHG emissions factor for EVs and PHEVs in the 
final rulemaking. Specifically, the Agency discussed its intention to 
account for the likely regional sales variation for initial EV/PHEV/
FCVs, and the likely frequency of daytime and nighttime charging. EPA 
sought comment on whether there were additional factors that the Agency 
should try to include in the IPM modeling for the final rulemaking.
    All of the relevant comments directly or indirectly supported a 
more sophisticated approach for determining the electricity upstream 
GHG emissions factor. Nissan noted that most of its initial Leaf sales 
have been in California and other states with lower-than-average 
electricity GHG emissions. It concluded: ``By accounting for upstream 
emissions using a national average, electric vehicle manufacturers 
would be penalized because their compliance standard will not be 
reflective of actual upstream emissions.'' Edison Electric Institute 
stated: ``[i]t is inappropriate for EPA, now in 2012, to calculate any 
upstream electricity GHG emissions rate for 2025, as there is no way 
that this value could reasonably approximate actual electric generating 
unit (EGU) emissions 13 years in the future * * *. Unless EPA 
dramatically changes its assumptions about the makeup of the generating 
fleet in 2025 to better reflect current and expected regulations, any 
additional IPM runs--even those using updated vehicle and charging 
assumptions--will be equally unable to provide an upstream electricity 
GHG emissions rate that has any relationship to actual emissions in 
2025. If EPA does decide to conduct additional IPM runs for the final 
rule, the Agency must do more than update vehicle and charging 
assumptions * * *. In 2011, California residents purchased more than 60 
percent of the Nissan Leafs and about 30 percent of the Chevrolet Volts 
sold in the U.S. * * *. The Agency would be better served by waiting 
until MY 2021 to estimate upstream GHG electricity emissions, using 
actual emissions data and the most up-to-date information about the EGU 
generating fleet. EPA easily could conduct this analysis concurrently 
with the planned midterm evaluation of the vehicle standards necessary 
to support NHTSA's required, separate rulemaking to establish CAFE 
standards for MY 2022-2025.''
    The Electric Drive Transportation Association (EDTA) argued that 
``[t]his national average--or any national average for that matter--
fails to take into account the wide variation in actual `upstream 
emissions' among different regions, demographic groups, and

[[Page 62821]]

vehicle types. The fundamental point is that average GHG emissions from 
electricity generation are not necessarily representative of the 
incremental emissions resulting from the charging of a particular 
vehicle or vehicle model. The additional emissions associated with 
charging a particular vehicle or vehicle model will depend on many 
factors. First, any estimate of upstream emissions would need to take 
into account the geographic distribution of the users of the vehicles, 
since the electricity generation mix varies considerably by region. In 
addition, it would need to take into account the expected driving 
habits and charging habits of those users, which could vary 
significantly for different vehicle models. It also would need to take 
into account a host of capital investment and operational decisions 
made by electric utilities and grid operators, including decisions 
about the electricity generation mix for both base load and peak load 
that are made on a daily basis in managing the grid, and over time, in 
planning the energy inventory of a service territory.'' Ford stated 
that it supported the EDTA comment. The American Petroleum Institute 
stated: ``API concurs with the EPA's observation that there is 
significant regional as well as temporal variation in the fuels and 
equipment used for electric power generation. Consequently, a more 
robust analysis and representation of upstream electricity GHG 
emissions that incorporates this regional and temporal variability is 
preferable if the ultimate objective is to reflect real-world fuel 
usage patterns.'' Referring to the 1.06 multiplicative factor that EPA 
used to account for feedstock-related GHG emissions, API stated: 
``Using the most recent version of GREET (version 1--2011) yields an 
adjustment factor of 9.2% for the average US electricity mix in 
calendar year 2020.'' The Natural Resources Defense Council (NRDC) 
noted that ``there are several factors to consider including marginal 
versus average power plant emissions rates, regional variability and 
how to project emission rates for vehicles that are charging over many 
years. NRDC provided comments in the 2012-2016 GHG proposed rule along 
these lines and we recognize that on-going analysis could be 
appropriate to most accurately quantify electric vehicle emission rates 
for real-world operation.''
    EPA agrees with the commenters that developing an appropriate 
electricity upstream GHG emissions factor for vehicles that will be 
sold in MYs 2022-2025, and be on the road out to 2040 or even 2050, is 
a challenging task, due to the many assumptions that must be made to 
reflect relevant variables. EPA continues to believe that the IPM model 
is the best tool for making such long-term projections, as it is a 
long-term capacity expansion and production costing model for analyzing 
the U.S. electric power sector. EPA has used IPM for most electricity 
sector analysis for the last 15 years, including for several major EPA 
power sector regulatory initiatives. While continuing to use the IPM 
model, EPA has made several refinements in the approach that we are 
adopting for estimating the electricity upstream GHG emissions for 
vehicles sold in MYs 2022-2025 subsequent to the proposal. One, we are 
using a newer IPM version (version 4.10) that is harmonized with new 
EPA stationary source emissions controls (such as the Mercury and Air 
Toxics Standards and the Cross-State Air Pollution Rule) and reflects 
recent economic conditions such as lower natural gas prices and lower 
electricity demand growth. This newer IPM version should address many 
of the concerns expressed by the Edison Electric Institute that use of 
IPM will necessarily overestimate future electricity GHG emissions. 
Two, as we suggested in the proposal and as supported by public 
comments, EPA changed from a ``national average'' electricity GHG 
emissions factor to one that projects the average electricity GHG 
emissions factor for the additional electricity demand represented by 
the EVs and PHEVs that EPA projects will be sold in MYs 2022-2025 and 
on the road in calendar year 2030. Three, rather than assuming that EVs 
and PHEVs would be distributed proportionally throughout the U.S., EPA 
distributed EV and PHEV sales into the 32 IPM regions based on the 
distribution of hybrid vehicle sales in 2006-2009 (e.g., much higher 
per capita sales in California, lower per capita sales in Montana). 
Four, EPA assumed that EVs and PHEVs would charge 25 percent of the 
time on-peak and 75 percent of the time off-peak, which is consistent 
with early vehicle charging data from the DOE ``EV Project.'' \530\ The 
cumulative effect of these changes is that IPM projects that about 80 
percent of the additional electricity needed to reflect the extra 
demand by EVs and PHEVs in 2030 will come from natural gas, with 14 
percent from coal, and 6 percent from wind and other feedstocks (66.3% 
of this average power plant GHG emissions factor originates from 
natural gas combustion emissions, 33.4% from coal combustion emissions, 
and 0.3% from combustion emissions of other feedstocks such as landfill 
gas petroleum coke, and oil). This is a lower-GHG mix of feedstocks 
than the mix that was projected for the national average approach in 
the proposal. Using this approach, the average power plant electricity 
GHG emissions factor is projected by IPM to be 0.445 grams/watt-hour.
---------------------------------------------------------------------------

    \530\ http://www.theevproject.com/downloads/documents/45.%20Battery%20Electric%20Vehicle%20Driving%20and%20Charging%20Behavior%20Observed%20Early%20in%20The%20EV%20Project%20(April%202012).pdf
, last accessed July 10, 2012.
---------------------------------------------------------------------------

    Since the proposal, EPA has also re-evaluated the appropriate 
multiplicative factor to account for the feedstock-related GHG 
emissions upstream of the power plant. This is necessary for three 
reasons: The feedstock mix in the new approach is very different than 
the national average feedstock mix assumed in the proposal (i.e., 
natural gas represents a much higher fraction of the projected 2030 
feedstock mix under the new approach), there are more recent data on 
the upstream GHG emissions associated with natural gas production that 
were not reflected in the 1.06 feedstock factor that was used in the 
proposal, and EPA recently promulgated a New Source Performance 
Standard (NSPS) for natural gas operations beginning in 2015.\531\ EPA 
is now using a projected multiplicative factor of 1.20 for feedstock-
related GHG emissions for the additional electricity necessary to 
support EVs and PHEVs in 2030. This factor is derived from application 
of Argonne National Laboratory's GREET model, which was used to 
estimate GHG emissions that occur upstream of the power plant emissions 
(for example, the emissions associated with the extraction, processing 
and transportation of power plant feedstocks). EPA used the GREET 
default values for different feedstocks with one exception. EPA 
adjusted a default GREET value for upstream methane emissions 
associated with natural gas-fired power plants to account for the 
impact of the recently promulgated NSPS for natural gas 
operations.\532\ The NSPS will result in a 95 percent reduction of 
uncontrolled VOC emissions (causing a corresponding reduction in 
methane

[[Page 62822]]

emissions) due to requirements for flaring and reduced emissions 
completions and workovers for hydraulically fractured wells. This 
adjustment to the one GREET model default value had a minimal impact on 
the total life cycle emissions from natural gas electricity generation 
because these completion and workovers are only a few of many emissions 
sources included in natural gas emissions totals, and because the GREET 
emission values for these activities already accounted for state 
regulatory efforts and industry best practices. Expressing the results 
of the GREET modeling effort in terms of multiplicative factors of life 
cycle GHG emissions mass per power plant GHG emissions mass for each 
feedstock, coal has a feedstock multiplier of 1.05 and natural gas has 
a feedstock multiplier of 1.28. The emissions from the other feedstocks 
are low enough, less than 0.3 percent, to ignore the feedstock 
multipliers (effectively assigning a value of 1.0). Weighting these 
feedstock multipliers by the IPM run GHG emissions percentages (33.4 
percent natural gas, 66.3 percent coal, 0.3 percent other feedstocks) 
yields an overall feedstock multiplier of 1.20.
---------------------------------------------------------------------------

    \531\ EPA signed the final rule on 4/17/12; publication of the 
official version in the Federal Register is forthcoming. For 
internet version of final rule, see http://www.epa.gov/airquality/oilandgas/pdfs/20120417finalrule.pdf.
    \532\ EPA utilized GREET 1--2011, available at http://greet.es.anl.gov/ (last accessed July 10, 2012). EPA revised the 
default emissions estimate of about 481 g CH4 per mmBtu 
of natural gas for electricity generation to 458 g CH4 
per mmBtu (see ``NG'' worksheet, C156).
---------------------------------------------------------------------------

    The overall electricity upstream GHG emissions factor, for the 
additional electricity needed to reflect the extra demand by EVs and 
PHEVs in 2030, is the product of the 0.445 grams/watt-hour power plant 
value and the 1.20 factor for feedstock-related emissions, or 0.534 
grams/watt-hour. This is somewhat lower than the 0.574 grams/watt-hour 
value that was used in the proposal.
    Below is an example of the 4-step methodology in today's final rule 
for calculating the GHG emissions compliance value for vehicle 
production in excess of the cumulative production cap for an individual 
automaker for MYs 2022-2025, for an EV that has the same electricity 
consumption, 238 watt-hours/mile, as the 2012 Nissan Leaf:
     A measured 2-cycle vehicle electricity consumption of 238 
watt-hours/mile over the EPA city and highway tests
     Adjusting this watt-hours/mile value upward to account for 
electricity losses during electricity transmission (dividing 238 watt-
hours/mile by 0.935 to account for grid/transmission losses yields a 
value of 255 watt-hours/mile)
     Multiplying the adjusted watt-hours/mile value by a 2030 
EV/PHEV electricity upstream GHG emissions rate of 0.534 grams/watt-
hour at the power plant (255 watt-hours/mile multiplied by 0.534 grams 
GHG/watt-hour yields 136 grams/mile)
     Subtracting the upstream GHG emissions of a comparable 
midsize gasoline vehicle of 41 grams/mile \533\ to reflect a full net 
increase in upstream GHG emissions (136 grams/mile for the EV minus 41 
grams/mile for the gasoline vehicle yields a net increase and EV 
compliance value of 95 grams/mile).\534\
---------------------------------------------------------------------------

    \533\ A midsize gasoline vehicle with a footprint of 46 square 
feet would have a MY 2025 GHG target of about 147 grams/mile; 
dividing 8887 grams CO2/gallon of gasoline by 147 grams/mile yields 
an equivalent fuel economy level of 60.5 mpg; and dividing 2478 
grams upstream GHG/gallon of gasoline by 60.5 mpg yields a midsize 
gasoline vehicle upstream GHG value of 41 grams/mile. The 2478 grams 
upstream GHG/gallon of gasoline is calculated from 21,546 grams 
upstream GHG/million Btu (EPA value for future gasoline based on 
DOE's GREET model modified by EPA standards and data; see docket 
memo to MY2012-2016 rulemaking titled ``Calculation of Upstream 
Emissions for the GHG Vehicle Rule'') and multiplying by 0.115 
million Btu/gallon of gasoline.
    \534\ Manufacturers can utilize alternate calculation 
methodologies if shown to yield equivalent or superior results and 
if approved in advance by the Administrator.
---------------------------------------------------------------------------

    The full accounting methodology for FCVs and the portion of PHEV 
operation on grid electricity would use this same approach. The final 
regulations adopt EPA's proposed method to determine the compliance 
value for PHEVs, and EPA will develop a similar methodology for FCVs if 
and when the need arises based on the fuel production and distribution 
GHG emissions associated with hydrogen production for various 
feedstocks and processes.\535\
---------------------------------------------------------------------------

    \535\ 40 CFR 600.113-12(m).
---------------------------------------------------------------------------

    The final issue raised by the Edison Electric Institute was that it 
would be better for EPA to wait until the midterm evaluation to adopt 
an electricity upstream GHG emissions factor. EPA disagrees with this 
comment. EPA believes it is critical to provide the automobile 
manufacturers, for their long-term compliance planning, a value that we 
expect to be used for compliance purposes in MYs 2022-2025, for those 
manufacturers who exceed their vehicle production caps for EVs and 
PHEVs. We understand that there are many factors that could lead to an 
electricity upstream GHG emissions factor for EVs and PHEVs that may be 
higher or lower, such as future regulations, market forces, regional 
distribution of EV/PHEV sales, and vehicle charging patterns. EPA will 
continue to evaluate these factors, including in the mid-term 
evaluation, and will address these issues there.
vii. Should Other Technologies Be Eligible for Incentives?
    The proposal included temporary regulatory incentives for three 
technologies: EVs, PHEVs, and FCVs. Sections III.C.2.c.ii and 
III.C.2.c.v discuss the final incentives for EVs, PHEVs, and FCVs. EPA 
also solicited comment on whether incentives should be provided for CNG 
vehicles, and Section III.C.2.c.iv discusses the final incentives for 
those vehicles. The Agency also received comments recommending that 
other technologies receive regulatory incentives.
    The Alliance of Automobile Manufacturers, Association of Global 
Automakers, and Ford recommended that incentive multipliers be 
available for manufacturers of liquefied petroleum gas (LPG) vehicles. 
EPA is not adopting incentive multipliers for LPG vehicles because the 
Agency does not believe that LPG vehicles promote the commercialization 
of technologies that have, or technologies whose commercialization can 
be critical facilitators of next-generation technologies that have, the 
potential to transform the light-duty vehicle sector by achieving zero 
or near-zero GHG emissions and oil consumption.
    Toyota suggested that conventional hybrid electric vehicles should 
receive incentive multipliers, if, as is the case, CNG vehicles receive 
such multipliers. EPA is not adopting incentive multipliers for 
conventional hybrid vehicles. Although the Agency agrees with Toyota 
that conventional hybrids share many of the same electric drive 
components of EVs and PHEVs (e.g., batteries, motors, controllers), 
with respect to consumer acceptance and barriers to utilization, the 
Agency believes that conventional hybrids are much more similar to 
gasoline vehicles than they are to EVs, in that all of the propulsion 
energy comes from gasoline, vehicle range is improved, and hybrids need 
no new refueling infrastructure. As such there is not the same degree 
of market barriers inhibiting increased use of this technology.
    Volkswagen also recommended incentives for ``advanced technology 
compression ignition engines,'' or what are more commonly referred to 
as advanced diesel engines. EPA is not adopting an incentive multiplier 
for advanced diesel vehicles because the Agency does not believe that 
advanced diesel vehicles promote the commercialization of technologies 
that have, or technologies whose commercialization can be critical 
facilitators of next-generation technologies that have, the potential 
to transform the light-duty vehicle sector by achieving zero or near-
zero GHG emissions and oil consumption, nor do advanced diesels face 
significant barriers with respect to consumer acceptance, relative to 
EV/PHEV/FCVs and CNG vehicles.

[[Page 62823]]

    Finally, the Agency received many comments related to a broad set 
of issues related to biofuels.
    The Clean Fuels Development Coalition, Growth Energy, the 25x'25 
Alliance (and partners), Volkswagen, and the Association of Global 
Automakers recommended that EPA provide GHG emissions incentives to 
automakers that produce vehicles capable of operating on biofuels, such 
as ethanol and biodiesel, beyond MY 2015 (when incentives under the 
light-duty vehicle GHG program currently expire) and/or gasoline/
biofuels blends. EPA recognizes that the use of certain biofuels has 
the potential to reduce lifecycle GHG emissions. EPA also recognizes 
that other programs already either require the increasing use of 
renewable fuels in the transportation sector or provide incentives for 
vehicle manufacturers to produce vehicles capable of operating on more 
than one fuel. In that context, EPA believes it is not appropriate to 
adopt incentive multipliers, or the 0.15 divisor, in this rule for 
manufacturers of biofuel-capable vehicles. The tailpipe GHG emissions 
of biofuel-capable vehicles when operated on biofuels are typically 
slightly lower than GHG emissions from conventional vehicles, and those 
GHG emissions performance-based reductions would be accounted for in 
EPA compliance calculations based on the actual use of biofuels. On the 
other hand, biofuels-capable vehicles are typically no more expensive 
than conventional vehicles, they may or may not use a biofuel (since 
they can operate on conventional fuel), and they do not face 
significant consumer acceptance barriers since they can, and most often 
are, operated on fuels with high gasoline content. As noted above, one 
purpose of the incentive multipliers for vehicles such as EVs, PHEVs, 
FCVs, and CNG vehicles is to address barriers to the increased use in 
the marketplace of those vehicles and their fuels. The factors above 
indicate there are not similar barriers for the increased production of 
biofuel-capable vehicles. As such, there is not a similar basis for 
adopting incentive multipliers for biofuel-capable vehicles.
    The 25x'25 Alliance (and partners) specifically recommended that 
EPA adopt a ``0.15 multiplier'' for CO2 emissions compliance 
``in order to preserve existing statutory incentives for alternative 
fuels'' under the CAFE program. As discussed above when the same issue 
arose with respect to CNG vehicles, EPA disagrees with this comment. 
Congress provided the 0.15 divisor for CAFE compliance because a 
vehicle that operates on a nonpetroleum fuel (like E85) consumes zero 
or near-zero petroleum, and petroleum conservation is a primary 
objective of the CAFE program. The primary focus of the GHG standards 
is GHG emissions. EPA believes that compliance must be based on 
demonstrated GHG emissions performance, not on a 0.15 incentive. We 
also disagree that EPA must adopt the 0.15 incentive in order to 
``preserve existing statutory incentives'' for CAFE credits. EPA's GHG 
program and NHTSA's CAFE program are harmonized in numerous ways, but 
compliance with one program does not imply compliance with the other. 
There are a number of instances where the programs diverge with respect 
to incentives and flexibilities. See section I.B.4 above. Here, EPA 
believes that the paramount emission reduction goals of the CAA warrant 
the difference in approach.
    Several commenters, including Growth Energy and Plant Oil Powered 
Diesel Fuel Systems, pointed out that cellulose-based ethanol and other 
renewable fuels have the potential to yield large lifecycle GHG 
emissions benefits due to the CO2 uptake during plant 
growth, and recommended that such fuels be given credits to reflect the 
upstream GHG emissions benefits. The use of low-GHG biofuels is already 
required under the Renewable Fuel Standard (RFS) program, which has 
been in place since 2006 and is designed to achieve GHG emissions 
benefits through the required use of renewable transportation fuels 
that have better lifecycle GHG emissions performance than the gasoline 
or diesel fuel that they displace. EPA has already quantified the GHG 
emissions benefits associated with the RFS program. Providing an 
additional incentive in the MYs 2017-2025 GHG program, which is focused 
on vehicle tailpipe emissions and not lifecycle emissions, would not 
achieve any greater use of renewable fuels than is already required 
under the RFS program, and thus would not achieve any greater emissions 
reductions from the use of such fuel. Thus, providing an additional 
incentive would only lead to a reduction in the emissions benefits of 
the MYs 2017-2025 light-duty vehicle GHG emissions program. Given that 
renewable fuel use is already required by and accounted for under the 
RFS program, it therefore would be inappropriate to provide additional 
incentives in the MYs 2017-2025 program.\536\
---------------------------------------------------------------------------

    \536\ The plant oil-based fuel produced by POP Diesel is not 
currently identified as an acceptable renewable fuel under the RFS 
program. EPA is currently considering the company's petition seeking 
approval of its product under the RFS program. The RFS program 
established by Congress is the appropriate mechanism for evaluating 
the full lifecycle emissions impact of this type of biofuel use, 
rather than a program focused principally on vehicle tailpipe 
emissions.
---------------------------------------------------------------------------

    A related comment from Growth Energy, the 25x'25 Alliance (and 
partners), the National Corn Growers Association, and the Minnesota 
Department of Commerce was that, by not providing incentives for 
ethanol or biofuel vehicles, the proposal was ``inconsistent'' with the 
RFS, and, as stated by Growth Energy, ``will make the volumetric 
biofuels requirements of Title II in EISA unachievable.'' EPA disagrees 
with these comments. There is nothing inconsistent between the MYs 
2017-2025 GHG program and the RFS program. The MYs 2017-2025 GHG 
program is designed to achieve GHG emission reductions from vehicle 
operation as measured at the tailpipe. The RFS program is a standalone 
program designed to increase the use of renewable fuels and to achieve 
GHG emission reductions primarily through upstream emission reductions. 
The RFS program can be achieved independent of the vehicle GHG 
standards. The RFS program does not mandate any particular type of fuel 
(or vehicle) and relies on market forces to determine the most cost-
effective approaches for meeting the RFS program's volume requirements. 
Achievement of the RFS volume mandates is largely based on decisions 
that will be made by the fuel industries about what renewable fuels to 
produce and how to distribute and market them. The RFS program already 
contains mechanisms to create market incentives to facilitate such 
increases. No additional incentives for vehicle manufacturers are 
needed to do so.
    Furthermore, there have been CAFE incentives for automakers that 
produce ethanol FFVs (and other dual fuel vehicles) for many years (see 
75 FR 25432-33), and CAFE incentives will remain in place. Although the 
GHG emissions incentive under the light-duty vehicle GHG rule, designed 
to be equivalent to the CAFE incentive, will end in MY 2015, automakers 
can achieve lower GHG emissions compliance values for ethanol FFVs 
based on lower tailpipe GHG emissions when operating on E85 and a 
weighting of E85 and gasoline emissions performance based on actual E85 
use, an option that EPA is finalizing. (See Section III.C.4 for more 
detail on the methodology for calculating GHG emissions from ethanol 
FFVs.) There are approximately 10 million ethanol FFVs on the road in 
the U.S. today (far more than any other incentivized technology),

[[Page 62824]]

and automakers produced approximately 2 million ethanol FFVs in MY 2011 
alone. Although the great majority of ethanol FFVs currently use 
gasoline, EPA believes that automakers will continue to produce ethanol 
FFVs, as more consumers begin to fuel their ethanol FFVs with E85 fuel. 
Given the long history of federal incentives for ethanol FFVs, and the 
fact that ethanol FFVs can achieve small GHG emissions credits after 
the GHG emissions incentives expire, the Agency believes that there is 
no need to provide additional incentives for ethanol FFVs in this 
rulemaking, beyond those already provided.
viii. Applicability of Credits for EV/PHEV/FCVs
    In the proposal, EPA did not propose any restrictions on the use of 
GHG emissions credits for those vehicles eligible for the 0 g/mi GHG 
emissions compliance incentive. The Natural Resources Defense Council 
commented that ``if the agencies proceed with their proposed 0 g/mi 
treatment, other incentives, such as off-cycle credits, should not be 
available for the portion of an advanced vehicle's driving range that 
is powered by grid electricity or off-board hydrogen. No vehicles 
should be allowed to have negative emissions.'' EPA is finalizing, as 
proposed and consistent with the MYs 2012-2016 program, no restrictions 
on the use of GHG emissions credits for those vehicles eligible for the 
0 g/mi GHG emissions compliance treatment, i.e., EV/PHEV/FCVs can earn 
air conditioner efficiency, air conditioner refrigerant, and off-cycle 
credits. EPA will be accounting for these credits at the manufacturer 
fleet level, not at the individual vehicle model level, though we 
accept the point by NRDC that, in effect, if one were to assess the 
actual credits earned on a per vehicle basis, the overall compliance 
value would appear to be negative for this limited set of vehicles. 
Because of the relatively small number of EV/PHEV/FCVs expected during 
MYs 2017-2025, EPA expects the fleetwide impact of these additional 
credits to be very small (see Table III-17), and EPA does not want to 
discourage improvements in air conditioner and other technologies for 
EV/PHEV/FCVs that provide real world GHG emissions benefits (including, 
in the case of air conditioner refrigerants, some of the most potent 
GHGs).
ix. Changes to MYs 2012-2016 Regulations
    In the proposal, EPA sought comments on whether any changes should 
be made for MYs 2012-2016, i.e., whether the compliance value for 
production beyond the cap should be one-half of the net increase in 
upstream GHG emissions, or whether the current cap for MYs 2012-2016 
should be removed. See 76 FR 75013. EPA received two comments on this 
topic. Within a broader context of reiterating its support for a 0 g/mi 
tailpipe-based compliance treatment for EVs, Nissan recommended that if 
a manufacturer reaches its vehicle production threshold for MYs 2012-
2016, there be an ``interim period'' (for the same volume of vehicles 
that initially triggers the cap) where the non-0 g/mi compliance value 
be equal to one-half of the net increase. Alternatively, the Natural 
Resources Defense Council supported no change in the MYs 2012-2016 
regulations. EPA is not adopting changes to the MYs 2012-2016 
regulations as we believe that the incentives currently in place for 
MYs 2012-2016 provide a sufficient incentive.
x. Impact of Temporary Regulatory Incentives for EV/PHEVs on Projected 
GHG Emissions Reductions
    In this section, EPA projects the potential impact on GHG emissions 
that will be associated with both the temporary incentive multiplier 
and the 0 g/mi compliance value for EV/PHEVs over the MYs 2017-2025 
timeframe. Since it is impossible to know precisely how many vehicles 
will be sold in the MYs 2017-2025 timeframe that will utilize the 
proposed incentives, EPA provides projections for two scenarios: (1) 
the number of EV/PHEV sales in MYs 2017-2025 that EPA's OMEGA 
technology and cost model predicts for the most cost-effective way for 
the industry to meet the standards, and (2) an alternative scenario 
with a greater number of EV/PHEVs, based not only on compliance with 
the standards, but on other factors that could affect the market for 
EV/PHEVs as well.\537\ For this analysis, EPA assumes that EVs and 
PHEVs each account for 50 percent of all EV/PHEVs.
---------------------------------------------------------------------------

    \537\ These projections do not include any FCVs or CNG vehicles.

                Table III-17--Projected Impact of EV/PHEV Incentives on GHG Emissions Reductions
----------------------------------------------------------------------------------------------------------------
                                                                                                    Percentage
                                                                             Cumulative decrease    decrease in
                                    Cumulative EV/PHEV   Cumulative EV/PHEV    in GHG emissions    GHG emissions
             Scenario                sales 2017-2025      sales  2022-2025     reductions 2017-     reductions
                                                                                  2025 \538\         2017-2025
                                                                                                       \539\
----------------------------------------------------------------------------------------------------------------
EPA OMEGA model projection.......  1.5 million........  1.1 million........  56 MMT.............            2.7%
EPA alternative projection.......  2.8 million........  2.0 million........  101 MMT............            5.0%
----------------------------------------------------------------------------------------------------------------

    EPA projects that the cumulative GHG emissions savings of the MYs 
2017-2025 standards, on a model year lifetime basis, is approximately 2 
billion metric tons. Table III-17 projects that the likely decrease in 
cumulative GHG emissions reductions due to the EV/PHEV incentives for 
MYs 2017-2025 vehicles is in the range of 56 to 101 million metric 
tons, or 2.7 to 5.0 percent of overall program savings.
---------------------------------------------------------------------------

    \538\ The number of metric tons represents the number of 
additional tons that would be reduced if the standards stayed the 
same and there was no temporary incentive multiplier and no 0 gram 
per mile compliance value.
    \539\ The percentage change represents the ratio of the 
cumulative decrease in GHG emissions reductions from the prior 
column to the total cumulative GHG emissions reductions associated 
with the program.
---------------------------------------------------------------------------

    It is important to note that the above projections of the possible 
impact of the EV/PHEV incentives on the overall program GHG emissions 
reductions assumes that there would be no change to the standard even 
if the EV 0 g/mi incentive were not in effect, i.e., that EPA would 
promulgate exactly the same standard if the 0 g/mi compliance value 
were not allowed for any EV/PHEVs. Although EPA has not analyzed such a 
scenario, it is clear that not allowing a 0 g/mi compliance value would 
change the technology mix and cost projected for the standards.
    Of course, either technology innovation or a future comprehensive 
program addressing upstream emissions

[[Page 62825]]

of GHGs from the generation of electricity could decrease the loss of 
GHG reductions associated with the temporary regulatory incentives.
    On the other hand, EPA also recognizes that EV/PHEV sales could be 
higher than projected, and that there are factors which could increase 
the appropriate electricity upstream GHG emissions factor in the 
future, such as greater use of high-power charging, and the possibility 
that EVs won't displace gasoline vehicle use on a 1:1 basis (i.e., 
multi-vehicle households may use EVs for more shorter trips and fewer 
longer trips, which could lead to lower overall travel for typical EVs 
and higher overall travel for gasoline vehicles).
3. Incentives for Using Advanced ``Game-Changing'' Technologies in 
Full-Size Pickup Trucks
    As explained in section II.C, the agencies recognize that the MY 
2017-2025 standards will be challenging for large vehicles, including 
full-size pickup trucks that are often used for commercial purposes. In 
Section II.C, and in Chapter 2 of the joint TSD, EPA and NHTSA describe 
how the slope of the truck curve has been adjusted compared to the 
2012-2016 rule to reflect these disproportionate challenges. In Section 
III.B, EPA describes the progression of the truck standards. In this 
section, EPA describes advanced technology incentives that were 
proposed and are being adopted for full-size pickup trucks under both 
section 202(a) of the CAA and section 32904(c) of EPCA. These 
incentives are in the form of credits under the EPA GHG program, and 
fuel consumption improvement values (equivalent to EPA's credits) under 
the CAFE program.
    The agencies' goal is to incentivize the penetration into the 
marketplace of ``game changing'' technologies for these pickups, 
including their hybridization. For that reason, EPA proposed and is 
adopting per-vehicle credit provisions for manufacturers that hybridize 
a significant number of their full-size pickup trucks, or use other 
technologies that comparably reduce CO2 emissions and fuel 
consumption. As described in sections II.F.3 and III.B.10, EPA and 
NHTSA are coordinating to allow manufacturers to include ``fuel 
consumption improvement values'' equivalent to EPA CO2 
credits in the CAFE program.\540\ Comments on the need for and scope of 
these provisions are discussed in section II.F.3.
---------------------------------------------------------------------------

    \540\ Note that EPA's calculation methodology in 40 CFR 600.510-
12 does not use vehicle-specific fuel consumption adjustments to 
determine the CAFE increase due to the various incentives allowed 
under the program. Instead, EPA will convert the total 
CO2 credits due to each incentive program from metric 
tons of CO2 to a fleetwide CAFE improvement value.
---------------------------------------------------------------------------

    As was proposed, the agencies are defining a full-size pickup truck 
based on minimum bed size and hauling capability, as detailed in 
86.1866-12(e) of the regulations being adopted. This definition is 
meant to ensure that the larger pickup trucks, which provide 
significant utility with respect to bed access and payload and towing 
capacities, are captured by the definition, while smaller pickup trucks 
with more limited capacities are not covered. A full-size pickup truck 
is defined as meeting requirements (1) and (2) below, as well as either 
requirement (3) or (4) below. Section II.F.3 includes a discussion of 
comments received on this definition.
    (1) Bed Width--The vehicle must have an open cargo box with a 
minimum width between the wheelhouses of 48 inches, measured as the 
minimum lateral distance between the limiting interferences (pass-
through) of the wheelhouses, excluding any transitional arc, local 
protrusions, and depressions or pockets (dimension W202 in SAE 
Procedure J1100). An open cargo box means a cargo bed without a 
permanent roof or cover. Vehicles sold with detachable covers are 
considered ``open'' for the purposes of these criteria. And--
    (2) Bed Length--The length of the open cargo box must be at least 
60 inches, as measured at both the top of the body and at the bed floor 
(dimensions L506 and L505 in SAE Procedure J1100). And--
    (3) Towing Capability--the gross combined weight rating (GCWR) 
minus the gross vehicle weight rating (GVWR) must be at least 5,000 
pounds. Or--
    (4) Payload Capability--the GVWR minus the curb weight (as defined 
in 40 CFR 86.1803) must be at least 1,700 pounds.
    Full-size pickup trucks using mild hybrid technology will be 
eligible for a per-truck 10 g/mi CO2 credit (equivalent to 
0.0011 gal/mi for a gasoline-fueled truck) during MYs 2017-2021. Full-
size pickup trucks using strong hybrid technology will be eligible for 
a per-truck 20 g/mi CO2 credit (0.0023 gal/mi) during MYs 
2017-2025. Eligibility for both the mild and strong hybrid credit is 
dependent on the manufacturer reaching the technology penetration 
thresholds discussed below.
    Because of their importance in assigning credit amounts, the 
definitions of mild and strong hybrids for purposes of this credit 
program must be fair and unambiguous. The proposal included explicit 
criteria regarding a hybrid's percent efficiency in recovering braking 
energy (75% to qualify as a strong hybrid, 15% for a mild hybrid). EPA 
received a number of manufacturer comments on the proposed definitions. 
Some industry commenters objected to EPA's characterization of the 
credit provisions as applying to hybrid ``gasoline-electric'' vehicles. 
We agree that this would be an overly narrow characterization, and are 
clarifying that the provisions also apply to non-gasoline (including 
diesel-, ethanol-, and CNG-fueled) hybrids. Further extension to 
hybrids employing non-electric battery storage (including hydraulic-, 
capacitive-, and mechanical-energy storage) is complicated, however, by 
the difficulty in developing regulatory procedures for all conceivable 
energy-storage media. We believe that these technologies are not 
hampered in participating in the large truck credit program because 
manufacturers using them can take the alternative, performance-based 
pathway described below to gain the credits.
    Ford, Toyota, and the Alliance of Automobile Manufacturers 
suggested improvements to the proposed procedure for determining 
whether hybrid technology is categorized as strong, mild, or having 
energy recovery too minimal to warrant credits. Most importantly, they 
argued that the proposed approach improperly integrated energy 
contributions over the entire city cycle FTP, thereby capturing more 
than just the intended recovered braking energy and creating an 
opportunity for gaming through tailoring of the direct addition of 
energy from the engine. They offered alternative procedures and 
corresponding recovered energy threshold levels based on energy input 
only during decelerations, with the recovery efficiency cutpoint 
between strong and mild hybrids correspondingly reduced from 75% to 
40%. Chrysler maintained that a 75% energy recovery rate would be 
challenging for large pickups because of the need to design the braking 
system for maximum payload and trailer capability while maintaining 
drivability in the absence of loads. Chrysler's specific recommendation 
was for a cutpoint of 50% energy recovery rate. Ford and Toyota also 
suggested an additional metric for qualifying strong HEVs--that at 
least 10% of the total tractive energy during positive accelerations on 
the FTP must be from the electric drive with the engine off.
    As discussed in detail in section 5.3.3 of the TSD, we have 
evaluated these

[[Page 62826]]

concerns and the suggested changes and have concluded that the proposed 
metric remains adequate for our purposes, and furthermore has the 
advantage of being simpler and easier to measure than other metrics. 
However, based on the comments received from Chrysler and follow-up 
testing described in section 5.3.3 of the TSD, showing that the only 
large hybrid truck currently marketed would not satisfy the proposed 
75% metric, we believe that 65% is a more appropriate threshold for 
defining strong hybrid energy recovery while remaining consistent with 
the overall goals of this incentive program, and so are adopting this 
threshold into the final regulations. We are retaining the proposed 15% 
threshold for mild hybrid energy recovery; commenters supported this 
threshold. Because there are other, non-hybrid, advanced technologies 
that can reduce pickup truck GHG emissions and fuel consumption at 
rates comparable to strong and mild hybrid technology, EPA is also 
adopting the proposed credit provisions for full-size pickup trucks 
that achieve emissions levels significantly below their applicable 
CO2 targets. This performance-based credit will be 10 g/mi 
CO2 (equivalent to 0.0011 gal/mi for the CAFE program) or 20 
g/mi CO2 (0.0023 gal/mi) for full-size pickups achieving 15% 
or 20%, respectively, better CO2 than their footprint-based 
targets in a given model year. The basis for our choice of the 15 and 
20% over-compliance minimums is explained in Section 5.3.4 of the TSD.
    These performance-based credits have no specific technology or 
design requirements; automakers can use any technology or set of 
technologies as long as the vehicle's CO2 performance is at 
least 15 or 20% below the vehicle's footprint-based target. However, a 
vehicle cannot receive both hybrid and performance-based credits, since 
that would be double-counting. In addition, because the footprint 
target curve has been adjusted to account for A/C-related credits, the 
CO2 level to be compared with the target will also include 
any A/C-related credits generated by the vehicles.
    The 10 g/mi performance-based credit will be available for MYs 2017 
to 2021. In recognition of the nature of automotive redesign cycles, a 
vehicle model meeting the requirements in a model year will receive the 
credit in subsequent model years through 2021 unless its CO2 
level increases or its production level drops below the penetration 
threshold described below, even if the year-by-year reduction in 
standards levels causes the vehicle to fall below the 15% over-
compliance threshold. Not doing so would reduce substantially the 
incentive to introduce advanced technology in earlier model years if 
the incentive wasn't available for the design cycle period. The 10 g/mi 
credit is not available after MY 2021 because the post-MY 2021 
standards quickly overtake designs that were originally 15% over-
compliant, making the awarding of credits to them inappropriate. The 20 
g/mi CO2 performance-based credit will be available for a 
maximum of 5 consecutive model years (the typical redesign cycle 
period) within the 2017 to 2025 model year period, provided the vehicle 
model's CO2 level does not increase from the level 
determined in its first qualifying model year, and subject to the 
technology penetration requirement described below. A qualifying 
vehicle model that subsequently undergoes a major redesign can 
requalify for the credit for an additional period starting in the 
redesign model year, not to exceed 5 model years and not to extend 
beyond MY 2025.
    Access to any of these large pickup truck credits requires that the 
technology be used on a minimum percentage of a manufacturer's full-
size pickup trucks. These minimum percentages are set to encourage 
significant penetration of these technologies, leading to long-term 
market acceptance. Meeting the penetration threshold in one model year 
does not ensure credits in subsequent years; if the production level in 
a model year drops below the required threshold, the credit is not 
earned for that model year. The required penetration levels are:
     For strong hybrid credits: 10% in each model year 2017 
through 2025.
     For mild hybrid credits: 20-30-55-70-80% in model years 
2017-2018-2019-2020-2021, respectively.
     For ``20 percent better'' performance-based credits: 10% 
in each model year 2017 through 2025.
     For ``15 percent better'' performance-based credits: 15-
20-28-35-40% in model years 2017-2018-2019-2020-2021, respectively.
    These are identical to the proposed levels except that the levels 
for MY 2017 and 2018 vehicles using the mild hybrid credits, 20 and 
30%, are lower than the proposed 30 and 40% levels, for reasons 
explained below.
    EPA received a number of comments on the proposed minimum 
penetration thresholds, primarily from manufacturers arguing that they 
should be reduced or eliminated. These commenters felt that the 
requirements run counter to the agencies' goal of incentivizing 
technology introduction, because they add uncertainty over whether the 
investment in a technology, a commitment that is made years ahead of 
time, will reap the credits if a decline in sales causes the production 
level to fall short of the minimum in a model year. These commenters 
also noted that new technologies are often phased in at rates lower 
than the proposed minimum penetration rates in order to gauge consumer 
interest and acceptance. GM specifically objected to the proposed rapid 
ramp up of the mild hybrid penetration rate as not being aligned with 
historic rates of customer acceptance of new and/or advanced 
technologies. GM requested that the levels be instead cut in half to 
match those proposed for the ``15 percent better'' performance-based 
credits.
    Our reason for setting ambitious market penetration thresholds 
remains--our goal is to create an incentive for manufacturers to commit 
to the large-scale application of hybrids and other advanced 
technologies in the challenging large truck sector and specifically 
that at least mild hybrid or comparable technology become a standard 
technology feature for large pickup trucks. Eliminating or greatly 
tempering the minimum penetration requirements might retain the 
incentive for niche applications but would lose any assurance of 
widespread ``game-changing'' technology introduction and substantial 
penetration. We do agree with comments that the ambitious penetration 
levels proposed for mild hybrid credits in the initial model years may 
be counter-productive, as launching a complex new technology on almost 
a third of first-year sales could be a risky business strategy in this 
highly competitive large truck market segment. As a result, we are 
scaling this requirement back to 20 and 30% in model years 2017 and 
2018 (compared to the proposed levels of 30 and 40% in MY 2017 and 
2018, respectively), to help facilitate the smooth introduction of mild 
hybrid technology. However, we are retaining the substantial 
penetration requirements that were proposed for later model years to 
maintain our focus on encouraging this technology to be more or less 
standard on large trucks. We note that a manufacturer which is unable 
to meet these penetration requirements may continue to generate credits 
through the 2021 model year for mild hybrid trucks under the 
performance-based credit option, assuming the less aggressive 
penetration threshold requirements for the performance-based credit 
provision are satisfied.

[[Page 62827]]

4. Treatment of Plug-In Hybrid Electric Vehicles, Dual Fuel Compressed 
Natural Gas Vehicles, and Ethanol Flexible Fuel Vehicles for GHG 
Emissions Compliance
    This section describes the approaches for determining the 
compliance values for greenhouse gas (GHG) emissions and fuel economy 
for those vehicles that can use two different fuels, typically referred 
to as dual fuel vehicles under the CAFE program.\541\ Three specific 
technologies are addressed: plug-in hybrid electric vehicles (PHEVs), 
dual fuel compressed natural gas (CNG) vehicles, and ethanol flexible 
fuel vehicles (FFVs).\542\ Since the compliance approaches for GHG 
emissions and fuel economy vary across different time periods and 
across different technologies, the first part of this section addresses 
GHG emissions compliance and the second part of this section addresses 
fuel economy compliance (which likewise is administered by EPA pursuant 
to authority delegated under EPCA rather than under the Clean Air Act 
\543\).
---------------------------------------------------------------------------

    \541\ EPA is not making any changes to the tailpipe GHG 
emissions or fuel economy regulations for the compliance treatment 
for dedicated alternative fuel vehicles, i.e., those vehicles that 
operate on a single alternative fuel. For the GHG emissions 
compliance treatment for dedicated alternative fuel vehicles, see 75 
FR 25434. For CAFE treatment for dedicated alternative vehicles, see 
49 U.S.C. 32905.
    \542\ EPA recognizes that other vehicle technologies may be 
introduced in the future that can use two (or more) fuels. For 
example, the original FFVs were designed for up to 85% methanol/15% 
gasoline, rather than the 85% ethanol/15% gasoline for which current 
FFVs are designed. EPA has regulations that address methanol 
vehicles (both FFVs and dedicated vehicles), and, for GHG emissions 
compliance in MYs 2017-2025, EPA would treat methanol vehicles in 
the same way as ethanol vehicles. EPA would treat B20-capable 
vehicles in the same way as ethanol FFVs. Other technologies that 
could use multiple fuels would be addressed on an as needed basis 
under 40 CFR 600.111-08(f), which allows EPA to prescribe special 
test procedures for vehicles (such as new, advanced, technologies) 
for which there are no applicable regulatory test procedures.
    \543\ See 49 U.S.C. 32904(a) and (c).
---------------------------------------------------------------------------

a. Greenhouse Gas Emissions
    EPA's underlying principle is to base GHG emissions compliance 
values on demonstrated vehicle tailpipe CO2 emissions 
performance. The key issue with vehicles that can use more than one 
fuel is how to weight the GHG emissions performance on the two 
different fuels. EPA is adopting an approach to do this on a 
technology-by-technology basis, and the sections below explain the 
rationale for choosing a particular approach for each vehicle 
technology.
i. Plug-In Hybrid Electric Vehicles
    PHEVs can operate both on an on-board battery that can be charged 
by wall electricity from the grid, and on a conventional liquid fuel 
(such as gasoline or diesel). Depending on how these vehicles are 
fueled and operated, PHEVs could operate exclusively on grid 
electricity, exclusively on the conventional fuel, or on a combination 
of both fuels. EPA can determine the CO2 emissions 
performance when operated in charge depleting mode (when the battery is 
being used to provide grid electricity, either as the sole source of 
power or in combination with the engine) and in charge sustaining mode 
(when the battery is not providing grid electricity). But, in order to 
generate a single CO2 emissions compliance value, EPA must 
adopt an approach for determining the appropriate weighting of the 
CO2 emissions performance in these two modes.\544\
---------------------------------------------------------------------------

    \544\ PHEVs operated in all-electric mode have zero gram per 
mile tailpipe emissions. See Section III.C.2.c.v for the explanation 
of how and when the Agency will also account for the upstream fuel 
production and distribution GHG emissions associated with the use of 
grid electricity.
---------------------------------------------------------------------------

    EPA proposed to use the Society of Automotive Engineers (SAE) 
cycle-specific fleet-based utility factor approach for PHEV compliance 
calculations first adopted by EPA in the joint EPA/DOT final rulemaking 
establishing new fuel economy and environment label requirements for MY 
2013 and later vehicles.\545\ This utility factor approach is based on 
several key assumptions. One, PHEVs are designed such that the first 
mode of operation is all-electric drive or electric assist. Every PHEV 
design with which EPA is familiar is consistent with this assumption. 
Two, PHEVs will have a full battery charge at the beginning of each 
day. Although this assumption is unlikely to be met by every PHEV 
driver every day, EPA believes that a large majority of PHEV owners 
will be highly motivated to re-charge as frequently as possible, both 
because the owner has paid a considerably higher initial vehicle cost 
to be able to operate on grid electricity, and because electricity is 
considerably cheaper, on a per mile basis, than gasoline.\546\ Three, 
PHEV drivers will retain driving profiles similar to those of past 
drivers on which the utility factors were based. Based on this utility 
factor approach, and individual PHEV-specific test data for charge 
depleting range and charge sustaining range, the cycle-specific utility 
factor methodology yields individual PHEV-specific values for projected 
average percent of operation in charge depleting and charge sustaining 
modes over both the city and highway test cycles. See 76 FR 75018.
---------------------------------------------------------------------------

    \545\ 76 FR 39504-39505 and 40 CFR 600.116-12(b). For more 
detailed information on the development of this SAE utility factor 
approach, see http://www.SAE.org, specifically SAE J2841 ``Utility 
Factor Definitions for Plug-In Hybrid Electric Vehicles Using Travel 
Survey Data,'' September 2010.
    \546\ It is also possible that some PHEV owners will charge 
their vehicles more than once per day.
---------------------------------------------------------------------------

    EPA received a small number of comments on our proposed compliance 
treatment for PHEVs. The Alliance of Automobile Manufacturers, Fisker 
Automotive, the Electric Drive Transportation Association, and the 
American Council for an Energy-Efficient Economy (ACEEE) supported the 
use of the SAE utility factor methodology for PHEVs. The American 
Petroleum Institute (API) was the one commenter expressing several 
concerns, such as whether PHEVs and other dual fuel vehicles will 
always have a full tank of fuel at the beginning of each day, and 
whether the driving behavior of early adopters will be similar to those 
of the average drivers, on which the utility factor methodology is 
based. Securing America's Future Energy (SAFE) argued that the SAE-
based utility factors would be too conservative for PHEVs, because PHEV 
buyers are more likely to be drivers who will maximize their 
electricity-to-gasoline use, due to various factors. SAFE also 
suggested that the agencies should continue to monitor the usage 
patterns of PHEVs and update the utility factor methodology if 
appropriate. ACEEE and API recommended that EPA use lower 5-cycle range 
values for all-electric (or equivalent all-electric) operation in the 
calculation of the utility factor, to better simulate the relative 
electric and conventional fuel operation in the real world. ACEEE also 
recommended that this rule use fleet based utility factors for 
compliance, rather than the individual based utility factors that are 
used for fuel economy and environment labels.
    EPA is finalizing the PHEV compliance treatment as proposed, which 
was supported by most of the commenters who addressed this topic. While 
some of the comments suggest that the utility factors may be too high 
or favorable to PHEVs (since some PHEVs may not always have a fully 
charged battery each morning, and use of 2-cycle range in the 
calculations may not always be appropriate), other comments suggest 
that the utility factors may be too low or unfavorable to PHEVs (some 
PHEVs may be charged more than once per day, PHEVs may on average be 
driven fewer miles than the average

[[Page 62828]]

vehicle, and PHEVs may be purchased by owners with driving patterns 
that allow them to optimize for maximum electricity use). No commenter 
suggested a specific alternative to the SAE utility factor methodology. 
Given the variables that could yield both higher and lower utility 
factors, EPA believes the SAE utility factor methodology is a 
reasonable approach to use at this time. EPA also agrees with SAFE that 
the agency should monitor PHEV usage patterns in the real world and use 
that data to refine the development of future utility factors if 
necessary. Finally, EPA notes that we are finalizing, as proposed, to 
use the fleet based utility factors, as suggested by ACEEE (see 40 CFR 
600.116(b)(1)).
    For example, based on the cycle-specific, fleet utility factors, 
the 2012 Chevrolet Volt PHEV, which has an all-electric range of 50 
miles over EPA's 2-cycle tests, has a combined city/highway cycle 
utility factor of 0.69, meaning that the average Volt driver is 
projected to drive about 69 percent of miles on grid electricity and 
about 31 percent of miles on gasoline.
    Based on this utility factor approach, EPA calculates the GHG 
emissions compliance value for an individual PHEV as the sum of 1) the 
GHG emissions value for charge depleting operation (for all electric 
operation, either 0 g/mi or a non-zero value reflecting the net 
upstream GHG emissions accounting depending on whether automaker EV/
PHEV/FCV production is below or above its cumulative production cap as 
discussed in Section III.C.2 above; or a blended value for electric and 
gasoline/diesel operation) multiplied by the utility factor, and 2) the 
tailpipe CO2 emissions value on gasoline/diesel multiplied 
by (1 minus the utility factor).
ii. Dual Fuel Compressed Natural Gas Vehicles
    Current dual fuel CNG vehicles operate on either compressed natural 
gas or gasoline, but not both at the same time, and have separate tanks 
for the two fuels.\547\ There are no OEM dual fuel CNG vehicles in the 
U.S. market today, but some manufacturers have expressed interest in 
bringing them to market during the MYs 2017-2025 time frame. Under 
current EPA regulations through MY 2015, GHG emissions compliance 
values for dual fuel CNG vehicles are based on a methodology that 
provides significant GHG emissions incentives equivalent to the ``CAFE 
credit'' approach for dual and flexible fuel vehicles. For MY 2016, 
current EPA regulations utilize a methodology based on demonstrated 
vehicle emissions performance and real world fuels usage, similar to 
that for ethanol flexible fuel vehicles discussed below.\548\
---------------------------------------------------------------------------

    \547\ EPA considers ``bi-fuel'' CNG vehicles to be those 
vehicles that can operate on a mixture of CNG and gasoline. Bi-fuel 
vehicles would not be eligible for this compliance treatment, since 
they are not designed to allow the use of CNG only. There are no bi-
fuel CNG vehicles sold in the US market, and EPA has no regulations 
in place for bi-fuel CNG vehicles.
    \548\ See 75 FR 25433-34. See also section III.C.2.c.iv above 
for the discussion of tailpipe GHG emissions from current CNG 
vehicles and of incentives for dedicated and dual fuel CNG vehicles. 
Based on data available to EPA, assuming equivalent energy 
efficiency on both gasoline and CNG, operation on CNG typically 
yields about 20% lower tailpipe CO2 emissions than 
gasoline operation. Dual fuel CNG compliance values would be based 
on demonstrated emissions performance over EPA 2-cycle tests, so 
tailpipe CO2 emission reductions from CNG operation, 
relative to gasoline, could be higher or lower than 20%.
---------------------------------------------------------------------------

    EPA proposed a new approach for dual fuel CNG vehicle GHG emissions 
compliance based on the fleet-based utility factor approach described 
above for PHEVs, beginning in MY 2016. In the proposal, EPA suggested 
that, as with PHEVs, owners of dual fuel CNG vehicles would be expected 
to preferentially seek to refuel and operate on CNG fuel as much as 
possible, both because the owner would have to pay a higher vehicle 
price for the dual fuel capability, and because CNG fuel is 
considerably cheaper than gasoline on a per mile basis. EPA noted that 
there are some relevant differences between dual fuel CNG vehicles and 
PHEVs, some of which might strengthen the case for the use of utility 
factors and some of which might weaken the case, but in the aggregate 
EPA believed that the use of utility factors for dual fuel CNG vehicles 
was appropriate. Further, for dual fuel CNG vehicles in MYs 2012-2015, 
EPA also proposed to allow the option, at the manufacturer's 
discretion, to use the utility factor-based methodology. The rationale 
for providing this option was that, without it, some manufacturers are 
likely to reach the maximum allowable dual fuel vehicle GHG emissions 
credits for MYs 2012-2015 (which are consistent with the statutory CAFE 
credits) through their production of ethanol FFVs, and therefore would 
not be able to gain any GHG emissions compliance benefit even if they 
produced dual fuel CNG vehicles that demonstrated superior GHG 
emissions performance. Finally, EPA also asked for comments on the 
desirability of additional design or performance-based eligibility 
constraints for dual fuel CNG vehicles to be able to use the utility 
factor methodology.
    Commenters expressed widespread support for the proposal. Natural 
gas advocacy groups (including America's Natural Gas Alliance/American 
Gas Association, American Public Gas Association, Clean Energy, Encana 
Natural Gas Inc., NGV America, and VNG.Co) supported the use of cycle-
specific fleet-based utility factors for dual fuel CNG vehicles, 
supported the extension of this approach for MYs 2012-2015, and 
generally argued against any eligibility requirements for the 
application of utility factors for dual fuel CNG vehicles. One natural 
gas advocacy group, the American Clean Skies Foundation, recommended a 
fixed 95% utility factor so as not to ``require a case-by-case 
review.'' The Alliance of Automobile Manufacturers also supported the 
utility factor methodology, and for pulling it ahead to MYs 2012-2015, 
and proposed a work group to discuss possible eligibility requirements 
for dual fuel CNG vehicles. Chrysler also supported using utility 
factors beginning in MY 2012. In addition, several of the natural gas 
and automobile commenters asked EPA to consider a ``separate track'' 
for all dual fuel CNG vehicles (e.g., NGV America), or for ``extended 
range'' dual fuel CNG vehicles (e.g., Chrysler), in order to allow 
manufacturers of dual fuel CNG vehicles the option to benefit from the 
lower GHG emissions, which otherwise would not be possible for those 
manufacturers that have ``maxed out'' with ethanol FFV credits in the 
MYs 2012-2015 timeframe. The Natural Resources Defense Council (NRDC) 
also supported the use of utility factors, but was the one commenter to 
condition its support upon eligibility constraints. It suggested 
``[t]he agencies should consider prioritizing a minimum requirement for 
natural gas-to-gasoline range of at least 80 percent on natural gas.'' 
Finally, as with PHEVs, the American Petroleum Institute was the only 
commenter to express some concerns with the use of utility factors for 
dual fuel CNG vehicles, but did not suggest an alternative approach.
    EPA is finalizing, as proposed, the use of SAE fleet-based utility 
factors for dual fuel CNG vehicles, and is also finalizing some 
additional requirements in order for a dual fuel CNG vehicle to be able 
to use the utility factors. Dual fuel CNG vehicles must meet two 
requirements in order to use the utility factor approach. One, the 
vehicle must have a minimum natural gas range-to-gasoline range of 2.0. 
This is to ensure that there is a vehicle range incentive to encourage 
vehicle owners to seek to use CNG fuel as much as possible (for

[[Page 62829]]

example, if a vehicle had equal or greater range on gasoline than on 
natural gas, the agency is concerned that some owners would fuel more 
often on gasoline). While NRDC suggested a minimum natural gas range-
to-gasoline range of 4.0, the agency believes that a ratio of 2.0, in 
concert with a (currently) much less expensive fuel, is very strong 
incentive to use natural gas fuel. Two, the vehicle must be designed 
such that gasoline can only be used when the CNG tank is empty, though 
EPA is permitting a de minimis exemption for those dual fuel vehicle 
designs where a very small amount of gasoline is used to initiate 
combustion before changing over to a much greater volume of natural gas 
to sustain combustion. With these eligibility requirements, EPA 
believes that there will be strong economic motivation for consumers to 
preferentially seek out and use CNG fuel in dual fuel CNG vehicles. 
Consumers will have paid a premium for this feature, and will have 
greater range on CNG. We also believe that the utility factor approach 
is the most reasonable approach for projecting the real world use of 
CNG and gasoline fuels in such dual fuel CNG vehicles. Any dual fuel 
CNG vehicles that do not meet the above eligibility requirements would 
use a utility factor of 0.50, the value that has been used in the past 
for dual fuel vehicles under the CAFE program.
    As noted above, there was widespread public support from the 
commenters for the utility factor approach for dual fuel CNG vehicles. 
EPA is rejecting the one alternative approach that was suggested, the 
use of a fixed 95% utility factor, because it would allow a dual fuel 
CNG vehicle with a small CNG tank to benefit from a very large utility 
factor. Further, EPA is finalizing the option for manufacturers to 
begin using this approach in MY 2012, at the manufacturer's discretion. 
EPA agrees with the arguments from many commenters that, for those 
manufacturers who are already obtaining maximum dual fuel vehicle GHG 
emissions credits from the production of ethanol FFVs, there is 
effectively ``no room'' for additional GHG emissions credits from dual 
fuel CNG vehicles, even though these vehicles are likely to provide 
real world GHG emissions reductions. Allowing these manufacturers to 
use the utility factor approach, beginning in MY 2012, effectively 
provides the ``separate track'' that was requested by several 
commenters.
    Table III-18 shows the utility factors that EPA is adopting, based 
on the SAE methodology, for use for dual fuel CNG vehicles that meet 
the eligibility requirements. A dual fuel CNG vehicle with a 150-mile 
2-cycle CNG range would result in a compliance assumption of 92.5% 
percent operation on CNG and 7.5% operation on gasoline.\549\ A dual 
fuel CNG vehicle with a driving range of less than 30 miles would use a 
utility factor of 0.50.
---------------------------------------------------------------------------

    \549\ See SAE J2841 ``Utility Factor Definitions for Plug-In 
Hybrid Electric Vehicles Using Travel Survey Data,'' September 2010, 
available at http://www.SAE.org, which we are adopting for dual fuel 
CNG vehicles as well.

    Table III-18--EPA Utility Factors for Dual Fuel CNG Vehicles as a
                        Function of 2-Cycle Range
------------------------------------------------------------------------
                  CNG driving range (miles)                        UF
------------------------------------------------------------------------
30...........................................................      0.523
40...........................................................      0.617
50...........................................................      0.689
60...........................................................      0.743
70...........................................................      0.785
80...........................................................      0.818
90...........................................................      0.844
100..........................................................      0.865
110..........................................................      0.882
120..........................................................      0.896
130..........................................................      0.907
140..........................................................      0.917
150..........................................................      0.925
160..........................................................      0.932
170..........................................................      0.939
180..........................................................      0.944
190..........................................................      0.949
200..........................................................      0.954
210..........................................................      0.958
220..........................................................      0.962
230..........................................................      0.965
240..........................................................      0.968
250..........................................................      0.971
260..........................................................      0.973
270..........................................................      0.976
280..........................................................      0.978
290..........................................................      0.980
300..........................................................      0.981
------------------------------------------------------------------------

iii. Ethanol Flexible Fuel Vehicles
    Ethanol flexible fuel vehicles (FFVs) can operate on E85 (a blend 
of 85 percent ethanol and 15 percent gasoline, by volume), gasoline, or 
any blend of the two. There are many ethanol FFVs in the U.S. market 
today.\550\
---------------------------------------------------------------------------

    \550\ While there are no B20-capable light-duty diesel vehicles 
in the U.S. market today, the compliance treatment for B20-capable 
vehicles in the future will be the same as for ethanol FFVs.
---------------------------------------------------------------------------

    In the final rulemaking for MYs 2012-2016, EPA promulgated 
regulations for MYs 2012-2015 ethanol FFVs that provide significant GHG 
emissions incentives equivalent to the long-standing ``CAFE credits'' 
for ethanol FFVs under EPCA, since many manufacturers had relied on the 
availability of these credits in developing their compliance 
strategies.\551\ Beginning in MY 2016, EPA ended the GHG emissions 
compliance incentives and adopted a methodology based on demonstrated 
vehicle emissions performance. This methodology established a default 
value where ethanol FFVs are assumed to be operated 100 percent of the 
time on gasoline, but allows manufacturers to use a relative E85 and 
gasoline vehicle emissions performance weighting based either on 
national average E85 and gasoline sales data, or manufacturer-specific 
data showing the percentage of miles that are driven on E85 vis-
[agrave]-vis gasoline for that manufacturer's ethanol FFVs.\552\ Since 
tailpipe GHG emissions from FFVs operated on E85 are typically slightly 
lower than those from gasoline operation, this methodology provides an 
opportunity for ethanol FFVs to earn GHG emissions credits, 
particularly if E85 use grows in the future.
---------------------------------------------------------------------------

    \551\ 75 FR 25432-433.
    \552\ 75 FR 25433-434.
---------------------------------------------------------------------------

    EPA did not propose to make any changes to this methodology for MYs 
2017-2025. In the proposal, the Agency laid out its rationale for not 
adopting a utility factor-based approach, as discussed above for PHEVs 
and dual fuel CNG vehicles, for ethanol FFVs. Unlike with PHEVs and 
dual fuel CNG vehicles, owners of ethanol FFVs do not pay any more for 
the E85 fueling capability. Unlike with PHEVs and dual fuel CNG 
vehicles, operation on E85 is not cheaper than gasoline on a per mile 
basis, it is typically the same or somewhat more expensive to operate 
on E85. Accordingly, there is no direct economic motivation for the 
owner of an ethanol FFV to seek E85 refueling, and in some cases there 
is an economic disincentive. Because E85 has a lower energy content per 
gallon than gasoline, an ethanol FFV will have a lower range on E85 
than on gasoline, which provides an additional disincentive to use E85 
fuel. The data confirm that, on a national average basis in 2008, less 
than one percent of the fuel used in FFVs was E85.\553\
---------------------------------------------------------------------------

    \553\ 75 FR 14762 (March 26, 2010).
---------------------------------------------------------------------------

    Most commenters who addressed FFVs that can operate on ethanol or 
other biofuels focused on the need for broader incentives, not the more 
narrow compliance issues like utility factors that are the focus of 
this preamble section.\554\ The Renewable Fuels Association argued in 
favor of utility factors for ethanol FFVs, stating: ``EPA/NHTSA's 
rationale for allowing the use of these utility factors for some dual 
fuel

[[Page 62830]]

vehicles but not for others is highly questionable. EPA and NHTSA state 
that PHEV and CNG vehicle owners paid a premium for their vehicles and 
thus will seek out and predominantly use alternative fuels more 
frequently than they will use gasoline. EPA/NHTSA also assume that 
alternative fuels used by PHEVs and CNGVs will be cheaper than gasoline 
on a per mile basis. These assumptions do not take into account that 
refueling access for these vehicles may be limited or unavailable (EPA/
NHTSA also assume, without basis, that PHEV drivers will always 
recharge once per day). Further, the cost per mile for these fuels may 
actually prove to be higher than gasoline, and prices may fluctuate as 
demand increases. If theoretical utility factors are to be applied to 
PHEVs and CNGVs, they should also apply to FFVs and any other dual 
fueled vehicles.'' The Alliance of Automobile Manufacturers (AAM), 
Ford, and General Motors supported the concept of not using utility 
factors for ethanol FFVs, and instead basing FFV emissions values on a 
relative gasoline/E85 weighting based on national average E85 usage in 
FFVs (this would count all ethanol consumption beyond E10 and convert 
this volume of ethanol to E85). These automakers asked for ``early 
guidance'' so that automakers would have the relevant information for 
development of compliance plans, and want the guidance to reflect the 
expected ethanol volumes that will be necessary to comply with future 
Renewable Fuel Standard program volume requirements. The 25x'25 
Alliance (and partners) recommended that the agency either adopt the 
utility factor methodology for FFVs or adopt the recommendation for 
gasoline/E85 weighting by AAM. The National Corn Growers Association 
argued that: ``[T]he concern for high relative cost of mid or high 
level ethanol blends does not seem to be justified in the term of the 
CAFE/GHG and RFS2 rules since at some point in the renewable fuel 
volume ramp-up of RFS2, market forces would result in competitive 
prices for ethanol and gasoline in order for the required volumes to be 
sold.''
---------------------------------------------------------------------------

    \554\ For a discussion of why the Agency is not promulgating 
incentives for biofuel-capable vehicles like ethanol FFVs for model 
years beyond 2015, see Section III.C.2.c.vii.
---------------------------------------------------------------------------

    EPA is finalizing its proposed approach of not using utility 
factors for ethanol FFVs and, instead, to base the relative weighting 
of gasoline and E85 emissions performance on the actual national 
average use of E85 in ethanol FFVs, consistent with the provisions in 
the MYs 2012-2016 standards final rulemaking.\555\ EPA understands the 
request from manufacturers for early guidance regarding the relative 
weightings of gasoline and E85 usage in FFVs and that planning and 
manufacturing commitments for future production of FFVs may depend on 
knowing the future regulatory environment. EPA commits to providing 
early guidance to manufacturers well in advance of each model year. The 
agency disagrees with the objections raised by the Renewable Fuels 
Association with respect to the selective use of utility factors for 
various dual fuel vehicles. EPA continues to believe that it is 
appropriate to assume that owners of some types of dual fuel vehicles, 
such as PHEVs and CNG vehicles, will preferentially seek to use the 
alternative fuel when the vehicle is much more expensive to purchase 
and much less expensive to operate on the alternative fuel--why else 
would the consumer pay more for the vehicle if (s)he did not intend to 
use the cheaper fuel? Similarly, EPA believes it is appropriate to 
assume that ethanol FFVs will primarily use gasoline fuel, as there is 
no extra vehicle cost, E85 fuel is no cheaper and in fact usually more 
expensive per mile, and use of E85 reduces overall vehicle range since 
there is only one fuel tank (as opposed to PHEVs and dual fuel CNG 
vehicles which have two fuel storage devices and therefore the use of 
the alternative fuel raises overall vehicle range). Further, even with 
approximately 10 million ethanol FFVs in the U.S. car and light truck 
fleet, fuel use data demonstrate that ethanol FFVs only use E85 less 
than one percent of the time. EPA considers the comment from the 
Renewable Fuels Association about relative fuel prices to be without 
merit. While it is true that prices of all motor fuels can be volatile, 
CNG prices are approximately one-half those of gasoline \556\ (and 
electricity prices, per mile, are even lower), and expected to remain 
low for the foreseeable future. Finally, our approach is responsive to 
comments from automakers, the 25x'25 Alliance, and the National Corn 
Growers Association, in that if actual use of E85 and other higher-
ethanol blends increases, for example in response to future RFS 
requirements and/or due to more competitive pricing, then the 
regulations already allow automakers to apply a higher E85 weighting 
consistent with the greater use of the fuel, which in turn could allow 
ethanol FFVs to generate emissions credits if GHG emissions from E85 
operation are lower than from gasoline operation.
---------------------------------------------------------------------------

    \555\ The preamble to the 2012-2016 final rule stated: ``EPA 
plans to make this assigned fuel usage factor available through 
guidance prior to the start of MY 2016 and adjust it annually as 
necessary.'' 75 FR 25434, May 7, 2010.
    \556\ http://www.afdc.energy.gov/afdc/pdfs/afpr_apr_12.pdf
---------------------------------------------------------------------------

b. CAFE Calculations for MY 2020 and Later
    49 U.S.C. 32905 specifies how the fuel economy of dual fuel 
vehicles is to be calculated for the purposes of CAFE through the 2019 
model year. The basic calculation is a 50/50 harmonic average of the 
fuel economy for the alternative fuel and the conventional fuel, 
irrespective of the actual usage of each fuel. In addition, the fuel 
economy value for the alternative fuel is significantly increased by 
dividing by 0.15 in the case of CNG and ethanol and by using a 
petroleum equivalency factor methodology that yields a similar overall 
increase in the CAFE mpg value for electricity.\557\ In a related 
provision, 49 U.S.C. 32906, the amount by which a manufacturer's CAFE 
value (for domestic passenger cars, import passenger cars, or light-
duty trucks) can be improved by the statutory incentive for dual fuel 
vehicles is limited by EPCA to 1.2 mpg through 2014, and then gradually 
reduced until it is phased out entirely starting in model year 
2020.\558\ With the expiration of the special calculation procedures in 
49 U.S.C. 32905 for dual fueled vehicles, the CAFE calculation 
procedures for model years 2020 and later vehicles need to be set under 
the general provisions authorizing EPA to establish testing and 
calculation procedures.\559\
---------------------------------------------------------------------------

    \557\ 49 U.S.C. 32905.
    \558\ 49 U.S.C. 32906. NHTSA interprets section 32906(a) as not 
limiting the impact of duel fueled vehicles on CAFE calculations 
after MY2019.
    \559\ 49 U.S.C. 32904(a), (c).
---------------------------------------------------------------------------

    With the expiration of the specific procedures for dual fueled 
vehicles, there is less need to base the procedures on whether a 
vehicle meets the specific definition of a dual fueled vehicle in EPCA. 
Instead, EPA's focus is on establishing appropriate procedures for the 
broad range of vehicles that can use both alternative and conventional 
fuels. For convenience, this discussion uses the term dual fuel to 
refer to vehicles that can operate separately on both an alternative 
fuel and on a conventional fuel.
    EPA proposed, for PHEVs, dual-fuel CNG vehicles, and FFVs, to apply 
the same fuel weighting approaches for CAFE purposes as we do for GHG 
emissions compliance. For PHEVs and dual-fuel CNG vehicles, the Agency 
proposed that fuel economy weightings would be determined using the SAE 
utility factor methodology, while for ethanol FFVs, manufacturers could

[[Page 62831]]

choose to use a default based on 100% gasoline operation, can choose to 
base the fuel economy weightings on national average E85 and gasoline 
use, or can use manufacturer-specific data showing the percentage of 
miles that are driven on E85 vis-[agrave]-vis gasoline for that 
manufacturer's ethanol FFVs. EPA further proposed for model years 2020 
and later to continue to use the 0.15 divisor for CNG and ethanol, and 
the petroleum equivalency factor for electricity, both of which the 
statute requires to be used through 2019. EPA sought comment on an 
alternative approach where we would not adopt the 0.15 divisor and 
petroleum equivalency factor for model years 2020 and later. Under this 
alternative approach, the fuel economy for the CNG portion of a dual 
fuel CNG vehicle, E85 portion of FFVs, and the electric portion of a 
PHEV would be determined strictly on an energy-equivalent basis, 
without any adjustment based on the 0.15 divisor or petroleum 
equivalency factor. See 76 FR 75019.
    No commenters specifically addressed utility factors for CAFE 
beginning in MY 2020, though the general arguments for and against 
utility factors for CAFE compliance would be the same as those 
discussed above for GHG emissions compliance. With one exception, 
commenters supported the proposal to continue to use the 0.15 divisor 
for CAFE compliance beginning in MY 2020. Nissan summarized the most 
common argument for retaining the 0.15 divisor for CAFE compliance, 
stating that the 0.15 divisor ``is consistent with the purpose of the 
CAFE program--to reduce our country's dependence on foreign oil.'' The 
Alliance of Automobile Manufacturers argued that ``this approach will 
maintain consistency between dedicated and dual fuel vehicle 
calculations and will continue to encourage manufacturers to build 
vehicles capable of operating on fuels other than petroleum.'' There 
was also support for retaining the 0.15 divisor for the CAFE program 
from other automakers, natural gas advocacy groups, and ethanol/
renewable fuel groups. The one comment against retaining the 0.15 
divisor was the American Petroleum Institute. It argued: ``Section 
32906 of the Energy Independence and Security Act of 2007 phased-out 
the maximum fuel economy credit attributable to dual fuel vehicles 
(except electric vehicles) that could be taken by manufacturers of 
those vehicles such that the credit was reduced from 1.2 mpg in model 
year 2014 (and previous model years) to 0.2 mpg in model year 2019 to 
`0 miles per gallon for model years after 2019.' Clearly, the EPA and 
NHTSA proposed treatment of model year 2020 and later dual fueled 
natural gas vehicles is overly generous and inconsistent with the 
intent and will of Congress. It should be set aside.''
    EPA is finalizing the CAFE compliance treatment for MY 2020 and 
later, as proposed, with one change being the addition of eligibility 
requirements for dual fuel CNG vehicles to be able to use the utility 
factor approach. For the reasons discussed above for GHG emissions 
compliance, EPA is adopting the same approaches for weighting the fuel 
economy compliance values for dual fuel vehicles: using utility factors 
for PHEVs and dual fuel CNG vehicles (the latter must meet the 
eligibility requirements), and providing manufacturers the option of 
using national average E85 usage data, manufacturer-specific E85 usage 
data, or a 100% gasoline default value for ethanol FFVs. EPA is 
adopting the 0.15 divisor, and petroleum equivalency factor for PHEVs, 
for dual fuel vehicle CAFE compliance in MY 2020 and later, for two 
reasons. One, this approach is directionally consistent with the 
overall petroleum reduction goals of EPCA and the CAFE program, because 
it reflects the much lower or zero petroleum content of alternative 
fuels and continues to encourage manufacturers to build vehicles 
capable of operating on fuels other than petroleum. Two, the 0.15 
divisor and petroleum equivalency factor (PEF) are used under EPCA to 
calculate CAFE compliance values for dedicated alternative fuel 
vehicles, and retaining this approach for dual fuel vehicles maintains 
consistency, for MY 2020 and later, between the approaches for 
dedicated alternative fuel vehicles and for the alternative fuel 
portion of dual fuel vehicle operation.
    In response to the comment from the American Petroleum Institute, 
EPA recognizes that use of the 0.15 divisor, and petroleum equivalency 
factor for PHEVs, will continue to provide a large increase in CAFE 
compliance values for the vehicles previously covered by the special 
calculation procedures in 49 U.S.C. 32905, and that Congress chose both 
to end the specific calculation procedures in that section and over 
time to reduce the benefit for CAFE purposes of the increase in fuel 
economy mandated by those special calculation procedures. However, the 
MY 2020 and later methodology differs significantly in important ways 
from the special calculation provisions mandated by EPCA. Most 
importantly, the MY 2020 and later methodology reflects actual usage 
rates of the alternative fuel and does not use the artificial 50/50 
weighting previously mandated by 49 U.S.C. 32905. In practice this 
means the primary vehicles to benefit from the MY 2020 and later 
methodology will be PHEVs and dual-fuel CNG vehicles, and not ethanol 
FFVs, while the primary source of benefit to manufacturers under the 
statutory provisions came from ethanol FFVs. Changing the weighting to 
better reflect real world usage is a major change from that mandated by 
49 U.S.C. 32905, and it orients the calculation procedure more to the 
real world impact on petroleum usage, consistent with the statute's 
overarching purpose of petroleum conservation. In addition, as noted 
above, Congress maintained the 0.15 divisor in the calculation 
procedures for dedicated alternative fuel vehicles that result in 
increased fuel economy values. Finalizing the 0.15 divisor for dual 
fuel vehicles is consistent with this, as it uses the same approach for 
calculating fuel economy on the alternative fuel when there is real 
world usage of the alternative fuel. Since the MY 2020 and later 
methodology is quite different in effect from the specified provisions 
in 49 U.S.C. 32905, and is consistent with the calculation procedures 
for dedicated vehicles that use the same alternative fuel, EPA believes 
this methodology is an appropriate exercise of discretion under the 
general authority provided in 49 U.S.C. 32904.
    Bosch and the Motor and Equipment Manufacturers Association 
commented that all types of alternative fuels, including biodiesel, be 
treated ``equivalently'' under the CAFE program. EPA agrees with these 
comments, and all dedicated alternative fuel vehicles will use the 0.15 
divisor in CAFE calculations for MY 2020 and later. In addition, 
vehicles capable of operating on diesel containing at least 85% 
biodiesel (B85), will also use the 0.15 divisor in CAFE calculations 
for MY 2020 and later. While B85 may not be considered an alternative 
fuel under EPCA at this time, 20% biodiesel (B20) is recognized by 
Congress for purposes of section 32905, and B85 exhibits the same or 
better petroleum replacement benefits as the 85% alcohol blend 
alternative fuels currently used in FFVs. The American Council for an 
Energy-Efficient Economy, Encana Natural Gas, Inc., and NGV America 
recommended that utility factors be used for CAFE calculations prior to 
2020. EPA is rejecting this recommendation, as EPCA requires the Agency 
to assume 50% use of the conventional fuel and 50% use of the 
alternative fuel for CAFE calculations through MY 2019. Finally,

[[Page 62832]]

VNG.Co suggested that that agencies consider possible ways to provide 
CAFE credits, in the pre-2020 timeframe, for duel fuel CNG vehicles 
that have a CNG range of less than 200 miles. EPA is rejecting this 
recommendation as well, as the 200-mile minimum range requirement is 
required under 49 U.S.C. 32901(c).
5. Off-cycle Technology Credits
    For MYs 2012-2016, EPA provided an option for manufacturers to 
generate credits by employing new and innovative technologies that 
achieve CO2 reductions which are not reflected on current 2-cycle test 
procedures. For this final rule, EPA, in coordination with NHTSA, is 
applying the off-cycle credits, and equivalent fuel consumption 
improvement values, to both the GHG and CAFE programs for MY 2017 and 
later. This is a change from the 2012-16 final rule where EPA only 
provided the off-cycle credits for the GHG program. For MY 2017 and 
later, manufacturers may continue to use off-cycle credits for GHG 
compliance and begin to generate and use fuel consumption improvement 
values (essentially equivalent to EPA credits) for CAFE compliance. In 
addition, EPA, in coordination with NHTSA, is adopting a list of 
defined (i.e. default) values for identified off-cycle technologies 
that would apply unless the manufacturer demonstrates that a different 
value for its technologies is appropriate.
    There are two key changes EPA is making to the proposal based on 
comments received. First, EPA is allowing the pre-defined list to be 
used starting in MY 2014, rather than the proposed starting point of MY 
2017. This change does not apply to CAFE, where the off-cycle credits 
program does not begin until MY 2017. Second, EPA is not finalizing the 
proposed minimum penetration thresholds for technologies on the pre-
defined list. For most of the listed technologies, the minimum 
threshold as proposed would have required manufacturers to use the 
listed technologies on at least 10 percent of their production before 
the manufacturer could begin generating credits based on the pre-
defined list. All of the changes to the EPA off-cycle credit program 
for the GHG program are described in Section III.C.5.a-b below, and 
those for the CAFE program are described in Section III.C.5.c below.
a. Background on the Off-Cycle Credit Program Adopted in MY 2012-2016 
GHG Rule
    In the MY 2012-2016 final rule, EPA adopted an optional credit 
opportunity for new and innovative technologies that reduce vehicle 
CO2 emissions, but for which the CO2 reduction 
benefits are not significantly captured over the 2-cycle test 
procedures used to determine compliance with the fleet average 
standards (i.e., ``off-cycle'').\560\ EPA established eligibility 
criteria requiring technologies to be innovative, relatively newly 
introduced in one or more vehicle models, but not yet implemented in 
widespread use in the light-duty fleet, and which provide novel 
approaches to reducing greenhouse gas emissions. The technologies must 
be used to achieve verifiable and demonstrable real-world GHG 
reductions.\561\ EPA adopted the off-cycle credit option to provide an 
incentive to encourage the introduction of these types of technologies, 
believing that bona fide reductions from these technologies should be 
considered in determining a manufacturer's fleet average, and that a 
credit mechanism is an effective way to do this. The optional off-cycle 
credit opportunity adopted in the MY 2012-2016 GHG rule is available 
through the 2016 model year.
---------------------------------------------------------------------------

    \560\ 75 FR 25438-440.
    \561\ See 40 CFR section 1866.12(d); 75 FR 25438.
---------------------------------------------------------------------------

    In the MY 2012-2016 rule, EPA finalized a two-tiered process for 
OEMs to demonstrate that CO2 reductions of an innovative and 
novel technology are verifiable and measureable but are not captured by 
the 2-cycle test procedures. First, a manufacturer must determine 
whether the benefit of the technology could be captured using the 5-
cycle methodology currently used to determine fuel economy label 
values. EPA established the 5-cycle test methods to better represent 
real-world factors impacting fuel economy, including higher speeds and 
more aggressive driving, colder temperature operation, and the use of 
air conditioning. If this determination is affirmative, the 
manufacturer must follow the 5-cycle procedures to demonstrate 
potential benefits and to quantify CO2 gram per mile 
credits.
    If the manufacturer finds that the technology is such that the 
benefit is not adequately captured using the 5-cycle approach, then the 
manufacturer would have to develop a robust methodology, subject to EPA 
approval, to demonstrate the benefit and determine the appropriate 
CO2 gram per mile credit. This case-by-case, non-5-cycle 
credits approach includes an opportunity for public comment as part of 
the approval process. The demonstration program must be robust, 
verifiable, and capable of demonstrating the real-world emissions 
benefit of the technology with strong statistical significance. Whether 
the approach involves on-road testing, modeling, or some other 
analytical approach, the manufacturer is required to present a proposed 
methodology to EPA. EPA will approve the methodology and credits only 
if certain criteria are met. Baseline emissions and control emissions 
must be clearly demonstrated over a wide range of real world driving 
conditions and over a sufficient number of vehicles to address issues 
of uncertainty with the data. Data must be on a vehicle model-specific 
basis unless a manufacturer demonstrated model specific data was not 
necessary. See generally 75 FR 25438-40.
b. Changes to the Off-Cycle Credits Program
    EPA has been encouraged by automakers' interest in developing 
innovative technologies which could be used to generate off-cycle 
credits. Though it is early in the program, several manufacturers have 
shown interest in introducing off-cycle technologies which are in 
various stages of development and testing. EPA believes that continuing 
the option for off-cycle credits will further encourage innovative 
strategies for reducing CO2 emissions beyond those measured 
by the 2-cycle test procedures. Continuing the program provides 
manufacturers with additional flexibility in reducing CO2 to 
meet increasingly stringent CO2 standards and encourages 
early penetration of off-cycle technologies into the light duty fleet. 
Furthermore, extending the program may encourage automakers to invest 
in off-cycle technologies that could have the benefit of realizing 
additional reductions in the light-duty fleet over the longer-term. EPA 
received a significant number of comments from manufacturers and 
suppliers supporting the continuation of the off-cycle program, and no 
opposition to doing so. For these reasons, EPA proposed and is 
finalizing extending the off-cycle credits program to 2017 and later 
model years.
    In implementing the program, some manufacturers expressed concern 
prior to proposal that a drawback to using the program is uncertainty 
over which technologies may be eligible for off-cycle credits plus 
uncertainties resulting from a potentially cumbersome case-by-case 
approval process. See 76 FR 75021. As noted above, EPA eligibility 
criteria adopted in the MY 2012-2016 final rule require technologies to 
be new, innovative, and not in widespread use in order to qualify as a 
source of off-cycle credit generation. Also, the MY 2012-2016 final 
rule specifies that technologies must not be significantly

[[Page 62833]]

measurable on the 2-cycle test procedures. As discussed below, EPA is 
adopting the modifications it proposed to the technology eligibility 
criteria, as the current criteria are not well defined and have been a 
source of uncertainty for manufacturers, thereby interfering with the 
goal of providing an incentive for the development and use of 
additional technologies to achieve real world reductions in 
CO2 emissions. The focus will be on whether or not off-cycle 
technologies can be demonstrated to provide off-cycle CO2 
emissions reductions that are not sufficiently reflected on the 2-cycle 
tests.
    In addition, as described below in section III.C.5.b.i, EPA is 
finalizing a new credit pathway that allows manufacturers to generate 
credits by using technologies listed on an EPA pre-defined and pre-
approved technology list, and to do so starting with MY 2014. These 
credits will be verified and approved as part of certification with no 
prior approval process needed. We believe this new option significantly 
streamlines and simplifies the program for manufacturers choosing to 
use it and will provide manufacturers with certainty that credits may 
be generated through the use of pre-evaluated and approved 
technologies. For credits not based on the pre-defined list, EPA is 
finalizing as proposed a streamlined and better defined step-by-step 
process for demonstrating emissions reductions and for applying for 
credits under the existing credit pathways. EPA is finalizing these 
procedural changes to the existing case-by-case pathways effective for 
new credit applications for the MY 2012-2016 program as well as for MY 
2017 and later for credits that are not based on the pre-defined list.
    As discussed in section II.F and III.B.10, EPA, in coordination 
with NHTSA, is also finalizing the proposed provision allowing 
manufacturers to include fuel consumption reductions resulting from the 
use of off-cycle technologies in their CAFE compliance calculations. 
This provision would apply starting in MY 2017. Manufacturers may 
generate ``fuel consumption improvement values'' essentially equivalent 
to EPA credits, for use in the CAFE program. The changes to the CAFE 
program to incorporate off-cycle technologies are discussed below in 
section III.5.c.
i. Pre-Defined Credit List
    As noted above, EPA proposed and is finalizing a list of off-cycle 
technologies from which manufacturers can select and by doing so 
automatically generate a pre-defined level of CO2 credits. 
This provision will apply starting in MY 2014 and apply in each 
successive model year. Both technologies and credit values based on the 
list are established by rule. That is, there is no approval process 
associated with obtaining the credit. Prior to MY 2014, manufacturers 
must provide a demonstration of off-cycle emissions reductions in order 
to generate credits for off-cycle technologies, as is required under 
the program finalized in the MY 2012-2016 rule, including for those 
technologies on the list. Requirements for demonstrating off-cycle 
credits not based on the list are described below. EPA received several 
comments supporting EPA's proposal to establish a pre-defined and pre-
approved technology list for the off-cycle program. Manufacturers 
supported the list as a necessary element to streamline and simplify 
the off-cycle program. EPA did not receive any comments against 
establishing a pre-defined list, but did receive comments on various 
aspects of the list, as discussed in this section and Section II.F.
    EPA proposed that manufacturers could begin generating credits 
based on the pre-defined list beginning in MY 2017. EPA also solicited 
comment generally on ways to liberalize the pre-2017 MY procedures for 
obtaining off-cycle CO2 credits, and proposed to change some 
of the criteria in the MY 2012-2016 rule for obtaining such credits. 
See 76 FR 75023, 75024. The agencies received several comments from 
manufacturers that the pre-defined list should also be available for 
use in MY 2012-2016. Commenters stated that: (1) These are real and 
measurable GHG and fuel consumption reductions and estimated benefits 
will equally apply to MY 2012-2016 vehicles as to MY 2017 and later 
vehicles, (2) since the credits for technologies on the list are based 
on conservative estimates, there is no reason to limit availability, 
(3) the reasons for streamlining and simplifying the off-cycle credits 
program apply equally to pre-MY 2017 model years, (4) allowing the list 
in MY 2012-2016 promotes earlier implementation of CO2-
reducing technology, and (5) requiring testing in the MY 2012-2016 time 
frame has the potential to create significant discrepancies and 
potential unfairness among manufacturers if EPA awards credits either 
higher or lower than the list value.
    EPA agrees that the credits on the pre-defined list are based on 
conservative estimates of real world off-cycle CO2 and fuel 
consumption benefits. Allowing manufacturers to pursue credits through 
the use of the pre-defined list provides a significantly streamlined 
pathway under the existing program, and therefore has the potential to 
encourage the earlier introduction of off-cycle technologies. Allowing 
manufacturers to use the list in pre-2017 model years also helps 
address concerns raised by manufacturers regarding uncertainty with the 
existing credit application and approval process, and potentially 
reduces the cost associated with the program by providing a pathway 
that does not include testing requirements. These reasons support 
applying the list prior to MY 2017.
    EPA is allowing use of the credit list starting with MY 2014. For 
MY 2012-2013, it is too late for the provisions to have the desired 
effect of encouraging the use of off-cycle technologies on additional 
vehicle models (MY 2012 is almost complete and MY 2013 is underway). 
Allowing the pre-defined list to be used in these model years would 
effectively provide credits for actions manufacturers have already 
taken for reasons other than gaining off-cycle credits. For 
manufacturers not pursuing credits under the existing program, they 
would have already decided to forego potential off-cycle credits in 
these model years. Providing credits for MY 2012-2013 through the use 
of the list thus could be viewed as a windfall--providing credits for 
conduct which would occur anyway rather than creating an incentive to 
introduce new technologies. EPA therefore is not allowing the list to 
be used before MY 2014.
    Extending the use of the pre-defined list to MYs 2014-2016 is not 
appropriate for the CAFE program. Although EPA included the off-cycle 
credit program when adopting the GHG emissions standards for these 
model years, see 76 FR 75022, NHTSA did not include an off-cycle credit 
program when adopting the CAFE standards for those model years. Fuel 
economy improvement values in the CAFE program, and associated 
comments, are discussed further in section III.5.c, below.
    Table III-19 provides the list of the technologies and per vehicle 
credit levels included in the final rule for cars and light trucks. The 
manufacturer must demonstrate in the certification process that its 
technology meets the definition for the listed technology (see Sec.  
86.1869-12(d)(1)(iv)). EPA has made changes to some of the technologies 
and credit values on the list based on comments the agencies received. 
Section II.F of the preamble provides an overview of the technologies, 
credit values, and comments the agencies received on the proposed 
technology list. Chapter 5 of the joint TSD provides a further detailed 
description of how these technologies

[[Page 62834]]

are defined and how the credit levels were derived. EPA continues to 
believe that these values reasonably estimate the amount of GHG 
improvement associated with use of the technology, albeit 
conservatively (in keeping with the list's function as providing 
default values, and providing assurance that the credits will not 
result in a loss of CO2 benefits). EPA used a combination of 
available activity data from the MOVES model, vehicle and test data, 
and EPA's vehicle simulation tool described in Section II.F, to 
estimate these credit values. In particular, the vehicle simulation 
tool was used to determine the credit amount for electrical load 
reduction technologies (e.g. high efficiency exterior lighting, engine 
heat recovery, and solar roof panels) and active aerodynamic 
improvements.

   Table III-19--Off-Cycle Technologies and Credits for Cars and Light
                                 Trucks
------------------------------------------------------------------------
                                   Credit for cars     Credit for light
                                ---------------------       trucks
           Technology                                -------------------
                                         g/mi                g/mi
------------------------------------------------------------------------
High Efficiency Exterior         1.0                  1.0
 Lighting (at 100W).
Waste Heat Recovery (at 100W;    0.7                  0.7
 scalable).
Solar Roof Panels (for 75 W,     3.3                  3.3
 battery charging only).
Solar Roof Panels (for 75 W,     2.5                  2.5
 active cabin ventilation plus
 battery charging).
Active Aerodynamic Improvements  0.6                  1.0
 (scalable).
Engine Idle Start-Stop w/heater  2.5                  4.4
 circulation system.
Engine Idle Start-Stop without/  1.5                  2.9
 heater circulation system.
Active Transmission Warm-Up....  1.5                  3.2
Active Engine Warm-Up..........  1.5                  3.2
Solar/Thermal Control..........  Up to 3.0            Up to 4.3
------------------------------------------------------------------------

    As proposed, EPA is capping the amount of credits a manufacturer 
may generate using the above list to 10 g/mile per year on a combined 
car and truck fleet-wide average basis. As proposed, manufacturers 
wanting to generate credits in excess of the 10 g/mile limit for these 
listed technologies could do so by generating necessary data and going 
through the credit approval process described below in Section 
III.C.5.b.iii and iv. In addition, the cap does not apply on a vehicle 
model basis, allowing manufacturers the flexibility to focus off-cycle 
technologies on certain vehicle models and to generate credits for that 
vehicle model in excess of 10 g/mile. (The vehicle is of course part of 
the manufacturer's fleet wide average, and further credits from the 
list could remain available so long as the manufacturer's fleetwide 
credits remained less than or equal to 10 g/mile.) EPA is finalizing a 
fleet-wide cap because the default credit values are based on limited 
data, and also because EPA recognizes that some uncertainty is 
introduced when credits are provided based on a general assessment of 
off-cycle performance as opposed to testing on the individual vehicle 
models.
    EPA received several comments regarding the 10 g/mile credit cap 
for the pre-defined technology list. Some manufacturers commented that 
the credit cap should be removed, primarily for the following reasons; 
(1) the credits on the list are based on conservative estimates of 
real-world reductions and industry should receive credits for all 
applications without requiring additional testing, and (2) the cap is 
counterproductive as it discourages the maximum adoption of the pre-
defined off-cycle technologies (since there would be less incentive to 
introduce technologies that would take the manufacturer beyond the 
cap). NRDC and ICCT commented in support of the 10 g/mile credit cap 
because some uncertainty is inherent with using estimates rather than 
vehicle model specific test data. NRDC recommended that EPA fully 
evaluate the adequacy of the 10 g/mile cap level, given the 
uncertainties in real, verifiable emissions reductions, and to adopt a 
lower cap if necessary.
    EPA has reviewed the level of credits being provided for listed 
technologies and the basis for those estimates, as discussed in section 
II.F, and EPA continues to believe that the 10 g/mile cap is 
appropriate. The cap balances the goal of providing a streamlined 
pathway to encourage significant introduction of innovative off-cycle 
technologies with the environmental risk from the uncertainty inherent 
with the estimated level of credits being provided. EPA believes that 
10 g/mile is substantial relative to the overall emissions reduction 
obligation of manufacturers (for example, 10 g/mile represents over 11% 
of the difference between a fleet average of 250 g/mile and 163 g/
mile), and that the cap will not be particularly limiting or deter 
manufacturers from introducing technology. Manufacturers would need to 
use several listed technologies across a very large portion of their 
fleet before they would reach the cap. Based on manufacturer comments 
regarding the proposed penetration thresholds, discussed below, 
manufacturers in general are not anticipating widespread adoption of 
these technologies, at least not in the early years of the program. 
Also, the cap is not an absolute limitation because manufacturers have 
the option of submitting data and applying for credits which would not 
be subject to the 10 g/mile credit limit. EPA thus believes credits 
generated beyond the 10 g/mile credit cap should be based on additional 
manufacturer-specific data.
    In the NPRM, EPA discussed the possibility of adding technologies 
to the list based on data provided by manufacturers, and other 
available data, through future rulemaking. EPA received comments 
supporting revisiting the list annually, or from time to time as data 
become available, with one commenter recommending that the list be 
revisited and fully examined during the mid-term review. EPA received 
one comment objecting to providing additional credits without a 
rulemaking. EPA also received comment that the 10 g/mile cap discussed 
above should be revisited if the list is expanded in the future. EPA is 
not announcing a regular schedule to revisit the list, since it is 
unclear what the timing might be for other technologies to emerge with 
sufficient data supporting their consideration. However, EPA plans to 
monitor the emission reduction potential of off-cycle technologies in 
coordination with NHTSA. If the CO2 reduction benefits of a 
technology have been established through manufacturer data and testing, 
or other available data, it would be appropriate to consider listing 
the technology and a conservative associated credit value. EPA agrees 
that

[[Page 62835]]

any changes to the list would need to be done through a rulemaking 
(which would provide an opportunity for public comment), since the list 
is part of the regulation, so it would be the regulation itself that 
would change. EPA understands commenter interest in revisiting the 
issue of the credit cap in conjunction with revisiting the list, and 
expects the cap to be a topic for further consideration should a 
rulemaking be undertaken in the future and to be one of the issues the 
agencies examine during the mid-term review.
    EPA also proposed to require minimum penetration rates for several 
of the listed technologies as a condition for generating credit from 
the list as a way to further encourage their significant adoption by MY 
2017 and later. This proposal was intended to support the programmatic 
objective of encouraging market penetration of the technologies. See 76 
FR 75023. Under the proposed approach, at the end of the model year for 
which the off-cycle credit is claimed, manufacturers would need to 
demonstrate that production of vehicles equipped with the technologies 
for that model year met or exceeded the percentage thresholds in order 
to receive the listed credit. EPA proposed to set the threshold at 10 
percent of a manufacturer's overall combined car and light truck 
production for some technologies on the list.
    EPA received several comments from manufacturers and suppliers 
recommending that EPA not adopt the proposed penetration thresholds. 
Commenters provided several reasons for not adopting thresholds, 
including; (1) actions to reduce emissions should be recognized on a 
per-vehicle-so-equipped basis, (2) thresholds unfairly withholds credit 
for actual, real-world emission reductions that are achieved in the 
early stages of technology roll-out, (3) the minimum threshold does not 
incentivize the introduction of these technologies, which typically 
require extensive development at significant cost. Instead, 
manufacturers may choose not to implement new technologies, or to delay 
introduction based on the fact that they cannot know with certainty if 
they will be able to meet the proposed penetration rates. Business 
cases for some of these new technologies will be based on the ability 
to achieve expected credit amounts, (4) it is common practice for new 
automotive technologies to be introduced on a single model, or even 
single configuration within a model. This low production trial period 
allows manufacturers to monitor technology performance and reliability, 
and to gauge consumer acceptance. Achieving a 10 percent market 
penetration can take a decade or more for certain technologies, (5) 
new, expensive technologies often are applied first on more expensive, 
lower volume models. This process has the salutary effect of lowering a 
manufacturer's risk, (6) a smaller penetration rate would create a 
correspondingly smaller credit, so we see no problem being created at 
lower penetration levels, and (7) EPA has failed to demonstrate a clear 
need for the minimum penetration restriction. EPA did not receive any 
comments in support of the proposed penetration thresholds.
    EPA has decided not to adopt penetration thresholds as a condition 
for generation credits using the pre-defined list. EPA proposed the 
thresholds as a way to encourage the widespread adoption of off-cycle 
technologies by encouraging manufacturers to use the technologies on 
larger volume models. EPA believes that several points raised by the 
commenters are persuasive in demonstrating that a penetration threshold 
could have the opposite effect, dissuading manufacturers from 
introducing technologies. EPA agrees that in some cases manufacturers 
would proceed by introducing technologies on lower production volume 
vehicles in order to gain experience with them and to gauge market 
acceptance. EPA does not want to discourage this practice. The ability 
to generate additional credits by increasing the use of the 
technologies across their fleet will encourage manufacturers to bring 
off-cycle technologies into the mainstream. In addition, there is no 
loss of environmental benefits if the thresholds are not adopted.
ii. Technology Eligibility Criteria
    As discussed above, EPA originally established the off-cycle credit 
program in the MY 2012-2016 program. EPA expects that the pre-defined 
list may become the primary pathway for off-cycle credit generation due 
to the streamlined process the list provides. However, the ability of 
manufacturers to generate credits beyond or in addition to those 
included in the pre-defined technology list based on manufacturer test 
data remains part of the off-cycle credits program under both the MYs 
2012-2016 and MY 2017-2025 programs. EPA proposed and is finalizing 
several changes to the off-cycle credits pathway procedures originally 
established in the MY 2012-2016 rule.
    As proposed, EPA is removing the criteria in the 2012-2016 rule 
that off-cycle technologies must be `new, innovative, and not in 
widespread use.' EPA proposed to remove the criteria from the program 
because these terms are imprecise and have created implementation 
questions and uncertainty in the program. See 76 FR 75024. For example, 
under the criteria that technology must be ``new'' it has been unclear 
if technologies developed in the past but not used extensively would be 
considered new, if only the first one or two manufacturers using the 
technology would be eligible or if all manufacturers could use a 
technology to generate credits, or if credits for a technology would 
sunset after a period of time. These criteria have interfered with the 
goal of providing an incentive for the development and use of off-cycle 
technology that reduces CO2 emissions. EPA received only 
supportive comments for these proposed changes to the eligibility 
criteria. EPA believes it is appropriate to provide credit 
opportunities for off-cycle technologies that achieve significant real 
world reductions beyond those measured under the two-cycle test without 
further making (somewhat subjective) judgments regarding the newness 
and innovativeness of the technology. Therefore, as proposed, EPA is 
implementing this program change for new MY 2012-2016 credits as well 
as for MY 2017-2025.
    A further uncertainty in the MY2012-2016 rule was the requirement 
that off-cycle credits not be significantly measureable over the 2-
cycle test. As noted at proposal, this left unclear whether 
technologies partially measureable over the 2-cycle test but generating 
significant additional CO2 reductions in fact (as measured 
by the 5-cycle test for example) could generate off-cycle credits. 76 
FR 75024. As proposed, EPA would provide off-cycle credits for any 
technologies that are added to a vehicle model that are demonstrated to 
provide significant off-cycle CO2 reductions, like those on 
the list. EPA includes technologies providing small reductions on the 
2-cycle tests but additional significant reductions off-cycle. Thus, as 
proposed, EPA is removing the ``not significantly measurable over the 
2-cycle test'' criteria. The technology demonstration and step-by-step 
application process is described in detail below in section 
III.C.5.b.ii
    As proposed, technologies included in EPA's assessment in this 
rulemaking of technology for purposes of developing the standard would 
not be allowed to generate off-cycle credits, as their cost and 
effectiveness and expected use are already included in the assessment 
of the standard (with the exception of stop start and active

[[Page 62836]]

aerodynamic improvements whose credits are included in determining the 
appropriateness of the standards, and potential exception of high 
efficiency alternators, as discussed in section II.F.) Also, as 
proposed, technologies integral or inherent to the basic vehicle design 
including engine, transmission, mass reduction, passive aerodynamic 
design, and base tires will not be eligible for credits. For example, 
manufacturers may not generate off-cycle credits by moving to an eight-
speed transmission. EPA continues to believe that it would be difficult 
to clearly establish an appropriate A/B test (i.e., testing with and 
without the technology) for technologies so integral to the basic 
vehicle design. EPA is limiting the off-cycle program to technologies 
that can be clearly identified as add-on technologies conducive to A/B 
testing. Further, EPA will not provide credits for a technology 
required to be used by Federal law, as EPA would consider such credits 
to be windfall credits (i.e. not generated as a result of the rule). 
The base versions of such technologies would be considered part of the 
base vehicle. If a manufacturer demonstrates that an improvement to 
such technologies provides additional off-cycle benefits above and 
beyond a system meeting minimum Federal requirements, those incremental 
improvements could be eligible for off-cycle credits, assuming an 
appropriate quantification of credits is demonstrated. In addition, as 
discussed in II.F above, the agencies are not providing off-cycle 
credits potentially attributable to crash avoidance systems, safety 
critical systems, or technologies that may reduce the frequency of 
vehicle crashes.
    EPA received a variety of comments on these aspects of the program. 
Environmental groups were concerned that there could be double counting 
of credits if a technology provided 2-cycle emissions reductions. As 
noted above, only emissions reductions above and beyond those provided 
over the 2-cycle test may be counted as off-cycle credits. The test 
data provided by manufacturers, either 5-cycle or through the public 
process described below, must be sufficient to allow EPA to determine 
an incremental off-cycle benefit that is significantly greater than the 
2-cycle benefit.
    Global Automakers commented that eligibility for off-cycle credits 
should not be limited to add-on technologies. They commented that 
although it may be that making a credible demonstration of benefits for 
some integral technologies will be difficult, that is no reason to deny 
manufacturers the opportunity to do so. If EPA finds such a 
demonstration to lack credibility, it would be able to deny the 
manufacturer's credit request. Ford similarly commented that EPA should 
work with manufacturers to develop methods to demonstrate integral 
technologies that cannot be turned off or disabled such as advanced 
combustion concepts, cam-less engines, variable compression ratio 
engines, air/hydraulic micro hybrids/launch assist devices, and 
advanced transmissions.
    EPA continues to believe it is appropriate to not provide off-cycle 
credits for technologies that are integral to basic vehicle design. EPA 
continues to believe it would be very difficult to accurately parse out 
the off-cycle benefits for some integral technologies such as engine 
changes and transmission improvements. EPA is also concerned that 
certain fundamental vehicle design elements may inherently provide 
better CO2 performance and fuel economy under certain off-
cycle conditions than over the 2-cycle test. For example, a V-12 engine 
may provide improved performance over the USO6 test cycle. EPA believes 
it would be inappropriate to provide off-cycle credits in such 
circumstances, as these benefits are inherent to the vehicle design 
rather than to development in reaction to the off-cycle credit program. 
EPA views such credits as windfalls. The intent of the off-cycle 
provisions is to provide an incentive for CO2 and fuel 
consumption reducing off-cycle technologies that would otherwise not be 
developed because they do not offer a significant 2-cycle benefit. 
Unlike off-cycle technologies that provide a small 2-cycle benefit and 
significant 5-cycle benefits, 2-cycle technologies that are fundamental 
to vehicle design would never generate additional 5-cycle reductions in 
reaction to the off-cycle credit program. These reductions would occur 
regardless, and thus are not appropriate for credits.
    Global Automakers further commented on EPA's proposal that 
technologies included in the agencies' standard-setting analysis may 
not generate off-cycle credits (with the exception of active 
aerodynamic devices and engine stop-start systems). EPA states that 
allowing such credits for these technologies would amount to ``double-
counting'' of benefits. Global Automakers comment that there may emerge 
by 2025 advanced levels for current technologies that are capable of 
achieving greater benefits than current systems. Global Automakers 
commented that if a manufacturer can demonstrate that an advanced 
version of one of the technologies that is included in the standard-
setting analysis can achieve greater benefits than projected by the 
agencies, and those benefits are not captured with the current test 
procedure, there is no justification for excluding these technologies 
from the off-cycle credit program.
    Similarly, MEMA commented that there will very likely be future 
technologies--in addition to stop/start and active aerodynamics--that 
could result in both significant on-cycle and off-cycle benefits. MEMA 
believes that these dual-benefit technologies should not be precluded 
from consideration. For example, for any of the technologies that are 
considered in setting the standard (in other words, baseline 
technologies for the program), there could come a time when an on-cycle 
technology may evolve and provide a significant off-cycle benefit.
    In response to these comments, EPA remains concerned with double 
counting issues if the program were to allow credits for technologies 
that EPA has accounted for in establishing the level of the standards. 
As with 2-cycle technologies which are fundamental to vehicle design, 
EPA believes the use of these technologies will be driven by the 
standards. As noted above, the fundamental purpose of the off-cycle 
credit program is to provide incentive for manufacturers to develop new 
technologies that provide significantly greater emissions reductions 
off-cycle than over the 2-cycle test. Therefore, double counting and 
windfall credits issues remain a concern for technologies EPA already 
accounts for in establishing the standards and therefore expects 
manufacturers to use widely to meet the standards. For these reasons, 
as proposed, EPA is not allowing credits for technologies described in 
Chapter 3 of the TSD.\562\
---------------------------------------------------------------------------

    \562\ With the exception of stop start and active aerodynamics 
and the potential exception of high efficiency alternators, as 
discussed in section II.F.
---------------------------------------------------------------------------

    As noted in the proposal, by removing the ``new, innovative, not 
widespread use'' criteria initially established in the MY 2012-2016 
rule, EPA is also making clear that once approved, EPA does not intend 
to sunset a technology's credit eligibility or to deny credits to other 
vehicle applications using the technology, as may have been implied by 
those criteria under the MY 2012-2016 program. EPA believes, at this 
time, that it should encourage the wider use of technologies with 
legitimate off-cycle emissions benefits. See 76 FR 75024. Manufacturers 
demonstrating through the EPA approval process that the technology is 
effective on additional vehicle models would be eligible for

[[Page 62837]]

credits. Limiting the application of a technology or sunsetting the 
availability of credits during the 2017-2025 time frame would be 
counterproductive because it would remove part of the incentive for 
manufacturers to invest in developing and deploying off-cycle 
technologies, some of which may be promising but have considerable 
development costs associated with them. Also, approving a technology 
only to later disallow it could lead to a manufacturer discontinuing 
the use of the technology even if it remained a cost effective way to 
reduce emissions. EPA also believes that this approach provides an 
incentive for manufacturers to continue to improve technologies without 
concern that they will become ineligible for credits at some future 
time.
    EPA received comments from manufacturers and suppliers in general 
support of not sunsetting the off-cycle credits program. EPA received 
comments from CBD that ``the concept of allowing credit for the 
installation of new and energy efficient technology that cannot be 
measured by existing testing mechanisms is sound, as long as the 
duration of the credit period is brief and provides no disincentive to 
the implementation of other available features.'' The commenter did not 
provide additional rationale as to why the credit period should be 
brief. For the reasons described above, EPA continues to believe that 
it is appropriate not to sunset credits for off-cycle technologies.
iii. Demonstrating Off-cycle Emissions Reductions
5-Cycle Testing
    In those instances when a manufacturer is not using the default 
credit value provided by the pre-defined menu, EPA is retaining a two-
tiered process for demonstrating the CO2 reductions of off-
cycle technologies, but is clarifying several of the requirements. The 
process described below would be used for all credits not based on the 
pre-defined list described in Section III.C.5.i, above.
    The 5-cycle test procedures remain the starting point for 
manufacturers to demonstrate off-cycle emissions reductions. The MY 
2012-2016 rulemaking established general 5-cycle testing requirements 
and EPA is finalizing several provisions to delineate what EPA expects 
as part of a 5-cycle based demonstration. EPA has received and approved 
one off-cycle credit application from a single manufacturer under the 
5-cycle testing approach. Manufacturers requested clarification on the 
amount of 5-cycle testing that would be needed to demonstrate off-cycle 
credits, and EPA is finalizing the following as part of the step-by-
step methodology manufacturers would follow to seek approval of 
credits. EPA is also finalizing a specific requirement that all 
applications include an engineering analysis for how the technology 
provides off-cycle emissions reductions.
    As proposed, EPA is specifying that manufacturers would run an 
initial set of three 5-cycle tests with and without the technology 
providing the off-cycle CO2 reduction. Testing must be 
conducted on a representative vehicle, selected using good engineering 
judgment, for each vehicle test group. As proposed, manufacturers could 
bundle off-cycle technologies together for testing in order to reduce 
testing costs and to improve their ability to demonstrate consistently 
measurable reductions over the tests. If these A/B 5-cycle tests 
demonstrate an off-cycle benefit of 3 percent or greater, comparing 
average test results with and without the off-cycle technology, the 
manufacturer would be able to use the data as the basis for credits. 
EPA has long used 3 percent as a threshold in fuel economy confirmatory 
testing for determining if a manufacturer's fuel economy test results 
are comparable to those run by EPA.\563\
---------------------------------------------------------------------------

    \563\ 40 CFR 600.008(b)(3).
---------------------------------------------------------------------------

    EPA proposed that if the initial three sets of 5-cycle results 
demonstrate a reduction of less than a 3 percent difference in the 5-
cycle results with and without the off-cycle technology, the 
manufacturer would have to run two additional 5-cycle tests with and 
without the off-cycle technologies and verify the emission reduction 
using the EPA Light-duty Simulation Tool described in Section II.F. See 
76 FR 75024-25. If the simulation tool supports credits that are less 
than 3 percent of the baseline 2-cycle emissions, then EPA would 
approve the credits based on the test results. EPA received comments 
from manufacturers that the additional 5-cycle testing would be 
burdensome and be unlikely to yield significantly different results. 
EPA also received comment that the use of the simulation tool should 
not be required, as it may not be appropriate for some applications. 
After reviewing the comments, EPA is not adopting an automatic 
triggering of the additional testing (i.e., the additional two sets of 
5-cycle tests) and use of the vehicle simulation tool to verify 
credits. EPA agrees that there may be instances where additional test 
data is unnecessary. Instead, EPA will have the discretion to request 
additional testing in cases where the agency determines that the 
additional test would provide useful data in verifying credit levels. 
Further, EPA is not requiring manufacturers to use the EPA simulation 
tool, but EPA may use the simulation tool as a check to help verify the 
level of credits as part of the credit approval process. EPA is 
adopting the requirement for the initial three sets of 5-cycle testing 
as proposed. As outlined below, credits based on this methodology would 
be subject to a 60 day EPA review period starting when EPA receives a 
complete application, and this process based on 5-cycle testing would 
not include a public review.
    EPA received comments that in many cases technologies would 
reasonably be expected to have no impact on certain test cycles. For 
example, cold weather technologies would be expected to have no impact 
on the SCO3 cycle. In these cases, it would be wasteful to require 
multiple tests for cycles that are not relevant and have no impact on 
the credits determination. EPA agrees with these comments and will 
allow manufacturers to submit an engineering analysis demonstrating 
that the technology has no effect (either positive or negative) on 
emissions for one or more of the 5-cycle tests. If EPA concurs with the 
manufacturer's engineering analysis, the manufacturer must submit only 
one test result for that test cycle, either with or without the off-
cycle technology. The value will be held constant and used for all of 
the 5-cycle weighting calculations. If EPA does not agree with the 
manufacturer's determination and believes that the test cycles are 
relevant, EPA may request that the manufacturer conduct the testing and 
provide the test data.
    EPA also received comment from Center for Biological Diversity 
disagreeing with the agencies' suggestion that even more off-cycle 
credits should be allowed, without any rulemaking, if some unspecified 
data supports them. In response, EPA has specified in the final rule 
(and in fact, in the proposal (76 FR 75024/3)), the data needed under 
the 5-cycle approach. Manufacturers may generate credits beyond the 
conservative credit values provided on the pre-defined list only if 
they provide the required vehicle specific test data supporting the 
credit application. This is a case by case application process by a 
manufacturer, and this type of adjudicative process does not require a 
rulemaking procedure. As discussed below, EPA has included a public 
review and comment process in cases where manufacturers develop non 5-
cycle demonstrations.

[[Page 62838]]

EPA believes this process will provide opportunity for public review 
and comment.
Demonstrations not Based on 5-Cycle Testing
    In cases where the benefit of a technological approach to reducing 
CO2 emissions cannot be adequately represented using 5-cycle 
testing, manufacturers will need to develop test procedures and 
analytical approaches to estimate the effectiveness of the technology 
for the purpose of generating credits. These provisions were 
established as part of the MY 2012-2016 program. See 75 FR 25440. No 
applications under these provisions have been received to date. EPA did 
not propose to make significant changes to this aspect of the program. 
If the specific technology being considered by the manufacturer does 
not demonstrate emissions reductions over the 5-cycle tests (i.e., the 
5-cycle tests do not capture the specific real-world reductions of the 
technology), then an alternative approach may be developed by the 
manufacturer and submitted to EPA for evaluation and approval. The 
demonstration program must be robust, verifiable, and capable of 
demonstrating the real-world emissions benefit of the technology with 
strong statistical significance. The methodology developed and 
submitted to EPA would be subject to public review as explained at 75 
FR 25440 and in 86.1866 (d)(2)(ii). Because these applications involve 
a public comment opportunity, the EPA review period would be longer 
than 60 days.
    EPA has identified two general situations where manufacturers would 
need to develop their own demonstration methodology. The first is a 
situation where the technology is active only during certain operating 
conditions that are not represented by any of the 5-cycle tests. To 
determine the overall emissions reductions, manufacturers must 
determine not only the emissions impacts during operation but also 
real-world activity data to determine how often the technology is 
utilized during actual, in-use driving on average across the fleet. EPA 
has identified some of these types of technologies and has calculated a 
default credit for them, including items such as high efficiency (e.g., 
LED) lights and solar panels on hybrids. See Table III-19 above. In 
their demonstrations, manufacturers may be able to apply the same type 
of methodologies used by EPA as a basis for these default values (see 
TSD Chapter 5).
    The second type of situation where manufacturers would need to 
develop their own demonstration data would be for technologies that 
involve action by the driver to make the technology effective in 
reducing CO2 emissions. EPA believes that driver interactive 
technologies face the highest demonstration hurdle because 
manufacturers would need to provide actual real-world usage data on 
driver response rates. Such technologies would include ``eco buttons'' 
where the driver has the option of selecting more fuel efficient 
operating modes, and traffic mitigation systems. EPA believes that data 
would need to be from instrumented vehicle studies and not through 
driver surveys where results may be influenced by the driver's failure 
to accurately recall their response behavior. Systems such as OnStar 
could be one promising way to collect driver response data if they are 
designed to do so. Manufacturers might have to design extensive on-road 
test programs. Any such on-road testing programs would need to be 
statistically robust and based on average U.S. driving conditions, 
factoring in differences in geography, climate, and driving behavior 
across the U.S.
    Several manufacturers expressed interested in credit opportunities 
based on eco driving modes and other driver interactive technologies, 
as discussed in Section II.F. The Alliance of Automobile Manufacturers 
commented that eco driving technologies are not sufficiently defined 
for the Alliance to propose specific credit definitions and criteria at 
this time, but the industry hopes that it can work with the agencies in 
the future to create off-cycle credits for these technologies. 
Commenters encouraged the agencies to consider alternative 
demonstration pathways and that they look forward to working with the 
agencies to develop new methodologies. Some manufacturers commented 
that the non 5-cycle credit pathway remains unclear. In response, EPA 
continues to believe that the data needed for demonstrating non 5-cycle 
technologies will likely be highly specific to the candidate technology 
and does not believe that it is practical to attempt to provide more 
specificity to the testing and data requirements at this time. EPA 
plans to work with manufacturers interested in pursuing credits under 
the non 5-cycle pathway. Upon request, EPA will informally review a 
manufacturer's planned methodology in coordination with NHTSA early in 
the process prior to the manufacturer undertaking testing and/or data 
gathering efforts in support of their application. This informal review 
would occur prior to the manufacturer submitting a formal application 
(and therefore would not include a public review process).
iv. In-use Emissions Requirements
    EPA requires off-cycle components to be durable in-use and 
continues to believe that this is an important aspect of the program. 
See 86.1866-12(d)(1)(iii). The technologies upon which the credits are 
based are 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 
useful life of the vehicle, the manufacturer must account for 
deterioration in the estimation of the credits in order to ensure that 
the credits are based on real in-use emissions reductions over the life 
of the vehicle. In-use requirements apply to technologies generating 
credits based on the pre-defined list as well as to those based on a 
manufacturer's demonstration.
    Prior to proposal, manufacturers requested clarification of these 
provisions and guidance on how to demonstrate in-use performance. As 
discussed in the proposal, EPA is clarifying that off-cycle 
technologies are considered emissions related components and all in-use 
requirements apply including defect reporting, warranty, and recall. 
See 76 FR 75026. OBD requirements do not apply under either the MY 
2012-2016 or MY 2017 and later program and EPA did not propose any OBD 
requirements for off-cycle technologies. Manufacturers may establish 
maintenance intervals for these components in the same way they would 
for other emissions related components. The performance of these 
components would be considered in determining compliance with the 
applicable in-use CO2 standards. Manufacturers may 
demonstrate in-use emissions durability at time of certification by 
submitting an engineering analysis describing why the technology is 
durable and expected to last for the full useful life of the vehicle. 
This demonstration may also include component durability testing or 
through whole vehicle aging if the manufacturer has such data. The 
demonstration will be subject to EPA approval prior to credits being 
awarded.\564\ EPA believes these provisions are important to ensure 
that promised emissions reductions and fuel economy benefit to the 
consumer are delivered in-use.
---------------------------------------------------------------------------

    \564\ Listed technologies are pre-approved assuming the 
manufacturer demonstrates durability.
---------------------------------------------------------------------------

    EPA received one comment requesting clarification regarding when

[[Page 62839]]

durability testing must be conducted. The commenter recommended that 
manufacturers have the flexibility to conduct durability testing during 
the model year in which credits would be generated, rather than being 
required to submit the data before the beginning of the model year, 
since credits are not actually awarded by EPA to the manufacturer until 
the end of the model year. EPA believes this is a reasonable approach 
and is clarifying in the regulations that manufacturers may submit data 
during the model year in which credits would be generated (Sec.  
86.1869-12). EPA will review the data as part of the end of year credit 
review and approval process. EPA notes that data submitted late in the 
model year may delay the end of year review and approval of credits.
v. Step-by-Step EPA Review Process
    As proposed, EPA is finalizing a step-by-step process and timeline 
for reviewing credit applications and providing a decision to 
manufacturers. EPA proposed and is finalizing these clarifications and 
further detailed step-by-step instructions for new MY 2012-2016 credits 
as well as for MY 2017-2025. EPA believes these additional details are 
consistent with the general off-cycle requirements adopted in the MY 
2012-2016 rule. As discussed above, starting in MY 2014, manufacturers 
may generate credits using a pre-defined technology list, and these 
technologies would not be required to go through the approval process 
described below.
Step 1: Manufacturer Conducts Testing and Prepares Application
     5-cycle--Manufacturers would conduct the three sets of A/B 
5-cycle testing as described above
     Non 5-cycle--Manufacturers would develop a methodology for 
non 5-cycle based demonstration and carry-out necessary testing and 
analysis
    [cir] Manufacturers may opt to meet with EPA to discuss their plans 
for demonstrating technologies and seek EPA input prior to conducting 
testing or analysis
     Manufacturers conduct engineering analysis and/or testing 
to demonstrate in-use durability
Step 2: Manufacturer Submits Application
    The manufacturer application must contain the following:
     Description of the off-cycle technologies and engineering 
analysis of how they function to reduce off-cycle emissions
     The vehicle models on which the technology will be applied
     Test vehicles selection and supporting engineering 
analysis for their selection
     Required three sets of A/B 5-cycle test data
     An estimate of off-cycle credits by vehicle model, and 
fleetwide based on projected vehicle sales
     Engineering analysis and/or component durability testing 
or whole vehicle test data (as necessary) demonstrating in-use 
durability of components
     For credits not based on 5-cycle testing, all of the above 
with the exception of 5-cycle data, plus a complete description of 
methodology used to estimate credits and supporting data (vehicle test 
data and activity data)
    [cir] Manufacturer may seek EPA input on methodology prior to 
conducting testing or analysis
Step 3: EPA Review
    Once EPA receives an application:
     EPA will review the application for completeness and 
within 30 days will notify the manufacturer if additional information 
or data is needed
     EPA will review the data and information provided to 
determine if the application supports the level of credits estimated by 
the manufacturers
     EPA will consult with NHTSA on the application and the 
data received in cases where the manufacturer intends to generate fuel 
consumption improvement values for CAFE in MY 2017 and later
     For 5-cycle based credits:
    [cir] EPA may request additional sets of A/B 5-cycle test data 
where there is less than a three percent difference in A/B 5-cycle test 
results
    [cir] EPA may conduct vehicle simulation tool analysis for 
candidate technology where there is less than a three percent 
difference in A/B 5-cycle test results
     For non 5-cycle based credits:
    [cir] EPA will make the applications available to the public within 
60 days of receiving a complete application
    [cir] The public review period will be 30 day review of the 
methodology used by the manufacturer to estimate credits, during which 
time the public may submit comments.
    [cir] Manufacturers may submit a written rebuttal of comments for 
EPA consideration or may revise their application in response to 
comments following the end of the public review period.
Step 4: EPA Decision
     For 5-cycle based credits, EPA, after consultation with 
NHTSA in cases where the manufacturer intends to generate fuel 
consumption improvement values for CAFE in MY 2017 and later, will 
notify the manufacturer of its decision within 60 days of receiving a 
complete application
     For non 5-cycle based applications where the rule does 
specify public participation and review, EPA will notify the 
manufacturer of its decision on the application after reviewing public 
comments.
     EPA will notify manufacturers in writing of its decision 
to approve or deny the credits application, and provide a written 
explanation for its action (supported by the administrative record for 
the application proceeding)
    EPA received one comment that it is unclear from the proposal 
language whether the approval process will be completed and credits 
will be available in the same year the automaker provides data and 
requests approval for new off-cycle technologies. In response, EPA 
clarifies that submitting an application for off-cycle technologies is 
viewed as independent from the certification application process and 
off-cycle applications are not required to be submitted prior to the 
beginning of the model year. EPA has laid out its expectations 
regarding the timing of its review of credit applications. The specific 
timing of when credits are awarded will depend on when the agency 
receives a complete application and has concluded its review. If a 
manufacturer submits an application late in the model year, the 
approval process might not be concluded until after the end of the 
model year. Credits would not be available for use by the manufacturer 
until the application process has been concluded and credits have been 
verified. However, manufacturers would generate credits for the model 
year that has concluded for each vehicle built with the off-cycle 
technology, as long as the application is submitted prior to the end of 
the model year.
c. Off-cycle Technology Fuel Consumption Improvement Values in the CAFE 
Program
    As proposed, EPA in coordination with NHTSA, will allow 
manufacturers to generate fuel consumption improvement values 
equivalent to CO2 off-cycle credits for use in the CAFE 
program. The CAFE improvement value for off-cycle improvements will be 
determined at the fleet level by converting the CO2 credits 
determined under the EPA program (in metric tons of CO2) for 
each fleet (car and truck) to a fleet fuel consumption improvement 
value. This improvement value would

[[Page 62840]]

then be used to adjust the fleet's CAFE level upward. See the 
regulations at 40 CFR 600.510-12. Note that while the following table 
presents fuel consumption values equivalent to a given CO2 
credit value, these consumption values are presented for informational 
purposes and are not meant to imply that these values will be used to 
determine the fuel economy for individual vehicles. For off-cycle 
CO2 credits not based on the list, manufacturers must go 
though the steps described above in Section III.C.5.b. Again, all off-
cycle CO2 credits would be converted to a gallons-per-mile 
fuel consumption improvement value at a fleet level for purposes of the 
CAFE program. EPA would approve credit generation, and corresponding 
equivalent fuel consumption improvement values, in consultation with 
NHTSA.

Table III-20--Fuel Consumption Improvement Values Equivalent to CO2 Off-
                              cycle Credits
------------------------------------------------------------------------
                                    Credit for Cars    Credit for Light
           Technology                 gallons/mi      Trucks  gallons/mi
------------------------------------------------------------------------
High Efficiency Exterior          0.000113..........  0.000113
 Lighting (at 100W).
Waste Heat Recovery (per 100W;    0.000079..........  0.000079
 scalable).
Solar Roof Panels (for 75 W,      0.000372..........  0.000372
 battery charging only).
Solar Roof Panels (for 75 W,      0.000282..........  0.000282
 active cabin ventilation plus
 battery charging).
Active Aerodynamic Improvements   0.000068..........  0.000113
 (scalable).
Engine Idle Start-Stop w/heater   0.000282..........  0.000496
 circulation system.
Engine Idle Start-Stop without/   0.000169..........  0.000327
 heater circulation system.
Active Transmission Warm-Up.....  0.000169..........  0.000361
Active Engine Warm-Up...........  0.000169..........  0.000361
Solar/Thermal Control...........  Up to 0.000338....  Up to 0.000484
------------------------------------------------------------------------

    Manufacturers commented in support of providing equivalent fuel 
consumption improvement values for off-cycle technologies under the 
CAFE program, supporting the harmonization of the GHG and CAFE programs 
to the maximum extent possible. EPA and NHTSA also received comments 
that fuel consumption improvement values based on the pre-defined list 
should be available for CAFE in the MY 2012-2016 program. As discussed 
above, EPA is allowing credits toward the GHG standards to be generated 
based on the list in MY 2014. EPA believes that this is appropriate 
because it is a modification to an existing off-cycle credits program, 
which reduces manufacturer testing associated with the program. In 
contrast, CAFE does not contain an off-cycle program for MY 2012-2016. 
NHTSA did not take such credits into account when adopting the CAFE 
standards for those model years. As such extending the credit program 
to the CAFE program for those model years would not be appropriate.

D. Technical Assessment of the CO2 Standards

    The CO2 standards in this rule are based on the need to 
obtain significant GHG emissions reductions from the transportation 
sector, and the recognition that there are cost-effective technologies 
available in this timeframe to achieve such reductions for MY 2017-2025 
light duty vehicles. As in many prior mobile source rulemakings, the 
decision on what standard to set is largely based on the effectiveness 
of the emissions control technology, the cost and other impacts of 
implementing the technology, and the lead time needed for manufacturers 
to employ the control technology. The standards derived from assessing 
these factors are also evaluated in terms of the need for reductions of 
greenhouse gases, the degree of reductions achieved by the standards, 
and the impacts of the standards in terms of costs, quantified 
benefits, and other impacts of the standards. The availability of 
technology to achieve reductions and the cost and other aspects of this 
technology are therefore a central focus of this rulemaking.
    As described in the proposal, EPA is taking the same basic approach 
in this rulemaking as that taken in the MYs 2012-2016 rulemaking and 
evaluating emissions control technologies which reduce CO2 
and other greenhouse gases. CO2 emissions from automobiles 
are largely the product of fuel combustion. Vehicles combust fuel to 
perform two basic functions: 1) to transport the vehicle, its 
passengers and its contents (and any towed loads), and 2) to operate 
various accessories during the operation of the vehicle such as the air 
conditioner. Technology can reduce CO2 emissions by either 
making more efficient use of the energy that is produced through 
combustion of the fuel or reducing the energy needed to perform either 
of these functions.
    This focus on efficiency calls for looking at the vehicle as an 
entire system, and as in the MYs 2012-2016 rule, the final standards 
reflect this basic paradigm. In addition to fuel delivery, combustion, 
and aftertreatment technology, any aspect of the vehicle that affects 
the consumption of energy must also be considered. For example, the 
efficiency of the transmission system, which transmits mechanical 
energy from the engine to the wheels, and the rolling resistance of the 
tires both have major impacts on the amount of energy that is consumed 
while operating the vehicle. The braking system, the aerodynamics of 
the vehicle, and the efficiency of accessories, such as the air 
conditioner, also affect energy consumption. The mass of the vehicle 
also has a significant impact on its energy consumption.\565\
---------------------------------------------------------------------------

    \565\ Like other vehicular greenhouse gas control technologies, 
the agencies' joint analysis of mass reduction is discussed in TSD 
3.
---------------------------------------------------------------------------

    In evaluating vehicle efficiency, EPA's analysis preserves all 
existing vehicle utility. That is, in evaluating available technologies 
and potential compliance pathways, we preserve vehicle utility and thus 
do not consider fundamental changes in vehicles' utility.\566\ For 
example, we did not evaluate converting minivans and SUVs to station 
wagons, converting vehicles with four wheel drive to two wheel drive, 
or reducing headroom in order to lower the roofline and reduce 
aerodynamic drag. We have limited our assessment of technical 
feasibility and resultant vehicle cost to technologies which maintain 
vehicle utility as much as possible (and, in our assessment of the 
costs of the rule, included the costs to manufacturers of preserving 
vehicle utility).

[[Page 62841]]

Manufacturers may decide to alter the utility of the vehicles which 
they sell, but this would not be a consequence of the rule but rather a 
matter of automaker choice.
---------------------------------------------------------------------------

    \566\ EPA recognizes that electric vehicles, a technology 
considered in this analysis, have unique attributes and discusses 
these considerations in Section III.H.1.b. There is also a fuller 
discussion of the utility of Atkinson engine hybrid vehicles in EPA 
RIA Chapter 1.
---------------------------------------------------------------------------

    The Center for Biological Diversity commented that ``[t]he Agencies 
have selected standards that value purported consumer choice and the 
continued production of every vehicle in its current form over the need 
to conserve energy: as soon as increased fuel efficiency begins to 
affect any attribute of any existing vehicle, stringency increases 
cease. That is clearly impermissible and contrary to Congressional 
purpose.'' (CBD Comments p. 4). The commenter is mistaken. In 
evaluating the costs of the rule, the agencies have included costs to 
preserve vehicle utility but certainly have not ``ceased * * * 
increases in stringency'' in the face of those costs. Indeed, were the 
commenter correct, the standards for cars and trucks would not increase 
in stringency each model year. Moreover, ``if CBD is advocating a 
radical reshifting of domestic fleet composition (such as requiring 
U.S. consumers to purchase much smaller vehicles and requiring U.S. 
consumers to purchase vehicles with manual transmissions), it is 
sufficient to say that standards forcing such a result are not 
compelled under section 202(a), where reasonable preservation of 
consumer choice remains a pertinent factor for EPA to consider in 
balancing the relevant statutory factors.'' 75 FR 25467 (May 7, 2010). 
The agencies' approach also makes evident common sense. If vehicles 
subject to these standards lack the utility that consumers desire, the 
vehicles will not be purchased and the ultimate goals of decreased GHG 
emissions and energy conservation will be derogated rather than 
furthered. See also International Harvester v. EPA, 478 F. 2d 615, 640 
(D.C. Cir. 1973) (EPA required to consider issues of basic demand for 
passenger vehicles in making technical feasibility and lead time 
determinations). Consequently, EPA believes this comment to be 
misplaced and incorrect.
    This need to focus on the efficient use of energy by the vehicle as 
a system leads to a broad focus on a wide variety of technologies that 
affect vehicle design. As discussed below, there are many technologies 
that are currently available which can reduce vehicle energy 
consumption. Several of these are advanced technologies and are already 
being commercially utilized to a limited degree in the current light-
duty fleet. Examples include hybrid technologies that use high 
efficiency batteries and electric motors in combination with or instead 
of internal combustion engines, plug-in hybrid electric vehicles, and 
battery-electric vehicles. While already commercialized, these 
technologies continue to be developed and offer the potential for even 
more significant efficiency improvements. There are also other advanced 
technologies under development and not yet on production vehicles, such 
as 24 and 27 bar BMEP engines with cooled EGR, which offer the 
potential to move gasoline combustion efficiency closer to its 
thermodynamic limit. In addition, the available technologies are not 
limited to powertrain improvements but also include a number of 
technologies that are expected to continually improve incrementally, 
such as engine friction reduction, tire rolling resistance reduction, 
mass reduction, electrical system efficiencies, and aerodynamic 
improvements.
    The large number of possible technologies to consider and the 
breadth of vehicle systems that are affected mean that consideration of 
the manufacturer's design, product development and manufacturing 
process plays a major role in developing the final standards. Vehicle 
manufacturers typically develop many different models based on a 
limited number of vehicle platforms. The platform typically consists of 
a common set of vehicle architecture and structural components.\567\ 
This allows for efficient use of design and manufacturing resources. 
Given the very large investment put into designing and producing each 
vehicle model, manufacturers typically plan on a major redesign for the 
models approximately every 5 years.\568\ At the redesign stage, the 
manufacturer will upgrade or add all of the technology and make most 
other changes supporting the manufacturer's plans for the next several 
years, including plans to comply with emissions, fuel economy, and 
safety regulations.\569\ This redesign often involves significant 
engineering, development, manufacturing, and marketing resources to 
create a new product with multiple new features. In order to leverage 
this significant upfront investment, manufacturers plan vehicle 
redesigns with several model years' of production in mind. Vehicle 
models are not completely static between redesigns as limited changes 
are often incorporated for each model year. This interim process is 
called a ``refresh'' of the vehicle and generally does not allow for 
major technology changes although more minor ones can be done (e.g., 
small aerodynamic improvements, valve timing improvements, etc). More 
major technology upgrades that affect multiple systems of the vehicle 
thus occur at the vehicle redesign stage and not in the time period 
between redesigns.
---------------------------------------------------------------------------

    \567\ Examples of shared vehicle platforms include the Ford 
Taurus and Ford Explorer, or the Chrysler Sebring/200 and Dodge 
Journey.
    \568\ See TSD Chapter 3; see also 75 FR 25467 (May 7, 2010).
    \569\ TSD 3 discusses redesign schedules in greater detail.
---------------------------------------------------------------------------

    This final rule affects nine years of vehicle production, model 
years 2017-2025.\570\ Given the five year redesign cycle, many vehicles 
will be redesigned three times between MY 2012 and MY 2025 and are 
expected to be redesigned twice during the 2017-2025 timeframe. Due to 
the relatively long lead time before 2017, there are fewer lead time 
concerns with regard to product redesign in this final rule than with 
the MYs 2012-2016 rule (or the MY 2014-2018 rule for heavy duty 
vehicles and engines). However, there are still some technologies that 
require significant lead time, and are not projected to be heavily 
utilized in the first years of this final rule. An example is the 
advanced 24 and 27 bar BMEP, cooled EGR engines. Although a number of 
demonstration projects have been completed, these engines are not yet 
in production vehicles today, and a further research and development 
period is required (as discussed in Chapter 3 of the joint TSD).
---------------------------------------------------------------------------

    \570\ In absence of additional EPA action, the MY 2025 standard 
would continue indefinitely for later model years.
---------------------------------------------------------------------------

    EPA's technical assessment of the final MY2017-2025 standards is 
described below. EPA has also evaluated a set of alternative standards 
for these model years, two of which are more stringent and two of which 
are less stringent than the promulgated standards. The technical 
assessment of these alternative standards in relation to the final 
standards is discussed at the end of this section.
    Evaluating the appropriateness of these standards includes a core 
focus on identifying available technologies and assessing their 
effectiveness, cost, and impact on relevant aspects of vehicle 
performance and utility. The wide number of technologies which are 
available and likely to be used in combination requires a sophisticated 
assessment of their combined cost and effectiveness. An important 
factor is also the degree that these technologies are already being 
used in the current vehicle fleet and thus, unavailable for use to 
reduce GHGs beyond current levels. Finally, we consider the challenge 
for manufacturers to design

[[Page 62842]]

the technology into their products within the constraints of the 
redesign cycles, and the appropriate lead time needed to employ the 
technology over the product line of the industry.
    Applying these technologies efficiently to the wide range of 
vehicles produced by various manufacturers is a challenging task 
involving dozens of technologies and hundreds of vehicle platforms. In 
order to assist in this task, as in the MYs 2012-2016 rulemaking, EPA 
is again using a computerized program called the Optimization Model for 
reducing Emissions of Greenhouse gases from Automobiles (OMEGA). No 
comments were received on the use of the OMEGA model. Broadly, OMEGA 
starts with a description of the future vehicle fleet (i.e. the 
`reference fleet'; see section II.B above),\571\ including 
manufacturer, sales, base CO2 emissions, footprint and the 
extent to which emission control technologies are already employed. For 
the purpose of this analysis, EPA uses OMEGA to analyze over 200 
vehicle platforms comprising approximately 1300 vehicle models in order 
to capture the important differences in vehicle utility and engine 
design among future vehicles with sales of roughly 15-17 million units 
annually in the MYs 2017-2025 timeframe. The model is then provided 
with a list of technologies, or packages of technologies, which are 
applicable to various types of vehicles, along with the technologies' 
cost and effectiveness, and an upper limit for the percentage of 
vehicle sales that can receive each technology during the redesign 
cycle or cycles of interest. The model combines this information with 
economic parameters, such as fuel prices and a discount rate, to 
project how various manufacturers would apply the available technology 
in order to meet increasing levels of emission control. The result is a 
description of which technologies are added to each vehicle platform, 
along with the resulting cost. Although OMEGA can apply technologies 
that reduce GHG emissions related to air conditioning efficiency 
improvements and reduction of refrigerant leakage this task is 
currently handled outside of the OMEGA model. A/C improvements are 
relatively cost-effective, and we reasonably project that they would 
always be added to vehicles by the model. We thus simply added 
projected A/C improvements into the results at the projected 
penetration levels. The model can also be set to account for the 
various final compliance flexibilities (and to accommodate compliance 
flexibilities in general) and was set to account for some of the off-
cycle and full size pickup credits.
---------------------------------------------------------------------------

    \571\ Note that we worked with two ``baseline'' fleets in this 
analysis--the 2008 based fleet projection and the 2010 based fleet 
projection--and used the 2008 based fleet projection to analyze our 
primary case (i.e., the final standards). For alternative standards 
and sensitivities, as discussed later in this section and in Chapter 
10 of EPA's RIA, we have presented results for the 2010 based fleet 
projections.
---------------------------------------------------------------------------

    The remainder of this section describes the technical feasibility 
analysis in greater detail. Section III.D.1 describes the development 
of our reference and control case projections of the MY 2017-2025 
fleet. Section III.D.2 describes our estimates of the effectiveness and 
cost of the control technologies available for application in the 2017-
2025 timeframe. Section III.D.3 describes how these technologies are 
combined into packages that are likely to be applied by manufacturers 
to comply with the standards. In this section, the overall 
effectiveness of the technology packages vis-[agrave]-vis their 
effectiveness when adopted individually is described. Section III.D.4 
describes EPA's OMEGA model and its approach to estimating how 
manufacturers will add technology to their vehicles in order to comply 
with potential CO2 emission standards. Section III.0 
presents the results of the OMEGA modeling, namely the level of 
technology added to manufacturers' vehicles and the cost of adding that 
technology. Section III.D.6 discusses the appropriateness of the final 
standards in relation to the alternative standards of greater and 
lesser stringency which we analyzed. Further technical detail on all of 
these issues can be found in EPA's Regulatory Impact Analysis.
1. How did EPA develop reference and control fleets for evaluating 
standards?
    In order to calculate the impacts of this final rule, it is 
necessary to project the GHG emissions characteristics of the future 
vehicle fleet absent the final regulation. As discussed in Preamble I, 
for this final rulemaking, EPA has analyzed the costs and benefits of 
the standards using two different scenarios of the baseline fleet and 
future fleet projections. EPA is presenting its primary analysis of the 
standards using essentially the same baseline/future fleet projection 
that was used in the NPRM (i.e., based on the MY 2008 baseline fleet, 
AEO2011 interim projection of future fleet sales volume, and the future 
fleet forecast conducted by CSM).\572\ EPA also conducted an 
alternative analysis of the standards based on MY2010 based fleet 
projection using a 2010 baseline fleet, an updated AEO 2012 (early 
release) projections of the future fleet sales volumes, and an 
alternative forecast of the future fleet mix projections to 2025 
conducted by LMC Automotive (formerly J.D. Powers Automotive). EPA is 
presenting the 2008 baseline fleet and CSM future fleet forecast for 
its primary analysis based on a number of factors as described in 
Section I.C of the preamble. A detailed sensitivity analysis of the 
standards using the MY 2010 based fleet projection is contained in EPA 
RIA Chapter 10.
---------------------------------------------------------------------------

    \572\ As explained in detail in section 1.3.1 and 1.3.2.1 of the 
joint TSD, there are minor changes from proposal in the 2008 MY 
fleet-based reference fleet. Namely, there are minor corrections to 
some of the footprint data used, which on average, slightly reduced 
the footprint of the fleet. In aggregate, incorporating these 
changes resulted in practically no change from the proposal.
---------------------------------------------------------------------------

    EPA and NHTSA develop this projection of the future vehicle fleet 
using a three step process. (1) Develop a set of detailed vehicle 
characteristics and sales for a specific model year (in this case, 
2008). This is called the baseline fleet. (2) Adjust the sales of this 
baseline fleet using projections made by the Energy Information 
Administration (EIA) and CSM to account for projected sales volumes in 
future MYs absent future regulation.\573\ (3) Apply fuel saving and 
emission control technology to these vehicles to the extent necessary 
for manufacturers to comply with the existing 2016 standards and the 
final standards.
---------------------------------------------------------------------------

    \573\ See generally Chapter 1 of the Joint TSD for details on 
development of the baseline fleet, and Section III.H.1 for a 
discussion of the potential sales impacts of this final rule.
---------------------------------------------------------------------------

    Thus, the analyzed fleet differs from the MY 2008 baseline fleet in 
both the level of technology utilized and in terms of the sales of any 
particular vehicle. A similar method is used to analyze both reference 
(which assume that the MY 2016 standards are maintained indefinitely) 
and the control cases, with the major distinction being the stringency 
of the standards.
    EPA and NHTSA perform steps one and two above in an identical 
manner. The development of the characteristics of the baseline 2008 
fleet and the sales adjustment to match AEO and CSM forecasts is 
described in Section II.B above and in greater detail in Chapter 1 of 
the joint TSD. The two agencies perform step three in a conceptually 
identical manner, but each agency utilizes its own vehicle technology 
and emission model to project the technology needed to comply with the 
reference and final standards. Further, each agency evaluates its own 
final and MY 2016 standards; neither NHTSA nor

[[Page 62843]]

EPA evaluated the other agency's standard in this final rule.\574\ The 
models employed by the two agencies are distinct due to the differences 
in the statutory requirements of the two agencies (as discussed in 
Section I of the preamble).
---------------------------------------------------------------------------

    \574\ While the MY 2012-2016 standards are largely similar, some 
important differences remain. See 75 FR 25342
---------------------------------------------------------------------------

    The use of MY 2008 vehicles \575\ in our fleet projections includes 
vehicle models which already have or will be discontinued by the time 
this rule takes effect and will be replaced by more advanced vehicle 
models. However, we believe that the use of MY 2008 vehicle designs is 
reasonable for this final rule.\576\ With regard to the issue of which 
models are included, we note that the designs of MYs 2017-2025 vehicles 
at the level of detail required for emission and cost modeling are not 
publically available, and in many cases, do not yet exist. Even 
confidential descriptions of these vehicle designs provided by 
manufacturers are usually not of sufficient detail to facilitate the 
level of technology and emission modeling performed by both agencies. 
Second, steps two and three of the process used to create the reference 
case fleet adjust both the sales and technology of the 2008 vehicles. 
Thus, our reference fleet reflects the extent that completely new 
vehicles are expected to shift the light duty vehicle market in terms 
of both segment and manufacturer. Also, by adding technology to 
facilitate compliance with the MY 2016 standards, we account for the 
vast majority of ways in which these new vehicles will differ from 
their older counterparts.
---------------------------------------------------------------------------

    \575\ While this discussion focuses on MY 2008 vehicles, the 
same concepts apply the MY 2010 based fleet projection.
    \576\ See section I.C concerning the selection of MY 2008 as an 
appropriate baseline.
---------------------------------------------------------------------------

a. Reference Fleet Scenario Modeled
    In this final rule, EPA is assuming, based on the following 
rationale and as in the proposal, that in the absence of more stringent 
GHG and CAFE standards, the reference case fleet in MY 2017-2025 would 
have fleetwide GHG emissions performance equal to that necessary to 
meet the MY 2016 standards.
    One critical factor supporting the final approach is that AEO2012 
Early Release projects relatively stable gasoline prices over the next 
13 years. The average actual price in the U.S. for the first four 
months of 2012 for regular gasoline was $3.68 per gallon \577\ with 
prices approaching $4.00 in March and April.\578\ The AEO2012 Early 
Release reference case projects the regular gasoline price to be $3.87 
per gallon in 2025, only slightly higher than the price for the first 
four months of 2012.\579\ Accordingly, the reference fleet for MYs 
2017-2025 reflects constant GHG emission standards (i.e. the MY 2016 
standards continuing to apply in each of those model years), and 
gasoline prices only slightly higher than today's gasoline prices.
---------------------------------------------------------------------------

    \577\ In 2012 dollars. As 2012 is not yet complete, we are not 
relating this value to 2010 dollars. See RIA 1 for additional 
details on the conversion between dollar years.
    \578\ http://www.eia.gov/petroleum/gasdiesel/ and click on 
``full history'' for weekly regular gasoline prices through May 7, 
2012, last accessed on May 8, 2012.
    \579\ http://www.eia.gov/forecasts/aeo/er/ last accessed on May 
8, 2012.
---------------------------------------------------------------------------

    As discussed at proposal, these are reasonable assumptions to make 
for a reference case. See 76 FR 75030-31. EPA has reviewed the 
historical record for similar periods when there were relatively stable 
fuel economy standards and gasoline prices. EPA maintains, and 
publishes every year, the authoritative reference on new light-duty 
vehicle CO2 emissions and fuel economy.\580\ This report 
contains very detailed data from MYs 1975-2011. There was an extended 
18-year period from 1986 through 2003 during which CAFE standards were 
essentially unchanged,\581\ and gasoline prices were relatively stable 
and remained below $1.50 per gallon for almost the entire period. The 
1975-1985 and 2004-2011 timeframes are not relevant in this regard due 
to either rising gasoline prices, rising CAFE standards, or both. Thus, 
the 1986-2003 timeframe is analogous to the period out to MY 2025 
during which AEO projects relatively stable gasoline prices. EPA staff 
have analyzed the fuel economy trends data from the 1986-2003 timeframe 
(during which CAFE standards did not vary by footprint) and have drawn 
three conclusions: (1) There was a small, industry average over-
compliance with CAFE on the order of 1-2 mpg or 3-4%, (2) almost all of 
this industry-wide over-compliance was from 3 companies (Toyota, Honda, 
and Nissan) that routinely over-complied with the universal (i.e., non-
footprint based) CAFE standards simply because they produced smaller 
and lighter vehicles relative to the industry average, and (3) full 
line car and truck manufacturers, such as General Motors, Ford, and 
Chrysler, which produced larger and heavier vehicles relative to the 
industry average and which were constrained by the universal CAFE 
standards, rarely over-complied during the entire 18-year period.\582\
---------------------------------------------------------------------------

    \580\ Light-Duty Automotive Technology, Carbon Dioxide 
Emissions, and Fuel Economy Trends: 1975 through 2011, March 2012, 
available at www.epa.gov/otaq/fetrends.htm.
    \581\ There are no EPA LD GHG emissions regulations prior to MY 
2012.
    \582\ See Regulatory Impact Analysis, Chapter 3.
---------------------------------------------------------------------------

    Since the MYs 2012-2016 standards are footprint-based, every major 
manufacturer is expected to be constrained by the new standards in 
2016, and manufacturers of small vehicles will not routinely over-
comply as they had with the past universal CAFE standards.\583\ Thus, 
the historical evidence and the footprint-based design of the MY 2016 
GHG emissions and CAFE standards strongly support the use of a 
reference case fleet where there are no further fuel economy 
improvements beyond those required by the MY 2016 standards. There are 
additional factors that reinforce the historical evidence. While it is 
possible that one or two companies may over-comply, any voluntary over-
compliance by one company would generate credits that could be sold to 
other companies to substitute for their more expensive compliance 
technologies. This ability to buy and sell credits could eliminate any 
over-compliance for the overall fleet.\584\ NHTSA (for the proposal) 
also evaluated EIA assumptions and inputs employed in the version of 
NEMS used to support AEO 2011 and found, based on this analysis, that 
when fuel economy standards were held constant after MY 2016, EIA 
appears to forecast market-driven levels of over- and under-compliance 
generally consistent with a CAFE model analysis using a flat, 2016-
based reference case fleet. From a market driven perspective, while 
there is considerable evidence that many consumers now care more about 
fuel economy than in past decades, the MY 2016 compliance level is 
projected to be several mpg higher than that being achieved in the 
market today.\585\ On the other hand, some manufacturers have already 
announced plans to introduce technology well beyond that required by

[[Page 62844]]

the MY 2016 GHG standards.\586\ However, it is difficult, if not 
impossible, to separate future fuel economy improvements made for 
marketing purposes from those designed to efficiently plan for 
compliance with anticipated future CAFE or CO2 emission 
standards (e.g., some manufacturers may have made public statements 
about higher mpg levels in the future in part because of the 
expectation of higher future standards).
---------------------------------------------------------------------------

    \583\ With the notable exception of manufacturers who only 
market electric vehicles or other limited product lines.
    \584\ Oates, Wallace E., Paul R. Portney, and Albert M. 
McGartland. ``The Net Benefits of Incentive-Based Regulation: A Case 
Study of Environmental Standard Setting.'' American Economic Review 
79(5) (December 1989): 1233-1242.
    \585\ The average, fleetwide ``laboratory'' or ``unadjusted'' 
fuel economy value for MY 2011 is 28.6 mpg (see Light-Duty 
Automotive Technology, Carbon Dioxide Emissions, and Fuel Economy 
Trends: 1975 Through 2011, March 2012, available at www.epa.gov/otaq/fetrends.htm), 6 mpg less than the 34-35 mpg levels necessary 
to meet the EPA GHG and NHTSA CAFE levels in MY 2016.
    \586\ For example, Hyundai has made a public commitment to 
achieve 50 mpg by 2025. See also section III.D.8 below documenting 
those vehicles either achieving their post-MY 2016 targets, or which 
could do so with the use of A/C credits.
---------------------------------------------------------------------------

    While EPA exclusively assumed a ``flat'' baseline in the proposal, 
NHTSA used a flat baseline for its primary analysis, but assumed an 
``increasing'' baseline (i.e., a market-driven fuel economy improvement 
in MYs 2017-2025 beyond the projected 34.1 mpg fleetwide CAFE level in 
MY 2016) in a sensitivity analysis. The agencies received five comments 
on this topic. The American Council for an Energy-Efficient Economy 
stated ``[t]here is little historical basis for a scenario in which 
there is a sustained increase in fuel economy in the absence of 
increases in standards. Public interest in fuel economy does shift with 
fuel prices, but even that interest typically has followed from large, 
rapid changes in price and has been short-lived. The fuel prices on 
which the various agency analyses are largely based are EIA projections 
and do not contain dramatic increases in price.'' The Environmental 
Defense Fund ``supports EPA's proposal to assume the reference case 
fleet in MY 2017-2025 would have fleet wide GHG emissions performance 
no better than that projected to be necessary to meet the MY 2016 
standards. Because EPA is using AEO2011 fuel price forecasts, which 
project relatively stable fuel prices over the next 15 years, it is 
reasonable to assume that manufacturers will not over comply with the 
2016 standards and/or consumers will not demand fuel economy greater 
than the 2016 standard.'' The International Council on Clean 
Transportation argued that ``[t]he proposed 2017-2025 standards follow 
aggressive increases in standards from 2011 through 2016. Further, the 
change to a footprint-based standard means that all manufacturers must 
increase the efficiency of their vehicles to comply, even manufacturers 
of primarily smaller vehicles. Thus, the 2012-2016 standards have 
already driven the market beyond the level of efficiency it would have 
demanded in the absence of standards.'' The Natural Resources Defense 
Council and joint Sierra Club/Environment America/Safe Climate 
Campaign/Clean Air Council comment echoed these arguments.
    In sum, all five comments on this topic supported EPA's exclusive 
use of a flat baseline, and no comments supported a sensitivity case 
with an increasing baseline.
    Based on the above data-driven rationale for a flat baseline, along 
with the fact that all of the public comments on this topic support a 
flat baseline, EPA reaffirms the reasonableness of its assumption in 
the proposal that, in the absence of more stringent standards, the 
greenhouse gas emissions performance of MY 2017-2025 vehicles would 
remain at MY 2016 levels, and therefore has used a ``flat'' baseline 
for the analysis in this final rulemaking.
    Based on this assessment, the EPA My 2008 based reference case 
fleet is estimated through the target curves defined in the MY 2016 
rulemaking applied to the projected MYs 2017-2025 fleet.\587\ As in the 
MYs 2012-2016 rulemaking, EPA assumes that manufacturers make use of 
10.2 grams of air conditioning credits on cars and 11.5 on light 
trucks, or an average of approximately 11 grams on the U.S. fleet and 
the technology for doing so is included in the reference case (Section 
III.C).
---------------------------------------------------------------------------

    \587\ 75 FR 25686.
---------------------------------------------------------------------------

b. Emission Control Scenarios Modeled
    For the emission control scenario (i.e. scenarios where there are 
standards for MYs 2017-2025 which differ from the MY 2016 standards), 
EPA modeled the final standard curves discussed in Section III.B, as 
well as the alternative scenarios discussed in III.D.6.d. Certain 
flexibilities are also accounted for in the analysis. Air conditioning 
credits (both leakage and efficiency) discussed in section III.C.1 and 
III.D.2 are included in the cost and technology analysis described 
below. Full size pick-up truck HEV credits are also modeled in this 
final rule analysis. See 76 FR 75082 (noting that modeling for the 
final rule might include these credits.) The compliance value of 0 g/
mile for EVs and the electric portion of PHEVs are also included. In a 
change from the proposal, we have also included some off-cycle credits 
(start-stop systems and active aerodynamic improvements) in the cost 
assessment as these technologies' two-cycle benefits were already 
assumed in EPA's list of technology packages (i.e. the technology 
packages modeled by OMEGA). See 76 FR 75022 and section III.C.5 
above.\588\ However, advanced technology multipliers through MY 2021, 
intermediate volume manufacturer provisions, flexible fuel, and carry 
forward/back credits are not included explicitly in the cost analysis. 
These flexibilities will offer the manufacturers more compliance 
options and lower compliance costs. Moreover, the overall cost analysis 
includes small volume manufacturers in the fleet, while in actuality, 
these companies would likely have company specific standards (see 
section III.B.5). Thus, in these respects EPA is utilizing a 
conservative costing methodology.
---------------------------------------------------------------------------

    \588\ The off-cycle technologies not part of EPA's technology 
packages are not included in the analysis.
---------------------------------------------------------------------------

    EPA notes that the stringency of the final standards reflects use 
of air conditioning improvements and use of the 2-cycle values for the 
stop-start and active aerodynamic off-cycle technologies. These 
technologies are highly cost effective, and the improvements in GHG 
emissions attributable to use of these technologies can be reliably 
quantified.\589\ The standards do not directly reflect use of the 
credits related to use of advanced technologies on full size pickup 
trucks, notwithstanding that EPA believes that there is sufficient 
information to reflect and quantify use of these credits in its cost 
and feasibility modeling. The reason the standards do not reflect use 
of these advanced technology credits is the same reason EPA is 
establishing the provisions as incentives: use of advanced technologies 
in large pickup trucks may face issues of consumer acceptance of both 
the extra cost and of the technologies themselves. Consequently, EPA 
has made a reasonable policy choice to encourage penetration of these 
technologies into the large pickup truck sector rather than to adopt 
standards premised on aggressive penetration rates of these 
technologies. See 76 FR 75082.
---------------------------------------------------------------------------

    \589\ See generally TSD 3 and 5.
---------------------------------------------------------------------------

c. Vehicle Groupings Used
    In order to create future technology projections and enable 
compliance with the modeled standards, EPA aggregates vehicle sales by 
a combination of manufacturer, vehicle platform, and engine design for 
the OMEGA model. As discussed above, manufacturers implement major 
design changes at vehicle redesign and tend to implement these changes 
across a vehicle platform (such as large SUV, mid-size SUV, large 
automobile, etc) at a given manufacturing plant. Because the cost of

[[Page 62845]]

modifying the engine depends on the valve train design (such as SOHC, 
DOHC, etc.), the number of cylinders, and in some cases head design, 
the vehicle sales are broken down beyond the platform level to reflect 
relevant engine differences. The vehicle groupings are shown in Table 
III-21. While there were no comments on this topic, EPA has updated 
these groupings from those used in the proposal. The new groupings 
provide a more accurate mapping of vehicle technologies to vehicle 
platforms.

                   Table III-21--Vehicle Groupings \a\
------------------------------------------------------------------------
      Vehicle description         Vehicle type         Vehicle class
------------------------------------------------------------------------
Auto Subcompact I3 DOHC 4v....                 1  Small car.
Auto Subcompact I4 SOHC/DOHC
 2v/4v
Auto Subcompact Electric
Auto Compact SOHC 2v..........                 2  Standard car.
Auto Compact SOHC/DOHC 4v
Auto Midsize SOHC/DOHC 4v
Pickup Small DOHC 4v
Auto Subcompact I5 SOHC 4v....                 3  Standard car.
Auto Subcompact V6 SOHC/DOHC
 4v
Auto Subcompact I4 SOHC/DOHC
 4v turbo/supercharged
Auto Compact Rotary
Auto Compact I5 DOHC 4v
Auto Compact V6 SOHC/DOHC 4v
Auto Compact I4 SOHC/DOHC 4v
 turbo/supercharged
Auto Midsize V6 SOHC/DOHC 4v
Auto Midsize I4 SOHC/DOHC 4v
 tubo/supercharged
Auto Large V6 SOHC/DOHC 4v
Auto Midsize I4 SOHC 4v tubo/
 supercharged
Auto Subcompact V6 SOHC 3v....                 4  Standard car.
Auto Compact V6 OHV 2v
Auto Midsize V6 SOHC 2v
Auto Midsize V6 OHV 2v
Auto Large V6 OHV 2v
Auto Subcompact V8 DOHC 4v....                 5  Large car.
Auto Compact V10 DOHC 4v
Auto Compact V8 DOHC 4v turbo/
 supercharged
Auto Compact V8 DOHC 4v/5v
Auto Compact V6 DOHC 4v
Auto Compact V5 DOHC 4v turbo/
 supercharged
Auto Midsize V12 DOHC 4v
Auto Midsize V10 DOHC 4v
Auto Midsize V8 DOHC 4v/5v
Auto Midsize V8 SOHC 4v
Auto Midsize V6 DOHC 4v
Auto Midsize V7 DOHC 4v
Auto Large V16 DOHC 4v turbo/
 supercharged
Auto Large V12 SOHC 4v turbo/
 supercharged
Auto Large V12 DOHC 4v
Auto Large V10 DOHC 4v
Auto Large V8 DOHC 4v turbo/
 supercharged
Auto Large V8 DOHC 2v/4v
Auto Large V8 SOHC 4v
Auto Subcompact V10 OHV 2v....                 6  Large car.
Auto Subcompact V8 SOHC 3v
Auto Midsize V8 SOHC 3v turbo/
 supercharged
Auto Midsize V8 SOHC 3v
Auto Midsize V8 OHV 2v
Auto Large V12 SOHC 3v turbo/
 supercharged
Auto Large V8 SOHC 3v turbo/
 supercharged
Auto Large V8 SOHC 2v
Auto Large V8 OHV 2v/4v
SUV Small I4 DOHC 4v..........                 7  Small MPV.
SUV Midsize SOHC/DOHC 4v
SUV Large DOHC 4v
Minivan I4 DOHC 4v
SUV Small I4 DOHC 4v turbo/                    8  Large MPV.
 supercharged.
SUV Midsize V6 SOHC/DOHC 4v
SUV Midsize I4 SOHC/DOHC 4v
 turbo/supercharged
SUV Large V6 SOHC/DOHC 4v
SUV Large I5 DOHC 2v
SUV Large I4 DOHC 4v turbo/
 supercharged
SUV Midsize V6 SOHC 2v........                 9  Large MPV.
SUV Large V6 SOHC 2v
SUV Small V6 OHV 2v...........                10  Large MPV.
SUV Midsize V6 OHV 2v
SUV Large V6 OHV 2v

[[Page 62846]]

 
Minivan V6 OHV 2v
Cargo Van V6 OHV 2v
SUV Large V10 DOHC 4v turbo/                  11  Truck.
 supercharged.
SUV Large V8 DOHC 4v turbo/
 supercharged
SUV Large V8 SOHC/DOHC 4v
SUV Large V6 DOHC 4v turbo/
 supercharged
SUV Large V8 SOHC 3v turbo/                   12  Truck.
 supercharged.
SUV Large V8 SOHC 2v/3v
SUV Large V8 OHV 2v
Cargo Van V10 SOHC 2v
Cargo Van V8 SOHC/OHV 2v
Pickup Large DOHC 4v..........                13  Small MPV.
Pickup Small V6 SOHC 4v.......                14  Large MPV.
Pickup Small I5 DOHC 2v
Pickup Large V6 DOHC 2v/4v
Pickup Large I5 DOHC 2v
Pickup Small V6 SOHC 2v.......                15  Large MPV.
Pickup Small V6 OHV 2v
Pickup Large V6 SOHC 2v
Pickup Large V6 OHV 2v
Pickup Large V8 DOHC 4v.......                16  Truck.
Pickup Large V8 SOHC 2v.......                17  Truck.
Pickup Large V8 SOHC/DOHC 3v                  18  Truck.
 turbo/supercharged.
Pickup Large V8 SOHC 3v
Pickup Large V8 OHV 2v........                19  Truck.
------------------------------------------------------------------------
\a\ I4 = 4 cylinder engine, I5 = 5 cylinder engine, V6, V7, and V8 = 6,
  7, and 8 cylinder engines, respectively, DOHC = Double overhead cam,
  SOHC = Single overhead cam, OHV = Overhead valve, v = number of valves
  per cylinder.

2. What are the effectiveness and costs of CO2-reducing 
technologies?
    EPA and NHTSA worked together to develop information on the 
effectiveness and cost of most CO2-reducing and fuel 
economy-improving technologies. This joint work is reflected in Chapter 
3 of the Joint TSD and in Section II.D of this preamble. The work on 
technology cost and effectiveness also includes maximum penetration 
rates, or ``phase-in caps'' for the OMEGA model. These caps are an 
important input to OMEGA that capture the agencies' analysis of the 
rate at which technologies can be added to the fleet (see Chapter 3.4.2 
of the joint TSD for more detail). This preamble section, rather than 
repeating those details, focuses upon EPA-only technology assumptions, 
specifically, those relating to air conditioning (A/C) refrigerant.
    EPA expects all manufacturers will choose to use A/C improvement 
credit opportunities as a strategy for complying with the 
CO2 standards, and has set the stringency of the proposed 
and final standards accordingly (see section III.C.1). EPA estimates 
that the average level of the credits earned will increase from 2017 
(13 g/mile) to 2021 (21 g/mile) as more vehicles in the fleet convert 
to use of the new alternative refrigerant.\590\ By 2021, we project 
that 100% of the MY 2021 fleet will be using alternative refrigerants, 
and that credit usage will remain constant on a car and truck fleet 
basis until 2025. Note from the table below that costs then decrease 
from 2021 to 2025 due to manufacturer learning as discussed in Section 
II of this preamble and in Chapter 3 of the joint TSD. A more in-depth 
discussion of feasibility and availability of low GWP alternative 
refrigerants can be found in Section III.C.1 of the Preamble.
---------------------------------------------------------------------------

    \590\ See table in III.B.

               Table III-22--Total Costs for A/C Technologies Related to Alternative Refrigerants
                                             [Costs in 2010 dollars]
----------------------------------------------------------------------------------------------------------------
                           Technology                                  2017            2021            2025
----------------------------------------------------------------------------------------------------------------
Car:
    Leakage reduction (continued from the 2012-2016 rule).......              $3              $3              $3
    Low GWP refrigerant.........................................              17              58              50
    Low GWP refrigerant hardware................................               4              17              16
                                                                 -----------------------------------------------
        Total...................................................              23              77              68
Truck:
    Leakage reduction (continued from the 2012-2016 rule).......               1               3               3
    Low GWP refrigerant.........................................               0              58              50
    Low GWP refrigerant hardware................................               0              17              16
                                                                 -----------------------------------------------
        Total...................................................               1              77              68
Fleet:
    Total.......................................................              24              77              68
----------------------------------------------------------------------------------------------------------------

[[Page 62847]]

    Additionally, by MY 2019, EPA estimates that 100% of the A/C 
efficiency improvements will by fully phased-in. However 85% of these 
costs are already in the reference fleet, as this is the level of 
penetration assumed in the MYs 2012-2016 final rule. The penetration of 
A/C improvements and costs for this final rule can be found in Chapter 
5 of the joint TSD.
3. How were technologies combined into ``Packages'' and what is the 
cost and effectiveness of packages?
    Individual technologies can be used by manufacturers to achieve 
incremental CO2 reductions. However, as discussed 
extensively in the MYs 2012-2016 Rule, EPA believes that manufacturers 
are more likely to bundle technologies into ``packages'' to capture 
synergistic aspects and reflect progressively larger CO2 
reductions with additions or changes to any given package. In this 
manner, and consistent with the concept of a redesign cycle, 
manufacturers can optimize their available resources, including 
engineering, development, manufacturing and marketing activities to 
create a product with multiple new features. Therefore, the approach 
taken here is to group technologies into packages of increasing cost 
and effectiveness.
    As in the proposal, EPA built unique technology packages for each 
of 19 ``vehicle types,'' which, as in the MYs 2012-2016 rule and the 
proposal, provides sufficient resolution to represent the technology of 
the entire fleet at varying levels of stringency.\591\ This was the 
result of analyzing the existing light duty fleet with respect to 
vehicle size and powertrain configurations. All vehicles, including 
cars and trucks, were first distributed based on their relative size, 
starting from compact cars and working upward to large trucks. Next, 
each vehicle was evaluated for powertrain, specifically the engine size 
(I4, V6, and V8), valvetrain configuration (DOHC, SOHC, OHV), and 
number of valves per cylinder. For purposes of calculating some 
technology costs and effectiveness values, each of these 19 vehicle 
types is mapped into one of six classes of vehicles: Small car, 
Standard car, Large car, Small MPV, Large MPV and Truck.\592\ We 
believe that these six vehicle classes, along with engine cylinder 
count and valvetrain configuration, provide adequate representation for 
the cost basis associated with most technology application. A detailed 
table showing the 19 vehicle types, their baseline packages and their 
descriptions is contained in Table III-21 and in Chapter 1 of EPA's 
RIA.
---------------------------------------------------------------------------

    \591\ Note that the 19 vehicle types have been significantly 
modified for this final rule relative to the proposal. These changes 
allow more accurate placement of vehicles into the appropriate 
vehicle types, such as towing and non-towing vehicles. See Chapter 1 
of EPA's final RIA for more detail on the new vehicle types.
    \592\ Note that, for this final rule and representing an update 
since the proposal, EPA has used vehicle class designations that are 
consistent with those in the lumped parameter model used for 
effectiveness determinations. As such, the 19 vehicle types are 
mapped into vehicle classes with different names although the 
proposal's names and the final rule's names are essentially 
identical in meaning. This semantic change is meant to reduce 
confusion and to more closely tie the cost elements of our modeling 
with the effectiveness elements.
---------------------------------------------------------------------------

    Within each of the 19 vehicle types, multiple technology packages 
were created with increasing technology content and resulting increases 
in effectiveness. As stated earlier, with few exceptions, each 
technology package is meant to provide the same driver-perceived 
performance and utility as the baseline package. Note that we refer 
throughout this discussion of package building to a ``baseline'' 
package. This should not be confused with the baseline fleet, which is 
the fleet of roughly 16 million 2008MY individual vehicles comprised of 
over 1,300 vehicle models. In this discussion, when we refer to 
``baseline'' packages we refer to the ``baseline'' configuration of the 
given vehicle type. So, we have 19 baseline packages in the context of 
building packages. Each of those 19 baseline packages is comprised of a 
port fuel injected engine and a 4 speed automatic transmission, the 
valvetrain configuration and the number of cylinders changes for each 
vehicle type in an effort to encompass the diversity in the 2008 
baseline fleet as discussed above. We describe this in more detail in 
Chapter 1 of EPA's RIA.
    To develop a set of packages as OMEGA inputs, EPA builds packages 
consisting of every feasible combination of technology available, 
subject to constraints.\593\ For the 2025MY, this ``master-set'' of 
packages consists of roughly 2,500 possible packages of technologies 
for each of 19 vehicle types, or roughly 47,000 packages in all. The 
cost of each package is determined by adding the cost of each 
individual technology contained in the package for the given year of 
interest. The effectiveness of each package is determined in a more 
complex manner; one cannot simply add the effectiveness of individual 
technologies to arrive at a package-level effectiveness because of the 
synergistic effects of technologies when grouped with other 
technologies that seek to improve the same or similar efficiency loss 
mechanism. As an example, the benefits of the engine and transmission 
technologies can usually be combined multiplicatively,\594\ but in some 
cases, the benefit of the transmission-related technologies overlaps 
with the engine technologies. This occurs because the transmission 
technologies shift operation of the engine to more efficient locations 
on the engine map by incorporating more ratio selections and a wider 
ratio span into the transmissions. Some of the engine technologies have 
the same goal, such as cylinder deactivation, advanced valve trains, 
and turbocharging. In order to account for this overlap and avoid over-
estimating emissions reduction effectiveness, EPA uses an engineering 
approach known as the lumped-parameter technique. The results from this 
approach were then applied directly to the vehicle packages. The 
lumped-parameter technique is well documented in the literature, and 
the specific approach developed by EPA is detailed in Chapter 3 
(Section 3.3.2) of the joint TSD as well as in Chapter 1 of EPA's RIA.
---------------------------------------------------------------------------

    \593\ Example constraints include the requirement for 
stoichiometric gasoline direct injection on every turbocharged and 
downsized engine and/or any 27 bar BMEP turbocharged and downsized 
engine must also include cooled EGR. Some constraints are the result 
of engineering judgment while others are the result of effectiveness 
value estimates which are tied to specific combinations of 
technologies.
    \594\ For example, if an engine technology reduces 
CO2 emissions by five percent and a transmission 
technology reduces CO2 emissions by four percent, the 
benefit of applying both technologies is 8.8 percent (100%-(100%-4%) 
* (100%-5%)).
---------------------------------------------------------------------------

    Table III-23 presents technology costs for a subset of the more 
prominent technologies in our analysis (note that all technology costs 
are presented in Chapter 3 of the Joint TSD and in Chapter 1.2 of EPA's 
RIA). Table III-23 includes technology costs for a V6 dual overhead cam 
midsize car and a V8 overhead valve large pickup truck. This table is 
meant to illustrate how technology costs are similar and/or different 
for these two large selling vehicle classes and how the technology 
costs change over time due to learning and indirect cost changes as 
described in section II.D of this preamble and at length in Chapter 3.2 
of the Joint TSD. Note that these costs are not package costs but, 
rather, individual technology costs. We present package costs for the 
V6 midsize car in Table III-24, below.
    As discussed in II.D, we received relatively few detailed comments 
on technology cost and effectiveness, with the primary comments from 
NADA and

[[Page 62848]]

ICCT. At a high level, the changes made since the proposal discussed in 
Section II.D of this preamble. More detailed discussion of technology 
cost and effectiveness is presented in Chapter 3 of the Joint TSD.

          Table III-23--Total Costs of Select Technologies for V6 Midsize Car and V8 Large Pickup Truck
                                                 [2010 dollars]
----------------------------------------------------------------------------------------------------------------
      Vehicle class & base  engine              Technology            2017 MY         2021 MY         2025 MY
----------------------------------------------------------------------------------------------------------------
Midsize/Standard car....................  Dual cam phasing on V6            $205            $178            $168
V6 DOHC.................................  Dual cam phasing on I4              95              83              78
4 valves/cylinder.......................   (used when downsized              417             362             340
Port fuel injected......................   to I4 DOHC).                      277             240             226
4 speed auto trans......................  Stoichiometric
                                           gasoline direct
                                           injection on V6.
                                          Stoichiometric
                                           gasoline direct
                                           injection on I4 (used
                                           when downsized).
                                          18-bar BMEP with                   248             161             169
                                           downsize from V6 DOHC
                                           to I4 DOHC.
                                          24-bar BMEP with                   510             449             383
                                           downsize from V6 DOHC
                                           to I4 DOHC.
                                          Cooled EGR on I-                   305             288             249
                                           configuration (used
                                           when downsized).
                                          Advanced diesel.......            2965            2572            2420
                                          8 speed dual clutch                 47              45              39
                                           transmission (wet).
                                          High efficiency                    251             227             202
                                           gearbox.
                                          Aerodynamic treatments             213             199             176
                                           (active, Aero2).
                                          Stop-start (12 Volt)..             401             338             308
                                          P2 hybrid electric               3,847           3,230           2,861
                                           technology \a\.
                                          Plug-in hybrid                  13,148           9,950           8,145
                                           technology with 20
                                           mile range \a\.
                                          Electric vehicle                17,684          13,232           9,795
                                           technology with 75
                                           mile range \a\.
Large pickup truck......................  Dual cam phasing on V6             205             178             168
V8 OHV..................................   (used when downsized              501             435             409
2 valves/cylinder.......................   to V6 DOHC).                      417             362             340
Port fuel injected......................  Stoichiometric
4 speed auto trans......................   gasoline direct
                                           injection on V8.
                                          Stoichiometric
                                           gasoline direct
                                           injection on V6 (used
                                           when downsized).
                                          18-bar BMEP with                 1,339           1,151           1,080
                                           downsize from V8 OHV
                                           to V6 DOHC.
                                          24-bar BMEP with                 1,781           1,636           1,441
                                           downsize from V8 OHV
                                           to V6 DOHC.
                                          Cooled EGR on V-                   305             288             249
                                           configuration.
                                          Advanced diesel.......           4,154           3,605           3,392
                                          8 speed automatic                   62              54              50
                                           transmission.
                                          High efficiency                    251             227             202
                                           gearbox.
                                          Aerodynamic treatments             213             199             176
                                           (active, Aero2).
                                          Stop-start (12 Volt)..             498             420             383
                                          P2 hybrid electric               4,575           3,851           3,399
                                           technology \a\.
----------------------------------------------------------------------------------------------------------------
\a\ Assumes application of weight reduction technology resulting in 10% weight reduction before adding back the
  weight of batteries and motors resulting in a net weight reduction less than 10% (see Chapter 3.4.3.8 of the
  Joint TSD for more details).

    As detailed in Chapter 1 of EPA's RIA, this master-set of packages 
is then ranked according to technology application ranking factors 
(TARFs) to eliminate packages that are not as cost-effective as 
others.\595\
---------------------------------------------------------------------------

    \595\ The Technology Application Ranking Factor (TARF) is 
discussed further in III.D.4. More detail on the TARF can be found 
in the OMEGA model supporting documentation (see EPA-420-B-10-042).
---------------------------------------------------------------------------

    The OMEGA model can utilize several approaches to determining the 
order in which vehicles receive technologies. For this analysis, EPA 
used a ``manufacturer-based net cost-effectiveness factor'' to rank the 
technology packages in the order in which a manufacturer is likely to 
apply them. Conceptually, this approach estimates the cost of adding 
the technology from the manufacturer's perspective and divides it by 
the mass of CO2 the technology will reduce. One component of 
the cost of adding a technology is its production cost, as discussed 
above. However, it is expected that purchasers of new vehicles value 
improved fuel economy since it reduces the cost of operating the 
vehicle. Typical vehicle purchasers are assumed to value the fuel 
savings accrued over the period of time which they will own the 
vehicle, which is estimated to be roughly five years. It is also 
assumed that consumers discount these savings at the same rate as that 
used in the rest of the analysis (3 or 7 percent).\596\ Any residual 
value of the additional technology which might remain when the vehicle 
is sold is not considered. The CO2 emission reduction is the 
change in CO2 emissions multiplied by the percentage of 
vehicles surviving after each year of use multiplied by the annual 
miles travelled by age.
---------------------------------------------------------------------------

    \596\ While our costs and benefits are discounted at 3% or 7%, 
the decision algorithm (TARF) used in OMEGA was run at a discount 
rate of 3%. Given that manufacturers must comply with the standard 
regardless of the discount rate used in the TARF, this has little 
impact on the technology projections shown here.
---------------------------------------------------------------------------

    Given this definition, the higher priority technologies are those 
with the lowest manufacturer-based net cost-effectiveness value 
(relatively low technology cost or high fuel savings leads to lower 
values). Because the order of technology application is set for each 
vehicle, the model uses the manufacturer-based net cost-effectiveness 
primarily to decide which vehicle receives the next technology 
addition. Initially, technology package 1 is the only one 
available to any particular vehicle. However, as soon as a vehicle 
receives technology package 1, the model considers the 
manufacturer-based net cost-effectiveness of technology package 
2 for that vehicle and so on. In general terms, the equation 
describing the calculation of manufacturer-based cost effectiveness is 
as follows:

[[Page 62849]]

[GRAPHIC] [TIFF OMITTED] TR15OC12.012

Where:

CostEffManuft = Manufacturer-Based Cost Effectiveness (in 
dollars per kilogram CO2),
[Delta]TechCost = Difference in marked up cost of the technology 
(dollars),
[Delta]FS = Difference in fuel consumption due to the addition of 
technology times fuel price and discounted over the payback period, 
or the number of years of vehicle use over which consumers value 
fuel savings when evaluating the value of a new vehicle at time of 
purchase
[Delta]CO2 = Difference in CO2 emissions (g/
mile) due to the addition of technology
VMTregulatory = the statutorily defined VMT

    EPA describes the technology ranking methodology and manufacturer-
based cost effectiveness metric in greater detail in the OMEGA 
documentation.\597\ For this final rulemaking, we have additionally 
incorporated the off-cycle and hybrid credits into the TARF 
equations.\598\ As the calculation is from the manufacturers' 
perspective, the credit value is considered as additional 
CO2 savings when the model calculates the TARF.\599\
---------------------------------------------------------------------------

    \597\ OMEGA model documentation. EPA-420-B-10-042.
    \598\ As noted previously, selected off-cycle credits were 
included in the cost analysis. Thus, their usage was also included 
in the TARF (technology selection algorithm), so that the model 
could consider both the two cycle and off-cycle effectiveness when 
choosing technologies.
    \599\ Of the off-cycle credits on the menu, only stop start and 
the active aerodynamics are considered when analyzing costs of 
complying with the standards the final analysis. We have done this 
because of their relatively high expected penetration rates.
---------------------------------------------------------------------------

    When calculating the fuel savings in the TARF equation, the full 
retail price of fuel, including taxes is used. While taxes are not 
generally included when calculating the cost or benefits of a 
regulation, the net cost component of the manufacturer-based net cost-
effectiveness equation is not a measure of the social cost of this 
final rule, but a measure of the private cost, (i.e., a measure of the 
vehicle purchaser's willingness to pay more for a vehicle with higher 
fuel efficiency). Since vehicle operators pay the full price of fuel, 
including taxes, they value fuel costs or savings at this level, and 
OMEGA presumes that manufacturers will consider this when choosing 
among the technology options.\600\
---------------------------------------------------------------------------

    \600\ This definition of manufacturer-based net cost-
effectiveness ignores any change in the residual value of the 
vehicle due to the additional technology when the vehicle is five 
years old. Based on historic used car pricing, applicable sales 
taxes, and insurance, vehicles are worth roughly 23% of their 
original cost after five years, discounted to year of vehicle 
purchase at 7% per annum. It is reasonable to estimate that the 
added technology to improve CO2 level and fuel economy 
will retain this same percentage of value when the vehicle is five 
years old. However, it is less clear whether first purchasers, and 
thus, manufacturers consider this residual value when making vehicle 
purchases and ranking technology choices, respectively. For this 
final rule, this factor was not included in our determination of 
manufacturer-based net cost-effectiveness in the analyses.
---------------------------------------------------------------------------

    The values of manufacturer-based net cost-effectiveness for 
specific technologies will vary from vehicle to vehicle, often 
substantially. This occurs for three reasons. First, the technology 
cost, change in ownership fuel costs, and lifetime CO2 
effectiveness of a specific technology all vary by the type of vehicle 
or engine to which it is being applied (e.g., small car versus large 
truck, or 4-cylinder versus 8-cylinder engine). Second, the 
effectiveness of a specific technology often depends on the presence of 
other technologies already being used on the vehicle (i.e., the dis-
synergies). Third, the absolute fuel savings and CO2 
reduction of a percentage are an incremental reduction in fuel 
consumption depends on the CO2 level of the vehicle prior to 
adding the technology. Chapter 1 of EPA's RIA contains further detail 
on the values of manufacturer-based net cost-effectiveness for the 
various technology packages.
    The result of this TARF ranking process is a ``ranked-set'' of over 
700 packages for use as OMEGA inputs, or roughly 40 per vehicle type. 
EPA prepares a ranked-set of packages for any MY in which OMEGA is 
run,\601\ the initial packages represent what we believe a manufacturer 
will most likely implement on all vehicles, including lower rolling 
resistance tires, low friction lubricants, engine friction reduction, 
aggressive shift logic, early torque converter lock-up, improved 
electrical accessories, and low drag brakes (to the extent not 
reflected in the baseline vehicle).\602\ Subsequent packages include 
gasoline direct injection, turbocharging and downsizing, and more 
advanced transmission technologies such as six and eight speed dual-
clutch transmissions and 6 and 8 speed automatic transmissions. The 
most technologically advanced packages within a vehicle type include 
hybrid-electric, plug-in hybrid-electric and battery-electric 
technologies. Note that plug-in hybrid and electric vehicle packages 
are only modeled for the non-towing vehicle types, in order to better 
maintain utility (see RIA chapter 1). In the proposal, we requested 
comment on this approach and whether we should consider plug-in hybrids 
for towing vehicle types. We did not receive any comments on this topic 
and have maintained the same approach in the final rule as used in the 
proposal.
---------------------------------------------------------------------------

    \601\ Note that a ranked-set of package is regenerated for any 
year for which OMEGA is run due to the changes in costs and maximum 
penetration rates. EPA's RIA chapter 3 contains more details on the 
OMEGA modeling and Joint TSD Chapter 3 has more detail on both costs 
changes over time and the maximum penetration limits of certain 
technologies used in the agencies modeling.
    \602\ When making reference to low friction lubricants, the 
technology being referred to is the engine changes and possible 
durability testing that would be done to accommodate the low 
friction lubricants, not the lubricants themselves.
---------------------------------------------------------------------------

    Table III-24 presents the cost and effectiveness values from a 
2025MY ranked-set of packages used in the OMEGA model for EPA's vehicle 
type 3, a midsize or standard car class equipped with a V6 engine. 
Similar packages were generated for each of the 19 vehicle types and 
the costs and effectiveness estimates for each of those packages are 
discussed in detail in Chapter 1 of EPA's RIA.

   Table III-24--CO2 Reducing Technology Vehicle Packages Used in OMEGA for a V6 Midsize Car Effectiveness and
                                               Costs in the 2025MY
                                             [Costs in 2010 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                Mass Rdxn
       Tech Pkg              Engine & vehicle           applied            Cost          Effectiveness
                                        technologies            (percent)                           (percent)
----------------------------------------------------------------------------------------------------------------
3.0000.........................  Auto 4VDV6...............              base                $0               0.0

[[Page 62850]]

 
3.0131.........................  Auto 4VDV6 +EFR2 +ASL2                    5               822              29.8
                                  +LDB +IACC1 +EPS +Aero1
                                  +LRRT1 +HEG +DCP +WR5%
                                  +6sp.
3.0195.........................  Auto 4VDI4 +EFR2 +ASL2                    5             1,070              36.8
                                  +LDB +IACC1 +EPS +Aero1
                                  +LRRT1 +HEG +DCP +GDI
                                  +TDS18 +WR5% +6sp.
3.0196.........................  Auto 4VDI4 +EFR2 +ASL2                    5             1,287              40.4
                                  +LDB +IACC2 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +GDI
                                  +TDS18 +WR5% +6sp.
3.0388.........................  Auto 4VDI4 +EFR2 +ASL2                    5             1,402              42.3
                                  +LDB +IACC2 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +GDI
                                  +TDS18 +WR5% +8sp.
3.0772.........................  Auto 4VDI4 +EFR2 +ASL2                   10             1,519              43.9
                                  +LDB +IACC2 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +GDI
                                  +TDS18 +WR10% +8sp.
3.1156.........................  Auto 4VDI4 +EFR2 +ASL2                   15             1,745              45.5
                                  +LDB +IACC2 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +GDI
                                  +TDS18 +WR15% +8sp.
3.0804.........................  Auto 4VDI4 +EFR2 +ASL2                   10             1,733              45.7
                                  +LDB +IACC2 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +GDI
                                  +TDS24 +WR10% +8sp.
3.0836.........................  Auto 4VDI4 +EFR2 +ASL2                   10             1,982              47.7
                                  +LDB +IACC2 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +GDI
                                  +TDS24 +EGR +WR10% +8sp.
3.1220.........................  Auto 4VDI4 +EFR2 +ASL2                   15             2,209              49.2
                                  +LDB +IACC2 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +GDI
                                  +TDS24 +EGR +WR15% +8sp.
3.2004.........................  Auto 4VDI4 +EFR2 +ASL2                   10             2,722              50.2
                                  +LDB +IACC1 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +GDI
                                  +MHEV +TDS18 +WR10% +8sp.
3.1604.........................  Auto 4VDI4 +EFR2 +ASL2                   20             2,506              50.7
                                  +LDB +IACC2 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +GDI
                                  +TDS24 +EGR +WR20% +8sp.
3.1612.........................  Auto 4VDI4 +EFR2 +ASL2                   20             2,814              51.2
                                  +LDB +IACC2 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +GDI
                                  +SS +TDS24 +EGR +WR20%
                                  +8sp.
3.2196.........................  Auto 4VDI4 +EFR2 +ASL2                   15             2,948              51.4
                                  +LDB +IACC1 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +GDI
                                  +MHEV +TDS18 +WR15% +8sp.
3.1628.........................  Auto 4VDI4 +EFR2 +ASL2                   20             2,896              51.5
                                  +LDB +IACC2 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +GDI
                                  +SS +SAX +TDS24 +EGR
                                  +WR20% +8sp.
3.2204.........................  Auto 4VDI4 +EFR2 +ASL2                   15             3,030              51.8
                                  +LDB +IACC1 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +GDI
                                  +MHEV +SAX +TDS18 +WR15%
                                  +8sp.
3.2020.........................  Auto 4VDI4 +EFR2 +ASL2                   10             2,936              51.9
                                  +LDB +IACC1 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +GDI
                                  +MHEV +TDS24 +WR10% +8sp.
3.2396.........................  Auto 4VDI4 +EFR2 +ASL2                   20             3,327              53.0
                                  +LDB +IACC1 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +GDI
                                  +MHEV +SAX +TDS18 +WR20%
                                  +8sp.
3.2400.........................  Auto 4VDI4 +EFR2 +ASL2                   20             3,461              53.4
                                  +LDB +IACC1 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +DVVL
                                  +GDI +MHEV +SAX +TDS18
                                  +WR20% +8sp.
3.2220.........................  Auto 4VDI4 +EFR2 +ASL2                   15             3,245              53.4
                                  +LDB +IACC1 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +GDI
                                  +MHEV +SAX +TDS24 +WR15%
                                  +8sp.
3.2036.........................  Auto 4VDI4 +EFR2 +ASL2                   10             3,185              53.6
                                  +LDB +IACC1 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +GDI
                                  +MHEV +TDS24 +EGR +WR10%
                                  +8sp.
3.2228.........................  Auto 4VDI4 +EFR2 +ASL2                   15             3,412              54.7
                                  +LDB +IACC1 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +GDI
                                  +MHEV +TDS24 +EGR +WR15%
                                  +8sp.
3.2236.........................  Auto 4VDI4 +EFR2 +ASL2                   15             3,494              55.1
                                  +LDB +IACC1 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +GDI
                                  +MHEV +SAX +TDS24 +EGR
                                  +WR15% +8sp.
3.2428.........................  Auto 4VDI4 +EFR2 +ASL2                   20             3,791              56.2
                                  +LDB +IACC1 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +GDI
                                  +MHEV +SAX +TDS24 +EGR
                                  +WR20% +8sp.
3.1680.........................  Auto 4VDV6 +EFR2 +ASL2                   20             5,156              57.3
                                  +LDB +IACC1 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +DVVL
                                  +GDI +HEV +SAX +ATKCS
                                  +WR20% +8sp.
3.2465.........................  Auto 4VDV6 +EFR2 +ASL2                   20            11,047              74.3
                                  +LDB +IACC1 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +DVVL
                                  +GDI +ATKCS +REEV20
                                  +WR20% +8sp.
3.2466.........................  Auto 4VDV6 +EFR2 +ASL2                   20            13,534              83.8
                                  +LDB +IACC1 +EPS +Aero2
                                  +LRRT2 +HEG +DCP +DVVL
                                  +GDI +ATKCS +REEV40
                                  +WR20% +8sp.
3.2467.........................  +IACC1 +EPS +Aero2 +LRRT2                20            11,451             100.0
                                  +EV75 mile +WR20% +0sp.
3.2468.........................  +IACC1 +EPS +Aero2 +LRRT2                20            13,376             100.0
                                  +EV100 mile +WR20% +0sp.
3.2469.........................  +IACC1 +EPS +Aero2 +LRRT2                20            18,306             100.0
                                  +EV150 mile +WR20% +0sp.
----------------------------------------------------------------------------------------------------------------
6sp = 6sp transmission (DCT-wet for vehicle type 3); 8sp = 8 speed DCT-wet; Aero = aerodynamic treatments; ASL =
  aggressive shift logic; AT = auto trans; ATKCS = Atkinson-cycle; DCP = dual cam phasing; DCT = dual clutch
  trans; DSL-Adv = advanced diesel; DOHC = dual overhead cam; EFR = engine friction reduction; EGR = exhaust gas
  recirculation; EPS = electric power steering; EV = electric vehicle; GDI = stoich gasoline direct injection;
  HEG = high efficiency gearbox; HEV = hybrid EV; MHEV = Mild HEV; IACC = improved accessories; LDB = low drag
  brakes; LRRT = lower rolling resistance tires; REEV = range extended EV or plug-in HEV; SAX = secondary axle
  disconnect; S-S = stop-start; TDS18/24/27 = turbocharged & downsized 18 bar BMEP/24 bar BMEP/27 bar BMEP.
``1'' and ``2'' suffixes to certain technologies indicate the first level versus the second level of the
  technology as described in Chapter 3 of the joint TSD.

[[Page 62851]]

 
Note that MHEV, HEV, REEV and EV technologies include both the cost and effectiveness of IACC2 within the
  electrification technology, so IACC2 is not independently listed in the package description.
Note that the level of weight reduction actually applied to a given vehicle is controlled within OMEGA based on
  safety constraints.

4. How does EPA project how a manufacturer would decide between options 
to improve CO2 performance to meet a fleet average standard?
    As discussed, there are many ways for a manufacturer to reduce 
CO2-emissions from its vehicles. A manufacturer can choose 
from a myriad of CO2 reducing technologies and can apply one 
or more of these technologies to some or all of its vehicles. Thus, for 
a variety of levels of CO2 emission control, there are an 
almost infinite number of technology combinations which produce a 
desired CO2 reduction. As explained above, EPA used the 
OMEGA model, in order to make a reasonable estimate of how 
manufacturers will add technologies to vehicles in order to meet a 
fleet-wide CO2 emissions level. EPA has described OMEGA's 
specific methodologies and algorithms previously in model 
documentation,\603\ makes the model publically available on its Web 
site,\604\ and has subjected the model to peer review.\605\
---------------------------------------------------------------------------

    \603\ Previous OMEGA documentation for versions used in MYs 
2012-2016 final rule (EPA-420-B-09-035), Interim Joint TAR (EPA-420-
B-10-042)
    \604\ http://www.epa.gov/oms/climate/models.htm
    \605\ EPA-420-R-09-016, September 2009.
---------------------------------------------------------------------------

    The OMEGA model utilizes four basic sets of input data. The first 
is a description of the vehicle fleet. The key pieces of data required 
for each vehicle are its manufacturer, CO2 emission level, 
fuel type, projected sales and footprint. The model also requires that 
each vehicle be assigned to one of the 19 vehicle types described 
above, which tells the model which set of technologies can be applied 
to that vehicle. In addition, the degree to which each baseline vehicle 
already reflects the effectiveness and cost of each available 
technology must also be input. This avoids the situation, for example, 
where the model might try to add a basic engine improvement to a 
current hybrid vehicle, or to a vehicle that already has this 
equipment. The development of the required data regarding the reference 
fleet is described in Section II.B and III.D.1 above and in Chapter 1 
of the Joint TSD.
    The second type of input data used by the model is a description of 
the technologies available to manufacturers, primarily their cost, 
effectiveness, and any credit value that they accrue during the 
compliance process. As noted previously, accounting for credit value is 
a change from the proposal, and allows EPA to more accurately reflect 
compliance related impacts of technology usage in its cost assessment. 
This information was described above as well as in Chapter 3 of the 
Joint TSD and Chapter 1 of EPA's RIA. In all cases, the order of the 
technologies or technology packages for a particular vehicle type is 
determined by the model user prior to running the model. The third type 
of input data describes vehicle operational data, such as annual 
vehicle scrappage rates and mileage accumulation rates, and economic 
data, such as fuel prices and discount rates. These estimates are 
described in Section II.E above, Section III.H below and Chapter 4 of 
the Joint TSD.
    The fourth type of data describes the CO2 emission 
standards being modeled. These include the MY 2016 (reference case) 
standards, and the MY 2021 and MY 2025 control case standards as well 
as the alternative standards described later in this chapter. The 
results for intermediate years are interpolated as described in Chapter 
5 of the EPA RIA. As described in more detail below, the application of 
A/C technology is evaluated in a separate analysis from those 
technologies which impact CO2 emissions over the 2-cycle 
test procedure. Thus, for the percent of vehicles that are projected to 
achieve A/C related reductions, the CO2 credit associated 
with the projected use of improved A/C systems is used to adjust the 
final CO2 standard which will be applicable to each 
manufacturer to develop a target for CO2 emissions over the 
2-cycle test which is assessed in our OMEGA modeling. As an example, on 
an industry wide basis, EPA projects that manufacturers will generate 
11 g/mile of A/C credit in MY 2016. Thus, the MY 2016 CO2 
target in OMEGA was approximately eleven grams less stringent for each 
manufacturer than predicted by the curves. Similar adjustments were 
made for the control cases (i.e. the A/C credits allowed by the rule 
are accounted for in the standards), but for a larger amount of A/C 
credit (approximately 21 grams).
    As mentioned above for the market data input file utilized by 
OMEGA, which characterizes the vehicle fleet, our modeling accounts for 
the fact that many baseline vehicles are already equipped with one or 
more of the technologies discussed in Section III.D.2 above. Because of 
the choice to apply technologies in packages, and because MY 2008 
vehicles are equipped with individual technologies in a wide variety of 
combinations, accounting for the presence of specific technologies in 
terms of their proportion of package cost and CO2 
effectiveness required a detailed analysis.
    Thus, EPA developed a method to account for the presence of the 
combinations of applied technologies in terms of their proportion of 
the technology packages. This analysis can be broken down into four 
steps.
    The first step in the process is to break down the available GHG 
control technologies into five groups: (1) Engine-related, (2) 
transmission-related, (3) hybridization, (4) weight reduction and (5) 
other. Within each group, each individual technology was given a 
ranking which generally followed the degree of complexity, cost and 
effectiveness of the technologies within each group. More specifically, 
the ranking is based on the premise that a technology on a baseline 
vehicle with a lower ranking would be replaced by one with a higher 
ranking which was contained in one of the technology packages which we 
included in our OMEGA modeling. The corollary of this premise is that a 
technology on a baseline vehicle with a higher ranking would be not be 
replaced by one with an equal or lower ranking which was contained in 
one of the technology packages which we chose to include in our OMEGA 
modeling. This ranking scheme can be seen in an OMEGA pre-processor 
(the TEB/CEB calculation macro), available in the docket.
    In the second step of the process, these rankings were used to 
estimate the complete list of technologies which would be present on 
each baseline vehicle after the application of a technology package. In 
other words, this step indicates the specific technology on each 
baseline vehicle after a package has been applied to it. EPA then used 
the lumped parameter model to estimate the total percentage 
CO2 emission reduction associated with the technology 
present on the baseline vehicle (termed package 0), as well as the 
total percentage reduction after application of each package. A similar 
approach was used to determine the total cost of all of the technology 
present on the baseline vehicle and after the application of each 
applicable technology package.
    The third step in this process is to account for the degree to 
which each technology package's incremental effectiveness and 
incremental cost is affected by the technology already

[[Page 62852]]

present on the baseline vehicle. Termed the technology effectiveness 
basis (TEB) and cost effectiveness basis (CEB), respectively, the 
values are calculated in this step using the equations shown in EPA RIA 
chapter 3. For this final rulemaking, we also account for the credit 
values using a factor termed other effectiveness basis (OEB).
    As described in Section III.D.3 above, technology packages are 
applied to groups of vehicles which generally represent a single 
vehicle platform and which are equipped with a single engine size 
(e.g., compact cars with four cylinder engine produced by Ford). These 
groupings are described in Table III-21. Thus, the fourth step is to 
combine the fractions of the CEB and TEB of each technology package 
already present on the individual MY 2008 vehicle models for each 
vehicle grouping. For cost, percentages of each package already present 
are combined using a simple sales-weighting procedure, since the cost 
of each package is the same for each vehicle in a grouping. For 
effectiveness, the individual percentages are combined by weighting 
them by both sales and base CO2 emission level. This 
appropriately weights vehicle models with either higher sales or 
CO2 emissions within a grouping. Once again, this process 
prevents the model from adding technology which is already present on 
vehicles, and thus ensures that the model does not double count 
technology effectiveness and cost associated with complying with the 
modeled standards.
    Conceptually, the OMEGA model begins by determining the specific 
CO2 emission standard applicable for each manufacturer and 
its vehicle class (i.e., car or truck). Since the final rule allows for 
averaging across a manufacturer's cars and trucks, the model determines 
the CO2 emission standard applicable to each manufacturer's 
car and truck sales from the two sets of coefficients describing the 
piecewise linear standard functions for cars and trucks (i.e. the 
respective car and truck curves) in the inputs, and creates a combined 
car-truck standard for that manufacturer. This combined standard 
considers the difference in lifetime VMT of cars and trucks, as 
indicated in the final regulations which govern credit trading between 
these two vehicle classes (which reflect the final MYs 2012-2016 rules 
on this point).
    As noted above, EPA estimated separately the cost of the improved 
A/C systems required to generate the credit. In the reference case 
fleet that complies with the MY 2016 standards, 85% of vehicles are 
modeled with improved A/C efficiency and leakage prevention technology.
    The model then works with one manufacturer at a time to add 
technologies until that manufacturer meets its applicable standard.
5. Projected Compliance Costs and Technology Penetrations
    The following tables present the projected incremental costs and 
technology penetrations for the final program. The most significant 
differences between the proposal analysis and the final rulemaking 
analysis presented below include:
     Cost-impacts of the off-cycle, strong, and mild hybrid 
full size pickup provisions: In the proposal, although we included 
these credits in our assessment of program impacts, we did not include 
these credits in the cost analysis. For this final rulemaking, we 
include these credits as further described in EPA RIA chapter 3.\606\ 
As discussed in III.C.5, while manufacturers were also given the 
opportunity to use these credits from the off-cycle menu under the 
reference MY 2016 standards, in all cases, these additional compliance 
options lead to reductions in costs.
---------------------------------------------------------------------------

    \606\ Of the many off-cycle credits on the menu, only stop start 
and active aerodynamics are included in this analysis. As we 
explained at proposal, EPA has sufficient information on these 
technologies' effectiveness, cost, and availability to reliably 
model them, and also has adjusted the stringency of the standard 
based on their 2-cycle effectiveness to reflect their use. See 76 FR 
75022. This is not the case for the remaining ``menu'' off-cycle 
technologies where EPA has virtually no information on costs. Id. at 
75022-023. At proposal, we used only the 2-cycle benefits associated 
with use of the stop-start and active aero, but in the modeling for 
the final rule, we now include their off-cycle credit value in the 
analysis of the costs and benefits of the program and, as at 
proposal, use these technologies' 2-cycle benefits in setting the 
standard.
---------------------------------------------------------------------------

     Mild hybrid technology: As described in Chapter 3 of the 
TSD, we did not model a mild hybrid technology in the proposal. Between 
proposal and final rulemaking, new technical information has become 
available for this technology, and the mild hybrid technology has been 
included in the assessment. In combination with the off-cycle credits, 
this technology has the potential to be a highly cost-effective 
compliance option, and leads to cost reductions in this analysis.
     Updated safety coefficients: As a result of the safety 
analysis described in Section II.G, the amount of mass reduction 
applied to the fleet was modified in order to show a compliance path 
and cost-assessment that is safety neutral. This led to a smaller 
application of mass reduction compared to the proposal. This change 
slightly increased the costs relative to the proposal since mass 
reduction is a relative cost effective technology at the levels we are 
estimating it will be implemented.
    As a result, the projected MY 2025 compliance costs are slightly 
less than those projected in the proposal (despite the increased cost 
from less mass reduction). These changes do not change the agency's 
overall assessment of the appropriateness of the standards we are 
adopting. As will be discussed later in this section, the proposal 
analysis using the MY 2008 based fleet projection, the final rulemaking 
results using the MY 2008 based fleet projection, and the final 
rulemaking analysis using the MY 2010 based fleet projection, all 
support EPA's assessment of the appropriateness of the standards.
    Analysis results in the remainder of this section are for the MY 
2008 based fleet projection only. EPA has additionally replicated many 
of the analyses discussed in this chapter using the MY 2010 based fleet 
projection (EPA RIA chapter 10). As noted, the differences in costs, 
benefits, and technology penetrations between results of the two fleet 
projections are relatively minor, and do not alter EPA's judgment of 
the appropriateness of the final standards.
    Overall projected per vehicle cost increases relative to the 
reference fleet (i.e. the MY 2008 based fleet complying with the MY 
2016 standard) are $766 in MY 2021 and $1836 in MY 2025. Captured in 
these costs, we see significant increases in advanced transmission 
technologies such as the high efficiency gear box and 8 speed 
transmissions, as well as more moderate increase in turbo downsized, 
cooled EGR 24 bar BMEP engines. In the control case, 31 percent of the 
MY 2025 fleet is projected to have strong P2 hybrid or mild hybrid 
technology (5% P2, 26% MHEV) as compared to 5% in the 2016 reference 
case (5% P2, 0% MHEV). Similarly, 2% percent of the MY 2025 fleet are 
projected to be electric vehicles while less than 1% percent are 
projected to be electric vehicles in the reference case. EPA notes that 
we have projected one potential compliance path for each company and 
for the industry as a whole--this does not mean that other potential 
technology penetrations and pathways are not possible. In fact, it is 
likely that each firm will plot their own future course to compliance. 
For example, while we show relatively low levels of EV and PHEV 
technologies, several firms have announced plans to aggressively pursue 
EV and PHEV technologies and thus the actual

[[Page 62853]]

penetration of those technologies may turn out to be much higher than 
the compliance pathway we present here.

                                 Table III-25--Total Costs per Vehicle by Company, Incremental to the MY 2016 Standards
                                                                         [2010$]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               2021                                            2025
                         Company                         -----------------------------------------------------------------------------------------------
                                                               Cars           Trucks           Fleet           Cars           Trucks           Fleet
--------------------------------------------------------------------------------------------------------------------------------------------------------
BMW.....................................................            $967            $529            $852          $2,147          $1,250          $1,910
Chrysler/Fiat...........................................             681             796             733           1,617           2,388           1,950
Daimler.................................................           1,985             659           1,655           3,011           1,284           2,616
Ferrari \607\...........................................           6,712               0           6,712           7,864               0           7,864
Ford....................................................             680             875             746           1,811           2,505           2,025
Geely-Volvo.............................................           2,132             734           1,698           3,177           1,504           2,681
GM......................................................             519             720             619           1,518           2,237           1,861
Honda...................................................             532             829             624           1,525           1,923           1,642
Hyundai.................................................             773             875             794           1,673           2,268           1,792
Kia.....................................................             625             908             689           1,572           1,977           1,658
Mazda...................................................             959           1,246           1,010           1,979           2,449           2,057
Mitsubishi..............................................             611           1,127             791           1,939           2,169           2,015
Nissan..................................................             644             904             725           1,618           2,391           1,847
Porsche \608\...........................................           4,878             604           3,871           4,807           1,274           4,044
Spyker-Saab.............................................           3,019             607           2,674           3,580             964           3,238
Subaru..................................................             982           1,594           1,128           1,926           2,495           2,054
Suzuki..................................................           1,032           1,210           1,064           2,112           1,848           2,066
Tata-JLR................................................           3,916           1,061           2,495           5,077           1,447           3,390
Toyota..................................................             488             600             532           1,239           1,700           1,407
VW......................................................           1,492             508           1,293           2,412           1,237           2,181
Fleet...................................................             767             763             766           1,726           2,059           1,836
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs for Aston Martin, Lotus and Tesla are not included here but can be found in EPA's RIA.
Costs include stranded capital and A/C-related costs.
\607\ Note that Ferrari is shown as a separate entity in the table above but could be combined with other Fiat-owned companies for purposes of GHG
  compliance at the manufacturer's discretion. Also, as discussed in Section III.B., companies with U.S. sales below 5,000 vehicles that are able to
  demonstrate ``operational independence'' from their parent company will be eligible to petition EPA for SVM alternative standards. However, since
  these determinations have not yet been made, the costs shown above are based on Ferrari meeting the primary program standards.
\608\ EPA analyzed Porsche and VW as separate fleets for the final rule. However, on August 1, 2012, VW completed its acquisition of Porsche and thus
  EPA expects that the Porsche fleet will be combined with the VW fleet for purposes of compliance with the MY 2017-2025 standards.

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6. How does the technical assessment support the final CO2 
standards as compared to the alternatives EPA has considered?
a. What are the targets and achieved levels for the fleet in this final 
rule?
    In this section EPA analyzes the final standards alongside several 
potential alternative GHG standards. These alternatives (car and truck 
standards which are 20 g/mile more and less stringent than those 
adopted) reasonably bound the range of alternatives. All analyses shown 
in this section are conducted using the MY 2008 based fleet projection. 
The analysis using the MY 2010 based fleet projection is shown in EPA 
RIA chapter 10 and leads to the same conclusions.
    Table III-30 includes a summary of the final standards and the four 
alternatives considered by EPA. In this table and for the majority of 
the data presented in this section, EPA focuses on two specific model 
years in the MYs 2017-2025 time frame addressed by this final rule. For 
the purposes of considering alternatives, EPA assessed these two 
specific years as being reasonably separated in time in order to 
evaluate a range of meaningfully different standards, rather than 
analyzing alternatives for each individual model year. Table III-30 
presents the projected reference case targets for the fleet in MYs 2021 
and 2025, that is the estimated industry wide targets that would be 
required for the projected fleet in those years by the MY 2016 
standards.\609\ The alternatives, like the final standards, account for 
projected use of A/C related credits. They represent the average 
targets for cars and trucks projected for the final standards and the 
four alternative standards. They do not represent the manner in which 
manufacturers are projected to achieve compliance with these targets, 
which includes the ability to transfer credits to and from the car and 
truck fleets. That is discussed later, and in tables shown in Section 
III.A.
---------------------------------------------------------------------------

    \609\ The reference case targets for MYS 2021 and 2025 may be 
different even though the footprint based standards are identical 
(the MY 2016 curves). This is because the fleet distribution of cars 
and trucks may change in the intervening years thus changing the 
targets in MYs 2021 and 2025.

           Table III-30--MYs 2021 and 2025 Fleet Targets for the Final Rule and Alternative Standards
                                               [g/mile CO2] \610\
----------------------------------------------------------------------------------------------------------------
                                                                    Car target     Truck target    Fleet target
----------------------------------------------------------------------------------------------------------------
2021 Final Rule.................................................             172             249             199
Alternative 1: 2021 Trucks + 20.................................             172             229             206
Alternative 2: 2021 Trucks-20...................................             172             269             192
Alternative 3: 2021 Cars + 20...................................             192             249             212
Alternative 4: 2021 Cars-20.....................................             152             249             186
2021 Reference Case.............................................             224             296             250
2025 Final Rule.................................................             143             203             163
Alternative 1: 2025 Trucks + 20.................................             143             223             170
Alternative 2: 2025 Trucks-20...................................             143             183             156
Alternative 3: 2025 Cars + 20...................................             163             203             176
Alternative 4: 2025 Cars-20.....................................             123             203             150
2025 Reference Case.............................................             224             295             248
----------------------------------------------------------------------------------------------------------------

    Alternatives 1 and 2 are focused on changes in the level of 
stringency for light-duty trucks only. Alternative 1 is 20 g/mile less 
stringent (higher) in 2021 and 2025, and Alternative 2 is 20 g/mile 
more stringent (lower) in 2021 and 2025. Alternatives 3 and 4 are 
focused on changes in the level of stringency for just passenger cars: 
Alternative 3 is 20 g/mile less stringent (higher) in MYs 2021 and 
2025, and Alternative 4 is 20 g/mile more stringent (lower) in 2021 and 
2025. When combined with the sales projections for MYs 2021 and 2025, 
these alternatives span fleet wide targets with a range of 186-212 g/
mile in MY 2021 (equivalent to a range of 42-48 mpge if all 
improvements were made with fuel economy technologies) and a range of 
150-176 g/mile in MY 2025 (equivalent to a range of 50-59 mpg if all 
improvements were made with fuel economy technologies).
---------------------------------------------------------------------------

    \610\ These targets are slightly different than those shown in 
the proposal due to minor updates to footprint values in the fleet 
projection. On average, many vehicles become slightly smaller, but 
this change is not significant at a fleet level. (See TSD 1.3.2). 
The target curves are unchanged from proposal.
---------------------------------------------------------------------------

    Using the OMEGA model, EPA evaluated the final standards and each 
of the alternatives in MY 2021 and in MY 2025. It is worth noting that 
although Alternatives 1 and 2 consider different truck footprint curves 
compared to the final rule and Alternatives 3 and 4 evaluate different 
car footprint curves compared to the final rule, in all cases EPA 
evaluated the alternatives by modeling both the car and truck footprint 
curves together (which achieve the fleet targets shown in Table III-30) 
as this is how manufacturers would view the future standards given the 
opportunity to transfer credits between their car and truck fleets 
under the GHG rule.\611\ A manufacturer's ability to transfer GHG 
credits between its car and truck fleets without limit does have the 
effect of muting the ``truck'' focused and ``car'' focused nature of 
the alternatives EPA is evaluating. For example, while Alternative 1 
has truck standards projected in MYs 2021 and 2025 to be 20 g/mile less 
stringent than the final truck standards and the same car standards as 
the final car standards, individual firms may over comply on trucks and 
under-comply on cars (or vice versa) in order to meet Alternative 1 in 
a cost effective manner from each company's perspective. EPA's modeling 
of manufacturer fleets appropriately reflects this flexibility, since 
as just noted, it reflects manufacturers' expected response.
---------------------------------------------------------------------------

    \611\ The curves for the alternatives were developed using the 
same methods as the final curves, however with different targets. 
Thus, just as in the final curves, the car and truck curves 
described in TSD 2 were ``fanned'' up or down to determine the 
curves of the alternatives.
---------------------------------------------------------------------------

    Table III-31 shows the projected target and projected achieved 
levels in MY 2025 for the final standards. This accounts for a 
manufacturer's ability to transfer credits to and from cars and trucks 
to meet a manufacturer's car and truck targets and consequent standard.

[[Page 62863]]

                            Table III-31--MY2025 Projected Target and Achieved Levels for the Final Rule for Individual Firms
                                                                      [g/mile CO2]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Target                             Achieved                               Truck
                        Company                        ------------------------------------------------------------------------ Car  target-   target-
                                                           Cars       Trucks       Fleet       Cars       Trucks       Fleet      achieved     achieved
--------------------------------------------------------------------------------------------------------------------------------------------------------
BMW...................................................         146         194         159         144         199         158            2           -5
Chrysler/Fiat.........................................         146         201         170         154         191         170           -8           10
Daimler...............................................         150         208         163         140         233         161           10          -25
Ferrari...............................................         150           0         150         168           0         168          -17          n/a
Ford..................................................         147         212         167         157         192         168          -10           20
Geely-Volvo...........................................         148         189         160         138         207         159           10          -18
GM....................................................         144         213         177         156         202         178          -12           11
Honda.................................................         142         191         156         145         183         156           -3            8
Hyundai...............................................         142         188         151         146         172         152           -4           16
Kia...................................................         139         199         152         145         177         152           -6           22
Mazda.................................................         140         186         148         145         163         148           -5           22
Mitsubishi............................................         139         180         153         146         166         153           -7           14
Nissan................................................         145         202         162         149         191         162           -5           10
Porsche...............................................         131         195         144         118         231         143           12          -37
Spyker-Saab...........................................         139         188         146         132         231         145            7          -43
Subaru................................................         134         169         142         145         138         143          -11           31
Suzuki................................................         132         181         140         133         174         140           -2            8
Tata-JLR..............................................         161         182         171         114         228         167           47          -46
Toyota................................................         141         201         163         146         193         163           -5            8
VW....................................................         138         203         151         131         228         150            7          -25
Fleet.................................................         143         203         163         147         194         163           -4            9
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: This table and the remainder in this section do not include projections for Aston Martin and Lotus. These two firms would qualify for
  consideration of the unique Small Volume Manufacturer alternative standards discussed in Section III.B, and thus while we have included modeling for
  these companies in the RIA, we do not present the results in this section. In addition, we do not present in this section results for the firm Tesla,
  as our forecast assumes they only make all electric vehicles, and thus under any standard we analyzed the firm always complies without the addition of
  any technology.

    Similar tables for each of the alternatives for MY 2025 and for the 
alternatives and the final rule for MY 2021 are contained in Chapter 3 
of EPA's RIA. With the final standards and for Alternatives 1 and 2, 
all companies are projected to be able to comply both in MYs2021 and 
2025, with the exception of Ferrari, which in each case falls 17 g/mile 
short of its projected fleet wide obligation in MY 2025.\612\ In 
Alternatives 3 and 4, where the car stringency varies, all companies 
are again projected to comply with the exception of Ferrari, which has 
a 38 gram shortfall under Alternative 4.
---------------------------------------------------------------------------

    \612\ Note that Ferrari is shown as a separate entity in the 
table above but could be combined with other Fiat-owned companies 
for purposes of GHG compliance at the manufacturer's discretion. 
Also, as discussed above in this section and in Section III.B.5, 
companies with U.S. sales below 5,000 vehicles that are able to 
demonstrate ``operational independence'' from their parent company 
will be eligible to petition EPA for SVM alternative standards. 
However, since these determinations have not yet been made, the 
costs shown above are based on Ferrari meeting the primary program 
standards. As a result of these provisions, Ferrari is not discussed 
in the remainder of this section as we discuss the appropriateness 
and feasibility of the standards.
---------------------------------------------------------------------------

b. Why is the relative rate of car truck stringency appropriate?
    Table III-31 illustrates the importance of car-truck credit 
transfer for individual firms. For example, the OMEGA model projects 
for the final standards that in MY 2025, Daimler would under comply for 
trucks by 25 g/mile but over comply in their car fleet by 10 g/mile in 
order to meet their overall compliance obligation. By contrast, the 
OMEGA model projects that under the final standards Kia's truck fleet 
would over comply by 22 g/mile and under comply in their car fleet by 6 
g/mile in order to meet their compliance obligations. The choice of 
transferring credits from cars to trucks, or trucks to cars, is 
dependent on the fleet configuration of the individual manufacturers. 
Individual manufacturers will be influenced by their relative number of 
cars and trucks, as well as by the starting technology and emissions 
performance of those vehicles.
    Under the FRM analysis, we project a slightly larger quantity of 
credit transfer than that which was projected in the proposal. The 
increase in credit transfer is largely attributable to the FRM modeling 
of stop start and active aerodynamics off-cycle credits and full-size 
pick-up truck HEV flexibilities, which were not included in the cost 
modeling used for the proposal. These credits either offer larger 
benefits to trucks than to cars (in the case of off-cycle credits), or 
are not available to cars (the full size pickup HEV flexibilities). 
However, while the total credit transfer value has increased relative 
to the proposal analysis, for the fleet as a whole, we project only a 
relatively small degree of net credit transfers from the truck fleet to 
the car fleet. From the reference case emission level (sales weighted 
average of approximately 250) to the control case (sales weighted 
average of approximately 163) is a drop of approximately 90 grams. Four 
grams of credit transfer (Table III-31) to the car fleet is relatively 
small in this context, and demonstrates the appropriate balance between 
car and truck stringencies. Table III-25 shows that the average costs 
for cars and trucks are also similar for MY 2021 and MY 2025. For MY 
2021, the average cost to comply with the car standards is $767, while 
it is $763 for trucks. For MY 2025, the average cost to comply with the 
car standards is $1,726, while it is $2,059 for trucks. These results 
are consistent with the small degree of net projected credit transfer 
between cars and trucks. While costs are generally higher for trucks in 
MY 2025, these higher estimates reflect the degree of credit transfer 
expected in the fleet, and are not necessarily indicative of a 
relatively more or less stringent truck standard. One factor in this 
cost delta is the relatively larger degree of mass reduction modeled 
for trucks under our analysis of safety impacts (see section II.G.5 
above).

[[Page 62864]]

    After including these factors, the average cost for complying with 
the truck and car standards are largely similar, even though the level 
of stringency for trucks is increasing at a slower rate than for cars 
in the program's initial model years. As described in Section I.B.2 of 
the preamble, the final car standards are decreasing (in CO2 
space, and therefore increasing in stringency) at a rate of 5% per year 
from MYs 2017-2025, while the final truck standards are decreasing at a 
rate of 3.5% per year on average from MYs 2017-2021, and 5% per year 
thereafter through MY2025. Given this difference in percentage rates of 
increase in stringency, the similarity in average cost stems from the 
fact that it is more costly to add the technologies to trucks (in 
general) than to cars as described in Chapter 1 of the EPA RIA. 
Moreover, some technologies are not made available for towing trucks. 
These include EVs, PHEVs, Atkinson Cycle engines (matched with HEVs), 
and DCTs--the prior two provide significant effectiveness, and the 
latter two are relatively cost effective. Together these differences 
result in a decrease in effectiveness potential for the heavier towing 
trucks compared to non-towing trucks and cars. In addition, while there 
is more mass reduction projected for these vehicles, this comes at 
higher cost as well, as the cost per pound for mass reduction goes up 
with higher levels of mass reduction (that is, the cost increase curves 
upward rather than being linear). As described in greater detail in 
Chapter 2 of the joint TSD, these factors are among the reasons the 
truck curve is steeper relative to the MY 2016 truck curve, resulting 
in a truck curve that is ``more parallel'' to cars than was the MY 2016 
truck curve.
    Taken together, EPA's analysis shows that under the final 
standards, there is relatively little net trading between cars and 
trucks as a fraction of the overall improvement; average costs for 
compliance with cars is generally similar to that of trucks in MY 2021 
as well as MY 2025; and it is more costly to add technologies to trucks 
than to cars. These facts corroborate the reasonableness for increasing 
the slope of the truck curve relative to MY 2016. These observations 
also lead us to the conclusion that (at a fleet level) starting from 
MYs 2017-2021, the slower rate of increase for trucks compared to cars 
(3.5% compared to 5% per year), and the same rate of increase (5% per 
year) for both cars and trucks for MYs 2022-2025 results in car and 
truck standards that reflect increases in stringency over time that are 
comparable from the perspective of the costs born by cars versus 
trucks.
    Many commenters questioned the relative stringency of the car and 
truck curves, manufacturers whose fleets are dominated by passenger 
cars generally indicating that the curves favored trucks at the expense 
of cars, and several groups going so far as maintaining that the 
difference in stringency and slope created an inherent incentive to 
upsize the fleet. These comments are not supported by the analysis 
conducted here. There are no indications that either the truck or car 
standards will encourage manufacturers to choose technology paths that 
lead to significant over or under compliance for cars or trucks, on an 
industry wide level. That is, there is no indication that on average, 
in light of the truck standard, manufacturers would consistently under 
or over comply with the car standard, or vice versa. As seen in our 
final rule modeling, seven manufacturers over-complied on cars, while 
twelve over-complied on trucks. A consistent pattern across the 
industry of manufacturers choosing to under or over comply with a car 
or trucks standard could indicate that the car or truck standard should 
be evaluated further to determine if the relative stringency is 
appropriate in light of the technology choices available to 
manufacturers, and the costs of those technology choices. As just 
shown, that is not the case for the final car and truck standards. 
Moreover, as noted above, we project only a relatively small overall 
degree of net credit transfers from the truck fleet to the car fleet. 
In addition, as discussed further below, EPA did evaluate the effect of 
the relative stringency of the car and truck standards using 
alternative standards and this analysis leads to the same conclusions. 
EPA thus continues to believe that the relative stringency of the car 
and truck curves is reasonable and appropriate.
c. What are the costs and advanced technology penetration rates for the 
alternative standards in relation to the final standards?
    Below we discuss results for the final car and truck standards 
compared first to the truck alternatives (Alternatives 1 and 2), 
followed by a comparison to the car alternatives (Alternatives 3 and 
4).
    Table III-32 presents our projected per-vehicle cost for the 
average car, truck and for the fleet in model years 2021 and 2025 for 
the final rule and for Alternatives 1 and 2. All costs are relative to 
the reference case (i.e. the fleet with technology added to meet the 
2016 MY standards). As can be seen, even though only the truck 
standards vary among these three scenarios, in each case the projected 
average car and truck costs vary as a result of car-truck credit 
transfer by individual companies.

  Table III-32--2021 and 2025 Fleet Average Projected Per-Vehicle Costs for Final Rule and Alternatives 1 and 2
                                                 [2010$/vehicle]
----------------------------------------------------------------------------------------------------------------
                                                                       Cars           Trucks           Fleet
----------------------------------------------------------------------------------------------------------------
2021 Final Rule.................................................            $767            $763            $766
Alternative 1: 2021 Trucks + 20.................................             497             492             496
Alternative 2: 2021 Trucks-20...................................           1,062           1,159           1,096
2025 Final Rule.................................................           1,726           2,059           1,836
Alternative 1: 2025 Trucks + 20.................................           1,460           1,582           1,500
Alternative 2: 2025 Trucks-20...................................           2,146           2,434           2,241
----------------------------------------------------------------------------------------------------------------

    Table III-33 presents the per-vehicle cost estimates in MY 2021 by 
company for the final rule, Alternative 1, and Alternative 2.

[[Page 62865]]

      Table III-33--2021 Projected Per-Vehicle Costs for the Final Rule and Alternatives 1 and 2 by Company
                                         [cars & trucks, 2010$/vehicle]
----------------------------------------------------------------------------------------------------------------
                                                                                   Alternative 1   Alternative 2
                                                                    Final rule     (trucks + 20)    (trucks-20)
----------------------------------------------------------------------------------------------------------------
BMW.............................................................            $852            $467          $1,307
Chrysler/Fiat...................................................             733             377           1,156
Daimler.........................................................           1,655           1,226           2,196
Ferrari.........................................................           6,712           6,712           6,712
Ford............................................................             746             438           1,116
Geely-Volvo.....................................................           1,698           1,171           2,376
GM..............................................................             619             271           1,087
Honda...........................................................             624             450             841
Hyundai.........................................................             794             620             963
Kia.............................................................             689             550             872
Mazda...........................................................           1,010             858           1,198
Mitsubishi......................................................             791             468           1,192
Nissan..........................................................             725             495             990
Porsche.........................................................           3,871           3,397           4,468
Spyker-Saab.....................................................           2,674           2,375           3,009
Subaru..........................................................           1,128             865           1,379
Suzuki..........................................................           1,064             840           1,265
Tata-JLR........................................................           2,495           1,365           3,652
Toyota..........................................................             532             359             746
VW..............................................................           1,293             945           1,678
Fleet...........................................................             766             496           1,096
----------------------------------------------------------------------------------------------------------------

    Table III-34 presents the per-vehicle cost estimates in MY 2025 by 
company for the final rule, Alternative 1 and Alternative 2. In 
general, for most of the companies our projected results show the same 
trends as for the industry as a whole, with Alternative 1 generally 
less costly than the final rule, and Alternative 2 generally more 
costly. Notably, the incremental average cost is higher for the more 
stringent alternative than for an equally less stringent alternative 
standard. This is not a surprise as more technologies must be added to 
vehicles to meet more stringent standards, and these technologies 
increase in cost in a non-linear fashion.

      Table III-34--MY 2025 Projected Per-Vehicle Costs for Final Rule and Alternatives 1 and 2 by Company
                                         [cars & trucks, 2010$/vehicle]
----------------------------------------------------------------------------------------------------------------
                                                                                   Alternative 1   Alternative 2
                                                                    Final rule     (trucks + 20)    (trucks-20)
----------------------------------------------------------------------------------------------------------------
BMW.............................................................          $1,910          $1,566          $2,300
Chrysler/Fiat...................................................           1,950           1,494           2,474
Daimler.........................................................           2,616           2,176           2,995
Ferrari.........................................................           7,864           7,864           7,864
Ford............................................................           2,025           1,650           2,390
Geely-Volvo.....................................................           2,681           2,141           3,250
GM..............................................................           1,861           1,347           2,517
Honda...........................................................           1,642           1,376           1,907
Hyundai.........................................................           1,792           1,617           2,025
Kia.............................................................           1,658           1,449           1,868
Mazda...........................................................           2,057           1,911           2,233
Mitsubishi......................................................           2,015           1,609           2,369
Nissan..........................................................           1,847           1,530           2,168
Porsche.........................................................           4,044           3,678           4,434
Spyker-Saab.....................................................           3,238           2,971           3,360
Subaru..........................................................           2,054           1,842           2,314
Suzuki..........................................................           2,066           1,946           2,381
Tata-JLR........................................................           3,390           2,534           4,627
Toyota..........................................................           1,407           1,163           1,788
VW..............................................................           2,181           1,953           2,538
Fleet...........................................................           1,836           1,500           2,241
----------------------------------------------------------------------------------------------------------------

    The previous tables present the costs for the final rule and 
alternatives 1 and 2 at both the industry and company level. In 
addition to costs, another key is the technology expected to be needed 
to meet future standards. The EPA assessment of the final rule, as well 
as Alternatives 1 and 2, predict the penetration into the fleet of a 
large number of technologies at various rates. A subset of these 
technologies are discussed below, while EPA's RIA Chapter 3 includes 
the details on this much longer list for the passenger car, light-duty 
truck, and the overall fleet at both the industry and individual 
company level. Table III-35 and Table III-36 present only a sub-set of 
the technologies EPA estimates could be used to meet the final 
standards as well as alternatives 1 and 2 in MY 2021.

[[Page 62866]]

Table III-37 and Table III-38 show the same for MY 2025. The 
technologies listed in these tables are those for which there is a 
large difference in penetration rates between the final rule and the 
alternatives. We have not included here, for example, the penetration 
rates for improved high efficiency gear boxes or eight speed 
transmissions because for MY 2021, our modeling estimates similar total 
fleet penetrations of these technologies for the final rule and 
alternatives 1 and 2.
    Table III-35 shows that in MY 2021, the final rule requires higher 
levels of penetration for several technologies for trucks than 
alternative 1. For example for trucks, compared to the final rule, 
alternative 1 leads to a decrease in the penetration of 24 bar turbo-
charged/downsized engines, a decrease in the penetration of cooled EGR, 
and a decrease in the penetration of gasoline direct injection fuel 
systems. We also see that due to credit transfer between cars and 
trucks, the lower level of stringency considered for trucks in 
alternative 1 also impacts the penetration of technology to the car 
fleet--with alternative 1 leading to a decrease in penetration of 18 
bar turbo-downsized engines, a decrease in penetration of 24 bar turbo-
downsize engines, a decrease in penetration of 8 speed dual clutch 
transmissions, and a decrease in penetration of gasoline direct 
injection fuel systems in the car fleet. For the more stringent 
alternative 2, we see increases in the penetration of many of these 
technologies projected for MY 2021, and we see this for the truck fleet 
as well as for the car fleet. Table III-36 shows these same overall 
trends but at the sales weighted fleet level in MY 2021.
    Although EPA does not project dramatic differences in technology 
penetration between the final MY 2021 standards and those modeled in 
Alternative 2 during these earlier years of the program, EPA remains 
concerned about lead time relative to rapid increases in truck standard 
stringency between MYs 2016 and 2021. Several vehicle manufacturers, 
particularly those who manufacture large trucks, voiced concerns about 
the increase in stringency during MYs 2012-2016 as described in the 
NPRM (76 FR 74862-865). In comments on the NPRM, Ford noted that it 
viewed the MYs 2012-2016 standards as ``overly stringent standards 
imposed on light duty trucks in the 2012-2016 model year regulation.'' 
As discussed in TSD 2.4, EPA does not agree that the MYs 2012-2016 
program is overly stringent, however we do acknowledge that it will be 
challenging for some manufacturers and furthermore, we acknowledge the 
possibility that it may be more challenging for the larger truck market 
than the smaller truck or car market. Several issues are unique to the 
trucks with the largest footprints (pickup trucks in particular). 
Although no individual vehicle need comply with its target, the large 
truck segment is dominated by relatively few vehicle platforms with 
relatively large sales, and this limited number of vehicle platforms 
makes rapid technology changes a greater challenge than in other market 
segments. See TSD p. 2-23. The pick-up trucks tend to have longer 
redesign cycles. Though there may be evidence to show that redesign 
periods are getting shorter for both cars and pickup trucks, the 
utility requirements of pick-up trucks relative to smaller vehicles 
results in longer development times for validation of a new platform. 
Pick-up truck product validation occurs across a broader range of gross 
vehicle weights for each platform due to a relatively large payload 
capacity and can include validation of trailer towing capability for 
multiple trailer configurations. Consequently, EPA is choosing to 
provide appropriate lead time in the MY 2017-2021 truck standards.
    Further, EPA has carefully weighed the issue of consumer 
acceptance. As many commenters stressed, without consumer acceptance of 
these vehicles, the rule's benefits will not accrue. As noted by the 
U.S. Coalition for Advanced Diesels, battery electric technologies have 
had limited commercial success in larger trucks.\613\ Although EPA has 
maintained utility in its analysis of compliance costs and while we do 
not expect that future hybrid applications will have the same degree of 
consumer resistance, nonetheless EPA regards the issue of consumer 
acceptance as legitimate and we therefore are being appropriately 
cautious in crafting the standards. We are thus structuring the MY 2021 
truck standard to provide appropriate lead time rather than 
significantly depending on electrified technologies in the earlier 
years of the program.\614\ The MY 2021 truck standard, as shown in 
Table III-35, is also projected to require a significant amount of 
turbo-charged and downsized engines, in addition to other advanced 
technologies. At the same time, we are providing regulatory incentives 
and flexibilities to promote further acceptance of electrified 
technologies into the pickup truck market sector.
---------------------------------------------------------------------------

    \613\ The U.S. Coalition for Advanced Diesel Cars commented: 
``Hybrid powertrains have been available on pickup trucks in the 
U.S. market since MY 2005. Since that time, some hybrid variants 
have been dropped by manufacturers due to the lack of customer 
demand. By 2011, in fact, less than one-quarter of a percent (0.23%) 
of customers selected the hybrid pickup truck option where it was 
available as an option. In contrast, depending on the model, 15% to 
50% of customers selected a diesel powertrain when such an option 
was offered.'' Docket no. NHTSA-2010-0131-0246-A1, p.4
    \614\ See Table III-35 below, where under alternative 2, we 
project that 20% of the vehicle fleet will be MHEV or HEV (the 
projection is 18% MHEV) in MY 2021. By comparison, the final rule is 
projected to be 13% MHEV & HEV (11% MHEV).
---------------------------------------------------------------------------

    These issues of consumer acceptance are not as pronounced for 
smaller light trucks and cars. On an industry basis, single vehicle 
models do not similarly dominate these segments. Further, hybrid 
electric technology is more common in both passenger cars and the 
smaller light truck fleet. Consumer perception of vehicle utility is 
also significant for the largest trucks, and greater challenges exist 
in convincing truck buyers that hybrid and even other advanced 
powertrains can provide equivalent utility, despite these technologies 
existing in other market segments.\615\ Finally, as is shown in section 
III.D.7, the rate of increase in stringency for smaller trucks and cars 
are similar under the final standards, so that the challenges to the 
stringency of the truck standards are essentially addressed only to the 
larger footprint trucks. As to these vehicles, EPA is being properly 
cautious with respect to issues of lead time and consumer acceptances, 
as just explained.
---------------------------------------------------------------------------

    \615\ When mass reduction technologies and turbo-charged and 
downsized engines were introduced to full size pickups, analogous 
consumer acceptance challenges were experienced (http://moneyland.time.com/2012/07/31/can-an-aluminum-truck-really-be-considered-ford-tough/), despite the eventual popularity of these 
technologies.

[[Page 62867]]

                 Table III-35--MY 2021 Projected Technology Penetrations for Final Rule and Alternatives 1 and 2 for all Cars and Trucks
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Cars                                           Trucks
                                                         -----------------------------------------------------------------------------------------------
                       Technology                           Final rule        Alt. 1          Alt. 2        Final rule        Alt. 1          Alt. 2
                                                             (percent)       (percent)       (percent)       (percent)       (percent)       (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Turbo-downsize(18 bar)..................................              43              38              50              53              50              58
Turbo-downsize (24 bar).................................              14               9              19              16              12              24
8 speed DCT.............................................              61              61              62               7               6               7
Cooled EGR*.............................................              11               7              17              16               8              22
Hybrid Electric Vehicle.................................               4               4               5               2               1               2
LRRT2...................................................              72              72              72              74              74              74
IACC2...................................................              71              56              70              64              57              61
GDI.....................................................              60              49              74              73              65              86
MHEV....................................................               5               4               6              11               7              18
--------------------------------------------------------------------------------------------------------------------------------------------------------
* In EPA packages TDS27 engines have cooled EGR, nearly all TDS24 engines also have cooled EGR, virtually none of the TDS18 bar engines have cooled EGR
  (See Chapter 1 of the RIA).

    Table III-36--MY 2021 Projected Technology Penetrations for Final Rule and Alternatives 1 and 2 for Fleet
----------------------------------------------------------------------------------------------------------------
                                                                    Final rule        Alt. 1          Alt. 2
                                                                     (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Turbo-downsize (18 bar).........................................              46              42              53
Turbo-downsize (24 bar).........................................              15              10              21
8 speed DCT.....................................................              42              42              43
Cooled EGR......................................................              12               7              18
Hybrid Electric Vehicle.........................................               4               3               4
LRRT2...........................................................              73              73              73
IACC2...........................................................              68              56              67
GDI.............................................................              65              54              78
MHEV............................................................               7               5              10
----------------------------------------------------------------------------------------------------------------

    Table III-37 shows that in MY 2025, there is only a small change in 
many of these technology penetration rates when comparing the final 
rule standards to alternative 1 for trucks, and most of the change 
shows up in the car fleet. One important exception is mild hybrid 
electric vehicles, where the less stringent alternative 1 is projected 
to be met with a decrease in penetration of mild HEVs compared to the 
final rule standards. As in MY 2021, we see that due to credit transfer 
between cars and trucks, the lower level of stringency considered for 
trucks in alternative 1 also impacts the car fleet penetration--with 
alternative 1 leading to a decrease in penetration of 24 bar turbo-
downsized engines, a decrease in penetration of cooled EGR, a decrease 
in penetration of mild HEVs, and a decrease in penetration of electric 
vehicles. For the more stringent alternative 2, we see only small 
increases in the penetration of many of these technologies projected 
for MY 2025, with a major exception being a significant increase (more 
than double) in the penetration of HEVs for trucks compared to the 
final rule standards, an increase in the penetration of HEVs and MHEVs 
for cars compared to the final rule standards, and a small increase in 
the penetration of EVs for cars compared to the final rule standards.

                 Table III-37--MY 2025 Projected Technology Penetrations for Final Rule and Alternatives 1 and 2 for all Cars and Trucks
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Cars                                           Trucks
                                                         -----------------------------------------------------------------------------------------------
                                                            Final rule        Alt. 1          Alt. 2        Final rule        Alt. 1          Alt. 2
                                                             (percent)       (percent)       (percent)       (percent)       (percent)       (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Turbo-downsize (18 bar).................................              25              24              18              19              17              18
Turbo-downsize (24 bar).................................              63              60              69              67              64              69
8 speed DCT.............................................              79              79              78               9               9               9
Cooled EGR..............................................              65              57              71              74              72              74
Hybrid Electric Vehicle.................................               4               4               5               5               2              11
EV......................................................             3.0             2.3             4.6             0.3             0.1             0.5
LRRT2...................................................              96              96              96              99              99              99
IACC2...................................................              73              81              59              55              71              50
GDI.....................................................              93              87              92              97              92              99
MHEV....................................................              20              13              31              39              27              38
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 62868]]

     Table III-38--2025 Projected Technology Penetrations for Final Rule and Alternatives 1 and 2 for Fleet
----------------------------------------------------------------------------------------------------------------
                                                                    Final rule        Alt. 1          Alt. 2
                                                                     (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Turbo-downsize (18 bar).........................................              23              21              18
Turbo-downsize (24 bar).........................................              64              61              69
8 speed DCT.....................................................              56              56              55
Cooled EGR......................................................              68              62              72
Hybrid Electric Vehicle.........................................               5               3               7
EV..............................................................             2.1             1.6             3.3
LRRT2...........................................................              97              97              97
IACC2...........................................................              67              78              56
GDI.............................................................              94              89              94
MHEV............................................................              26              17              33
----------------------------------------------------------------------------------------------------------------

    The results are similar for Alternatives 3 and 4, where the truck 
standard stays at the final rule level and the car stringency varies, 
+20 g/mile and -20 g/mile respectively. Table III-39 presents our 
projected per-vehicle cost for the average car, truck and for the fleet 
in model years 2021 and 2025 for the final rule and for Alternatives 3 
and 4. Compared to the final rule, Alternative 3 (with a MYs 2021 and 
2025 car target 20 g/mile less stringent then the final rule) is 
considerably less costly on average than the final rule in MY 2021 and 
in 2025. Alternative 4 (with a MYs 2021 and 2025 car target 20 g/mile 
more stringent then the final rule) is considerably more costly on 
average than the final rule in MY 2021 and in MY 2025. The differences 
for these alternatives relative to the final rule are even more 
pronounced than the differences for Alternatives 1 and 2. As in the 
analysis above, the cost increases are greater for more stringent 
alternatives than the reduced costs from the less stringent 
alternatives.

 Table III-39--MYs 2021 and 2025 Fleet Average Projected Per-Vehicle Costs for Final Rule and Alternatives 3 and
                                                        4
                                                 [2010$/vehicle]
----------------------------------------------------------------------------------------------------------------
                                                                       Cars           Trucks           Fleet
----------------------------------------------------------------------------------------------------------------
2021 Final rule.................................................            $767            $763            $766
Alternative 3: 2021 Cars + 20...................................             298             388             330
Alternative 4: 2021 Cars-20.....................................           1,422           1,261           1,365
2025 Final rule.................................................           1,726           2,059           1,836
Alternative 3: 2025 Cars + 20...................................           1,151           1,448           1,249
Alternative 4: 2025 Cars-20.....................................           2,556           2,612           2,574
----------------------------------------------------------------------------------------------------------------

    Table III-40 presents the per-vehicle cost estimates in MY 2021 by 
company for the final rule, Alternative 3, and Alternative 4. In 
general, for most of the companies our projected results show the same 
trends as for the industry as a whole, with Alternative 3 being several 
hundred dollars per vehicle less expensive then the final rule, and 
Alternative 4 being several hundred dollars per vehicle more expensive 
(with larger increment for the more stringent alternative than the less 
stringent alternative). In some cases the differences exceed $1,000 
(e.g. BMW, Daimler, Geely/Volvo, Spyker/Saab, Suzuki and Tata).

      Table III-40--MY 2021 Projected Per-Vehicle Costs for Final Rule and Alternatives 3 and 4 by Company
                                     [Cars & trucks combined, 2010$/vehicle]
----------------------------------------------------------------------------------------------------------------
                                                                                  Alt. 3 (cars +   Alt. 4 (cars-
                                                                    Final rule          20)             20)
----------------------------------------------------------------------------------------------------------------
BMW.............................................................            $852            -$65          $2,075
Chrysler/Fiat...................................................             733             377           1,206
Daimler.........................................................           1,655             673           3,181
Ferrari.........................................................           6,712           6,712           6,712
Ford............................................................             746             254           1,403
Geely-Volvo.....................................................           1,698             623           3,151
GM..............................................................             619             313           1,015
Honda...........................................................             624             327           1,083
Hyundai.........................................................             794             351           1,426
Kia.............................................................             689             353           1,249
Mazda...........................................................           1,010             412           1,920
Mitsubishi......................................................             791             263           1,562
Nissan..........................................................             725             282           1,292
Porsche.........................................................           3,871           2,663           4,788
Spyker-Saab.....................................................           2,674           1,308           4,324
Subaru..........................................................           1,128             474           1,950
Suzuki..........................................................           1,064             356           2,039
Tata-JLR........................................................           2,495           1,365           3,723

[[Page 62869]]

 
Toyota..........................................................             532             312             857
VW..............................................................           1,293             215           2,734
Fleet...........................................................             766             330           1,365
----------------------------------------------------------------------------------------------------------------

    Table III-41 presents the per-vehicle cost estimates in MY 2025 by 
company for the final rule, Alternative 3 and Alternative 4. In 
general, for most of the companies our projected results show the same 
trends as for the industry as a whole, with Alternative 3 less costly 
than the final rule, and Alternative 4 more costly. Again these 
differences are more pronounced for the car alternatives than the truck 
alternatives.

      Table III-41--MY 2025 Projected Per-Vehicle Costs for Final Rule and Alternatives 3 and 4 by Company
                                         [Cars & trucks, 2010$/vehicle]
----------------------------------------------------------------------------------------------------------------
                                                                                  Alt. 3 (cars +   Alt. 4 (cars-
                                                                    Final rule          20)             20)
----------------------------------------------------------------------------------------------------------------
BMW.............................................................          $1,910          $1,102          $3,041
Chrysler/Fiat...................................................           1,950           1,419           2,556
Daimler.........................................................           2,616           1,622           3,826
Ferrari.........................................................           7,864           7,416           7,864
Ford............................................................           2,025           1,302           2,800
Geely-Volvo.....................................................           2,681           1,647           3,998
GM..............................................................           1,861           1,400           2,417
Honda...........................................................           1,642           1,105           2,293
Hyundai.........................................................           1,792           1,138           2,666
Kia.............................................................           1,658           1,040           2,452
Mazda...........................................................           2,057           1,284           3,064
Mitsubishi......................................................           2,015           1,307           2,782
Nissan..........................................................           1,847           1,244           2,583
Porsche.........................................................           4,044           2,997           5,296
Spyker-Saab.....................................................           3,238           2,059           4,507
Subaru..........................................................           2,054           1,405           2,893
Suzuki..........................................................           2,066           1,379           3,070
Tata-JLR........................................................           3,390           2,264           4,815
Toyota..........................................................           1,407           1,020           1,971
VW..............................................................           2,181           1,281           3,471
Fleet...........................................................           1,836           1,249           2,574
----------------------------------------------------------------------------------------------------------------

    Table III-42 shows that in MY 2021, for several technologies 
Alternative 3 leads to lower levels of technology penetration for cars 
as well as for trucks compared to the final rule. For example, on cars 
there is a decrease in the 18 bar turbo-charged/downsized engines, a 
decrease in the penetration of cooled EGR, and a decrease in the 
penetration of gasoline direct injection fuel systems. We also see that 
due to credit transfer between cars and trucks, the lower level of 
stringency considered for cars in alternative 3 also impacts the 
penetration of technology to the truck fleet--with alternative 3 
leading to a decrease in penetration of 24 bar turbo-downsized engines, 
a decrease in penetration of cooled EGR, and a decrease in penetration 
of gasoline direct injection fuel systems in the car fleet. For the 
more stringent alternative 4, we see increases in the penetration of 
many of these technologies projected for MY 2021, for the truck fleet 
as well as for the car fleet. Table III-43 shows these same overall 
trends but at the sales weighted fleet level in MY 2021.

                 Table III-42--MY 2021 Projected Technology Penetrations for Final Rule and Alternatives 3 and 4 for all Cars and Trucks
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Cars                                           Trucks
                                                         -----------------------------------------------------------------------------------------------
                       Technology                           Final rule        Alt. 3          Alt. 4        Final rule        Alt. 3          Alt. 4
                                                             (percent)       (percent)       (percent)       (percent)       (percent)       (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Turbo-downsize (18 bar).................................              43              37              55              53              50              57
Turbo-downsize (24 bar).................................              14               7              22              16              10              25
8 speed DCT.............................................              61              60              63               7               6               7
Cooled EGR..............................................              11               5              19              16               8              24
Hybrid Electric Vehicle.................................               4               4               7               2               1               3
LRRT2...................................................              72              72              72              74              74              74
IACC2...................................................              71              48              67              64              52              60

[[Page 62870]]

 
GDI.....................................................              60              45              84              73              63              87
MHEV....................................................               5               3               7              11               5              19
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table III-43--MY 2021 Projected Technology Penetrations for Final Rule and Alternatives 3 and 4 for Fleet
----------------------------------------------------------------------------------------------------------------
                                                                    Final rule        Alt. 3          Alt. 4
                           Technologies                              (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Turbo-downsize (18 bar).........................................              46              41              56
Turbo-downsize (24 bar).........................................              15               8              23
8 speed DCT.....................................................              42              41              43
Cooled EGR......................................................              12               6              21
Hybrid Electric Vehicle.........................................               4               3               6
LRRT2...........................................................              73              73              73
IACC2...........................................................              68              49              65
GDI.............................................................              65              51              85
----------------------------------------------------------------------------------------------------------------

    Table III-44 shows that in MY 2025, there are significant 
differences in technology penetration rates when comparing the final 
rule to alternative 3 for cars, and additional change shows up in the 
truck fleet. As compared to the final rule, Alternative 3 would require 
approximately half the number of MHEVs, HEVs, and EVs As in MY 2021, we 
see that due to credit transfer between cars and trucks, the lower 
level of stringency considered for cars in alternative 3 also impacts 
the truck fleet penetration--with alternative 3 leading to a 
significant decrease in penetration of HEVs and MHEVs. For the more 
stringent alternative 4, we see a significant increase in the 
penetration of EVs, MHEVs and HEVs for cars compared to the final 
rule., Further, we see a sharp increase (a tripling) in the penetration 
of HEVs for trucks compared to the final rule.

                 Table III-44--MY 2025 Projected Technology Penetrations for Final Rule and Alternatives 3 and 4 for all Cars and Trucks
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Cars                                           Trucks
                                                         -----------------------------------------------------------------------------------------------
                      Technologies                          Final rule        Alt. 3          Alt. 4        Final rule         Alt.3          Alt. 4
                                                             (percent)       (percent)       (percent)       (percent)       (percent)       (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Turbo-downsize (18 bar).................................              25              20              16              19              19              19
Turbo-downsize (24 bar).................................              63              52              67              67              62              67
8 speed DCT.............................................              79              79              77               9               9               8
Cooled EGR..............................................              65              44              70              74              71              73
Hybrid Electric Vehicle.................................               4               4               6               5               2              15
EV......................................................               3             1.5             6.5               0             0.0             1.1
LRRT2...................................................              96              96              97              99              98              99
IACC2...................................................              73              86              49              55              76              48
GDI.....................................................              93              76              90              97              92              98
MHEV....................................................              20               9              45              39              23              35
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table III-45--MY 2025 Projected Technology Penetrations for Final Rule and Alternatives 3 and 4 for Fleet
----------------------------------------------------------------------------------------------------------------
                                                                    Final rule        Alt. 3          Alt. 4
                           Technologies                              (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Turbo-downsize (18 bar).........................................              23              20              16
Turbo-downsize (24 bar).........................................              64              56              67
8 speed DCT.....................................................              56              56              55
Cooled EGR......................................................              68              53              71
Hybrid Electric Vehicle.........................................               5               3               9
EV..............................................................               2             1.0             4.7
LRRT2...........................................................              97              97              98
IACC2...........................................................              67              83              49
GDI.............................................................              94              81              93
MHEV............................................................              26              13              36
----------------------------------------------------------------------------------------------------------------

[[Page 62871]]

    As stated above, EPA's analysis indicates that there is a 
technology pathway for all manufacturers to build vehicles that would 
meet their final standards as well as the alternative standards.\616\ 
The differences between the final standards and these analyzed 
alternatives lie in the per-vehicle costs and the associated technology 
penetrations. We have also shown that the relative rate of increase in 
the stringencies of cars and trucks is appropriate such that there is 
greater balance among the manufacturers where the distribution of the 
burden is relatively evenly spread between cars and trucks, and that 
neither standard is disproportionately stringent relative to the other 
since the modeled flow of credits between cars and trucks is relatively 
equal. By MY 2025, the final rule standards are projected to result in 
MHEV or stronger battery technology on 33% of the new vehicle fleet. 
Our modeling shows that this level of technology is feasible and cost 
effective. In Section I.C of the Preamble, we also showed that the 
benefits of the program are significant, and that vehicle purchasers 
can recover this cost within the first four years of vehicle ownership.
---------------------------------------------------------------------------

    \616\ Except Ferrari.
---------------------------------------------------------------------------

    EPA's analysis of the four alternatives indicates that under all of 
the alternatives the projected response of the manufacturers is to 
apply technology to both their car and truck fleets. Whether the car or 
truck standard is being changed, and whether it is being made more or 
less stringent, the response of the manufacturers is to make changes 
across their fleet, in light of their ability to transfer credits 
between cars and trucks. For example, Alternatives 1 and 3 make either 
car or truck standards less stringent, and keep the other standard as 
is. For both alternatives, manufacturers' car and truck fleets each 
increase their projected CO2 g/mile level. Similarly, for 
alternatives 2 and 4, where either the truck or car fleet standard is 
made more stringent, and the other standard is kept as is, 
manufacturers reduce the projected CO2 g/mile level achieved 
by both their car and trucks fleets, in a generally comparable fashion. 
This is summarized in Table III-46 for MY 2025.

  Table III-46--A Comparison of the Achieved CO[ihel2] levels in Relation to the Final Achieved Levels for all
                                        Alternative Scenarios in MY 2025
----------------------------------------------------------------------------------------------------------------
                                                                                             Change in truck
                                                                 Change in car achieved  achieved level compared
                          Alternative                           level compared to final   to final rule achieved
                                                                  rule achieved level             level
----------------------------------------------------------------------------------------------------------------
1: truck + 20.................................................                       +6                      +10
2: truck -20..................................................                       -8                       -6
3: car + 20...................................................                      +12                      +13
4: car -20....................................................                      -15                       -9
----------------------------------------------------------------------------------------------------------------

    This demonstrates that the four alternatives are indicative of what 
would happen if EPA increased the stringency of both the car and truck 
fleet at the same time, or decreased the stringency of the car and 
truck fleet at the same time. E.g., Alternative 4 would be comparable 
to an alternative where EPA made the car standard more stringent by 14 
g/mile and the truck standard more stringent by 9 g/mile. Under such an 
alternative, there would logically be little if any net transfer of 
credits between cars and trucks. Similarly, the results from 
alternatives 1 and 3 indicate what would be expected if EPA decreased 
the stringency of both the car and truck standards, and alternatives 2 
and 4 indicate what would happen if EPA increased the stringency of 
both the car and truck standards. In general, it appears that 
decreasing the stringency of the standards would lead the manufacturers 
to comparably increase the CO2 g/mile of both cars and 
trucks (alternatives 1 and 3). Increasing the stringency of the car and 
truck standards would also generally lead to comparable decreases in g/
mile for both cars and trucks. Again, these analyses (which were 
presented at proposal and not directly controverted in any of the 
comments) support the relative stringency of the car and truck curves 
and their relation to each other. This is because there is not a 
disproportionate shift of projected compliance paths from car to truck 
improvements, or vice versa, under the final standards or the 
alternatives.\617\
---------------------------------------------------------------------------

    \617\ As also noted above, this analysis serves as a response to 
those commenters claiming that the truck standard was insufficiently 
stringent or created inherent incentives to upsize the light duty 
vehicle fleet. The analysis shows no indication that either the 
truck or car standards will encourage manufacturers to choose 
technology paths that lead to significant over or under compliance 
for cars or trucks, on an industry wide level.
---------------------------------------------------------------------------

    EPA is not selecting either alternative 1 or 3 as a final standard. 
Under these less stringent alternatives, there would be significantly 
less emission reductions (as shown in section III.F.1), and would 
therefore forego important benefits that the final standards achieve at 
reasonable costs and penetrations of technology. EPA judges that there 
is not a good reason to forego such benefits, and is not adopting less 
stringent standards such as alternatives 1 and 3. Indeed, although a 
handful of commenters urged EPA not to establish MYs 2017-2025 
standards at all, no commenters endorsed these specific standard 
stringencies.
    Alternatives 2 and 4 increase the per vehicle estimates by roughly 
$300 and $600, respectively, in MY 2021 and $400 and $700, 
respectively, in MY2025. This increase in cost relative to the costs of 
the final rule standards stems from the increases in the costlier 
electrification technologies, such as HEVs and EVs that we project 
these standards would effectively force. The following tables and 
charts show the technology penetrations by manufacturer in greater 
detail.
    Table III-47 and later tables describe the projected penetration 
rates for the OEMs of some key technologies in MY 2021 and MY2025 under 
the final standards. TDS27, HEV, MHEV, and PHEV+EV technologies 
represent the most costly technologies added in the package generation 
process, and the OMEGA model generally adds them as one of the last 
technology choices for compliance. They are therefore an indicator of 
the extent to which the stringency of the standard is pushing the 
manufacturers to utilize the most costly technology. Cost (as shown 
above) is a similar indicator.
    Table III-47 describes technology penetration for MY2021 under the 
final rule.

[[Page 62872]]

                             Table III-47--Percent Projected Penetration of Technologies in MY 2021 for the Final Standards
                                                       [Ferrari has been removed from this table]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         2021 Car                            2021 Truck                           2021 Fleet
                                          --------------------------------------------------------------------------------------------------------------
                                           TDS24  TDS27   HEV    MHEV  PHEV+EV  TDS24  TDS27   HEV    MHEV  PHEV+EV  TDS24  TDS27   HEV    MHEV  PHEV+EV
                                             (%)    (%)    (%)    (%)     (%)     (%)    (%)    (%)    (%)     (%)     (%)    (%)    (%)    (%)     (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
BMW......................................     28      6      9     21       4      30      5      0     30       0      29      6      7     23       3
Chrysler/Fiat............................     21      1      0      0       0      19      3      0     11       0      20      2      0      5       0
Daimler..................................     29     12      7     22       9      28     10      0     30       0      29     11      5     24       7
Ford.....................................     17      1      2      6       0      21      6      2     21       0      19      3      2     11       0
Geely/Volvo..............................     30     13     13     17       9      30      6      0     30       0      30     11      9     21       6
GM.......................................     15      1      0      0       0      15      5      0     10       0      15      3      0      5       0
Honda....................................      5      0      3      0       0      18      0      0      4       0       9      0      2      1       0
Hyundai..................................     14      0      0      1       0      25      0      0      5       0      17      0      0      2       0
Kia......................................      5      0      0      0       0      25      0      0      5       0      10      0      0      1       0
Mazda....................................     28      0      0      4       0      28      0      0     14       0      28      0      0      6       0
Mitsubishi...............................     29      0      0      6       0      30      0      3     26       0      29      0      1     13       0
Nissan...................................     19      0      1      0       0      17      3      0     15       0      18      1      1      5       0
Porsche..................................     28     15     25      5      27      30     11      2     28       0      29     14     20     10      21
Spyker/Saab..............................     30     15     22      8      14      30      9      2     28       0      30     14     19     11      12
Subaru...................................     29      0      0     19       0      30      0     20     10       0      30      0      5     17       0
Suzuki...................................     30      0      0     25       0      30      0      0     30       0      30      0      0     26       0
Tata/JLR.................................     30     15     25      5      17      30     12     22      8       0      30     13     23      7       9
Toyota...................................      0      0     15      0       0       2      3      5      0       0       1      1     12      0       0
VW.......................................     30     12      1     29       8      30      7      0     30       0      30     11      1     29       6
Fleet....................................     14      2      4      5       1      16      4      2     11       0      15      3      4      7       1
--------------------------------------------------------------------------------------------------------------------------------------------------------
TDS24 = 24 bar bmep Turbo downsized GDI Engines, where most of these are EGR boosted, TDS27 = EGR boosted turbo downsized GDI 24 bar bmep, HEV = Hybrid
  Electric Vehicle, MHEV = Mild HEV, EV = Electric Vehicle, PHEV = Plug-in Hybrid Electric Vehicle.

    It can be seen from this table that the larger volume manufacturers 
have levels of the most advanced technologies, such as plug-in and 
electric vehicles, 27 bar BMEP engines, and hybridization that are 
significantly below the modeled maximum penetration rates (i.e. the 
phase-in caps, described in the next table). On the other hand, some of 
the ``luxury'' manufacturers tend to require higher levels of these 
technologies than do the broader market manufacturers.\618\ Together 
these seven ``luxury'' vehicle manufacturers represent 12% of vehicle 
sales and, as shown in Table III-48, their estimated cost of compliance 
is considerably higher than for broader market manufacturers in both 
MYs 2021 and 2025 regardless of the standard level.
---------------------------------------------------------------------------

    \618\ These ``luxury'' manufacturers are BMW, Daimler, Volvo, 
Porsche, Saab, Jaguar/LandRover, and VW. Note that we group these 
manufacturers here only for sake of differentiation in the analysis 
presented in this Section III.D.6. The term ``luxury'' manufacturer, 
as used here, carries no regulatory meaning and the use here should 
not be confused with any of our compliance flexibilities.

        Table III-48--Costs by Alternative for ``Luxury'' Manufacturers vs. Broader Market Manufacturers
                                         [Cars & trucks, 2010$/vehicle]
----------------------------------------------------------------------------------------------------------------
                                                               2021                            2025
                                                 ---------------------------------------------------------------
                                                      Luxury       Broad market       Luxury       Broad market
----------------------------------------------------------------------------------------------------------------
Primary.........................................          $1,438            $672          $2,364          $1,763
Alternative 1...................................           1,002             423           2,000           1,430
Alternative 2...................................           1,943             979           2,797           2,165
Alternative 3...................................             410             316           1,439           1,222
Alternative 4...................................           2,819           1,166           3,604           2,432
----------------------------------------------------------------------------------------------------------------
Note: Several of the luxury manufacturers, including Porsche and Tata (Jaguar/Land Rover) are eligible for
  compliance flexibility based on their sales volumes; therefore, their costs would be lower than the sales
  weighted results used to generate the ``luxury'' manufacturer costs presented here.

    The caps or limits on the technology phase in rates described in 
Chapter 3.4.2 of the joint TSD relate to the remainder of this 
discussion. As a modeling tool, EPA imposes upper limits on the 
penetration rates allowed under our modeling. These maximum penetration 
rates may reflect technical judgments about technology feasibility and 
availability, consumer acceptance, lead time, supplier capacity, up-
front investment capital requirements, manufacturability, and other 
reasons as detailed in Chapter 3 of the Joint TSD. The maximum 
penetration rates are not a judgment that rates below that cap are 
practical or reasonable.\619\ Table III-49 summarizes the caps on the 
phase in rates of some of the key technologies. A projected penetration 
rate that approaches the caps for these technologies for a given 
manufacturer is an indication of how much that manufacturer is being 
``pushed'' to the limits of available technology by the standards.
---------------------------------------------------------------------------

    \619\ For example, in MY 2010, there were 3% HEVs in the new 
vehicle fleet. In MYs 2016, 2021 and 2025 we project that the cap on 
this technology penetration rate increases to 15%, 30% and 50% 
respectively. In MY 2010, there were practically no PH/EVs. In MYs 
2016, 2021, and 2025 we project that this cap on technology 
penetration rate increases to approximately 5%, 10%, and 15% 
respectively for EVs and PHEVs separately. These highly complex 
technologies also have the slowest penetration phase-in rates to 
reflect the relatively long lead time required to implement into 
substantial fractions of the fleet subject to the manufacturers' 
product redesign schedules. In contrast, an advanced technology for 
improved engine design still under development, TDS27, has a cap on 
penetration phase in rate in MYs 2016, 2021, and 2025 of 0%, 15%, 
and 50%, indicative of a longer lead time to develop the technology, 
but a relatively faster phase in rate once the technology is 
``ready'' (consistent with other ``conventional'' evolutionary 
improvements).

[[Page 62873]]

                         Table III-49--Phase-in Rates for Some Key Advanced Technologies
----------------------------------------------------------------------------------------------------------------
                                                                       2016            2021            2025
                           Technology                                (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Turbocharging & downsizing with EGR Level 1 (w/cooled EGR, 24                 15              30              75
 bar)...........................................................
Turbocharging & downsizing with EGR Level 2 (w/cooled EGR, 27                  0              15              50
 bar)...........................................................
Mild and StrongHybrid...........................................              15              30              50
Plug-in Hybrid..................................................               5              10              14
Electric Vehicle................................................               6              11              15
----------------------------------------------------------------------------------------------------------------

    Table III-50 shows the technology penetrations for Alternative 2. 
In MY2021, penetration rates of truck mild and strong HEVs doubles in 
comparison to the final rule. The Ford truck fleet increases the MHEV 
penetration significantly relative to the final rule in Alternative 2.
    There are other significant increases in the larger manufacturers 
and even more dramatic increases in the HEV penetration in smaller 
manufacturers' fleets. There are also now six manufacturers with total 
fleet PH/EV penetration rates equal to 9% or greater.
    The broader market manufacturers have an estimated per vehicle cost 
of compliance with 2021 alternative 2 standards of roughly $1,000 which 
is roughly $300 more than under the final standards (see Table III-48, 
above). The seven ``luxury'' vehicle manufacturers now have estimated 
costs in 2021 of roughly $1,950, which is roughly $500 higher than the 
final standards (See Table III-48, above).

                                     Table III-50--Percent Penetration of Technologies in MY 2021 for Alternative 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         2021 Car                            2021 Truck                           2021 Fleet
                                          --------------------------------------------------------------------------------------------------------------
                                           TDS24  TDS27   HEV    MHEV  PHEV+EV  TDS24  TDS27   HEV    MHEV  PHEV+EV  TDS24  TDS27   HEV    MHEV  PHEV+EV
                                             (%)    (%)    (%)    (%)     (%)     (%)    (%)    (%)    (%)     (%)     (%)    (%)    (%)    (%)     (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
BMW......................................     28      6     12     18       7      30      9      0     30       0      29      7      9     21       5
Chrysler/Fiat............................     28      1      0      3       0      27      3      0     21       0      28      2      0     11       0
Daimler..................................     30     13     16     14      13      28     10      0     30       0      29     13     12     18      10
Ford.....................................     26      1      2     12       0      29      6      2     27       0      27      3      2     17       0
Geely/Volvo..............................     30     14     21      9      14      30      6      4     26       0      30     11     16     14      10
GM.......................................     25      1      0      2       0      24      5      0     23       0      25      3      0     12       0
Honda....................................     10      0      3      0       0      18      0      0      6       0      12      0      2      2       0
Hyundai..................................     17      0      0      1       0      25      0      0      5       0      18      0      0      2       0
Kia......................................     12      0      0      0       0      25      0      0      5       0      15      0      0      1       0
Mazda....................................     30      0      0     11       0      29      0      1     21       0      30      0      0     12       0
Mitsubishi...............................     30      0      3     26       0      30      0      4     26       1      30      0      4     26       1
Nissan...................................     21      0      1      0       0      25      3      0     18       0      22      1      1      6       0
Porsche..................................     28     15     25      5      30      30     11     13     17       0      29     14     23      7      23
Spyker/Saab..............................     30     15     22      8      17      30      9      2     28       0      30     14     19     11      14
Subaru...................................     29      0     14     15       0      30      0     20     10       0      30      0     15     14       0
Suzuki...................................     30      0     19      7       0      30      0      0     30       0      30      0     15     11       0
Tata/JLR.................................     25     15     26      4      30      30     12     22      8       0      27     13     24      6      15
Toyota...................................      4      0     15      0       0      19      3      5      8       0      10      1     11      3       0
VW.......................................     30     15      1     29      11      30      7      0     30       0      30     13      1     29       9
Fleet....................................     19      2      5      6       2      24      4      2     18       0      21      3      4     10       1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table III-51 shows the technology penetrations for Alternative 4 
for MY 2021. The large volume manufacturer, Ford now has a significant 
increase compared to the final standards of truck MHEVs and the fleet 
MHEV penetration has gone up significantly for this company in 
comparison to the final standards.
    Cars for several manufacturers now reach closer to the maximum 
technology penetration cap of 30% for HEVs. Also, there are now six 
manufacturers with fleet PH/EV penetration rates greater than 10%.
    The broader market manufacturers now have an estimated per vehicle 
cost of compliance with 2021 alternative 4 standards of roughly $1,200, 
which is approximately $600 higher than the final standards. The seven 
``luxury'' vehicle manufacturers now have estimated costs of roughly 
$2,800, which is approximately $1,100 higher than the final standard 
(See Table III-48, above). For the seven luxury manufacturers, this per 
vehicle cost in MY 2021 exceeds the full fleet costs under the final 
rule for complying with the considerably more stringent 2025 standards.

[[Page 62874]]

[GRAPHIC] [TIFF OMITTED] TR15OC12.021

    Table III-52 shows the technology penetrations for the final 
standards in MY 2025. The larger volume manufacturers have levels of 
advanced technologies that are below the maximum penetration rates 
though there are some notably high penetration rates for truck HEVs for 
Ford and Nissan. For the fleet in general, we note a 2% penetration 
rate of PHEVs and EVs, which coincidentally is similar to the current 
penetration rate of HEVs. It has taken approximately 10 years for HEV 
penetration to reach this level, without an increase in the stringency 
of passenger car CAFE standards. Therefore, EPA believes that there is 
sufficient lead time for PHEVs and EVs to reach this level of 
penetration by 2025.

[[Page 62875]]

[GRAPHIC] [TIFF OMITTED] TR15OC12.022

    All of the luxury manufacturers have significant MHEV penetrations. 
Several luxury manufacturers reach the maximum MHEV penetration cap on 
their truck portion of their fleet. 6 of the 7 luxury vehicle 
manufacturers also have greater than 10% penetration of PH/EVs (which 
has a total cap of 29%). Several companies have large penetration rates 
(>15%) of TDS27, such as Jaguar/LandRover, BMW, and Geely.
    The estimated per vehicle cost of compliance with 2025 final 
standards is roughly $1,800 for the broader market manufacturers and 
roughly $2,400 for the seven ``luxury'' vehicle manufacturers.
    Table III-53 shows the technology penetrations for Alternative 2 in 
MY 2025. In this alternative, Chrysler trucks increase their 
penetration of HEVs. GM has a large increase in truck HEVs, and 
PHEVs+EVs as well. Toyota also has an increased number of HEVs. In this 
alternative there are many more companies with a significant number of 
HEVs. As we noted at proposal when presenting this type of analysis, 
these penetration rates may well be overly aggressive in the face of 
uncertain consumer acceptance of both the added costs and the 
technologies themselves. 76 FR 75082. EPA continues to believe

[[Page 62876]]

that these technology penetration rates are inappropriate given the 
concerns just voiced.\620\ The estimated per vehicle cost of compliance 
with 2025 alternative 2 standards is roughly $2,200, which is roughly 
$400 higher than the final standards. The seven luxury vehicle 
manufacturers now have costs of roughly $2,800, which is roughly $400 
higher than the final standards. See Table III-48 above.
---------------------------------------------------------------------------

    \620\ ACEEE stated that the more stringent alternative was 
preferable because ``[t]hese alternatives adhere to technology 
penetration rates that fall within the caps set by EPA to ensure 
feasibility.'' ACEEE Comments p. 8. However, the technology caps 
reflect the physical limits of technical capability, as explained 
above. That so many manufacturers are pushing up against those 
limits in this analysis raises legitimate issues of not only lead 
time and cost, but consumer acceptance as well. ACEEE's further 
comment that the truck standards should be more stringent in light 
of the incentives for advanced technologies for pickup trucks (ACEEE 
Comments p. 8) simply questions the agencies' policy judgment that 
it is more appropriate to encourage introduction of these advanced 
technologies into the large pickup truck sector by means of 
incentives, rather than to try and compel the technologies' 
penetration through more stringent standards, with the attendant 
issues just noted of rejection due to cost and consumer acceptance. 
Moreover, for the final rule, EPA modeled the incentives for large 
pickup trucks in its cost analysis and the results strongly support 
the decision not to adopt the more stringent alternative standards. 
See section d below. In addition, the agencies' policy choice is 
further appropriate as not creating an incentive to reduce pickup 
truck utility as a compliance strategy, as noted in section II.C 
above.

                                     Table III-53--Percent Penetration of Technologies in MY 2025 for Alternative 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Car                                 Truck                                Fleet
                                          --------------------------------------------------------------------------------------------------------------
                                           TDS24  TDS27   HEV    MHEV  PHEV+EV  TDS24  TDS27   HEV    MHEV  PHEV+EV  TDS24  TDS27   HEV    MHEV  PHEV+EV
                                             (%)    (%)    (%)    (%)     (%)     (%)    (%)    (%)    (%)     (%)     (%)    (%)    (%)    (%)     (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
BMW......................................     51     20      7     43      16      65     19      0     50       0      55     20      5     45      12
Chrysler/Fiat............................     73      3      3     45       4      70      8      9     41       1      72      5      5     44       2
Daimler..................................     56     14      4     46      21      58     23      0     50       0      56     16      3     47      16
Ford.....................................     70      4      6     37       5      64     20     28     23       1      68      9     13     33       4
Geely/Volvo..............................     44     24      5     45      24      72      6      0     50       0      53     18      3     47      17
GM.......................................     72      3      1     41       4      67     15     15     35       0      70      9      8     38       2
Honda....................................     73      0      3     14       0      75      0      2     41       0      73      0      3     22       0
Hyundai..................................     75      0      0     23       0      75      0      0     50       0      75      0      0     28       0
Kia......................................     75      0      0      9       0      75      0      0     50       0      75      0      0     17       0
Mazda....................................     75      0      4     45       2      75      0      5     45       2      75      0      4     45       2
Mitsubishi...............................     74      0      3     46       8      70      0      7     43       2      73      0      4     45       6
Nissan...................................     74      0      0     41       2      70      9     17     33       2      73      3      5     38       2
Porsche..................................     52      9      2     48      37      61     28      0     50       0      54     13      1     49      29
Spyker/Saab..............................     65      8      2     48      22      65     19      0     50       0      65     10      1     49      19
Subaru...................................     75      0     11     35       6      75      0     12     38       5      75      0     12     36       6
Suzuki...................................     75      0     16     34       7      75      0      0     50       0      75      0     13     37       6
Tata/JLR.................................     13     22     20     30      45      59     33     33     17       0      34     27     26     24      24
Toyota...................................     63      1     15     13       0      68      8      6     43       0      65      4     12     24       0
VW.......................................     70      2      1     49      18      69     11      0     50       0      70      4      1     49      14
Fleet....................................     69      3      5     31       5      69     11     11     38       1      69      6      7     33       3
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table III-54 shows the technology penetrations for Alternative 4 in 
2025. In this alternative every company has a significant fraction of 
MHEVS and HEVs. Many of the large volume manufacturers have even more 
dramatic increases in the volumes of P/H/EVs than in Alternative 2.
    The estimated per vehicle cost of compliance with 2025 alternative 
4 standards is roughly $2,600, which is approximately $700 higher than 
the final standards. The seven luxury vehicle manufacturers now have 
costs of roughly $3,600, which is approximately $1,200 higher than the 
final standards. Much of this non-linear increase in cost is due to 
increased penetration of PHEVs and EVs (more so than HEVs).

                                     Table III-54--Percent Penetration of Technologies in MY 2025 for Alternative 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Car                                 Truck                                Fleet
                                          --------------------------------------------------------------------------------------------------------------
                                           TDS24  TDS27   HEV    MHEV  PHEV+EV  TDS24  TDS27   HEV    MHEV  PHEV+EV  TDS24  TDS27   HEV    MHEV  PHEV+EV
                                             (%)    (%)    (%)    (%)     (%)     (%)    (%)    (%)    (%)     (%)     (%)    (%)    (%)    (%)     (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
BMW......................................     48     20      7     43      22      65     19      0     50       0      52     20      5     45      16
Chrysler/Fiat............................     72      3      3     47       4      69      8     10     40       1      71      5      6     44       2
Daimler..................................     52     14      4     46      29      58     23      0     50       0      54     16      3     47      23
Ford.....................................     70      4      6     43       8      62     20     30     21       2      68      9     13     37       6
Geely/Volvo..............................     30     23     14     36      30      72      6      0     50       0      42     18     10     40      21
GM.......................................     72      3      1     41       2      67     15     15     35       0      70      9      8     38       1
Honda....................................     73      0      4     29       2      75      0      8     42       2      73      0      5     33       2
Hyundai..................................     75      0      5     45       3      75      0      0     50       0      75      0      4     46       3
Kia......................................     75      0      2     36       3      75      0      0     50       0      75      0      1     39       3
Mazda....................................     66      0     11     39       9      63      0     15     35       5      65      0     11     39       9
Mitsubishi...............................     71      0     10     40      12      70      0      7     43       2      70      0      9     41       9
Nissan...................................     74      0      4     46       5      62      9     23     27       3      71      3      9     40       4
Porsche..................................     46      5      5     45      45      50     50     39     11       0      47     15     12     38      35
Spyker/Saab..............................     56      8      2     48      34      65     19      0     50       0      57     10      1     49      30
Subaru...................................     74      0     11     39      10      48      0     34     16      10      68      0     16     33      10
Suzuki...................................     44      0     40     10      14      75      0      0     50       0      50      0     33     17      12
Tata/JLR.................................     13     22     20     30      45      59     41     50      0       0      34     31     34     16      24
Toyota...................................     63      1     14     21       0      68      8     16     37       1      65      4     15     27       0
VW.......................................     65      2      1     49      26      69     11      0     50       0      66      3      1     49      21
Fleet....................................     67      3      6     37       7      67     11     15     35       1      67      6      9     36       5
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 62877]]

d. Summary of the Technology Penetration Rates and Costs From the 
Alternative Scenarios in Relation to the Final Standards
    As described above, alternatives 2 and 4 would lead to significant 
increases in the penetration of advanced technologies into the fleet 
during the time frame of these standards. In general, both alternatives 
would lead to an increase in the average penetration rate for advanced 
technologies in MY 2021, in effect accelerating some of the technology 
penetration that would otherwise occur in the MYs 2022-2025 timeframe. 
As discussed above, EPA maintains lead time concerns about requiring 
aggressive technology penetration early in this time period subsequent 
to the advances in stringency during the MYs 2012-2016. In MY 2025, 
these alternatives would dramatically affect penetration rates of 
MHEVs, HEVs, EVs, and PHEVs, in each case leading to significant 
increases on average for the fleet. Again, Alternative 4 would lead to 
greater penetration rates than Alternative 2. When one considers the 
technology penetration rates for individual manufacturers, in MY 2021 
the alternatives lead to much higher increases than average for some 
individual large volume manufacturers. Smaller volume manufacturers 
start out with higher penetration rates and are pushed to even higher 
levels. This result is even more pronounced in MY 2025.
    This increase in technology penetration rates raises serious 
concerns about the ability and likelihood manufacturers can smoothly 
implement the increased technology penetration in a fleet that has so 
far seen limited usage of these technologies, especially for trucks--
and for towing trucks in particular. While this is more pronounced for 
2025, the lead time issues discussed previously remain for MY 2021 and 
earlier years.. Although EPA believes that these penetration rates are, 
in the narrow sense, technically achievable, it is more a question of 
judgment whether we are confident at this time that these increased 
rates of advanced technology usage can be practically and smoothly 
implemented into the fleet. This concern is one reason the agencies are 
attempting to encourage more utilization of these advanced technologies 
with the advanced technology incentive programs but being reasonably 
prudent in not adopting standards that could as a practical matter 
force high degrees of penetration of these technologies on towing 
trucks.\621\
---------------------------------------------------------------------------

    \621\ See 76 FR 57220 discussing a similar issue in the context 
of the standards for heavy duty pickups and vans: ``Hybrid electric 
technology likewise could be applied to heavy-duty vehicles, and in 
fact has already been so applied on a limited basis. However, the 
development, design, and tooling effort needed to apply this 
technology to a vehicle model is quite large, and seems less likely 
to prove cost-effective in this time frame, due to the small sales 
volumes relative to the light-duty sector. Here again, potential 
customer acceptance would need to be better understood because the 
smaller engines that facilitate much of a hybrid's benefit are 
typically at odds with the importance pickup truck buyers place on 
engine horsepower and torque, whatever the vehicle's real 
performance''.
---------------------------------------------------------------------------

    EPA notes that the same concerns support the final decision to 
steepen the slope of the truck curve in acknowledgement of the special 
challenges these larger footprint trucks (which in many instances are 
towing vehicles) would face. Without the steepening, the penetration 
rates of these challenging technologies would have been even greater.
    From a cost point of view, the impacts on cost track fairly closely 
with the technology penetration rates discussed above. The average cost 
increases under Alternatives 2 and 4 are significant for 2021 
(approximately $300 and $600), and for some manufacturers they result 
in very large cost increases. For 2025 the cost increases are even 
higher (approximately $400 and $700). Alternative 4, as expected, is 
significantly more costly than alternative 2. From another perspective, 
the average cost of compliance to the industry on average is $12 and 
$31 billion for the MYs 2021 and 2025 final standards, respectively. 
Alternative 2 will cost the industry on average $5 and $7 billion in 
excess, while Alternative 4 will cost the industry on average $9 and 
$13 billion in excess of the costs for the final standards. These are 
large increases in percentage terms, ranging from approximately 40% to 
70% in MY 2021, and from approximately 20% to 40% in MY 2025.
    Under the more stringent alternatives, per vehicle costs would also 
increase dramatically, including for some of the largest, full-line 
manufacturers. Under Alternative 2, per vehicle costs for the large 
volume manufacturers increase roughly 50% to meet the 2021 standards 
and roughly 20% to meet the 2025 standards (see Table III-48, above). 
The per-vehicle costs to meet Alternative 4 for these manufacturers are 
roughly 75% in MY 2021 and 40% in MY 2025 (see Table III-48, above).
    As noted, these cost increases are associated especially with 
increased utilization of advanced technologies. As shown in Figure III-
3 below, HEV+PHEV+EV penetration are projected to increase in MY 2025 
from 6% in the final standards, to 11% and nearly 13% under 
Alternatives 2 and 4, respectively, for manufacturers with annual sales 
above 500,000 vehicles (including Chrysler, Ford, GM, Honda, Hyundai, 
Nissan, Toyota, and VW). The differences are less pronounced for MY 
2021, but still (in alternative 4) over double the penetration level of 
the final rule. EPA regards these differences as significant, given the 
factors of expense, consumer cost, consumer acceptance, and potentially 
(for MY 2021) lead time.
    The figures below also do not show the significant penetration of 
mild hybrid technology into the fleet. Under the primary scenario, we 
project mild hybrid penetration of approximately 26% for the larger 
manufacturers, which rises to 33% and 37% under the two more stringent 
alternatives.

[[Page 62878]]

[GRAPHIC] [TIFF OMITTED] TR15OC12.023

    Figure III-4 below shows the HEV+PHEV+EV penetration for 
manufacturers with sales below 500,000 but exceeding 30,000 (including 
BMW, Daimler, Volvo, Kia, Mazda, Mitsubishi, Porsche, Subaru, Suzuki, 
and Jaguar/LandRover while excluding Aston Martin, Ferrari, Lotus, 
Saab, and Tesla). While the penetration rates of these advanced 
technologies also increase, the distribution within these are shifting 
to the higher cost EVs and PHEVs as noted above.
[GRAPHIC] [TIFF OMITTED] TR15OC12.024

    EPA modeled a number of flexibilities when conducting the analysis 
for the FRM. Unlike in the proposal, where PHEV, EV, and fuel cell 
vehicle incentive multipliers for 2017-2021, full size pickup truck HEV 
incentive credits, full size pickup truck performance based incentive 
credits, and off-cycle credits, were not modeled, we have included the 
full size pickup truck incentive credits and some off-cycle credits in 
our cost analysis.\622\ These credits reduce the estimated costs of the 
program for most manufacturers relative to the proposal. The average 
(non A/C) projected credit usage by manufacturer is approximately 2.7 
grams (Table III-3). From an industry wide perspective, the overall 
impact on costs, technology penetration, and emissions reductions and 
other benefits is limited, as seen in projected costs and technology

[[Page 62879]]

penetrations that are largely similar to those from the proposal. The 
new analysis demonstrates that these credits provide important 
flexibility in achieving the final levels and promoting more advanced 
technology and supports the reasonableness of the final standards. As 
shown in the previously presented technology projections, the standards 
and off-cycle credits appropriately encourage technologies that will 
yield real benefit that is not reflected on the two cycle compliance 
test. Relative to the NPRM modeling, which did not consider the off-
cycle credits, there is a significant increase in the modeled 
projections of start-stop technology. In the proposal, only 15% of the 
MY 2025 control case fleet was projected to receive start stop 
technology.\623\ By contrast, in the analysis presented here, 
approximately 45% of vehicles have technologies that shut off engine at 
stop.\624\
---------------------------------------------------------------------------

    \622\ We did not model the manufacturer minimums as a 
requirement for the pick-up truck credits. See section III.C for a 
discussion of these minimums, and EPA RIA Chapter 3 for a table of 
credits by company.
    \623\ 76 FR 75050. Of this 15%, nearly all are HEVs.
    \624\ These vehicles are a mixture of MHEVS (26%), HEVs (5%) and 
start-stop (15%).
---------------------------------------------------------------------------

    Overall, EPA believes that the characteristics and impacts of these 
and other alternative standards generally reflect a continuum in terms 
of technical feasibility, cost, lead time, consumer impacts, emissions 
reductions and oil savings, and other factors evaluated under section 
202(a). In determining the appropriate standard to adopt in this 
context, EPA judges that the final standards are appropriate and 
preferable to more stringent alternatives based largely on 
consideration of cost--both to manufacturers and to consumers--and the 
potential for overly aggressive penetration rates for advanced 
technologies relative to the penetration rates seen in the final 
standards, especially in the face of unknown degree of consumer 
acceptance of both the increased costs and of the technologies 
themselves. At the same time, the final rule helps to address these 
issues by providing incentives to promote early and broader deployment 
of advanced technologies, and so provides a means of encouraging their 
further penetration while leaving manufacturers alternative technology 
choices. EPA thus judges that the increase in technology penetration 
rates and the increase in costs under the increased stringency for the 
car and truck fleets reflected in alternatives 2 and 4 are such that it 
would not be appropriate to propose standards that would increase the 
stringency of the car and truck fleets in this manner.
    The two tables below show the year on year costs as described in 
greater detail in Chapter 5 of the RIA. These projections show a steady 
increase in costs from 2017 thru 2025 (as interpolated).

                                            Table III-55--Costs by Manufacturer by MY--Combined Fleet (2010$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                            Company                               2017      2018      2019      2020      2021      2022      2023      2024      2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
BMW...........................................................      $193      $386      $531      $673      $852    $1,283    $1,565    $1,826    $1,910
Chrysler/Fiat.................................................       180       314       416       521       733     1,092     1,454     1,799     1,950
Daimler.......................................................       349       723     1,014     1,305     1,655     2,242     2,460     2,652     2,616
Ferrari.......................................................     1,720     3,250     4,403     5,565     6,712     7,280     7,763     8,174     7,864
Ford..........................................................       133       291       412       517       746     1,102     1,491     1,860     2,025
Geely-Volvo...................................................       412       794     1,075     1,357     1,698     2,366     2,567     2,746     2,681
GM............................................................       125       241       333       418       619       940     1,322     1,684     1,861
Honda.........................................................       110       241       343       448       624       883     1,194     1,497     1,642
Hyundai.......................................................       166       343       477       611       794     1,105     1,400     1,679     1,792
Kia...........................................................       123       269       388       511       689       957     1,251     1,532     1,658
Mazda.........................................................       193       430       606       775     1,010     1,312     1,634     1,942     2,057
Mitsubishi....................................................       148       321       438       565       791     1,055     1,455     1,831     2,015
Nissan........................................................       136       290       411       531       725     1,022     1,369     1,697     1,847
Porsche.......................................................        39        62     1,734     2,447     3,871     4,790     4,672     4,534     4,044
Spyker-Saab...................................................       703     1,304     1,754     2,205     2,674     3,185     3,315     3,422     3,238
Subaru........................................................       262       505       673       854     1,128     1,337     1,655     1,951     2,054
Suzuki........................................................        50        66       477       651     1,064     1,377     1,686     1,972     2,066
Tata-JLR......................................................        31        61     1,057     1,486     2,495     3,891     3,832     3,756     3,390
Toyota........................................................        94       210       299       380       532       780     1,043     1,291     1,407
Volkswagen....................................................       311       602       825     1,044     1,293     1,749     1,972     2,176     2,181
Fleet.........................................................       154       311       438       557       766     1,115     1,425     1,718     1,836
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                Table III-56--Industry Average Vehicle Costs Associated With the Final Standards (2009$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                          Model Year                              2017      2018      2019      2020      2021      2022      2023      2024      2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
$/car.........................................................      $206      $374      $510      $634      $767    $1,079    $1,357    $1,622    $1,726
$/truck.......................................................        57       196       304       415       763     1,186     1,562     1,914     2,059
Combined......................................................       154       311       438       557       766     1,115     1,425     1,718     1,836
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Figure III-5 below shows graphically the year on year average costs 
presented in Table III-56 with the per vehicle costs on the left axis 
and the projected CO2 target standards on the right axis. It 
is quite evident and intuitive that as the stringency of the standard 
gets tighter, the average per vehicle costs increase. It is also clear 
that the costs for cars exceed that of trucks for the early years of 
the program, but then truck costs exceed car costs for the years 2022 
through 2025. It is interesting to note that the slower rate of 
progression of the standards for trucks seems to result in a slower 
rate of increase in costs for both cars and trucks. This initial slower 
rate of stringency for trucks is appropriate due primarily to concerns 
over lead time relative to the standards and disproportionately higher 
costs for adding technologies to trucks than cars, as described in 
Section III.D.6.b above. The figure below corroborates these

[[Page 62880]]

conclusions and further demonstrates that based on the smooth 
progression of average costs (from MYs 2017-2025), the year on year 
increase in stringency of the standards is also reasonable. Though 
there are undoubtedly a range of minor modifications that could be made 
to the progression of standards, EPA believes that the progression is 
reasonable and appropriate. Also, EPA believes that any progression of 
standards that significantly deviates from the final standards (such as 
those in Alternatives 1 through 4) are much less appropriate for the 
reasons provided in the discussion above.
[GRAPHIC] [TIFF OMITTED] TR15OC12.025

7. Comments Received on the Analysis of Technical Feasibility and 
Appropriateness of the Standards
    Several comments were received on the feasibility of the standards. 
These comments addressed the standards' technical feasibility, their 
feasibility for small manufacturers, and the relative stringency of the 
car and truck standards.
    In comments on the overall feasibility of the proposed standards, 
some organizations, such as American Chemistry Council, Hyundai, Kia, 
and NADA affirmed the technical feasibility of the proposed standards. 
Other organizations, such as the Center for Biological Diversity, 
International Council on Clean Transportation (ICCT), Northeast States 
for Coordinated Air Use Management (NESCAUM), and the Union of 
Concerned Scientists commented that more stringent standards would also 
be technically feasible. Several comments were submitted that the 
technological feasibility of the full program would not be known until 
the mid-term evaluation (Mercedes-Benz, Nissan, Alliance, Global 
Automakers). EPA agrees with commenters that this program is 
technically feasible and cost-effective. As shown in the analysis 
earlier in this section, significant reductions can be made in tailpipe 
GHG emissions with technology that is either currently available, or 
available in the near term.
    Lead time is a significant component of technical feasibility, and 
several comments were received with regard to the appropriateness of 
the lead time provided to meet the standards. Consumers' Union, 
Hyundai, and Kia commented that the amount of lead time provided by 
this rulemaking was appropriate. In contrast, Mitsubishi, Suzuki and 
Chrysler commented on the difficulty of forecasting consumer 
preferences into the future, and were therefore concerned as to the 
number of model years covered by the rules, even though not questioning 
that the rules provide sufficient lead time to meet the standards. The 
ICCT and CBD both commented that the long lead time should virtually 
eliminate costs of stranded capital. EPA agrees that the long lead time 
in this rulemaking should provide additional certainty to manufacturers 
in their product planning. EPA believes that there are several factors 
that have quickened the pace with which new technologies are being 
brought to market, and this will also facilitate regulatory compliance. 
These factors are discussed in Technical

[[Page 62881]]

Support Document section 3.4. EPA plans to assess consumer acceptance 
of vehicles produced under the MYs 2012-2016 rulemaking, as well as 
under this rulemaking, during the mid-term evaluation. Indeed, the mid-
term evaluation is a chief mechanism for evaluating the assumptions on 
which the standards are based, and so addresses comments such as those 
of Mitsubishi, Suzuki, and Chrysler.
    EPA agrees with the commenters that the analyses supporting this 
final rulemaking have demonstrated the feasibility of these standards, 
particularly as further supported by the number of vehicles today which 
meet the MY 2017 (and later) standards (see III.D.8 below). However, as 
discussed earlier in Section III.D.6, our analyses have shown that 
increasing the stringency beyond the promulgated levels would add 
significant cost with diminishing additional benefit, and for light 
trucks, potentially leading to overly aggressive penetration rates of 
certain advanced technologies, raising issues of lead time, costs, and 
consumer acceptance, as well as creating incentives to comply by 
reducing vehicle utility. As such, EPA has not made changes to increase 
or decrease the overall stringency across the car and truck fleets from 
the levels proposed.
    Several comments addressed the feasibility of the standards for 
smaller manufacturers. As an example, Jaguar/Land Rover, and Porsche 
commented that the technology penetrations the agency projected for 
their companies were too severe, disproportionate to improvements 
needed for other companies to comply with the standards, and requested 
additional lead time to meet the standards. EPA's analyses tend to 
confirm the thrust of these comments. See, e.g. Table III-47 and Table 
III-48 and accompanying text above. In light of the comments regarding 
smaller manufacturers, EPA is finalizing provisions to allow 
intermediate volume manufacturers some amount of additional lead time 
out to MY 2021. Details of this alternative standard, and the rationale 
for it, can be found in Section III.B.6.
    The comments on the relative car and truck stringency were largely 
divided between NGOs and OEMs (typically manufacturers of smaller 
trucks) that were concerned with the shape and relative rate of 
increase of the truck curve, and OEMs (typically manufacturers of 
larger trucks) who expressed concern about their ability to comply with 
a large truck standard that continued to increase in stringency at the 
rate of the MY 2016 standard. For example, Ford Motor Company 
commented: ``Ford also believes that the relative stringency levels for 
the car and truck fleets, as proposed by the agencies, are appropriate 
* * *. In terms of the product actions necessary to comply, the 
proposed car and truck standards are roughly equivalent in stringency. 
This is attributable to the unique attributes expected from trucks--
particularly the larger work trucks that constitute a significant 
portion of our full-line vehicle fleet offering--and also to the overly 
stringent standards imposed on light duty trucks in the 2012-2016 model 
year regulation.'' General Motors submitted comments that the company 
``supports the target standard curve shapes, [and] the relative car and 
truck stringency.'' Chrysler submitted similar comments. The UAW 
commented that ``In particular the UAW supports the aspects of the 
proposals that recognize the importance of balancing the challenges of 
adding fuel-economy improving technologies to the largest light trucks 
with the need to maintain the full functionality of these vehicles 
across a wide range of applications.''
    As mentioned above, several commenters raised concerns about the 
relative stringency between cars and trucks. ACEEE commented that 
``[t]he weakness of the standards at the large footprint end of the 
light truck spectrum not only will result in a direct loss in GHG 
reductions relative to what would have been saved with a uniform five 
percent annual emissions reduction across all classes, but also runs 
the risk of pushing production towards that larger end.'' Honda 
commented that it was ``concerned that the relative stringency between 
small footprint light trucks and large footprint light trucks diverge 
dramatically from one another, and that the stringency increases fall 
disproportionately on the smaller foot-print light trucks. Consumer's 
Union stated that ``[t]here are several strong indicators that the gap 
between the curves is too large.'' The ICCT wrote: ``the 2017-2025 rule 
increased the gap between cars and light trucks, providing stronger 
incentives for manufacturers to reclassify cars as light trucks and 
potentially undermining the benefits of the rule.'' The agencies 
received similar comments from several mass comment campaigns (Union of 
Concerned Scientists, NACAA, NRDC), and other NGOs. VW, Toyota, and 
Nissan also expressed similar concerns, with Toyota stating ``we remain 
concerned about two aspects of the proposed standards. First, the 
targets for trucks require a lower average rate of improvement than for 
cars. And second, the targets for larger trucks require a lower average 
rate of improvement than smaller trucks.''
    EPA recognizes that significant differences in the year-to-year 
stringency for cars and trucks could lead to the result of an 
increasingly widening gap between the car and truck curves and increase 
the incentives to reclassify cars as light trucks, thus undermining the 
fuel economy and greenhouse gas reduction benefits of the standards. 
However, even with reduced stringency of the truck standard in the 
early model years of the rule, the trend of a gradually widening gap 
during this period is reversed during the MY 2021-2025 period. As shown 
in Table III-57, by MY 2025 the gap for larger footprint vehicles is at 
levels similar to the MY 2012-2016 rule, while for smaller footprint 
vehicles, the gap is less than during the MY 2012-2016 rule. EPA 
believes that the increase in stringency for the truck standard in the 
latter phase of the rule is a reasonable approach for avoiding a large 
gap between car and truck curves while also taking account of the 
challenges of implementing efficiency technologies in trucks during the 
first phase of the rule as explained in Section III.D.6 above.

                                         Table III-57--Gap Between Car and Truck Curves, MYs 2012-2025 (g/mile)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                      Model Year                         2012   2013   2014   2015   2016   2017   2018   2019   2020   2021   2022   2023   2024   2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Smaller Footprint Vehicles............................     50     47     47     44     41   43.4   41.9   44.2   45.8   38.2   35.5   33.1   30.8   28.6
(left car cutpoint = 41 sq. ft.)......................
Larger Footprint Vehicles \a\.........................   39.8   37.9   36.6   33.3   30.3   44.0   48.1   51.8   54.3   44.6   41.3   38.5   35.8   33.5
(right car cutpoint = 56 sq. ft.).....................
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Vehicles with footprints of approximately 56 sq. ft. include the MY 2010 Lincoln Town Car, and Toyota Tacoma. Only a few MY 2010 cars have
  footprints greater than 56 sq. ft.

[[Page 62882]]

    EPA's determination of the standards was based on considerations of 
the technical differences between the cars and trucks, as described in 
Chapter 2 of the Joint TSD and Section II.C of the Preamble. As 
compared to the MY 2016 standard, the gap between the MY 2025 car and 
truck targets decreases in the smaller footprint range where these 
regulatory classes share the most design attributes, and the target 
curves appropriately reflect differences in the vehicle characteristics 
at the larger footprint end (see discussion in TSD chapter 2.4.2) As a 
result, the car and truck curves developed from this analysis exhibit 
differences in both the relative level of the target at a given 
footprint, and the overall stringency as standards increase year-to-
year. EPA believes that the final standards reasonably balance the 
issues and address the concerns raised by commenters, resulting in 
significant CO2 emissions reductions using technologies that 
can be feasibly adopted over the rulemaking timeframe. It is important 
to note that while it was not an express goal of the EPA's analysis or 
standards to distribute compliance burdens equitably among 
manufacturers and vehicle types, we believe that the promulgated 
standards will do just that, by promoting emissions reductions across 
the full range of vehicles. Furthermore, by considering the technical 
features unique to cars and trucks at all footprint sizes, the 
standards avoid the technically inappropriate result of the car and 
truck curves converging at footprint levels at which cars and truck 
properties are most different.
    With regard to the year-to-year increase in stringency, the 
promulgated standards encourage manufacturers to apply additional 
technologies throughout the rulemaking timeframe. The standards are 
based on footprint, and increase in stringency at all vehicle 
sizes.\625\ The year-to-year stringency for trucks is in general lower 
than cars in the early years of the program, in consideration of the 
technical challenges involved in applying efficiency technologies to 
these vehicles as well as lead time concerns relative to the early 
years of the programs. Moreover, EPA recognizes that trucks do not 
uniformly face the same technical challenges,\626\ and the standards 
reflect these differences. Thus, the promulgated standards promote 
similar levels of emission reductions for smaller trucks and for cars 
of the same size. For example, the average year-to-year increase in the 
target level over the entire MY 2017-2025 period is identical for cars 
and trucks at the 41 sq. ft. curve cutpoint (5.1 percent per year), and 
is nearly the same over the initial MY 2017-2021 period (4.8 and 4.5 
percent per year, for cars and trucks, respectively.) Some commenters 
expressed concern that manufactures will use the initially lower truck 
standards to delay implementation of efficient technologies, and then 
use this circumstance to argue in the mid-term evaluation for relaxed 
standards. EPA does not believe this concern in justified, since the 
mid-term evaluation will occur before many of these vehicles are in 
production. EPA will carefully monitor this issue during the mid-term 
evaluation.
---------------------------------------------------------------------------

    \625\ This was achieved by applying a proportional year-to-year 
increase (multiplicative) to the target at every footprint level, 
unlike the MY 2012-2016 rule in which a constant-value (additive) 
increase was applied by offsetting curves vertically.
    \626\ See preamble II.C for discussion of these technical 
challenges.
---------------------------------------------------------------------------

8. To what extent do any of today's vehicles meet or surpass the final 
MY 2017-2025 CO2 footprint-based targets with current 
powertrain designs?
    In addition to the analysis discussed above regarding what 
technologies could be added to vehicles in order to achieve the 
projected CO2 obligation for each automotive company under 
the final MY 2017 to 2025 standards, EPA performed an assessment of the 
light-duty vehicles available in the market today to see how such 
vehicles compare to the MY 2017-2025 footprint-based standard curves. 
This analysis supports EPA's overall assessment that there are a broad 
range of effective and available technologies that could be used to 
achieve the standards, and illustrates the need for the leadtime 
between today and MY 2017 to MY 2025 in order for continued refinement 
of today's technologies and their broader penetration across the fleet 
for the industry as a whole as well as individual companies. In 
addition, this assessment supports EPA's view that the standards would 
not interfere with consumer utility. Footprint-attribute standards 
provide manufacturers with the ability to offer consumers a full range 
of vehicles with the utility customers want, and do not require or 
encourage companies to just produce small passenger cars with very low 
CO2 emissions.
    Using publicly available data, EPA compiled a list of current 
vehicles and their 2-cycle CO2 emissions performance (that 
is, the performance over the city and highway test cycles that are used 
for compliance with this rule). Data is currently available for all MY 
2012 vehicles and some MY 2013 vehicles. EPA gathered vehicle footprint 
data from EPA reports, manufacturer submitted CAFE reports, and 
manufacturer Web sites.
    EPA evaluated these vehicles against the final CO2 
footprint-based standard curves to determine which vehicles would meet 
or exceed the final MY 2017-MY 2025 footprint-based CO2 
targets assuming air conditioning credit generation consistent with 
today's final rule, but no other changes. Under the final MY 2017-2025 
greenhouse gas emissions standards, each vehicle will have a unique 
CO2 target based on the vehicle's footprint. However, it is 
important to note that the overall manufacturer obligation is a 
company-specific, sales-weighted, fleet-wide CO2 standard 
for each company's passenger cars and truck fleets calculated using the 
final footprint-based standard curves. No individual vehicle is 
required to achieve a specific CO2 target. In this analysis, 
EPA assumed usage of air conditioner credits because air conditioner 
improvements are considered to be among the cheapest and easiest 
technologies to reduce greenhouse gas emissions, manufacturers are 
already investing in air conditioner improvements, and air conditioner 
changes do not impact engine, transmission, or aerodynamic designs so 
assuming such credits does not affect consideration of cost and 
leadtime for use of these other technologies. In this analysis, EPA 
assumed increasing air conditioner efficiency and refrigerant credits 
over time with a phase-in of alternative refrigerant for the generation 
of HFC leakage reduction credits consistent with the assumed phase-in 
schedule discussed in Section III.C.1. of this preamble. No adjustments 
were made to vehicle CO2 performance other than this 
assumption of air conditioning credit generation, although additional 
credits may be available. The details regarding this assessment are in 
Chapter 3 of the EPA RIA.
    This assessment shows that a significant number of vehicles models 
sold today (over 100 models) have CO2 values at or below the 
final MY 2017 footprint-based targets with current powertrain designs, 
assuming air conditioning credit generation consistent with our final 
rule. The list of vehicles meeting MY 2017 targets, with no technology 
improvements other than air conditioning system upgrades, cover a full 
suite of vehicle sizes and classes, including midsize cars, minivans, 
sport utility vehicles, compact cars, small pickup trucks and full size 
pickup trucks. These vehicles utilize a wide variety of powertrain

[[Page 62883]]

technologies and operate on a variety of different fuels including 
gasoline, diesel, electricity, and compressed natural gas. Nearly every 
major manufacturer currently produces vehicles that would meet or 
exceed the MY 2017 footprint CO2 targets with only 
improvements in air conditioning systems. For all of these vehicle 
classes the MY 2017 targets are achieved with conventional gasoline 
powertrains, with the exception of the full size (or ``standard'') 
pickup trucks. In the case of full size pickups trucks, only HEV 
versions of the Chevrolet Silverado and the GMC Sierra meet 2017 
targets (though the HEV Silverado and Sierra's meet not just the MY 
2017 footprint-based CO2 targets with A/C improvements, but 
their respective targets through MY 2022). EPA also assessed the subset 
of these vehicles that have emissions within 5% of the final 
CO2 targets. As detailed in Chapter 3 of the EPA RIA, the 
analysis shows that there are more than 66 additional vehicle models 
(primarily with gasoline and diesel powertrains) that are within 5% of 
the MY 2017 CO2 targets, including compact cars, midsize 
cars, large cars, SUVs, station wagons, minivans, small and standard 
pickup trucks. In total, nearly 175 current vehicle models (or about 
15% of all models) meet or are within 5% of the final MY 2017 targets.
    The number of vehicles available that meet the final MY 2017 
targets has already significantly increased since the proposal. In 
particular, the number of vehicles with conventional gasoline 
powertrains that meet or exceed the final MY 2017 targets has increased 
from 27 at the time of proposal to 65 models currently. An additional 
58 vehicles currently available with conventional gasoline powertrains 
are within 5% of the final MY 2017 standards. As the CO2 
targets become more stringent each model year, fewer MY 2012 and MY 
2013 vehicles achieve or surpass the final CO2 targets, in 
particular for gasoline powertrains. While approximately 65 unique 
gasoline vehicle models achieve or surpass the MY 2017 targets, this 
number falls to approximately 38 for the MY 2018 targets, 23 for the 
model year 2019 targets, and 12 unique gasoline vehicle models can 
achieve the MY 2020 final CO2 targets with A/C improvements.

                                             Table III-58--Number of Vehicles Compliant With MY2017 Targets
--------------------------------------------------------------------------------------------------------------------------------------------------------
                           Model year                              Gasoline    Diesel      CNG        HEV        PHEV        EV        FCV       Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011/2012.......................................................         27          1          1         27          1          3          0         60
2012/2013.......................................................         65          3          1         29          1          8          1        108
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                            Table III-59--Number of Vehicles Within 5% of the MY2017 Targets
--------------------------------------------------------------------------------------------------------------------------------------------------------
                           Model year                              Gasoline    Diesel      CNG        HEV        PHEV        EV        FCV       Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011/2012.......................................................         38          6          0          3          0          0          0         47
2012/2013.......................................................         58          6          0          2          0          0          0         66
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Prior to each model year, EPA receives projected sales data from 
each manufacturer. Based on this data, approximately 17% of MY 2012 
sales will be vehicles that meet or are lower than their vehicle 
specific MY 2017 targets, requiring only improvements in air 
conditioning systems. This is more than double the 7% of MY 2011 sales 
that EPA projected to meet the MY 2017 targets. An additional 12% of 
projected MY 2012 sales will be within 5% of the MY 2017 footprint 
CO2 target with only simple improvements to air conditioning 
systems, five model years before the standard takes effect.
    With improvements to air conditioning systems, the most efficient 
gasoline internal combustion engines would meet the MY 2022 footprint 
targets. After MY 2022, the only current vehicles that continue to meet 
the footprint-based CO2 targets (assuming improvements in 
air conditioning) are hybrid-electric, plug-in hybrid-electric, and 
fully electric vehicles, and CNG vehicles. However, the MY 2021 
standards would not need to be met for another 8 years. Today's Toyota 
Prius (three versions), Ford Fusion Hybrid, Chevrolet Volt, Nissan 
Leaf, Honda Civic Hybrid, Camry Hybrid, Lexus CT 200h Hybrid, Lincoln 
MKZ Hybrid, and Hyundai Sonata Hybrid all meet or surpass the 
footprint-based CO2 targets through MY 2025. In fact, the 
current Prius, Volt, and several EVs meet the 2025 CO2 
targets without air conditioning credits.
    This assessment of MY 2012 and MY 2013 vehicles makes it clear that 
HEV technology (and of course EVs and PHEVs) is capable of achieving 
the MY 2025 standards. However, as discussed earlier in this section, 
EPA's modeling projects that the MY 2017-2025 standards can primarily 
be achieved by advanced gasoline vehicles--for example, in MY 2025, we 
project more than 75 percent of the new vehicles could be advanced 
gasoline powertrains. The assessment of MY 2012 and MY 2013 vehicles 
available in the market today indicates advanced gasoline vehicles (as 
well as diesels) can achieve the targets for the early model years of 
the program (i.e., model years 2017-2022) with only improvements in air 
conditioning systems. However, significant improvements in technologies 
are needed and penetrations of those technologies must increase 
substantially in order for individual manufacturers (and the fleet 
overall) to achieve the standards for the early years of the program, 
and certainly for the later years. These technology improvements are 
the very technologies EPA and NHTSA describe in detail in Chapter 3 of 
the Joint Technical Support Document and for which we project 
penetration rates earlier in this section III.D. These technologies 
include, for example: Gasoline direct injection fuel systems; downsized 
and turbocharged gasoline engines (including in some cases with the 
application of cooled exhaust gas recirculation); continued 
improvements in engine friction reduction and low friction lubricants; 
transmissions with an increased number of forward gears (e.g., 8 
speeds); improvements in transmission shifting logic; improvements in 
transmission gear box efficiency; vehicle mass reduction; lower rolling 
resistance tires, and improved vehicle aerodynamics. In most cases, 
these technologies are beginning to penetrate the U.S. light-duty 
vehicle market.
    In general, these technologies must go through the automotive 
product development cycle in order to be introduced into a vehicle. In 
some cases additional research is needed before the technologies' 
CO2 benefits can be fully

[[Page 62884]]

realized and large-scale manufacturing can be achieved. The subject of 
technology penetration phase-in rates is discussed in more detail in 
Chapter 3.4.2 of the Joint Technical Support Document. In that Chapter, 
we explain that many CO2 reducing technologies should be 
able to penetrate the new vehicle market at high levels between now and 
MY 2016. These are also many of the key technologies we project as 
being needed to achieve the MYs 2017-2025 standards which will only be 
able to penetrate the market at relatively low levels (e.g., a maximum 
level of 30% or less) by MY 2016, and even by MY 2021. These include 
important powertrain technologies such as 8-speed transmissions and 
second or third generation downsized engines with turbocharging.
    The majority of these technologies must be integrated into vehicles 
during the product redesign schedule, which is typically on a 5-year 
cycle. EPA discussed in the MY 2012-2016 rule the significant costs and 
potential risks associated with requiring major technologies to be 
added in-between the typical 5-year vehicle redesign schedule (see 75 
FR 25467-68, May 7, 2010). In addition, engines and transmissions 
generally have longer lifetimes than 5 years, typically on the order of 
10 years. Thus, major powertrain technologies generally take longer to 
penetrate the new vehicle fleet than can be done in a 5-year redesign 
cycle. As detailed in Chapter 3.4 of the Joint TSD, EPA projects that 
8-speed transmissions could increase their maximum penetration in the 
fleet from 30% in MY 2016 to 80% in MY 2021 and to 100% in MY 2025. 
Similarly, we project that second generation downsized and turbocharged 
engines (represented in our assessment as engines with a brake-mean 
effective pressure of 24 bars) could penetrate the new vehicle fleet at 
a maximum level of 15% in MY 2016, 30% in MY 2021, and 75% in MY 2025. 
When coupled with the typical 5-year vehicle redesign schedule, EPA 
projects that it is not possible for all of the advanced gasoline 
vehicle technologies we have assessed to penetrate the fleet in a 
single 5-year vehicle redesign schedule.
    Given the status of the technologies we project to be used to 
achieve the MY 2017-2025 standards and the product development and 
introduction process which is fairly standard in the automotive 
industry today, our assessment of the MY 2012 and MY 2013 vehicles in 
comparison to the standards supports our overall feasibility 
assessment, and reinforces our assessment of the lead time needed for 
the industry to achieve the standards.

E. Certification, Compliance, and Enforcement

1. Compliance Program Overview
    This section summarizes EPA's comprehensive program to ensure 
compliance with emission standards for carbon dioxide (CO2), 
nitrous oxide (N2O), and methane (CH4), as 
described in Section III.B. An effective compliance program is 
essential to achieving the environmental and public health benefits 
promised by these mobile source GHG standards. EPA's GHG compliance 
program is designed around two overarching priorities: (1) To address 
Clean Air Act (CAA) requirements and policy objectives; and (2) to 
streamline the compliance process for both manufacturers and EPA by 
building on existing practice wherever possible, and by structuring the 
program such that manufacturers can use a single data set to satisfy 
both GHG and Corporate Average Fuel Economy (CAFE) testing and 
reporting requirements. EPA has had the statutorily-designated 
responsibility for managing the testing, data collection, and 
calculation procedures of the CAFE program since the 1970's, see 49 
U.S.C. 32904(c) and EPA's experience with that program allowed EPA to 
integrate the newer GHG requirements with the older CAFE requirements 
such that little to no additional test data is required and data and 
reporting requirements are largely synchronized. The EPA and NHTSA 
programs for MYs 2017 and later replicate the compliance protocols 
established in the MY 2012-2016 rule.\627\ The certification, testing, 
reporting, and associated compliance activities track current practices 
and are thus familiar to manufacturers. As is the case under the MYs 
2012-2016 program, EPA and NHTSA have designed a coordinated compliance 
approach for MY 2017 and later model years such that the compliance 
mechanisms for both GHG and CAFE standards are consistent and non-
duplicative. Readers are encouraged to review the MYs 2012-2016 final 
rule for background and a detailed description of these certification, 
compliance, and enforcement requirements.\628\
---------------------------------------------------------------------------

    \627\ See 75 FR 25468, May 7, 2010.
    \628\ Also see current regulations at 40 CFR Part 86, Subpart S, 
and 40 CFR Part 600.
---------------------------------------------------------------------------

    Vehicle emission standards established under the CAA apply 
throughout a vehicle's full useful life. Today's rule establishes two 
sets of EPA standards: fleet average greenhouse gas standards and in-
use standards. Compliance with the fleet average standard in a given 
model year is determined based on testing performed prior to production 
and on actual vehicle production in that model year, as with the 
current CAFE standards. EPA is also establishing in-use standards that 
apply throughout a vehicle's useful life, with the in-use standard 
determined by adding an adjustment factor to the emission results used 
to calculate the fleet average.\629\ EPA's program will thus not only 
assess compliance with the fleet average standards described in Section 
III.B, but will also assess compliance with the in-use standards. As it 
does now, EPA will use a variety of compliance mechanisms to conduct 
these assessments, including pre-production certification and post-
production in-use monitoring once vehicles enter customer service. 
Under this compliance program manufacturers will also be afforded 
numerous flexibilities to help achieve compliance, both stemming from 
the program design itself in the form of a manufacturer-specific 
CO2 fleet average standard, as well as in various credit 
banking and trading opportunities, as described in Section III.C. 
Because much of the compliance program was largely finalized with the 
2012-2016 GHG standards, there were very few comments specifically 
related to these elements of the 2017 and later GHG program. Comments 
mostly addressed some of the newly proposed provisions, such as new 
flexibilities for off-cycle credits, credits for certain pickup trucks, 
small volume alternative standards, and others. These comments are 
discussed in Sections III.B and III.C. The compliance program is 
summarized in further detail below.
---------------------------------------------------------------------------

    \629\ Dual fuel vehicles (with the exception of plug-in hybrid 
electric vehicles) are treated slightly differently. These vehicles 
would be potentially tested in use on either or both fuels, and each 
fuel would have an associated standard.
---------------------------------------------------------------------------

2. Compliance With Fleet-Average CO2 Standards
    Fleet average emission levels can only be determined when a 
complete fleet profile becomes available at the close of the model 
year. Therefore, EPA will determine compliance with the fleet average 
CO2 standards when the model year closes out, based on 
actual production figures for each model type \630\ and on emissions 
data collected through testing over the course of the model year. 
Manufacturers will submit this information to EPA in an end-of-year 
report which is discussed in detail

[[Page 62885]]

in Section III.E.5.h of the MYs 2012-2016 final rule preamble (see 75 
FR 25481). EPA received no significant comments on these general 
compliance provisions, unless specifically noted below, and these 
provisions are being finalized as they were proposed.
---------------------------------------------------------------------------

    \630\ A model type is ``a unique combination of car line, basic 
engine, and transmission class'' (40 CFR 600.002).
---------------------------------------------------------------------------

a. Compliance Determinations
    As described in Section III.B above, the fleet average standards 
will be determined on a manufacturer-by-manufacturer basis, separately 
for cars and trucks, using the footprint attribute curves. EPA will 
calculate the fleet average emission level using actual production 
figures and CO2 emission test values generated at the time 
of a manufacturer's CAFE testing. EPA will then compare the actual 
fleet average to the manufacturer's footprint-based fleet standard to 
determine compliance, taking into consideration use of averaging and 
credits.
    Final determination of compliance with fleet average CO2 
standards may not occur until several years after the close of the 
model year due to the flexibilities allowing the carry-forward and 
carry-back of credits and the remediation of deficits (see Section 
III.B). A failure to meet the fleet average standard after credit 
opportunities have been exhausted could ultimately result in penalties 
and injunctive orders under the CAA as described in Section III.E.6 
below.
b. Required Minimum Testing For Fleet Average CO2
    EPA will require and use the same test data to determine a 
manufacturer's compliance with both the CAFE standard and the fleet 
average CO2 emissions standard. Please see Section III.E.2.b 
of the MYs 2012-2016 final rule preamble (75 FR 25469) for details.
3. Vehicle Certification
    CAA section 203(a)(1) prohibits manufacturers from introducing a 
new motor vehicle into commerce unless the vehicle is covered by an 
EPA-issued certificate of conformity. Section 206(a)(1) of the CAA 
describes the requirements for EPA issuance of a certificate of 
conformity, based on a demonstration of compliance with the emission 
standards established by EPA under section 202 of the Act. The 
certification demonstration requires emission testing, and must be done 
for each model year.\631\
---------------------------------------------------------------------------

    \631\ CAA section 206(a)(1).
---------------------------------------------------------------------------

    Since compliance with a fleet average standard depends on actual 
production volumes, it is not possible to determine compliance with the 
fleet average at the time the manufacturer applies for and receives a 
certificate of conformity for a test group. Instead, EPA will continue 
to condition each certificate of conformity for the GHG program upon a 
manufacturer's demonstration of compliance with the manufacturer's 
fleet-wide average CO2 standard. Please see Section III.E.3 
of the MYs 2012-2016 final rule preamble (75 FR 25470) for a discussion 
of how EPA will certify vehicles under the GHG standards.
4. Useful Life Compliance
    Section 202(a)(1) of the CAA requires emission standards to apply 
to vehicles throughout their statutory useful life, as further 
described in Section III.A. The in-use CO2 standard under 
the greenhouse gas program would apply to individual vehicles and is 
separate from the fleet-average standard. The in-use CO2 
standard for each model type would be the model-specific CO2 
level used in calculating the fleet average, adjusted to be 10% higher 
to account for test-to-test and production variability that might 
affect in-use test results. Please see Section III.E.4 of the MYs 2012-
2016 final rule preamble (75 FR 25473) for a detailed discussion of the 
in-use standard, in-use testing requirements, and use of deterioration 
factors for CO2, N2O, and CH4.
5. Credit Program Implementation
    As described in Section III.C, several credit programs are 
available under this rulemaking, including some new programs which are 
not part of the MYs 2012-2016 rule (e.g., credits for certain pickup 
trucks). Please see Section III.E.5 of the MYs 2012-2016 final rule 
preamble (75 FR 25477) for a detailed explanation of credit program 
implementation, sample credit and deficit calculations, and end-of-year 
reporting requirements.
6. Enforcement
    The enforcement structure EPA promulgated under the MYs 2012-2016 
rulemaking remains in place. Please see Section III.E.6 of the MYs 
2012-2016 final rule preamble (75 FR 25482) for a discussion of these 
provisions.
    Section 203 of the Clean Air Act describes acts that are prohibited 
by law. This section and associated regulations apply equally to the 
greenhouse gas standards as to any other regulated emissions. Acts that 
are prohibited by section 203 of the Clean Air Act include the 
introduction into commerce or the sale of a vehicle without a 
certificate of conformity, removing or otherwise defeating emission 
control equipment, the sale or installation of devices designed to 
defeat emission controls, and other actions. EPA finalized language in 
the 2012 greenhouse gas regulations that details the specific 
prohibited acts under the Clean Air Act. While these regulations carry 
no specific regulatory burden and essentially repeat the Clean Air Act 
language, EPA believed that providing that language was helpful and 
added clarity to our regulations. We proposed no changes to this 
language in this rulemaking for the 2017 and later model years, no 
comments were received, and thus the language will continue to apply to 
the 2017 and later model years.
7. Other Certification Issues
a. Carryover/Carry Across Certification Test Data
    EPA's certification program for vehicles allows manufacturers to 
carry certification test data over and across certification testing 
from one model year to the next, when no significant changes to models 
are made. EPA would continue to apply this policy to CO2, 
N2O and CH4 certification test data and would 
allow manufacturers to use carryover and carry across data to 
demonstrate CO2 fleet average compliance if they have done 
so for CAFE purposes. For test groups that are using carry-over data 
for certification, EPA will allow those test groups to carry over the 
N2O compliance statement (now allowed through the 2016 model 
year) into the 2017 and 2018 model years.
b. Compliance Fees
    The CAA allows EPA to collect fees to cover the costs of issuing 
certificates of conformity for the classes of vehicles covered by this 
rule.
    At this time the extent of any added costs to EPA as a result of 
this rule is not known. EPA will assess its compliance testing and 
other activities associated with the rule and may amend its fees 
regulations in the future to include any warranted new costs.
c. Small Entity Exemption
    As discussed in Section III.B.7, businesses meeting the Small 
Business Administration (SBA) criterion of a small business as 
described in 13 CFR 121.201 were entirely exempted from the MYs 2012-
2016 GHG requirements. However, based on comments from at least one 
small business, we are including a provision in this final rule that 
will provide these previously exempted manufacturers with the option of 
voluntarily opting in to the program. Once opted in, however, such a 
manufacturer would be fully subject to

[[Page 62886]]

all the GHG standards and requirements in the regulations.
    As discussed in detail in Section III.B.5, small volume 
manufacturers with annual sales volumes of less than 5,000 vehicles 
will be required to meet the primary GHG standards, with the option of 
petitioning the Agency for alternative standards developed on a case-
by-case basis.
d. Onboard Diagnostics (OBD) and CO2 Regulations
    As under the current program, EPA will not require CO2, 
N2O, and CH4 emissions as one of the applicable 
standards required for the OBD monitoring threshold.
e. Applicability of Current High Altitude Provisions to Greenhouse 
Gases
    As under the current program, vehicles covered by this rule would 
be required to meet the CO2, N2O and 
CH4 standard at altitude but would not normally be required 
to submit vehicle CO2 test data for high altitude. Instead, 
they would submit an engineering evaluation indicating that common 
calibration approaches will be utilized at high altitude.
f. Applicability of Standards to Aftermarket Conversions
    With the exception of the small business exemption and the 
conditional exemption for small volume manufacturers available through 
the 2016 model year, EPA's emission standards, including greenhouse gas 
standards, will continue to apply as stated in the applicability 
sections of the relevant regulations. EPA expects that some aftermarket 
conversion companies will qualify for and seek the small business 
exemption, but those that do not qualify will be required to meet the 
applicable emission standards, including the greenhouse gas standards, 
to qualify for a tampering exemption under 40 CFR subpart F. Because 
fuel converters are not required to meet a fleet average standard, the 
new provisions allowing a small volume manufacturer to petition EPA for 
alternative standards do not apply. Fleet average standards are not 
generally appropriate for fuel conversion manufacturers because the 
``fleet'' of vehicles to which a conversion system may be applied has 
already been accounted for under the OEM's fleet average standard. 
Therefore, EPA is retaining the process promulgated in 40 CFR part 85 
subpart F anti-tampering regulations whereby conversion manufacturers 
demonstrate compliance at the vehicle rather than the fleet level. Fuel 
converters will continue to show compliance with greenhouse gas 
standards by submitting data to demonstrate that the conversion 
emission data vehicle N2O, CH4 and CREE results 
are less than or equal to the OEM's in-use standard for that 
subconfiguration. EPA is also continuing to allow conversion 
manufacturers, on a test group basis, to convert CO2 over-
compliance into CO2 equivalents of N2O and/or 
CH4 that can be subtracted from the CH4 and 
N2O measured values to demonstrate compliance with 
CH4 and/or N2O standards.
g. Geographical Location of Greenhouse Gas Fleet Vehicles
    EPA emission certification regulations require emission compliance 
\632\ 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.
---------------------------------------------------------------------------

    \632\ Section 216 of the Clean Air Act defines the term commerce 
to mean ``(A) commerce between any place in any State and any place 
outside thereof; and (B) commerce wholly within the District 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 Virgin Islands, Guam, and American Samoa and 
includes the 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 the Northern Mariana Islands, Guam, 
American Samoa, and the U.S. Virgin Islands.''
---------------------------------------------------------------------------

h. Temporary Lead-time Allowance Alternative Standards (TLAAS) 
Implementation
    EPA is also clarifying provisions of the MYs 2012-2016 light duty 
vehicle GHG standards to address an inadvertent gap in those rules 
dealing with situations of mergers between non-TLAAS manufacturers and 
TLAAS manufacturers. By way of background, the TLAAS provisions provide 
additional lead time for limited volume manufacturers, whereby a 
specified number of vehicles are subject to a less stringent standard 
in either MYs 2012-2015, or (for smaller volume manufacturers), MY 
2016. See 75 FR 25414-419. Limited volume manufacturers may elect to 
use the TLAAS provisions, but are not required to do so.
    The TLAAS rule provisions address situations where TLAAS 
manufacturers merge with or are acquired by another manufacturer. See 
section 86.1818-12(e)(1)(i)(B) and (C). These provisions address two 
scenarios. The first is when companies merge and the new company 
exceeds the 400,000 vehicle sale threshold (the eligibility threshold 
for the base TLAAS program). In such cases, the manufacturer may use 
TLAAS in the model year underway at the point of the merger, but loses 
eligibility in the model year following the merger.\633\ For example, 
if the merger takes place during MY 2013 (which began January 2, 2012), 
beginning in MY 2014, the merged entity may not use TLAAS. The second 
scenario addressed by the regulations is where the companies being 
merged are both TLAAS manufacturers, and both participate in TLAAS, and 
the merged company does not exceed the 400,000 vehicle threshold. In 
such cases the allotments of the two companies under TLAAS are not 
additive and the new (merged) company only receives a single TLAAS 
allotment.
---------------------------------------------------------------------------

    \633\ The model year following the merger is referred to as the 
model year that is numerically two years greater than the calendar 
year in which the merger/acquisition took place in the regulatory 
text.
---------------------------------------------------------------------------

    EPA received a comment from Volkswagen requesting clarification in 
cases where the parent company, while eligible for TLAAS, has not 
elected to use TLAAS and does not plan to use TLAAS for future years. 
The commenter recommended that in such a case, the parent company 
should have the option of being treated in the same manner as when the 
company resulting from the merger exceeds the 400,000 vehicle threshold 
(i.e., the first scenario described above). The company would no longer 
be allowed to use TLAAS in the model year following the merger but 
could use TLAAS for the company being acquired for the model years 
already underway. EPA recognizes that this was not a scenario 
specifically contemplated by the existing regulatory language, but we 
believe that this is a reasonable approach since it brings parity to 
the transitional merger provisions of a large (non-TLAAS eligible) 
company compared to those of a TLAAS eligible company that chooses to 
forgo its opportunity to participate in the TLAAS program. EPA is 
adding this clarification to the MYs2012-2016 regulations. The revised 
regulatory text clarifies that in cases where one manufacturer that is 
eligible for TLAAS but nevertheless elects to forgo the use of TLAAS 
acquires another company that is already using TLAAS, the parent 
company is required to end the use of TLAAS for the acquired company in 
the model year following the merger (whether or not the 400,000 sales 
threshold is exceeded). The

[[Page 62887]]

manufacturer must notify EPA in writing prior to the end of the model 
year in which the merger is effective of its decision to elect not to 
use the TLAAS program in any year. As provided in the current rules, 
the total cumulative allotment that may be used for the manufacturer 
being acquired is limited to 100,000 vehicles (i.e., the lower level of 
allotments available to companies with between 50,000-400,000 vehicle 
sales).
    In addition to treating all non-TLAAS participants identically in 
this situation, the clarified rule leads to environmental benefits 
compared to the alternative. Consider the case of a merger between a 
TLAAS-eligible TLAAS non-participant and a TLAAS manufacturer with 
sales under 50,000, where the merged entity remains under the 400,000 
sales threshold. Without today's clarified rule, the merged entity 
would have a strong incentive to elect to use TLAAS, because the 
present rules only provide all-or-nothing alternatives due to the lack 
of explicit provisions allowing the additional model year of TLAAS for 
the smaller merger partner. Thus, the merged entity could produce up to 
100,000 vehicles (minus the TLAAS allotment already used by the smaller 
company) through MY 2015 which would be subject to the more lenient 
TLAAS standards. Under the clarified rule, the merged entity could use 
the TLAAS allotment for the smaller company for one additional model 
year, at which point the merged entity would be subject to the 
principal GHG standards (i.e. just as if the merger exceeded the 
400,000 sales threshold, as in present section 86.1818-12 (e)(1) (i)).
8. Warranty, Defect Reporting, and Other Emission-related Components 
Provisions
    This rulemaking would retain warranty, defect reporting, and other 
emission-related component provisions promulgated in the MY 2012-2016 
rulemaking. Please see Section III.E.10 of the MYs 2012-2016 final rule 
preamble (75 FR 25486) for a discussion of these provisions.
9. Miscellaneous Technical Amendments and Corrections
    EPA is including a number of noncontroversial amendments and 
corrections to the existing regulations in this final rule. Because the 
regulatory provisions for the EPA greenhouse gas program, NHTSA's CAFE 
program, and the joint fuel economy and environment labeling program 
are all intertwined in 40 CFR Part 600, this rule presents an 
opportunity to make corrections and clarifications to all or any of 
these programs. Consequently, EPA proposed and is now finalizing a 
number of minor and non-substantive corrections to the regulations that 
implement these programs. We note that certain provisions of the 
existing model year 2012-2016 program are repeated in the final 
regulations for readers' convenience. We are not reopening. 
reconsidering. or otherwise reexamining those provisions.
    Amendments include the following:

In section 86.135-12, we have removed references to the model year 
applicability of N2O measurement. This applicability is 
covered elsewhere in the regulations, and we believe that--where 
possible--testing regulations should be limited to the specifics of 
testing and measurement.
EPA proposed to revise the definition of ``Footprint'' in 86.1803-01 to 
clarify measurement and rounding. The previous definition stated that 
track width is ``measured in inches,'' which may inadvertently imply 
measuring and recording to the nearest inch. The revised definition 
clarifies that measurements should be to the nearest one tenth of an 
inch, and average track width should be rounded to the nearest tenth of 
an inch. EPA received no comments on this provision, and is finalizing 
as proposed.

    We are also finalizing a solution to a situation in which a 
manufacturer of a clean alternative fuel conversion is attempting to 
comply with the fuel conversion regulations (see 40 CFR part 85 subpart 
F) at a point in time before which certain data is available from the 
original manufacturer of the vehicle. Clean alternative fuel 
conversions are subject to greenhouse gas standards if the vehicle as 
originally manufactured was subject to greenhouse gas standards, unless 
the conversion manufacturer qualifies for exemption as a small 
business. Compliance with light-duty vehicle greenhouse gas emission 
standards is demonstrated by complying with the N2O and 
CH4 standards and the in-use CO2 exhaust emission 
standard set forth in 40 CFR 86.1818-12(d) as determined by the 
original manufacturer for the subconfiguration that is identical to the 
fuel conversion emission data vehicle (EDV). However, the 
subconfiguration data may not be available to the fuel conversion 
manufacturer at the time they are seeking EPA certification. Several 
compliance options are currently provided to fuel conversion 
manufacturers that are consistent with the compliance options for the 
original equipment manufacturers. EPA is adding another option that 
will be applicable starting with the 2012 model year. The new option 
will allow clean alternative fuel conversion manufacturers to satisfy 
the greenhouse gas standards if the pre-conversion sum of 
CH4 plus N2O plus CREE emissions from the vehicle 
is less than the post-conversion emissions, adjusting for the global 
warming potential of the constituents.
10. Base Tire Definition
    One of the factors in a manufacturer's calculation of vehicle 
footprint is the base tire. Footprint is based on a vehicle's wheel 
base and track width, and track width in turn is ``the lateral distance 
between the centerlines of the base tires at ground, including the 
camber angle.'' \634\ EPA's current definition of base tire is the 
``tire specified as standard equipment by the manufacturer.'' \635\ 
NHTSA proposed a specific change to the base tire definition for the 
CAFE program (see Section IV.I.5.g, and proposed 49 CFR 523.2), and EPA 
requested comment on whether the base tire definition should be 
clarified to ensure a more uniform application across manufacturers (76 
FR 75088, December 1, 2011).
---------------------------------------------------------------------------

    \634\ See 40 CFR 86.1803-01
    \635\ See 40 CFR 86.1803-01, and 40 CFR 600.002. Standard 
equipment means those features or equipment which are marketed on a 
vehicle over which the purchaser can exercise no choice.
---------------------------------------------------------------------------

    Vehicle manufacturers were the only parties providing comments on 
this issue, and they were essentially unanimous in stating a desire for 
a level playing field, while reiterating that the issue is complex. 
Several manufacturers pointed out that the proposed NHTSA definition, 
which includes a connection to a vehicle configuration, may not be 
workable because the definition of a configuration is independent of 
vehicle size, or footprint. Several manufacturers suggested that EPA, 
NHTSA, and the auto companies should postpone action on this issue in 
this rule and work together to ensure a consistent and complete 
understanding of the issue. Others agreed that the definition could 
benefit from some clarification. After consideration of the comments, 
and a recognition of the importance that the footprint calculation (and 
therefore all the elements that comprise the footprint calculation) be 
harmonized across EPA and NHTSA, EPA is finalizing a revised definition 
in this final rule, which is consistent with the definition being 
finalized by NHTSA. The revised definition is as follows:

    Base tire means the tire size specified as standard equipment by 
the manufacturer on each unique

[[Page 62888]]

combination of a vehicle's footprint and model type. Standard equipment 
is defined in 40 CFR 86.1803-01.
    This definition appropriately removes the link to vehicle 
configuration that was in NHTSA's proposal, and improves upon EPA's 
existing definition with additional specificity that is consistent with 
the goal of a footprint-based program, which, as stated by the Alliance 
of Automobile Manufacturers, is that ``All vehicles should be included 
* * * using a representative footprint based on the physical vehicle * 
* *'' EPA agrees with this broadly stated goal, and we believe that the 
revised definition offers reasonable clarification that should help 
ensure a consistent application of the footprint-based standards across 
manufacturers. This new definition, which is harmonized with the 
definition being finalized by NHTSA, is also consistent with existing 
regulatory language that specifies how EPA intends that footprint-based 
standards be implemented. For example, EPA regulations currently state 
that ``Each CO2 target value, which represents a unique 
combination of model type and footprint value, shall be multiplied by 
the total production of that model type/footprint combination for the 
appropriate model year'' (see 40 CFR 86.1818-12(c)(2)).
11. Treatment of Driver-Selectable Modes and Conditions
    EPA requested comments on whether there is a need to clarify in the 
regulations how EPA treats driver-selectable modes (such as multi-mode 
transmissions and other user-selectable buttons or switches) that may 
impact fuel economy and GHG emissions in certification testing. See 76 
FR 75089; see also section II.F of this preamble for a discussion of 
how driver-selectable technologies may be eligible for off-cycle 
credits under the case-by-case demonstration provisions in the rule. 
New technologies continue to arrive on the market, with increasing 
complexity and an increasing array of ways a driver can make choices 
that affect the fuel economy and greenhouse gas emissions. For example, 
some start-stop systems may offer the driver the option of choosing 
whether or not the system is enabled. Similarly, vehicles with ride 
height adjustment or grill shutters may allow drivers to override those 
features. Note that this discussion pertains specifically to 
implementing the testing required on the Federal Test Procedure and the 
Highway Fuel Economy Test to generate combined City/Highway GHG and MPG 
values for each model type for use in calculating fleet average GHG and 
MPG values. For the purpose of assigning off-cycle credit values that 
may be based on a driver-selectable technology (see section II.F), 
where determination of an accurate real-world benefit of the technology 
is a fundamental goal, the policy described here and in current EPA 
guidance may not be appropriate.
    Under the current regulations, EPA draws a distinction between 
vehicles tested for purposes of CO2 emissions performance 
and fuel economy and vehicles tested for non-CO2 emissions 
performance. When testing emission data vehicles for certification 
under Part 86 for non-CO2 emissions standards, a vehicle 
that has multiple operating modes must meet the applicable emission 
standards in all modes, and on all fuels. Sometimes testing may occur 
in all modes, but more frequently the worst-case mode is selected for 
testing to represent the emission test group. For example, a vehicle 
that allows the user to disengage the start-stop capability must meet 
the standards with and without the start-stop system operating. 
Similarly, a plug-in hybrid electric vehicle is tested in charge-
sustaining (i.e., gasoline-only) operation. Current regulations require 
the reporting of CO2 emissions from certification tests 
conducted under Part 86, but EPA regulations also recognize that these 
values, from emission data vehicles that represent a test group, are 
ultimately not the values that are used to establish in-use 
CO2 standards (which are established on much more detailed 
sub-configuration-specific level) or the model type CO2 and 
fuel economy values used for fleet averaging under Part 600.
    When EPA tests vehicles for fuel economy and CO2 
emissions performance, user-selectable modes are treated somewhat 
differently, where the goals are different and where worst-case 
operation may not be the appropriate choice for testing. For example, 
EPA does not believe that the fuel economy and CO2 emissions 
value for a PHEV should ignore the use of grid electricity, or that 
other dual fuel vehicles should ignore the real-world use of 
alternative fuels that reduce GHG emissions. For PHEVs and dual fuel 
CNG vehicles, where the consumer pays an up-front premium for the 
vehicle but can recoup that investment by using a less expensive fuel, 
the regulations allow the use of utility factors to weight the 
CO2 performance on the conventional fuel and the alternative 
fuel. Similarly, non-CO2 emission certification testing may 
be done in a transmission mode that is not likely to be the predominant 
mode used by consumers. Testing under Part 600 must determine a single 
fuel economy value for each model type for the CAFE program and a 
single CO2 value for each model type for EPA's program. With 
respect to transmissions, Part 600 refers to 40 CFR 86.128, which 
states the following:
    ``All test conditions, except as noted, shall be run according 
to the manufacturer's recommendations to the ultimate purchaser, 
Provided, That: Such recommendations are representative of what may 
reasonably be expected to be followed by the ultimate purchaser 
under in-use conditions.''

    For multi-mode transmissions EPA relies on guidance letter CISD-09-
19 (December 3, 2009) to guide the determination of what is 
``representative of what may reasonably be expected to be followed by 
the ultimate purchaser under in-use conditions.'' If EPA can make a 
determination that a certain mode is the ``predominant'' mode (meaning 
nearly total usage), then testing may be done in that mode. However, if 
EPA cannot be convinced that a single mode is predominant, then fuel 
economy and GHG results from each mode are typically averaged with 
equal weighting. There are also detailed provisions that explain how a 
manufacturer may conduct surveys to support a statement that a given 
mode is predominant. However, CISD-09-19 only addresses transmissions, 
and states the following regarding other technologies:

    ``Please contact EPA in advance to request guidance for vehicles 
equipped with future technologies not covered by this document, 
unusual default strategies or driver selectable features, e.g., 
hybrid electric vehicles where the multimode button or switch 
disables or modifies any fuel saving features of the vehicle (such 
as the stop-start feature, air conditioning compressor operation, 
electric-only operation, etc.).''

    The unique operating characteristics of these technologies often 
requires that EPA determine fuel economy and CO2 testing and 
calculations on a case-by-case basis. Because the CAFE and 
CO2 programs require a single value to represent a model 
type, EPA must make a decision regarding how to account for multiple 
modes of operation. When a manufacturer brings such a technology to us 
for consideration, we will evaluate the technology (including possibly 
requiring that the manufacturer give us a vehicle to test) and provide 
the manufacturer with instructions on how to determine fuel economy and 
CO2 emissions. In general we will evaluate these 
technologies in the same way and following the same principles we use 
to evaluate transmissions under CISD-09-19, making a determination as 
to whether a given operating mode is predominant or not (using the 
criteria for predominance described in CISD-

[[Page 62889]]

09-19). These instructions are provided to the manufacturer under the 
authority for special test procedures described in 40 CFR 600.111-08. 
EPA would apply the same approach to testing for compliance with the 
in-use CO2 standard, so testing for the CO2 fleet 
average and testing for compliance with the in-use CO2 
standard would be consistent.
    EPA requested comment on whether the current approach and 
regulatory provisions are sufficient, or whether additional regulations 
or guidance should be developed to describe EPA's process. 
Manufacturers, who were the only commenters on this issue, commented 
that the current case-by-case approach is adequate, and EPA agrees. We 
recognize that no regulation can anticipate all options, devices, and 
operator controls that may arrive in the future, and adequate 
flexibility to address future situations is an important attribute for 
fuel economy and CO2 emissions testing. We believe it would 
be difficult at this time to construct regulations that adequately and 
generically address the use of multiple modes in GHG/MPG testing.
12. Publication of GHG Compliance Information
    As was the case in the MYs 2012-2016 regulation, EPA received 
several comments 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. 
NRDC argued that EPA and NHTSA should publish data on each 
manufacturer's credit status and technology penetration on an annual 
basis. They suggested specific data that should be disclosed, by car 
and truck fleets, including the amount of cumulative credits or debits, 
the within-manufacturer credit transfers between car and truck fleets, 
air conditioning credits, use of multipliers for EVs, PHEVs, and FCVs, 
full size pick-up truck HEV and performance-based credits, and off-
cycle technology credits. They further suggested that the Fuel Economy 
Trends Report and the Fuel Economy Guide and associated online database 
could be enhanced to include additional vehicle and technology 
information, by model and manufacturer. The Union of Concerned 
Scientists (UCS) reiterated these comments, noting that EPA should have 
a ``clear public accounting of credits and program compliance.'' They 
specifically request that data at the ``sub-model level'' be published 
regularly, and that such data include the following: model year, make, 
model/nameplate, engine family, transmission type, criteria pollutant 
certification levels, number of cylinders, fuel type, drive type, 
horsepower, footprint, GHG emissions and fuel economy test results, 
window label fuel economy, sales volume, sales origin, market 
classification, EPA classification, and whether a vehicle is using the 
TLAAS program standards. Like NRDC, UCS also requested enhancements to 
the Light-Duty Automotive Technology, Carbon Dioxide Emissions, and 
Fuel Economy Trends report by adding information on car/truck 
designations and vehicle size/footprint.
    EPA remains committed to the principle of transparency and to 
disseminating as much information as we are reasonably and legally able 
to provide. Not surprisingly, manufacturers have also commented about 
the need to protect confidential business information, a practice to 
which we also remain committed. As stated in the MYs 2012-2016 final 
rule, EPA expects that the dissemination of GHG program data will 
possibly take place through the annual Fuel Economy Trends report, the 
annual Compliance Report, or through other means, such as online 
distribution through fueleconomy.gov or other EPA Web sites, new GHG-
specific reports, or through some combination of all of these. Given 
that the data will be released well after the conclusion of a given 
model year, certain information is clearly no longer confidential 
business information. For example, vehicle production volumes by model 
type are unlikely to be treated as confidential given that essentially 
the same information can be purchased from sources like WardsAuto. But 
production volumes at a finer level of detail, such as at the 
subconfiguration or configuration level, could potentially be 
considered confidential because those volumes, which are not available 
elsewhere, may potentially reveal something about a manufacturer's 
long-term strategies. These are issues and questions that EPA expects 
to be addressing as we move forward with publishing our compliance 
data.
    EPA already releases a considerable amount of information regarding 
fuel economy, emissions, and vehicle characteristics, both at the test 
level and at the model type level.\636\ The downloadable model type 
data available at fueleconomy.gov will soon have CO2 
emissions values (adjusted label values and unadjusted values, similar 
to the MPG reporting) in addition to the 127 columns of data we already 
provide for each model type. However, we plan to expand what we release 
publicly such that more information is available regarding GHG program 
compliance, For example, EPA intends to publish the applicable fleet 
average standards (for cars and for trucks) and the actual fleet 
performance for each manufacturer, and the resulting credits or debits 
(in Megagrams, or metric tons). In addition, EPA anticipates publishing 
the amount of credits generated by each manufacturer (separately for 
each of the car and truck fleets) under the optional credit programs, 
and the associated volumes of vehicles to which those credits apply. 
EPA will also likely publish various credit transactions (transfers 
among fleets within a manufacturer and trades between manufacturers), 
as well as the total credits or debits accumulated in a model year and 
the resulting overall credit or debit balance, taking into account the 
credit and debit carry-forward provisions. EPA anticipates that the 
data publication will evolve over time, both as the program progresses 
and as our data systems adapt to the new requirements and are able to 
manage and report data accurately and effectively. For example, our 
first public release of information is likely to be a summary of the 
early credits generated in the 2009-2011 model years that, at least 
initially, may not be as comprehensive as the reporting that follows 
the 2012 model year.\637\ EPA is currently assessing how to best 
release these data (both the content and the mechanism), but expects 
that publication will occur later this year.
---------------------------------------------------------------------------

    \636\ See http://www.epa.gov/otaq/tcldata.htm and http://www.fueleconomy.gov/.
    \637\ Reporting of these credits was due from manufacturers at 
the end of March, 2012, and EPA is currently evaluating the data to 
ensure compliance with regulatory requirements.
---------------------------------------------------------------------------

F. How will this rule reduce GHG emissions and their associated 
effects?

    This action is an important step towards curbing growth of GHG 
emissions from cars and light trucks. In the absence of control, GHG 
emissions worldwide and in the U.S. are projected to continue steady 
growth. Table III-60 shows emissions of carbon dioxide 
(CO2), methane (CH4), nitrous oxide 
(N2O) and air conditioning refrigerant (HFC-134a) on a 
CO2-equivalent basis for calendar years 2010, 2020, 2030, 
2040 and 2050. As shown below, in 2010 U.S. GHG emissions made up 
roughly 15 percent of total worldwide emissions. The contribution of 
direct emissions from cars and light-trucks to this U.S. share is an 
estimated 16 percent of U.S. emissions by 2030 in the

[[Page 62890]]

absence of control (beyond the control provided by the MY 2016 GHG 
standards for these vehicles). As discussed later in this section, this 
steady rise in GHG emissions is associated with numerous adverse 
impacts on human health, food and agriculture, air quality, and water 
and forestry resources.

                 Table III-60--GHG Emissions by Calendar Year Without the MY 2017-2025 Standards
                                                [MMTCO2eq] \638\
----------------------------------------------------------------------------------------------------------------
                                       2010            2020            2030            2040            2050
----------------------------------------------------------------------------------------------------------------
All Sectors (Worldwide) \a\.....          45,000          53,000          61,000          69,000          76,000
All Sectors (U.S. Only) a b.....           6,800           7,300           7,600           8,000           8,100
U.S. Cars/Light Truck Only \c\..           1,100           1,200           1,200           1,400           1,600
----------------------------------------------------------------------------------------------------------------
\a\ Global Change Assessment Model (GCAM).\639\
\b\ 2010 data is from USEPA GHG Inventory,\640\ future year data is from Applied Dynamic Analysis of the Global
  Economy (ADAGE) model.\641\
\c\ 2010 data is from USEPA GHG Inventory, future year data from OMEGA model, Tailpipe CO2 and HFC134a only
  (includes impacts of MYs 2012-2016 standards).

    This rule will result in significant GHG reductions as newer, 
cleaner vehicles come into the fleet. EPA estimates the reductions 
attributable to the MYs 2017-2025 standards over time assuming the 
model year 2025 standards continue indefinitely post-2025, compared to 
a reference scenario in which the 2016 model year GHG standards 
continue indefinitely beyond 2016.
---------------------------------------------------------------------------

    \638\ ADAGE and GCAM model projections of worldwide and U.S. GHG 
emissions are provided for context only. The baseline data in these 
models differ in certain assumptions from the baseline used in this 
rule. For example, the ADAGE baseline is calibrated to AEO 2010, 
which includes the EISA 35 MPG by 2020 provision, but does not 
explicitly include the MYs 2012-2016 rule or the 2014-2018 HD GHG 
rule. All emissions data were rounded to two significant digits.
    \639\ Based on the Representative Concentration Pathway scenario 
in GCAM available at www.globalchange.umd.edu/gcamrcp. See section 
III.F.3 and RIA Chapter 6.4 for additional information on GCAM.
---------------------------------------------------------------------------

    For this rule, EPA estimates greenhouse gas impacts from several 
sources including: (a) The impact of the standards on tailpipe 
CO2 emissions, (b) projected improvements in the efficiency 
of vehicle air conditioning systems as a result of the credit program, 
(c) reductions in direct emissions of the refrigerant and potent 
greenhouse gas HFC-134a from air conditioning systems, (d) ``upstream'' 
emission reductions from gasoline extraction, production and 
distribution processes as a result of reduced gasoline demand 
associated with this rule, and (e) ``upstream'' emission increases from 
power plants as electric powertrain vehicles increase in the light duty 
fleet as a result of this rule. EPA also accounted for the greenhouse 
gas impacts of additional vehicle miles travelled (VMT) due to the 
``rebound'' effect discussed in Section III.H.
---------------------------------------------------------------------------

    \640\ U.S. EPA (2012) Inventory of U.S. Greenhouse Gas Emissions 
and Sinks: 1990-2010. EPA 430-R-12-001. Available at http://epa.gov/climatechange/emissions/downloads12/US-GHG-Inventory-2012-Main-Text.pdf.
    \641\ Based on the ADAGE reference case used in U.S. EPA (2010). 
``EPA Analysis of the American Power Act of 2010'' U.S. 
Environmental Protection Agency, Washington, DC, USA (www.epa.gov/climatechange/economics/economicanalyses.html).
---------------------------------------------------------------------------

    EPA has updated a number of analytic inputs for this final rule 
analysis, as compared to the proposal. The majority of these changes 
have small impacts. Two notable changes are a lower VMT projection, 
corresponding to a lower projection in Annual Energy Outlook (AEO) 2012 
as compared to the AEO 2011 estimates used in the NPRM, and new 
emission factors for electricity, discussed later in this section and 
in EPA RIA Chapter 4. No significant comments were received on the 
general methods used for calculating greenhouse gas impacts, including 
the use of the OMEGA model. All tables in this section contain data 
from the analysis with the MY 2008 based future fleet projection. For 
the analysis containing the MY 2010 alternate future fleet projection, 
please see EPA RIA chapter 10.
    Using this approach EPA estimates the standards will reduce annual 
fleetwide car and light truck vehicle GHG emissions by approximately 
220 million metric tons (MMT) CO2eq or 17 percent by 2030, 
when 85 percent of car and light truck miles will be travelled by 
vehicles meeting the MY 2017 or later standards. An additional 60 
MMTCO2eq of reduced emissions are attributable to reductions 
in gasoline production, distribution and transport. 10 
MMTCO2eq of additional emissions will be attributable to 
increased electricity production. In total, EPA estimates that compared 
to a baseline of indefinite 2016 model year standards, net GHG emission 
reductions from the program will be approximately 270 
MMTCO2-equivalent (MMTCO2eq) annually by 2030, 
which represents a reduction of 4% percent of total U.S. GHG emissions 
and 0.5% percent of total worldwide GHG emissions projected in that 
year. That year, these GHG emission reductions will result in savings 
of approximately 23 billion gallons of petroleum-based gasoline.\642\
---------------------------------------------------------------------------

    \642\ All estimates of fuel savings presented here assume that 
manufacturers use air conditioning leakage credits as part of their 
compliance strategy. If these credits are not used, then 
manufacturers would be meeting the standards via adding more fuel 
efficient technologies, and thus the fuel savings of the program 
would be larger.
---------------------------------------------------------------------------

    EPA projects the total GHG reductions of the program over the full 
life of model year 2017-2025 vehicles to be about 1,960 
MMTCO2eq, with fuel savings of 160 billion gallons (3.9 
billion barrels) of gasoline over the life of these vehicles.
    Section III.F.1 discusses the emission inventory impacts of this 
rulemaking, while III.F.2 discusses the climate change impacts of GHGs. 
The impacts of this rule on atmospheric CO2 concentrations, 
global mean surface temperature, sea level rise, and ocean pH are 
discussed in Section III.F.3.
1. Impact on GHG Emissions
    The modeling of fuel savings and greenhouse gas emissions is 
substantially similar to the modeling conducted in the proposal as well 
as in the MYs 2012-2016 rulemaking and the MYs 2017-2025 Interim Joint 
Technical Assessment Report (TAR). As detailed in EPA RIA chapter 4, 
EPA estimated calendar year tailpipe CO2 reductions based on 
pre- and post-control CO2 gram per mile levels from EPA's 
OMEGA model, coupled with VMT schedules derived from AEO 2012 Early 
Release. These estimates reflect the real-world CO2 
emissions reductions projected for the entire U.S. vehicle fleet in a 
specified calendar year. EPA also estimated full lifetime impacts for 
model years 2017-2025 using pre- and post-control CO2 levels 
projected by the OMEGA model, coupled with projected vehicle sales and 
lifetime mileage estimates. These estimates reflect the real-world GHG 
emission reductions projected for model years 2017 through

[[Page 62891]]

2025 vehicles over their entire life. Upstream impacts from power plant 
emissions came from OMEGA estimates of EV/PHEV penetration into the 
fleet as a result of the final GHG rule (approximately 2% in MY 2025). 
For both calendar year and model year assessments, EPA estimated the 
environmental impact of the advanced technology multiplier, pickup 
truck hybrid electric vehicle (HEV) incentive credits, intermediate 
volume manufacturer provisions, and air conditioning credits. While the 
projected usage of off-cycle credits was quantified, their 
environmental impacts are not explicitly estimated, as these credits 
are assumed to be inherently environmentally neutral (see Section 
III.C). EPA also did not assess the impact of the credit banking carry-
forward programs.
    As in the MYs 2012-2016 rulemaking, this rule allows manufacturers 
to earn credits for improvements for controls of both direct and 
indirect AC emissions. Since these improvements are relatively low 
cost, EPA again projects that manufacturers will utilize these 
flexibilities widely, leading to additional reductions from GHG 
emissions associated with vehicle air conditioning systems. As 
explained above, these reductions will come from both direct emissions 
of air conditioning refrigerant over the life of the vehicle and 
tailpipe CO2 emissions produced by the increased load of the 
A/C system on the engine (so called indirect A/C emissions). In 
particular, EPA estimates that direct emissions of the refrigerant HFC-
134a, one of the most potent greenhouse gases, will be fully removed 
from light-duty vehicles through the phase-in of alternative 
refrigerants. More efficient air conditioning systems will also lead to 
fuel savings and additional reductions in upstream emissions from fuel 
production and distribution. Our estimated reductions from the A/C 
credit program assume that manufacturers will fully utilize the program 
(i.e. have 100% refrigerant replacement, and obtain the maximum credit 
for control of indirect A/C emissions) by MY 2021.
    Upstream greenhouse gas emission reductions associated with the 
production and distribution of fuel were estimated using emission 
factors from the Department of Energy's (DOE's) GREET1.8c model, with 
modifications as detailed in Chapter 4 of the RIA. These estimates 
include both international and domestic emission reductions, since 
reductions in foreign exports of finished gasoline and/or crude make up 
a significant share of the fuel savings resulting from the GHG 
standards. Thus, significant portions of the upstream GHG emission 
reductions will occur outside of the U.S.; a breakdown of projected 
international versus domestic reductions is included in the EPA RIA.
    Electricity emission factors were derived from EPA's Integrated 
Planning Model (IPM). EPA uses IPM to analyze the projected impact of 
environmental policies on the electric power sector in the 48 
contiguous states and the District of Columbia. IPM is a multi-
regional, dynamic, deterministic linear programming model of the U.S. 
electric power sector. It provides forecasts of least-cost capacity 
expansion, electricity dispatch, and emission control strategies for 
meeting energy demand and environmental, transmission, dispatch, and 
reliability constraints. For the proposal, we derived average national 
GHG emission factors (EFs) from the IPM version 4.10 base case run for 
the ``Proposed Transport Rule.\643\ '' The proposal further discussed 
the potential consideration of emission factors other than national 
power generation, such as marginal power emission factors, or regional 
emission factors.
---------------------------------------------------------------------------

    \643\ EPA. IPM. http://www.epa.gov/airmarkt/progsregs/epa-ipm/BaseCasev410.html. ``Proposed Transport Rule/NODA version'' of IPM . 
TR--SB--Limited Trading v.4.10.
---------------------------------------------------------------------------

    EPA received several comments on the use of marginal or incremental 
emission factors. These comments are discussed extensively in section 
III.C.2.a.vi, but generally favored the use of marginal power as 
opposed to national average during the impacts analysis. A national 
average EF is based on all power in U.S., including existing hydro-
electric, coal, and nuclear. Some of these power sources may not be 
available to electric vehicles, as they are at full capacity with 
current demands. For this final rulemaking, EPA updated the electricity 
emission factor in several ways. The final rulemaking emission factors 
include a newer IPM version that incorporates new EPA stationary source 
emissions controls (such as the Mercury and Air Toxics Standards and 
the Cross-State Air Pollution Rule) \644\ and reflects recent economic 
conditions. EPA also changed from a ``national average'' electricity 
GHG emissions factor to one that projects the average electricity GHG 
emissions factor for the additional electricity demand represented by 
the EVs and PHEVs that EPA projects will be on the road in calendar 
year 2030 as a result of this final, and bases the locations of these 
vehicles on the distribution of hybrid vehicle sales in 2006-2009. The 
cumulative effect of the changes is that IPM projects that about 80 
percent of the electricity that will be used by EVs and PHEVs in 2030 
will come from natural gas, with 15 percent from coal, and 5 percent 
from wind and other feedstocks. Details of this analysis can be found 
in EPA RIA chapter 4.7.3
---------------------------------------------------------------------------

    \644\ Citations to rules.
---------------------------------------------------------------------------

a. Calendar Year Reductions for Future Years
    Table III-61 shows reductions estimated from these GHG standards 
assuming a reference case of 2016 MY standards continuing indefinitely 
beyond 2016, and a post-control case in which 2025 MY GHG standards 
continue indefinitely beyond 2025. These reductions are broken down by 
upstream and downstream components, including air conditioning 
improvements, and also account for the offset from a 10 percent ``VMT 
rebound effect'' as discussed in Section III.H.
    For selected years, Table III-61 contains the detailed breakdown of 
the sources contributing to the GHG reductions. Table III-62 contains 
total GHG impacts and fuel savings for all years.

                  Table III-61--Projected Detailed GHG Impacts From the MY 2017-2025 Standards
                                               [MMTCO2eq per year]
----------------------------------------------------------------------------------------------------------------
                 Calendar year:                        2020            2030            2040            2050
----------------------------------------------------------------------------------------------------------------
Net Delta \*\...................................             -27            -271            -455            -569
Net CO2.........................................             -23            -247            -417            -522
Net other GHG...................................              -4             -25             -38             -47
Downstream......................................             -22            -223            -374            -467
CO2 (excluding A/C).............................             -18            -201            -341            -428
A/C--indirect CO2...............................              -1              -3              -4              -5

[[Page 62892]]

 
A/C--direct HFCs................................              -3             -19             -28             -35
CH4 (VMT rebound effect)........................               0               0               0               0
N2O (VMT rebound effect)........................               0               0               0               0
Gasoline Upstream...............................              -5             -57             -96            -121
CO2.............................................              -5             -50             -84            -105
CH4.............................................              -1              -7             -12             -15
N2O.............................................               0               0               0              -1
Electricity Upstream............................               1               9              15              19
CO2.............................................               1               7              13              16
CH4.............................................               0               1               2               3
N2O.............................................               0               0               0               0
----------------------------------------------------------------------------------------------------------------

                     Table III-62--Projected Annual Impacts from the MY 2017-2025 Standards
----------------------------------------------------------------------------------------------------------------
                                                                                    Light duty
                                                                                       fuel         Light duty
                                                                    GHG impact      consumption        fuel
                          Calendar year                            (MMT CO2 Eq)       impact        consumption
                                                                                     (billion       impact (%)
                                                                                     gallons)
----------------------------------------------------------------------------------------------------------------
2017............................................................              -2               0               0
2018............................................................              -8              -1               0
2019............................................................             -16              -1               0
2020............................................................             -27              -2               0
2021............................................................             -43              -3               0
2022............................................................             -63              -5               0
2023............................................................             -85              -7               0
2024............................................................            -111              -9               1
2025............................................................            -140             -12               2
2026............................................................            -167             -14               3
2027............................................................            -195             -16               4
2028............................................................            -221             -19               6
2029............................................................            -247             -21               7
2030............................................................            -271             -23               9
2031............................................................            -295             -25              11
2032............................................................            -317             -27              13
2033............................................................            -338             -29              15
2034............................................................            -358             -30              16
2035............................................................            -377             -32              18
2036............................................................            -394             -34              19
2037............................................................            -411             -35              20
2038............................................................            -427             -36              21
2039............................................................            -441             -38              22
2040............................................................            -455             -39              23
2041............................................................            -468             -40              24
2042............................................................            -480             -41              25
2043............................................................            -492             -42              25
2044............................................................            -504             -43              26
2045............................................................            -515             -44              26
2046............................................................            -526             -45              26
2047............................................................            -537             -46              27
2048............................................................            -548             -47              27
2049............................................................            -558             -48              27
2050............................................................            -569             -49              27
                                                                 -----------------------------------------------
    Total 2017-2050.............................................         -10,605            -903  ..............
----------------------------------------------------------------------------------------------------------------

    The total program emission reductions yield significant emission 
decreases relative to worldwide and national total emissions.

    Table III-63--Projected GHG Reductions From the MY 2017-2025 Standards as a Percentage of Total Emissions
                                               [MMTCO2eq per year]
----------------------------------------------------------------------------------------------------------------
                                                       2020            2030            2040            2050
         Emission Reduction Relative to:             (percent)       (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Worldwide reference.............................            -0.1            -0.4            -0.7            -0.8

[[Page 62893]]

 
U.S. reference (all sectors)....................            -0.4            -3.6            -5.7            -7.0
U.S. reference (cars + light trucks)\*\.........            -2.5           -22.6           -32.5           -35.6
----------------------------------------------------------------------------------------------------------------
\*\ Note that total emission reductions include sectors (such as fuel refineries) that are not part of this
  reference.

b. Lifetime Reductions for 2017-2025 Model Years

    EPA also analyzed the emission reductions over the full life of the 
2017-2025 model year cars and light trucks that will be affected by 
this program.\645\ These results, including both upstream and 
downstream GHG contributions, are presented in Table III-64.
---------------------------------------------------------------------------

    \645\ As detailed in RIA Chapter 4 and TSD Chapter 4, for this 
analysis the full life of the vehicle is represented by average 
lifetime mileages for cars (196,000 miles [MY 2017] and 206,000 
miles [MY 2025]) and trucks (213,000 miles [MY 2017] and 224,000 
miles [MY 2025]). These estimates are a function of how far vehicles 
are driven per year and scrappage rates.

                          Table III-64--Projected net MY 2017-2025 Lifetime GHG Impacts
                                               [MMTCO2eq per year]
----------------------------------------------------------------------------------------------------------------
                                                                     Upstream
                       MY                           Downstream      (Gasoline)      Electricity     Total CO2e
----------------------------------------------------------------------------------------------------------------
2017............................................             -25              -6               1             -30
2018............................................             -58             -14               2             -70
2019............................................             -89             -21               3            -108
2020............................................            -124             -29               4            -149
2021............................................            -178             -43               5            -216
2022............................................            -222             -55               7            -270
2023............................................            -262             -66               9            -320
2024............................................            -304             -78              11            -371
2025............................................            -347             -90              14            -423
                                                 ---------------------------------------------------------------
    Total.......................................          -1,610            -402              57          -1,956
----------------------------------------------------------------------------------------------------------------

c. Impacts of VMT Rebound Effect
    As noted above and discussed more fully in Section III.H., the 
effect of a decrease in fuel cost per mile on vehicle use (i.e., the 
VMT rebound effect) was accounted for in our assessment of economic and 
environmental impacts of this rule. A 10 percent rebound case was used 
for this analysis, meaning that VMT for affected model years is modeled 
as increasing by 10 percent as much as the decrease in fuel cost per 
mile; i.e., a 10 percent decrease in fuel cost per mile from our 
standards would result in a 1 percent increase in VMT. Detailed results 
are shown in Table III-65. (This increase is accounted for in the GHG 
impacts previously presented in this section). The table below compares 
the GHG emissions under two different scenarios: One in which the 
control scenario VMT estimate is entirely insensitive to the cost of 
travel, and one in which the control scenario is affected by the 
rebound effect. RIA Chapter 4.5 includes a sensitivity analysis of GHG 
emissions impacts from this rule assuming higher and lower values of 
the VMT rebound effect.

                       Table III-65--Delta GHG Increase From a 10% VMT Rebound Effect \a\
                                               [MMTCO2eq per year]
----------------------------------------------------------------------------------------------------------------
                                                                     Upstream       Electricity
                       CY                           Downstream       gasoline          \646\        Total CO2e
----------------------------------------------------------------------------------------------------------------
2020............................................               2               1               0               2
2030............................................              16               4               0              21
2040............................................              26               7               0              34
2050............................................              33               9               1              43
----------------------------------------------------------------------------------------------------------------
\a\ These impacts are included in the reductions shown in Table III-61 through Table III-64.

d. Analysis of Alternatives
    EPA analyzed four alternative standard scenarios for this rule 
using the MY 2008 based future fleet projection (Table III-66, Table 
III-67, Table III-68). EPA assumed that manufacturers would use air 
conditioning improvements in identical penetrations as in the primary 
scenario. EPA re-estimated the impact of the electric vehicle 
multiplier and the HEV pickup incentives under each alternative. Under 
these alternatives, EPA projects that the achieved fleetwide average 
emission levels would be 156 g/mile CO2 to 176 g/mile 
CO2eq in MY 2025. As in the primary scenario, EPA assumed 
that the fleet complied with

[[Page 62894]]

the standards. For full details on modeling assumptions, please refer 
to RIA Chapter 4.2. EPA's assessment of these alternative standards is 
discussed in Section III.D.6.
---------------------------------------------------------------------------

    \646\ This assessment assumes that owners of grid-electric 
powered vehicles react similarly to changes in the cost of driving 
as owners of conventional gasoline vehicles.

                                                Table III-66--GHG g/mile targets of Alternative Scenarios
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     2021  CO2 g/mile targets                        2025  CO2 g/mile Targets
                          Title                          -----------------------------------------------------------------------------------------------
                                                               Cars           Trucks           Fleet           Cars           Trucks           Fleet
--------------------------------------------------------------------------------------------------------------------------------------------------------
Primary.................................................             172             249             199             143             203             163
A--Cars +20 g/mile......................................             192             249             212             163             203             176
B--Cars -20 g/mile......................................             152             249             186             123             203             150
C--Trucks +20 g/mile....................................             172             229             206             143             223             170
D--Trucks -20 g/mile....................................             172             269             192             143             183             156
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                              Table III-67--Calendar Year Impacts of Alternative Scenarios
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                GHG delta  (MMT2 CO2eq)                  Fuel savings  (B. Gallons petroleum gasoline)
                    Scenario                     -------------------------------------------------------------------------------------------------------
                                                      2020         2030         2040         2050         2020         2030         2040         2050
--------------------------------------------------------------------------------------------------------------------------------------------------------
Primary.........................................          -27         -271         -455         -569           -2          -23          -39          -49
A--Cars +20 g/mile..............................          -19         -223         -382         -480           -1          -18          -32          -40
B--Cars -20 g/mile..............................          -34         -311         -514         -641           -3          -28          -46          -58
C--Trucks +20 g/mile............................          -27         -249         -420         -526           -2          -21          -36          -45
D--Trucks -20 g/mile............................          -36         -294         -484         -604           -3          -25          -42          -53
--------------------------------------------------------------------------------------------------------------------------------------------------------

                       Table III-68--Model Year Lifetime Impacts of Alternative Scenarios
                                          [Summary of MY 2017-MY 2025]
----------------------------------------------------------------------------------------------------------------
                                                                                    Fuel delta      Fuel delta
                                                                    Total CO2e        (b. gal       (b. barrels
                                                                       (MMT)         petroleum       petroleum
                                                                                     gasoline)       gasoline)
----------------------------------------------------------------------------------------------------------------
Primary.........................................................          -1,956            -163            -3.9
A--Cars +20 g/mile..............................................          -1,537            -122            -2.9
B--Cars -20 g/mile..............................................          -2,314            -200            -4.8
C--Trucks +20 g/mile............................................          -1,781            -146            -3.5
D--Trucks -20 g/mile............................................          -2,231            -189            -4.5
----------------------------------------------------------------------------------------------------------------

2. Climate Change Impacts From GHG Emissions
    The impact of GHG emissions on the climate has been reviewed in the 
NPRM, as well as in the MYs 2012-2016 light-duty rulemaking and the 
heavy-duty GHG rulemaking. See 76 FR 75096; 75 FR 25491; 76 FR 57294. 
This section briefly discusses again the issue of climate impacts 
noting the context of transportation emissions.
    Once emitted, GHGs that are the subject of this regulation can 
remain in the atmosphere for decades to millennia, meaning that (1) 
their concentrations become well-mixed throughout the global atmosphere 
regardless of emission origin, and (2) their effects on climate are 
long lasting. GHG emissions come mainly from the combustion of fossil 
fuels (coal, oil, and gas), with additional contributions from the 
clearing of forests, agricultural activities, cement production, and 
some industrial activities. Transportation activities, in aggregate, 
were the second largest contributor to total U.S. GHG emissions in 2010 
(27 percent of total domestic emissions).\647\
---------------------------------------------------------------------------

    \647\ U.S. EPA (2012) Inventory of U.S. Greenhouse Gas Emissions 
and Sinks: 1990-2010. EPA 430-R-12-001. Available at http://epa.gov/climatechange/emissions/downloads12/US-GHG-Inventory-2012-Main-Text.pdf.
---------------------------------------------------------------------------

    The Administrator relied on thorough and peer-reviewed assessments 
of climate change science prepared by the Intergovernmental Panel on 
Climate Change (``IPCC''), the United States Global Change Research 
Program (``USGCRP''), and the National Research Council of the National 
Academies (``NRC'') \648\ as the primary scientific and technical basis 
for the Endangerment and Cause or Contribute Findings for Greenhouse 
Gases Under Section 202(a) of the Clean Air Act (74 FR 66496, December 
15, 2009). These assessments comprehensively address the scientific 
issues the Administrator had to examine, providing her both data and 
information on a wide range of issues pertinent to the Endangerment 
Finding. These assessments have been rigorously reviewed by the expert 
community, and also by United States government agencies and 
scientists, including by EPA itself.
---------------------------------------------------------------------------

    \648\ For a complete list of core references from IPCC, USGCRP/
CCSP, NRC and others relied upon for development of the TSD for 
EPA's Endangerment and Cause or Contribute Findings see section 
1(b), specifically, Table 1.1 of the TSD. (Docket EPA-HQ-OAR-2010-
0799).
---------------------------------------------------------------------------

    Based on these assessments, the Administrator determined that 
greenhouse gases cause warming; that levels of greenhouse gases are 
increasing in the atmosphere due to human activity; the climate is 
warming; recent warming has been attributed to the increase in 
greenhouse gases; and that warming of the climate threatens human 
health and welfare. The Administrator further found that emissions of 
well-mixed greenhouse gases from new motor vehicles and engines 
contribute to the air pollution that endangers

[[Page 62895]]

public health and welfare. Specifically, the Administrator found under 
section 202(a) of the Act that six greenhouse gases (carbon dioxide, 
methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and 
sulfur hexafluoride) taken in combination endanger both the public 
health and the public welfare of current and future generations, and 
further found that the combined emissions of these greenhouse gases 
from new motor vehicles and engines contribute to the greenhouse gas 
air pollution that endangers public health and welfare. The D.C. 
Circuit recently emphatically upheld the reasonableness of all of these 
conclusions. See Coalition for Responsible Regulation v. EPA, (No. 09-
1322, (June 26, 2012) (D.C. Circuit)) slip op. p. 30 (upholding all of 
EPA's findings and stating ``EPA had before it substantial record 
evidence that anthropogenic emissions of greenhouse gases `very likely' 
caused warming of the climate over the last several decades. EPA 
further had evidence of current and future effects of this warming on 
public health and welfare. Relying again upon substantial scientific 
evidence, EPA determined that anthropogenically induced climate change 
threatens both public health and public welfare. It found that extreme 
weather events, changes in air quality, increases in food- and water-
borne pathogens, and increases in temperatures are likely to have 
adverse health effects. The record also supports EPA's conclusion that 
climate change endangers human welfare by creating risk to food 
production and agriculture, forestry, energy, infrastructure, 
ecosystems, and wildlife. Substantial evidence further supported EPA's 
conclusion that the warming resulting from the greenhouse gas emissions 
could be expected to create risks to water resources and in general to 
coastal areas as a result of expected increase in sea level.'')
    More recent assessments have reached similar conclusions to those 
of the assessments upon which the Administrator relied. In May 2010, 
the NRC published its comprehensive assessment, ``Advancing the Science 
of Climate Change.'' \649\ It concluded that ``climate change is 
occurring, is caused largely by human activities, and poses significant 
risks for--and in many cases is already affecting--a broad range of 
human and natural systems.'' Furthermore, the NRC stated that this 
conclusion is based on findings that are ``consistent with the 
conclusions of recent assessments by the U.S. Global Change Research 
Program, the Intergovernmental Panel on Climate Change's Fourth 
Assessment Report, and other assessments of the state of scientific 
knowledge on climate change.'' These are the same assessments that 
served as the primary scientific references underlying the 
Administrator's Endangerment Finding. Another NRC assessment, ``Climate 
Stabilization Targets: Emissions, Concentrations, and Impacts over 
Decades to Millennia'', was published in 2011. This report found that 
climate change due to carbon dioxide emissions will persist for many 
centuries. The report also estimates a number of specific climate 
change impacts, finding that every degree Celsius (C) of warming could 
lead to increases in the heaviest 15% of daily rainfalls of 3 to 10%, 
decreases of 5 to 15% in yields for a number of crops (absent 
adaptation measures that do not presently exist), decreases of Arctic 
sea ice extent of 25% in September and 15% annually averaged, along 
with changes in precipitation and streamflow of 5 to 10% in many 
regions and river basins (increases in some regions, decreases in 
others). The assessment also found that for an increase of 4 degrees C 
nearly all land areas would experience summers warmer than all but 5% 
of summers in the 20th century, that for an increase of 1 to 2 degrees 
C the area burnt by wildfires in western North America will likely more 
than double, that for an increase of 3 degrees C the sea level will 
rise 1.6 to 3.3 feet by 2100, and that coral bleaching and erosion will 
increase due both to warming and ocean acidification. The assessment 
notes that many important aspects of climate change are difficult to 
quantify but that the risk of adverse impacts is likely to increase 
with increasing temperature, and that the risk of abrupt climate 
changes can be expected to increase with the duration and magnitude of 
the warming.
---------------------------------------------------------------------------

    \649\ National Research Council (NRC) (2010). Advancing the 
Science of Climate Change. National Academy Press. Washington, DC. 
(Docket EPA-HQ-OAR-2010-0799).
---------------------------------------------------------------------------

    In the 2010 report cited above, the NRC stated that some of the 
largest potential risks associated with future climate change may come 
not from relatively smooth changes that are reasonably well understood, 
but from extreme events, abrupt changes, and surprises that might occur 
when climate or environmental system thresholds are crossed. Examples 
cited as warranting more research include the release of large 
quantities of GHGs stored in permafrost (frozen soils) across the 
Arctic, rapid disintegration of the major ice sheets, irreversible 
drying and desertification in the subtropics, changes in ocean 
circulation, and the rapid release of destabilized methane hydrates in 
the oceans.
    On ocean acidification, the same report noted the potential for 
broad, ``catastrophic'' impacts on marine ecosystems. Ocean acidity has 
increased 25 percent since pre-industrial times, and is projected to 
continue increasing. By the time atmospheric CO2 content 
doubles over its preindustrial value, there would be virtually no place 
left in the ocean that can sustain coral reef growth. Ocean 
acidification could have dramatic consequences for polar food webs 
including salmon, the report said.
    Importantly, these recent NRC assessments represent another 
independent and critical inquiry of the state of climate change 
science, separate and apart from the previous IPCC and USGCRP 
assessments.
3. Changes in Global Climate Indicators Associated With This Rule's GHG 
Emissions Reductions
    Although ``EPA need not establish a minimum threshold of risk or 
harm before determining whether an air pollutant endangers'', and 
similarly need not condition regulation under section 202(a) ``on 
evidence of a particular level of mitigation''. see Coalition for 
Responsible Regulation v. EPA No. 09-1322, June 26, 2012 (D.C. Circuit) 
slip op. pp. 33, 43, EPA examined \650\ the reductions in 
CO2 and other GHGs associated with this rulemaking and 
analyzed the projected effects on atmospheric CO2 
concentrations, global mean surface temperature, sea level rise, and 
ocean pH which are common variables used as indicators of climate 
change. The analysis projects that the final rule will reduce 
atmospheric concentrations of CO2, global climate warming, 
ocean acidification, and sea level rise relative to the reference case. 
Although the projected reductions and improvements are small in 
comparison to the total projected climate change, they are 
quantifiable, directionally consistent, and will contribute to reducing 
the risks associated with climate change. Climate change is a global 
phenomenon and EPA recognizes that this one national action alone will 
not prevent it: EPA

[[Page 62896]]

notes this would be true for any given GHG mitigation action when taken 
alone or when considered in isolation. See Coalition for Responsible 
Regulation v. EPA, No. 09-1322, June 26, 2012 (D.C. Circuit)) slip op. 
p 43 noting that the GHG emission reductions of the MYs 2012-2016 rule 
``result in meaningful mitigation of greenhouse gas emissions''; the 
projected emissions reductions of this MYs 2017-2025 rule are projected 
to be approximately double those of the MYs 2012-2016 rule so that this 
rule obviously results in ``meaningful mitigation of greenhouse gas 
emissions'' as well. EPA also repeats that a substantial portion of 
CO2 emitted into the atmosphere is not removed by natural 
processes for millennia, and therefore each unit of CO2 not 
emitted into the atmosphere due to this rule avoids essentially 
permanent climate change on centennial time scales.
---------------------------------------------------------------------------

    \650\ Using the Model for the Assessment of Greenhouse Gas 
Induced Climate Change (MAGICC) 5.3v2, http://www.cgd.ucar.edu/cas/wigley/magicc/), EPA estimated the effects of this rulemaking's 
greenhouse gas emissions reductions on global mean temperature and 
sea level. EPA applied the CO2SYS program to estimate the effects of 
this rulemaking's greenhouse gas emissions reductions on ocean 
acidification. Please refer to Chapter 6.4 of the RIA for additional 
information.
---------------------------------------------------------------------------

    EPA determines that the projected reductions in atmospheric 
CO2, global mean temperature, sea level rise, and ocean 
acidification are meaningful in the context of this action. The results 
of the analysis demonstrate that relative to the reference case, by 
2100 projected atmospheric CO2 concentrations are estimated 
to be reduced by 3.21 to 3.58 part per million by volume (ppmv), global 
mean temperature is estimated to be reduced by 0.0074 to 0.0176[deg]C, 
and sea-level rise is projected to be reduced by approximately 0.071-
0.159 cm, based on a range of climate sensitivities (described below). 
The analysis also demonstrates that ocean pH will increase by 0.0017 pH 
units by 2100 relative to the reference case (ie, reduced 
acidification).
a. Estimated Reductions in Atmospheric CO2 Concentration, 
Global Mean Surface Temperatures, Sea Level Rise, and Ocean pH
    As in the NPRM, EPA estimated changes in the atmospheric 
CO2 concentration, global mean temperature, and sea level 
rise out to 2100 resulting from the emissions reductions in this 
rulemaking using the Global Change Assessment Model (GCAM, formerly 
MiniCAM) \651\ coupled with the Model for the Assessment of Greenhouse 
Gas Induced Climate Change (MAGICC, version 5.3v2).\652\ GCAM was used 
to create the globally and temporally consistent set of climate 
relevant variables required for running MAGICC. MAGICC was then used to 
estimate the projected change in these variables over time. Given the 
magnitude of the estimated emissions reductions associated with this 
action, a simple climate model such as MAGICC is reasonable for 
estimating the atmospheric and climate response. This widely-used, peer 
reviewed modeling tool was also used to project temperature and sea 
level rise under different emissions scenarios in the Third and Fourth 
Assessments of the IPCC.
---------------------------------------------------------------------------

    \651\ GCAM is a long-term, global integrated assessment model of 
energy, economy, agriculture and land use, that considers the 
sources of emissions of a suite of GHG's, emitted in 14 globally 
disaggregated regions, the fate of emissions to the atmosphere, and 
the consequences of changing concentrations of greenhouse related 
gases for climate change. GCAM begins with a representation of 
demographic and economic developments in each region and combines 
these with assumptions about technology development to describe an 
internally consistent representation of energy, agriculture, land-
use, and economic developments that in turn shape global emissions. 
Brenkert A, S. Smith, S. Kim, and H. Pitcher, 2003: Model 
Documentation for the MiniCAM. PNNL-14337, Pacific Northwest 
National Laboratory, Richland, Washington. (Docket EPA-HQ-OAR-2010-
0799)
    \652\ Wigley, T.M.L. 2008. MAGICC 5.3.v2 User Manual. UCAR--
Climate and Global Dynamics Division, Boulder, Colorado. http://www.cgd.ucar.edu/cas/wigley/magicc/ (Docket EPA-HQ-OAR-2010-0799)
---------------------------------------------------------------------------

    The integrated impact of the following non-GHG and GHG emissions 
changes are considered: CO2, CH4, N2O, 
HFC-134a, NOX, CO, SO2, and volatile organic 
compounds (VOC). For these pollutants an annual time-series of 
(upstream + downstream) emissions reductions estimated from the 
rulemaking were applied as net reductions to a global reference case 
(or baseline) emissions scenario in GCAM to generate an emissions 
scenario specific to this rule.\653\ The emissions reductions past 
calendar year 2050 for all gases were scaled with total U.S. road 
transportation fuel consumption from the GCAM reference scenario. Road 
transport fuel consumption past 2050 does not change significantly and 
thus emissions reductions remain relatively constant from 2050 through 
2100. Specific details about the GCAM reference case scenario can be 
found in Chapter 6.4 of the RIA that accompanies this final rule.
---------------------------------------------------------------------------

    \653\ Due to timing constraints, this analysis was conducted 
with preliminary estimates of the emissions reductions projected 
from the final rule, which were highly similar to the final 
estimates presented in Chapter 4 of the RIA. For example, the final 
projected CO2 emissions reductions for most years in the 
2017-2050 time period were roughly one-tenth of a percent smaller 
than the preliminary estimates. The preliminary emissions reduction 
projections are available in the docket (see ``Emissions for MAGICC 
modeling'' in Docket EPA-HQ-OAR-2010-0799), and the files used as 
inputs for the MAGICC model are also available (see ``MAGICC Input 
File (policy)'' and ``MAGICC Input File (reference)'').
---------------------------------------------------------------------------

    MAGICC calculates the forcing response at the global scale from 
changes in atmospheric concentrations of CO2, 
CH4, N2O, HFCs, and tropospheric ozone 
(O3). It also includes the effects of temperature changes on 
stratospheric ozone and the effects of CH4 emissions on 
stratospheric water vapor. Changes in CH4, NOX, 
VOC, and CO emissions affect both O3 concentrations and 
CH4 concentrations. MAGICC includes the relative climate 
forcing effects of changes in sulfate concentrations due to changing 
SO2 emissions, including both the direct effect of sulfate 
particles and the indirect effects related to cloud interactions. 
However, MAGICC does not calculate the effect of changes in 
concentrations of other aerosols such as nitrates, black carbon, or 
organic carbon, making the assumption that the sulfate cooling effect 
is a proxy for the sum of all the aerosol effects. Therefore, the 
climate effects of changes in PM2.5 emissions and precursors 
(besides SO2) that are presented in the RIA Chapter 6 were 
not included in the calculations. MAGICC also calculates all climate 
effects at the global scale. This global scale captures the climate 
effects of the long-lived, well-mixed greenhouse gases, but does not 
address the fact that short-lived climate forcers such as aerosols and 
ozone can have effects that vary with location and timing of emissions. 
Black carbon in particular is known to cause a positive forcing or 
warming effect by absorbing incoming solar radiation, but there are 
uncertainties about the magnitude of that warming effect and the 
interaction of black carbon (and other co-emitted aerosol species) with 
clouds. See 77 FR 38890, 38991-993 (June 29, 2012). While black carbon 
is likely to be an important contributor to climate change, it would be 
premature to include quantification of black carbon climate impacts in 
an analysis of these final standards. See generally, EPA, Response to 
Comments to the Endangerment Finding Vol. 9 section 9.1.6.1 \654\ and 
the discussion of black carbon in the endangerment finding at 74 FR 
66520 as well as EPA's discussion in the recent proposal to revise the 
PM NAAQS (77 FR 38991-993). Additionally, the magnitude of 
PM2.5 emissions changes (and therefore, black carbon 
emission changes) related to these final standards are small in 
comparison to the changes in the pollutants which have been included in 
the MAGICC model simulations.
---------------------------------------------------------------------------

    \654\ See http://epa.gov/climatechange/endangerment/comments/volume9.html#1-6-1 (last accessed August 10, 2012) or Docket EPA-HQ-
OAR-2009-0171-11676.

---------------------------------------------------------------------------

[[Page 62897]]

    The International Council on Clean Transportation (ICCT) and the 
Manufacturers of Emissions Control Association (MECA) mentioned the 
benefits of black carbon reductions. Since the proposed rule, EPA has 
recently released a Report to Congress addressing black carbon.\655\ 
EPA continues to recognize that black carbon is an important climate 
forcing agent and takes very seriously the emerging science on black 
carbon's contribution to global climate change in general and the high 
rates of observed climate change in the Arctic in particular. MECA also 
mentioned the effects of NOX on climate. As discussed above, 
changes in NOX emissions are included as an input into the 
MAGICC model. However, the effects due to NOX changes alone 
have not been isolated, and because NOX emissions lead to 
decreased levels of methane in addition to increased levels of ozone, 
the net effect on climate of changes in NOX emissions is 
unclear.
---------------------------------------------------------------------------

    \655\ See EPA, March 2012. Report to Congress on Black Carbon 
(EPA-450/R-12-001) available at http://epa.gov/blackcarbon/ (last 
accessed August 10, 2012).
---------------------------------------------------------------------------

    Changes in atmospheric CO2 concentration, global mean 
temperature, and sea level rise for both the reference case and the 
emissions scenarios associated with this action were computed using 
MAGICC. To calculate the reductions in the atmospheric CO2 
concentrations as well as in temperature and sea level resulting from 
this final rule, the output from the policy scenario associated with 
EPA's final standards was subtracted from an existing Global Change 
Assessment Model (GCAM, formerly MiniCAM) reference emission scenario. 
To capture some key uncertainties in the climate system with the MAGICC 
model, changes in atmospheric CO2, global mean temperature 
and sea level rise were projected across the most current IPCC range of 
climate sensitivities, from 1.5 [deg]C to 6.0 [deg]C.\656\ This range 
reflects the uncertainty for equilibrium climate sensitivity for how 
much global mean temperature would rise if the concentration of carbon 
dioxide in the atmosphere were to double. The information for this 
range come from constraints from past climate change on various time 
scales, and the spread of results for climate sensitivity from 
ensembles of models.\657\ Details about this modeling analysis can be 
found in the RIA Chapter 6.4.
---------------------------------------------------------------------------

    \656\ In IPCC reports, equilibrium climate sensitivity refers to 
the equilibrium change in the annual mean global surface temperature 
following a doubling of the atmospheric equivalent carbon dioxide 
concentration. The IPCC states that climate sensitivity is 
``likely'' to be in the range of 2 [deg]C to 4.5 [deg]C, ``very 
unlikely'' to be less than 1.5 [deg]C, and ``values substantially 
higher than 4.5 [deg]C cannot be excluded.'' IPCC WGI, 2007, Climate 
Change 2007--The Physical Science Basis, Contribution of Working 
Group I to the Fourth Assessment Report of the IPCC, http://www.ipcc.ch/ (Docket EPA-HQ-OAR-2010-0799).
    \657\ 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. Marquis, K.B. Averyt, M. Tignor and H.L. Miller 
(eds.)]. Cambridge University Press, Cambridge, United Kingdom and 
New York, NY, USA. (Docket EPA-HQ-OAR-2010-0799).
---------------------------------------------------------------------------

    The Institute for Energy Research (IER) argued that the climate 
sensitivity is likely to be below or in the low end of the range used 
by the EPA. However, this assertion was based on only two recent 
studies, while other recent studies have come to different conclusions. 
The EPA has relied on assessments like those of the National Academies, 
U.S. Global Change Research Program, and IPCC because assessments cover 
the full range of the literature and place the individual studies in 
context. In addition, one of the two specific studies relied on by IER 
to assert that EPA overestimated the climate sensitivity provided 
estimates of transient climate sensitivity. Transient sensitivity is a 
measure of the temperature change precisely at the time of doubling of 
CO2 concentrations, before the climate system has come to 
equilibrium. The transient sensitivity is usually about half of the 
equilibrium sensitivity. Therefore, it would be premature to conclude 
that the range used by the EPA either under or overestimates the likely 
equilibrium climate sensitivity.
    The results of this modeling, summarized in Table III-69, show 
quantified reductions in atmospheric CO2 concentrations, 
projected global mean temperature and sea level resulting from this 
action, across all climate sensitivities. As a result of the emission 
reductions from the final standards, relative to the reference case the 
atmospheric CO2 concentration is projected by 2100 to be 
reduced by 3.21-3.58 ppmv, the global mean temperature is projected to 
be reduced by approximately 0.0074-0.0176 [deg]C by 2100, and global 
mean sea level rise is projected to be reduced by approximately 0.071-
0.159 cm by 2100. The range of reductions in global mean temperature 
and sea level rise is larger than that for CO2 
concentrations because CO2 concentrations are only weakly 
coupled to climate sensitivity through the dependence on temperature of 
the rate of ocean absorption of CO2, whereas the magnitude 
of temperature change response to CO2 changes (and therefore 
sea level rise) is more tightly coupled to climate sensitivity in the 
MAGICC model.

  Table III-69--Impact of GHG Emissions Reductions on Projected Changes in Global Climate Associated With EPA's
                                      Final GHG Standards for MYs 2017-2025
                          [Based on a range of climate sensitivities from 1.5-6 [deg]C]
----------------------------------------------------------------------------------------------------------------
                  Variable                               Units                   Year         Projected change
----------------------------------------------------------------------------------------------------------------
Atmospheric CO2 Concentration..............  ppmv.........................            2100        -3.21 to -3.58
Global Mean Surface Temperature............  [deg]C.......................            2100    -0.0074 to -0.0176
Sea Level Rise.............................  cm...........................            2100      -0.071 to -0.159
Ocean pH...................................  pH units.....................            2100           +0.0017 \a\
----------------------------------------------------------------------------------------------------------------
\a\ The value for projected change in ocean pH is based on a climate sensitivity of 3.0.

    The projected reductions are small relative to the change in 
temperature (1.8-4.8 [deg]C), sea level rise (23-55 cm), and ocean 
acidity (-0.30 pH units) from 1990 to 2100 from the MAGICC simulations 
for the GCAM reference case. However, this is to be expected given the 
magnitude of emissions reductions expected from the program in the 
context of global emissions. This uncertainty range does not include 
the effects of uncertainty in future emissions. It should also be noted 
that the calculations in MAGICC do not include the possible effects of

[[Page 62898]]

accelerated ice flow in Greenland and/or Antarctica: the recent NRC 
report estimated a likely sea level increase for a business-as-usual 
scenario of 0.5 to 1.0 meters.\658\ Further discussion of EPA's 
modeling analysis is found in the RIA, Chapter 6.
---------------------------------------------------------------------------

    \658\ National Research Council (NRC), 2011. Climate 
Stabilization Targets: Emissions, Concentrations, and Impacts over 
Decades to Millennia. Washington, DC: National Academies Press. 
(Docket EPA-HQ-OAR-2010-0799)
---------------------------------------------------------------------------

    IER and a number of private citizens asserted that the reductions 
in temperature and other climate factors are too small to be 
meaningful. However, as has been stated, no one rule will prevent 
climate change by itself. As stated in the Endangerment and Cause or 
Contribute Findings for Greenhouse Gases Under Section 202(a) of the 
Clean Air Act; final rule (74 FR at 66543), ``The commenters' approach, 
if used globally, would effectively lead to a tragedy of the commons, 
whereby no country or source category would be accountable for 
contributing to the global problem of climate change, and nobody would 
take action as the problem persists and worsens.'' \659\ While this 
rule does not single-handedly eliminate climate change, it is an 
important contribution to reducing the rate of change, and this 
reduction in rate is global and long-lived. EPA appropriately placed 
the benefits of reductions in context in the rule, by calculating the 
likely reductions in temperature and comparing them to total projected 
changes in temperature over the same time period. In addition, EPA used 
the social cost of carbon methodology in order to estimate a 
monetization of the benefits of these reductions (see section III.H.6), 
and the net present value resulting from the CO2 reductions 
due to this rule (between years 2017 and 2050) was calculated to be 
between tens to hundreds of billions of dollars. As noted above, the 
D.C. Circuit pointedly rejected the argument that EPA should refrain 
from issuing GHG standards under section 202(a) due to claimed lack of 
mitigating effect on the endangerment, and further held that ``the 
emission standards would result in meaningful mitigation of greenhouse 
gas emissions'' in the form of ``960 million metric tons of 
CO2e over the lifetime of the model year 2012-2016 
vehicles''. Coalition for Responsible Regulation v. EPA, No. 09-1322, 
(June 26, 2012) (D.C. Circuit)) slip op. p 43; projected emissions 
reductions of this MYs 2017-2025 rule are projected to be approximately 
double those of the MYs 2012-2016 rule and thus, in the D.C. Circuit's 
language, ``result in meaningful mitigation of greenhouse gas 
emissions.''
---------------------------------------------------------------------------

    \659\ The Supreme Court likewise spoke to this issue, stating 
that ``[a]gencies, like legislatures, do not generally resolve 
massive problems'' like climate change ``in one fell regulatory 
swoop.'' Massachusetts v. EPA, 549 U.S. at 524. They ``whittle away 
at them over time.'' Id. The Supreme Court additionally emphasized 
that ``reducing domestic automobile [greenhouse gas] emissions is 
hardly a tentative step'' toward addressing climate change, inasmuch 
as ``the United States transportation sector emits an enormous 
quantity of carbon dioxide into the atmosphere.'' Id. Thus, 
``[j]udged by any standard, U.S. motor-vehicle emissions make a 
meaningful contribution to greenhouse gas concentrations.'' Id. at 
525.
---------------------------------------------------------------------------

    The National Wildlife Federation (NWF), Union of Concerned 
Scientists, American Medical Association of California, Ceres, 
Environmental Defense Fund, and several private citizens also discussed 
the importance of these standards in terms of mitigating climate risks, 
noting impacts to heat, ozone, extreme events, wildfires, floods, 
agriculture, coastal regions, droughts, and vulnerable populations. The 
EPA agrees that the reductions enacted in this rule are an important 
step towards reducing climate risks over the coming decades and 
centuries.
    A summary of comments on climate change impacts from GHG emissions 
and other climate-forcing agents as well as changes in global 
indicators associated with GHG emissions reductions from this rule is 
available in sections 16.2 and 16.3 of EPA's Response to Comments 
document. These sections also contain EPA's more detailed responses to 
these comments.
    EPA used the computer program CO2SYS,\660\ version 1.05, to 
estimate projected changes in ocean pH for tropical waters based on the 
atmospheric CO2 concentration change (reduction) resulting 
from this final rule.\661\ The program performs calculations relating 
parameters of the CO2 system in seawater. EPA used the 
program to calculate ocean pH as a function of atmospheric 
CO2 concentrations, among other specified input conditions. 
Based on the projected atmospheric CO2 concentration 
reductions resulting from this final rule, the program calculates an 
increase in ocean pH of 0.0017 pH units in 2100 relative to the 
reference case (compared to a decrease of 0.3 pH units from 1990 to 
2100 in the reference case). Thus, this analysis indicates the 
projected decrease in atmospheric CO2 concentrations from 
EPA's final standards will result in an increase in ocean pH. For 
additional validation, results were generated using different known 
constants from the literature. A comprehensive discussion of the 
modeling analysis associated with ocean pH is provided in the RIA, 
Chapter 6.
---------------------------------------------------------------------------

    \660\ Lewis, E., and D.W.R. Wallace. 1998. Program Developed for 
CO2 System Calculations. ORNL/CDIAC-105. Carbon Dioxide 
Information Analysis Center, Oak Ridge National Laboratory, U.S. 
Department of Energy, Oak Ridge, Tennessee. (Docket EPA-HQ-OAR-2010-
0799)
    \661\ Due to timing constraints, this analysis was conducted 
with preliminary estimates of the CO2 emissions 
reductions projected from the final rule, which were highly similar 
to the final estimates presented in Chapter 4 of this RIA. The final 
projected CO2 emissions reductions for most years in the 
2017-2050 time period were roughly one-tenth of a percent smaller 
than the preliminary estimates. The preliminary CO2 
emissions reduction projections are available in the docket (see 
``Emissions for MAGICC modeling'' in Docket EPA-HQ-OAR-2010-0799).
---------------------------------------------------------------------------

    As discussed in III.F.2, the 2011 NRC assessment on ``Climate 
Stabilization Targets: Emissions, Concentrations, and Impacts over 
Decades to Millennia'' determined how a number of climate impacts--such 
as heaviest daily rainfalls, crop yields, and Arctic sea ice extent--
would change with a temperature change of 1 degree Celsius (C) of 
warming. These relationships of impacts with temperature change could 
be combined with the calculated reductions in warming in Table II-63 to 
estimate changes in these impacts associated with this rulemaking.
b. Program's Effect on Climate
    As 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 some degree of 
permanent climate change. Therefore, reductions in emissions in the 
near-term are important in determining climate impacts experienced not 
just over the next decades but over thousands of years.\662\ Though the 
magnitude, in isolation, of the avoided climate change projected here 
is small in comparison to the total projected changes, these reductions 
represent a reduction in the adverse risks associated with climate 
change (though these risks were not formally estimated for this action) 
across a range of equilibrium climate sensitivities.
---------------------------------------------------------------------------

    \662\ National Research Council (NRC) (2011). Climate 
Stabilization Targets: Emissions, Concentrations, and Impacts over 
Decades to Millennia. National Academy Press. Washington, DC. 
(Docket EPA-HQ-OAR-2010-0799)
---------------------------------------------------------------------------

    EPA's analysis of this rule's impact on global climate conditions 
is intended to quantify these potential reductions using the best 
available science. EPA's modeling results show repeatable, consistent 
reductions relative to the reference case in changes of CO2 
concentration, temperature, sea-level rise, and ocean pH over the next 
century.

[[Page 62899]]

G. How will the rule impact non-GHG emissions and their associated 
effects?

    Although this rule focuses on GHGs, it will also have an impact on 
the emissions of non-GHG pollutants. Section III.G.1 of this preamble 
details the criteria pollutant and air toxic inventory impacts of this 
rule. The subsequent sections, III.G.2 and III.G.3, discuss the health 
and environmental effects associated with the criteria and toxic air 
pollutants that are being impacted by this rule. In Section III.G.4, we 
discuss the potential impact of this rule on concentrations of criteria 
and air toxic pollutants in the ambient air. The tools and 
methodologies used in this analysis are substantially similar to those 
used in the proposal and in the MYs 2012-2016 light duty rulemaking.
1. Inventory
a. Impacts
    In addition to reducing the emissions of greenhouse gases, this 
rule will influence ``non-GHG'' pollutants, i.e., ``criteria'' air 
pollutants and their precursors, and air toxics. The rule will affect 
emissions of carbon monoxide (CO), fine particulate matter 
(PM2.5), sulfur dioxide (SOX), volatile organic 
compounds (VOC), nitrogen oxides (NOX), benzene, 1,3-
butadiene, formaldehyde, acetaldehyde, and acrolein. Our estimates of 
these non-GHG emission impacts from the GHG program are shown by 
pollutant in Table III-70 and Table III-71 both in total and broken 
down by the three drivers of these changes: (a) ``Downstream'' emission 
changes, reflecting the estimated effects of VMT rebound (discussed in 
Sections III.F and III.H) and decreased consumption of fuel; (b) 
``upstream'' emission reductions due to decreased extraction, 
production and distribution of motor vehicle gasoline; (c) ``upstream'' 
emission increases from power plants as electric powertrain vehicles 
increase in the light duty fleet as a result of this rule. The GHG 
rule's impacts on criteria and toxics emissions are discussed below, 
followed by individual discussions of the methodology used to calculate 
each of these three sources of impacts.
    As shown in Table III-70, EPA estimates that the light duty vehicle 
program will result in reductions of NOX, VOC, 
PM2.5 and SOX, but will increase CO emissions. 
For NOx, VOC, and PM2.5, we estimate net 
reductions because the net emissions reductions from reduced fuel 
refining, distribution and transport is larger than the emission 
increases due to increased VMT and increased electricity production. In 
the case of CO, we estimate slight emission increases, because there 
are relatively small reductions in upstream emissions, and thus the 
projected emission increases due to VMT rebound and electricity 
production are greater than the projected emission decreases due to 
reduced fuel production. For SOX, downstream emissions are 
roughly proportional to fuel consumption, therefore a decrease is seen 
in both downstream and fuel refining sources.
    We received several comments on the methods used to quantify 
emissions from advanced technology vehicles. Growth Energy commented 
that ``There is substantial evidence that GDI increases PM mass and PM 
number emissions compared to the conventional port fuel injection (PFI) 
technology now in widespread use * * *. Therefore, the final rule 
should evaluate and consider both the increased PM due to GDI use and 
the potential for more widespread ethanol use to decrease PM mass and 
number emissions.'' The Clean Fuels Development Coalition submitted 
similar comments. EPA agrees with the commenter that testing on initial 
GDI technology, primarily wall-guided systems, has shown an increase in 
PM emissions over the FTP as compared to conventional PFI gasoline 
engines. However, the technology is still evolving, making it difficult 
to predict future PM emission performance of GDI vehicles. Testing on 
initial spray-guided GDI systems has shown less of a PM increase over 
the FTP, and even reduced PM emissions over the USO6 compared to PFI 
vehicles.\663\ Due to the improved fuel economy and reduced emissions 
offered by spray-guided GDI technology, it is anticipated that spray-
guided GDI will replace wall-guided systems in the 2017 to 2025 
timeframe.\664\ As a result, in the technical assessment conducted by 
the agencies as part of this rulemaking, the agencies assessed the 
emissions and fuel consumption improvements associated with spray-
guided GDI systems and assumed that their overall in-use PM emission 
performance was comparable to that of PFI vehicles.
---------------------------------------------------------------------------

    \663\ ``Test Program to evaluate PM emissions from GDI 
vehicles,'' Memo from Michael Olechiw to EPA docket EPA-HQ-OAR-2010-
0799
    \664\ The technology modeling for this rule includes a spray 
guided GDI system. See Joint TSD Section 3.3
---------------------------------------------------------------------------

    For all criteria pollutants the overall impact of the program will 
be small compared to total U.S. inventories across all sectors. In 
2030, EPA estimates that the program will reduce total NOX, 
PM2.5, VOC and SOX inventories by 0.1 to 1.0 
percent, while increasing the total national CO inventory by 0.4 
percent.
    As shown in Table III-71, EPA estimates that the program will 
result in similarly small changes for air toxic emissions compared to 
total U.S. inventories across all sectors. In 2030, EPA estimates the 
program will increase total 1,3-butadiene and acetaldehyde emissions by 
0.1 to 0.2 percent. Total acrolein, benzene and formaldehyde emissions 
will decrease by similarly small amounts.

                            Table III-70--Annual Criteria Emission Impacts of Program
                                                  [Short tons]
----------------------------------------------------------------------------------------------------------------
                                                              CY 2020                         CY 2030
                                                 ---------------------------------------------------------------
                                    Pollutant         Impacts       % of total        Impacts       % of total
                                                   (short tons)   U.S. inventory   (short tons)   U.S. inventory
----------------------------------------------------------------------------------------------------------------
Total.........................  VOC.............         -11,712            -0.1        -123,070            -1.0
                                CO..............          14,164             0.0         224,875             0.4
                                NOX.............            -904             0.0          -6,509            -0.1
                                PM2.5...........            -136             0.0          -1,254             0.0
                                SOX.............          -1,270             0.0         -13,377            -0.2
Downstream....................  VOC.............             249             0.0           4,835             0.0
                                CO..............          14,414             0.0         227,250             0.4
                                NOX.............             498             0.0           8,281             0.1
                                PM2.5...........              40             0.0             568             0.0

[[Page 62900]]

 
                                SOX.............            -420             0.0          -4,498            -0.1
Fuel Production and             VOC.............         -12,043            -0.1        -128,823            -1.0
 Distribution.
                                CO..............            -749             0.0          -8,009             0.0
                                NOX.............          -1,757             0.0         -18,795            -0.2
                                PM2.5...........            -280             0.0          -3,000            -0.1
                                SOX.............          -1,198             0.0         -12,813            -0.2
Electricity...................  VOC.............              81             0.0             917             0.0
                                CO..............             499             0.0           5,634             0.0
                                NOX.............             355             0.0           4,005             0.0
                                PM2.5...........             104             0.0           1,179             0.0
                                SOX.............             348             0.0           3,933             0.0
----------------------------------------------------------------------------------------------------------------

                           Table III-71--Annual Air Toxic Emission Impacts of Program
                                                  [Short tons]
----------------------------------------------------------------------------------------------------------------
                                                              CY 2020                         CY 2030
                                                 ---------------------------------------------------------------
                                    Pollutant         Impacts       % of total        Impacts       % of total
                                                   (short tons)   U.S. inventory   (short tons)   U.S. inventory
----------------------------------------------------------------------------------------------------------------
Total.........................  1,3-Butadiene...               1             0.0              25             0.2
                                Acetaldehyde....               3             0.0              57             0.1
                                Acrolein........               0             0.0               2             0.0
                                Benzene.........             -16             0.0            -101             0.0
                                Formaldehyde....              -7             0.0             -43             0.0
Downstream....................  1,3-Butadiene...               1             0.0              28             0.2
                                Acetaldehyde....               4             0.0              70             0.1
                                Acrolein........               0             0.0               3             0.0
                                Benzene.........               8             0.0             160             0.1
                                Formaldehyde....               3             0.0              66             0.0
Fuel Production and             1,3-Butadiene...               0             0.0              -2             0.0
 Distribution.
                                Acetaldehyde....              -1             0.0             -14             0.0
                                Acrolein........               0             0.0              -2             0.0
                                Benzene.........             -24             0.0            -261            -0.1
                                Formaldehyde....             -10             0.0            -110            -0.1
Electricity...................  1,3-Butadiene...               0             0.0               0             0.0
                                Acetaldehyde....               0             0.0               1             0.0
                                Acrolein........               0             0.0               1             0.0
                                Benzene.........               0             0.0               0             0.0
                                Formaldehyde....               0             0.0               1             0.0
----------------------------------------------------------------------------------------------------------------

b. Methodology
    As in the MYs 2012-2016 rulemaking and in the proposal, for the 
downstream analysis, the current version of the EPA motor vehicle 
emission simulator (MOVES2010a) was used to estimate VOC, CO, 
NOX, PM and air toxics emission rates. Additional emissions 
from light duty cars and trucks attributable to the rebound effect were 
then calculated using the OMEGA model post-processor. A more complete 
discussion of the inputs, methodology, and results is contained in RIA 
Chapter 4.
    This rule assumes that MY 2017 and later vehicles are compliant 
with the agency's Tier 2 emission standards. This rule does not model 
any future Tier 3 emission standards, because these standards have not 
yet been proposed (see Section III.A).
    As in the MYs 2012-2016 GHG rulemaking, for this analysis we 
attribute decreased fuel consumption from this program to petroleum-
based fuels only, while assuming no effect on volumes of ethanol and 
other renewable fuels because they are mandated under the Renewable 
Fuel Standard (RFS2). For the purposes of this emission analysis, we 
assume that all gasoline in the timeframe of the analysis is blended 
with 10 percent ethanol (E10). However, as a consequence of the fixed 
volume of renewable fuels mandated in the RFS2 rulemaking and the 
decreasing petroleum consumption predicted here, we anticipate that 
this rulemaking would in fact increase the fraction of the U.S. fuel 
supply that is made up by renewable fuels. The impacts of this increase 
are difficult to project at the present time. Since it is not centrally 
relevant to the analysis for this rulemaking, we have not included 
renewable fuel volumes in this analysis beyond the assumption that all 
gasoline is E10.
    In this rulemaking EPA modeled the three impacts on criteria 
pollutant emissions (VMT rebound driving, changes in fuel production, 
and changes in electricity production) discussed above.
    While electric vehicles have zero tailpipe emissions, EPA assumes 
that manufacturers will plan for these vehicles in their regulatory 
compliance strategy for non-GHG emissions standards, and will not over-
comply with those standards. Since the Tier 2 emissions standards are 
fleet-average

[[Page 62901]]

standards, we assume that if a manufacturer introduces EVs into its 
fleet, that it would correspondingly compensate through changes to 
vehicles elsewhere in its fleet, rather than meet an overall lower 
fleet-average emissions level.\665\ Consequently, EPA assumes neither 
tailpipe pollutant benefit (other than CO2) nor an 
evaporative emission benefit from the introduction of electric vehicles 
into the fleet. Other factors which may impact downstream non-GHG 
emissions, but which are not estimated in the final rulemaking 
inventory analysis, include: the potential for decreased criteria 
pollutant emissions due to increased air conditioner efficiency; 
reduced refueling emissions due to less frequent refueling events and 
reduced annual refueling volumes resulting from the GHG standards; and 
increased hot soak evaporative emissions due to the likely increase in 
number of trips associated with VMT rebound modeled in this rule. In 
all, these additional analyses would likely result only in small 
changes relative to the national inventory.
---------------------------------------------------------------------------

    \665\ Historically, manufacturers have reduced precious metal 
loading in catalysts in order to reduce costs. See http://www.platinum.matthey.com/media-room/our-view-on-.-.-./thrifting-of-precious-metals-in-autocatalysts/ Accessed 11/08/2011. 
Alternatively, manufacturers could also modify vehicle calibration.
---------------------------------------------------------------------------

    To determine the upstream fuel production impacts, EPA estimated 
the impact of reduced petroleum volumes on the extraction and 
transportation of crude oil as well as the production and distribution 
of finished gasoline. For the purpose of assessing domestic-only 
emission reductions it was necessary to estimate the fraction of fuel 
savings attributable to domestic finished gasoline, and of this 
gasoline what fraction is produced from domestic crude. For this 
analysis EPA estimated that 50 percent of fuel savings is attributable 
to domestic finished gasoline and that 90 percent of this gasoline 
originated from imported crude. Emission factors for most upstream 
emission sources are based on the GREET1.8 model, developed by DOE's 
Argonne National Laboratory,\666\ but in some cases the GREET values 
were modified or updated by EPA to be consistent with the National 
Emission Inventory (NEI) or other relevant data.\667\ EPA made several 
additional updates between proposal and final rulemaking to the non-GHG 
emission rates as discussed in chapter 4 of the RIA. The primary 
updates for this analysis were to incorporate newer information on 
gasoline distribution emissions for VOC from the NEI, which were 
significantly higher than GREET estimates; newer information on on-site 
refinery emissions from the NEI, which were significantly lower than 
GREET estimates; new mobile source emission factors; and the 
incorporation of upstream emission factors for the air toxics estimated 
in this analysis: benzene, 1,3-butadiene, acetaldehyde, acrolein, and 
formaldehyde. The development of these emission factors is detailed in 
a memo to the docket and in RIA Chapter 4. These emission factors were 
incorporated into the OMEGA post-processor.
---------------------------------------------------------------------------

    \666\ Greenhouse Gas, Regulated Emissions, and Energy Use in 
Transportation model (GREET), U.S. Department of Energy, Argonne 
National Laboratory, http://www.transportation.anl.gov/modeling_simulation/GREET/.
    \667\ U.S. EPA. 2002 National Emissions Inventory (NEI) Data and 
Documentation, http://www.epa.gov/ttn/chief/net/2002inventory.html.
---------------------------------------------------------------------------

    As with the GHG emission analysis discussed in section III.F, 
electricity emission factors were derived from EPA's Integrated 
Planning Model (IPM). EPA uses IPM to analyze the projected impact of 
environmental policies on the electric power sector in the 48 
contiguous states and the District of Columbia. IPM is a multi-
regional, dynamic, deterministic linear programming model of the U.S. 
electric power sector. It provides forecasts of least-cost capacity 
expansion, electricity dispatch, and emission control strategies for 
meeting energy demand and environmental, transmission, dispatch, and 
reliability constraints. EPA discusses revisions to these emission 
factors in Section III.F and in RIA chapter 4.
2. Health Effects of Non-GHG Pollutants
    In this section we discuss health effects associated with exposure 
to some of the criteria and air toxic pollutants impacted by the 
vehicle standards.
a. Particulate Matter
    Particulate matter (PM) is a highly complex mixture of solid 
particles and liquid droplets distributed among numerous atmospheric 
gases which interact with solid and liquid phases. Particles range in 
size from those smaller than 1 nanometer (10-9 meter) to 
over 100 micrometer ([micro]m, or 10-6 meter) in diameter 
(for reference, a typical strand of human hair is 70 um in diameter and 
a grain of salt is about 100 [micro]m). Atmospheric particles can be 
grouped into several classes according to their aerodynamic and 
physical sizes, including ultrafine particles (1 to 3 [micro]m). For regulatory purposes, fine particles 
are measured as PM2.5 and inhalable or thoracic coarse 
particles are measured as PM10-2.5, corresponding to their 
size (diameter) range in micrometers and referring to total particle 
mass under 2.5 and between 2.5 and 10 micrometers, respectively. The 
EPA currently has standards that measure PM2.5 and 
PM10.\668\
---------------------------------------------------------------------------

    \668\ Regulatory definitions of PM size fractions, and 
information on reference and equivalent methods for measuring PM in 
ambient air, are provided in 40 CFR Parts 50, 53, and 58.
---------------------------------------------------------------------------

    Particles span many sizes and shapes and consist of hundreds of 
different chemicals. Particles are emitted directly from sources and 
are also formed through atmospheric chemical reactions; the former are 
often referred to as ``primary'' particles, and the latter as 
``secondary'' particles. Particle pollution also varies by time of year 
and location and is affected by several weather-related factors, such 
as temperature, clouds, humidity, and wind. A further layer of 
complexity comes from particles' ability to shift between solid/liquid 
and gaseous phases, which is influenced by concentration and 
meteorology, especially temperature.
    Fine particles are produced primarily by combustion processes and 
by transformations of gaseous emissions (e.g., sulfur oxides 
(SOX), nitrogen oxides (NOX), and volatile 
organic compounds (VOC)) in the atmosphere. The chemical and physical 
properties of PM2.5 may vary greatly with time, region, 
meteorology, and source category. Thus, PM2.5 may include a 
complex mixture of different components including sulfates, nitrates, 
organic compounds, elemental carbon and metal compounds. These 
particles can remain in the atmosphere for days to weeks and travel 
hundreds to thousands of kilometers.
i. Health Effects of Particulate Matter
    Scientific studies show ambient PM is associated with a series of 
adverse health effects. These health effects are discussed in detail in 
EPA's Integrated Science Assessment (ISA) for Particulate Matter.\669\ 
Further discussion of health effects associated with PM can also be 
found in the RIA for this final rule. The ISA summarizes health effects 
evidence associated with both short-term and long-term exposures to 
PM2.5, PM10-2.5, and ultrafine particles.\670\
---------------------------------------------------------------------------

    \669\ U.S. EPA (2009) Integrated Science Assessment for 
Particulate Matter (Final Report). U.S. Environmental Protection 
Agency, Washington, DC, EPA/600/R-08/139F, Docket EPA-HQ-OAR-2010-
0799.
    \670\ See also 77 FR 38906-909 (proposing revisions to the 
primary PM NAAQS and summarizing evidence on health effects related 
to exposure to fine particulate matter).

---------------------------------------------------------------------------

[[Page 62902]]

    The ISA concludes that health effects associated with short-term 
exposures (hours to days) to ambient PM2.5 include 
mortality, cardiovascular effects, such as altered vasomotor function 
and hospital admissions and emergency department visits for ischemic 
heart disease and congestive heart failure, and respiratory effects, 
such as exacerbation of asthma symptoms in children and hospital 
admissions and emergency department visits for chronic obstructive 
pulmonary disease and respiratory infections.\671\ The ISA notes that 
long-term exposure (months to years) to PM2.5 is associated 
with the development/progression of cardiovascular disease, premature 
mortality, and respiratory effects, including reduced lung function 
growth, increased respiratory symptoms, and asthma development.\672\ 
The ISA concludes that the currently available scientific evidence from 
epidemiologic, controlled human exposure, and toxicological studies 
supports a causal association between short- and long-term exposures to 
PM2.5 and cardiovascular effects and mortality. Furthermore, 
the ISA concludes that the collective evidence supports likely causal 
associations between short- and long-term PM2.5 exposures 
and respiratory effects. The ISA also concludes that the scientific 
evidence is suggestive of a causal association for reproductive and 
developmental effects and cancer, mutagenicity, and genotoxicity and 
long-term exposure to PM2.5.\673\
---------------------------------------------------------------------------

    \671\ See U.S. EPA, 2009 Final PM ISA, Note 669, at Section 
2.3.1.1.
    \672\ See U.S. EPA 2009 Final PM ISA, Note 669, at page 2-12, 
Sections 7.3.1.1 and 7.3.2.1.
    \673\ See U.S. EPA 2009 Final PM ISA, Note 669, at Section 
2.3.2.
---------------------------------------------------------------------------

    For PM10-2.5, the ISA concludes that the current 
evidence is suggestive of a causal relationship between short-term 
exposures and cardiovascular effects. There is also suggestive evidence 
of a causal relationship between short-term PM10-2.5 
exposure and mortality and respiratory effects. Data are inadequate to 
draw conclusions regarding the health effects associated with long-term 
exposure to PM10-2.5.674,675
---------------------------------------------------------------------------

    \674\ See U.S. EPA 2009 Final PM ISA, Note 669, at Section 
2.3.4, Table 2-6.
    \675\ See also 77 FR 38947-948 (discussing health effects 
related to exposure to PM10-2.5).
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    For ultrafine particles, the ISA concludes that there is suggestive 
evidence of a causal relationship between short-term exposures and 
cardiovascular effects, such as changes in heart rhythm and blood 
vessel function. It also concludes that there is suggestive evidence of 
association between short-term exposure to ultrafine particles and 
respiratory effects. Data are inadequate to draw conclusions regarding 
the health effects associated with long-term exposure to ultrafine 
particles.\676\
---------------------------------------------------------------------------

    \676\ See U.S. EPA 2009 Final PM ISA, Note 669, at Section 
2.3.5, Table 2-6.
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b. Ozone
    Ground-level ozone pollution is typically formed by the reaction of 
VOC and NOX in the lower atmosphere in the presence of 
sunlight. These pollutants, often referred to as ozone precursors, are 
emitted by many types of pollution sources, such as highway and nonroad 
motor vehicles and engines, power plants, chemical plants, refineries, 
makers of consumer and commercial products, industrial facilities, and 
smaller area sources.
    The science of ozone formation, transport, and accumulation is 
complex. Ground-level ozone is produced and destroyed in a cyclical set 
of chemical reactions, many of which are sensitive to temperature and 
sunlight. When ambient temperatures and sunlight levels remain high for 
several days and the air is relatively stagnant, ozone and its 
precursors can build up and result in more ozone than typically occurs 
on a single high-temperature day. Ozone can be transported hundreds of 
miles downwind from precursor emissions, resulting in elevated ozone 
levels even in areas with low local VOC or NOX emissions.
i. Health Effects of Ozone
    The health and welfare effects of ozone are well documented and are 
assessed in EPA's 2006 Air Quality Criteria Document and 2007 Staff 
Paper.677,678 People who are more susceptible to effects 
associated with exposure to ozone can include children, the elderly, 
and individuals with respiratory disease such as asthma. Those with 
greater exposures to ozone, for instance due to time spent outdoors 
(e.g., children and outdoor workers), are of particular concern. Ozone 
can irritate the respiratory system, causing coughing, throat 
irritation, and breathing discomfort. Ozone can reduce lung function 
and cause pulmonary inflammation in healthy individuals. Ozone can also 
aggravate asthma, leading to more asthma attacks that require medical 
attention and/or the use of additional medication. Thus, ambient ozone 
may cause both healthy and asthmatic individuals to limit their outdoor 
activities. In addition, there is suggestive evidence of a contribution 
of ozone to cardiovascular-related morbidity and highly suggestive 
evidence that short-term ozone exposure directly or indirectly 
contributes to non-accidental and cardiopulmonary-related mortality, 
but additional research is needed to clarify the underlying mechanisms 
causing these effects. In a report on the estimation of ozone-related 
premature mortality published by NRC, a panel of experts and reviewers 
concluded that short-term exposure to ambient ozone is likely to 
contribute to premature deaths and that ozone-related mortality should 
be included in estimates of the health benefits of reducing ozone 
exposure.\679\ Animal toxicological evidence indicates that with 
repeated exposure, ozone can inflame and damage the lining of the 
lungs, which may lead to permanent changes in lung tissue and 
irreversible reductions in lung function. The respiratory effects 
observed in controlled human exposure studies and animal studies are 
coherent with the evidence from epidemiologic studies supporting a 
causal relationship between acute ambient ozone exposures and increased 
respiratory-related emergency room visits and hospitalizations in the 
warm season. In addition, there is suggestive evidence of a 
contribution of ozone to cardiovascular-related morbidity and non-
accidental and cardiopulmonary mortality.
---------------------------------------------------------------------------

    \677\ U.S. EPA. (2006). Air Quality Criteria for Ozone and 
Related Photochemical Oxidants (Final). EPA/600/R-05/004aF-cF. 
Washington, DC: U.S. EPA. Docket EPA-HQ-OAR-2010-0799.
    \678\ U.S. EPA. (2007). Review of the National Ambient Air 
Quality Standards for Ozone: Policy Assessment of Scientific and 
Technical Information, OAQPS Staff Paper. EPA-452/R-07-003. 
Washington, DC, U.S. EPA. Docket EPA-HQ-OAR-2010-0799.
    \679\ National Research Council (NRC), 2008. Estimating 
Mortality Risk Reduction and Economic Benefits from Controlling 
Ozone Air Pollution. The National Academies Press: Washington, DC 
Docket EPA-HQ-OAR-2010-0799.
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c. Nitrogen Oxides and Sulfur Oxides
    Nitrogen dioxide (NO2) is a member of the NOX 
family of gases. Most NO2 is formed in the air through the 
oxidation of nitric oxide (NO) emitted when fuel is burned at a high 
temperature. Sulfur dioxide (SO2) a member of the sulfur 
oxide (SOX) family of gases, is formed from burning fuels 
containing sulfur (e.g., coal or oil derived), extracting gasoline from 
oil, or extracting metals from ore.
    SO2 and NO2 can dissolve in water droplets 
and further oxidize to form sulfuric and nitric acid which react with 
ammonia to form sulfates and nitrates, both of which are important 
components of ambient PM. The health

[[Page 62903]]

effects of ambient PM are discussed in Section III.G.2.a of this 
preamble. NOX and NMHC are the two major precursors of 
ozone. The health effects of ozone are covered in Section III.G.2.b.i.
i. Health Effects of NO2
    Information on the health effects of NO2 can be found in 
the EPA Integrated Science Assessment (ISA) for Nitrogen Oxides.\680\ 
The EPA has concluded that the findings of epidemiologic, controlled 
human exposure, and animal toxicological studies provide evidence that 
is sufficient to infer a likely causal relationship between respiratory 
effects and short-term NO2 exposure. The ISA concludes that 
the strongest evidence for such a relationship comes from epidemiologic 
studies of respiratory effects including symptoms, emergency department 
visits, and hospital admissions. Based on both short- and long-term 
studies, the ISA concludes that associations of NO2 with 
respiratory health effects are stronger among a number of groups; these 
include individuals with preexisting pulmonary conditions (e.g., asthma 
or COPD), children and older adults. The ISA also draws two broad 
conclusions regarding airway responsiveness following NO2 
exposure. First, the ISA concludes that NO2 exposure may 
enhance the sensitivity to allergen-induced decrements in lung function 
and increase the allergen-induced airway inflammatory response 
following 30-minute exposures of asthmatics to NO2 
concentrations as low as 0.26 ppm. Second, exposure to NO2 
has been found to enhance the inherent responsiveness of the airway to 
subsequent nonspecific challenges in controlled human exposure studies 
of asthmatic subjects. Small but significant increases in non-specific 
airway hyperresponsiveness were reported following 1-hour exposures of 
asthmatics to 0.1 ppm NO2. Enhanced airway responsiveness 
could have important clinical implications for asthmatics since 
transient increases in airway responsiveness following NO2 
exposure have the potential to increase symptoms and worsen asthma 
control. Together, the epidemiologic and experimental data sets form a 
plausible, consistent, and coherent description of a relationship 
between NO2 exposures and an array of adverse health effects 
that range from the onset of respiratory symptoms to hospital 
admission.
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    \680\ U.S. EPA (2008). Integrated Science Assessment for Oxides 
of Nitrogen--Health Criteria (Final Report). EPA/600/R-08/071. 
Washington, DC: U.S.EPA. Docket EPA-HQ-OAR-2010-0799.
---------------------------------------------------------------------------

    Although the weight of evidence supporting a causal relationship is 
somewhat less certain than that associated with respiratory morbidity, 
NO2 has also been linked to other health endpoints. These 
include all-cause (nonaccidental) mortality, hospital admissions or 
emergency department visits for cardiovascular disease, and decrements 
in lung function growth associated with chronic exposure.
ii. Health Effects of SO2
    Information on the health effects of SO2 can be found in 
the EPA Integrated Science Assessment for Sulfur Oxides.\681\ 
SO2 has long been known to cause adverse respiratory health 
effects, particularly among individuals with asthma. Other potentially 
sensitive groups include children and the elderly. During periods of 
elevated ventilation, asthmatics may experience symptomatic 
bronchoconstriction within minutes of exposure. Following an extensive 
evaluation of health evidence from epidemiologic and laboratory 
studies, the EPA has concluded that there is a causal relationship 
between respiratory health effects and short-term exposure to 
SO2. Separately, based on an evaluation of the epidemiologic 
evidence of associations between short-term exposure to SO2 
and mortality, the EPA has concluded that the overall evidence is 
suggestive of a causal relationship between short-term exposure to 
SO2 and mortality.
---------------------------------------------------------------------------

    \681\ U.S. EPA. (2008). Integrated Science Assessment (ISA) for 
Sulfur Oxides--Health Criteria (Final Report). EPA/600/R-08/047F. 
Washington, DC: U.S. Environmental Protection Agency. Docket EPA-HQ-
OAR-2010-0799.
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d. Carbon Monoxide
    Carbon monoxide (CO) is a colorless, odorless gas emitted from 
combustion processes. Nationally and, particularly in urban areas, the 
majority of CO emissions to ambient air come from mobile sources.
i. Health Effects of CO
    Information on the health effects of CO can be found in the EPA 
Integrated Science Assessment (ISA) for Carbon Monoxide.\682\ The ISA 
concludes that ambient concentrations of CO are associated with a 
number of adverse health effects.\683\ This section provides a summary 
of the health effects associated with exposure to ambient 
concentrations of CO.\684\
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    \682\ U.S. EPA, 2010. Integrated Science Assessment for Carbon 
Monoxide (Final Report). U.S. Environmental Protection Agency, 
Washington, DC, EPA/600/R-09/019F, 2010. Available at http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=218686. Docket EPA-HQ-
OAR-2010-0799
    \683\ The ISA evaluates the health evidence associated with 
different health effects, assigning one of five ``weight of 
evidence'' determinations: causal relationship, likely to be a 
causal relationship, suggestive of a causal relationship, inadequate 
to infer a causal relationship, and not likely to be a causal 
relationship. For definitions of these levels of evidence, please 
refer to Section 1.6 of the ISA.
    \684\ Personal exposure includes contributions from many 
sources, and in many different environments. Total personal exposure 
to CO includes both ambient and nonambient components; and both 
components may contribute to adverse health effects.
---------------------------------------------------------------------------

    Human clinical studies of subjects with coronary artery disease 
show a decrease in the time to onset of exercise-induced angina (chest 
pain) and electrocardiogram changes following CO exposure. In addition, 
epidemiologic studies show associations between short-term CO exposure 
and cardiovascular morbidity, particularly increased emergency room 
visits and hospital admissions for coronary heart disease (including 
ischemic heart disease, myocardial infarction, and angina). Some 
epidemiologic evidence is also available for increased hospital 
admissions and emergency room visits for congestive heart failure and 
cardiovascular disease as a whole. The ISA concludes that a causal 
relationship is likely to exist between short-term exposures to CO and 
cardiovascular morbidity. It also concludes that available data are 
inadequate to conclude that a causal relationship exists between long-
term exposures to CO and cardiovascular morbidity.
    Animal studies show various neurological effects with in-utero CO 
exposure. Controlled human exposure studies report inconsistent neural 
and behavioral effects following low-level CO exposures. The ISA 
concludes the evidence is suggestive of a causal relationship with both 
short- and long-term exposure to CO and central nervous system effects.
    A number of epidemiologic and animal toxicological studies cited in 
the ISA have evaluated associations between CO exposure and birth 
outcomes such as preterm birth or cardiac birth defects. The 
epidemiologic studies provide limited evidence of a CO-induced effect 
on preterm births and birth defects, with weak evidence for a decrease 
in birth weight. Animal toxicological studies have found associations 
between perinatal CO exposure and decrements in birth weight, as well 
as other developmental outcomes. The ISA concludes these studies are 
suggestive of a causal relationship between long-term exposures to CO 
and developmental effects and birth outcomes.

[[Page 62904]]

    Epidemiologic studies provide evidence of effects on respiratory 
morbidity such as changes in pulmonary function, respiratory symptoms, 
and hospital admissions associated with ambient CO concentrations. A 
limited number of epidemiologic studies considered copollutants such as 
ozone, SO2, and PM in two-pollutant models and found that CO 
risk estimates were generally robust, although this limited evidence 
makes it difficult to disentangle effects attributed to CO itself from 
those of the larger complex air pollution mixture. Controlled human 
exposure studies have not extensively evaluated the effect of CO on 
respiratory morbidity. Animal studies at levels of 50-100 ppm CO show 
preliminary evidence of altered pulmonary vascular remodeling and 
oxidative injury. The ISA concludes that the evidence is suggestive of 
a causal relationship between short-term CO exposure and respiratory 
morbidity, and inadequate to conclude that a causal relationship exists 
between long-term exposure and respiratory morbidity.
    Finally, the ISA concludes that the epidemiologic evidence is 
suggestive of a causal relationship between short-term exposures to CO 
and mortality. Epidemiologic studies provide evidence of an association 
between short-term exposure to CO and mortality, but limited evidence 
is available to evaluate cause-specific mortality outcomes associated 
with CO exposure. In addition, the attenuation of CO risk estimates 
which was often observed in copollutant models contributes to the 
uncertainty as to whether CO is acting alone or as an indicator for 
other combustion-related pollutants. The ISA also concludes that there 
is not likely to be a causal relationship between relevant long-term 
exposures to CO and mortality.
e. Air Toxics
    Light-duty vehicle emissions contribute to ambient levels of mobile 
source air toxics, which are compounds that are known or suspected as 
human or animal carcinogens, or that have noncancer health 
effects.\685\ The population experiences an elevated risk of cancer and 
other noncancer health effects from exposure to the class of pollutants 
known collectively as air toxics.\686\ These compounds include, but are 
not limited to, benzene, 1,3-butadiene, formaldehyde, acetaldehyde, 
acrolein, polycyclic organic matter, and naphthalene. These compounds 
were identified as national or regional risk drivers or contributors in 
the 2005 National-scale Air Toxics Assessment and have significant 
inventory contributions from mobile sources.\687\
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    \685\ U.S. Environmental Protection Agency (2007). Control of 
Hazardous Air Pollutants from Mobile Sources; final rule. 72 FR 
8434, February 26, 2007.
    \686\ U.S. EPA. (2011) Summary of Results for the 2005 National-
Scale Assessment. www.epa.gov/ttn/atw/nata2005/05pdf/sum_results.pdf. Docket EPA-HQ-OAR-2010-0799.
    \687\ U.S. EPA (2011) 2005 National-Scale Air Toxics Assessment. 
http://www.epa.gov/ttn/atw/nata2005. Docket EPA-HQ-OAR-2010-0799.
---------------------------------------------------------------------------

i. Benzene
    The EPA's Integrated Risk Information System (IRIS) database lists 
benzene as a known human carcinogen (causing leukemia) by all routes of 
exposure, and concludes that exposure is associated with additional 
health effects, including genetic changes in both humans and animals 
and increased proliferation of bone marrow cells in 
mice.688,689,690 EPA states in its IRIS database that data 
indicate a causal relationship between benzene exposure and acute 
lymphocytic leukemia and suggest a relationship between benzene 
exposure and chronic non-lymphocytic leukemia and chronic lymphocytic 
leukemia. The International Agency for Research on Carcinogens (IARC) 
has determined that benzene is a human carcinogen and the U.S. 
Department of Health and Human Services (DHHS) has characterized 
benzene as a known human carcinogen.691,692
---------------------------------------------------------------------------

    \688\ U.S. EPA. 2000. Integrated Risk Information System File 
for Benzene. This material is available electronically at http://www.epa.gov/iris/subst/0276.htm. Docket EPA-HQ-OAR-2010-0799.
    \689\ International Agency for Research on Cancer. 1982. 
Monographs on the evaluation of carcinogenic risk of chemicals to 
humans, Volume 29. Some industrial chemicals and dyestuffs, World 
Health Organization, Lyon, France, p. 345-389. Docket EPA-HQ-OAR-
2010-0799
    \690\ Irons, R.D.; Stillman, W.S.; Colagiovanni, D.B.; Henry, 
V.A. 1992. Synergistic action of the benzene metabolite hydroquinone 
on myelopoietic stimulating activity of granulocyte/macrophage 
colony-stimulating factor in vitro, Proc. Natl. Acad. Sci. 89:3691-
3695. Docket EPA-HQ-OAR-2010-0799.
    \691\ See IARC, Note 689, above.
    \692\ U.S. Department of Health and Human Services National 
Toxicology Program 11th Report on Carcinogens available at: http://ntp.niehs.nih.gov/go/16183. Docket EPA-HQ-OAR-2010-0799
---------------------------------------------------------------------------

    A number of adverse noncancer health effects including blood 
disorders, such as preleukemia and aplastic anemia, have also been 
associated with long-term exposure to benzene.693,694 The 
most sensitive noncancer effect observed in humans, based on current 
data, is the depression of the absolute lymphocyte count in 
blood.695,696 In addition, published work, including studies 
sponsored by the Health Effects Institute (HEI), provides evidence that 
biochemical responses are occurring at lower levels of benzene exposure 
than previously known.697,698,699,700 EPA's IRIS program has 
not yet evaluated these new data.
---------------------------------------------------------------------------

    \693\ Aksoy, M. (1989). Hematotoxicity and carcinogenicity of 
benzene. Environ. Health Perspect. 82: 193-197. Docket EPA-HQ-OAR-
2010-0799.
    \694\ Goldstein, B.D. (1988). Benzene toxicity. Occupational 
medicine. State of the Art Reviews. 3: 541-554. Docket EPA-HQ-OAR-
2010-0799.
    \695\ Rothman, N., G.L. Li, M. Dosemeci, W.E. Bechtold, G.E. 
Marti, Y.Z. Wang, M. Linet, L.Q. Xi, W. Lu, M.T. Smith, N. Titenko-
Holland, L.P. Zhang, W. Blot, S.N. Yin, and R.B. Hayes (1996) 
Hematotoxicity among Chinese workers heavily exposed to benzene. Am. 
J. Ind. Med. 29: 236-246. Docket EPA-HQ-OAR-2010-0799.
    \696\ U.S. EPA (2002) Toxicological Review of Benzene (Noncancer 
Effects). Environmental Protection Agency, Integrated Risk 
Information System, Research and Development, National Center for 
Environmental Assessment, Washington DC. This material is available 
electronically at http://www.epa.gov/iris/subst/0276.htm. Docket 
EPA-HQ-OAR-2010-0799.
    \697\ Qu, O.; Shore, R.; Li, G.; Jin, X.; Chen, C.L.; Cohen, B.; 
Melikian, A.; Eastmond, D.; Rappaport, S.; Li, H.; Rupa, D.; 
Suramaya, R.; Songnian, W.; Huifant, Y.; Meng, M.; Winnik, M.; Kwok, 
E.; Li, Y.; Mu, R.; Xu, B.; Zhang, X.; Li, K. (2003) HEI Report 115, 
Validation & Evaluation of Biomarkers in Workers Exposed to Benzene 
in China. Docket EPA-HQ-OAR-2010-0799.
    \698\ Qu, Q., R. Shore, G. Li, X. Jin, L.C. Chen, B. Cohen, et 
al. (2002) Hematological changes among Chinese workers with a broad 
range of benzene exposures. Am. J. Industr. Med. 42: 275-285. Docket 
EPA-HQ-OAR-2010-0799.
    \699\ Lan, Qing, Zhang, L., Li, G., Vermeulen, R., et al. (2004) 
Hematotoxically in Workers Exposed to Low Levels of Benzene. Science 
306: 1774-1776. Docket EPA-HQ-OAR-2010-0799.
    \700\ Turtletaub, K.W. and Mani, C. (2003) Benzene metabolism in 
rodents at doses relevant to human exposure from Urban Air. Research 
Reports Health Effect Inst. Report No.113. Docket EPA-HQ-OAR-2010-
0799.
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ii. 1,3-Butadiene
    EPA has characterized 1,3-butadiene as carcinogenic to humans by 
inhalation.701,702 The IARC has determined that 1,3-
butadiene is a human carcinogen and the U.S. DHHS has characterized 
1,3-butadiene as a known human carcinogen.703,704 There

[[Page 62905]]

are numerous studies consistently demonstrating that 1,3-butadiene is 
metabolized into genotoxic metabolites by experimental animals and 
humans. The specific mechanisms of 1,3-butadiene-induced carcinogenesis 
are unknown; however, the scientific evidence strongly suggests that 
the carcinogenic effects are mediated by genotoxic metabolites. Animal 
data suggest that females may be more sensitive than males for cancer 
effects associated with 1,3-butadiene exposure; there are insufficient 
data in humans from which to draw conclusions about sensitive 
subpopulations. 1,3-butadiene also causes a variety of reproductive and 
developmental effects in mice; no human data on these effects are 
available. The most sensitive effect was ovarian atrophy observed in a 
lifetime bioassay of female mice.\705\
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    \701\ U.S. EPA (2002) Health Assessment of 1,3-Butadiene. Office 
of Research and Development, National Center for Environmental 
Assessment, Washington Office, Washington, DC. Report No. EPA600-P-
98-001F. This document is available electronically at http://www.epa.gov/iris/supdocs/buta-sup.pdf. Docket EPA-HQ-OAR-2010-0799.
    \702\ U.S. EPA (2002) Full IRIS Summary for 1,3-butadiene (CASRN 
106-99-0). Environmental Protection Agency, Integrated Risk 
Information System (IRIS), Research and Development, National Center 
for Environmental Assessment, Washington, DC http://www.epa.gov/iris/subst/0139.htm. Docket EPA-HQ-OAR-2010-0799.
    \703\ International Agency for Research on Cancer (1999) 
Monographs on the evaluation of carcinogenic risk of chemicals to 
humans, Volume 71, Re-evaluation of some organic chemicals, 
hydrazine and hydrogen peroxide and Volume 97 (in preparation), 
World Health Organization, Lyon, France. Docket EPA-HQ-OAR-2010-
0799.
    \704\ U.S. Department of Health and Human Services (2005) 
National Toxicology Program 11th Report on Carcinogens available at: 
ntp.niehs.nih.gov/index.cfm?objectid=32BA9724-F1F6-975E-7FCE50709CB4C932. Docket EPA-HQ-OAR-2010-0799.
    \705\ Bevan, C.; Stadler, J.C.; Elliot, G.S.; et al. (1996) 
Subchronic toxicity of 4-vinylcyclohexene in rats and mice by 
inhalation. Fundam. Appl. Toxicol. 32:1-10. Docket EPA-HQ-OAR-2010-
0799.
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iii. Formaldehyde
    In 1991, EPA concluded that formaldehyde is a carcinogen based on 
nasal tumors in animal bioassays.\706\ An Inhalation Unit Risk for 
cancer and a Reference Dose for oral noncancer effects were developed 
by the Agency and posted on the Integrated Risk Information System 
(IRIS) database. Since that time, the National Toxicology Program (NTP) 
and International Agency for Research on Cancer (IARC) have concluded 
that formaldehyde is a known human carcinogen.707,708,709
---------------------------------------------------------------------------

    \706\ EPA. Integrated Risk Information System. Formaldehyde 
(CASRN 50-00-0) http://www.epa.gov/iris/subst/0419/htm.
    \707\ National Toxicology Program, U.S. Department of Health and 
Human Services (HHS), 12th Report on Carcinogens, June 10, 2011.
    \708\ IARC Monographs on the Evaluation of Carcinogenic Risks to 
Humans Volume 88 (2006): Formaldehyde, 2-Butoxyethanol and 1-tert-
Butoxypropan-2-ol.
    \709\ IARC Mongraphs on the Evaluation of Carcinogenic Risks to 
Humans Volume 100F (2012): Formaldehyde.
---------------------------------------------------------------------------

    The conclusions by IARC and NTP reflect the results of 
epidemiologic research published since 1991 in combination with 
previous animal, human and mechanistic evidence. Research conducted by 
the National Cancer Institute reported an increased risk of 
nasopharyngeal cancer and specific lymphohematopoietic malignancies 
among workers exposed to formaldehyde.710,711,712 A National 
Institute of Occupational Safety and Health study of garment workers 
also reported increased risk of death due to leukemia among workers 
exposed to formaldehyde.\713\ Extended follow-up of a cohort of British 
chemical workers did not report evidence of an increase in 
nasopharyngeal or lymphohematopoietic cancers, but a continuing 
statistically significant excess in lung cancers was reported.\714\ 
Finally, a study of embalmers reported formaldehyde exposures to be 
associated with an increased risk of myeloid leukemia but not brain 
cancer.\715\
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    \710\ Hauptmann, M..; Lubin, J. H.; Stewart, P. A.; Hayes, R. 
B.; Blair, A. 2003. Mortality from lymphohematopoetic malignancies 
among workers in formaldehyde industries. Journal of the National 
Cancer Institute 95: 1615-1623. Docket EPA-HQ-OAR-2010-0799.
    \711\ Hauptmann, M..; Lubin, J. H.; Stewart, P. A.; Hayes, R. 
B.; Blair, A. 2004. Mortality from solid cancers among workers in 
formaldehyde industries. American Journal of Epidemiology 159: 1117-
1130. Docket EPA-HQ-OAR-2010-0799.
    \712\ Beane Freeman, L. E.; Blair, A.; Lubin, J. H.; Stewart, P. 
A.; Hayes, R. B.; Hoover, R. N.; Hauptmann, M. 2009. Mortality from 
lymphohematopoietic malignancies among workers in formaldehyde 
industries: The National Cancer Institute cohort. J. National Cancer 
Inst. 101: 751-761. Docket EPA-HQ-OAR-2010-0799.
    \713\ Pinkerton, L. E. 2004. Mortality among a cohort of garment 
workers exposed to formaldehyde: an update. Occup. Environ. Med. 61: 
193-200. Docket EPA-HQ-OAR-2010-0799.
    \714\ Coggon, D, EC Harris, J Poole, KT Palmer. 2003. Extended 
follow-up of a cohort of British chemical workers exposed to 
formaldehyde. J National Cancer Inst. 95:1608-1615. Docket EPA-HQ-
OAR-2010-0799.
    \715\ Hauptmann, M,; Stewart P. A.; Lubin J. H.; Beane Freeman, 
L. E.; Hornung, R. W.; Herrick, R. F.; Hoover, R. N.; Fraumeni, J. 
F.; Hayes, R. B. 2009. Mortality from lymphohematopoietic 
malignancies and brain cancer among embalmers exposed to 
formaldehyde. Journal of the National Cancer Institute 101:1696-
1708.
---------------------------------------------------------------------------

    Health effects of formaldehyde in addition to cancer were reviewed 
by the Agency for Toxics Substances and Disease Registry in 1999 \716\ 
and supplemented in 2010,\717\ and by the World Health 
Organization.\718\ These organizations reviewed the literature 
concerning effects on the eyes and respiratory system, the primary 
point of contact for inhaled formaldehyde, including sensory irritation 
of eyes and respiratory tract, pulmonary function, nasal 
histopathology, and immune system effects. In addition, research on 
reproductive and developmental effects and neurological effects were 
discussed.
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    \716\ ATSDR. 1999. Toxicological Profile for Formaldehyde, U.S. 
Department of Health and Human Services (HHS), July 1999.
    \717\ ATSDR. 2010. Supplement to the Toxicological Profile for 
Formaldehyde U.S. Department of Health and Human Services (HHS), 
October 2010.
    \718\ IPCS. 2002. Concise International Chemical Assessment 
Document 40. Formaldehyde. World Health Organization.
---------------------------------------------------------------------------

    EPA released a draft Toxicological Review of Formaldehyde--
Inhalation Assessment through the IRIS program for peer review by the 
National Research Council (NRC) and public comment in June 2010.\719\ 
The draft assessment reviewed more recent research from animal and 
human studies on cancer and other health effects. The NRC released 
their review report in April 2011 \720\ (http://www.nap.edu/catalog.php?record_id=13142). The EPA is currently revising the draft 
assessment in response to this review.
---------------------------------------------------------------------------

    \719\ EPA (U.S. Environmental Protection Agency). 2010. 
Toxicological Review of Formaldehyde (CAS No. 50-00-0)--Inhalation 
Assessment: In Support of Summary Information on the Integrated Risk 
Information System (IRIS). External Review Draft. EPA/635/R-10/002A. 
U.S. Environmental Protection Agency, Washington DC [online]. 
Available: http://cfpub.epa.gov/ncea/irs_drats/recordisplay.cfm?deid=223614.
    \720\ NRC (National Research Council). 2011. Review of the 
Environmental Protection Agency's Draft IRIS Assessment of 
Formaldehyde. Washington DC: National Academies Press.
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iv. Acetaldehyde
    Acetaldehyde is classified in EPA's IRIS database as a probable 
human carcinogen, based on nasal tumors in rats, and is considered 
toxic by the inhalation, oral, and intravenous routes.\721\ 
Acetaldehyde is reasonably anticipated to be a human carcinogen by the 
U.S. DHHS in the 11th Report on Carcinogens and is classified as 
possibly carcinogenic to humans (Group 2B) by the 
IARC.722,723 EPA is currently conducting a reassessment of 
cancer risk from inhalation exposure to acetaldehyde.
---------------------------------------------------------------------------

    \721\ U.S. EPA. 1991. Integrated Risk Information System File of 
Acetaldehyde. Research and Development, National Center for 
Environmental Assessment, Washington, DC. Available at http://www.epa.gov/iris/subst/0290.htm. Docket EPA-HQ-OAR-2010-0799.
    \722\ U.S. Department of Health and Human Services National 
Toxicology Program 11th Report on Carcinogens available at: 
ntp.niehs.nih.gov/index.cfm?objectid=32BA9724-F1F6-975E-7FCE50709CB4C932. Docket EPA-HQ-OAR-2010-0799.
    \723\ International Agency for Research on Cancer. 1999. Re-
evaluation of some organic chemicals, hydrazine, and hydrogen 
peroxide. IARC Monographs on the Evaluation of Carcinogenic Risk of 
Chemical to Humans, Vol 71. Lyon, France. Docket EPA-HQ-OAR-2010-
0799.
---------------------------------------------------------------------------

    The primary noncancer effects of exposure to acetaldehyde vapors 
include irritation of the eyes, skin, and respiratory tract.\724\ In 
short-term (4 week) rat studies, degeneration of olfactory epithelium 
was observed at various concentration levels of acetaldehyde 
exposure.725,726 Data from

[[Page 62906]]

these studies were used by EPA to develop an inhalation reference 
concentration. Some asthmatics have been shown to be a sensitive 
subpopulation to decrements in functional expiratory volume (FEV1 test) 
and bronchoconstriction upon acetaldehyde inhalation.\727\ The agency 
is currently conducting a reassessment of the health hazards from 
inhalation exposure to acetaldehyde.
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    \724\ See Integrated Risk Information System File of 
Acetaldehyde, Note 721, above.
    \725\ Appleman, L.M., R.A. Woutersen, V.J. Feron, R.N. Hooftman, 
and W.R.F. Notten. 1986. Effects of the variable versus fixed 
exposure levels on the toxicity of acetaldehyde in rats. J. Appl. 
Toxicol. 6: 331-336. Docket EPA-HQ-OAR-2010-0799.
    \726\ Appleman, L.M., R.A. Woutersen, and V.J. Feron. 1982. 
Inhalation toxicity of acetaldehyde in rats. I. Acute and subacute 
studies. Toxicology. 23: 293-297. Docket EPA-HQ-OAR-2010-0799.
    \727\ Myou, S.; Fujimura, M.; Nishi K.; Ohka, T.; and Matsuda, 
T. 1993. Aerosolized acetaldehyde induces histamine-mediated 
bronchoconstriction in asthmatics. Am. Rev. Respir.Dis.148(4 Pt 1): 
940-3. Docket EPA-HQ-OAR-2010-0799.
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v. Acrolein
    Acrolein is extremely acrid and irritating to humans when inhaled, 
with acute exposure resulting in upper respiratory tract irritation, 
mucus hypersecretion and congestion. The intense irritancy of this 
carbonyl has been demonstrated during controlled tests in human 
subjects, who suffer intolerable eye and nasal mucosal sensory 
reactions within minutes of exposure.\728\ These data and additional 
studies regarding acute effects of human exposure to acrolein are 
summarized in EPA's 2003 IRIS Human Health Assessment for 
acrolein.\729\ Evidence available from studies in humans indicate that 
levels as low as 0.09 ppm (0.21 mg/m\3\) for five minutes may elicit 
subjective complaints of eye irritation with increasing concentrations 
leading to more extensive eye, nose and respiratory symptoms.\730\ 
Lesions to the lungs and upper respiratory tract of rats, rabbits, and 
hamsters have been observed after subchronic exposure to acrolein.\731\ 
Acute exposure effects in animal studies report bronchial hyper-
responsiveness.\732\ In one study, the acute respiratory irritant 
effects of exposure to 1.1 ppm acrolein were more pronounced in mice 
with allergic airway disease by comparison to non-diseased mice which 
also showed decreases in respiratory rate.\733\ Based on these animal 
data and demonstration of similar effects in humans (e.g., reduction in 
respiratory rate), individuals with compromised respiratory function 
(e.g., emphysema, asthma) are expected to be at increased risk of 
developing adverse responses to strong respiratory irritants such as 
acrolein.
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    \728\ U.S. EPA (U.S. Environmental Protection Agency). (2003) 
Toxicological review of acrolein in support of summary information 
on Integrated Risk Information System (IRIS) National Center for 
Environmental Assessment, Washington, DC. EPA/635/R-03/003. p. 10. 
Available online at: http://www.epa.gov/ncea/iris/toxreviews/0364tr.pdf. Docket EPA-HQ-OAR-2010-0799.
    \729\ See U.S. EPA 2003 Toxicological review of acrolein, Note 
728, above.
    \730\ See U.S. EPA 2003 Toxicological review of acrolein, Note 
728, at p. 11.
    \731\ Integrated Risk Information System File of Acrolein. 
Office of Research and Development, National Center for 
Environmental Assessment, Washington, DC. This material is available 
at http://www.epa.gov/iris/subst/0364.htm. Docket EPA-HQ-OAR-2010-
0799.
    \732\ See U.S. 2003 Toxicological review of acrolein, Note 728, 
at p. 15.
    \733\ Morris JB, Symanowicz PT, Olsen JE, et al. 2003. Immediate 
sensory nerve-mediated respiratory responses to irritants in healthy 
and allergic airway-diseased mice. J Appl Physiol 94(4):1563-1571. 
Docket EPA-HQ-OAR-2010-0799.
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    EPA determined in 2003 that the human carcinogenic potential of 
acrolein could not be determined because the available data were 
inadequate. No information was available on the carcinogenic effects of 
acrolein in humans and the animal data provided inadequate evidence of 
carcinogenicity.\734\ The IARC determined in 1995 that acrolein was not 
classifiable as to its carcinogenicity in humans.\735\
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    \734\ U.S. EPA. 2003. Integrated Risk Information System File of 
Acrolein. Research and Development, National Center for 
Environmental Assessment, Washington, DC. This material is available 
at http://www.epa.gov/iris/subst/0364.htm. Docket EPA-HQ-OAR-2010-
0799.
    \735\ International Agency for Research on Cancer. 1995. 
Monographs on the evaluation of carcinogenic risk of chemicals to 
humans, Volume 63. Dry cleaning, some chlorinated solvents and other 
industrial chemicals, World Health Organization, Lyon, France. 
Docket EPA-HQ-OAR-2010-0799.
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vi. Polycyclic Organic Matter
    The term polycyclic organic matter (POM) defines a broad class of 
compounds that includes the polycyclic aromatic hydrocarbon compounds 
(PAHs). One of these compounds, naphthalene, is discussed separately 
below. POM compounds are formed primarily from combustion and are 
present in the atmosphere in gas and particulate form. Cancer is the 
major concern from exposure to POM. Epidemiologic studies have reported 
an increase in lung cancer in humans exposed to diesel exhaust, coke 
oven emissions, roofing tar emissions, and cigarette smoke; all of 
these mixtures contain POM compounds.736,737 Animal studies 
have reported respiratory tract tumors from inhalation exposure to 
benzo[a]pyrene and alimentary tract and liver tumors from oral exposure 
to benzo[a]pyrene.\738\ In 1997 EPA classified seven PAHs 
(benzo[a]pyrene, benz[a]anthracene, chrysene, benzo[b]fluoranthene, 
benzo[k]fluoranthene, dibenz[a,h]anthracene, and indeno[1,2,3-
cd]pyrene) as Group B2, probable human carcinogens.\739\ Since that 
time, studies have found that maternal exposures to PAHs in a 
population of pregnant women were associated with several adverse birth 
outcomes, including low birth weight and reduced length at birth, as 
well as impaired cognitive development in preschool children (3 years 
of age).740,741 These and similar studies are being 
evaluated as a part of the ongoing IRIS assessment of health effects 
associated with exposure to benzo[a]pyrene.
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    \736\ Agency for Toxic Substances and Disease Registry (ATSDR). 
1995. Toxicological profile for Polycyclic Aromatic Hydrocarbons 
(PAHs). Atlanta, GA: U.S. Department of Health and Human Services, 
Public Health Service. Available electronically at http://www.atsdr.cdc.gov/ToxProfiles/TP.asp?id=122&tid=25.
    \737\ U.S. EPA (2002). Health Assessment Document for Diesel 
Engine Exhaust. EPA/600/8-90/057F Office of Research and 
Development, Washington DC. http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=29060. Docket EPA-HQ-OAR-2010-0799.
    \738\ International Agency for Research on Cancer (IARC). 
(2012). Monographs on the Evaluation of the Carcinogenic Risk of 
Chemicals for Humans, Chemical Agents and Related Occupations. Vol. 
100F. Lyon, France.
    \739\ U.S. EPA (1997). Integrated Risk Information System File 
of indeno(1,2,3-cd)pyrene. Research and Development, National Center 
for Environmental Assessment, Washington, DC. This material is 
available electronically at http://www.epa.gov/ncea/iris/subst/0457.htm.
    \740\ Perera, F.P.; Rauh, V.; Tsai, W-Y.; et al. (2002) Effect 
of transplacental exposure to environmental pollutants on birth 
outcomes in a multiethnic population. Environ Health Perspect. 111: 
201-205.
    \741\ Perera, F.P.; Rauh, V.; Whyatt, R.M.; Tsai, W.Y.; Tang, 
D.; Diaz, D.; Hoepner, L.; Barr, D.; Tu, Y.H.; Camann, D.; Kinney, 
P. (2006) Effect of prenatal exposure to airborne polycyclic 
aromatic hydrocarbons on neurodevelopment in the first 3 years of 
life among inner-city children. Environ Health Perspect 114: 1287-
1292.
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vii. Naphthalene
    Naphthalene is found in small quantities in gasoline and diesel 
fuels. Naphthalene emissions have been measured in larger quantities in 
both gasoline and diesel exhaust compared with evaporative emissions 
from mobile sources, indicating it is primarily a product of 
combustion. Acute (short-term) exposure of humans to naphthalene by 
inhalation, ingestion, or dermal contact is associated with hemolytic 
anemia and damage to the liver and the nervous system.\742\ Chronic 
(long term) exposure of workers and rodents to naphthalene has been 
reported to cause cataracts and retinal

[[Page 62907]]

damage.\743\ EPA released an external review draft of a reassessment of 
the inhalation carcinogenicity of naphthalene based on a number of 
recent animal carcinogenicity studies.\744\ The draft reassessment 
completed external peer review.\745\ Based on external peer review 
comments received, a revised draft assessment that considers all routes 
of exposure, as well as cancer and noncancer effects, is under 
development. The external review draft does not represent official 
agency opinion and was released solely for the purposes of external 
peer review and public comment. The National Toxicology Program listed 
naphthalene as ``reasonably anticipated to be a human carcinogen'' in 
2004 on the basis of bioassays reporting clear evidence of 
carcinogenicity in rats and some evidence of carcinogenicity in 
mice.\746\ California EPA has released a new risk assessment for 
naphthalene, and the IARC has reevaluated naphthalene and re-classified 
it as Group 2B: possibly carcinogenic to humans.\747\ Naphthalene also 
causes a number of chronic non-cancer effects in animals, including 
abnormal cell changes and growth in respiratory and nasal tissues.\748\
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    \742\ U.S. EPA. 1998. Toxicological Review of Naphthalene 
(Reassessment of the Inhalation Cancer Risk), Environmental 
Protection Agency, Integrated Risk Information System, Research and 
Development, National Center for Environmental Assessment, 
Washington, DC. This material is available electronically at http://www.epa.gov/iris/subst/0436.htm.
    \743\ U.S. EPA. 1998. Toxicological Review of Naphthalene 
(Reassessment of the Inhalation Cancer Risk), Environmental 
Protection Agency, Integrated Risk Information System, Research and 
Development, National Center for Environmental Assessment, 
Washington, DC. This material is available electronically at http://www.epa.gov/iris/subst/0436.htm.
    \744\ U.S. EPA. 1998. Toxicological Review of Naphthalene 
(Reassessment of the Inhalation Cancer Risk), Environmental 
Protection Agency, Integrated Risk Information System, Research and 
Development, National Center for Environmental Assessment, 
Washington, DC. This material is available electronically at http://www.epa.gov/iris/subst/0436.htm. Docket EPA-HQ-OAR-2010-0799.
    \745\ Oak Ridge Institute for Science and Education. (2004). 
External Peer Review for the IRIS Reassessment of the Inhalation 
Carcinogenicity of Naphthalene. August 2004. http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=84403. Docket EPA-HQ-OAR-2010-0799.
    \746\ National Toxicology Program (NTP). (2004). 11th Report on 
Carcinogens. Public Health Service, U.S. Department of Health and 
Human Services, Research Triangle Park, NC. Available from: http://ntp-server.niehs.nih.gov.
    \747\ International Agency for Research on Cancer (IARC). 
(2002). Monographs on the Evaluation of the Carcinogenic Risk of 
Chemicals for Humans. Vol. 82. Lyon, France. Docket EPA-HQ-OAR-2010-
0799.
    \748\ U.S. EPA. 1998. Toxicological Review of Naphthalene, 
Environmental Protection Agency, Integrated Risk Information System, 
Research and Development, National Center for Environmental 
Assessment, Washington, DC. This material is available 
electronically at http://www.epa.gov/iris/subst/0436.htm.
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viii. Other Air Toxics
    In addition to the compounds described above, other compounds in 
gaseous hydrocarbon and PM emissions from light-duty vehicles will be 
affected by this rule. Mobile source air toxic compounds that would 
potentially be impacted include ethylbenzene, propionaldehyde, toluene, 
and xylene. Information regarding the health effects of these compounds 
can be found in EPA's IRIS database.\749\
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    \749\ U.S. EPA Integrated Risk Information System (IRIS) 
database is available at: www.epa.gov/iris.
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f. Exposure and Health Effects Associated With Traffic-Related Air 
Pollution
    Populations who live, work, or attend school near major roads 
experience elevated exposure to a wide range of air pollutants, as well 
as higher risks for a number of adverse health effects. While the 
previous sections of this preamble have focused on the health effects 
associated with individual criteria pollutants or air toxics, this 
section discusses the mixture of different exposures near major 
roadways, rather than the effects of any single pollutant. As such, 
this section emphasizes traffic-related air pollution, in general, as 
the relevant indicator of exposure rather than any particular 
pollutant.
    Concentrations of many traffic-generated air pollutants are 
elevated for up to 300-500 meters downwind of roads with high traffic 
volumes.\750\ Numerous sources on roads contribute to elevated roadside 
concentrations, including exhaust and evaporative emissions, and 
resuspension of road dust and tire and brake wear. Concentrations of 
several criteria and hazardous air pollutants are elevated near major 
roads. Furthermore, different semi-volatile organic compounds and 
chemical components of particulate matter, including elemental carbon, 
organic material, and trace metals, have been reported at higher 
concentrations near major roads.
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    \750\ Zhou, Y.; Levy, J.I. (2007) Factors influencing the 
spatial extent of mobile source air pollution impacts: a meta-
analysis. BMC Public Health 7: 89. doi:10.1186/1471-2458-7-89 Docket 
EPA-HQ-OAR-2010-0799.
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    Populations near major roads experience greater risk of certain 
adverse health effects. The Health Effects Institute published a report 
on the health effects of traffic-related air pollution.\751\ It 
concluded that evidence is ``sufficient to infer the presence of a 
causal association'' between traffic exposure and exacerbation of 
childhood asthma symptoms. The HEI report also concludes that the 
evidence is either ``sufficient'' or ``suggestive but not sufficient'' 
for a causal association between traffic exposure and new childhood 
asthma cases. A review of asthma studies by Salam et al. (2008) reaches 
similar conclusions.\752\ The HEI report also concludes that there is 
``suggestive'' evidence for pulmonary function deficits associated with 
traffic exposure, but concluded that there is ``inadequate and 
insufficient'' evidence for causal associations with respiratory health 
care utilization, adult-onset asthma, chronic obstructive pulmonary 
disease symptoms, and allergy. A review by Holguin (2008) notes that 
the effects of traffic on asthma may be modified by nutrition status, 
medication use, and genetic factors.\753\
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    \751\ HEI Panel on the Health Effects of Air Pollution. (2010) 
Traffic-related air pollution: a critical review of the literature 
on emissions, exposure, and health effects. [Online at 
www.healtheffects.org] Docket EPA-HQ-OAR-2010-0799.
    \752\ Salam, M.T.; Islam, T.; Gilliland, F.D. (2008) Recent 
evidence for adverse effects of residential proximity to traffic 
sources on asthma. Current Opin Pulm Med 14: 3-8. Docket EPA-HQ-OAR-
2010-0799.
    \753\ Holguin, F. (2008) Traffic, outdoor air pollution, and 
asthma. Immunol Allergy Clinics North Am 28: 577-588. Docket EPA-HQ-
OAR-2010-0799.
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    The HEI report also concludes that evidence is ``suggestive'' of a 
causal association between traffic exposure and all-cause and 
cardiovascular mortality. There is also evidence of an association 
between traffic-related air pollutants and cardiovascular effects such 
as changes in heart rhythm, heart attack, and cardiovascular disease. 
The HEI report characterizes this evidence as ``suggestive'' of a 
causal association, and an independent epidemiological literature 
review by Adar and Kaufman (2007) concludes that there is ``consistent 
evidence'' linking traffic-related pollution and adverse cardiovascular 
health outcomes.\754\
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    \754\ Adar, S.D.; Kaufman, J.D. (2007) Cardiovascular disease 
and air pollutants: evaluating and improving epidemiological data 
implicating traffic exposure. Inhal Toxicol 19: 135-149. Docket EPA-
HQ-OAR-2010-0799.
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    Some studies have reported associations between traffic exposure 
and other health effects, such as birth outcomes (e.g., low birth 
weight) and childhood cancer. The HEI report concludes that there is 
currently ``inadequate and insufficient'' evidence for a causal 
association between these effects and traffic exposure. A review by 
Raaschou-Nielsen and Reynolds (2006) concluded that evidence of an 
association between childhood cancer and traffic-related air pollutants 
is weak, but noted the inability to draw firm conclusions based on 
limited evidence.\755\
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    \755\ Raaschou-Nielsen, O.; Reynolds, P. (2006) Air pollution 
and childhood cancer: A review of the epidemiological literature. 
Int J Cancer 118: 2920-2929. Docket EPA-HQ-OAR-2010-0799.

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[[Page 62908]]

    There is a large population in the United States living in close 
proximity of major roads. According to the Census Bureau's American 
Housing Survey for 2007, approximately 20 million residences in the 
United States, 15.6% of all homes, are located within 300 feet (91 m) 
of a highway with 4+ lanes, a railroad, or an airport.\756\ Therefore, 
at current population of approximately 309 million, assuming that 
population and housing are similarly distributed, there are over 48 
million people in the United States living near such sources. The HEI 
report also notes that in two North American cities, Los Angeles and 
Toronto, over 40% of each city's population live within 500 meters of a 
highway or 100 meters of a major road. It also notes that about 33% of 
each city's population resides within 50 meters of major roads. 
Together, the evidence suggests that a large U.S. population lives in 
areas with elevated traffic-related air pollution.
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    \756\ U.S. Census Bureau (2008) American Housing Survey for the 
United States in 2007. Series H-150 (National Data), Table 1A-7. 
[Accessed at http://www.census.gov/hhes/www/housing/ahs/ahs07/ahs07.html on January 22, 2009] Docket EPA-HQ-OAR-2010-0799.
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    People living near roads are often socioeconomically disadvantaged. 
According to the 2007 American Housing Survey, a renter-occupied 
property is over twice as likely as an owner-occupied property to be 
located near a highway with 4+ lanes, railroad or airport. In the same 
survey, the median household income of rental housing occupants was 
less than half that of owner-occupants ($28,921/$59,886). Numerous 
studies in individual urban areas report higher levels of traffic-
related air pollutants in areas with high minority or poor 
populations.757,758,759
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    \757\ Lena, T.S.; Ochieng, V.; Carter, M.; Holgu[iacute]n-Veras, 
J.; Kinney, P.L. (2002) Elemental carbon and PM2.5 levels 
in an urban community heavily impacted by truck traffic. Environ 
Health Perspect 110: 1009-1015. Docket EPA-HQ-OAR-2010-0799.
    \758\ Wier, M.; Sciammas, C.; Seto, E.; Bhatia, R.; Rivard, T. 
(2009) Health, traffic, and environmental justice: collaborative 
research and community action in San Francisco, California. Am J 
Public Health 99: S499-S504. Docket EPA-HQ-OAR-2010-0799.
    \759\ Forkenbrock, D.J. and L.A. Schweitzer, Environmental 
Justice and Transportation Investment Policy. Iowa City: University 
of Iowa, 1997. Docket EPA-HQ-OAR-2010-0799.
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    Students may also be exposed in situations where schools are 
located near major roads. In a study of nine metropolitan areas across 
the United States, Appatova et al. (2008) found that on average greater 
than 33% of schools were located within 400 m of an Interstate, U.S., 
or state highway, while 12% were located within 100 m.\760\ The study 
also found that among the metropolitan areas studied, schools in the 
Eastern United States were more often sited near major roadways than 
schools in the Western United States.
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    \760\ Appatova, A.S.; Ryan, P.H.; LeMasters, G.K.; Grinshpun, 
S.A. (2008) Proximal exposure of public schools and students to 
major roadways: A nationwide U.S. survey. J Environ Plan Mgmt Docket 
EPA-HQ-OAR-2010-0799.
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    Demographic studies of students in schools near major roadways 
suggest that this population is more likely than the general student 
population to be of non-white race or Hispanic ethnicity, and more 
often live in low socioeconomic status locations.761,762,763 
There is some inconsistency in the evidence, which may be due to 
different local development patterns and measures of traffic and 
geographic scale used in the studies.\760\
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    \761\ Green, R.S.; Smorodinsky, S.; Kim, J.J.; McLaughlin, R.; 
Ostro, B. (2004) Proximity of California public schools to busy 
roads. Environ Health Perspect 112: 61-66. Docket EPA-HQ-OAR-2010-
0799.
    \762\ Houston, D.; Ong, P.; Wu, J.; Winer, A. (2006) Proximity 
of licensed child care facilities to near-roadway vehicle pollution. 
Am J Public Health 96: 1611-1617. Docket EPA-HQ-OAR-2010-0799.
    \763\ Wu, Y.; Batterman, S. (2006) Proximity of schools in 
Detroit, Michigan to automobile and truck traffic. J Exposure Sci 
Environ Epidemiol 16: 457-470. Docket EPA-HQ-OAR-2010-0799.
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3. Environmental Effects of Non-GHG Pollutants
    In this section we discuss some of the environmental effects of PM 
and its precursors such as visibility impairment, atmospheric 
deposition, and materials damage and soiling, as well as environmental 
effects associated with the presence of ozone in the ambient air, such 
as impacts on plants, including trees, agronomic crops and urban 
ornamentals, and environmental effects associated with air toxics.
a. Visibility
    Visibility can be defined as the degree to which the atmosphere is 
transparent to visible light.\764\ Visibility impairment is caused by 
light scattering and absorption by suspended particles and gases. 
Visibility is important because it has direct significance to people's 
enjoyment of daily activities in all parts of the country. Individuals 
value good visibility for the well-being it provides them directly, 
where they live and work, and in places where they enjoy recreational 
opportunities. Visibility is also highly valued in significant natural 
areas, such as national parks and wilderness areas, and special 
emphasis is given to protecting visibility in these areas. For more 
information on visibility see the final 2009 PM ISA.\765\
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    \764\ National Research Council, 1993. Protecting Visibility in 
National Parks and Wilderness Areas. National Academy of Sciences 
Committee on Haze in National Parks and Wilderness Areas. National 
Academy Press, Washington, DC. Docket EPA-HQ-OAR-2010-0799. This 
book can be viewed on the National Academy Press Web site at http://www.nap.edu/books/0309048443/html/.
    \765\ See U.S. EPA 2009 Final PM ISA, Note 669.
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    EPA is pursuing a two-part strategy to address visibility 
impairment. First, EPA developed the regional haze program (64 FR 
35714) which was put in place in July 1999 to protect the visibility in 
Mandatory Class I Federal areas. There are 156 national parks, forests 
and wilderness areas categorized as Mandatory Class I Federal areas (62 
FR 38680-38681, July 18, 1997). These areas are defined in CAA section 
162 as those national parks exceeding 6,000 acres, wilderness areas and 
memorial parks exceeding 5,000 acres, and all international parks which 
were in existence on August 7, 1977. Second, EPA has concluded that 
PM2.5 causes adverse effects on visibility in other areas 
that are not protected by the Regional Haze Rule, depending on 
PM2.5 concentrations and other factors that control their 
visibility impact effectiveness such as dry chemical composition and 
relative humidity (i.e., an indicator of the water composition of the 
particles), and has set secondary PM2.5 standards to address 
these areas. The existing annual primary and secondary PM2.5 
standards have been remanded by the DC Circuit and EPA has proposed to 
revise the suite of secondary PM standards by adding a distinct 
standard for PM2.5 to address PM-related visibility 
impairment.\766\
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    \766\ See American Farm Bureau v. EPA, 559 F. 3d 512, 528-32 (DC 
Cir. 2009) (remanding secondary NAAQS) and 77 FR 38979-991 
(proposing distinct secondary standard for PM2.5 to 
address visibility impairment).
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b. Plant and Ecosystem Effects of Ozone
    Elevated ozone levels contribute to environmental effects, with 
impacts to plants and ecosystems being of most concern. Ozone can 
produce both acute and chronic injury in sensitive species depending on 
the concentration level and the duration of the exposure. Ozone effects 
also tend to accumulate over the growing season of the plant, so that 
even low concentrations experienced for a longer duration have the 
potential to create chronic stress on vegetation. Ozone damage to 
plants includes visible injury to leaves and impaired photosynthesis, 
both of which can lead to reduced plant growth and reproduction, 
resulting in reduced crop yields, forestry production, and use of 
sensitive ornamentals in landscaping. In addition, the impairment of 
photosynthesis, the process by which

[[Page 62909]]

the plant makes carbohydrates (its source of energy and food), can lead 
to a subsequent reduction in root growth and carbohydrate storage below 
ground, resulting in other, more subtle plant and ecosystems impacts.
    These latter impacts include increased susceptibility of plants to 
insect attack, disease, harsh weather, interspecies competition and 
overall decreased plant vigor. The adverse effects of ozone on forest 
and other natural vegetation can potentially lead to species shifts and 
loss from the affected ecosystems, resulting in a loss or reduction in 
associated ecosystem goods and services. Lastly, visible ozone injury 
to leaves can result in a loss of aesthetic value in areas of special 
scenic significance like national parks and wilderness areas. The final 
2006 Ozone Air Quality Criteria Document presents more detailed 
information on ozone effects on vegetation and ecosystems.
c. Atmospheric Deposition
    Wet and dry deposition of ambient particulate matter delivers a 
complex mixture of metals (e.g., mercury, zinc, lead, nickel, aluminum, 
cadmium), organic compounds (e.g., polycyclic organic matter, dioxins, 
furans) and inorganic compounds (e.g., nitrate, sulfate) to terrestrial 
and aquatic ecosystems. The chemical form of the compounds deposited 
depends on a variety of factors including ambient conditions (e.g., 
temperature, humidity, oxidant levels) and the sources of the material. 
Chemical and physical transformations of the compounds occur in the 
atmosphere as well as the media onto which they deposit. These 
transformations in turn influence the fate, bioavailability and 
potential toxicity of these compounds. Atmospheric deposition has been 
identified as a key component of the environmental and human health 
hazard posed by several pollutants including mercury, dioxin and 
PCBs.\767\
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    \767\ U.S. EPA (2000) Deposition of Air Pollutants to the Great 
Waters: Third Report to Congress. Office of Air Quality Planning and 
Standards. EPA-453/R-00-0005. Docket EPA-HQ-OAR-2010-0799.
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    Adverse impacts on water quality can occur when atmospheric 
contaminants deposit to the water surface or when material deposited on 
the land enters a waterbody through runoff. Potential impacts of 
atmospheric deposition to waterbodies include those related to both 
nutrient and toxic inputs. Adverse effects to human health and welfare 
can occur from the addition of excess nitrogen via atmospheric 
deposition. The nitrogen-nutrient enrichment contributes to toxic algae 
blooms and zones of depleted oxygen, which can lead to fish kills, 
frequently in coastal waters. Deposition of heavy metals or other 
toxics may lead to the human ingestion of contaminated fish, impairment 
of drinking water, damage to freshwater and marine ecosystem 
components, and limits to recreational uses. Several studies have been 
conducted in U.S. coastal waters and in the Great Lakes Region in which 
the role of ambient PM deposition and runoff is 
investigated.768,769,770,771,772
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    \768\ U.S. EPA (2004) National Coastal Condition Report II. 
Office of Research and Development/Office of Water. EPA-620/R-03/
002. Docket EPA-HQ-OAR-2010-0799.
    \769\ Gao, Y., E.D. Nelson, M.P. Field, et al. 2002. 
Characterization of atmospheric trace elements on PM2.5 
particulate matter over the New York-New Jersey harbor estuary. 
Atmos. Environ. 36: 1077-1086. Docket EPA-HQ-OAR-2010-0799.
    \770\ Kim, G., N. Hussain, J.R. Scudlark, and T.M. Church. 2000. 
Factors influencing the atmospheric depositional fluxes of stable 
Pb, 210Pb, and 7Be into Chesapeake Bay. J. Atmos. Chem. 36: 65-79. 
Docket EPA-HQ-OAR-2010-0799.
    \771\ Lu, R., R.P. Turco, K. Stolzenbach, et al. 2003. Dry 
deposition of airborne trace metals on the Los Angeles Basin and 
adjacent coastal waters. J. Geophys. Res. 108(D2, 4074): AAC 11-1 to 
11-24. Docket EPA-HQ-OAR-2010-0799.
    \772\ Marvin, C.H., M.N. Charlton, E.J. Reiner, et al. 2002. 
Surficial sediment contamination in Lakes Erie and Ontario: A 
comparative analysis. J. Great Lakes Res. 28(3): 437-450. Docket 
EPA-HQ-OAR-2010-0799.
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    Atmospheric deposition of nitrogen and sulfur contributes to 
acidification, altering biogeochemistry and affecting animal and plant 
life in terrestrial and aquatic ecosystems across the United States. 
The sensitivity of terrestrial and aquatic ecosystems to acidification 
from nitrogen and sulfur deposition is predominantly governed by 
geology. Prolonged exposure to excess nitrogen and sulfur deposition in 
sensitive areas acidifies lakes, rivers and soils. Increased acidity in 
surface waters creates inhospitable conditions for biota and affects 
the abundance and nutritional value of preferred prey species, 
threatening biodiversity and ecosystem function. Over time, acidifying 
deposition also removes essential nutrients from forest soils, 
depleting the capacity of soils to neutralize future acid loadings and 
negatively affecting forest sustainability. Major effects include a 
decline in sensitive forest tree species, such as red spruce (Picea 
rubens) and sugar maple (Acer saccharum), and a loss of biodiversity of 
fishes, zooplankton, and macro invertebrates.
    In addition to the role nitrogen deposition plays in acidification, 
nitrogen deposition also leads to nutrient enrichment and altered 
biogeochemical cycling. In aquatic systems increased nitrogen can alter 
species assemblages and cause eutrophication. In terrestrial systems 
nitrogen loading can lead to loss of nitrogen sensitive lichen species, 
decreased biodiversity of grasslands, meadows and other sensitive 
habitats, and increased potential for invasive species. For a broader 
explanation of the topics treated here, refer to the description in 
Section 6.1.2.3.1 of the RIA.
    Adverse impacts on soil chemistry and plant life have been observed 
for areas heavily influenced by atmospheric deposition of nutrients, 
metals and acid species, resulting in species shifts, loss of 
biodiversity, forest decline, damage to forest productivity and 
reductions in ecosystem services. Potential impacts also include 
adverse effects to human health through ingestion of contaminated 
vegetation or livestock (as in the case for dioxin deposition), 
reduction in crop yield, and limited use of land due to contamination.
    Atmospheric deposition of pollutants can reduce the aesthetic 
appeal of buildings and culturally important articles through soiling, 
and can contribute directly (or in conjunction with other pollutants) 
to structural damage by means of corrosion or erosion. Atmospheric 
deposition may affect materials principally by promoting and 
accelerating the corrosion of metals, by degrading paints, and by 
deteriorating building materials such as concrete and limestone. 
Particles contribute to these effects because of their electrolytic, 
hygroscopic, and acidic properties, and their ability to adsorb 
corrosive gases (principally sulfur dioxide).
d. Environmental Effects of Air Toxics
    Emissions from producing, transporting and combusting fuel 
contribute to ambient levels of pollutants that contribute to adverse 
effects on vegetation. Volatile organic compounds, some of which are 
considered air toxics, have long been suspected to play a role in 
vegetation damage.\773\ In laboratory experiments, a wide range of 
tolerance to VOCs has been observed.\774\ Decreases in harvested seed 
pod weight have been reported for the more sensitive plants, and some 
studies have reported effects on seed germination, flowering and fruit

[[Page 62910]]

ripening. Effects of individual VOCs or their role in conjunction with 
other stressors (e.g., acidification, drought, temperature extremes) 
have not been well studied. In a recent study of a mixture of VOCs 
including ethanol and toluene on herbaceous plants, significant effects 
on seed production, leaf water content and photosynthetic efficiency 
were reported for some plant species.\775\
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    \773\ U.S. EPA. 1991. Effects of organic chemicals in the 
atmosphere on terrestrial plants. EPA/600/3-91/001. Docket EPA-HQ-
OAR-2010-0799.
    \774\ Cape JN, ID Leith, J Binnie, J Content, M Donkin, M 
Skewes, DN Price AR Brown, AD Sharpe. 2003. Effects of VOCs on 
herbaceous plants in an open-top chamber experiment. Environ. 
Pollut. 124:341-343. Docket EPA-HQ-OAR-2010-0799.
    \775\ Cape JN, ID Leith, J Binnie, J Content, M Donkin, M 
Skewes, DN Price AR Brown, AD Sharpe. 2003. Effects of VOCs on 
herbaceous plants in an open-top chamber experiment. Environ. 
Pollut. 124:341-343. Docket EPA-HQ-OAR-2010-0799.
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    Research suggests an adverse impact of vehicle exhaust on plants, 
which has in some cases been attributed to aromatic compounds and in 
other cases to nitrogen oxides.776,777,778 The impacts of 
VOCs on plant reproduction may have long-term implications for 
biodiversity and survival of native species near major roadways. Most 
of the studies of the impacts of VOCs on vegetation have focused on 
short-term exposure and few studies have focused on long-term effects 
of VOCs on vegetation and the potential for metabolites of these 
compounds to affect herbivores or insects.
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    \776\ Viskari E-L. 2000. Epicuticular wax of Norway spruce 
needles as indicator of traffic pollutant deposition. Water, Air, 
and Soil Pollut. 121:327-337. Docket EPA-HQ-OAR-2010-0799.
    \777\ Ugrekhelidze D, F Korte, G Kvesitadze. 1997. Uptake and 
transformation of benzene and toluene by plant leaves. Ecotox. 
Environ. Safety 37:24-29. Docket EPA-HQ-OAR-2010-0799.
    \778\ Kammerbauer H, H Selinger, R Rommelt, A Ziegler-Jons, D 
Knoppik, B Hock. 1987. Toxic components of motor vehicle emissions 
for the spruce Picea abies. Environ. Pollut. 48:235-243. Docket EPA-
HQ-OAR-2010-0799.
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4. Air Quality Impacts of Non-GHG Pollutants
    Air quality modeling was performed to assess the impact of the 
vehicle standards on criteria and air toxic pollutants. In this 
section, we present information on current levels of pollution as well 
as projections for 2030, with respect to ambient PM2.5, 
ozone, selected air toxics, visibility levels and nitrogen and sulfur 
deposition. The results are discussed in more detail in Section 6.2.2 
of the RIA.
a. Ozone
i. Current Levels
    Concentrations that exceed the level of the ozone NAAQS occur in 
many parts of the country. The primary and secondary NAAQS for ozone 
are 8-hour standards with a level of 0.075 ppm. The most recent 
revision to the ozone standards was in 2008; the previous 8-hour ozone 
standards, set in 1997, had a level of 0.08 ppm. In 2004, the U.S. EPA 
designated nonattainment areas for the 1997 8-hour ozone 
NAAQS.779,780 As of July 20, 2012, there were 43 ozone 
nonattainment areas for the 1997 ozone NAAQS composed of 237 full or 
partial counties, with a total population of over 129 million. 
Nonattainment designations for the 2008 ozone standards were finalized 
on April 30, 2012 and May 31, 2012.\781\ These designations include 46 
areas, composed of 227 full or partial counties, with a population of 
over 123 million. As of July 20, 2012, 140 million people are living in 
ozone nonattainment areas.
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    \779\ 69 FR 23858 (April 30, 2004).
    \780\ A nonattainment area is defined in the Clean Air Act (CAA) 
as an area that is violating an ambient standard or is contributing 
to a nearby area that is violating the standard.
    \781\ 77FR 30088 (May 21, 2012).
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ii. Projected Levels Without the Vehicle Standards
    States with ozone nonattainment areas are required to take action 
to bring those areas into attainment. The attainment date assigned to 
an ozone nonattainment area is based on the area's classification. Most 
ozone nonattainment areas are required to attain the 1997 8-hour ozone 
NAAQS in the 2007 to 2013 time frame and attainment dates for the 2008 
8-hour ozone NAAQS are in the 2015 to 2032 timeframe.\782\ Once an 
ozone nonattainment area has attained the NAAQS they are then required 
to maintain it thereafter.
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    \782\ The Los Angeles South Coast Air Basin 8-hour ozone 
nonattainment area and the San Joaquin Valley Air Basin 8-hour ozone 
nonattainment area are designated as extreme and will have to attain 
before June 15, 2024. The Sacramento, Coachella Valley, Western 
Mojave and Houston 8-hour ozone nonattainment areas are designated 
as severe and will have to attain by June 15, 2019.
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    EPA has already adopted many emission control programs that are 
expected to reduce ambient ozone levels. As a result of these and other 
federal, state and local programs, 8-hour ozone levels are expected to 
improve in the future. Even so, our air quality modeling projects that 
in 2030, with all current controls but excluding the impacts of the 
vehicle standards, up to 10 counties with a population of over 30 
million would have projected design values above the level of the 2008 
ozone standard of 0.075 ppm (75 ppb). These numbers do not account for 
those areas that are close to (e.g., within 10 percent of) the 2008 
ozone standard. These areas, although not above the standards, will 
also be impacted by changes in ozone concentrations as they work to 
ensure long-term maintenance of the ozone NAAQS.
iii. Projected Levels With the Vehicle Standards
    Our modeling indicates that there will be very small changes in 
ambient ozone concentrations across most of the country. However, there 
will be small decreases in ozone design value concentrations in some 
areas of the country and small increases in ozone design value 
concentrations in other areas.\783\ The increases in ozone design 
values are likely due mainly to the VMT rebound effect in some places 
and in other places are likely due mainly to increased electricity 
generation. The ozone decreases are likely due mainly to changes in the 
location of EGUs, or power plants, in some places and in other places 
are likely due mainly to reduced fuel production. The average modeled 
8-hour ozone design values are projected to increase by 0.01 ppb in 
2030 and the design values for those counties that are projected to be 
above the 2008 ozone standard in 2030 will decrease by 0.14 ppb due to 
the vehicle standards.
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    \783\ An 8-hour ozone design value is the concentration that 
determines whether a monitoring site meets the 8-hour ozone NAAQS. 
The full details involved in calculating an 8-hour ozone design 
value are given in appendix I of 40 CFR part 50.
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b. Particulate Matter
i. Current Levels
    There are many areas of the country that are currently in 
nonattainment for the PM2.5 NAAQS. There are two NAAQS for 
PM2.5: An annual standard (15 micrograms per cubic meter 
([mu]g/m\3\) and a 24-hour standard (35 [mu]g/m\3\). The most recent 
revisions to these standards were in 1997 and 2006. In June 2012, EPA 
proposed to revise the PM2.5 NAAQS and is scheduled to issue 
final revisions in December 2012 under a court-ordered schedule. The 
proposed changes include revising the annual PM2.5 standard 
to a level between 12 and 13 [mu]g/m\3\, and establishing a distinct 
secondary PM2.5 standard for the protection of visibility, 
particularly in urban areas.
    In 2005 EPA designated nonattainment areas for the 1997 
PM2.5 NAAQS.\784\ As of July 20, 2012, over 91 million 
people lived in the 35 areas that are designated as nonattainment for 
the 1997 PM2.5 NAAQS. These PM2.5 nonattainment 
areas are comprised of 191 full or partial counties. On October 8, 
2009, the EPA issued final nonattainment area designations for the 2006 
24-hour PM2.5 NAAQS.\785\ These designations include 32 
areas,

[[Page 62911]]

composed of 121 full or partial counties, with a population of over 70 
million. In total, there are 50 PM2.5 nonattainment areas 
with a population of over 105 million people.\786\
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    \784\ 70 FR 19844 (April 14, 2005).
    \785\ 74 FR 58688 (November 13, 2009).
    \786\ Data come from Summary Nonattainment Area Population 
Exposure Report, current as of July 20, 2012 at: http://www.epa.gov/oar/oaqps/greenbk/popexp.html and contained in Docket EPA-HQ-OAR-
2010-0799.
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ii. Projected Levels Without the Vehicle Standards
    States with PM2.5 nonattainment areas will be required 
to take action to bring those areas into attainment in the future. The 
1997 PM2.5 nonattainment areas are required to attain the 
1997 PM2.5 NAAQS in the 2010 to 2015 time frame and then 
maintain it thereafter. The 2006 24-hour PM2.5 nonattainment 
areas are required to attain the 2006 24-hour PM2.5 NAAQS in 
the 2014 to 2019 time frame and then maintain it thereafter.\787\
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    \787\ U.S. EPA. (2011). PM Standards Revision--2006: Timeline. 
Available at http://www.epa.gov/PM/naaqsrev2006.html#timeline. 
Accessed December 31, 2011.
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    EPA has already adopted many mobile source emission control 
programs that are expected to reduce ambient PM levels. As a result of 
these and other federal, state and local programs, the number of areas 
that fail to meet the PM2.5 NAAQS in the future is expected 
to decrease. Even so, our air quality modeling projects that in 2030, 
with all current controls but excluding the impacts of the vehicle 
standards adopted here, at least 4 counties with a population of almost 
7 million would have projected design values above the level of the 
1997 annual PM2.5 standard of 15 [mu]g/m\3\ and 21 counties 
with a population of over 31 million would have projected design values 
above the level of the 2006 24-hour PM2.5 standard of 35 
[mu]g/m\3\. These numbers do not account for those areas that are close 
to (e.g., within 10 percent of) the PM2.5 standards. These 
areas, although not above the standards, will also be impacted by any 
changes in PM2.5 concentrations as they work to ensure long-
term maintenance of the PM2.5 NAAQS.
iii. Projected Levels With the Vehicle Standards
    Our modeling indicates that there will be very small changes in 
ambient PM2.5 concentrations across most of the country. 
However, there will be small decreases in PM2.5 design value 
concentrations in some areas of the country and small increases in 
PM2.5 design value concentrations in other areas.\788\ The 
decreases in PM2.5 design values for some counties are 
likely due to emission reductions related to lower fuel production and 
the increases are likely due to increased emissions from the VMT 
rebound effect or increased electricity generation.
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    \788\ An annual PM2.5 design value is the 
concentration that determines whether a monitoring site meets the 
annual NAAQS for PM2.5. The full details involved in 
calculating an annual PM2.5 design value are given in 
appendix N of 40 CFR part 50. A 24-hour PM2.5 design 
value is the concentration that determines whether a monitoring site 
meets the 24-hour NAAQS for PM2.5. The full details 
involved in calculating a 24-hour PM2.5 design value are 
given in appendix N of 40 CFR part 50.
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c. Air Toxics
i. Current Levels
    The majority of Americans continue to be exposed to ambient 
concentrations of air toxics at levels which have the potential to 
cause adverse health effects.\789\ The levels of air toxics to which 
people are exposed vary depending on where people live and work and the 
kinds of activities in which they engage, as discussed in detail in 
U.S. EPA's 2007 Mobile Source Air Toxics Rule.\790\ According to the 
National Air Toxic Assessment (NATA) for 2005,\791\ mobile sources were 
responsible for 43 percent of outdoor toxic emissions and over 50 
percent of the cancer risk and noncancer hazard associated with primary 
emissions. Mobile sources are also large contributors to precursor 
emissions which react to form secondary concentrations of air toxics. 
Formaldehyde is the largest contributor to cancer risk of all 80 
pollutants quantitatively assessed in the 2005 NATA. Mobile sources 
were responsible for over 40 percent of primary emissions of this 
pollutant in 2005, and are major contributors to formaldehyde precursor 
emissions. Benzene is also a large contributor to cancer risk, and 
mobile sources account for over 70 percent of ambient exposure. Over 
the years, EPA has implemented a number of mobile source and fuel 
controls which have resulted in VOC reductions, which also reduced 
formaldehyde, benzene and other air toxic emissions.
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    \789\ U.S. Environmental Protection Agency (2007). Control of 
Hazardous Air Pollutants from Mobile Sources; final rule. 72 FR 
8434, February 26, 2007.
    \790\ U.S. Environmental Protection Agency (2007). Control of 
Hazardous Air Pollutants from Mobile Sources; final rule. 72 FR 
8434, February 26, 2007.
    \791\ U.S. EPA. (2011). 2005 National-Scale Air Toxics 
Assessment. http://www.epa.gov/ttn/atw/nata2005/.
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ii. Projected Levels
    Our modeling indicates that national average ambient concentrations 
of the modeled air toxics change less than 1 percent across most of the 
country due to the final standards. Additional detail on the air toxics 
results can be found in Section 6.2.2.3 of the RIA.
d. Nitrogen and Sulfur Deposition
i. Current Nitrogen and Sulfur Deposition Levels
    Over the past two decades, the EPA has undertaken numerous efforts 
to reduce nitrogen and sulfur deposition across the U.S. Analyses of 
long-term monitoring data for the U.S. show that deposition of both 
nitrogen and sulfur compounds has decreased over the last 17 years. The 
data show that reductions were more substantial for sulfur compounds 
than for nitrogen compounds. In the eastern U.S., where data are most 
abundant, total sulfur deposition decreased by about 44 percent between 
1990 and 2007, while total nitrogen deposition decreased by 25 percent 
over the same time frame.\792\ These numbers are generated by the U.S. 
national monitoring network and they likely underestimate nitrogen 
deposition because neither ammonia nor organic nitrogen is measured. 
Although total nitrogen and sulfur deposition has decreased over time, 
many areas continue to be negatively impacted by deposition. Deposition 
of inorganic nitrogen and sulfur species routinely measured in the U.S. 
between 2005 and 2007 were as high as 9.6 kilograms of nitrogen per 
hectare (kg N/ha) averaged over three years and 20.8 kilograms of 
sulfur per hectare (kg S/ha) averaged over three years.\793\
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    \792\ U.S. EPA. (2012). U.S. EPA's Report on the Environment. 
Data accessed online February 15, 2012 at: http://cfpub.epa.gov/eroe/index.cfm?fuseaction=detail.viewPDF&ch=46&lShowInd=0&subtop=341&lv=list.listByChapter&r=216610 and contained in Docket EPA-HQ-OAR-
2010-0799.
    \793\ U.S. EPA. (2012). U.S. EPA's Report on the Environment. 
Data accessed online February 15, 2012 at: http://cfpub.epa.gov/eroe/index.cfm?fuseaction=detail.viewPDF&ch=46&lShowInd=0&subtop=341&lv=list.listByChapter&r=216610 and contained in Docket EPA-HQ-OAR-
2010-0799.
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ii. Projected Nitrogen and Sulfur Deposition Levels
    Our air quality modeling projects increases in nitrogen deposition 
in some localized areas across the U.S. along with a few areas of 
decreases in nitrogen deposition as a result of the GHG standards. The 
increases in nitrogen deposition are likely due to projected upstream 
emissions increases in NOX from increased electricity 
generation and increased driving due to the VMT rebound effect. The 
decreases in nitrogen deposition are likely due to projected upstream 
emissions decreases in NOX from changes in the location of 
electricity generation. The remainder of

[[Page 62912]]

the country will experience only minimal changes in nitrogen 
deposition, ranging from decreases of less than 0.5% to increases of 
less than 0.5%.
    Our air quality modeling also projects both increases and decreases 
in sulfur deposition as a result of the GHG standards. The decreases in 
sulfur deposition are likely due to projected upstream emissions 
decreases from changes in the location of electricity generation and 
from reduced gasoline production. The increases in sulfur deposition 
are likely due to projected upstream emissions increases from increased 
electricity generation. The remainder of the country will experience 
only minimal changes in sulfur deposition, ranging from decreases of 
less than 0.5% to increases of less than 0.5%.
    For maps of 2030 deposition impacts and additional information on 
these impacts see Section 6.2.2.4 of the RIA.
e. Visibility
i. Current Visibility Levels
    As mentioned in Section III.G.4.i, millions of people live in 
nonattainment areas for the PM2.5 NAAQS. These populations, 
as well as large numbers of individuals who travel to these areas, are 
likely to experience visibility impairment. In addition, while 
visibility trends have improved in mandatory class I federal areas, the 
most recent data show that these areas continue to suffer from 
visibility impairment. In summary, visibility impairment is experienced 
throughout the U.S., in multi-state regions, urban areas, and remote 
mandatory class I federal areas.
ii. Projected Visibility Levels
    Air quality modeling was used to project visibility conditions in 
139 mandatory class I federal areas across the U.S. The results show 
that in 2030 all the modeled areas would continue to have annual 
average deciview levels above background.\794\ Overall the vehicle 
standards will have a very small impact on visibility. The average 
visibility at all modeled mandatory class I federal areas on the 20 
percent worst days is projected to improve by 0.003 deciviews, or 0.03 
percent, in 2030. Section 6.2.2.5 of the RIA contains more detail on 
the visibility portion of the air quality modeling.
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    \794\ The level of visibility impairment in an area is based on 
the light-extinction coefficient and a unitless visibility index, 
called a ``deciview'', which is used in the valuation of visibility. 
The deciview metric provides a scale for perceived visual changes 
over the entire range of conditions, from clear to hazy. Under many 
scenic conditions, the average person can generally perceive a 
change of one deciview. The higher the deciview value, the worse the 
visibility. Thus, an improvement in visibility is a decrease in 
deciview value.
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5. Other Unquantified Health and Environmental Effects
    In the NPRM, EPA sought comment on whether there are any other 
health and environmental impacts associated with advancements in 
vehicle GHG reduction technologies that the agency should consider. In 
particular, EPA requested information on studies or research underway 
on a vehicle's life-cycle impacts (e.g., materials usage, 
manufacturing, end of life disposal) beyond issues regarding fuel 
production and distribution (upstream) discussed in Section III.C.\795\
---------------------------------------------------------------------------

    \795\ See 76 FR 75112.
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    EPA received a mix of comments on this topic, many highlighting 
recent or upcoming studies including new research from the University 
of California, Davis and the University of Michigan. Some commenters 
argued that EPA should base future GHG standards on life-cycle 
emissions in order to avoid favoring technologies that have lower 
emissions during operation or the ``use phase,'' but higher total 
greenhouse gas emissions when production and other stages of a 
vehicle's life are considered. For example, several organizations from 
the steel industry recommended that EPA and NHTSA consider 
incorporating life-cycle assessment into vehicle regulations as part of 
the 2018 mid-term evaluation and outlined one potential framework for 
establishing such life-cycle based standards.
    Other commenters agreed with the agencies' proposal not to consider 
life-cycle impacts as part of the standards, arguing that life-cycle 
analysis (LCA) is beyond the intended scope of the rulemaking and that 
regulating emissions from vehicle operation addresses the majority of 
GHG emissions. The American Chemistry Council also noted, ``Further, 
this type of rulemaking is not an appropriate place to apply LCA 
because of the lack of consensus regarding how to calculate inputs and 
outputs in an LCA evaluation at this time.''
    EPA is glad to see the advances in research on this important topic 
and plans to monitor new work in this area. However, the agency 
continues to believe that, as of the time of this rulemaking, there is 
too much uncertainty about the life-cycle impacts of future advanced 
technologies to conduct the type of detailed, vehicle-specific 
assessments that would be needed in a regulatory context. See the EPA 
Response to Comments document for a more detailed discussion on this 
topic and a fuller summary of comments received.\796\
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    \796\ Also, see Ch. 6 of NHTSA's Environmental Impact Statement 
for this rulemaking, ``Literature Synthesis of Life-cycle 
Environmental Impacts of Certain Vehicle Materials and 
Technologies,'' Docket No. NHTSA-2011-0056. The range of different 
models and approaches utilized in the surveyed LCA studies, and the 
sensitivity of the results to study assumptions, demonstrate the 
challenge of developing a fair and robust method to evaluate life-
cycle impacts across a range of different vehicle technologies at 
this time.
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H. What are the estimated cost, economic, and other impacts of the 
rule?

    In this section, EPA presents the costs and impacts of the GHG 
standards. It is important to note that NHTSA's CAFE standards and 
EPA's GHG standards will both be in effect, and each will lead to 
average fuel economy increases and CO2 emissions reductions. 
The two agencies' standards comprise the National Program, and this 
discussion of costs and benefits of EPA's GHG standard does not change 
the fact that both the CAFE and GHG standards, jointly, will be the 
source of the benefits and costs of the National Program. These costs 
and benefits are appropriately analyzed separately by each agency and 
should not be added together.
    This section outlines the basis for assessing the benefits and 
costs of the GHG standards and provides estimates of these costs and 
benefits. Some of these effects are private, meaning that they affect 
consumers and producers directly in their sales, purchases, and use of 
vehicles. These private effects include the increase in vehicle prices 
due to costs of the technology, fuel savings, and the benefits of 
additional driving and reduced refueling. Other costs and benefits 
affect people outside the markets for vehicles and their use; these 
effects are termed external, because they affect people in ways other 
than the effect on the market for and use of new vehicles and are 
generally not taken into account by the purchaser of the vehicle. The 
external effects include the climate impacts, the effects on non-GHG 
pollutants, energy security impacts, and the effects on traffic, 
accidents, and noise due to additional driving. The sum of the private 
and external benefits and costs is the net social benefits of the 
standards.
    There is some debate about the behavior of private markets in the 
context of these standards: if consumers optimize their purchases of 
fuel economy, with full information and perfect foresight, in perfectly 
efficient markets, they should have already

[[Page 62913]]

considered these benefits in their vehicle purchase decisions. If so, 
then no net private benefits would result from the program, because 
consumers would already buy vehicles with the amount of fuel economy 
that is optimal for them; requiring additional fuel economy would alter 
both the purchase prices of new cars and their lifetime streams of 
operating costs in ways that will inevitably reduce consumers' well-
being. Section III.H.1 discusses this issue more fully.
    The net benefits of EPA's rule consist of the effects of the 
standards on:
     The vehicle costs;
     Fuel savings associated with reduced fuel usage resulting 
from the program;
     Greenhouse gas emissions;
     Other air pollutants;
     Other impacts, including noise, congestion, accidents;
     Energy security impacts;
     Changes in refueling events;
     Increased driving due to the VMT ``rebound'' effect.
    EPA also presents the cost per ton of GHG reductions associated 
with the GHG standards on a CO2eq basis, in Section III.H.3 
below.
    The total present value of monetized benefits (excluding fuel 
savings) under the standards are projected to be between $257 to $743 
billion, using a 3 percent discount rate and depending on the value 
used for the social cost of carbon. With a 7 percent discount rate, the 
total present value of monetized benefits (excluding fuel savings) 
under the standards are projected to be between $118 to $604 billion, 
depending on the value used for the social cost of carbon. These 
benefits are summarized below in Table 103. The present value in 2012 
of technology and maintenance costs of the standards are estimated to 
be between $247 to $561 billion for new vehicle technology (assuming a 
7 and 3 percent discount rate, respectively, and costs through 2050), 
less $607 to $1,600 billion in savings realized by consumers through 
fewer fuel expenditures (calculated using pre-tax fuel prices and using 
a 7 and 3 percent discount rate, respectively, and fuel savings through 
2050). These costs are summarized below in Table III-101 and the fuel 
savings are summarized in Table III-102. The total net present value of 
net benefits under the standards are projected to be between $1,290 and 
$1,780 billion, using a 3 percent discount rate and depending on the 
value used for the social cost of carbon. With a 7 percent discount 
rate, the total net present value of net benefits under the standards 
are projected to be between $478 billion to $964 billion, depending on 
the value used for the social cost of carbon. The estimates developed 
here use as a baseline for comparison the greenhouse gas performance 
and fuel economy associated with MY 2016 standards. To the extent that 
greater fuel economy improvements than those assumed to occur under the 
baseline may have occurred due to market forces alone (absent these 
standards), the analysis overestimates private and social net benefits.
    While NHTSA and EPA each modeled their respective regulatory 
programs, the analyses were generally consistent and featured similar 
parameters. For this rule, EPA has not conducted an overall uncertainty 
analysis of the impacts associated with its regulatory program, though 
it did conduct sensitivity analyses of individual components of the 
analysis (e.g., alternative SCC estimates, VMT rebound effect, battery 
costs, mass reduction costs, the indirect cost markup factor, and cost 
learning curves); these analyses are found in Chapters 3, 4, and 7 of 
the EPA RIA. NHTSA, however, conducted a Monte Carlo simulation of the 
uncertainty associated with its regulatory program. The focus of the 
simulation model was variation around the chosen uncertainty parameters 
and their resulting impact on the key output parameters, fuel savings, 
and net benefits. Because of the similarities between the two analyses, 
EPA references NHTSA RIA Chapters X and XII as indicative of the 
relative magnitude, uncertainty and sensitivities of parameters of the 
cost/benefit analysis. EPA has also analyzed the potential impact of 
this rule on vehicle sales and employment. These impacts are not 
included in the analysis of overall costs and benefits of the 
standards. Further information on these and other aspects of the 
economic impacts of EPA's rule are summarized in the following sections 
and are presented in more detail in the RIA for this rulemaking.
1. Conceptual Framework for Evaluating Consumer Impacts
    For this rule, EPA projects significant private gains to consumers 
in three major areas: (1) reductions in spending on fuel; (2) for 
gasoline-fueled vehicles, time saved due to less refueling; and (3) 
additional driving that results from the VMT rebound effect. In 
combination, these private benefits, mostly from fuel savings, appear 
to outweigh the costs of the standards, 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 is smaller than the fuel 
savings. Yet many of these technologies are 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 consumers 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. If our analysis projects 
net private benefits that consumers have not realized in this perfectly 
functioning market, then, with the above assumptions, there must be 
additional costs of these private net benefits that are not accounted 
for. This calculation assumes that consumers accurately predict and act 
on all the fuel-saving benefits they will get from a new vehicle, and 
that producers market products providing those benefits. The estimate 
of large private net benefits from this rule, then, suggests either 
that the assumptions noted above do not hold, or that EPA's analysis 
has missed some factor(s) tied to improved fuel economy that reduce(s) 
consumer welfare.
    This subsection discusses the economic principles underlying the 
assessment of impacts on consumer well-being due to the changes in the 
vehicles. Because conventional gasoline- and diesel-fueled vehicles 
have quite different characteristics from alternatively fueled vehicles 
(especially electric vehicles), the principles for these different 
kinds vehicles are discussed separately below.
a. Conventional Vehicles
    For conventional vehicles, the estimates of technology costs 
developed for this rule take into account the cost needed to ensure 
that vehicle utility (including performance, reliability, and size) 
stay constant, except for fuel economy and vehicle price, with some 
minor exceptions (e.g., see the discussion of the ``Atkinson-cycle'' 
engine and towing capacity in III.D.5). For example, using a 4-cylinder 
engine instead of a 6-cylinder engine reduces fuel economy, but also 
reduces performance; turbocharging the 4-cylinder engine, though, 
produces fuel savings while maintaining performance. The cost estimates 
assume turbocharging accompanies engine downsizing. As a result, if the 
market for fuel economy is efficient and these

[[Page 62914]]

cost estimates are correct, then the existence of large private net 
benefits implies that there would need to be some other changed 
qualities, missed in the cost estimates, which would reduce the 
benefits consumers receive from their vehicles.
    We sought comments that identify any such changed qualities omitted 
from the analysis. Some comments asserted that these costs must exist, 
because it is implausible that the market would otherwise not provide 
all the cost-effective fuel savings found in the rule. In the absence 
of identified impacts, though, the conundrum remains. A number of 
comments discussed consumer acceptance of the vehicles that will be 
built in response to this rule; some expressed worry that people would 
not want them, and that they will find their choices of vehicles 
limited; others expressed confidence that people will want more fuel-
efficient vehicles and note the increase in choices that will be 
available to consumers. We note that the footprint-based standards are 
intended to preserve the current range of choice of vehicles, and the 
costs of the rule take into account the costs of preserving the current 
attributes of those vehicles (see RIA Chapter 1.3). Some comments 
suggested that auto makers would substitute improvements in fuel 
economy for improvements in other vehicle attributes, such as power. 
Though that tradeoff may be true for a given engine or vehicle cost, 
those comments do not take into account that it is possible to have 
improvements in both fuel economy and other attributes through 
applications of additional technologies. Those combinations would 
increase vehicle costs. The costs of this rule have been estimated for 
vehicles with maintained power, size, and other attributes. Because 
increases in power or changes in other vehicle attributes are voluntary 
design choices by auto makers, we have not included the costs of those 
changes in the rule. If those changes would have taken place in the 
absence of the rule, and if those changes would be more expensive for 
vehicles with increased fuel economy, then there may be some 
incremental costs of these technologies not accounted for in the rule--
the difference in cost, for instance, for greater power with and 
without higher fuel economy. In the absence of data to estimate this 
effect, we rely on our cost estimates based on holding those other 
attributes constant.
    The central conundrum observed in this market, that consumers 
appear not to purchase products featuring levels of energy efficiency 
that are in their economic self-interest, has been referred to as the 
Energy Paradox in this setting (and in several others).\797\ There are 
many possible reasons discussed in academic research why this might 
occur: \798\
---------------------------------------------------------------------------

    \797\ 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-2010-0799-0651.
    \798\ For an overview, see Helfand, Gloria and Ann Wolverton, 
``Evaluating the Consumer Response to Fuel Economy: A Review of the 
Literature.'' International Review of Environmental and Resource 
Economics 5 (2011): 103-146, Docket EPA-HQ-OAR-2010-0799-0652.
---------------------------------------------------------------------------

     Consumers might be ``myopic'' and hence undervalue future 
fuel savings in their purchasing decisions.
     Consumers might lack the information necessary to estimate 
the value of future fuel savings, or not have a full understanding of 
this information even when it is presented.
     Consumer may be accounting for uncertainty in future fuel 
savings when comparing upfront cost to future returns.
     Consumers may consider fuel economy after other vehicle 
attributes and, as such, not optimize the level of this attribute 
(instead ``satisficing''--that is, selecting a vehicle that is 
acceptable rather than optimal--or selecting vehicles that have some 
sufficient amount of fuel economy).
     Consumers might be especially averse to the short-term 
losses associated with the higher prices of energy efficient products 
relative to the future fuel savings (the behavioral phenomenon of 
``loss aversion'').
     Consumers might associate higher fuel economy with 
inexpensive, less well designed vehicles.
     When buying vehicles, consumers may focus on visible 
attributes that convey status, such as size, and pay less attention to 
attributes such as fuel economy that do not visibly convey status.
     Even if consumers have relevant knowledge, selecting a 
vehicle is a highly complex undertaking, involving many vehicle 
characteristics. In the face of such a complicated choice, consumers 
may use simplified decision rules.
     In the case of vehicle fuel efficiency, and perhaps as a 
result of one or more of the foregoing factors, consumers may have 
relatively few choices to purchase vehicles with greater fuel economy 
once other characteristics, such as vehicle class, are chosen.\799\
---------------------------------------------------------------------------

    \799\ For instance, in MY 2010, the range of fuel economy 
(combined city and highway) available among all listed 6-cylinder 
minivans was 18 to 20 miles per gallon. With a manual-transmission 
4-cylinder minivan, it is possible to get 24 mpg. See http://www.fueleconomy.gov, which is jointly maintained by the U.S. 
Department of Energy and the EPA.
---------------------------------------------------------------------------

    A great deal of work in behavioral economics identifies and 
elaborates factors of this sort, which help account for the Energy 
Paradox.\800\ This paradox is found in the context of fuel savings (the 
main focus here), but it applies equally to the other private benefits, 
including reductions in refueling frequency and additional driving. For 
example, it might well be questioned whether significant reductions in 
refueling frequency, and corresponding private savings, are fully 
internalized when consumers are making purchasing decisions.
---------------------------------------------------------------------------

    \800\ 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-2010-0799-0651.
---------------------------------------------------------------------------

    EPA discussed this issue at length in the MYs 2012-2016 light duty 
rulemaking and in the medium- and heavy-duty greenhouse gas rulemaking 
(see 75 FR 25510-13; 76 FR 57315-19), as well in as the NPRM and in RIA 
Chapter 8.1.2.6. Considerable research indicates that the Energy 
Paradox may be a real and significant phenomenon, although the 
literature has not reached a consensus about the reasons for its 
existence. Studies regularly show that fuel economy plays a role in 
consumers' vehicle purchases, but modeling that role is still in 
development, and there is no consensus that most consumers make fully 
informed tradeoffs.\801\ A review commissioned by EPA finds great 
variability in estimates of the role of fuel economy in consumers' 
vehicle purchase decisions.\802\ Of 27 studies, significant numbers of 
them find that consumers undervalue, overvalue, or value approximately 
correctly the fuel savings that they will receive from improved fuel 
economy. The variation in the value of fuel economy in these studies is 
so high that it appears to be inappropriate to identify one central 
estimate of this value from the literature. Thus, estimating consumer 
response to higher vehicle fuel economy is still unsettled science.
---------------------------------------------------------------------------

    \801\ Helfand, Gloria and Ann Wolverton, ``Evaluating the 
Consumer Response to Fuel Economy: A Review of the Literature.'' 
International Review of Environmental and Resource Economics 5 
(2011): 103-146 (Docket EPA-HQ-OAR-2010-0799-0652).
    \802\ Greene, David L. ``How Consumers Value Fuel Economy: A 
Literature Review.'' EPA Report EPA-420-R-10-008, March 2010 (Docket 
EPA-HQ-OAR-2010-0799-0711).
---------------------------------------------------------------------------

    EPA requested and received a number of comments discussing the role 
of the Energy Paradox in consumer vehicle

[[Page 62915]]

purchase decisions. Some comments argued that it is possible that 
consumers rationally discount higher than the 3 and 7 percent rates 
used in this rulemaking, because of uncertainty and volatility related 
to fuel savings; those comments recommend that those higher rates 
should be used in estimating the value of the fuel savings achieved by 
the rule. Other comments support the use of 3 and 7 percent as the 
discount rates in our analysis of fuel savings as representing the 
opportunity costs of capital. We note that the high discount rates 
affect how consumers think about fuel savings in the course of buying a 
vehicle, and thus may affect vehicle sales (see Section III.H.11), but 
do not represent the social opportunity costs of capital that the 
discount rate is intended to reflect; we thus continue our use of 3 and 
7 percent as the discount rates for fuel savings in the benefit-cost 
analysis. Other arguments state that it is unprofitable for 
manufacturers to make vehicles with better fuel economy and the vehicle 
attributes that consumers desire, because consumers are unwilling to 
pay for the fuel-saving technologies; if there are profit-making 
opportunities, EPA has not explained why auto makers have not pursued 
them. These arguments, which do not come with data or references to 
support them, serve to reinforce the existence of the paradox without 
explaining it. EPA cannot fully explain why we appear to have 
identified possible profit-making opportunities associated with fuel-
saving technologies that the auto makers have historically not adopted. 
We agree that the forces of competition would be expected to lead to 
auto makers offering these technologies in response to consumer demand. 
As discussed in Section III.D.1, though, we do not have a basis to 
expect that auto makers will go beyond the standards for MY 2016 in the 
absence of this rule. Other comments emphasize the ``positional'' 
nature of cars and trucks: people buy them as a reflection of their 
status, and focus on vehicle attributes, such as size, that visibly 
convey that status. These comments argue that consumers may become 
better off through reduced incentives to compete on these positional 
attributes and perhaps increased incentives to compete on fuel economy. 
EPA acknowledges that vehicles can be positional, and appreciates the 
possibility that fuel economy may become a more valued attribute for 
consumers; at the same time, the positional nature of vehicles may not 
be sufficient by itself to explain the energy paradox, and increasing 
the visibility of fuel economy as an attribute may not by itself be 
sufficient to meet the greenhouse gas standards of this rule. Any 
increase in the desirability of fuel economy, though, would be expected 
to facilitate meeting those emissions goals. Other comments addressed 
consumer heterogeneity: though some will benefit, others may be made 
worse off, and a ``one size fits all'' policy reduces consumer options. 
We note that the footprint-based standard as well as the numerous 
flexibilities in the rule mean that there are many different paths to 
compliance that maintain consumer options; we expect no reduction in 
consumer choices. Some commenters expressed that the rule would 
increase choices through options for advanced technologies. Though some 
consumers who drive little may face longer-than-average payback 
periods, those who drive more are expected to benefit, with the gains 
outweighing the losses.\803\
---------------------------------------------------------------------------

    \803\ One commenter noted that aggregating consumers' 
preferences is a controversial area of economic theory. In fact, 
aggregating consumers' preferences is the basis of benefit-cost 
analysis and welfare analysis more generally. Though people discuss 
the merits of benefit-cost analysis as a decision rule versus a 
contribution to a decision, and ethical questions can arise about 
the distributional impacts of policies, the practice of aggregating 
preferences is quite common.
---------------------------------------------------------------------------

    EPA and NHTSA recently revised the fuel economy label on new 
vehicles in ways intended to improve information for consumers.\804\ 
For instance, it presents fuel consumption data in addition to miles 
per gallon, in response to the concern over the difficulties of 
translating mpg into fuel savings; it also reports expected fuel 
savings or additional costs relative to an average vehicle. Whether the 
new label will help consumers to overcome the energy paradox is not 
known at this point. A literature review that contributed to the fuel 
economy labeling rule points out that consumers increasingly do a great 
deal of research on the internet before going to an auto dealer.\805\ 
To the extent that the label improves consumers' understanding of the 
value of fuel economy, purchase decisions could change. At least until 
the newly revised labels enter the marketplace with MY 2013 vehicles 
(or optionally sooner), the agencies may not be able to determine how 
vehicle purchase decisions are likely to change as a result of the new 
labels.
---------------------------------------------------------------------------

    \804\ Environmental Protection Agency and Department of 
Transportation, ``Revisions and Additions to Motor Vehicle Fuel 
Economy Label,'' Federal Register 76(129) (July 6, 2011): 39478-
39587.
    \805\ PRR, Inc., ``Environmental Protection Agency Fuel Economy 
Label: Literature Review.'' EPA-420-R-10-906, August 2010, available 
at http://www.epa.gov/fueleconomy/label/420r10906.pdf 2010 (Docket 
EPA-HQ-OAR-2010-0799-0712).
---------------------------------------------------------------------------

    If there is a difference between expected fuel savings and 
consumers' willingness to pay for those 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 calculate 
savings. Also as noted, 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 significant gains to 
consumers of the government mandating additional fuel economy. Several 
commenters specifically supported this argument in support of using 
expected future fuel savings in the benefit-cost analysis. Other 
comments argued that consumers are willing to pay only 25 percent of 
expected future fuel savings, and that that value should be used in the 
benefit-cost analysis,\806\ while also arguing against the existence of 
the energy paradox.\807\ We note, again, the difference between what 
consumers think about when they buy their vehicles (which may not be 
expected future fuel savings) and what they will experience once they 
have bought their vehicles.
---------------------------------------------------------------------------

    \806\ The comment that consumers are willing to pay for only 25 
percent of expected future fuel savings is based on a study, not of 
consumer preferences, but rather of vehicle technology 
(Bandivadekar, Anup, et al. (July 2008). On the Road in 2035: 
Reducing Transportation's Petroleum Consumption and GHG Emissions, 
Massachusetts Institute of Technology, Laboratory for Energy and the 
Environment Report No. LFEE 2008-05 RP, Docket EPA-HQ-OAR-2010-0799-
0736); it is based on a comparison of the fuel-saving technology 
that auto companies provide in European vs. U.S. vehicles. 
Technology tradeoffs do not estimate consumer behavior, unless auto 
manufacturers perfectly understand and respond to consumer desires. 
Using the technology tradeoffs to measure consumer behavior is 
additionally unnecessary and inappropriate because a number of 
studies specifically examine consumer behavior for fuel economy; 
see, e.g., Greene's review in note 802, above.
    \807\ These two statements are contradictory. The existence of 
the energy paradox is based on comparing consumer willingness to pay 
for fuel savings with the expected fuel savings they will receive. 
If consumers are willing to pay for only 25% of fuel savings, they 
undervalue fuel savings, and there is an energy paradox; if they do 
not undervalue fuel savings, and there is no energy paradox, they 
are willing to pay for 100% of fuel savings.

---------------------------------------------------------------------------

[[Page 62916]]

    While acknowledging the conundrum, EPA continues to value fuel 
savings from the standards using the projected market value over the 
vehicles' entire lifetimes, and to report that value among private 
benefits of the rule. Improved fuel economy will significantly reduce 
consumer expenditures on fuel, thus benefiting consumers. Real money is 
being saved and accrued by the initial buyer and by subsequent owners. 
We note that comments arguing for use of less than fuel savings did not 
dispute the existence of those fuel savings, but only how to estimate 
their value; we continue to use the market valuation rather than the 
subjective preference at the time of vehicle purchase. In addition to 
these other factors, using a measure based on consumer consideration at 
the time of vehicle purchase would involve a very wide range of 
uncertainty, due to the lack of consensus in the relevant literature on 
the value of additional fuel economy. Due partly to this factor, it is 
true that limitations in modeling affect our ability to estimate how 
much of these savings would have occurred in the absence of the rule. 
For example, some of the technologies predicted to be adopted in 
response to the rule may already be in the deployment process due to 
shifts in consumer demand for fuel economy, or due to expectations by 
auto makers of future GHG/fuel economy standards. It is possible that 
some of these savings would have occurred in the absence of the 
standards.\808\ To the extent that greater fuel economy improvements 
than those assumed to occur under the baseline may have occurred due to 
market forces alone (absent the standards), the analysis overestimates 
private and social benefits and also overestimates the rule's costs. As 
discussed below, limitations in modeling also affect our ability to 
estimate the effects of the rule on net benefits in the market for 
vehicles.
---------------------------------------------------------------------------

    \808\ However, as discussed at section III.D.1 above, the 
assumption of a flat baseline absent this rule rests on strong 
historic evidence of lack of increase in fuel economy absent either 
regulatory control or sharply rising fuel prices.
---------------------------------------------------------------------------

    Consumer vehicle choice models estimate what vehicles consumers buy 
based on vehicle and consumer characteristics. In principle, such 
models 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. Helfand and 
Wolverton discuss the wide variation in the structure and results of 
these models.\809\ 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.
---------------------------------------------------------------------------

    \809\ Helfand, Gloria and Ann Wolverton, ``Evaluating the 
Consumer Response to Fuel Economy: A Review of the Literature.'' 
International Review of Environmental and Resource Economics 5 
(2011): 103-146 (Docket EPA-HQ-OAR-2010-0799-0652).
---------------------------------------------------------------------------

    In order to develop greater understanding of these models, EPA has 
developed a preliminary vehicle choice model. As described in the NPRM, 
it uses a ``nested logit'' structure common in the vehicle choice 
modeling literature. ``Nesting'' refers to the decision-tree structure 
of buyers' choices among vehicles the model employs, and ``logit'' 
refers to the specific pattern by which buyers' choices respond to 
differences in the overall utility that individual vehicle models and 
their attributes provide.\810\ The nesting structure in EPA's model 
involves a hierarchy of choices. For instance, at the initial decision 
node, consumers choose between buying a new vehicle or not. Conditional 
on choosing a new vehicle, consumers then choose among passenger 
vehicles, cargo vehicles, and ultra-luxury vehicles. After two more 
nodes, at the bottom are the individual models. At this bottom level, 
vehicles that are similar to each other end up in the same nest; for 
example, two such nests are standard subcompacts and prestige large 
vehicles. Substitution within a nest is considered much more likely 
than substitution across nests, because the vehicles within a nest are 
more similar to each other than vehicles in different nests. For 
instance, a person is more likely to substitute between a Chevrolet 
Aveo and a Toyota Yaris (both subcompacts) than between an Aveo and a 
pickup truck. In addition, substitution is greater at low decision 
nodes (such as individual vehicles) than at higher decision nodes (such 
as the buy/no buy decision), because there are more choices at lower 
levels than at higher levels. Parameters for the model (including 
demand elasticities and the value of fuel economy in purchase 
decisions) are based on a review of values found in the literature on 
vehicle choice modeling. Additional discussion of this model can be 
found in Chapter 8.1.2.8 of the RIA and in the model 
documentation.\811\
---------------------------------------------------------------------------

    \810\ Logit refers to a statistical analysis method used for 
analyzing the factors that affect discrete choices (i.e., yes/no 
decisions or the choice among a countable number of options).
    \811\ Greene, David L., and Changzheng Liu (March 2012). 
``Consumer Vehicle Choice Model Documentation.'' Prepared for the 
U.S. Environmental Protection Agency by Oak Ridge National 
Laboratory. Docket EPA-HQ-OAR-2010-0799.
---------------------------------------------------------------------------

    In the peer review of EPA's model, the reviewers found the basic 
structure of the model to be reasonable, while pointing out, first, 
that its use in policy analysis depended on its integration with OMEGA, 
and second, that conducting uncertainty analysis would be important 
given the uncertainties around the model's parameters.\812\ These are 
valuable suggestions for next steps in the modeling process, now that a 
preliminary model has been developed.
---------------------------------------------------------------------------

    \812\ U.S. Environmental Protection Agency. ``Peer Review for 
the Consumer Vehicle Choice Model and Documentation.'' Office of 
Transportation and Air Quality, Assessment and Standards Division, 
EPA-420-R-12-013, April 2012. Docket EPA-HQ-OAR-2010-0799.
---------------------------------------------------------------------------

    In the NPRM, EPA asked for comments on the use of vehicle choice 
modeling for predicting changes in sales mix, and on methods to test 
the predictive abilities of models. See 76 FR 75116. Several commenters 
expressed concern that consumer choice models are too uncertain to be 
used in policy making. One comment argued that the rulemaking should 
not continue if the agencies do not use vehicle choice models that have 
been subject to public comment and peer review, to reflect consumer 
acceptability. As discussed in greater detail in Section 18.1 of the 
Response to Comment Document, we disagree that the rulemaking requires 
the use of vehicle choice models. Because the predictive ability of 
these models has not been well tested, the quality of the information 
that would come from a vehicle choice model is not well understood. 
Instead, we provide here and in Section III.H.11(a) thorough discussion 
of the effects of the rule on consumer welfare and on vehicle sales.
    EPA agrees with some commenters that there is yet much to learn 
about consumer vehicle choice models and their predictive abilities. 
EPA is therefore not using its preliminary consumer choice model in 
this rulemaking because we believe it needs further development and 
testing before we have confidence in its use and results. As the peer 
review noted, it has not yet been integrated with OMEGA, an important 
step for ensuring that changes in the vehicle fleet estimated by the 
model will result in a fleet compliant with the standards. In addition, 
concerns remain that vehicle choice models have rarely been validated 
against real-world data. In response to these concerns, we would expect 
any use of the model to involve, at the least,

[[Page 62917]]

a number of sensitivity analyses to examine the robustness of results 
to key parameters. We will continue model development and testing to 
understand better the results and limitations of using the model.
    The next issue is the potential for loss in consumer welfare due to 
the rule. As mentioned above (and discussed more thoroughly in Section 
III.D.3 of this preamble), the technology cost estimates developed here 
for conventional vehicles take into account the costs to hold other 
vehicle attributes, such as size and performance, constant.\813\ In 
addition, the analysis assumes that the full technology costs are 
passed along to consumers. With these assumptions, because paying the 
consumers back the technology costs would completely compensate them 
for their losses,\814\ the price increase measures the loss to the 
buyer.\815\ Assuming that the full technology cost gets passed along to 
the buyer as an increase in price, the technology cost thus measures 
the welfare loss to the consumer. Increasing fuel economy would have to 
lead to other changes in the vehicles that consumers find undesirable 
for there to be additional losses not bounded by the technology costs.
---------------------------------------------------------------------------

    \813\ If the reference-case vehicles include different vehicle 
characteristics, such as improved acceleration or towing capacity, 
then the costs for the standards would be, as here, the costs of 
adding compliance technologies to those reference-case vehicles. 
These costs may differ from those estimated here, due to our lack of 
information on how those vehicle characteristics might change 
between now and 2025.
    \814\ 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 variation, estimates the income change that 
would be an alternative to the change taking place. The difference 
between them is whether the consumer's point 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 for marketed goods.
    \815\ Indeed, it is likely to be an overestimate of the loss 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 the vehicle due to the 
fuel economy improvements, unaccounted for in the costs, that make 
the vehicle less desirable to consumers.
---------------------------------------------------------------------------

b. Electric Vehicles and Other Advanced Technology Vehicles
    The analysis of this rule finds that alternative-fuel vehicles, 
especially electric vehicles (EVs), may form a part (albeit limited) of 
some manufacturers' compliance strategies. The following discussion 
will focus on EVs, because they are expected to play more of a role in 
compliance than vehicles with other alternative fuels, but related 
issues may arise for other alternative fuel vehicles. It should be 
noted that EPA's projection of the penetration of EVs in the MY 2025 
fleet is very small (under 3%).
    Electric vehicles (EVs), at the time of this rulemaking, have very 
different refueling infrastructures than conventional gasoline- or 
diesel-fueled vehicles: refueling EVs requires either access to 
electric charging facilities or battery replacement. In addition, 
because of the expense of increased battery capacity, EVs commonly have 
a smaller driving range than conventional vehicles. Because of these 
differences, the vehicles cannot be considered conventional vehicles 
unmodified except for cost and fuel economy. As a result, the consumer 
welfare arguments presented above may need adjustments to account for 
these differences.
    Comments differed on consumer attitudes toward EVs. The National 
Automobile Dealers Association and some fuels-related organizations 
argued that consumers are likely to hesitate to buy even hybrid 
electric vehicles, in part because they like vehicles that are familiar 
to them, and it is risky to depend on EVs to meet the standards of this 
program. Some fuels organizations pointed to low sales of existing EVs 
and plug-in hybrid electric vehicles (PHEVs) as evidence of consumer 
unwillingness to consider these vehicles, and thus as evidence that the 
standards are too stringent because they rely on electrification. We 
note that electrification is an option for compliance but is not 
required under this rule (and indeed, EPA projects minimal penetration 
of electrification as the likely compliance path even for the MY 2025 
standards, as documented in section III.D.6.c above). Others note the 
expense of EVs. Environmental and consumer organizations argue that 
there are reasons to be optimistic about consumer adoption of these 
vehicles because consumers may appreciate their low or zero gasoline 
consumption. EPA recognizes all these as possibilities in response to 
this rule. Many of the organizations skeptical of EVs expressed concern 
that the rule would reduce vehicle choices for consumers, by requiring 
people to buy more fuel-efficient vehicles when they might otherwise 
not choose them. Those optimistic about EVs said that choices were 
expected to increase, because consumers could choose between 
conventional and alternative fuel vehicles.
    A first important point to observe in response to these concerns is 
that, although auto makers are required to comply with the standards, 
producing EVs as a compliance strategy is not required. Auto makers 
will choose to provide EVs either if they have few alternative ways to 
comply, or if EVs are, for some range of production, likely to be more 
profitable (or less unprofitable) than other ways of complying.
    From the consumer perspective, it is important to observe that 
there is no mandate for any consumer to choose any particular kind of 
vehicle. An individual consumer will buy an EV only if the price and 
characteristics of the vehicle make it more attractive to her than 
other vehicles. If the range of vehicles in the conventional fleet does 
not shrink, the availability of EVs should not reduce consumer welfare 
compared to a fleet with no EVs: increasing options should not reduce 
consumer well-being, because other existing options still are 
available. On the other hand, if the variety of vehicles in the 
conventional market does change, there may be consumers who may need to 
substitute to alternative vehicles. The use of the footprint-based 
standard is intended in part to help maintain the diversity of vehicle 
sizes. Because the agencies do not expect any vehicle classes to become 
unavailable, consumers who buy EVs therefore are expected to choose 
them voluntarily, in preference to the other vehicles available to 
them.
    From a practical perspective, the key issue is whether the consumer 
demand for EVs is large enough to absorb all the EVs that automakers 
will produce in order to comply with these standards, or whether 
automakers will need to increase consumer purchases by providing 
subsidies to consumers. If enough consumers find EVs more attractive 
than other vehicles, and automakers therefore do not need to subsidize 
their purchase, then both consumers and producers will benefit from the 
introduction of EVs. On the other hand, it is possible that automakers 
will find EVs to be part of a cost-effective compliance technology but 
nevertheless need to price them below cost them to sell sufficient 
numbers. If so, then there is a welfare loss associated with the sale 
of EVs beyond those that would be sold in the free market. While it is 
theoretically possible to quantify such a welfare loss, the data needed 
to support such a calculation is not available at this time. To 
quantify this value, the deadweight loss can be approximated as one-
half of the size of the subsidy needed for the

[[Page 62918]]

marginal purchaser, times the number of sales that would need the 
subsidy.\816\ Estimating this value would require knowing the number of 
sales necessary beyond the expected sales level in an unregulated 
market, and the amount of the subsidy that would be necessary to induce 
the desired number of sales. Given the fledgling state of the market 
for EVs, neither of these values is easily knowable for the 2017 to 
2025 time frame.
---------------------------------------------------------------------------

    \816\ This calculation approximately measures the area between 
the supply and demand curves for these vehicles when the number sold 
exceeds the equilibrium value. The supply curve approximately 
measures the costs of producing the vehicles, and the demand curve 
estimates how much consumers are willing to pay for the vehicles. 
The measure described here estimates the difference between the 
extra cost for these excess vehicles and their value to their 
buyers.
---------------------------------------------------------------------------

    A number of factors will affect the likelihood of consumer 
acceptance of EVs. People with short commutes may find little obstacle 
in the relatively short driving range, but others who regularly drive 
long distances may find EVs' ranges limiting. The reduced tailpipe 
emissions and reduced noise may be attractive features to some 
consumers.\817\ Recharging at home could be a convenient, desirable 
feature for people who have garages with electric charging capability, 
but not for people who park on the street. If an infrastructure 
develops for recharging vehicles with the convenience approaching that 
of buying gasoline, limited range or lack of home recharging may become 
less of a barrier to purchase. Of course, other attributes of the 
marketed EVs, such as their cost, performance, and their passenger and 
storage capacity, will also affect the share of consumers who will 
consider them. As infrastructure, EV technology, and costs evolve over 
time, consumer interest in EVs will adjust as well. Thus, modeling 
consumer response to advanced technology vehicles in the 2017-2025 time 
frame poses even more challenges than those associated with modeling 
consumer response for conventional vehicles.
---------------------------------------------------------------------------

    \817\ For instance, Hidrue et al. (Hidrue, Michael K., George R. 
Parsons, Willett Kempton, and Meryl P. Gardner. ``Willingness to Pay 
for Electric Vehicles and their Attributes.'' Resource and Energy 
Economics 33(3) (2011): 686-705 (Docket EPA-HQ-OAR-2010-0799)) find 
that some consumers are willing to pay $5100 for vehicles with 95% 
lower emissions than the vehicles they otherwise aim to purchase.
---------------------------------------------------------------------------

    Because range is a major factor in EV acceptability, it is starting 
to draw attention in the research community. For instance, several 
studies have examined consumers' willingness to pay for increased 
vehicle range. Results vary, depending on when the survey was conducted 
(studies from the early 1990s have much higher values than more recent 
studies) and on household income and other demographic factors; some 
find range to be statistically indistinguishable from zero, while 
others find the value of increasing range from 150 to 300 miles to be 
as much as $59,000 (2010$) (see RIA Chapter 8.1.2.7 for more 
discussion).
    Other research has examined how the range limitation may affect 
driving patterns. Pearre et al. observed daily driving patterns for 484 
vehicles in the Atlanta area over a year.\818\ In their sample, 9 
percent of vehicles never exceeded 100 miles in one day, and 21 percent 
never exceeded 150 miles in one day. Lin and Greene compared the cost 
of reduced range to the cost of additional battery capacity for 
EVs.\819\ They find that an ``optimized'' range of about 75 miles would 
be sufficient for 98% of days for ``modest'' drivers (those who average 
about 25 miles per day); the optimized EV range for ``average'' drivers 
(who average about 43 miles per day), close to 120 miles, would meet 
their needs on 97 percent of days. Turrentine et al. studied drivers 
who leased MINI E EVs (a conversion of the MINI Cooper) for a 
year.\820\ They found that drivers adapted their driving patterns in 
response to EV ownership: for instance, they modified where they 
shopped and increased their use of regenerative braking in order to 
reduce range as a constraint. These findings suggest that, for some 
consumers, range may be a limiting factor only occasionally. If those 
consumers are willing to consider alternative ways of driving long 
distances, such as renting a gasoline vehicle or exchanging vehicles 
within the household, then limited range may not be a barrier to 
adoption for them. These studies also raise the question whether 
analysis of EV use should be based on the driving patterns from 
conventional vehicles, because consumers may use EVs differently than 
conventional vehicles.
---------------------------------------------------------------------------

    \818\ Pearre, Nathaniel S., Willett Kempton, Randall L. 
Guensler, and Vetri V. Elango. ``Electric vehicles: How much range 
is required for a day's driving?'' Transportation Research Part C 
19(6) (2011): 1171-1184 (Docket EPA-HQ-OAR-2010-0799-0668).
    \819\ Lin, Zhenhong, and David Greene. ``Rethinking FCV/BEV 
Vehicle Range: A Consumer Value Trade-off Perspective.'' The 25th 
World Battery, Hybrid and Fuel Cell Electric Vehicle Symposium and 
Exhibition, Shenzhen, China, Nov. 5-9, 2010 (Docket EPA-HQ-OAR-2010-
0799-0670).
    \820\ Turrentine, Tom, Dahlia Garas, Andy Lentz, and Justin 
Woodjack. ``The UC Davis MINI E Consumer Study.'' UC Davis Institute 
of Transportation Research Report UCD-ITS-RR-11-05, May 4, 2011 
(Docket EPA-HQ-OAR-2010-0799-0671).
---------------------------------------------------------------------------

    EVs themselves are expected to change over time, as battery 
technologies and costs develop. In addition, consumer interest in EVs 
is likely to change over time, as early adopters share their 
experiences. The initial research in the area suggests that consumers 
put a high value on increased range, though this value appears to be 
changing over time. The research also suggests that some segments of 
the driving public may experience little, if any, restriction on their 
driving due to range limitations if they were to purchase EVs. At this 
time we do not estimate whether the number of people who will choose to 
purchase EVs at private-market prices will be more or less than the 
number that auto makers are expected to produce to comply with the 
standards. As noted above, our projections of technology penetrations 
indicate that a very small portion (fewer than 3 percent) of new 
vehicles produced in MY 2025 will need to be EVs. For the purposes of 
the analysis presented here for this rule, we assume that the consumer 
market will be sufficient to absorb the number of EVs expected to be 
used for compliance under this rule.
c. Summary
    The Energy Paradox, also known as the efficiency gap, raises the 
question, why do private markets not provide energy savings that 
engineering technology cost analyses find are cost-effective? Though a 
number of hypotheses have been raised to explain the paradox, studies 
have not been able at this time to identify the relative importance of 
different explanations. As a result, it is not possible at this point 
to state with any degree of certainty whether the market for fuel 
efficiency is operating efficiently, or whether the market has 
failings.
    For conventional vehicles, the key implication is that the there 
may be two different estimates of the value of fuel savings. One value 
comes from the engineering estimates, based on consumers' expected 
driving patterns over the vehicle's lifetime; the other value is what 
the consumer factors into the purchase decision when buying a vehicle. 
Although economic theory suggests that these two values should be the 
same in a well functioning market, if engineering estimates accurately 
measure fuel savings that consumers will experience, the available 
evidence does not provide support for that theory. The fuel savings 
estimates presented here are based on expected consumers' in-use fuel 
consumption rather than the value they estimate at the time that they 
consider purchasing a vehicle. Though

[[Page 62919]]

the cost estimates may not have taken into account some changes that 
consumers may not find desirable, those omitted costs would have to be 
of very considerable magnitude to have a significant effect on the net 
benefits of this rule. The costs imposed on the consumer are measured 
by the costs of the technologies needed to comply with the standards. 
Because the cost estimates have built into them the costs required to 
hold other vehicle attributes constant, then, in principle, 
compensating consumers for the increased costs would hold them 
harmless, even if they paid no attention to the fuel efficiency of 
vehicles when making their purchase decisions.
    For electric vehicles, and perhaps for other advanced-technology 
vehicles, other vehicle attributes are not expected to be held 
constant. In particular, their ranges and modes of refueling will be 
different from those of conventional vehicles. From a social welfare 
perspective, the key question is whether the number of consumers who 
will want to buy EVs at their private-market prices will exceed the 
number that auto makers are expected to produce to comply with the 
standards. If too few consumers are willing to buy them at their 
private-market prices, then auto makers may have to subsidize their 
prices, if they have no other less costly technologies available to 
meet the standards. Though current research finds that consumers 
typically have a high value for increasing the range of EVs (and thus 
would consider a shorter range a cost of an EV), current research also 
suggests that some consumers may find ways to adapt to the shorter 
range so that it is less constraining. The technologies, prices, 
infrastructure, and consumer experiences associated with EVs are all 
expected to evolve between now and when the MY 2017-25 standards take 
effect. The analysis in this rule assumes that the consumer market is 
sufficient to absorb the expected number of EVs without subsidies.
2. Costs Associated With the Vehicle Standards
    In this section, EPA presents our estimate of the costs associated 
with the vehicle program. The presentation here summarizes the vehicle 
level costs associated with the new technologies expected to be added 
to meet the GHG standards, including hardware costs to comply with the 
A/C credit program. The analysis summarized here provides our estimate 
of incremental costs on a per vehicle basis and on an annual total 
basis.
    The presentation here summarizes the outputs of the OMEGA model 
that was discussed in some detail in Section III.D of this preamble. 
For details behind the analysis such as the OMEGA model inputs and the 
estimates of costs associated with individual technologies, the reader 
is directed to Chapter 1 of the EPA's final RIA and Chapter 3 of the 
Joint TSD. For more detail on the outputs of the OMEGA model and the 
overall vehicle program costs summarized here, the reader is directed 
to Chapters 3 and 5 of EPA's RIA.
    With respect to the aggregate cost estimations presented here, EPA 
notes that there are a number of areas where the results of our 
analysis may be conservative and, in general, EPA believes we have 
directionally overestimated the costs of compliance with these new 
standards, especially in not accounting for the full range of credit 
opportunities available to manufacturers. For example, some cost saving 
programs are considered in our analysis, such as full car/truck 
trading, while others are not, such as the full suite of available off-
cycle credits.
a. New Technology Costs per Vehicle
    To develop technology costs per vehicle, EPA has used the same 
methodology as that used in the recent 2012-2016 final rule, the 2010 
TAR and the proposal for this rule. Individual technology direct 
manufacturing costs have been estimated in a variety of ways--vehicle 
and technology tear down, models developed by outside organizations, 
and literature review--and indirect costs have been estimated using the 
updated and revised indirect cost multiplier (ICM) approach that was 
first developed for the 2012-2016 final rule.\821\ All of these 
individual technology costs are described in detail in Chapter 3 of the 
joint TSD. Also described there are the ICMs used in this rule and the 
ways the ICMs have been updated and revised since the 2012-2016 final 
rule which results in considerably higher indirect costs in this rule 
than estimated in the 2012-2016 final rule. Further, we describe in 
detail the adjustments to technology costs to account for manufacturing 
learning and the cost reductions that result from that learning. We 
note here that learning impacts are applied only to direct 
manufacturing costs which differs from the 2012-2016 final rule which 
applied learning to both direct and indirect costs. Learning effects in 
this final rule are applied exactly as was done in the proposal. 
Lastly, we have included costs associated with stranded capital (i.e., 
capital investments that are not fully recaptured by auto makers 
because they would be forced to update vehicles on a more rapid 
schedule than they may have intended absent this rule). Again, this is 
detailed in Chapter 3 of the joint TSD.
---------------------------------------------------------------------------

    \821\ The ICM approach was updated for the proposal and has not 
changed for this final rule.
---------------------------------------------------------------------------

    We requested comment on all aspects of our technology cost 
analysis--the DMCs themselves, the ICMs, learning effects, etc. We 
received a comment from NADA that our ICMs were too low and that we 
should use a Retail Price Equivalent (RPE) approach to estimating 
indirect costs rather than the ICM approach.\822\ Using the RPE 
approach would result in all indirect costs incurred by industry 
increasing due to regulatory demands. In contrast, the ICM approach 
results in a subset of all indirect costs increasing--the subset of 
indirect costs that are tied to changes in regulatory demands. For 
example, healthcare costs of currently retired employees would not be 
expected to increase due to a new regulation. An RPE approach would 
estimate increased healthcare costs for retired employees while an ICM 
approach would not. Further, the NADA comment suggested that an RPE 
factor of 2x was most appropriate, despite industry filings to the 
Security and Exchange Commission (SEC) that support a factor of 
1.5x.\823\ EPA disagrees with both of these comments, as discussed in 
more detail in Chapter 3.1.2.2 of the Joint TSD.
---------------------------------------------------------------------------

    \822\ See NADA (Docket Number EPA-HQ-OAR-2010-0799-9575, at page 
4).
    \823\ Rogozhin, Alex, Michael Gallaher, Gloria Helfand, and 
Walter McManus, ``Using Indirect Cost Multipliers to Estimate the 
Total Cost of Adding New Technology in the Automobile Industry.'' 
International Journal of Production Economics 124 (2010): 360-368.
---------------------------------------------------------------------------

    We received comments from ICCT that our ICM approach was more 
appropriate than an RPE approach, and that our updated method of 
applying ICMs to estimate indirect costs was much more appropriate than 
our old approach (i.e., delinking indirect costs and learning 
effects).\824\
---------------------------------------------------------------------------

    \824\ See ICCT (EPA-HQ-OAR-2009-0472-7156, at page 19).
---------------------------------------------------------------------------

    We did not receive comments on our approach to manufacturer 
learning. We did not receive any specific comments suggesting that our 
estimates of technology direct manufacturing costs were inappropriately 
high or low.
    EPA used the technology costs to build GHG and fuel consumption 
reducing packages of technologies for each of 19 different vehicle 
types meant to fully represent the range of baseline vehicle 
technologies in the marketplace (i.e., number of cylinders, valve train

[[Page 62920]]

configuration, vehicle class, etc.). This package building process as 
well as the process we use to determine the most cost effective 
packages for each of the 19 vehicle types is summarized in Section 
III.D.3 of this preamble and is detailed in Chapter 1 of EPA's final 
RIA. These packages are then used as inputs to the OMEGA model to 
estimate the most cost effective means of compliance with the standards 
giving due consideration to the timing required for manufacturers to 
implement the needed technologies. That is, we assume that 
manufacturers cannot add the full suite of needed technologies in the 
first year of implementation. Instead, we expect them to add 
technologies to vehicles during the typical 4 to 5 year redesign cycle. 
As such, we expect that every vehicle can be redesigned to add 
significant levels of new technology every 4 to 5 years. Further, we do 
not expect manufacturers to redesign or refresh vehicles at a pace more 
rapid than the industry standard four to five year cycle.
    The results, including costs associated with the air conditioning 
program and estimates of stranded capital as described in Chapter 3 of 
the joint TSD, are shown in Table III-72. Not included in the costs 
presented in Table III-72 are costs associated with maintenance. We 
discuss maintenance costs in Section III.H.2.b, below.

                                       Table III-72--Industry Average Vehicle Costs Associated With the Standards
                                                                     [2010 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
           Model year               2017      2018      2019      2020      2021      2022      2023      2024      2025      2030      2040      2050
--------------------------------------------------------------------------------------------------------------------------------------------------------
$/car...........................      $206      $374      $510      $634      $767    $1,079    $1,357    $1,622    $1,726    $1,710    $1,710    $1,710
$/truck.........................        57       196       304       415       763     1,186     1,562     1,914     2,059     2,044     2,044     2,044
Combined........................       154       311       438       557       766     1,115     1,425     1,718     1,836     1,818     1,816     1,816
--------------------------------------------------------------------------------------------------------------------------------------------------------

b. Costs of the National Program
i. Technology Costs
    The costs presented here represent the incremental costs for newly 
added technology to comply with the program. Together with the 
projected increases in car and truck sales, the increases in per-car 
and per-truck average costs shown in Table III-72, above result in the 
total annual costs presented in Table III-73 below. Note that the costs 
presented in Table III-73 do not include the fuel savings that 
consumers would experience as a result of driving a vehicle with 
improved fuel economy. Those impacts are presented in Section III.H.4. 
Similarly, the costs presented in Table III-73 do not include the 
maintenance costs that we have estimated in this final rule. 
Maintenance costs, presented below, were not included in the proposal. 
Note also that the costs presented here represent costs estimated to 
occur presuming that the MY 2025 standards would continue in 
perpetuity. Any changes to the standards would be considered as part of 
a future rulemaking. In other words, the standards would not apply only 
to 2017-2025 model year vehicles--they would, in fact, apply to all 
2025 and later model year vehicles.

      Table III-73--Undiscounted Annual Technology Costs, & Annual Technology Costs Discounted Back to 2012
                                           [millions of 2010 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                                   Total annual
                          Calendar year                                Cars            Truck           costs
----------------------------------------------------------------------------------------------------------------
2017............................................................          $2,060            $334          $2,440
2020............................................................           6,530           2,320           8,860
2030............................................................          21,400          12,200          33,700
2040............................................................          24,100          13,300          37,400
2050............................................................          27,100          14,900          42,000
NPV, 3%.........................................................         336,000         186,000         521,000
NPV, 7%.........................................................         149,000          81,900         231,000
----------------------------------------------------------------------------------------------------------------
Annual costs represent undiscounted values; net present values represent annual costs discounted to 2012.

    Looking at these costs by model year gives us the technology costs 
as shown in Table III-74.

                            Table III-74--Model Year Lifetime Present Value Technology Costs, Discounted Back to the 1st Year of Each MY at 3% and 7% Discount Rates
                                                                                   [Millions of 2010 dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                     NPV at                                                            2017       2018       2019       2020       2021       2022       2023       2024       2025       Sum
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3%.............................................  Car..............................     $2,030     $3,650     $5,020     $6,430     $7,940    $11,400    $14,700    $18,000    $19,600    $88,800
                                                 Truck............................        330      1,100      1,670      2,290      4,280      6,670      8,750     10,700     11,600     47,400
                                                 Fleet............................      2,400      4,780      6,720      8,730     12,200     18,100     23,400     28,700     31,200    136,000
7%.............................................  Car..............................      1,990      3,580      4,930      6,320      7,800     11,200     14,400     17,700     19,300     87,200
                                                 Truck............................        323      1,080      1,640      2,250      4,200      6,540      8,590     10,500     11,400     46,500
                                                 Fleet............................      2,360      4,690      6,590      8,570     12,000     17,700     23,000     28,100     30,600    134,000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 62921]]

ii. Maintenance Costs
    New for this final rule is consideration and quantification of 
maintenance costs associated with the new technologies added to comply 
with the standards. In the proposal, we requested comment on 
maintenance and repair costs and whether they might increase or 
decrease with the new technologies. We did not receive many comments, 
but NADA did comment that the agencies should include maintenance and 
repair costs in estimates of total cost of ownership (i.e., in our 
payback analyses).\825\ NADA offered their Web site as a place to find 
useful information on maintenance and repair costs that might be used 
in our final analyses.
---------------------------------------------------------------------------

    \825\ See NADA (EPA-HQ-OAR-2010-0799-9575, p.10).
---------------------------------------------------------------------------

    Here we summarize what we have done for the final rule with respect 
to maintenance costs. To make clear, we distinguish maintenance from 
repair costs as follows: maintenance costs are those costs that are 
required to keep a vehicle properly maintained and, as such, are 
usually recommended to occur by auto makers on a regular, periodic 
schedule. Examples of maintenance costs are oil and air filter changes, 
tire replacements, etc. Repair costs are those costs that are 
unexpected and, as such, occur randomly and uniquely for every driver, 
if at all. Examples of repair costs would be parts replacement 
following an accident, turbocharger replacement following a mechanical 
failure, etc.
    In the joint TSD (see Chapter 3.6), we present our estimates for 
maintenance cost impacts along with how we derived them. For most 
technologies that we expect will be added to comply with the final 
standards, we expect no impact on maintenance costs. In other words, 
the new technologies have identical maintenance intervals and identical 
costs per interval as the technologies they will replace. However, for 
a few technologies, we do expect some maintenance costs changes. As 
detailed in the Joint TSD, those technologies expected to result in a 
change in maintenance costs are low rolling resistance tires levels 1 
and 2 since they cost more than traditional tires and must be replaced 
at similar intervals, diesel fuel filters since they must be replaced 
more frequently and at higher cost than gasoline fuel filters, and 
several items for full EVs (oil changes, air filter changes, engine 
coolant flushes, spark plug replacements, etc.) since they do not need 
to be done on full EVs.
    Using the maintenance costs and intervals presented in the Joint 
TSD, we can estimate the annual maintenance cost increases/decreases 
for each of these technologies relative to their reference case 
gasoline counterparts. Clearly, while in the year 2017 roughly 15-16 
million vehicles will be sold, very few of those vehicles will 
experience any maintenance costs during their first year despite the 
fact that all will have low rolling resistance tires 1 or 2 (the 
typical replacement interval for tires is 40,000 miles). As such, the 
estimated maintenance costs are comparitively low in the year 2017. As 
more compliant vehicles enter the market in subsequent years, the 
annual maintenance costs increase as maintenance intervals begin to 
result in increasing numbers of vehicles incurring costs. The results 
are shown in Table III-75. We provide details of these maintenance 
costs in Chapter 5 of our RIA.

    Table III-75--Undiscounted Annual Maintenance Costs, and Annual Maintenance Costs Discounted Back to 2012
                                           [Millions of 2010 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                                   Total annual
                          Calendar year                                Cars           Trucks           costs
----------------------------------------------------------------------------------------------------------------
2017............................................................             $22             $16             $37
2020............................................................             199             131             330
2030............................................................           1,430             836           2,260
2040............................................................           2,320           1,310           3,630
2050............................................................           2,860           1,680           4,540
NPV, 3%.........................................................          24,900          14,500          39,500
NPV, 7%.........................................................           9,830           5,760          15,600
----------------------------------------------------------------------------------------------------------------
Annual costs represent undiscounted values; net present values represent annual costs discounted to 2012.

    We can also look at the costs on a model year basis by looking at 
the net present value of costs and savings over the full lifetime of 
each model year of vehicles. The net present value lifetime costs and 
savings for each MY 2017-2025 are shown in Table III-76.

                            Table III-76--Model Year Lifetime Present Value Maintenance Costs, Discounted Back to the 1st Year of Each MY at 3% and 7% Discount Rates
                                                                                         [2010 dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                    NPV at                                                           2017       2018       2019       2020       2021       2022       2023       2024       2025        Sum
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3%............................................  Car.............................       $222       $406       $600       $819     $1,040     $1,150     $1,250     $1,380     $1,490       $8,360
                                                Truck...........................        153        279        404        534        686        747        810        867        936        5,420
                                                Fleet...........................        375        684      1,000      1,350      1,730      1,890      2,060      2,240      2,430       13,800
7%............................................  Car.............................        172        314        465        634        812        887        977      1,060      1,160        6,480
                                                Truck...........................        118        214        310        411        523        570        620        669        718        4,150
                                                Fleet...........................        290        528        775      1,050      1,330      1,460      1,600      1,730      1,880       10,600
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 62922]]

iii. Vehicle Program Costs
    Annual costs of the vehicle program are the annual technology costs 
shown in Table III-73 and the annual maintenance costs shown in Table 
III-75. Those results are shown in Table III-77.

            Table III-77--Undiscounted Annual Program Costs, and Annual Costs Discounted Back to 2012
                                           [Millions of 2010 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                                   Total annual
                          Calendar year                                Cars           Trucks           costs
----------------------------------------------------------------------------------------------------------------
2017............................................................          $2,080            $350          $2,470
2020............................................................           6,730           2,450           9,190
2030............................................................          22,900          13,100          35,900
2040............................................................          26,400          14,600          41,000
2050............................................................          29,900          16,600          46,500
NPV, 3%.........................................................         361,000         200,000         561,000
NPV, 7%.........................................................         159,000          87,700         247,000
----------------------------------------------------------------------------------------------------------------
Annual costs represent undiscounted values; net present values represent annual costs discounted to 2012.

    Model year lifetime costs of the vehicle program are the lifetime 
technology costs shown in Table III-74 and the lifetime maintenance 
costs shown in Table III-76. Those results are shown in Table III-78.

                              Table III-78--Model Year Lifetime Present Value Program Costs, Discounted Back to the 1st Year of Each MY at 3% and 7% Discount Rates
                                                                                   [Millions of 2010 dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                    NPV at                                                           2017       2018       2019       2020       2021       2022       2023       2024       2025        Sum
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3%............................................  Car.............................     $2,250     $4,050     $5,620     $7,250     $8,990    $12,600    $15,900    $19,400    $21,100      $97,200
                                                Truck...........................        483      1,370      2,070      2,820      4,960      7,410      9,560     11,600     12,500       52,800
                                                Fleet...........................      2,770      5,460      7,720     10,100     14,000     19,900     25,400     30,900     33,600      150,000
7%............................................  Car.............................      2,170      3,890      5,400      6,950      8,610     12,100     15,400     18,700     20,400       93,600
                                                Truck...........................        441      1,290      1,950      2,660      4,720      7,110      9,210     11,200     12,100       50,600
                                                Fleet...........................      2,650      5,220      7,370      9,610     13,300     19,200     24,600     29,900     32,500      144,000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

3. Cost per Ton of Emissions Reduced
    EPA has calculated the cost per ton of GHG reductions associated 
with the GHG standards on a CO2eq basis using the annual 
program costs presented above and the emissions reductions described in 
Section III.F. These values are presented in Table III-79 for cars, 
trucks and the combined fleet. The cost per metric ton of GHG emissions 
reductions has been calculated in the years 2020, 2030, 2040, and 2050 
using the annual vehicle compliance costs and emission reductions for 
each of those years. The value in 2050 represents the long-term cost 
per ton of the emissions reduced. EPA has also calculated the cost per 
metric ton of GHG emission reductions including the savings associated 
with reduced fuel consumption (presented below in Section III.H.4). 
This latter calculation does not include the other benefits associated 
with this program such as those associated with energy security 
benefits as discussed later in Section III. By including the fuel 
savings, the cost per ton is generally less than $0 since the estimated 
value of fuel savings outweighs the program costs.

                                                Table III-79--Annual Cost per Metric Ton of CO2eq Reduced
                                                                     [2010 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        Undiscounted
                                                     Calendar Year     Undiscounted    annual pre-tax    Annual CO2eq        $/ton            $/ton
                                                                       annual costs     Fuel Savings      reduction
                                                    ...............      ($millions)      ($millions)            (mmt)        (w/o fuel         (w/ fuel
                                                                                                                               savings)         savings)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cars..............................................             2020           $6,730           $6,000               21             $316              $34
                                                               2030           22,900           56,700              179              128             -189
                                                               2040           26,400          102,000              300               88             -252
                                                               2050           29,900          138,000              374               80             -289
Trucks............................................             2020            2,450            1,430                6              430              179
                                                               2030           13,100           29,700               92              142             -180
                                                               2040           14,600           53,400              155               94             -251
                                                               2050           16,600           73,700              196               85             -292
Combined..........................................             2020            9,190            7,430               27              340               65
                                                               2030           35,900           86,400              271              132             -186
                                                               2040           41,000          155,000              455               90             -251
                                                               2050           46,500          212,000              569               82             -291
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 62923]]

4. Reduction in Fuel Consumption and its Impacts
a. What Are the Projected Changes in Fuel Consumption?
    The CO2 standards will result in significant 
improvements in the fuel efficiency of affected vehicles. Drivers of 
those vehicles will see corresponding savings associated with reduced 
fuel expenditures. EPA has estimated the impacts on fuel consumption 
for both the tailpipe CO2 standards and the A/C credit 
program. While gasoline consumption would decrease under the GHG 
standards, electricity consumption would increase slightly due to the 
small penetration of EVs and PHEVs (1-3% for the 2021 and 2025 MYs). 
The fuel savings includes both the gasoline consumption reductions and 
the electricity consumption increases. Note that the total number of 
miles that vehicles are driven each year is different under the control 
case than in the reference case due to the ``VMT rebound effect,'' 
which is discussed in Section III.H.4.c and in Chapter 4 of the joint 
TSD. EPA also notes that consumers who drive more than our average 
estimates for vehicle miles traveled (VMT) will experience more fuel 
savings; consumers who drive less than our average VMT estimates will 
experience less fuel savings.
    The expected impacts on fuel consumption are shown in Table III-80. 
The gallons reduced and kilowatt hours increased (kWh) as shown in the 
tables reflect impacts from the CO2 standards, including the 
A/C credit program, and include increased consumption resulting from 
the VMT rebound effect.

                 Table III-80--Fuel Consumption Impacts of the Standards and A/C Credit Programs
----------------------------------------------------------------------------------------------------------------
                                                          Petroleum-based
                     Calendar year                            gasoline       Petroleum-based      Electricity
                                                             reference       gasoline reduced      increased
                                                         (million gallons)  (million gallons)  (million kWh) \a\
----------------------------------------------------------------------------------------------------------------
2017...................................................            128,136                197                125
2020...................................................            124,513              2,149              1,242
2030...................................................            129,995             22,986             14,026
2040...................................................            150,053             38,901             24,661
2050...................................................            177,323             48,743             30,943
                                                        --------------------------------------------------------
    Total..............................................          5,464,349            903,298            564,873
----------------------------------------------------------------------------------------------------------------
\a\ Electricity increase by vehicles not by power plants.

b. What are the Fuel Savings to the Consumer?
    Using the fuel consumption estimates presented in Section 
III.H.4.a, EPA can calculate the monetized fuel savings associated with 
the standards. To do this, we multiply reduced fuel consumption in each 
year by the corresponding estimated average fuel price in that year, 
using the reference case taken from the AEO 2012 Early Release.\826\ 
These estimates do not account for the significant uncertainty in 
future fuel prices; the monetized fuel savings would be understated if 
actual future fuel prices are higher (or overstated if fuel prices are 
lower) than estimated. AEO is a standard reference used by NHTSA and 
EPA and many other government agencies to estimate the projected price 
of fuel. This has been done using both the pre-tax and post-tax 
gasoline prices. Since the post-tax gasoline prices are the prices paid 
at fuel pumps, the fuel savings calculated using these prices represent 
the savings consumers would see. The pre-tax fuel savings are those 
savings that society would see. Assuming no change in gasoline tax 
rates, the difference between these two columns represents the 
reduction in fuel tax revenues that will be received by state and 
federal governments--about $85 million in 2017 and $4.7 billion by 
2025. These results are shown in Table III-81. Note that in Section 
III.H.9, the overall benefits and costs of the rule are presented and, 
for that reason, only the pre-tax fuel savings are presented there.
---------------------------------------------------------------------------

    \826\ In the Executive Summary to AEO2012 Early Release, the 
Energy Information Administration describes the reference case. They 
state that, ``Projections * * * in the Reference case focus on the 
factors that shape U.S. energy markets in the long term, under the 
assumption that current laws and regulations remain generally 
unchanged throughout the projection period. The AEO2012 Reference 
case provides the basis for examination and discussion of energy 
market trends and serves as a starting point for analysis of 
potential changes in U.S. energy policies, rules, or regulations or 
potential technology breakthroughs.''

          Table III-81--Undiscounted Annual Fuel Savings, & Annual Fuel Savings Discounted Back to 2012
                                           [Millions of 2010 dollars]
----------------------------------------------------------------------------------------------------------------
                                     Gasoline        Gasoline       Electricity     Total fuel      Total fuel
          Calendar year               savings         savings          costs          savings         savings
                                       (pre-tax)         (taxed)  ..............       (pre-tax)         (taxed)
----------------------------------------------------------------------------------------------------------------
2017............................            $662            $747           $11.5            $651            $735
2020............................           7,540           8,440             114           7,430           8,320
2030............................          87,900          97,000           1,450          86,400          95,500
2040............................         158,000         172,000           2,800         155,000         169,000
2050............................         216,000         233,000           3,800         212,000         229,000
NPV, 3%.........................       1,630,000       1,780,000          28,100       1,600,000       1,750,000
NPV, 7%.........................         617,000         677,000          10,600         607,000         666,000
----------------------------------------------------------------------------------------------------------------
Annual values represent undiscounted values; net present values represent annual costs discounted to 2012.

[[Page 62924]]

    As shown in Table III-81, the agencies are projecting that 
consumers would realize very large fuel savings as a result of the 
standards. As discussed further in the introductory paragraphs of 
Section III.H.1, it is a conundrum from an economic perspective that 
these large fuel savings have not been provided by automakers and 
purchased by consumers. A number of behavioral and market phenomena may 
lead to this disparity between the fuel economy that makes financial 
sense to consumers and the fuel economy they purchase. Regardless how 
consumers make their decisions on how much fuel economy to purchase, 
EPA expects that, in the aggregate, they will gain these fuel savings, 
which will provide actual money in consumers' pockets.
c. VMT Rebound Effect
    The VMT rebound effect refers to the increase in vehicle use that 
results if an increase in fuel efficiency lowers the cost per mile of 
driving. Consistent with the proposal, EPA is using an estimate of 10 
percent for the VMT rebound effect for this final rule (i.e., we assume 
a 10 percent decrease in fuel cost per mile from our standards would 
result in a 1 percent increase in VMT).
    As we discussed in the proposed rule, in the MYs 2012-2016 
rulemaking, and more fully in Chapter 4 of the Joint TSD, this value 
was not derived from a single point estimate or from a particular 
study, but instead represents a reasonable compromise between 
historical estimates and projected future estimates. This value is 
consistent with the VMT rebound estimate for the most recent time 
period analyzed in the Small and Van Dender 2007 paper,\827\ and falls 
within the range of the larger body of historical work on the VMT 
rebound effect.\828\ Recent work by David Greene on the VMT rebound 
effect for light-duty vehicles in the U.S. supports the hypothesis that 
the rebound effect is decreasing over time,\829\ which could mean that 
rebound estimates based on recent time period data may be more reliable 
than historical estimates that are based on older time period data. New 
work by Hymel, Small, and Van Dender also supports the proposition that 
the VMT rebound effect is declining over time, although the Hymel et 
al. estimates are higher than the 2007 Small and Van Dender 
estimates.\830\ Furthermore, by using an estimate of the future VMT 
rebound effect, analysis by Small and Greene show that the rebound 
effect could be in the range of 5 percent or lower.\831\
---------------------------------------------------------------------------

    \827\ Small, K. and K. Van Dender, 2007. ``Fuel Efficiency and 
Motor Vehicle Travel: The Declining Rebound Effect'', The Energy 
Journal, vol. 28, no. 1, pp. 25-51 (Docket EPA-HQ-OAR-2010-0799-
0755).
    \828\ Sorrell, S. and J. Dimitropoulos, 2007. ``UKERC Review of 
Evidence for the Rebound Effect, Technical Report 2: Econometric 
Studies'', UKERC/WP/TPA/2007/010, UK Energy Research Centre, London, 
October (Docket EPA-HQ-OAR-2010-0799).
    \829\ Greene, David, 2012. ``Rebound 2007: Analysis of National 
Light-Duty Vehicle Travel Statistics,'' Energy Policy, vol. 41, pp. 
14-28. (Docket EPA-HQ-OAR-2010-0799)
    \830\ Hymel, Kent M., Kenneth A. Small, and Kurt Van Dender, 
``Induced demand and rebound effects in road transport,'' 
Transportation Research Part B: Methodological, Volume 44, Issue 10, 
December 2010, Pages 1220-1241, ISSN 0191-2615, DOI: 10.1016/
j.trb.2010.02.007. (Docket EPA-HQ-OAR-2010-0799)
    \831\ Report by Kenneth A. Small of University of California at 
Irvine to EPA, ``The Rebound Effect from Fuel Efficiency Standards: 
Measurement and Projection to 2030'', June 12, 2009 (Docket EPA-HQ-
OAR-2010-0799). See also Greene, 2012.
---------------------------------------------------------------------------

    We received four comments suggesting values both lower and higher 
than our proposed value of the VMT rebound effect. The Consumer 
Federation of America suggested that we use 5 percent in our national 
analysis since it would better reflect the income effect (consumers 
having more money in their pockets to spend on driving) and not the 
price effect (consumers wanting to drive more because it costs less) 
associated with lower driving costs. The International Council for 
Clean Transportation (ICCT) suggested we should rely solely on 
projected estimates that account for future incomes and fuel prices, 
which tend to be lower than 10 percent for the years covered by this 
rule. The Defour Group suggested using an estimate of 20 percent or 
higher; it commented that it believes there are potential 
methodological shortcomings in recent studies and suggested using the 
elasticity of demand for gasoline as a basis for estimating the VMT 
rebound effect. Finally Plant Oil Powered Diesel Fuel Systems, Inc. 
(POP Diesel) cited a recent study in Germany based on household survey 
data as evidence that EPA had underestimated the VMT rebound effect. 
POP Diesel also suggested that EPA should account for the energy and 
GHG emissions impact associated with the so-called ``indirect rebound 
effects'' of consumers using their increased disposable income from 
fuel savings to purchase goods and services that were produced with 
energy or that consume energy. POP Diesel also commented that there is 
a potential for consumers to shift to larger, more powerful vehicles 
that are less fuel-efficient in response to our standards. POP Diesel 
described this as a direct rebound effect; however, since this behavior 
does not influence VMT, we would classify it as another type of 
indirect effect unrelated to the direct VMT rebound effect.
    Commenters did not provide any persuasive new data or analysis that 
justify revising the 10 percent value at this time. We relied on a wide 
range of peer-reviewed literature to inform our estimate of the VMT 
rebound effect (as discussed above and in Chapter 4 of the Joint TSD), 
including recent studies and projected estimates as well as a larger 
body of historic literature using both aggregate and household level 
data. Most of the literature we reviewed controls for income (since all 
sources of income, not just income associated with fuel savings, can 
influence VMT) and, therefore, only captures the price effect. We 
recognize the merit of projected estimates of the VMT rebound effect 
that take into account future incomes, fuel efficiency, and fuel prices 
over the period impacted by our rulemaking, particularly since recent 
studies have found evidence that the VMT rebound effect is declining 
over time. Estimates of the elasticity of demand for gasoline, while a 
useful point of comparison, are not appropriate for measuring the VMT 
rebound effect because they reflect consumer selection of vehicle fuel 
efficiency in addition to VMT.\832\ In response to the comment that we 
should consider the rebound effect estimates from a German study, we 
focused on U.S.-based studies of the VMT rebound effect to inform our 
analysis because driver behavior in the U.S. differs from driver 
behavior in other countries (e.g., there is likely to be less elastic 
demand for VMT in the U.S. than Germany because of longer driving 
distances and fewer transportation alternatives).\833\
---------------------------------------------------------------------------

    \832\ We sought comment in the MYs 2012-2016 rulemaking on using 
the elasticity of demand for gasoline to estimate the VMT rebound 
effect. We received one comment during that rulemaking, from ICCT, 
that this elasticity should not be used to guide the choice of a 
value for the VMT rebound effect.
    \833\ Frondel, Manuel and Vance, Colin, 2011. ``Re-Identifying 
the Rebound--What About Asymmetry?'', Ruhr Economic Papers 
276. (Docket EPA-HQ-OAR-2010-0799).
---------------------------------------------------------------------------

    We are not aware of any data on potential indirect rebound effects 
(distinct from the VMT rebound effect), if any, from this rule 
associated with consumer purchase of energy-intensive goods and 
services with the disposable income they gain from fuel savings. 
Research on indirect rebound effects is nascent and POP Diesel did not 
provide analysis in its comments indicating an appropriate method or 
value to use to estimate these putative effects from our rule. We 
believe it is unreasonable to consider potential indirect rebound 
effects, if any, from our rule based on

[[Page 62925]]

the commenter's speculative assertions. As to the comment that 
consumers may shift to larger, more powerful vehicles that are less 
fuel-efficient as a type of indirect rebound response to our standards, 
we note that we have explained above that there is persuasive evidence 
that the standards do not create an incentive to upsize vehicles and 
that the footprint attribute provides incentives to make fuel economy 
and greenhouse gas emission improvements across the entire spectrum of 
vehicle footprints. See preamble sections III.D.7 (analysis of car and 
truck trading) and joint TSD section 2.1. If the comment refers solely 
to potential consumer purchasing behavior, we note that predictions of 
such behavior are highly uncertain. We recognize that there is a 
potential for consumers to shift to larger, more powerful vehicles that 
are less fuel-efficient just as there is a potential for consumers to 
buy even more fuel-efficient vehicles than we predict in our analysis 
\834\; these are potential consumer responses to our standards 
(unrelated to the VMT rebound effect) that we plan to monitor (see 
Section III.H.1.a for a discussion of the challenge of predicting 
consumer vehicle purchase decisions, section II.C and TSD Chapter 2.1 
and 2.2. for a discussion of how our rule sets attribute-based 
standards that reduce incentives to change the size distribution of 
vehicles in the fleet, and section II.B.5 for information on the mid-
term evaluation).
---------------------------------------------------------------------------

    \834\ Comments from the Institute for Policy Integrity suggest 
our rule could make fuel-efficient vehicles more popular and that we 
have therefore underestimated the benefits of our rule (see their 
discussion of ``positionality'' and the ``bandwagon effect'' in EPA-
HQ-OAR-2010-0799-9480-A1, pp. 19-21).
---------------------------------------------------------------------------

    We sought comment on the potential that the VMT rebound effect 
could be lower than estimates in the literature if drivers respond more 
to changes in fuel prices than fuel efficiency, price rises than 
decreases, and price shocks than gradual changes (discussed more fully 
in Chapter 4.2.5.2 of the Joint TSD), but we did not receive any 
comments on these topics. See 76 FR 75126.
    We also sought comment on whether there may be differences in the 
way consumers respond to changes in the cost per mile of driving that 
result from driving an electric-powered vehicle instead of a 
conventional gasoline vehicle. We did not receive any comments on this 
topic and therefore continue to assume in this final rule that the VMT 
rebound effect will be the same whether a consumer is driving a 
conventional gasoline vehicle or a vehicle powered by grid electricity.
    Chapter 4.2.5 of the Joint TSD reviews the relevant literature and 
discusses in more depth the reasoning for the VMT rebound value used 
here. The VMT rebound effect is also discussed in Section II.E of the 
preamble. A summary of comments on the rebound effect and our more 
detailed response to those comments is available in section 15 of EPA's 
Response to Comments document.
5. Cost of Ownership, Payback Period and Lifetime Savings on New 
Vehicle Purchases
    Here we look at the cost of owning a new vehicle complying with the 
standards and the payback period--the point at which savings exceed 
costs. For example, a new 2025 MY vehicle is estimated to cost roughly 
$1,800 more (on average, and relative to the reference case vehicle) 
due to the addition of new GHG reducing/fuel economy improving 
technology. This new technology will result in lower fuel consumption 
and, therefore, savings in fuel expenditures. But how many months or 
years would pass before the fuel savings exceed the upfront costs?
    Table III-82 presents our estimate of increased costs associated 
with owning a new 2025MY vehicle. The table uses annual miles driven 
(vehicle miles traveled, or VMT) and survival rates consistent with the 
emission and benefits analyses presented in Chapter 4 of the Joint TSD. 
The control case includes fuel savings associated with A/C controls. 
Newly included here as opposed to our proposed analysis, are estimated 
maintenance costs that owners of these vehicles will likely incur. 
Further, this analysis does not include other private impacts, such as 
reduced refueling events, or other societal impacts, such as the 
potential rebound miles driven or the value of driving those rebound 
miles, or noise, congestion and accidents, since the focus is meant to 
be on those factors consumers think about most while in the showroom 
considering a new car purchase and those factors that result in more or 
fewer dollars in their pockets. To estimate the upfront vehicle cost 
(i.e., the lifetime increased cost discounted back to purchase), we 
have included not only the sales tax on the new car purchase but also 
the increased insurance premiums that would result from the more 
valuable vehicle. Car/truck fleet weighting is handled as described in 
Chapter 1 of the Joint TSD. The present value of the increased vehicle 
costs shown in the table are $2,389 at a 3% discount rate and $2,300 at 
a 7% discount rate.

                                     Table III-82--Increased Costs on a 2025MY New Vehicle Purchase Via Cash (2010$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                            Cumulative
                                                             Increased       Increased       Increased         Total        discounted      Cumulative
                    Year of ownership                     purchase costs     insurance      maintenance      increased       increased      discounted
                                                                \a\            costs           costs           costs        costs at 3%      increased
                                                                                                                                \b\         costs at 7%
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................         -$1,937            -$34            -$14         -$1,984         -$1,984         -$1,984
2.......................................................               0             -33             -13             -46          -2,029          -2,027
3.......................................................               0             -31             -13             -44          -2,070          -2,065
4.......................................................               0             -29             -12             -41          -2,108          -2,099
5.......................................................               0             -28             -12             -39          -2,143          -2,129
6.......................................................               0             -26             -11             -38          -2,175          -2,156
7.......................................................               0             -25             -11             -35          -2,205          -2,179
8.......................................................               0             -23             -10             -33          -2,232          -2,200
                         [darr]                               [darr]          [darr]          [darr]          [darr]          [darr]          [darr]
NPV, 3%.................................................          -1,937            -313            -139          -2,389          -2,389  ..............
NPV, 7%.................................................          -1,937            -254            -109          -2,300  ..............          -2,300
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ [insert necessary notes].

[[Page 62926]]

    However, most people purchase a new vehicle using credit rather 
than paying cash up front. A common car loan today is a five year, 60 
month loan. The national average interest rate for a 4 or 5 year new 
car loan was 5.35 percent.\835\ For the credit purchase, the increased 
costs would look like that shown in Table III-83.
---------------------------------------------------------------------------

    \835\ ``National Auto Loan Rates for July 21, 2011,'' http://www.bankrate.com/finance/auto/national-auto-loan-rates-for-july-21-2011.aspx, accessed 7/26/11.

                                   Table III-83--Increased Costs on a 2025 MY New Vehicle Purchase Via Credit (2010$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                            Cumulative      Cumulative
                                                             Increased       Increased       Increased         Total        discounted      discounted
                    Year of ownership                     purchase costs     insurance      maintenance      increased       increased       increased
                                                                \a\            costs           costs           costs        costs at 3%    costs at 7% \
                                                                                                                                \b\             b\
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................           -$452            -$34            -$14           -$500           -$500           -$500
2.......................................................            -452             -33             -13            -497            -982            -964
3.......................................................            -452             -31             -13            -495          -1,449          -1,397
4.......................................................            -452             -29             -12            -493          -1,900          -1,799
5.......................................................            -452             -28             -12            -491          -2,337          -2,174
6.......................................................               0             -26             -11             -38          -2,369          -2,201
7.......................................................               0             -25             -11             -35          -2,399          -2,224
8.......................................................               0             -23             -10             -33          -2,425          -2,245
                         [darr]                               [darr]          [darr]          [darr]          [darr]          [darr]          [darr]
NPV, 3%.................................................          -2,131            -313            -139          -2,583          -2,583  ..............
NPV, 7%.................................................          -1,982            -254            -109          -2,345  ..............          -2,345
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ This uses the same increased cost as Table III[dash]82 but spreads it out over 5 years assuming a 5 year car loan at 5.35 percent.
\b\ Calculated using AEO 2012 early release reference case fuel prices including taxes.

    The above discussion covers costs, but what about the fuel savings 
side. Of course, fuel savings are the same whether a vehicle is 
purchased using cash or credit. Table III-84 shows the fuel savings for 
a 2025MY vehicle while excluding rebound driving.

                                                 Table III-84--Fuel Savings for a 2025MY Vehicle (2010$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                            Cumulative      Cumulative
                                                                                                                            discounted      discounted
            Year of ownership               Fuel price     Miles driven   Reference fuel   Control fuel    Fuel savings    fuel savings    fuel savings
                                                                                                                               at 3%           at 7%
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................           $3.87          16,779          $2,407          $1,702            $705            $695            $682
2.......................................            3.91          16,052           2,325           1,644             681           1,347           1,298
3.......................................            3.94          15,539           2,265           1,601             664           1,964           1,859
4.......................................            3.96          14,902           2,183           1,543             640           2,541           2,365
5.......................................            4.00          14,424           2,134           1,508             626           3,089           2,827
6.......................................            4.04          13,941           2,082           1,471             611           3,608           3,248
7.......................................            3.96          13,106           1,912           1,350             562           4,072           3,610
8.......................................            3.96          11,866           1,739           1,229             510           4,480           3,917
                 [darr]                       [darr]          [darr]          [darr]          [darr]          [darr]          [darr]          [darr]
NPV, 3%.................................  ..............  ..............          25,261          17,859           7,402           7,402  ..............
NPV, 7%.................................  ..............  ..............          19,354          13,680           5,674  ..............           5,674
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Fuel prices include taxes; miles driven exclude rebound miles.

    We can now compare the cumulative discounted costs to the 
cumulative discounted fuel savings to determine the point at which 
savings begin to exceed costs. This comparison is shown in Table III-85 
for the 3% discounting case and in Table III-86 for the 7% discounting 
case.

               Table III-85--Payback Period for Cash & Credit Purchases--3% Discount Rate (2010$)
----------------------------------------------------------------------------------------------------------------
                                   Cumulative      Cumulative
                                   discounted      discounted      Cumulative      Cumulative       Cumulative
       Year of ownership            increased       increased      discounted    discounted net   discounted net
                                   costs--cash    costs--credit   fuel savings    savings--cash  savings--credit
                                   purchase\b\     purchase\b\                      purchase         purchase
----------------------------------------------------------------------------------------------------------------
1..............................         -$1,984           -$500            $695         -$1,290             $195
2..............................          -2,029            -982           1,347            -682              365
3..............................          -2,070          -1,449           1,964            -106              515
4..............................          -2,108          -1,900           2,541             433              641
5..............................          -2,143          -2,337           3,089             946              752
6..............................          -2,175          -2,369           3,608           1,433            1,239
7..............................          -2,205          -2,399           4,072           1,867            1,673
8..............................          -2,232          -2,425           4,480           2,249            2,055

[[Page 62927]]

 
             [darr]                  [darr]          [darr]          [darr]          [darr]           [darr]
NPV, 3%........................          -2,389          -2,583           7,402           5,013            4,819
----------------------------------------------------------------------------------------------------------------

               Table III-86--Payback Period for Cash & Credit Purchases--7% Discount Rate (2010$)
----------------------------------------------------------------------------------------------------------------
                                    Cumulative      Cumulative                                      Cumulative
                                    discounted      discounted      Cumulative      Cumulative    discounted net
        Year of ownership            increased       increased      discounted    discounted net     savings--
                                    costs--cash    costs--credit   fuel savings    savings--cash      credit
                                   purchase \b\    purchase \b\                      purchase        purchase
----------------------------------------------------------------------------------------------------------------
1...............................         -$1,984           -$500            $682         -$1,302            $183
2...............................          -2,027            -964           1,298            -729             334
3...............................          -2,065          -1,397           1,859            -206             462
4...............................          -2,099          -1,799           2,365             266             565
5...............................          -2,129          -2,174           2,827             697             653
6...............................          -2,156          -2,201           3,248           1,092           1,047
7...............................          -2,179          -2,224           3,610           1,431           1,386
8...............................          -2,200          -2,245           3,917           1,717           1,672
             [darr]                   [darr]          [darr]          [darr]          [darr]          [darr]
NPV, 7%.........................          -2,300          -2,345           5,674           3,375           3,330
----------------------------------------------------------------------------------------------------------------

    Table III-85 shows that early in the 4th year of ownership (3.2 
years), the savings have started to outweigh the costs of the cash 
purchase. More interestingly, the savings immediately outweigh the cost 
of a credit purchase and, in fact, this is true even in the first month 
of ownership when the increased cost on the monthly car loan payment at 
$42 and the first month's fuel savings are $59 and, presumably, no 
maintenance costs have yet been incurred (none of these values are 
shown since the tables present annual values). So, for a new car 
purchaser who does not keep the vehicle for the full lifetime, the 
increased costs will payback within 4 years. For that rare owner that 
keeps the vehicle for its full life, the payback period would be the 
point at which the savings outweigh the full lifetime costs which 
occurs somewhat later since more costs are being included. For this 
case, referring again to Table III-85, we want the point at which the 
fuel savings exceed $2,389 or $2,583 for cash and credit purchases, 
respectively. Those payback periods would be 3.7 years for the cash 
purchase and 4.1 years for the credit purchase. Note that the full 
lifetime net savings amount to $5,013 for the cash purchase and $4,819 
for the credit purchase. These very large net savings may not be 
realized by many individual owners since very few people keep vehicles 
for their full lifetime. However, those savings would be realized in 
combination by all owners of the vehicle.
    Table III-86 shows the same information using a 7 percent discount 
rate. Here, the fuel savings being to outweigh the costs in 3.4 years 
for the cash purchase and within the first year for the credit 
purchase. For the full lifetime owner, the lifetime payback period 
would be 3.9 years for the cash purchase and 4.0 years for the credit 
purchase. The full lifetime net savings would be $3,375 for the cash 
purchase and $3,330 for the credit purchase.
    Note that throughout this consumer payback discussion, the analysis 
reflects the average number of vehicle miles traveled per year. Drivers 
who drive more miles than the average would incur fuel-related savings 
more quickly and, therefore, the payback would come sooner. Drivers who 
drive fewer miles than the average would incur fuel related savings 
more slowly and, therefore, the payback would come later.
    Note also that the insurance costs and sales taxes included here in 
the cost of ownership analysis have not been included in the benefit-
cost analysis (BCA) because those costs are transfer payments and have 
no net impact on the societal costs of interest in a BCA. Likewise, the 
fuel savings presented here include taxes since those are the cost 
incurred by drivers. However, fuel taxes are not included in the BCA 
since, again, they are transfer payments. Lastly, in this cost of 
ownership analysis, we have not included rebound miles in determining 
maintenance costs or fuel savings, and we have not included other 
private benefits/costs such as the value of driving rebound miles or 
reduced time spent refueling since we do not believe that consumers 
consider such impacts in their daily lives. In the BCA, we always 
include rebound miles in estimating maintenance costs and fuel savings, 
and we include the other private benefits/costs listed here.
6. CO2 Emission Reduction Benefits
    EPA has assigned a dollar value to reductions in CO2 
emissions using global estimates of the social cost of carbon (SCC) in 
the primary benefits analysis for this rule. The SCC is an estimate of 
the monetized damages associated with an incremental increase in carbon 
emissions in a given year. It is intended to include (but is not 
limited to) changes in net agricultural productivity, human health, 
property damages from increased flood risk, and the value of ecosystem 
services due to climate change. The SCC estimates used in this analysis 
were developed through an interagency process that included EPA, DOT/
NHTSA, and other executive branch entities, and concluded in February 
2010. The interagency group focused on global SCC values because 
emissions of CO2 involve a global externality: Greenhouse 
gases contribute to damages around the world wherever they are emitted. 
Consequently, to address the global nature of the climate change 
problem, the SCC must

[[Page 62928]]

incorporate the full (global) damages caused by GHG emissions. 
Furthermore, climate change occurs over very long time horizons and 
represents a problem that the United States cannot solve independently. 
We first used these SCC estimates in the benefits analysis for the 
2012-2016 light-duty GHG rulemaking; see 75 FR 25520. We have continued 
to use these estimates in other rulemaking analyses, including the 
heavy-duty GHG rulemaking; see 76 FR 57332. The SCC Technical Support 
Document (SCC TSD) provides a complete discussion of the methods used 
to develop these SCC estimates.\836\
---------------------------------------------------------------------------

    \836\ Docket ID EPA-HQ-OAR-2010-0799-0737, Technical Support 
Document: Social Cost of Carbon for Regulatory Impact Analysis Under 
Executive Order 12866, Interagency Working Group on Social Cost of 
Carbon, 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 
(February 2010). Also available at http://www.epa.gov/oms/climate/regulations/scc-tsd.pdf.
---------------------------------------------------------------------------

    The interagency group selected four SCC values for use in 
regulatory analyses, which we have applied in this analysis: $5, $22, 
$37, and $68 per metric ton of CO2 emissions in 2010, in 
2010 dollars.\837\ The first three values are based on the average SCC 
from three integrated assessment models, at discount rates of 5, 3, and 
2.5 percent, respectively. SCCs at several discount rates are included 
because the literature shows that the SCC is quite sensitive to 
assumptions about the discount rate, and because no consensus exists on 
the appropriate rate to use in an intergenerational context. The fourth 
value is the 95th percentile of the SCC from all three models at a 3 
percent discount rate. It is included to represent higher-than-expected 
impacts from temperature change further out in the tails of the SCC 
distribution. Low probability, high impact events are incorporated into 
all of 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 in all three models. 
Treating climate sensitivity probabilistically allows the estimation of 
SCC at higher temperature outcomes, which lead to higher projections of 
damages.
---------------------------------------------------------------------------

    \837\ The SCC estimates were converted from 2008 dollars to 2010 
dollars using a GDP price deflator (1.02). (EPA originally updated 
the interagency SCC estimates from 2007 to 2008 dollars in the 2012-
2016 light-duty GHG rulemaking using a GDP price deflator of 1.021). 
All price deflators were obtained from the Bureau of Economic 
Analysis, National Income and Product Accounts Table 1.1.4, Prices 
Indexes for Gross Domestic Product.
---------------------------------------------------------------------------

    The SCC increases over time because future emissions are expected 
to produce larger incremental damages as physical and economic systems 
become more stressed in response to greater climatic change. Note that 
the interagency group estimated the growth rate of the SCC directly 
using the three integrated assessment models rather than assuming a 
constant annual growth rate. This helps to ensure that the estimates 
are internally consistent with other modeling assumptions. Table III-87 
presents the SCC estimates used in this analysis.
    When attempting to assess the incremental economic impacts of 
carbon dioxide emissions, the analyst faces a number of serious 
challenges. A recent report from the National Academies of Science 
points out that any assessment will suffer from uncertainty, 
speculation, and lack of information about (1) future emissions of 
greenhouse gases, (2) the effects of past and future emissions on the 
climate system, (3) the impact of changes in climate on the physical 
and biological environment, and (4) the translation of these 
environmental impacts into economic damages.\838\ As a result, any 
effort to quantify and monetize the harms associated with climate 
change will raise serious questions of science, economics, and ethics 
and should be viewed as provisional.
---------------------------------------------------------------------------

    \838\ National Research Council (2009). Hidden Costs of Energy: 
Unpriced Consequences of Energy Production and Use. National 
Academies Press. See docket ID EPA-HQ-OAR-2010-0799-0738.
---------------------------------------------------------------------------

    The interagency group noted a number of limitations to the SCC 
analysis, including the incomplete way in which the integrated 
assessment models capture catastrophic and non-catastrophic impacts, 
their incomplete treatment of adaptation and technological change, 
uncertainty in the extrapolation of damages to high temperatures, and 
assumptions regarding risk aversion. The limited amount of research 
linking climate impacts to economic damages makes the interagency 
modeling exercise even more difficult. As noted in the SCC TSD, the 
interagency group hopes that over time researchers and modelers will 
work to fill these gaps and that the SCC estimates used for regulatory 
analysis by the Federal government will continue to evolve with 
improvements in modeling.
    The Environmental Defense Fund (EDF), the Institute for Policy 
Integrity (IPI), and the Natural Resources Defense Council (NRDC) 
discussed these limitations and stated that EPA should update the SCC 
estimates. These commenters provided specific methodological 
recommendations that focused on issues such as discount rate selection, 
evaluation of catastrophic impacts and non-monetized impacts, and risk 
aversion. EPA has considered each of the commenters' recommendations to 
update the SCC estimates and to modify the methodology in the context 
of this rulemaking. However, EPA has determined that these 
recommendations require additional research, review, and public comment 
before we can apply them to a rulemaking context. EPA has therefore 
continued to use the SCC estimates developed through the 2009-2010 
interagency process in this rulemaking, consistent with the proposal. 
See the EPA Response to Comments document, Section 18.4.1, for detailed 
responses to these recommendations.
    On the other hand, the Institute for Energy Research disagreed with 
the use of SCC in general to value GHG benefits, describing it as an 
unsupportable metric. EPA disagrees with this comment and notes that 
the SCC estimates were developed through an extensive, interagency 
process using a defensible set of input assumptions that are grounded 
in the existing literature. In this way, key uncertainties and model 
differences more transparently and consistently inform the range of SCC 
estimates used in the rulemaking process. In addition, these estimates 
have been subject to public comment through multiple rulemaking 
processes.\839\ See EPA's Response to Comments document for a more 
detailed response to this comment.
---------------------------------------------------------------------------

    \839\ For example, see: (1) EPA/DOT Rulemaking to establish 
Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate 
Average Fuel Economy Standards (75 FR 25324; 5/7/10); (2) Greenhouse 
Gas Emissions Standards and Fuel Efficiency Standards for Medium- 
and Heavy-Duty Engines and Vehicles (76 FR 57106; 9/15/11); and (3) 
Oil and Natural Gas Sector: New Source Performance Standards and 
National Emission Standards for Hazardous Air Pollutants Reviews (77 
FR 49490; August 16, 2012).
---------------------------------------------------------------------------

    Another limitation of the primary benefits analysis is that it does 
not include the valuation of non-CO2 GHG impacts (i.e., 
CH4, N2O, and HFCs). The interagency group did 
not directly estimate the social costs of non-CO2 GHG 
emissions when it developed the current social cost of CO2 
values. One way to approximate the value of marginal non-CO2 
GHG emission reductions in the absence of direct model estimates is to 
convert the reductions to CO2-equivalents which may then be 
valued using the SCC. Conversion to CO2-e is typically done

[[Page 62929]]

using the global warming potential (GWP) for the non-CO2 
gas. We refer to this as the ``GWP approach.''
    Recognizing that non-CO2 GHG impacts associated with 
this rulemaking (net reductions in CH4, N2O, and 
HFCs) would provide economic benefits to society, EPA requested comment 
on a methodology to value such impacts. The Center for Biological 
Diversity, EDF, IPI, and NRDC strongly encouraged EPA to value non-
CO2 GHG impacts associated with this final rule. EDF and 
NRDC suggested that EPA use the GWP approach, and EDF also recommended 
using direct model estimates and presenting a range of estimates in the 
final rule. Aside from the Institute for Energy Research, which 
disagreed with use of SCC in general to value GHG impacts, none of the 
commenters opposed the valuation of non-CO2 GHG impacts.
    While the GWP approach would provide an approximation of the 
monetized value of the non-CO2 GHG reductions anticipated 
from this rule, for a variety of reasons it produces estimates that are 
less accurate than those obtained from direct model computations (see 
RIA Chapter 7.1 for detailed discussion). These reasons include the 
differences in atmospheric lifetime of non-CO2 gases 
relative to CO2. This is a potentially confounding issue 
given that the social cost of GHGs is based on a discounted stream of 
damages that are non-linear in temperature. For example, CH4 
has an expected adjusted atmospheric lifetime of about 12 years and 
associated GWP of 25 (IPCC Fourth Assessment Report (AR4) 100-year GWP 
estimate). Gases with a relatively shorter lifetime, such as methane, 
have impacts that occur primarily in the near term and thus are not 
discounted as heavily as those caused by longer-lived gases, such as 
CO2, while the GWP treats additional forcing the same 
independent of when it occurs in time. Furthermore, the baseline 
temperature change is lower in the near term and therefore the 
additional warming from relatively short lived gases will have a lower 
marginal impact relative to longer lived gases that have an impact 
further out in the future when baseline warming is higher. In addition, 
impacts other than temperature change also vary across gases in ways 
that are not captured by GWP. For instance, CO2 emissions, 
unlike CH4, N2O, or HFCs, will result in 
CO2 passive fertilization to plants.
    A limited number of studies in the published literature explore the 
implications of using a GWP versus a direct estimation approach to 
quantify the benefits of changes in non-CO2 GHG emissions 
from a given policy.\840\ One recent working paper (Marten and Newbold, 
2011), found that the GWP-weighted benefit estimates for CH4 
and N2O are likely to be lower than those that would be 
derived using a directly modeled social cost of these gases for a 
variety of reasons.\841\ The GWP reflects only the integrated radiative 
forcing of a gas over 100 years. In contrast, the directly modeled 
social cost differs from the GWP because the differences in timing of 
the warming between gases are explicitly modeled, the non-linear 
effects of temperature change on economic damages are included, and 
rather than treating all impacts over a hundred years equally, the 
modeled social cost applies a discount rate but calculates impacts 
through the year 2300.
---------------------------------------------------------------------------

    \840\ For example: Hope, C. (2005) ``The climate change benefits 
of reducing methane emissions.'' Climatic Change, 68(1-2):21-39. See 
also Stephanie Waldhoff, David Anthoff, Steven Rose, and Richard 
S.J. Tol (2011). The Marginal Damage Costs of Different Greenhouse 
Gases: An Application of FUND. Economics Discussion Papers, No 2011-
43, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2011-43.
    \841\ Marten, A. and S. Newbold. 2011. ``Estimating the Social 
Cost of Non-CO2 GHG Emissions: Methane and Nitrous 
Oxide.'' NCEE Working Paper Series 11-01. http://yosemite.epa.gov/ee/epa/eed.nsf/WPNumber/2011-01?opendocument. 
Accessed May 24, 2012.
---------------------------------------------------------------------------

    In the absence of direct model estimates from the interagency 
analysis, EPA has used the GWP approach to estimate the dollar value of 
the non-CO2 benefits of this rule in a sensitivity analysis. 
Specifically, the EPA converted each non-CO2 GHG 
(CH4, N2O, HFC-134a) to CO2 
equivalents using the GWP of each gas, then multiplied these 
CO2 equivalent emission reductions by the social cost of 
carbon developed by the 2009-2010 interagency process. EPA has 
presented these estimates for illustrative purposes in a sensitivity 
analysis, i.e., the estimates are not included in the total benefit 
estimate of this rulemaking. EPA views the GWP approach as an interim 
method for analysis until we develop values for non-CO2 
GHGs. EPA also recently used this approach to estimate the 
CH4 co-benefits in a sensitivity analysis for the New Source 
Performance Standards final rule for oil and gas exploration.\842\ The 
methane co-benefits were presented for illustrative purposes and 
therefore not included in the total benefit estimate for the 
rulemaking.
---------------------------------------------------------------------------

    \842\ EPA signed final rule on 4/17/12; publication of the 
official version in the Federal Register is forthcoming. For 
internet version of final rule, see http://www.epa.gov/airquality/oilandgas/pdfs/20120417finalrule.pdf.
---------------------------------------------------------------------------

    Applying the global SCC estimates, shown in Table III-87, to the 
estimated reductions in CO2 emissions under the final 
standards, we estimate the dollar value of the CO2-related 
benefits for our primary benefits analysis (see EPA's RIA for estimates 
in each year). For internal consistency, the annual benefits are 
discounted back to net present value terms using the same discount rate 
as each SCC estimate (i.e., 5%, 3%, and 2.5%) rather than 3% and 
7%.\843\ These estimates are provided in Table III-88.
---------------------------------------------------------------------------

    \843\ It is possible that other benefits or costs of final 
regulations unrelated to CO2 emissions will be discounted 
at rates that differ from those used to develop the SCC estimates.

                                 Table III-87--Social Cost of CO2, 2017-2050 \a\
                                        [in 2010 dollars per metric ton]
----------------------------------------------------------------------------------------------------------------
                                                                    Discount rate and statistic
                                                 ---------------------------------------------------------------
                      Year                                                                            3% 95th
                                                    5% Average      3% Average     2.5% Average     Percentile
----------------------------------------------------------------------------------------------------------------
2017............................................              $6             $26             $41             $79
2020............................................               7              27              43              84
2030............................................              10              34              52             104
2040............................................              13              41              61             124
2050............................................              16              47              68             142
----------------------------------------------------------------------------------------------------------------
\a\ The SCC values are dollar-year and emissions-year specific.

[[Page 62930]]

 Table III-88--Undiscounted Annual Monetized CO2 Benefits of Vehicle Program, Annual CO2 Emission Reductions \a\
                                    and CO2 Benefits Discounted Back to 2012
                                      [Dollar values in millions of 2010$]
----------------------------------------------------------------------------------------------------------------
                                                                             Benefits
                                                 ---------------------------------------------------------------
                                   CO2 emissions                                                       95th
              Year                   reduction     Avg SCC at 5%   Avg SCC at 3%    Avg SCC at    percentile SCC
                                       (MMT)       ($6-$16) \a\    ($26-$47) \a\  2.5% ($41-$68)    at 3% ($79-
                                                                                        \a\          $142) \a\
----------------------------------------------------------------------------------------------------------------
2017............................             2.1             $14             $55             $87            $167
2020............................            23.1             164             633           1,000           1,940
2030............................           246.7           2,500           8,410          12,900          25,700
2040............................           417.0           5,510          17,000          25,400          51,800
2050............................           522.4           8,540          24,400          35,400          74,100
    Net Present Value \b\.......  ..............          32,400         170,000         290,000         519,000
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ Except for the last row (net present value), the SCC values are dollar-year and emissions-year specific.
\b\ Net present value of reduced CO2 emissions is calculated differently from other benefits. The same discount
  rate used to discount the value of damages from future emissions (SCC at 5, 3, 2.5 percent) is used to
  calculate net present value of SCC for internal consistency. Refer to the SCC TSD for more detail.

    We also apply the GWP approach in a sensitivity analysis to 
estimate the benefits associated with reductions of three non-
CO2 GHGs. Estimates are given for illustrative purposes and 
represent the CO2-e estimate of CH4, 
N2O, and HFC reductions multiplied by the SCC estimates 
(``GWP approach''), as described further above. CO2-e is 
calculated using the AR4 100-year GWP of each gas: CH4 (25), 
N2O (298), and HFC-134a (1,430).\844\ The total net present 
value of the annual 2017 through 2050 GHG benefits for this rulemaking 
would increase by about $3 billion to $50 billion, depending on 
discount rate used for the SCC estimate, or roughly 10 percent if these 
non-CO2 estimates were included (an amount which is small in 
the context of the total costs and benefits considered in this rule, 
and which would not affect any of the decisions regarding the 
appropriateness of the standards EPA is adopting here). The estimates 
are provided in the table below.
---------------------------------------------------------------------------

    \844\ As in the MY 2012-2016 LD rules and in the MY 2014-2018 MD 
and HD rule, the global warming potentials (GWP) used in this 
rulemaking are consistent with the 100-year time frame values in the 
2007 Intergovernmental Panel on Climate Change (IPCC) Fourth 
Assessment Report (AR4). At this time, the 100-year GWP values from 
the 1995 IPCC Second Assessment Report (SAR) are used in the 
official U.S. GHG inventory submission to the United Nations 
Framework Convention on Climate Change (UNFCCC) (per the reporting 
requirements under that international convention). The UNFCCC 
recently agreed on revisions to the national GHG inventory reporting 
requirements, and will begin using the 100-year GWP values from AR4 
for inventory submissions in the future. According to the AR4, 
CH4 has a 100-year GWP of 25, N2O has a 100-
year GWP of 298, and HFC-134a has a 100-year GWP of 1430.

    Table III-89--Undiscounted Annual Monetized Non-CO2 GHG Benefits of MY 2017-2025 Standards in Annual CO2
                      Equivalents \a\ and CO2 Equivalents Benefits Discounted Back to 2012
                                      [Dollar values in millions of 2010$]
----------------------------------------------------------------------------------------------------------------
                                                                             Benefits
                                    Non-CO2 GHG  ---------------------------------------------------------------
                                     emissions                                                         95th
              Year                reduction (MMT   Avg SCC at 5%   Avg SCC at 3%    Avg SCC at    percentile SCC
                                      CO2-e)       ($6-$16) \a\    ($26-$47) \a\  2.5% ($41-$68)    at 3% ($79-
                                                                                        \a\          $142) \a\
----------------------------------------------------------------------------------------------------------------
2017............................            0.28              $2              $7             $12             $22
2020............................            3.92              28             107             170             330
2030............................            24.6             250             838           1,280           2,560
2040............................            38.0             503           1,550           2,310           4,720
2050............................            46.9             767           2,190           3,170           6,650
Net Present Value \b\...........  ..............           3,120          16,300          27,700          49,600
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ Except for the last row (net present value), the SCC values are dollar-year and emissions-year specific.
\b\ Net present value of non-CO2 emissions changes is calculated differently from other benefits. The same
  discount rate used to discount the value of damages from future emissions (SCC at 5, 3, 2.5 percent) is used
  to calculate net present value of SCC for internal consistency. Refer to the SCC TSD for more detail.

7. Non-Greenhouse Gas Health and Environmental Impacts
    This section presents EPA's analysis of the criteria pollutant-
related health and environmental impacts that will occur as a result of 
the final standards. Light-duty vehicles and fuels are significant 
sources of mobile source air pollution such as direct PM, 
NOX, SOX, VOCs and air toxics. The impact that 
improved fuel economy will have on rebound driving will affect exhaust 
and evaporative emissions of these pollutants from vehicles. In 
addition, increased fuel savings associated with improved fuel economy 
achieved under the standards will affect emissions from upstream 
sources (see Section III.G for a complete description of emission 
impacts associated with the final standards). Emissions of 
NOX (a precursor to ozone formation and secondarily-formed 
PM2.5), SOX (a precursor to secondarily-formed 
PM2.5), VOCs (a precursor to ozone formation and, to a 
lesser degree, secondarily-formed PM2.5) and directly-
emitted

[[Page 62931]]

PM2.5 contribute to ambient concentrations of 
PM2.5 and ozone. Exposure to ozone and PM2.5 is 
linked to adverse human health impacts such as premature deaths as well 
as other important public health and environmental effects.
    As many commenters noted, it is important to quantify the health 
and environmental impacts associated with the final rule because it 
allows us to more accurately assess the net costs and benefits of the 
standards. Moreover, co-pollutant impacts tend to accrue in the near 
term, while any effects from reduced climate change mostly accrue over 
a time frame of several decades or longer.
    This section is split into two sub-sections: the first presents the 
PM- and ozone-related health and environmental impacts associated with 
the final rule in calendar year (CY) 2030; the second presents the PM-
related dollar-per-ton values used to monetize the PM-related co-
benefits associated with the model year (MY) analysis (i.e., over the 
lifetimes of the MY 2017-2025 vehicles) of the final rule.\845\
---------------------------------------------------------------------------

    \845\ EPA typically analyzes rule impacts (emissions, air 
quality, costs and benefits) in the year in which they occur; for 
this analysis, we selected 2030 as a representative future year. We 
refer to this analysis as the ``Calendar Year'' (CY) analysis. EPA 
also conducted a separate analysis of the impacts over the model 
year lifetimes of the 2017 through 2025 model year vehicles. We 
refer to this analysis as the ``Model Year'' (MY) analysis. In 
contrast to the CY analysis, the MY lifetime analysis shows the 
lifetime impacts of the program on each MY fleet over the course of 
its lifetime.
---------------------------------------------------------------------------

    EPA did receive adverse comments regarding the omission of some 
non-GHG impacts in the proposal. In that analysis, we used ``dollar-
per-ton'' estimates to monetize the health-related impacts of reduced 
exposure to PM2.5. We continue to apply these values in the 
MY analysis for the final rule. No ``dollar-per-ton'' method exists for 
ozone or toxic air pollutants due to complexity associated with 
atmospheric chemistry (for ozone and toxics) and a lack of economic 
valuation data/methods (for air toxics). However, we have conducted 
full-scale photochemical air quality modeling to estimate the change in 
ambient concentrations of ozone, PM2.5 and air toxics for 
the CY analysis in 2030 and used these modeling results as the basis 
for estimating the human health impacts and their economic value of the 
rule in 2030. EPA had neither the time nor resources to conduct such 
modeling for the Model Year analysis.
a. Quantified and Monetized Non-GHG Human Health Benefits of the 2030 
Calendar Year (CY) Analysis
    This analysis reflects the impact of the final light-duty GHG rule 
in 2030 compared to a future-year reference scenario without the rule 
in place.
    We estimate that the final rule will lead to a small net reduction 
in PM2.5-related health impacts--the reduction in 
population-weighted national average PM2.5 exposure results 
in a small net reduction in adverse PM-related human health impacts 
(the reduction in national population-weighted annual average 
PM2.5 is 0.0065 [mu]g/m3).
    The air quality modeling also projects a very small increase in 
ozone concentrations in many areas (population-weighted maximum 8-hour 
average ozone increases by 0.0009 ppb). While the ozone-related impacts 
are very small, the increase in population-weighted national average 
ozone exposure results in a very small increase in ozone-related health 
impacts.
    We base our analysis of the final rule's impact on human health in 
2030 on peer-reviewed studies of air quality and human health 
effects.846,847 These methods are described in more detail 
in the RIA that accompanies this action. Our benefits methods are also 
consistent with recent rulemaking analyses such as the proposed 
Portland Cement National Emissions Standards for Hazardous Air 
Pollutants (NESHAP) RIA,\848\ the final NO2 NAAQS,\849\ and 
the final Category 3 Marine Engine rule,\850\ and the final Cross State 
Air Pollution Rule.\851\ To model the ozone and PM air quality impacts 
of the final rule, we used the Community Multiscale Air Quality (CMAQ) 
model (see Section III.G.4). The modeled ambient air quality data 
serves as an input to the Environmental Benefits Mapping and Analysis 
Program (BenMAP).\852\ BenMAP is a computer program developed by the 
U.S. EPA that integrates a number of the modeling elements used in 
previous analyses (e.g., interpolation functions, population 
projections, health impact functions, valuation functions, analysis and 
pooling methods) to translate modeled air concentration estimates into 
health effects incidence estimates and monetized benefits estimates.
---------------------------------------------------------------------------

    \846\ U.S. Environmental Protection Agency. (2006). Final 
Regulatory Impact Analysis (RIA) for the Proposed National Ambient 
Air Quality Standards for Particulate Matter. Prepared by: Office of 
Air and Radiation. Retrieved March, 26, 2009 at http://www.epa.gov/ttn/ecas/ria.html.
    \847\ U.S. Environmental Protection Agency. (2008). Final Ozone 
NAAQS Regulatory Impact Analysis. Prepared by: Office of Air and 
Radiation, Office of Air Quality Planning and Standards. Retrieved 
March, 26, 2009 at http://www.epa.gov/ttn/ecas/ria.html.
    \848\ U.S. Environmental Protection Agency (U.S. EPA). 2009a. 
Regulatory Impact Analysis: National Emission Standards for 
Hazardous Air Pollutants from the Portland Cement Manufacturing 
Industry. Office of Air Quality Planning and Standards, Research 
Triangle Park, NC. April. Available on the Internet at http://www.epa.gov/ttn/ecas/regdata/RIAs/portlandcementria_4-20-09.pdf. 
Accessed March 15, 2010.
    \849\ U.S. Environmental Protection Agency (U.S. EPA). 2010. 
Final NO2 NAAQS Regulatory Impact Analysis (RIA). Office of Air 
Quality Planning and Standards, Research Triangle Park, NC. April. 
Available on the Internet at http://www.epa.gov/ttn/ecas/regdata/RIAs/FinalNO2RIAfulldocument.pdf. Accessed March 15, 2010.
    \850\ U.S. Environmental Protection Agency. 2009. Regulatory 
Impact Analysis: Control of Emissions of Air Pollution from Category 
3 Marine Diesel Engines. EPA-420-R-09-019, December 2009. Prepared 
by Office of Air and Radiation. http://www.epa.gov/otaq/regs/nonroad/marine/ci/420r09019.pdf. Accessed February 9, 2010.
    \851\ U.S. Environmental Protection Agency. 2011. Regulatory 
Impact Analysis for the Federal Implementation Plans to Reduce 
Interstate Transport of Fine Particulate Matter and Ozone in 27 
States; Correction of SIP Approvals for 22 States. EPA-HQ-OAR-2009-
0491, June 2011. Prepared by Office of Air and Radiation. http://www.epa.gov/airtransport/pdfs/FinalRIA.pdf. Accessed May 16, 2012.
    \852\ Information on BenMAP, including downloads of the 
software, can be found at http://www.epa.gov/ttn/ecas/benmodels.html.
---------------------------------------------------------------------------

    The range of total monetized ozone- and PM-related health impacts 
is presented in Table III-90. We present total benefits (the sum of 
morbidity-related benefits and mortality-related benefits) based on the 
PM- and ozone-related premature mortality function used. The benefits 
ranges therefore reflect the addition of each estimate of ozone-related 
premature mortality (across six selected studies, each with its own row 
in Table III-90) to each estimate of PM-related premature mortality 
(based on either Pope et al., 2002 or Laden et al., 2006), along with 
all morbidity-related benefits. These estimates represent EPA's 
preferred approach to characterizing a best estimate of monetized 
impacts. As is the nature of Regulatory Impact Analyses (RIAs), the 
assumptions and methods used to estimate air quality impacts evolve to 
reflect the Agency's most current interpretation of the scientific and 
economic literature.

[[Page 62932]]

                 Table III-90--Estimated 2030 Monetized PM-and Ozone-Related Health Impacts \a\
   2030 total ozone and PM benefits--PM mortality derived from American Cancer Society analysis and six-cities
                                                  analysis \a\
----------------------------------------------------------------------------------------------------------------
                                                                     Total benefits           Total benefits
  Premature ozone mortality function          Reference           (billions, 2010$, 3%     (billions, 2010$, 7%
                                                                  discount rate) b,c,d     discount rate) b,c,d
----------------------------------------------------------------------------------------------------------------
Multi-city analyses..................  Bell et al., 2004......  Total: $1.0-$2.6.......  Total: $0.92-$2.3.
                                                                PM: $1.1-$2.6..........  PM: $0.95-$2.3.
                                                                Ozone: -$0.006.........  Ozone: -$0.006.
                                       Huang et al., 2005.....  Total: $1.0-$2.6.......  Total: $0.92-$2.3.
                                                                PM: $1.1-$2.6..........  PM: $0.95-$2.3.
                                                                Ozone: -$0.006.........  Ozone: -$0.006.
                                       Schwartz, 2005.........  Total: $1.0-$2.6.......  Total: $0.92-$2.3.
                                                                PM: $1.1-$2.6..........  PM: $0.95-$2.3.
                                                                Ozone: -$0.009.........  Ozone: -$0.009.
Meta-analyses........................  Bell et al., 2005......  Total: $1.0-$2.6.......  Total: $0.92-$2.3.
                                                                PM: $1.1-$2.6..........  PM: $0.95-$2.3.
                                                                Ozone: -$0.019.........  Ozone: -$0.019.
                                       Ito et al., 2005.......  Total: $1.0-$2.6.......  Total: $0.92-$2.3.
                                                                PM: $1.1-$2.6..........  PM: $0.95-$2.3.
                                                                Ozone: -$0.026.........  Ozone: -$0.026.
                                       Levy et al., 2005......  Total: $1.0-$2.6.......  Total: $0.92-$2.3.
                                                                PM: $1.1-$2.6..........  PM: $0.95-$2.3.
                                                                Ozone: -$0.027.........  Ozone: -$0.027.
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ Total includes premature mortality-related and morbidity-related ozone and PM2.5 benefits. Range was
  developed by adding the estimate from the ozone premature mortality function to the estimate of PM2.5-related
  premature mortality derived from either the ACS study (Pope et al., 2002) or the Six-Cities study (Laden et
  al., 2006).
\b\ Note that totals presented here do not include a number of unquantified health impact categories. A detailed
  listing of unquantified health and welfare effects is provided in Table III-91.
\c\ Results reflect the use of both a 3 and 7 percent discount rate, as recommended by EPA's Guidelines for
  Preparing Economic Analyses and OMB Circular A-4. Results are rounded to two significant digits for ease of
  presentation and computation.
\d\ Negatives indicate a disbenefit, or an increase in health effect incidence. Monetized impacts are rounded to
  two significant digits. Totals may not sum due to rounding.

    The monetized impacts in Table III-90 include all of the human 
health impacts we are able to quantify and monetize at this time. 
However, the full complement of human health and welfare effects 
associated with PM, ozone and other criteria pollutants remain 
unquantified because of current limitations in methods or available 
data. We have not quantified a number of known or suspected health 
effects linked with ozone, PM and other criteria pollutants for which 
appropriate health impact functions are not available or which do not 
provide easily interpretable outcomes (e.g., changes in heart rate 
variability). Additionally, we are 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 impacts of eutrophication in coastal 
areas. These are listed in Table III-91. As a result, the health 
benefits quantified in this section do not reflect the full range of 
possible impacts attributable to the final rule.

                                             Table III-91--Unquantified and Non-Monetized Potential Effects
--------------------------------------------------------------------------------------------------------------------------------------------------------
               Pollutant/effects                                              Effects not included in analysis--changes in:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Ozone Health \a\...............................  Chronic respiratory damage.\b\
                                                 Premature aging of the lungs.\b\
                                                 Non-asthma respiratory emergency room visits.
                                                 Exposure to UVb (+/-).\e\
Ozone Welfare..................................  Yields for
                                                    --commercial forests.
                                                    --some fruits and vegetables.
                                                    --non-commercial crops.
                                                 Damage to urban ornamental plants.
                                                 Impacts on recreational demand from damaged forest aesthetics.
                                                 Ecosystem functions.
                                                 Exposure to UVb (+/-).\e\
PM Health \c\..................................  Premature mortality--short term exposures.\d\
                                                 Low birth weight.
                                                 Pulmonary function.
                                                 Chronic respiratory diseases other than chronic bronchitis.
                                                 Non-asthma respiratory emergency room visits.
                                                 Exposure to UVb (+/-)\e\
PM Welfare.....................................  Residential and recreational visibility in non-Class I areas.
                                                 Soiling and materials damage.
                                                 Damage to ecosystem functions.
                                                 Exposure to UVb (+/-)\e\
Nitrogen and Sulfate Deposition Welfare........  Commercial forests due to acidic sulfate and nitrate deposition.
                                                 Commercial freshwater fishing due to acidic deposition.

[[Page 62933]]

 
                                                 Recreation in terrestrial ecosystems due to acidic deposition.
                                                 Existence values for currently healthy ecosystems.
                                                 Commercial fishing, agriculture, and forests due to nitrogen deposition.
                                                 Recreation in estuarine ecosystems due to nitrogen deposition.
                                                 Ecosystem functions.
                                                 Passive fertilization.
CO Health......................................  Behavioral effects.
HC/Toxics Health \f\...........................  Cancer (benzene, 1,3-butadiene, formaldehyde, acetaldehyde)
                                                 Anemia (benzene).
                                                 Disruption of production of blood components (benzene).
                                                 Reduction in the number of blood platelets (benzene).
                                                 Excessive bone marrow formation (benzene).
                                                 Depression of lymphocyte counts (benzene).
                                                 Reproductive and developmental effects (1,3-butadiene).
                                                 Irritation of eyes and mucus membranes (formaldehyde).
                                                 Respiratory irritation (formaldehyde).
                                                 Asthma attacks in asthmatics (formaldehyde).
                                                 Asthma-like symptoms in non-asthmatics (formaldehyde).
                                                 Irritation of the eyes, skin, and respiratory tract (acetaldehyde).
                                                 Upper respiratory tract irritation and congestion (acrolein).
HC/Toxics Welfare..............................  Direct toxic effects to animals.
                                                 Bioaccumulation in the food chain.
                                                 Damage to ecosystem function.
                                                 Odor.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\a\ The public health impact of biological responses such as increased airway responsiveness to stimuli, inflammation in the lung, acute inflammation
  and respiratory cell damage, and increased susceptibility to respiratory infection are likely partially represented by our quantified endpoints.
\b\ The public health impact of effects such as chronic respiratory damage and premature aging of the lungs may be partially represented by quantified
  endpoints such as hospital admissions or premature mortality, but a number of other related health impacts, such as doctor visits and decreased
  athletic performance, remain unquantified.
\c\ In addition to primary economic endpoints, there are a number of biological responses that have been associated with PM health effects including
  morphological changes and altered host defense mechanisms. The public health impact of these biological responses may be partly represented by our
  quantified endpoints.
\d\ While some of the effects of short-term exposures are likely to be captured in the estimates, there may be premature mortality due to short-term
  exposure to PM not captured in the cohort studies used in this analysis. However, the PM mortality results derived from the expert elicitation do take
  into account premature mortality effects of short term exposures.
\e\ May result in benefits or disbenefits.
\f\ Many of the key hydrocarbons related to this rule are also hazardous air pollutants listed in the CAA.

    While there will be impacts associated with air toxic pollutant 
emission changes that result from the final rule, we do not attempt to 
monetize those impacts. This is primarily because currently available 
tools and methods to assess air toxics risk from mobile sources at the 
national scale are not adequate for extrapolation to incidence 
estimations or benefits assessment. The best suite of tools and methods 
currently available for assessment at the national scale are those used 
in the National-Scale Air Toxics Assessment (NATA). The EPA Science 
Advisory Board specifically commented in their review of the 1996 NATA 
that these tools were not yet ready for use in a national-scale 
benefits analysis, because they did not consider the full distribution 
of exposure and risk, or address sub-chronic health effects.\853\ While 
EPA has since improved the tools, there remain critical limitations for 
estimating incidence and assessing benefits of reducing mobile source 
air toxics. EPA continues to work to address these limitations; 
however, we did not have the methods and tools available for national-
scale application in time for the analysis of the final rule.\854\
---------------------------------------------------------------------------

    \853\ Science Advisory Board. 2001. NATA--Evaluating the 
National-Scale Air Toxics Assessment for 1996--an SAB Advisory. 
http://www.epa.gov/ttn/atw/sab/sabrev.html.
    \854\ In April, 2009, EPA hosted a workshop on estimating the 
benefits of reducing hazardous air pollutants. This workshop built 
upon the work accomplished in the June 2000 Science Advisory Board/
EPA Workshop on the Benefits of Reductions in Exposure to Hazardous 
Air Pollutants, which generated thoughtful discussion on approaches 
to estimating human health benefits from reductions in air toxics 
exposure, but no consensus was reached on methods that could be 
implemented in the near term for a broad selection of air toxics. 
Please visit http://epa.gov/air/toxicair/2009workshop.html for more 
information about the workshop and its associated materials.
---------------------------------------------------------------------------

    EPA is also unaware of specific information identifying any effects 
on listed endangered species from the small fluctuations in pollutant 
concentrations associated with this rule (see Section III.G.4). 
Furthermore, our current modeling tools are not designed to trace 
fluctuations in ambient concentration levels to potential impacts on 
particular endangered species.
i. Quantified Human Health Impacts
    Table III-92 and Table III-93 present the annual PM2.5 
and ozone health impacts in the 48 contiguous U.S. states associated 
with the final rule for 2030. For each endpoint presented in Table III-
92 and Table III-93, we provide both the mean estimate and the 90% 
confidence interval.
    Using EPA's preferred estimates, based on the American Cancer 
Society (ACS) and Six-Cities studies and no threshold assumption in the 
model of mortality, we estimate that the final rule will reduce between 
110 and 280 cases of PM2.5-related premature mortality 
annually in 2030. For ozone-related premature mortality in 2030, we 
estimate a range of between 1 to 3 cases of additional premature 
mortality.

[[Page 62934]]

         Table III-92--Estimated PM2.5-Related Health Impacts a
------------------------------------------------------------------------
                                     2030 Annual reduction in incidence
          Health effect                       (5th%-95th%ile)
------------------------------------------------------------------------
Premature Mortality--Derived from
 epidemiology literature: \b\
    Adult, age 30+, ACS Cohort     110 (30-190)
     Study (Pope et al., 2002).
    Adult, age 25+, Six-Cities     280 (130-440)
     Study (Laden et al., 2006).
    Infant, age 18)
 \d\.
Emergency room visits for asthma   72 (34-110)
 (age 18 years and younger).
Acute bronchitis, (children, age   160 (-42-370)
 8-12).
Lower respiratory symptoms         2,100 (770-3,400)
 (children, age 7-14).
Upper respiratory symptoms         1,600 (260-2,900)
 (asthmatic children, age 9-18).
Asthma exacerbation (asthmatic     3,500 (-120-9,700)
 children, age 6-18).
Work loss days...................  14,000 (12,000-16,000)
Minor restricted activity days     81,000 (65,000-96,000)
 (adults age 18-65).
------------------------------------------------------------------------
Notes:
\a\ Incidence is rounded to two significant digits. Estimates represent
  incidence within the 48 contiguous United States.
\b\ PM-related adult mortality based upon the American Cancer Society
  (ACS) Cohort Study (Pope et al., 2002) and the Six-Cities Study (Laden
  et al., 2006). Note that these are two alternative estimates of adult
  mortality and should not be summed. PM-related infant mortality based
  upon a study by Woodruff, Grillo, and Schoendorf, (1997).\855\
\c\ Respiratory hospital admissions for PM include admissions for
  chronic obstructive pulmonary disease (COPD), pneumonia and asthma.
\d\ Cardiovascular hospital admissions for PM include total
  cardiovascular and subcategories for ischemic heart disease,
  dysrhythmias, and heart failure.

     
---------------------------------------------------------------------------

    \855\ Woodruff, T.J., J. Grillo, and K.C. Schoendorf. 1997. 
``The Relationship Between Selected Causes of Postneonatal Infant 
Mortality and Particulate Air Pollution in the United States.'' 
Environmental Health Perspectives 105(6):608-612.

         Table III-93--Estimated Ozone-Related Health Impacts a
------------------------------------------------------------------------
                                     2030 Annual reduction in incidence
          Health effect                       (5th%-95th%ile)
------------------------------------------------------------------------
Premature Mortality, All ages \b\
Multi-City Analyses:
    Bell et al. (2004)--Non-       -1 (-4-3)
     accidental.
    1Huang et al. (2005)--         -1 (-5-4)
     Cardiopulmonary.
    Schwartz (2005)--Non-          -1 (-6-4)
     accidental.
Meta-analyses:
    Bell et al. (2005)--All cause  -2 (-10-6)
    Ito et al. (2005)--Non-        -3 (-11-6)
     accidental.
    Levy et al. (2005)--All        -3 (-10-4)
     causes.
\c\ Hospital admissions--          -6 (-30-15)
 respiratory causes (adult, 65
 and older).
Hospital admissions--respiratory   -3 (-12-6)
 causes (children, under 2).
Emergency room visit for asthma    -1 (-18-15)
 (all ages).
Minor restricted activity days     -930 (-18,000-16,000)
 (adults, age 18-65).
School absence days..............  -850 (-6,700-5,100)
------------------------------------------------------------------------
Notes:
\a\ Negatives indicate a disbenefit, or an increase in health effect
  incidence. Incidence is rounded to two significant digits. Estimates
  represent incidence within the 48 contiguous U.S.
\b\ Estimates of ozone-related premature mortality are based upon
  incidence estimates derived from several alternative studies: Bell et
  al. (2004); Huang et al. (2005); Schwartz (2005); Bell et al. (2005);
  Ito et al. (2005); Levy et al. (2005). The estimates of ozone-related
  premature mortality should therefore not be summed.
\c\ Respiratory hospital admissions for ozone include admissions for all
  respiratory causes and subcategories for COPD and pneumonia.

ii. Monetized Impacts
    Table III-94 presents the estimated monetary value of changes in 
the incidence of ozone and PM2.5-related health effects. All 
monetized estimates are stated in 2010$. These estimates account for 
growth in real gross domestic product (GDP) per capita between the 
present and 2030. Our estimate of total monetized impacts in 2030 for 
the final rule, using the ACS and Six-Cities PM mortality studies and 
the range of ozone mortality assumptions, is between $1.0 and $2.6 
billion, assuming a 3 percent discount rate, and between $0.92 and $2.3 
billion, assuming a 7 percent discount rate. As the results below 
indicate, monetized impacts are driven primarily by the change in 
premature fatalities in 2030.

[[Page 62935]]

Table III-94--Estimated Monetary Value of Changes in Incidence of Health
                           and Welfare Effects
                       [In millions of 2010$] a b
------------------------------------------------------------------------
                                          2030 (5th and 95th %ile)
------------------------------------------------------------------------
                  PM[bdi2].[bdi5]-Related Health Effect
------------------------------------------------------------------------
Premature Mortality--Derived from
 Epidemiology Studies: c d
    Adult, age 30+--ACS study
     (Pope et al., 2002):
        3% discount rate.........  $980 ($110-$2,600)
        7% discount rate.........  $880
                                   ($97-$2,400)
    Adult, age 25+--Six-Cities
     study (Laden et al., 2006):
        3% discount rate.........  $2,500
                                   ($340-$6,300)
        7% discount rate.........  $2,300
                                   ($310-$5,700)
    Infant Mortality,  The exclusion of potentially significant and unquantified 
benefit categories (such as health, odor, and ecological benefits of 
reduction in air toxics, ozone, and PM);
     Errors in measurement and projection for variables such as 
population growth;
     Uncertainties in the estimation of future year emissions 
inventories and air quality;
     Uncertainty in the estimated relationships of health and 
welfare effects to changes in pollutant concentrations including the 
shape of the concentration-response function, the

[[Page 62936]]

size of the effect estimates, and the relative toxicity of the many 
components of the PM mixture;
     Uncertainties in exposure estimation; and
     Uncertainties associated with the effect of potential 
future actions to limit emissions.
    As Table III-94 indicates, total benefits are driven primarily by 
the reduction in premature mortalities each year. Some key assumptions 
underlying the premature mortality estimates include the following, 
which may also contribute to uncertainty:
     Inhalation of fine particles is causally associated with 
premature death at concentrations near those experienced by most 
Americans on a daily basis. Although biological mechanisms for this 
effect have not yet been completely established, the weight of the 
available epidemiological, toxicological, and experimental evidence 
supports an assumption of causality. The impacts of including a 
probabilistic representation of causality were explored in the expert 
elicitation-based results of the 2006 p.m. NAAQS RIA.
     All fine particles, regardless of their chemical 
composition, are equally potent in causing premature mortality. This is 
an important assumption, because PM produced via transported precursors 
emitted from stationary sources may differ significantly from PM 
precursors released from mobile sources and other industrial sources. 
However, no clear scientific grounds exist for supporting differential 
effects estimates by particle type.
     The C-R function for fine particles is approximately 
linear within the range of ambient concentrations under consideration. 
Thus, the estimates include health benefits from reducing fine 
particles in areas with varied concentrations of PM, including both 
regions that may be in attainment with PM2.5 standards and 
those that are at risk of not meeting the standards.
     There is uncertainty in the magnitude of the association 
between ozone and premature mortality. The range of ozone impacts 
associated with the final standards is estimated based on the risk of 
several sources of ozone-related mortality effect estimates. In a 2008 
report on the estimation of ozone-related premature mortality published 
by the National Research Council, a panel of experts and reviewers 
concluded that short-term exposure to ambient ozone is likely to 
contribute to premature deaths and that ozone-related mortality should 
be included in estimates of the health benefits of reducing ozone 
exposure.\856\ EPA has requested advice from the National Academy of 
Sciences on how best to quantify uncertainty in the relationship 
between ozone exposure and premature mortality in the context of 
quantifying benefits.
---------------------------------------------------------------------------

    \856\ National Research Council (NRC), 2008. Estimating 
Mortality Risk Reduction and Economic Benefits from Controlling 
Ozone Air Pollution. The National Academies Press: Washington, DC.
---------------------------------------------------------------------------

    Acknowledging the data limitations and uncertainties, we present a 
best estimate of the total monetized health impacts based on our 
interpretation of the best available scientific literature and methods 
supported by EPA's technical peer review panel, the Science Advisory 
Board's Health Effects Subcommittee (SAB-HES). The National Academies 
of Science (NRC, 2002) has also reviewed EPA's methodology for 
analyzing the health benefits of measures taken to reduce air 
pollution. EPA addressed many of these comments in the analysis of the 
final PM NAAQS.857,858 The analysis in this final rule 
incorporates this most recent work to the extent possible.
---------------------------------------------------------------------------

    \857\ National Research Council (NRC). 2002. Estimating the 
Public Health Benefits of Proposed Air Pollution Regulations. The 
National Academies Press: Washington, DC.
    \858\ U.S. Environmental Protection Agency. October 2006. Final 
Regulatory Impact Analysis (RIA) for the Proposed National Ambient 
Air Quality Standards for Particulate Matter. Prepared by: Office of 
Air and Radiation. Available at http://www.epa.gov/ttn/ecas/ria.html.
---------------------------------------------------------------------------

b. PM-Related Monetized Benefits of the Model Year (MY) Analysis
    As described in Section III.G, the final standards will in some 
cases increase and other cases decrease emissions of several criteria 
and toxic air pollutants and precursors. In the MY analysis, EPA 
estimates the economic value of the human health impacts associated 
with PM2.5 exposure. Due to analytical limitations, this 
analysis does not estimate impacts related to other criteria pollutants 
(such as ozone, NO2 or SO2) or toxics pollutants, 
nor does it monetize all of the potential health and welfare effects 
associated with PM2.5.
    The MY analysis uses a ``dollar-per-ton'' method to estimate a 
selected suite of PM2.5-related health impacts described 
below. These PM2.5 dollar-per-ton estimates provide the 
total monetized human health impacts (the sum of premature mortality 
and premature morbidity) of reducing/increasing one ton of directly 
emitted PM2.5, or its precursors (such as NOX, 
SOX, and VOCs), from a specified source. Ideally, the human 
health impacts associated with the MY analysis would be estimated based 
on changes in ambient PM2.5 as determined by full-scale air 
quality modeling.
    The agency did receive adverse comments regarding the omission of 
these impacts in the analysis, however, no ``dollar-per-ton'' method 
exists for ozone or toxic air pollutants due to complexity associated 
with atmospheric chemistry (for ozone and toxics) and a lack of 
economic valuation data/methods (for air toxics). However, EPA also 
conducted full scale, photochemical air quality modeling to estimate 
the change in ambient concentrations of both ozone and PM2.5 
and used this as a basis for estimating the human health impacts and 
their economic value of the rule in 2030. Section III.G.4 presents 
these impact estimates.
    The dollar-per-ton estimates used in this analysis are provided in 
Table III-95. In the summary of costs and benefits, Section III.H.10 of 
this preamble, EPA presents the monetized value of PM-related 
improvements associated with the rule.

                                Table III-95--PM2.5-related Dollar-per-Ton Values
                                                   [2010$]a b
----------------------------------------------------------------------------------------------------------------
                                    All sources     Upstream (non-EGU)  sources           Mobile sources
                                        \d\                     \d\              -------------------------------
              Year               ------------------------------------------------
                                        SO2             NOX        Direct PM2.5         NOX        Direct PM2.5
----------------------------------------------------------------------------------------------------------------
Dollar-per-ton Derived from American Cancer Society Analysis (Pope et al., 2002) Using a 3 Percent Discount Rate
                                                       \c\
----------------------------------------------------------------------------------------------------------------
2015............................         $30,000          $4,900        $230,000          $5,100        $280,000
2020............................          33,000           5,400         250,000           5,600         310,000

[[Page 62937]]

 
2030............................          38,000           6,400         290,000           6,700         370,000
2040............................          45,000           7,600         340,000           8,000         440,000
----------------------------------------------------------------------------------------------------------------
  Dollar-per-ton Derived from American Cancer Society Analysis (Pope et al., 2002) Estimated Using a 7 Percent
                                                Discount Rate \c\
----------------------------------------------------------------------------------------------------------------
2015............................          27,000           4,500         210,000           4,600         250,000
2020............................          30,000           4,900         230,000           5,100         280,000
2030............................          35,000           5,800         270,000           6,100         330,000
2040............................          41,000           6,900         310,000           7,300         400,000
----------------------------------------------------------------------------------------------------------------
 Dollar-per-ton Derived from Six Cities Analysis (Laden et al., 2006) Estimated Using a 3 Percent Discount Rate
                                                       \c\
----------------------------------------------------------------------------------------------------------------
2015............................          73,000          12,000         560,000          12,000         680,000
2020............................          80,000          13,000         620,000          14,000         750,000
2030............................          94,000          16,000         720,000          16,000         900,000
2040............................         110,000          19,000         840,000          20,000       1,100,000
----------------------------------------------------------------------------------------------------------------
 Dollar-per-ton Derived from Six Cities Analysis (Laden et al., 2006) Estimated Using a 7 Percent Discount Rate
                                                       \c\
----------------------------------------------------------------------------------------------------------------
2015............................          66,000          11,000         510,000          11,000         620,000
2020............................          72,000          12,000         560,000          12,000         680,000
2030............................          84,000          14,000         650,000          15,000         810,000
2040............................          99,000          17,000         760,000          18,000         960,000
----------------------------------------------------------------------------------------------------------------
\a\ Total dollar-per-ton estimates include monetized PM2.5-related premature mortality and morbidity endpoints.
  Range of estimates are a function of the estimate of PM2.5-related premature mortality derived from either the
  ACS study (Pope et al., 2002) or the Six-Cities study (Laden et al., 2006).
\b\ Dollar-per-ton values were estimated for the years 2015, 2020, and 2030. For 2040, EPA extrapolated
  exponentially based on the growth between 2020 and 2030.
\c\ The dollar-per-ton estimates presented in this table assume either a 3 percent or 7 percent discount rate in
  the valuation of premature mortality to account for a twenty-year segmented cessation lag.
\d\ Note that the dollar-per-ton value for SO2 is based on the value for Stationary (Non-EGU) sources; no SO2
  value was estimated for mobile sources.

    The dollar-per-ton technique has been used in previous analyses, 
including EPA's recent Ozone National Ambient Air Quality Standards 
(NAAQS) RIA,\859\ the Portland Cement National Emissions Standards for 
Hazardous Air Pollutants (NESHAP) RIA,\860\ and the final 
NO2 NAAQS.\861\ Table III-96 shows the quantified and 
unquantified PM2.5-related co-benefits captured in those 
benefit-per-ton estimates.
---------------------------------------------------------------------------

    \859\ U.S. Environmental Protection Agency (U.S. EPA). 2008. 
Regulatory Impact Analysis, 2008 National Ambient Air Quality 
Standards for Ground-level Ozone, Chapter 6. Office of Air Quality 
Planning and Standards, Research Triangle Park, NC. March. Available 
at http://www.epa.gov/ttn/ecas/regdata/RIAs/6-ozoneriachapter6.pdf. 
Accessed March 15, 2010.
    \860\ U.S. Environmental Protection Agency (U.S. EPA). 2009. 
Regulatory Impact Analysis: National Emission Standards for 
Hazardous Air Pollutants from the Portland Cement Manufacturing 
Industry. Office of Air Quality Planning and Standards, Research 
Triangle Park, NC. April. Available on the Internet at http://www.epa.gov/ttn/ecas/regdata/RIAs/portlandcementria_4-;20-09.pdf. 
Accessed March 15, 2010.
    \861\ U.S. Environmental Protection Agency (U.S. EPA). 2010. 
Final NO2 NAAQS Regulatory Impact Analysis (RIA). Office 
of Air Quality Planning and Standards, Research Triangle Park, NC. 
April. Available on the Internet at http://www.epa.gov/ttn/ecas/regdata/RIAs/FinalNO2RIAfulldocument.pdf. Accessed March 15, 2010.

[[Page 62938]]

         Table III-96--Human Health and Welfare Effects of PM2.5
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Quantified and Monetized in Dollar-per-ton Estimates:
  Adult premature mortality.
  Bronchitis: Chronic and acute.
  Hospital admissions: Respiratory and cardiovascular.
  Emergency room visits for asthma.
  Nonfatal heart attacks (myocardial infarction).
  Lower and upper respiratory illness.
  Minor restricted-activity days.
  Work loss days.
  Asthma exacerbations (asthmatic population).
  Infant mortality.
Unquantified Effects Changes in:
Subchronic bronchitis cases.
Low birth weight.
Pulmonary function.
Chronic respiratory diseases other than chronic bronchitis.
Non-asthma respiratory emergency room visits.
Visibility.
Household soiling.
------------------------------------------------------------------------

    Consistent with the NO2 NAAQS,\862\ the dollar-per-ton 
estimates utilize the concentration-response functions as reported in 
the epidemiology literature. To calculate the total monetized impacts 
associated with quantified health impacts, EPA applies values derived 
from a number of sources. For premature mortality, EPA applies a value 
of a statistical life (VSL) derived from the mortality valuation 
literature. For certain health impacts, such as chronic bronchitis and 
a number of respiratory-related ailments, EPA applies willingness-to-
pay estimates derived from the valuation literature. For the remaining 
health impacts, EPA applies values derived from current cost-of-illness 
and/or wage estimates.
---------------------------------------------------------------------------

    \862\ Although we summarize the main issues in this chapter, we 
encourage interested readers to see the benefits chapter of the 
NO2 NAAQS for a more detailed description of recent 
changes to the PM benefits presentation and preference for the no-
threshold model.
---------------------------------------------------------------------------

    Readers interested in reviewing the complete methodology for 
creating the dollar-per-ton estimates used in this analysis can consult 
the Technical Support Document (TSD) \863\ accompanying the final ozone 
NAAQS RIA. Readers can also refer to Fann et al. (2009) \864\ for a 
detailed description of the dollar-per-ton methodology.\865\ A more 
detailed description of the dollar-per-ton estimates is also provided 
in the Joint TSD that accompanies this rulemaking.
---------------------------------------------------------------------------

    \863\ U.S. Environmental Protection Agency (U.S. EPA). 2008b. 
Technical Support Document: Calculating Benefit Per-Ton estimates, 
Ozone NAAQS Docket EPA-HQ-OAR-2007-0225-0284. Office of Air 
Quality Planning and Standards, Research Triangle Park, NC. March. 
Available on the Internet at http://www.regulations.gov.
    \864\ Fann, N. et al. (2009). The influence of location, source, 
and emission type in estimates of the human health benefits of 
reducing a ton of air pollution. Air Qual Atmos Health. Published 
online: 09 June, 2009.
    \865\ The values included in this report are different from 
those presented in the article cited above. Benefits methods change 
to reflect new information and evaluation of the science. Since 
publication of the June 2009 article, EPA has made two significant 
changes to its benefits methods: (1) We no longer assume that a 
threshold exists in PM-related models of health impacts; and (2) We 
have revised the Value of a Statistical Life to equal $6.3 million 
(year 2000$), up from an estimate of $5.5 million (year 2000$) used 
in the June 2009 report. Please refer to the following Web site for 
updates to the dollar-per-ton estimates: http://www.epa.gov/air/benmap/bpt.html
---------------------------------------------------------------------------

    As described in the documentation for the dollar-per-ton estimates 
cited above, national per-ton estimates were developed for selected 
pollutant/source category combinations. The per-ton values calculated 
therefore apply only to changes in tons from those specific pollutant/
source combinations (e.g., NO2 emitted from mobile sources; 
direct PM emitted from stationary sources). Our estimate of 
PM2.5-related impacts is therefore based on the total direct 
PM2.5 and PM-related precursor emissions changes by sector 
and multiplied by each per-ton value.
    The dollar-per-ton estimates are subject to a number of assumptions 
and uncertainties.
    [cir] Dollar-per-ton estimates do not reflect local variability in 
population density, meteorology, exposure, baseline health incidence 
rates, or other local factors that might lead to an overestimate or 
underestimate of the actual impacts of fine particulates. In Section 
III.G, we describe the full-scale air quality modeling conducted for 
the 2030 calendar year analysis in an effort to capture this 
variability.
    [cir] There are several health impact categories that EPA was 
unable to quantify in the MY analysis due to limitations associated 
with using dollar-per-ton estimates. Because NOX and VOC 
emissions are also precursors to ozone, changes in NOX and 
VOC would also impact ozone formation and the health effects associated 
with ozone exposure. Dollar-per-ton estimates for ozone, however, do 
not exist due to issues associated with the complexity of the 
atmospheric air chemistry and nonlinearities associated with ozone 
formation. The PM-related dollar-per-ton estimates also do not include 
any human welfare or ecological impacts. Please refer to Chapter 6 of 
the RIA that accompanies this rule for a description of the 
quantification and monetization of health impacts for the CY analysis 
and a description of the unquantified non-GHG impacts associated with 
this rulemaking.
    [cir] The dollar-per-ton estimates used in this analysis 
incorporate projections of key variables, including atmospheric 
conditions, source level emissions, population, health baselines and 
incomes, technology. These projections introduce some uncertainties to 
the dollar-per-ton estimates.
    As mentioned above, emissions changes and dollar-per-ton estimates 
alone are not a good indication of local or regional air quality and 
health impacts, as there may be localized impacts associated with this 
rulemaking. Additionally, the atmospheric chemistry related to ambient 
concentrations of PM2.5, ozone and air toxics is very 
complex. Full-scale photochemical modeling is therefore necessary to 
provide the needed spatial and temporal detail to more completely and 
accurately estimate the changes in ambient levels of these pollutants 
and their associated health and welfare impacts. Timing and resource 
constraints precluded EPA from conducting full-scale photochemical air 
quality modeling for the MY analysis. We have, however, conducted 
national-scale air quality modeling for the CY analysis to analyze the 
impacts of the standards on PM2.5, ozone, and selected air 
toxics (see the preceding section, Section III.7.a).
8. Energy Security Impacts
    The GHG standards require improvements in light-duty vehicle fuel 
efficiency which, in turn, will reduce overall fuel consumption and 
help to reduce U.S. petroleum imports. Reducing U.S. petroleum imports 
lowers both the financial and strategic risks caused by potential 
sudden disruptions in the supply of imported petroleum to the U.S. The 
economic value of reductions in these risks provides a measure of 
improved U.S. energy security. This section summarizes EPA's estimates 
of U.S. oil import reductions and energy security benefits from this 
rule. Additional discussion of this issue can be found in Chapter 4.2.8 
of the Joint TSD.
a. Implications of Reduced Petroleum Use on U.S. Imports
    In 2011, the United States imported 45 percent of the petroleum it 
consumed,\866\ while the transportation sector accounted for 70 percent 
of total U.S. petroleum consumption.\867\

[[Page 62939]]

Requiring vehicle technology that reduces GHGs and fuel consumption in 
light-duty vehicles is expected to lower U.S. oil imports. EPA's 
estimates of reductions in fuel consumption resulting from these 
standards are discussed in Section III.H.4 and in EPA's RIA.
---------------------------------------------------------------------------

    \866\ http://www.eia.gov/totalenergy/data/monthly/pdf/sec3_3.pdf.
    \867\ http://www.eia.gov/totalenergy/data/monthly/pdf/sec3_3.pdf.
---------------------------------------------------------------------------

    Based on analysis of historical and projected future variation in 
U.S. petroleum consumption and imports, EPA estimates that 
approximately 50 percent of the reduction in fuel consumption resulting 
from adopting improved GHG emission standards is likely to be reflected 
in lower U.S. imports of refined fuel, while the remaining 50 percent 
is expected to be reflected in reduced domestic fuel refining. Of this 
latter figure, 90 percent is anticipated to reduce U.S. imports of 
crude petroleum for use as a refinery feedstock, while the remaining 10 
percent is expected to reduce U.S. domestic production of crude 
petroleum. Thus, on balance, each gallon of fuel saved as a consequence 
of our final standards is anticipated to reduce total U.S. imports of 
petroleum by 0.95 gallons.\868\ Table III-97 below compares EPA's 
estimates of the reduction in imports of U.S. crude oil and petroleum-
based products from this program to projected total U.S. imports for 
selected years.
---------------------------------------------------------------------------

    \868\ This figure is calculated as 0.50 + 0.50*0.9 = 0.50 + 0.45 
= 0.95.

 Table III-97--Projected Import Reductions From This Rule and Total U.S.
               Petroleum-Based Imports for Selected Years
                   [millions of barrels per day, mmbd]
------------------------------------------------------------------------
                                       U.S. petroleum-     U.S. total
                                        based import     petroleum-based
                Year                   reductions from   imports without
                                       the rule (mmbd)   the rule (mmbb)
------------------------------------------------------------------------
2020................................             0.133              9.26
2030................................              1.42              8.94
2040................................              2.41                NA
2050................................              3.02                NA
------------------------------------------------------------------------
 Note: NA--Not available, forecasts reported in EIA's Annual Energy
  Outlook 2012 (Early Release) extend only to 2035.

b. Overview of EPA's Analysis of Energy Security Benefits
    U.S. consumption of imported petroleum products imposes costs on 
the domestic economy that are not reflected in the market price for 
crude oil, or in the prices paid by consumers of petroleum products 
such as gasoline (i.e., energy security costs). These costs include (1) 
higher prices for petroleum products resulting from the effect of 
increased U.S. demand for imported oil on the world oil price 
(``monopsony effect''); (2) the expected costs associated with the risk 
of disruptions to the U.S. economy caused by sudden reductions in the 
supply of imported oil to the U.S. (i.e., ``macroeconomic disruption 
and adjustment costs''); and (3) expenses for maintaining a U.S. 
military presence to secure imported oil supplies from unstable 
regions, and for maintaining the strategic petroleum reserve (SPR) to 
cushion the U.S. economy against the effects of oil supply disruptions 
(i.e., ``military/SPR costs'').\869\
---------------------------------------------------------------------------

    \869\ See, e.g., Bohi, Douglas R. and W. David Montgomery 
(1982). Oil Prices, Energy Security, and Import Policy Washington, 
DC: Resources for the Future, Johns Hopkins University Press; Bohi, 
D. R., and M. A. Toman (1993). ``Energy and Security: Externalities 
and Policies,'' Energy Policy 21:1093-1109; and Toman, M. A. (1993). 
``The Economics of Energy Security: Theory, Evidence, Policy,'' in 
A. V. Kneese and J. L. Sweeney, eds. (1993). Handbook of Natural 
Resource and Energy Economics, Vol. III. Amsterdam: North-Holland, 
pp. 1167-1218.
---------------------------------------------------------------------------

    In order to understand the energy security implications of reducing 
U.S. petroleum imports, EPA worked with Oak Ridge National Laboratory 
(ORNL), which has developed approaches for evaluating the energy 
security implications of oil use. The energy security estimates or 
``premiums'' provided below are based upon a methodology developed in a 
peer-reviewed study entitled, ``The Energy Security Benefits of Reduced 
Oil Use, 2006-2015,'' completed in March 2008. This study is included 
as part of the docket for this rule.870,871
---------------------------------------------------------------------------

    \870\ Leiby, Paul N., ``Estimating the Energy Security Benefits 
of Reduced U.S. Oil Imports'' Oak Ridge National Laboratory, ORNL/
TM-2007/028, Final Report, 2008. (Docket EPA-HQ-OAR-2010-0162).
    \871\ The ORNL study ``The Energy Security Benefits of Reduced 
Oil Use, 2006-2015,'' completed in March 2008, is an updated version 
of the approach used for estimating the energy security benefits of 
U.S. oil import reductions developed in an ORNL 1997 Report by 
Leiby, Paul N., Donald W. Jones, T. Randall Curlee, and Russell Lee, 
entitled ``Oil Imports: An Assessment of Benefits and Costs.'' 
(Docket EPA-HQ-OAR-2010-0162).
---------------------------------------------------------------------------

    When conducting its analysis, ORNL estimated energy security 
premiums by quantifying two components of the economic cost of 
importing petroleum into the U.S. (in addition to the purchase price of 
petroleum itself): Monopsony and macroeconomic disruption costs. For 
this rule, EPA worked with ORNL to update the energy security premiums 
by incorporating the AEO 2012 Early Release oil price forecasts and 
market trends.\872\ Energy security premiums for the selected years are 
presented in Table III-2 as well as a breakdown of the components of 
the energy security premiums for each of these years.873,874 
The components of ORNL's energy security premiums and their values are 
discussed in detail in the Joint TSD Chapter 4.2.8. EPA did not include 
the monopsony cost component in our cost-benefit analysis (see 
discussion in Section III.H.8.c). The ORNL analysis did not include 
military or SPR costs nor did EPA quantify them for this rule (see 
discussion in Section III.H.8.e).
---------------------------------------------------------------------------

    \872\ Leiby, Paul. Oak Ridge National Laboratory. ``Approach to 
Estimating the Oil Import Security Premium for the MY 2017-2025 
Light Duty Vehicle Rule'' 2012.
    \873\ AEO 2012 (Early Release) forecasts energy market trends 
and values only to 2035. The energy security premium estimates post-
2035 were assumed to be the 2035 estimate. Due to timing 
constraints, the energy security premiums ($/gallon) were derived 
using estimates of the gasoline consumption reductions projected 
from this rule proposal.
    \874\ Due to timing constraints, this analysis was conducted 
with preliminary estimates of the fuel savings projected from this 
rule, which were highly similar to the final estimates for the rule.

                                                Table III-98--Energy Security Premiums in Selected Years
                                                                     [2010$/Barrel]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       Macroeconomic disruption/
                                                           Monopsony                       adjustment costs                          Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
2020........................................               $10.02 ($3.35-$17.09)                $7.63 ($3.71-$11.00)               $17.64 ($9.83-$25.00)
2025........................................                $9.77 ($3.25-$16.69)                $8.26 ($4.03-$11.92)              $18.03 ($10.15-$25.47)
2030........................................                $9.28 ($3.10-$18.03)                $8.77 ($4.33-$12.60)              $18.05 ($10.29-$25.20)

[[Page 62940]]

 
2035+.......................................                $9.73 ($3.24-$16.68)                $9.46 ($4.72-$13.61)              $19.19 ($10.94-$26.78)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The main values in Table III-2 represent the mid-point of the ranges (90% confidence levels) of the values presented in the parentheses.

    Numerous private citizens and commenters from a large number of 
consumer groups, environmental organizations, and energy security 
advocacy organizations expressed strong support in both written 
comments and at the agencies' public hearings that these standards will 
have significant benefits for U.S. energy and national security, 
including energy independence. For example, the BlueGreen Alliance 
commented that ``[s]trong standards will keep more of the dollars here 
in the United States * * *'' and ``[t]hey will also set the stage for 
weaning America off oil dependence * * *'' Similarly, a Michigan State 
Senator, District 18 commented that ``[g]reater fuel economy benefits 
all of us in four ways: firstly, it benefits our environment by 
reducing greenhouse gas emissions; secondly, it secures our energy 
independence; thirdly, its saves us money at the pump; and finally, it 
creates high-quality U.S. jobs that strengthen the economy.'' The Pew 
Charitable Trusts stated that ``[o]ur bipartisan poll commissioned in 
July 2011 found that 91 percent of Americans identify U.S. dependence 
on foreign oil as a threat to our national security, and significant 
bipartisan majorities in every region of the country believe that 
adopting stronger fuel economy standards is the best way to lessen that 
dependence.'' Finally, the Union of Concerned Scientist estimated that 
``* * * the cumulative oil savings of the National Program (MYs 2012-
2025) could result in a total reduction in U.S. oil consumption of 
nearly 3.5 mbd in 2030, nearly double the amount the U.S. currently 
imports from the entire Persian Gulf. No other federal policy has 
delivered greater oil savings, energy security benefits, or greenhouse 
gas emissions reductions to the country.''
    In contrast, the Defour Group commented that there is no 
relationship between the energy security benefits of the U.S. and 
reduced oil consumption by the U.S., since the world economies are all 
tied together, thus calling into question estimates of the energy 
security benefits of the rule. Moreover, the Defour Group believes 
there is too much uncertainty in generating energy security premiums.
    EPA sponsored an extensive peer review of the methodology on which 
the proposed energy security benefits for this rule were based. The 
peer reviewers were generally highly supportive of the energy security 
methodology developed by ORNL and used by EPA. Also, EPA used this same 
energy security methodology in a number of previous rulemakings 
including the MYs 2012-2016 light duty vehicle GHG rule and the MYs 
2014-2018 medium- and heavy-duty vehicle GHG rule, with numerous 
commenters to those rules supporting the use of the methodology. Thus, 
while EPA considered all these comments, we continue to believe that 
the peer-reviewed, well scrutinized methodology used at proposal is 
reasonable and we are continuing to use it in this final rule for 
estimating the energy security benefits of this rule.
    EPA also solicited comments in the proposal on how to estimate the 
energy security benefits of the wider use of PHEVs and EVs including 
any relevant studies or research that have been published on these 
issues. Tesla Motors, Inc. commented that ``[r]educing our dependence 
on petroleum in the transportation sector is a national imperative.'' 
They go on to state that shifting the transportation sector to 
electricity would lessen the U.S. dependence on foreign oil and 
increase national security. However, no commenter provided EPA with a 
robust methodology for estimating the energy security benefits of the 
wider use of PHEVs and EVs as a result of this rule. Thus, due to 
timing constraints and the technical complexity of examining this 
issue, EPA was unable to conduct such an analysis for this rule. This 
is an issue that EPA will continue to study and will evaluate as part 
of the midterm review work.
c. Monopsony Component
    The literature on energy security for the last two decades has 
routinely combined the monopsony and the macroeconomic disruption 
components when calculating the total value of the energy security 
premium. However, in the context of using a global social cost of 
carbon (SCC) value (discussed in III.H.6), the question arises: how 
should the energy security premium be determined when a global 
perspective is taken? Monopsony benefits represent avoided payments by 
the United States to oil producers in foreign countries that result 
from a decrease in the world oil price as the U.S. reduces its 
consumption of imported oil. Although there is clearly a benefit to the 
U.S. when considered from a domestic perspective, the decrease in price 
due to reduced demand in the U.S. also represents a loss to other 
countries. Given the redistributive nature of this monopsony effect 
from a global perspective, EPA excluded monopsony costs from the 
quantified energy security benefits for the proposed rule. The Union of 
Concerned Scientists recommended that the monopsony benefits of the 
rule be included in EPA's overall estimates of the energy security 
benefits, since it is a benefit to the U.S. EPA continues to view 
energy security from a global perspective, and therefore excludes 
monopsony benefits to the U.S. in this final rule since these benefits 
are offset by losses to foreign oil producers. However, we present the 
monopsony energy security premiums in Table III-97 to show the general 
magnitude of their effects.
    One potential result of the potential decline in the world price of 
oil as a result of this rule would be an increase in the consumption of 
petroleum products, particularly outside the U.S. In addition, other 
fuels could be displaced from the increasing use of oil worldwide. For 
example, if a decline in the world oil price causes an increase in oil 
use in China, India, or another country's industrial sector, this 
increase in oil consumption may displace natural gas usage. 
Alternatively, the increased oil use could result in a decrease in coal 
used to produce electricity. An increase in the consumption of 
petroleum products particularly outside the U.S., could lead to a 
modest increase in emissions of GHGs, criteria air pollutants, and 
airborne toxics from their refining and use. However, lower usage of, 
for example, displaced coal would result in a decrease in GHG 
emissions. Therefore, any assessment of

[[Page 62941]]

the impacts on GHG emissions and other pollutants from a potential 
increase in world oil demand would need to take into account the 
impacts on all portions of global energy sector. EPA has not attempted 
to estimate these effects.
d. Macroeconomic Disruption Component
    In contrast to monopsony costs, the macroeconomic disruption and 
adjustment costs that arise from sudden reductions in the supply of 
imported oil to the U.S. do not have offsetting impacts outside of the 
U.S., so we include the estimated reduction in their expected value 
stemming from reduced U.S. petroleum imports in our energy security 
benefits estimated for this rule (as discussed in sections III.H.8.b 
and III.H.8.f).
e. Military and SPR Components
    The energy security benefits EPA presented in the NPRM from 
reducing U.S. oil imports did not include an estimate of potential 
reductions in costs for maintaining a U.S. military presence to help 
secure stable oil supply from potentially vulnerable regions of the 
world because attributing military spending to particular missions or 
activities is difficult. A number of commenters, including consumer 
advocacy and environmental organizations (e.g. Consumer Federation of 
America, Environmental Defense Fund, and National Wildlife Federation), 
natural gas organizations (e.g. America's Natural Gas Alliance, and 
American Gas Association), as well as energy security advocates (Center 
for Naval Analysis) and numerous private individuals, felt that EPA 
should quantify, to the extent possible, a military component of the 
energy security benefits associated with this rulemaking. These 
commenters felt that, although they understand that EPA would have 
difficulties in determining a point estimate of the energy security 
benefits from reduced military costs as a result of the rule, that even 
ranges would be useful. The American Petroleum Institute commented that 
military expenditures will not likely change with a reduction in U.S. 
oil imports, and therefore should not be included in the assessment of 
this rulemaking.
    Like most of the commenters, EPA believes that there is an evident 
connection between U.S. oil imports and a military presence to secure 
those imports and that this presence is influenced by the extent of 
importing. As Lt. Gen (Ret.) Zilmer stated at the Philadelphia public 
hearing on the proposed rule: ``The United States uses about 20 million 
barrels of oil a day, 11 million of that is imported'' and ``its often 
imported from customers who would rather not have to work with you * * 
* We have not gotten any closer to energy independence, and it becomes 
an increasing national security issue when we have to constantly have 
forces deployed in that region of the world, the Middle East and 
southwest Asia.'' \875\
---------------------------------------------------------------------------

    \875\ Transcript of Philadelphia public hearing, pp. 172-73.
---------------------------------------------------------------------------

    EPA has examined methodologies for estimating the military 
component of the energy security benefits of our rule and has faced two 
major challenges: ``attribution'' and ``incremental'' analysis. The 
attribution analysis challenge is to determine which military programs 
and expenditures can properly be attributed to oil supply protection, 
rather than to some other objective. The incremental analysis challenge 
is to estimate how much the supply protection costs might vary if U.S. 
oil use is reduced or eliminated.
    We reviewed a number of recent studies that attempt to overcome 
these challenges.\876\ Although these recent studies provide 
significant, useful insights into the military components of U.S. 
energy security, they do not provide enough substantive analysis to 
develop a robust methodology for quantifying the military components of 
energy security for this rulemaking. Thus, while EPA plans to continue 
to review new studies that provide better estimates of the military 
components of U.S. energy security benefits, for this rulemaking EPA 
continues to exclude military cost components in our quantified energy 
security benefits. Additional discussion of this issue can be found in 
Chapter 4.2.8 of the Joint TSD.
---------------------------------------------------------------------------

    \876\ More information, including citations for these recent 
studies, is available in Leiby, Paul. ``Military Costs of Energy 
Security'', 2012.
---------------------------------------------------------------------------

    A further potential component of the full economic costs of oil 
imports is the costs of building and maintaining the Strategic 
Petroleum Reserve (SPR). The SPR is clearly related to U.S. oil use and 
imports. Indeed, a stated purpose of the Energy Policy Conservation Act 
is ``to provide for the creation of a Strategic Petroleum Reserve 
capable of reducing the impact of severe energy supply interruptions'', 
a provision enacted following the 1973-74 Arab oil embargo.\877\ 
However, these costs have not varied historically in response to 
changes in U.S. oil import levels. Thus, although the influence of the 
SPR on oil price increases resulting from a disruption of U.S. oil 
imports is reflected in the ORNL estimate of the macroeconomic and 
adjustment cost component of the oil import premium, potential changes 
in the cost of maintaining the SPR associated with variation in U.S. 
petroleum imports are excluded.
---------------------------------------------------------------------------

    \877\ See 42 U.S.C section 6201 (2) and Center for Auto Safety 
v. NHTSA, 739 F. 2d 1322, 1324 (DC Cir. 1986).
---------------------------------------------------------------------------

f. Total Energy Security Benefits
    To summarize, EPA has included only the macroeconomic disruption 
and adjustment costs portion of potential energy security benefits to 
estimate the monetary value of the total energy security benefits of 
this rule. The energy security premium values in this final rule have 
been updated since the proposal to reflect the AEO2012 Early Release 
Reference Case world oil prices. Otherwise, the methodology for 
estimating the energy security benefits is consistent with that used in 
the proposal. Based on an update of an earlier peer-reviewed Oak Ridge 
National Laboratory study that was used in support of the both the 
2012-2016 light duty vehicle and the 2014-2018 medium- and heavy-duty 
vehicle GHG rulemakings, we estimate that each gallon of fuel saved 
will reduce expected macroeconomic disruption and adjustment costs of 
sudden reductions in the supply of imported oil to the U.S. economy by 
$0.182 in 2020, $0.197 in 2025, $0.208 in 2030 and $0.225 in 2035, in 
2010 dollars.
    Using our fuel consumption analysis in conjunction with the 
macroeconomic disruption and adjustment cost component of ORNL's energy 
security premium estimates,878 879 we developed estimates of 
the total energy security benefits of this rule for the years 2017 
through 2050 as shown in Table III-99.\880\
---------------------------------------------------------------------------

    \878\ AEO 2012 (Early Release) forecasts energy market trends 
and values only to 2035. The energy security premium estimates post-
2035 were assumed to be the 2035 estimate.
    \879\ Due to timing constraints, the energy security premiums 
($/gallon) were derived using estimates of the gasoline consumption 
reductions projected from this rule proposal.
    \880\ Estimated reductions in U.S. imports of finished petroleum 
products and crude oil are 95 percent of 54.2 million barrels (MMB) 
in 2020, 609 MMB in 2030, 962 MMB in 2040, and 1,140 MMB in 2050.

[[Page 62942]]

  Table III-99--Undiscounted Annual Energy Security Benefits & Program
                    Benefits Discounted Back to 2012
                                 [2010$]
------------------------------------------------------------------------
                                                Oil imports
                     Year                         reduced    Benefits ($
                                                   (mmb)      millions)
------------------------------------------------------------------------
2017.........................................           4.5          $33
2018.........................................          14.0          105
2019.........................................          28.6          216
2020.........................................          48.6          371
2021.........................................          77.7          601
2022.........................................         114            896
2023.........................................         158          1,260
2024.........................................         207          1,680
2025.........................................         263          2,170
2030.........................................         520          4,560
2040.........................................         880          8,320
2050.........................................       1,103         10,400
NPV, 3%......................................  ............       84,500
NPV, 7%......................................  ............       32,200
------------------------------------------------------------------------

9. Additional Impacts
    There are other impacts associated with the CO2 
emissions standards and associated reduced fuel consumption that vary 
with miles driven. Lower fuel consumption would, presumably, result in 
fewer trips to the filling station to refuel and, thus, time saved. The 
VMT rebound effect, discussed in detail in Section III.H.4.c, produces 
additional benefits to vehicle owners in the form of consumer surplus 
from the increase in vehicle-miles driven, but may also increase the 
societal costs associated with traffic congestion, motor vehicle 
crashes, and noise. These effects are likely to be relatively small in 
comparison to the value of fuel saved as a result of the standards, but 
they are nevertheless important to include. Table III-100 summarizes 
the other economic impacts. Please refer to Preamble Section II.E and 
the Joint TSD that accompanies this rule for more information about 
these impacts and how EPA and NHTSA use them in their analyses.

                                  Table III-100--Additional Impacts Associated With the Light-Duty Vehicle GHG Program
                                                               [Millions of 2010 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               2017            2020            2030            2040            2050           NPV, 3%         NPV, 7%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Accidents, Noise, Congestion Costs \a\..            -$54           -$564         -$5,710         -$9,650        -$12,100       -$101,000        -$39,200
Benefits of Increased Driving \b\.......              79             865           9,560          17,000          14,500         167,000          64,800
Benefits of Less Frequent Refueling.....              25             282           3,360           6,350           8,870          64,900          24,500
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Note that accidents, congestion and noise are costs, so the negative values shown represent increased costs which we treat as negative benefits.
\b\ Calculated using post-tax fuel prices.

10. Summary of Costs and Benefits
    In this section, the agencies present a summary of costs, benefits, 
and net benefits of the final program. Table III-101 shows the 
estimated annual monetized costs of the final program for the indicated 
calendar years. The table also shows the net present values of those 
costs for the calendar years 2012-2050 using both 3 percent and 7 
percent discount rates.\881\ Table III-102 shows the undiscounted 
annual monetized fuel savings of the final program. The table also 
shows the net present values of those fuel savings for the same 
calendar years using both 3 percent and 7 percent discount rates. In 
this table, the aggregate value of fuel savings is calculated using 
pre-tax fuel prices since savings in fuel taxes do not represent a 
reduction in the value of economic resources utilized in producing and 
consuming fuel. Note that the fuel savings shown here result from 
reductions in fleet-wide fuel use. Thus, fuel savings grow over time as 
an increasing fraction of the fleet meets the final standards.
---------------------------------------------------------------------------

    \881\ For the estimation of the stream of costs and benefits, we 
assume that after implementation of the proposed MY 2017-2025 
standards, the 2025 standards apply to each year thereafter.

                Table III-101--Undiscounted Annual Costs & Costs of the Final Program Discounted Back to 2012 at 3% and 7% Discount Rates
                                                                  [Millions, 2010$] \a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                            NPV, years      NPV, years
                                               2017            2020            2030            2040            2050        2012-2050, 3%   2012-2050, 7%
                                                                                                                           discount rate   discount rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Technology Costs........................          $2,440          $8,860         $33,700         $37,400         $42,000        $521,000        $231,000
Maintenance Costs.......................              37             330           2,260           3,630           4,540          39,500          15,600
Vehicle Program Costs...................           2,470           9,190          35,900          41,000          46,500         561,000         247,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note:
\a\ Technology costs for separate light-duty vehicle segments can be found in Section III.H.2. Annual costs shown are undiscounted values.

[[Page 62943]]

            Table III-102--Undiscounted Annual Fuel Savings & Final Program Fuel Savings Discounted Back to 2012 at 3% and 7% Discount Rates
                                                                  [Millions, 2010$] \a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                        NPV, years 2012- NPV, years 2012-
                                         2017             2020             2030             2040             2050           2050, 3%         2050, 7%
                                                                                                                         discount rate    discount rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fuel Savings (pre-tax)...........            $651           $7,430          $86,400         $155,000         $212,000       $1,600,000         $607,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note:
\a\ Fuel savings for separate light-duty vehicle segments can be found in Section III.H.3. Annual costs shown are undiscounted values.

    Table III-103 presents estimated annual monetized benefits for the 
indicated calendar years. The table also shows the net present values 
of those benefits for the calendar years 2012-2050 using both 3 percent 
and 7 percent discount rates. The table shows the benefits of reduced 
CO2 emissions--and consequently the annual quantified 
benefits (i.e., total benefits)--for each of the four social cost of 
carbon (SCC) values estimated by the interagency working group. As 
discussed in the RIA Chapter 7.2, there are some limitations to the SCC 
analysis, including the incomplete way in which the integrated 
assessment models capture catastrophic and non-catastrophic impacts, 
their incomplete treatment of adaptation and technological change, 
uncertainty in the extrapolation of damages to high temperatures, and 
assumptions regarding risk aversion.
    In addition, these monetized GHG benefits exclude the value of net 
reductions in non-CO2 GHG emissions (CH4, 
N2O, HFC) expected under this action. Although EPA has not 
monetized the benefits of reductions in non-CO2 GHGs, the 
value of these reductions should not be interpreted as zero. Rather, 
the net reductions in non-CO2 GHGs will contribute to this 
program's climate benefits, as explained in Section III.H.5.

        Table III-103--Monetized Undiscounted Annual Benefits & Benefits of the Final Program Discounted Back to 2012 at 3% and 7% Discount Rates
                                                                    [Millions, 2010$]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                            NPV, Years      NPV, Years
                                                                                                                           2012-2050, 3%   2012-2050, 7%
                                               2017            2020            2030            2040            2050        discount rate   discount rate
                                                                                                                                \a\             \a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                Reduced CO[ihel2] Emissions at Each Assumed SCC Value \b\
--------------------------------------------------------------------------------------------------------------------------------------------------------
5% (avg SCC)............................             $14            $164          $2,500          $5,510          $8,540         $32,400         $32,400
3% (avg SCC)............................              55             633           8,410          17,000          24,400         170,000         170,000
2.5% (avg SCC)..........................              87           1,000          12,900          25,400          35,400         290,000         290,000
3% (95th %ile)..........................             167           1,940          25,700          51,800          74,100         519,000         519,000
Energy Security Benefits (macro-                      33             371           4,560           8,320          10,400          84,500          32,200
 disruption costs)......................
Accidents, Congestion, Noise Costs \g\..             -54            -564          -5,710          -9,650         -12,100        -101,000         -39,200
Increased Travel Benefits \h\...........              79             865           9,560          17,000          14,500         167,000          64,800
Refueling Time Savings..................              25             282           3,360           6,350           8,870          64,900          24,500
Non-GHG Related Health Impacts \c,d,e\..               B               B       920-1,000       920-1,000       920-1,000           9,190           3,050
Non-CO2 GHG Impacts \f\.................             n/a             n/a             n/a             n/a             n/a             n/a             n/a
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   Total Annual Benefits at Each Assumed SCC Value \b\
--------------------------------------------------------------------------------------------------------------------------------------------------------
5% (avg SCC)............................              97           1,120          15,300          28,500          31,300         257,000         118,000
3% (avg SCC)............................             138           1,590          21,200          40,000          47,200         395,000         256,000
2.5% (avg SCC)..........................             171           1,960          25,600          48,400          58,100         515,000         376,000
3% (95th %ile)..........................             250           2,890          38,500          74,800          96,900         743,000         604,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\a\ Net present value of reduced CO2 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, 2.5 percent) is used to calculate net present value of SCC for internal consistency. Refer to the SCC TSD
  for more detail. Annual costs shown are undiscounted values.
\b\ Section III.H.5 notes that SCC increases over time. For the years 2012-2050, the SCC estimates range as follows: For Average SCC at 5%: 5-$16; for
  Average SCC at 3%: $23-$46; for Average SCC at 2.5%: $38-$67; and for 95th percentile SCC at 3%: $70-$140.
\c\ Note that ``B'' indicates unquantified criteria pollutant benefits in years prior to 2030 (2017-2029). For the final rule, EPA only conducted full-
  scale photochemical air quality modeling to estimate the rule's PM2.5- and ozone-related impacts in the calendar year 2030. For the purposes of
  estimating a stream of future-year criteria pollutant benefits associated with the final standards, we assume that the annual benefits out to 2050 are
  equal to, and no less than, those modeled in 2030 as reflected by the stream of estimated future emission reductions. The NPV of criteria pollutant-
  related benefits should therefore be considered a conservative estimate of the potential benefits associated with the final rule.

[[Page 62944]]

 
\d\ The PM2.5-related portion of the health benefits presented in this table are based on an estimate of premature mortality derived from the ACS study
  (Pope et al., 2002). However, EPA's primary method of characterizing PM-related premature mortality is to use both the ACS and the Six Cities study
  (Laden et al., 2006) to generate a co-equal range of benefits estimates. The decision to present only the ACS-based estimate in this table does not
  convey any preference for one study over the other. We note that this is also the more conservative of the two estimates--PM-related benefits would be
  approximately 245 percent (or nearly two-and-a-half times) larger had we used the per-ton benefit values based on the Six Cities study instead. Refer
  to Section III.H.7 to see the full range of non-GHG related health benefits in Calendar Year 2030.
\e\ The range of calendar year non-GHG benefits presented in this table assume either a 3% discount rate in the valuation of PM-related premature
  mortality ($1,000 million) or a 7% discount rate ($920 million) to account for a twenty-year segmented cessation lag. Note that the benefits estimated
  using a 3% discount rate were used to calculate the NPV using a 3% discount rate and the benefits estimated using a 7% discount rate were used to
  calculate the NPV using a 7% discount rate.
\f\ The monetized GHG benefits presented in this analysis exclude the value of changes in non-CO2 GHG emissions expected under this program (See RIA
  Chapter 7.1). Although EPA has not monetized changes in non-CO2 GHGs, the value of any increases or reductions should not be interpreted as zero. We
  seek comment on a method of quantifying non-CO2 GHG benefits in Section III.H.5.
\g\ Negative values for Accidents, Congestion, and Noise costs represent disbenefits.
\h\ Refer to Chapter 4.2.6 of the joint TSD for a description of how increased travel benefits are derived.

    Table III-104 presents estimated annual net benefits for the 
indicated calendar years. The table also shows the net present values 
of those net benefits for the calendar years 2012-2050 using both 3 
percent and 7 percent discount rates. The table includes the benefits 
of reduced CO2 emissions (and consequently the annual net 
benefits) for each of the four SCC values considered by EPA.

    Table III-104--Undiscounted Annual Monetized Net Benefits & Net Benefits of the Final Program Discounted Back to 2012 at 3% and 7% Discount Rates
                                                                    [Millions, 2009$]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               2017            2020            2030            2040            2050         NPV, 3%\a\      NPV, 7%\a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Vehicle Program Costs...................          $2,470          $9,190         $35,900         $41,000         $46,500        $561,000        $247,000
Fuel Savings............................             651           7,430          86,400         155,000         212,000       1,600,000         607,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   Total Annual Benefits at Each Assumed SCC Value \b\
--------------------------------------------------------------------------------------------------------------------------------------------------------
5% (avg SCC)............................              97           1,120          15,300          28,500          31,300         257,000         118,000
3% (avg SCC)............................             138           1,590          21,200          40,000          47,200         395,000         256,000
2.5% (avg SCC)..........................             171           1,960          25,600          48,400          58,100         515,000         376,000
3% (95th %ile)..........................             250           2,890          38,500          74,800          96,900         743,000         604,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Monetized Net Benefits at Each Assumed SCC Value \c\
--------------------------------------------------------------------------------------------------------------------------------------------------------
5% (avg SCC)............................          -1,690            -316          68,000         146,000         201,000       1,290,000         478,000
3% (avg SCC)............................          -1,650             153          73,900         158,000         217,000       1,430,000         616,000
2.5% (avg SCC)..........................          -1,610             524          78,300         166,000         228,000       1,550,000         736,000
3% (95th %ile)..........................          -1,530           1,460          91,200         192,000         267,000       1,780,000         964,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\a\ Net present value of reduced CO2 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, 2.5 percent) is used to calculate net present value of SCC for internal consistency. Refer to the SCC TSD
  for more detail. Annual costs shown are undiscounted values.
\b\ Section VIII.H.5 notes that SCC increases over time. For the years 2012-2050, the SCC estimates range as follows: for Average SCC at 5%: $5-$16; for
  Average SCC at 3%: $23-$46; for Average SCC at 2.5%: $38-$67; and for 95th percentile SCC at 3%: $70-$140. Section VIII.H.5 also presents these SCC
  estimates.
\c\ Net Benefits equal Fuel Savings minus Technology Costs plus Benefits.

    EPA also conducted a separate analysis of the total benefits over 
the model year lifetimes of the 2017 through 2025 model year vehicles. 
In contrast to the calendar year analysis presented above in Table III-
101 through Table III-104, the model year lifetime analysis below shows 
the impacts of the final program on vehicles produced during each of 
the model years 2017 through 2025 over the course of their expected 
lifetimes. The net societal benefits over the full lifetimes of 
vehicles produced during each of the nine model years from 2017 through 
2025 are shown in Table III-105 and Table III-106 at both 3 percent and 
7 percent discount rates, respectively.

  Table III-105--Monetized Technology Costs, Fuel Savings, Benefits, and Net Benefits Associated With the Lifetimes of 2017-2025 Model Year Light-Duty
                                                                        Vehicles
                                                         [Millions, 2009$; 3% discount rate] \h\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                            2017  MY   2018  MY   2019  MY   2020  MY   2021  MY   2022  MY   2023  MY   2024  MY   2025  MY      Sum
--------------------------------------------------------------------------------------------------------------------------------------------------------
Vehicle Program Costs....................     $2,770     $5,460     $7,720    $10,100    $14,000    $19,900    $25,400    $30,900    $33,600    $150,000
Fuel Savings (pre-tax)...................      7,040     15,500     24,300     34,100     50,400     64,900     78,500     92,800    107,000     475,000
Energy Security Benefits (macro-                 365        807      1,260      1,780      2,650      3,430      4,170      4,950      5,750      25,200
 disruption costs).......................

[[Page 62945]]

 
Accidents, Congestion, Noise Costs \f\...       -548     -1,150     -1,770     -2,440     -3,480     -4,420     -5,270     -6,160     -7,040     -32,300
Increased Travel Benefits \i\............      1,000      2,180      3,390      4,700      6,840      8,650     10,200     11,900     13,600      62,500
Refueling Time Savings...................        273        604        945      1,330      1,970      2,550      3,100      3,680      4,280      18,700
PM2.5 Related Health Impacts \c,d,e\.....         74        171        271        385        606        776        928      1,090      1,250       5,540
Non-CO2 GHG Impacts \g\..................        n/a        n/a        n/a        n/a        n/a        n/a        n/a        n/a        n/a         n/a
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Reduced CO[ihel2] Emissions at Each Assumed SCC Value \a,b\
--------------------------------------------------------------------------------------------------------------------------------------------------------
5% (avg SCC).............................        152        344        551        794      1,210      1,590      1,970      2,380      2,820      11,800
3% (avg SCC).............................        642      1,440      2,270      3,230      4,850      6,330      7,740      9,260     10,800      46,600
2.5% (avg SCC)...........................      1,040      2,320      3,660      5,190      7,760     10,100     12,300     14,700     17,100      74,100
3% (95th %ile)...........................      1,970      4,390      6,950      9,880     14,800     19,300     23,600     28,300     33,000     142,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                 Monetized Net Benefits at Each Assumed SCC Value \a,b\
--------------------------------------------------------------------------------------------------------------------------------------------------------
5% (avg SCC).............................      5,590     13,000     21,200     30,500     46,200     57,500     68,100     79,700     94,400     416,000
3% (avg SCC).............................      6,080     14,100     22,900     33,000     49,900     62,200     73,900     86,600    102,000     451,000
2.5% (avg SCC)...........................      6,480     15,000     24,300     34,900     52,800     66,000     78,500     92,000    109,000     479,000
3% (95th %ile)...........................      7,400     17,100     27,600     39,600     59,800     75,200     89,800    106,000    125,000     547,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\a\ Net present value of reduced CO2 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, 2.5 percent) is used to calculate net present value of SCC for internal consistency. Refer to the SCC TSD
  for more detail.
\b\ Section III.H.5 notes that SCC increases over time. For the years 2012-2050, the SCC estimates range as follows: For Average SCC at 5%: $5-$16; for
  Average SCC at 3%: $23-$46; for Average SCC at 2.5%: $38-$67; and for 95th percentile SCC at 3%: $70-$140. Section III.H.5 also presents these SCC
  estimates.
\c\ Note that the non-GHG impacts associated with the standards presented here do not include the full complement of endpoints that, if quantified and
  monetized, would change the total monetized estimate of rule-related impacts. Instead, the non-GHG benefits are based on benefit-per-ton values that
  reflect only human health impacts associated with reductions in PM2.5 exposure. Ideally, human health and environmental benefits would be based on
  changes in ambient PM2.5 and ozone as determined by full-scale air quality modeling. However, EPA was unable to conduct a full-scale air quality
  modeling for the Model Year analysis. Full scale air quality modeling was conducted for the Calendar Year analysis. See Section III.G and III.H.7 for
  a discussion of that analysis.
\d\ The PM2.5-related health benefits (derived from benefit-per-ton values) presented in this table are based on an estimate of premature mortality
  derived from the ACS study (Pope et al., 2002). However, EPA's primary method of characterizing PM-related premature mortality is to use both the ACS
  and the Six Cities study (Laden et al., 2006) to generate a co-equal range of benefits estimates. The decision to present only the ACS-based estimate
  in this table does not convey any preference for one study over the other. We note that this is also the more conservative of the two estimates--PM-
  related benefits would be approximately 245 percent (or nearly two-and-a-half times) larger had we used the per-ton benefit values based on the Six
  Cities study instead. See Joint TSD 4 for a detailed description of the dollar-per-ton values used in this analysis.
\e\ The PM2.5-related health benefits (derived from benefit-per-ton values) presented in this table assume a 3% discount rate in the valuation of
  premature mortality to account for a twenty-year segmented cessation lag. If a 7% discount rate had been used, the values would be approximately 9%
  lower.
\f\ Negative values for Accidents, Congestion, and Noise costs represent disbenefits.
\g\ The monetized GHG benefits presented in this analysis exclude the value of changes in non-CO2 GHG emissions expected under this action (See RIA
  Chapter 7.1). Although EPA has not monetized changes in non-CO2 GHGs, the value of any increases or reductions should not be interpreted as zero. We
  seek comment on a method of quantifying non-CO2 GHG benefits in Section III.H.5.
\h\ Model year values are discounted to the first year of each model year; the ``Sum'' represents those discounted values summed across model years.
\i\ Refer to Chapter 4.2.6 of the joint TSD for a description of how increased travel benefits are derived.

  Table III-106--Monetized Technology Costs, Fuel Savings, Benefits, and Net Benefits Associated With the Lifetimes of 2017-2025 Model Year Light-Duty
                                                                        Vehicles
                                                         [Millions, 2009; 7% discount rate] \h\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             2017  MY   2018  MY   2019  MY   2020  MY   2021  MY   2022  MY   2023 MY    2024  MY   2025  MY     Sum
--------------------------------------------------------------------------------------------------------------------------------------------------------
Vehicle Program Costs.....................     $2,650     $5,220     $7,370     $9,610    $13,300    $19,200    $24,600    $29,900    $32,500   $144,000
Fuel Savings (pre-tax)....................      5,410     11,900     18,600     26,100     38,600     49,700     60,100     71,100     82,300    364,000
Energy Security Benefits (macro-disruption        279        615        964      1,360      2,020      2,620      3,180      3,780      4,400     19,200
 costs)...................................

[[Page 62946]]

 
Accidents, Congestion, Noise Costs \f\....       -425       -893     -1,370     -1,890     -2,690     -3,410     -4,070     -4,760     -5,440    -24,900
Increased Travel Benefits \i\.............        761      1,650      2,550      3,530      5,120      6,470      7,640      8,870     10,100     46,700
Refueling Time Savings....................        209        461        721      1,020      1,500      1,940      2,360      2,800      3,260     14,300
PM2.5 Related Health Impacts c,d,e........         59        136        215        305        478        607        721        840        959      4,320
Non-CO2 GHG Impacts \g\...................        n/a        n/a        n/a        n/a        n/a        n/a        n/a        n/a        n/a        n/a
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Reduced CO[ihel2] Emissions at Each Assumed SCC Value \a,b\
--------------------------------------------------------------------------------------------------------------------------------------------------------
5% (avg SCC)..............................        152        344        551        794      1,210      1,590      1,970      2,380      2,820     11,800
3% (avg SCC)..............................        642      1,440      2,270      3,230      4,850      6,330      7,740      9,260     10,800     46,600
2.5% (avg SCC)............................      1,040      2,320      3,660      5,190      7,760     10,100     12,300     14,700     17,100     74,100
3% (95th %ile)............................      1,970      4,390      6,950      9,880     14,800     19,300     23,600     28,300     33,000    142,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Monetized Net Benefits at Each Assumed SCC Value a,b
--------------------------------------------------------------------------------------------------------------------------------------------------------
5% (avg SCC)..............................      3,800      9,010     14,900     21,600     32,900     40,300     47,300     55,100     65,800    291,000
3% (avg SCC)..............................      4,290     10,100     16,600     24,100     36,500     45,000     53,100     62,000     73,800    326,000
2.5% (avg SCC)............................      4,690     11,000     18,000     26,000     39,400     48,800     57,600     67,400     80,100    353,000
3% (95th %ile)............................      5,610     13,100     21,300     30,700     46,500     58,000     69,000     81,000     96,100    421,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\a\ Net present value of reduced CO2 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, 2.5 percent) is used to calculate net present value of SCC for internal consistency. Refer to the SCC TSD
  for more detail.
\b\ Section III.H.5 notes that SCC increases over time. For the years 2012-2050, the SCC estimates range as follows: For Average SCC at 5%: $5-$16; for
  Average SCC at 3%: $23-$46; for Average SCC at 2.5%: $38-$67; and for 95th percentile SCC at 3%: $70-$140. Section III.H.5 also presents these SCC
  estimates.
\c\ Note that the non-GHG impacts associated with the standards presented here do not include the full complement of endpoints that, if quantified and
  monetized, would change the total monetized estimate of rule-related impacts. Instead, the non-GHG benefits are based on benefit-per-ton values that
  reflect only human health impacts associated with reductions in PM2.5 exposure. Ideally, human health and environmental benefits would be based on
  changes in ambient PM2.5 and ozone as determined by full-scale air quality modeling. However, EPA was unable to conduct a full-scale air quality
  modeling for the Model Year analysis. Full scale air quality modeling was conducted for the Calendar Year analysis. See Section III.G and III.H.7 for
  a discussion of that analysis.
\d\ The PM2.5-related health benefits (derived from benefit-per-ton values) presented in this table are based on an estimate of premature mortality
  derived from the ACS study (Pope et al., 2002). However, EPA's primary method of characterizing PM-related premature mortality is to use both the ACS
  and the Six Cities study (Laden et al., 2006) to generate a co-equal range of benefits estimates. The decision to present only the ACS-based estimate
  in this table does not convey any preference for one study over the other. We note that this is also the more conservative of the two estimates--PM-
  related benefits would be approximately 245 percent (or nearly two-and-a-half times) larger had we used the per-ton benefit values based on the Six
  Cities study instead. See Joint TSD 4 for a detailed description of the dollar-per-ton values used in this analysis.
\e\ The PM2.5-related health benefits (derived from benefit-per-ton values) presented in this table assume a 3% discount rate in the valuation of
  premature mortality to account for a twenty-year segmented cessation lag. If a 7% discount rate had been used, the values would be approximately 9%
  lower.
\f\ Negative values for Accidents, Congestion, and Noise costs represent disbenefits.
\g\ The monetized GHG benefits presented in this analysis exclude the value of changes in non-CO2 GHG emissions expected under this action (See RIA
  Chapter 7.1). Although EPA has not monetized changes in non-CO2 GHGs, the value of any increases or reductions should not be interpreted as zero. We
  seek comment on a method of quantifying non-CO2 GHG benefits in Section III.H.5.
\h\ Model year values are discounted to the first year of each model year; the ``Sum'' represents those discounted values summed across model years.
\i\ Refer to Chapter 4.2.6 of the joint TSD for a description of how increased travel benefits are derived.

11. U.S. Vehicle Sales Impacts and Affordability of New Vehicles
a. Vehicle Sales Impacts
    Predicting the effects of this rule on vehicle sales entails 
comparing two effects. On the one hand, the vehicles designed to meet 
the standards will become more expensive, which would, by itself, 
discourage sales. On the other hand, the vehicles will have improved 
fuel economy and thus lower operating costs due to significant fuel 
savings, which could encourage sales. Which of these effects dominates 
for potential vehicle buyers when they are considering a purchase will 
determine the effect on sales. Assessing the net effect of these two 
competing effects is uncertain, as it rests on how consumers value fuel 
savings at the time of purchase and the extent to which manufacturers 
and dealers reflect technology costs in the purchase price. The 
empirical literature does not provide clear evidence on how much of the 
value of fuel savings consumers consider at the time of purchase. It 
also generally does not speak to the efficiency of manufacturing and 
dealer pricing decisions. Thus, we do not provide quantified estimates 
of potential sales impacts in this final rule.
    An additional source of uncertainty in the analysis is 
understanding what would happen in the absence of this rule. Standard 
economic theory would suggest that, if automakers could profitably 
increase sales by adding more fuel-saving technologies to their 
vehicles, then manufacturers' profit motives would lead them to 
voluntarily

[[Page 62947]]

add those technologies in the absence of this rule. As discussed in 
Preamble Section III.D.1, we project, based on historical patterns, 
that auto makers would not go beyond the MY 2016 standards in the 
absence of this rule. Yet, if consumers consider just over three years' 
worth of fuel savings in their vehicle purchase decisions and our 
assumptions about technology costs and future gas prices are correct, 
the payback period analysis in Section III.H.5 suggests that sales 
would increase in response to this rule.
    Although it is possible that manufacturers would not find it 
profitable to add at least some of the vehicle technologies in the 
absence of the rule (see Section III.H.1.a for a discussion), there may 
be the potential for increases in vehicle sales as a result of the 
rule. These explanations focus on conditions where the rule stimulates 
investments that would not happen in the rule's absence. The 
explanations posed below raise possibilities that the rule, by 
requiring all automakers to meet the standards, may lead to mutually 
beneficial outcomes that might not happen in the absence of the rule. 
Consumers would then have the opportunity to purchase vehicles that 
would not be available in the absence of the rule; if consumers 
consider at least as many years of fuel savings when buying new 
vehicles as the payback period for the new technologies, and if 
manufacturers nonetheless would not have produced these vehicles in the 
absence of the rule, positive sales impacts could occur as a result of 
these final standards. The three possibilities we suggest for such 
outcomes are promotion of social learning, reduction of risk and 
uncertainty for manufacturers, and promotion of innovation.
i. Social Learning
    For many years, fuel economy standards did not change (see Preamble 
III.D.1).\882\ As discussed in Preamble III.H.1.a, consumers may not 
have focused on fuel economy, or may have found it difficult to do 
calculations involving the tradeoffs between fuel economy and increased 
vehicle costs, or may not have found vehicles with their preferred 
combination of fuel economy and other features. In recent years, 
though, fuel economy standards have started to increase.\883\ In 
addition, high fuel prices have helped to focus consumer attention 
toward vehicle fuel economy. Finally, the recently revised fuel economy 
label, with prominent information on fuel savings, are starting to 
appear on new vehicles. These factors may contribute to consumers 
gaining experience with the benefits that accrue to them from owning 
and operating vehicles with greater fuel efficiency. Consumer 
households that include vehicles with a fairly wide range of fuel 
economy have an opportunity to learn about the value of fuel economy on 
their own. Consumer demand may be shifting towards such vehicles, not 
only because of higher fuel prices but also if many consumers are 
learning about the value of purchases based not only on initial costs 
but also on the total cost of owning and operating a vehicle over its 
lifetime. This type of learning should continue before and during the 
model years affected by this rule.
---------------------------------------------------------------------------

    \882\ Car CAFE standards did not change from MYs 1990 through 
2010. Truck CAFE standards did not change from MYs 1996 through 
2004, and changed only 0.5 mpg cumulatively from MYs 1991 through 
2004. See ``Summary of Fuel Economy Performance,'' March 12, 2012, 
DOT/NHTSA, http://www.nhtsa.gov/fuel-economy.
    \883\ Truck CAFE standards began to rise in MY 2005 and have 
risen every year since. Car CAFE standards began to rise in MY 2011. 
Ibid.
---------------------------------------------------------------------------

    Today's rule, combined with the new and easier-to-understand fuel 
economy labels required to be on all new vehicles in MY 2013, may 
increase sales by hastening this very type of consumer learning. As 
more consumers experience the savings in time and expense from owning 
more fuel efficient vehicles, demand may shift yet further in the 
direction of the vehicles with improved fuel economy and reduced GHG 
emissions mandated under the rule. This social learning can take place 
both within and across households, as consumers learn from one another. 
First and most directly, the time and fuel savings associated with 
operating more fuel efficient vehicles may be more salient to 
individuals who own them, which might cause their subsequent purchase 
decisions to shift closer to minimizing the total cost of ownership 
over the lifetime of the vehicle. Second, this appreciation may spread 
across households through word of mouth, marketing and advertising, and 
other forms of communications. Third, as more motorists experience the 
time and fuel savings associated with greater fuel efficiency, the 
price of used cars may better reflect such efficiency, further reducing 
the cost of owning more efficient vehicles for the buyers of new 
vehicles (since the resale price may increase). If these induced 
learning effects are strong, the rule could potentially increase total 
vehicle sales over time. This effect may be speeded or slowed by other 
factors that enter into a consumer's valuation of fuel efficiency in 
selecting vehicles.
    The possibility that the rule could (after a lag for consumer 
learning) increase sales need not rest on the assumption that 
automobile manufacturers are failing to pursue profitable opportunities 
to supply the vehicles that consumers demand. In the absence of the 
rule, no individual automobile manufacturer would find it profitable to 
move toward more efficient vehicles to increase consumer learning 
because no individual company can fully internalize the potential 
future boost to demand. If one company were to make more efficient 
vehicles, counting on consumer learning to enhance demand in the 
future, that company would capture only a fraction of the extra sales 
so generated, because the learning at issue is not specific to any one 
company's fleet. Many of the extra sales could accrue to that company's 
competitors.
    In other words, consumer learning about the benefits of fuel 
efficient vehicles involves positive externalities (spillovers) from 
one company to the others.\884\ These positive externalities may lead 
to benefits for manufacturers as a whole if they increase the demand 
for vehicles. We emphasize that this discussion has been tentative and 
qualified. It is not possible to quantify these learning effects years 
in advance, and these effects may be speeded or slowed by other factors 
that enter into a consumer's valuation of fuel efficiency in selecting 
vehicles. To be sure, social learning of related kinds has been 
identified in a number of contexts.\885\ We asked for comments on the 
discussion offered here, with particular reference to any relevant 
empirical findings. 76 FR 75150. We continue to explore this issue but 
did not receive any comments on the role of social learning, except in 
the context (discussed in Section III.H.1.a) of the effect of the rule 
on the visibility of and

[[Page 62948]]

status associated with owning vehicles with improved fuel economy.
---------------------------------------------------------------------------

    \884\ Industrywide positive spillovers of this type are hardly 
unique to this situation. In many industries, companies form trade 
associations to promote industry-wide public goods. For example, 
merchants in a given locale may band together to promote tourism in 
that locale. Antitrust law recognizes that this type of coordination 
can increase output.
    \885\ See Hunt Alcott, Social Norms and Energy Conservation, 
Journal of Public Economics (forthcoming 2011), available at http://web.mit.edu/allcott/www/Allcott%202011%20JPubEc%20-%20Social%20Norms%20and%20Energy%20Conservation.pdf (Docket EPA-HQ-
OAR-0799-0825); Christophe Chamley, Rational Herds: Economic Models 
of Social Learning (Cambridge, 2003) (Docket EPA-HQ-OAR-0799-1110).
---------------------------------------------------------------------------

ii. Reduction in Risk and Uncertainty for Manufacturers
    As discussed in Preamble III.H.1.a, there appears to be a great 
deal of uncertainty about how consumers will respond to increases in 
fuel economy. Automakers may be cautious about adding more fuel-saving 
technology to vehicles if they are uncertain how buyers will respond. 
Even if they believe that buyers will respond positively, if a company 
is risk-averse, it may nevertheless hesitate to make the substantial 
major investments in new technologies and in research that would lead 
to increases in fuel economy across its fleet.\886\ If a manufacturer 
invests substantially in fuel efficient technologies expecting higher 
consumer demand than realized, then the manufacturer has incurred the 
costs of investment but not reaped the benefits of those investments. 
On the other hand, if a manufacturer does not invest in fuel-efficient 
technologies, then the manufacturers may lose some sales in the short 
run if demand for fuel economy is higher than expected, but it still 
retains the option of investing in fuel-efficient technologies in the 
longer run. If its investments proved unsuccessful, the company might 
face substantial losses. Even if the probability of being unsuccessful 
is low, the manufacturer may nevertheless perceive the losses in that 
scenario as a substantial risk. If the investment proved successful, 
the company would, of course, take market share from other companies--
but, assuming that there are not brand-loyalty or other advantages to 
being first in the market with new fuel-saving technologies, only until 
the other auto companies caught up. In other words, for a risk-averse 
company, being a first mover may appear to have a greater downside risk 
than upside risk, even if the investment, on an expected-value basis, 
would pay off. If all companies are risk-averse, then they may all seek 
a strategy of waiting for some other company to be the first mover. In 
this case, caution about these major investments may lead to a lack of 
adoption of new technologies, in the absence of the rulemaking, 
consistent with the flat baseline assumption. This rulemaking, by 
requiring that all companies act at the same time, removes the scenario 
of one company bearing all the risk.
---------------------------------------------------------------------------

    \886\ Sunding, David, and David Zilberman, ``The Agricultural 
Innovation Process: Research and Technology Adoption in a Changing 
Agricultural Sector,'' Chapter 4 in Handbook of Agricultural 
Economics, Volume 1, edited by B. Gardner and G. Rausser (Elsevier, 
2001) show how delaying adoption of a new technology in order to 
gain more information may be a more profitable activity than 
adopting a technology, even if it has positive net benefits, when a 
potential adopter is risk-averse.
---------------------------------------------------------------------------

    In addition, there may be risk aversion on the consumer side. The 
simultaneous investment by all companies may also encourage consumer 
confidence in the new technologies. If only one company adopted new 
technologies, early adopters might gravitate toward that company, but 
early adopters tend to be a relatively small portion of the public. 
More cautious buyers, who are likely to be more numerous, might wait 
for greater information before moving away from well-known 
technologies. If all companies adopt advanced technologies at the same 
time, though, potential buyers may perceive the new technologies as the 
new norm rather than as a risky innovation. They will then be more 
willing to move to the new technologies. As some commenters have 
pointed out, simultaneous action required by the rule may change 
buyers' expectations (their reference points) for fuel economy, and 
investing in more fuel economy may seem less risky than in the absence 
of the rule.
    The rule, then, may reduce manufacturers' risk of making 
significant investments in fuel-saving technologies by requiring that 
all companies produce more fuel-efficient vehicles. Under this outcome, 
it is possible for the rule to facilitate investment that would not 
happen in the absence of the rule, and vehicle sales could increase as 
a result of the rule.
iii. Promotion of Innovation
    Research among multiple parties can be a synergistic process: Ideas 
by one researcher may stimulate new ideas by others, and more and 
better results occur than if the one researcher operated in 
isolation.\887\ Collaboration between automotive companies or 
automotive suppliers does occur; for example, in 2011 Toyota and Ford 
announced a new effort to collaborate on the development of hybrid 
technology for pickup trucks.\888\ Another example was the four-year 
joint development effort between General Motors and Ford from 2002-2006 
for the development of a new six-speed automatic transmission.\889\ One 
function that standards can serve is to promote research into low-
CO2 technologies that would not take place in the absence of 
the standards. Because all companies (both auto firms and auto 
suppliers) will have incentives to find better, less expensive ways of 
meeting the standards in this rule, the possibilities for synergistic 
interactions may increase. Thus, the rule, by focusing all companies on 
finding more efficient ways of achieving the standards, may lead to 
better outcomes than if any one company operated on its own.
---------------------------------------------------------------------------

    \887\ Powell, Walter W., and Eric Giannella, ``Collective 
Invention and Inventor Networks,'' Chapter 13 in Handbook of the 
Economics of Innovation, Volume 1, edited by B. Hall and N. 
Rosenberg (Elsevier, 2010) (EPA Docket EPA-HQ-OAR-2010-0799) discuss 
how a ``collective momentum'' has led uncoordinated research efforts 
among a diverse set of players to develop advances in a number of 
technologies (such as electricity and telephones). They contrast 
this view of technological innovation with that of proprietary 
research in corporate laboratories, where the research is part of a 
corporate strategy. Such momentum may result in part from alignment 
of economic, social, political, and other goals.
    \888\ ``Ford and Toyota To Work Together on Hybrid System for 
Trucks'', New York Times, August 22, 2011. (EPA Docket EPA-HQ-OAR-
2010-0799).
    \889\ ``Ford, GM Launch Joint 6-speed Automatic,'' Wards 
Automotive, August 31, 2006.
---------------------------------------------------------------------------

    An additional aspect of the standards is the possibility of greater 
standardization. As more companies adopt new technologies, the 
incentives increase for additional suppliers and more availability of 
after-market replacement parts; these suppliers would be likely to find 
ways to increase compatibility across vehicle types. For example, 
though electric vehicles (EVs) are not expected to be more than a few 
percent of the vehicles produced in response to this rule, their 
adoption depends on such factors as batteries and charging methods that 
are compatible across different companies. These are examples of 
``network externalities,'' where use of a technology by one party has 
greater benefits if more people are also using the technology. In this 
case, just as the ability to buy gasoline from any station facilitates 
owning a gasoline-based vehicle, the ability to recharge an EV or get 
replacement parts easily facilitates ownership of an EV. In the absence 
of the rule, fewer companies would be pursuing this technology, and it 
would be considered a specialty product; the incentives to coordinate 
might be low. If EVs become more common, though, compatible 
infrastructure and batteries may become more desirable, as potential 
buyers are likely to be encouraged toward this technology if they can 
easily find places to charge batteries.
    Thus, the rule may direct and promote innovation and 
standardization that would not happen in the absence of this rule. Such 
changes could reduce the cost increases associated with the rule and 
improve the qualities of the technologies, which could result in an

[[Page 62949]]

increase in vehicle sales. Further, the certainty of the regulations 
reduces the costs of meeting them, because there will be more economies 
of scale and more learning curve benefits due to greater cumulative 
production of fuel-efficient technologies.
    Several commenters requested that we conduct a quantitative vehicle 
sales analysis. As discussed in the proposal, in previous rulemakings, 
EPA and NHTSA conducted vehicle sales analyses by comparing the up-
front costs of the vehicles with the present value of five years' worth 
of fuel savings; the direction of vehicle sales would depend on whether 
up-front costs exceeded fuel savings (in which case sales would be 
expected to decline), or vice versa (in which case sales would be 
expected to increase).\890\ Some commenters specifically requested that 
we use the method found in the MYs 2012-16 rule; some specifically 
supported the five-year payback period; others argued for the 
importance of conducting the analysis without recommending methods. 
Ceres estimates that the rule will increase vehicle sales by 4.7 
percent; \891\ the Defour Group provided estimates that the rule will 
decrease vehicle sales by 6-10 percent.\892\ The differences in the 
results appear to depend on the cost estimates used and on assumptions 
made about how vehicle buyers think about fuel savings when deciding on 
vehicle purchases. The Defour Group, for instance, uses cost estimates 
of about $3000 per vehicle based on summing costs (but not benefits) 
across multiple rules (an estimate we consider to be unfounded for 
reasons explained in this section below and also in TSD Chapter 3.1.2) 
and the assumption that consumers consider only 25 percent of fuel 
savings in their vehicle purchase decisions (see discussion in Section 
III.H.1.a). Other commenters wanted specific information on the effect 
of the rule on vehicle costs and whether consumers will be willing to 
buy the new vehicles, while consumer and environmental organizations 
indicated that consumers want more fuel-efficient vehicles, even if the 
up-front costs of the vehicles increase. The costs of the rule are 
discussed in Preamble Section III.H.2. As discussed in Preamble Section 
III.H.1.a, we do not at this point have sufficient confidence in the 
estimates of the role of fuel economy in consumers' vehicle purchases 
to come to definitive conclusions about the impacts of the rule on 
vehicle sales. We do not, however, consider this uncertainty grounds 
for delaying the rule, as one comment suggested. The midterm evaluation 
provides an opportunity to revisit the impact of the rule on vehicle 
sales and consumer acceptance of the new technologies.
---------------------------------------------------------------------------

    \890\ For instance, see U.S. Environmental Protection Agency 
(April 2010). ``final rulemaking to Establish Light-Duty Vehicle 
Greenhouse Gas Emission Standards and Corporate Average Fuel Economy 
Standards: Regulatory Impact Analysis.'' EPA-420-R-10-009, Chapter 
8.1.1, pp. 8-1 to 8-4.
    \891\ Comments on this rule from Ceres, Docket EPA-HQ-OAR-2010-
0799-9475, referring to a forthcoming report, Citi Investment 
Research and Analysis, ``U.S. Autos and Auto Parts: Fuel Economy 
Focus: Industry Perspectives on 2020,'' April 3, 2012, Docket EPA-
HQ-OAR-2010-0799.
    \892\ Walton, Thomas F., and Dean Drake, Defour Group, LLC. 
``Comments on the Notice of Proposed Rulemaking and Preliminary 
Regulatory Impact Analysis for MY 2017 to 2025 Fuel Economy 
Standards.'' February 13, 2012. Docket EPA-HQ-OAR-2010-0799-9319-A1.
---------------------------------------------------------------------------

    This rule takes effect for MY 2017-2025. In the intervening years, 
it is possible that the assumptions underlying a quantitative analysis, 
as well as market conditions, might change. As the United Auto Workers 
points out, the state of the economy is a major, if not the primary, 
determinant of total vehicle sales. The impact of the rule on sales may 
therefore depend, among other factors, on changes in the state of the 
economy. Other commenters discussed the importance of consumer 
confidence, fuel prices, and even of publicity over fuel prices, in 
consumers' interest in additional fuel economy. Sales could be 
negatively affected if gasoline prices are lower than expected or 
technology costs are higher than expected. In these cases, it is 
possible that the standards could require manufacturers to produce cars 
with higher levels of fuel economy than consumers would wish to buy. On 
the other hand, manufacturers' marketing of increased fuel economy 
levels is also likely to play a role in consumer response to these 
vehicles. EPA agrees that these factors are important, but we are not 
sufficiently confident in quantitative estimates of the impacts of 
those factors to develop numerical estimates. We instead provide this 
qualitative assessment to highlight the factors important for 
understanding the effects of this rule on vehicle sales.
    As several commenters point out, the effect of this rule on the use 
and scrappage of older vehicles will be related to its effects on new 
vehicle prices, the fuel efficiency of new vehicle models, the fuel 
efficiency of used vehicles, and the total sales of new vehicles. If 
the value of fuel savings resulting from improved fuel efficiency to 
the typical potential buyer of a new vehicle outweighs the average 
increase in new models' prices, sales of new vehicles could rise, the 
used vehicle market may increase in volume as new vehicle buyers sell 
their older vehicles, and scrappage rates of used vehicles may increase 
slightly. This will cause both an influx of more efficient vehicles 
into the used vehicle market and an increase in the turnover of the 
vehicle fleet (i.e., the retirement of used vehicles and their 
replacement by new models), thus accentuating the anticipated effect of 
the rule on fleet-wide fuel consumption and CO2 emissions. 
However, if potential buyers value future fuel savings resulting from 
the increased fuel efficiency of new models at less than the increase 
in their average selling price, sales of new vehicles will decline, the 
used vehicle market may decrease in volume as people hold onto their 
vehicles longer, and there will be a reduction in the rate at which 
used vehicles are retired from service. These effects will partly 
reduce the anticipated effects of this rule on fuel use and emissions. 
Because we do not have good estimates of the relationships between the 
new and used vehicle markets, we have not attempted to estimate 
explicitly the effects of the rule on the used vehicle market, 
scrappage of older vehicles, and the turnover of the vehicle fleet.
    Consumer, environmental, and investor organizations, the United 
Auto Workers, as well as a citizens' campaign suggested that the rule 
will help the domestic auto industry, including the domestic supply 
base, compete in the global marketplace, through its encouragement of 
advanced technologies that may be useful in meeting emissions standards 
and consumer demands in foreign markets. We agree that this is likely 
for all global automakers, as generally the emission standards 
established in this rule are similar in stringency to emissions and 
fuel economy standards being considered by Japan, the European Union, 
South Korea, Canada, China and other international markets. Global 
manufacturers also design vehicles using a common platform in order to 
reduce costs. Vehicles built on these common platforms are sold in many 
markets around the world. To the extent the domestic OEMs and suppliers 
can focus their limited research and product development efforts on the 
same technologies for the U.S. market as for international markets, 
this should enable the companies to compete more effectively outside 
the U.S.
    Chapter 8 of EPA's RIA has further discussion of methods for 
examining the effects of this rule on vehicle sales.

[[Page 62950]]

b. Impact of the Rule on Affordability of Vehicles and Low-Income 
Households
    Several organizations provided comments about the effect of the 
rule on the affordability of new vehicles, as well as the impacts of 
the rule specifically on low-income households.
    Comments from Consumer Federation of America (CFA) and 23 other 
consumer groups, as well as Consumers Union (CU) and several 
environmental organizations, argued that low-income households will 
benefit from the rule. These commenters cite Bureau of Labor Statistics 
data that low-income households spend more on fuel than they do on new 
vehicles each year and are thus more vulnerable to fuel costs. CU 
comments that low-income households pay a disproportionately large 
portion of their income on fuel and are thus most vulnerable to price 
spikes in gasoline. CFA reported that in 2010, households with incomes 
below $20,000 spent 7.3 times as much on gasoline as on new car 
payments, compared with 1.2 times as much for households with incomes 
above $70,000. This commenter believes that consumers will benefit 
greatly from the fuel savings that come with improved fuel economy. 
These organizations note that low-income households account for a very 
small portion of new car buyers, since they primarily purchase used 
cars, and are therefore less affected by the up-front costs of the more 
efficient vehicles than those who buy new vehicles. CU further comments 
that Consumers Reports survey data show that low-income households 
support improved fuel economy. In a recent survey, 71% of low-income 
households responded that they expect to choose a model with better 
fuel economy, compared to 59% of moderate and high-income respondents. 
In addition, 79% of low-income respondents to the survey reported that 
they were willing to pay extra for a more fuel efficient vehicle if 
they can recover the additional cost through lower fuel costs within 
five years, compared to 86% of moderate and high-income respondents.
    In addition, these commenters agreed with EPA's assessment in the 
NPRM that consumers who buy their vehicles with loans save more in fuel 
each month than they do in increased loan payments. CU points out that 
this is especially true for buyers of future, more fuel-efficient used 
vehicles: The increase in up-front cost is much lower on a used 
vehicle, due to depreciation, while the fuel economy of the vehicle is 
unlikely to change over time. Because low-income households 
disproportionately buy used vehicles, they will benefit from this more 
rapid cost recovery. Because most of the increased vehicle cost 
depreciates after five years, the payback period for improved fuel 
economy in used MY 2017 and later vehicles will be shorter than the 
payback period for these vehicles when newly purchased (under two years 
for some examples). EPA agrees that more efficient vehicles will reduce 
operating costs for buyers of used vehicles as well as new vehicles, 
because the fuel-saving technologies maintain their effectiveness over 
time; indeed, GHG standards continue to apply in-use. As shown in RIA 
Chapter 5.5, our estimate of the payback period for five-year-old MY 
2025 vehicles is approximately 1.1 years, less than the payback period 
of about 3.2-3.4 years for new MY 2025 vehicles. We also note that 
depreciation rates may be affected by the rule: increases in 
reliability would decrease depreciation, and decreases in reliability 
would increase depreciation. Finally, CU points out that some auto 
lenders take into consideration the fuel economy of new vehicles, and 
offer discounted rates for more efficient vehicles.\893\ As discussed 
further below, EPA also finds that a number of financial institutions 
give a discount on loans for more fuel-efficient vehicles.
---------------------------------------------------------------------------

    \893\ See, for instance, Ladika, Susan (2009). `` `Green' auto 
loans offer lower rates,'' Bankrate.com, http://www.bankrate.com/finance/auto/green-auto-loans-offer-lower-rates-1.aspx, accessed 2/
28/12.
---------------------------------------------------------------------------

    The National Automobile Dealers Association (NADA) and the 
Institute for Energy Research emphasized that the increase in the up-
front vehicle costs would be a factor in consumers' abilities to 
purchase. In particular, they stated that, if vehicle buyers are not 
able to get loans for vehicles that have become more expensive as a 
result of new standards, because they cannot get access to credit for 
the additional cost, then they will be unable to participate in the new 
vehicle market even if the new vehicles offer significant fuel savings. 
This argument is based on the statement from NADA that auto lenders do 
not take into account the fuel economy of the vehicles when they are 
deciding on providing loans; the lenders consider only consumers' debt-
to-income ratios. NADA provided an analysis that concludes that 6.8 
million licensed drivers may no longer have access to new vehicles. 
According to NADA's analysis, this estimate is the number of licensed 
drivers who live in the 3.1-4.2 million households that could borrow 
$11,750, the loan amount for the least expensive new vehicle in 2011 
after a $1000 down payment, but could not borrow $14,750.\894\ This 
difference of $3,000 is meant to represent what NADA views as the cost 
increase of new fuel economy standards, which EPA believes is incorrect 
and responds to further below.
---------------------------------------------------------------------------

    \894\ Wagner, D., P. Nusinovich, and E. Plaza-Jennings, National 
Automobile Dealers Association (February 13, 2012). ``The Effect of 
Proposed MY 2017-2025 Corporate Average Fuel Economy (CAFE) 
Standards on the New Vehicle Market Population.'' Docket EPA-HQ-OAR-
0799.
---------------------------------------------------------------------------

    In assessing these comments, EPA finds that the NADA study does not 
provide a usable estimate of those consumers in the market for new 
vehicles who might have trouble getting loans, and is not a usable 
estimate of the impacts of the rule on the new vehicle market. Because 
the NADA study does not separate consumers who might consider new 
vehicles from consumers who are not in the market for new vehicles, the 
6.8 million licensed driver figure significantly overestimates any 
impact of this rule on the new vehicle market.
    The NADA study suffers from a number of inaccuracies and 
weaknesses. First, it is important to understand what NADA's 6.8 
million estimate actually represents. NADA simply looked at the 113 
million households in the U.S. who could afford to borrow $11,750 and 
estimated which ones of those could not afford to take out a loan of 
$14,750.\895\ NADA's analysis unfortunately neglects a fundamental 
factor that could make this analysis relevant to this rulemaking--how 
many of those households would in fact even be in the market for a new 
vehicle. EPA believes that the vast majority of these households would 
not be in the market for new vehicles (for context, the total new 
vehicle market is estimated to be 17.2 million vehicles in 2025; see 
TSD Chapter 1.3.2.1). As documented by many other commenters and as can 
be found in the Federal Reserve Board's Survey of Consumer 
Finances,\896\ low-

[[Page 62951]]

income households account for a very small portion of new car buyers, 
since they primarily purchase used cars. Thus, the NADA estimate is 
severely flawed and does not contribute usable information to identify 
the impacts of this rule on the vehicle market or on low-income 
households.
---------------------------------------------------------------------------

    \895\ The Bureau of Labor Statistics' Consumer Expenditure 
Survey, on which the Wagner et al. paper is based, measures 121,000 
households in the U.S. in 2010. Wagner et al. find that ``an 
estimated 93% of all consumer units have a financial profile that 
would allow them to meet the 40% maximum debt to income ratio after 
purchasing the current minimum cost new vehicle ($12,750).'' (See 
footnote 894, p. 4.) Ninety-three percent of 121 million households 
is about 113 million households; Wagner et al.'s estimate of 3.1 to 
4.2 million of those who can borrow $11,750 but not $14,750 is 2.8 
to 3.7 percent of that total.
    \896\ In the Federal Reserve Board's 2007 Survey of Consumer 
Finances, households with income below $35,200 (about the lower 40% 
of population by income) bought about 17% of new vehicles; those in 
the bottom quintile of income bought fewer than 2% of new vehicles. 
See Federal Reserve Board, 2007 Survey of Consumer Finances, http://www.federalreserve.gov/econresdata/scf/scf_2007.htm.
---------------------------------------------------------------------------

    Second, the NADA estimate is based, not on people who are 
considering purchasing new vehicles, but on the number of licensed 
drivers in households in the U.S. who could theoretically qualify to 
borrow $11,750, but not $14,750, based purely on debt-to-income 
ratio.\897\ Even accepting NADA's study at face value, the relevant 
unit for the financial decision would be the number of households--not 
every licensed driver in a low income household would purchase a 
separate vehicle. The number of households in the NADA study is 3.1 to 
4.2 million, already far lower than the estimate of 6.8 million 
drivers.
---------------------------------------------------------------------------

    \897\ As noted, these amounts are based on the cost of the least 
expensive vehicle in 2011, with $1,000 down payment, with the 
assumption that it will become $3,000 more expensive as the result 
of three rulemakings, for MYs 2011, 2012-16, and 2017-25 (see Wagner 
et al., footnote 894).
---------------------------------------------------------------------------

    Third, NADA's assumption of a $3,000 cost increase per vehicle is 
based on summing the costs of MY 2011, MY 2012-16, and MY 2017-25 
rules. This estimate does not correspond to EPA's estimate, an average 
cost of about $1,800 per vehicle by MY 2025, in several ways. For 
analyzing the effects of this rulemaking, it is appropriate to focus on 
the costs and benefits associated with this rulemaking, not those of 
previous rulemakings. The impacts of the other rules are included in 
the reference case for this rule. The NADA cost estimate, based on a MY 
2011 vehicle, appears to double-count MY 2011 costs, because those 
should already be included in the price of the MY 2011 vehicle used in 
its study. Further, the costs of meeting MY 2016 standards in 2025 are 
expected to be lower than the costs of meeting those standards in 2016, 
the value used by NADA, due to manufacturer learning. Moreover, EPA's 
costs estimates are based on industry-wide averages, not applicable to 
specific vehicle models. As discussed further below, impacts of the 
rule on the prices of low-price vehicles may well be less than these 
averages.
    Fourth, the estimate does not take into account, as pointed out by 
CU and as EPA has documented, that some lenders currently give 
discounts for loans to purchase more fuel-efficient vehicles.\898\ It 
is possible (though unknown at this time) that the auto loan market may 
evolve to include further consideration of fuel savings, as those 
savings play a significant factor in offsetting the increase in up-
front costs of vehicles.
---------------------------------------------------------------------------

    \898\ See footnote 893, above. An Internet search on the term 
``green auto loan'' produced more than 50 lending institutions that 
provide reduced rates for more efficient vehicles. See Helfand, 
Gloria (2012). ``Memorandum: Lending institutions that provide 
discounts for more fuel-efficient vehicles.'' Assessment and 
Standards Division, Office of Transportation and Air Quality, U.S. 
Environmental Protection Agency, Docket EPA-HQ-OAR-0799.
---------------------------------------------------------------------------

    Fifth, the NADA analysis is based on the cost of the least 
expensive vehicle in the MY 2011 market, but the market size for low-
priced vehicles is only about one-tenth the size of NADA's estimate of 
6.8 million affected people. The agencies' baseline estimates of the 
vehicle fleet in 2025 finds that total sales of vehicles costing less 
than $15,000 (a price point that low income consumers in the new car 
market would most likely be pursuing) in the absence of the rule are 
estimated to be well below 1 million in MY 2025; there is also no 
relationship between the NADA estimate and the potential impact of this 
rule on sales of low-priced vehicles.
    Sixth, if NADA's estimate reflected a measurable effect of the 
rule, that effect would be reflected in a commensurate reduction in 
vehicle sales. Yet there is no connection between any vehicle sales 
estimates provided in comments on this rule and the NADA estimate. As 
discussed in section III.H.11.a, many commenters predict an increase in 
vehicle sales as a result of the rule, though others predict 
decreases.\899\ However, even the most negative estimate provided in 
public comments of the GHG rule's impact on vehicle sales, from the 
Defour Group (which we address in detail in Section III.H.11.a), is a 
reduction of 1.8 million vehicles. The NADA estimate appears 
significantly overstated even compared to this commenter's most 
negative estimate of vehicle sales impacts.
---------------------------------------------------------------------------

    \899\ We note that the role of vehicle financing in vehicle 
purchase decisions is not a separate factor in typical studies of 
the determinants of vehicle sales. Estimates of vehicle sales in the 
literature, which commonly are dependent on both up-front vehicle 
costs and fuel costs, implicitly account for effects of the loan 
market.
---------------------------------------------------------------------------

    For these reasons, we find the NADA study does not provide a usable 
estimate of consumers in the market for new vehicles who might have 
trouble getting new vehicle loans, nor do we find it a usable estimate 
of the impacts of the rule on the new vehicle market.
    It is possible that future trends in the auto loan market may 
affect future vehicle sales. It is also possible that some people who 
have significant debt loads may not be able to get financing for some 
of these new vehicles; they may have to buy different vehicles 
(including used vehicles) or delay purchase. For others who borrow on 
credit, though, as discussed in Section III.H.5, the fuel savings are 
expected to outweigh the increased loan costs from the time of vehicle 
purchase. As some comments suggest, the rule thus may make vehicles 
more affordable to the public, by reducing consumers' vulnerability to 
fuel price jumps. Some comments raised concerns about the impacts of 
the rule specifically on low-priced vehicles. EPA agrees that vehicles 
in the low-priced (economy-class) segment will bear technology costs 
needed to meet the new standards, but it is not known how manufacturers 
will decide to pass on these costs across their vehicle fleets, 
including in the low-priced vehicle segment. If manufacturers decide to 
pass on the full cost of compliance in this segment, then it is 
possible that consumers who might barely afford new vehicles may be 
priced out of the new-vehicle market or may not have access to loans. 
As just discussed, the rule's impacts on availability of loans are 
unclear, because some lenders do factor fuel economy into their loans, 
and it is possible that this trend may expand. In addition, as the 
Union of Concerned Scientists comments, auto makers have some 
flexibility in how both technologies and price changes are applied to 
these vehicles; auto makers have ways to keep some vehicles in the low-
priced vehicle segment if they so choose. Though the rule is expected 
to increase the prices of these vehicles, the degrees of price increase 
and the impacts of the price increases, especially when combined with 
the fuel savings that will accompany these changes, are much less 
clear.
    The Defour Group suggests that the standards are regressive, with 
adverse impacts falling disproportionately on low-income households, 
and possibly limiting their ability to obtain employment because of 
limited mobility. The commenter's regressivity assessment is based on a 
study of a non-footprint-based fuel economy program; \900\ the 
disproportionate impact on low-income households is based on the 
increased prices of used vehicles and the shift toward smaller 
vehicles. As discussed above in Section III.H.11.a,

[[Page 62952]]

EPA finds that the impact on the used vehicle market depends on the 
impact of the rule on new vehicle sales, which we have not quantified. 
Because the footprint-based standard reduces incentives to downsize 
vehicles, we do not accept the conclusion that the rule will result in 
buyers of used vehicles getting smaller ones with a consequent welfare 
loss. For these reasons, the regressivity finding from Jacobsen's paper 
is not applicable to the effects of this rule.
---------------------------------------------------------------------------

    \900\ Jacobsen, Mark. ``Evaluating U.S. Fuel Economy Standards 
in a Model With Producer and Household Heterogeneity.'' Working 
paper, University of California, San Diego, September 2010. Docket 
EPA-HQ-OAR-0799-0829.
---------------------------------------------------------------------------

    In summary, the net effect of the rule on low-income households 
depends on several factors: The way that manufacturers choose to 
translate cost increases into price increases; the effects on sales of 
used vehicles, which depend on the effects on sales of new vehicles; 
the fuel savings that the new (and used) vehicles will provide; and any 
effects on access to credit for new and used vehicles. For reasons 
outlined above, we do not at this time have quantitative assessments of 
how these effects interact and affect low-income households. However, 
due to the significant effect of the rule on fuel savings, especially 
for used vehicles (see RIA Chapter 5.5), we expect low-income 
households to benefit from the more rapid payback period for used 
vehicles, though some of this benefit may be affected by the net effect 
of this rule on the prices and availability of used vehicles, which we 
have not estimated.
    In addition, the net effect of the rule on low-priced vehicles is 
difficult to assess; though we expect the prices of these vehicles to 
increase, it is also possible that auto makers may find ways to 
preserve the entry-vehicle segment, by adding less additional 
technology to these vehicles or through pricing strategies. The net 
effect of the rule on access to credit is also difficult to assess: 
though some consumers may find themselves credit-constrained, some auto 
lenders are already giving interest rate discounts for more fuel-
efficient vehicles, and the loan market may continue to evolve.
12. Employment Impacts
a. Introduction
    Although analysis of employment impacts is not part of a cost-
benefit analysis (except to the extent that labor costs contribute to 
costs), employment impacts of federal rules are of particular concern 
in the current economic climate of sizeable unemployment. When 
President Obama requested that the agencies develop this program, he 
sought a program that would ``strengthen the [auto] industry and 
enhance job creation in the United States.'' \901\ The recently issued 
Executive Order 13563, ``Improving Regulation and Regulatory Review'' 
(January 18, 2011), states, ``Our regulatory system must protect public 
health, welfare, safety, and our environment while promoting economic 
growth, innovation, competitiveness, and job creation'' (emphasis 
added). EPA is accordingly providing partial estimates of the effects 
of this rule on domestic employment in the auto manufacturing and parts 
sectors, while qualitatively discussing how it may affect employment in 
other sectors more generally. Several commenters specifically pointed 
to the desirability of our conducting employment analyses, to provide 
insights into the effects of the rule on economic recovery and the 
health of the auto industry; we did not receive comments opposed to the 
inclusion of employment impacts.
---------------------------------------------------------------------------

    \901\ President Barack Obama. ``Presidential Memorandum 
Regarding Fuel Efficiency Standards. The White House, Office of the 
Press Secretary, May 21, 2010. http://www.whitehouse.gov/the-press-office/presidential-memorandum-regarding-fuel-efficiency-standards.
---------------------------------------------------------------------------

    This rule is expected to affect employment in the United States 
through the regulated sector--the auto manufacturing industry--and 
through several related sectors, specifically, industries that supply 
the auto manufacturing industry (e.g., vehicle parts), auto dealers, 
the fuel refining and supply sectors, and the general retail sector. 
According to the U.S. Bureau of Labor Statistics, in 2010, about 
677,000 people in the U.S. were employed in Motor Vehicle and Parts 
Manufacturing Sector (NAICS 3361, 3362, and 3363). About 129,000 people 
in the U.S. were employed specifically in the Automobile and Light 
Truck Manufacturing Sector (NAICS 33611), the directly regulated 
sector, since it encompasses the auto manufacturers that are 
responsible for complying with the standards.\902\ The employment 
effects of this rule are expected to expand beyond the regulated 
sector. Though some of the parts used to achieve the standards are 
likely to be built by auto manufacturers themselves, the auto parts 
manufacturing sector also plays a significant role in providing those 
parts, and will also be affected by changes in vehicle sales. Changes 
in light duty vehicle sales, discussed in Section III.H.11, could 
affect employment for auto dealers. As discussed in Section III.H.4, 
this rule is expected to reduce the amount of fuel these vehicles use, 
and thus affect the petroleum refinery and supply industries. Finally, 
since the net reduction in cost associated with this rule is expected 
to lead to lower household expenditures on fuel net of vehicle costs, 
consumers then will have additional discretionary income that can be 
spent on other goods and services.
---------------------------------------------------------------------------

    \902\ U.S. Bureau of Labor Statistics, Quarterly Census of 
Employment and Wages, as accessed on August 9, 2011.
---------------------------------------------------------------------------

    When the economy is at full employment, an environmental regulation 
is unlikely to have much impact on net overall U.S. employment; 
instead, labor would primarily be shifted from one sector to another. 
These shifts in employment impose an opportunity cost on society, 
approximated by the wages of the employees, as regulation diverts 
workers from other activities in the economy. In this situation, any 
effects on net employment are likely to be transitory as workers change 
jobs (e.g., some workers may need to be retrained or require time to 
search for new jobs, while shortages in some sectors or regions could 
bid up wages to attract workers).
    On the other hand, if a regulation comes into effect during a 
period of high unemployment, a change in labor demand due to regulation 
may affect net overall U.S. employment because the labor market is not 
in equilibrium. In such a period, both positive and negative employment 
effects are possible.\903\ Schmalansee and Stavins point out that net 
positive employment effects are possible in the near term when the 
economy is at less than full employment due to the potential hiring of 
idle labor resources by the regulated sector to meet new requirements 
(e.g., to install new equipment) and new economic activity in sectors 
related to the regulated sector.\904\ In the longer run, the net effect 
on employment is more difficult to predict and will depend on the way 
in which the related industries respond to the regulatory requirements. 
As Schmalansee and Stavins note, it is possible that the magnitude of 
the effect on employment could vary over time, region, and sector, and 
positive effects on employment in some regions or sectors could be 
offset by negative effects in other regions or sectors. For this 
reason, they urge caution in reporting partial employment effects since 
it can ``paint an inaccurate

[[Page 62953]]

picture of net employment impacts if not placed in the broader economic 
context.''
---------------------------------------------------------------------------

    \903\ Masur and Posner, 2011. ``Regulation, Unemployment, and 
Cost-Benefit Analysis.'' http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1920441 (Docket EPA-HQ-OAR-2010-0799-1222).
    \904\ Schmalensee, Richard, and Robert N. Stavins. ``A Guide to 
Economic and Policy Analysis of EPA's Transport Rule.'' White paper 
commissioned by Excelon Corporation, March 2011 (Docket EPA-HQ-OAR-
2010-0799-0676).
---------------------------------------------------------------------------

    It is assumed that the official unemployment rate will have 
declined to 5.3 percent by the time by the time this rule takes effect 
and so the effect of the regulation on labor will be to shift workers 
from one sector to another.\905\ Those shifts in employment impose an 
opportunity cost on society, approximated by the wages of the 
employees, as regulation diverts workers from other activities in the 
economy. In this situation, any effects on net employment are likely to 
be transitory as workers change jobs (e.g., some workers may need to be 
retrained or require time to search for new jobs, while shortages in 
some sectors or regions could bid up wages to attract workers). It is 
also possible that the state of the economy will be such that positive 
or negative employment effects will occur.
---------------------------------------------------------------------------

    \905\ Office of Management and Budget, ``Fiscal Year 2012 Mid-
Session Review: Budget of the U.S. Government.'' http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/12msr.pdf, p. 10.
---------------------------------------------------------------------------

    Measuring the employment impacts of a policy depend on a number of 
inputs and assumptions. For instance, as discussed, assumptions about 
the overall state of unemployment in the economy play a major role in 
measured job impacts. The inputs to the models commonly are the changes 
in quantities or expenditures in the affected sectors; model results 
may vary in different studies depending on the assumptions about the 
levels of those inputs, and which sectors receive those changes. Which 
sectors are included in the study can also affect the results. For 
instance, a study of this program that looks only at employment impacts 
in the refinery sector may find negative effects, because consumers 
will purchase less gasoline; a study that looks only at the auto parts 
sector, on the other hand, may find positive impacts, because the 
program will require redesigned or additional parts for vehicles. In 
both instances, these would only be partial perspectives on the overall 
change in national employment due to Federal regulation.
    The NPRM included a discussion of different methods for conducting 
employment analysis (see the discussion in RIA Chapter 8.2.2), 
including computable general equilibrum models, input-output models, 
hybrid models, and single-sector models, and requested comment on those 
methods. See 76 FR 75155-156. That discussion noted that all potential 
methods of estimating employment impacts of a rule have advantages and 
limitations. We did not receive comments about methods, except for some 
support for EPA's approach in the NPRM, and some support (discussed 
further below) for including multiplier impacts.
    We received a number of comments (from the Defour Group and from 
some private individuals) asserting that there will be decreases in 
employment as a result of the costs of the rule, and a number of 
comments (from the United Auto Workers, environmental organizations, 
sustainable business groups, some private individuals, and others) 
asserting increases in employment, based on the development of advanced 
technologies and the reduction in net costs due to fuel savings. An 
assessment by the Defour Group predicts a loss of 155,000 jobs in 
manufacturing and supply, plus another 50,000 in distribution.\906\ A 
study by Ceres predicts job gains of 43,000 in the auto industry and 
484,000 economy-wide.\907\ Some comments cite a study by the Natural 
Resources Defense Council, National Wildlife Federation, and United 
Auto Workers that 150,000 auto workers already are working to supply 
clean, fuel-efficient technologies.\908\ The differences in results for 
quantitative employment impacts are due to factors such as those 
discussed above. Estimates of decreases in employment commonly come 
from studies that use cost estimates higher than those of EPA, and 
sometimes lower benefits estimates, resulting in reductions in vehicle 
sales. For instance, some comments from individuals cite the National 
Automobile Dealers Association and Center for Automotive Research for 
cost estimates of $5000 to $6000 per vehicle, much higher than those 
estimated in Section III.H.2; EPA does not endorse those alternative 
cost estimates, as discussed in Section 18.2 of the Response to 
Comments. The NADA estimates inappropriately include the costs of other 
rulemakings and use indirect cost estimates which we consider 
inappropriate (see TSD Chapter 3.1.2.2). The Center for Automotive 
Research estimates do not take into account expected technological 
advances, do not reflect the use of air conditioning credits in this 
rule, and calculate costs from a baseline of 2008 instead of MY 2016 
standards. Those studies commonly look at the employment associated 
with vehicle sales, but not the employment associated with producing 
the technologies needed to comply with the standards, or changes in 
labor intensity of production. Analyses that find increases in 
employment commonly start with increased vehicle sales as a result of 
the rule, and take into consideration the employment effects associated 
with additional technologies. In both cases, ``multiplier'' effects, 
which extend employment impacts beyond the auto sector to impacts on 
suppliers, other sectors, and expenditure changes by workers, lead to 
large estimates, either positive or negative, of the employment effects 
of the rule. We received the suggestion to include in our analysis an 
alternative scenario where there is less than full employment; the 
implication of less than full employment is that multiplier effects are 
more likely. We also requested comment on other sectors that warranted 
consideration in this rule, 76 FR 75157, but we did not receive 
suggestions.
---------------------------------------------------------------------------

    \906\ Walton, Thomas F., and Dean Drake, Defour Group LLC 
(February 13, 2012). ``Comments on the Notice of Proposed Rulemaking 
and Preliminary Regulatory Impact Analysis for MY 2017 to 2025 Fuel 
Economy Standards.'' Docket EPA-HQ-OAR-2010-0799-9319.
    \907\ Management Information Services, Inc. (July 2011). ``More 
Jobs per Gallon: How Strong Fuel Economy/GHG Standards Will Fuel 
American Jobs.'' Boston, MA: Ceres. Docket EPA-HQ-OAR-2010-0799-
0709.
    \908\ Natural Resources Defense Council, National Wildlife 
Federation, and United Auto Workers (August 2011). ``Supplying 
Ingenuity: U.S. Suppliers of Clean, Fuel-Efficient Vehicle 
Technologies.'' http://www.nrdc.org/transportation/autosuppliers/files/SupplierMappingReport.pdf (Docket EPA-HQ-OAR-2010-0799-).
---------------------------------------------------------------------------

    After considering these comments, EPA is continuing with the 
employment approach in the NPRM, though with some updating of 
quantitative impacts in the auto sector. For impacts in the auto 
sector, EPA uses a conceptual framework that identifies employment 
impacts due to changes in vehicle sales, changes in costs, and changes 
in the labor intensity of production. For impacts in related sectors, 
EPA presents qualitative discussions. We do not quantify multiplier 
effects, due to uncertainty over the state of the economy at the time 
this rule takes effect as well as the market evolutions that are likely 
to occur between now and implementation.
b. Conceptual Framework for Employment Impacts in the Regulated Sector
    A study by Morgenstern, Pizer, and Shih\909\ provides a 
retrospective look at the impacts of regulation in employment in the 
regulated sectors by estimating the effects on employment of

[[Page 62954]]

spending on pollution abatement for four highly polluting/regulated 
U.S. industries (pulp and paper, plastics, steel, and petroleum 
refining) using data for six years between 1979 and 1991. The paper 
provides a theoretical framework that can be useful for examining the 
impacts of a regulatory change on the regulated sector in the medium to 
longer term. In particular, it identifies three separate ways that 
employment levels may change in the regulated industry in response to a 
new (or more stringent) regulation.
---------------------------------------------------------------------------

    \909\ Morgenstern, Richard D., William A. Pizer, and Jhih-Shyang 
Shih. ``Jobs Versus the Environment: An Industry-Level 
Perspective.'' Journal of Environmental Economics and Management 43 
(2002): 412-436 (Docket EPA-HQ-OAR-2010-0799-1011).
---------------------------------------------------------------------------

    Demand effect: Higher production costs due to the regulation will 
lead to higher market prices; higher prices in turn reduce demand for 
the good, reducing the demand for labor to make that good. In the 
authors' words, the ``extent of this effect depends on the cost 
increase passed on to consumers as well as the demand elasticity of 
industry output.''
    Cost effect: As costs go up, plants add more capital and labor 
(holding other factors constant), with potentially positive effects on 
employment. In the authors' words, as ``production costs rise, more 
inputs, including labor, are used to produce the same amount of 
output.''
    Factor-shift effect: Post-regulation production technologies may be 
more or less labor-intensive (i.e., more/less labor is required per 
dollar of output). In the authors' words, ``environmental activities 
may be more labor intensive than conventional production,'' meaning 
that ``the amount of labor per dollar of output will rise,'' though it 
is also possible that ``cleaner operations could involve automation and 
less employment, for example.''
    According to the authors, the ``demand effect'' is expected to have 
a negative effect on employment,\910\ the ``cost effect'' to have a 
positive effect on employment, and the ``factor-shift effect'' to have 
an ambiguous effect on employment. Without more information with 
respect to the magnitudes of these competing effects, it is not 
possible to predict the total effect environmental regulation will have 
on employment levels in a regulated sector.
---------------------------------------------------------------------------

    \910\ As will be discussed below, the demand effect is 
potentially an exception to this rule. While the vehicles become 
more expensive, they also produce reduced fuel expenditures; the 
reduced fuel costs provide a countervailing impact on vehicle sales. 
As discussed in Preamble Section III.H.1, this possibility that 
vehicles may become more attractive to consumers after the program 
poses a conundrum: Why have interactions between vehicle buyers and 
producers not provided these benefits without government 
intervention?
---------------------------------------------------------------------------

    The authors conclude that increased abatement expenditures 
generally have not caused a significant change in employment in those 
sectors. More specifically, their results show that, on average across 
the industries studied, each additional $1 million spent on pollution 
abatement results in a (statistically insignificant) net increase of 
1.5 jobs.
    This approach to employment analysis has the advantage of carefully 
controlling for many possibly confounding effects in order to separate 
the effect of changes in regulatory costs on employment. It was, 
however, conducted for only four sectors. It could also be very 
difficult to update the study for other sectors, because one of the 
databases on which it relies, the Pollution Abatement Cost and 
Expenditure survey, has been conducted infrequently since 1994, with 
the last survey conducted in 2005. The empirical estimates provided by 
Morgenstern et al. are not relevant to the case of fuel economy 
standards, which are very different from the pollution control 
standards on industrial facilities that were considered in that study. 
In addition, it does not examine the effects of regulation on 
employment in sectors related to but outside of the regulated sector. 
Nevertheless, the theory that Morgenstern et al. developed continues to 
be useful in this context for examining the impacts of the rule on the 
auto sector.
c. Employment Analysis of This Rule
    As mentioned above, this program is expected to affect employment 
in the regulated sector (auto manufacturing) and other sectors directly 
affected by the rule: auto parts suppliers, auto dealers, and the fuel 
supply market (which will face reduced petroleum production due to 
reduced fuel demand but which may see additional demand for electricity 
or other fuels). Changes in consumer expenditures due to higher vehicle 
costs and lower fuel expenses will also affect employment. In addition, 
as the discussion above suggests, each of these sectors could 
potentially have ripple effects in the rest of the economy. These 
ripple effects depend much more heavily on the state of the 
macroeconomy than do the direct effects. At the national level, 
employment may increase in one industry or region and decrease in 
another, with the net effect being smaller than either individual-
sector effect. EPA does not attempt to quantify the net effects of the 
regulation on overall national employment.
    The discussion that follows provides a partial, bottom-up 
quantitative estimate of the effects of this rule on the regulated 
sector (the auto industry; for reasons discussed below, we include some 
quantitative assessment of effects on suppliers to the industry, 
although they are not regulated directly). It also includes qualitative 
discussion of the effects of the rule on other sectors. Focusing 
quantification of employment impacts on the regulated sector has some 
advantages over quantifying all impacts. The analysis relies on data 
generated as part of the rulemaking process, which focuses on the 
regulated sector; as a result, what is presented here is based on 
internally consistent assumptions and estimates made in this rule. 
Focusing on the regulated sector provides insight into employment 
effects in that sector without having to make assumptions about the 
state of the economy when this rule has its impacts. We include a 
qualitative discussion of employment effects in other sectors to 
provide a broader perspective on the impacts of this rule.
    As noted above, in a full-employment economy, any changes in 
employment will result from people changing jobs or voluntarily 
entering or exiting the workforce. In a full-employment economy, 
employment impacts of this rule will change employment in specific 
sectors, but it will have small, if any, effect on aggregate 
employment. This rule would take effect in 2017 through 2025; by then, 
the current high unemployment may be moderated or ended. For that 
reason, this analysis does not include multiplier effects, but instead 
focuses on employment impacts in the most directly affected industries. 
Those sectors are likely to face the most concentrated employment 
impacts.
i. Employment Impacts in the Auto Industry
    Following the Morgenstern et al. conceptual framework for the 
impacts of regulation on employment in the regulated sector, we 
consider three effects for the auto sector: The demand effect, the cost 
effect, and the factor shift effect. However, we are only able to offer 
quantitative estimates for the cost effect. We note that these 
estimates, based on extrapolations from current data, become more 
uncertain as time goes on.
(1) The Demand Effect
    The demand effect depends on the effects of this rule on vehicle 
sales. If vehicle sales increase, then more people will be required to 
assemble vehicles and their components. If vehicle sales decrease, 
employment associated with these activities will unambiguously 
decrease. Unlike in Morgenstern et al.'s study, where the demand effect 
decreased employment, there are countervailing effects in the vehicle

[[Page 62955]]

market due to the fuel savings resulting from this program. On one 
hand, this rule will increase vehicle costs; by itself, this effect 
would reduce vehicle sales. On the other hand, this rule will reduce 
the fuel costs of operating the vehicle; by itself, this effect would 
increase vehicle sales, especially if potential buyers have an 
expectation of higher fuel prices. The sign of the demand effect will 
depend on which of these effects dominates. This issue is discussed 
further in Sections III.H.1 and III.H.11. Some comments encouraged us 
to quantify this effect, once we quantified estimates for vehicle 
sales. Because, as described in Section III.H.11, we have not 
quantified the impact on sales for this rule, we do not quantify the 
demand effect.
(2) The Cost Effect
    The demand effect measures employment changes due to new vehicle 
sales only. The cost effect measures employment impacts due to the 
development, manufacturing, and installation by auto suppliers and 
manufacturers of the new or additional technologies needed for vehicles 
to comply with the standards. As RIA Chapter 8.2.3.1.2 explains, we 
estimate the cost effect by multiplying the costs of rule compliance by 
ratios of workers to each $1 million of expenditures in that sector. 
The magnitude and relative size of these ratios depends on the sectors' 
labor intensity of the production process. Several commenters mentioned 
the importance of this rule in encouraging employment related to the 
technologies expected to be used to comply with this rule. We received 
no comments criticizing the approach used here; the UAW commended EPA 
for it.
    The use of these ratios has both advantages and limitations. It is 
often possible to estimate these ratios for quite specific sectors of 
the economy; as a result, it is not necessary to extrapolate employment 
ratios from possibly unrelated sectors. On the other hand, these 
estimates are averages for the sectors, covering all the activities in 
those sectors; they may not be representative of the labor required 
when expenditures are required on specific activities, as the factor 
shift effect (discussed below) indicates. In addition, these estimates 
do not include changes in sectors that supply these sectors, such as 
steel or electronics producers. They thus may best be viewed as the 
effects on employment in the auto sector due to the changes in 
expenditures in that sector, rather than as an assessment of all 
employment changes due to these changes in expenditures.
    Some of the costs of this rule will be spent directly in the auto 
manufacturing sector, but some of the costs will be spent in the auto 
parts manufacturing sector. Because we do not have information on the 
proportion of expenditures in each sector, we separately present the 
ratios for both the auto manufacturing sector and the auto parts 
manufacturing sector. These are not additive, but should instead be 
considered as a range of estimates for the cost effect, depending on 
which sector adds technologies to the vehicles to comply with the 
regulation.
    We use several public sources for estimates of employment per $1 
million expenditures: The U.S. Bureau of Labor Statistics' (BLS) 
Employment Requirements Matrix (ERM); \911\ the Census Bureau's Annual 
Survey of Manufactures \912\ (ASM); and the Census Bureau's Economic 
Census. RIA Chapter 8.2.3.1.2 provides details on all these sources. 
The ASM and the Economic Census have more sectoral detail than the ERM; 
we provide estimates for both Motor Vehicle Manufacturing and Light 
Duty Vehicle Manufacturing sectors for comparison purposes. For all of 
these, we adjust for the ratio of domestic production to domestic sales 
(as supported by a commenter). The maximum value for employment impacts 
per $1 million expenditures (after accounting for the share of domestic 
production) in 2010 was estimated to be 1.809 if all the additional 
costs are in the parts sector; the minimum value is 0.402, if all the 
additional costs are in the light-duty vehicle manufacturing sector: 
that is, the range of employment impacts is between 0.4 and 2 
additional jobs per $1 million expenditures in the sector. The 
different data sources provide similar magnitudes for the estimates for 
the sectors. Parts manufacturing appears to be more labor-intensive 
than vehicle manufacturing; light-duty vehicle manufacturing appears to 
be slightly less labor-intensive than motor vehicle manufacturing as a 
whole. As discussed in the RIA, trends in the BLS ERM are used to 
estimate productivity improvements over time that are used to adjust 
these ratios over time. Table III-107 shows the cost estimates 
developed for this rule, discussed in Section III.H.2. Multiplying 
those cost estimates by the maximum and minimum values for the cost 
effect (maximum using the Economic Census ratio if all additional costs 
are in the parts sector, and minimum using the Economic Census ratio 
for the light-duty sector if all additional costs are borne by auto 
manufacturers) provides the cost effect employment estimates. This is a 
simple way to examine the relationship between labor required and 
expenditure.
---------------------------------------------------------------------------

    \911\ http://www.bls.gov/emp/ep_data_emp_requirements.htm.
    \912\ http://www.census.gov/manufacturing/asm/index.html.
---------------------------------------------------------------------------

    While we estimate employment impacts, in job-years, beginning with 
the first year of the standard (2017), some of these employment gains 
may occur earlier as auto manufacturers and parts suppliers hire staff 
in anticipation of compliance with the standard. A job-years is a way 
to calculate the amount of work needed to complete a specific task. For 
example, a job-year is one year of work for one person, or 6 months of 
work for 2 people.

       Table III-107--Employment Effects Due to Increased Expenditures on Vehicles and Parts, in Job-Years
----------------------------------------------------------------------------------------------------------------
                                                                                 Minimum
                                                           Costs (before    employment effect       Maximum
                                                           adjustment for         if all       employment effect
                          Year                                domestic       expenditures are        if all
                                                           proportion of      in light duty     expenditures are
                                                            production)        vehicle mfg        in the parts
                                                            ($millions)           sector             sector
----------------------------------------------------------------------------------------------------------------
2017...................................................             $2,435                700              3,200
2018...................................................              4,848              1,300              6,200
2019...................................................              6,818              1,700              8,400
2020...................................................              8,858              2,100             10,500
2021...................................................             12,400              2,900             14,200
2022...................................................             18,323              4,100             20,200
2023...................................................             23,734              5,100             25,200

[[Page 62956]]

 
2024...................................................             29,101              6,000             29,700
2025...................................................             31,678              6,300             31,100
                                                        --------------------------------------------------------
    Total..............................................  .................             30,300            148,800
----------------------------------------------------------------------------------------------------------------

(3) The Factor Shift Effect
    The factor shift effect looks at the effects on employment due to 
changes in labor intensity associated with a regulation. As noted 
above, the estimates of the cost effect assume constant labor per $1 
million in expenditures, though the new technologies may be either more 
or less labor-intensive than the existing ones. An estimate of the 
factor shift effect would either increase or decrease the estimate used 
for the cost effect.
    We are not quantifying the factor shift effect here, for lack of 
data on the labor intensity of all the possible technologies that 
manufacturers could use to comply with the standards. As discussed in 
RIA Chapter 8.2.3.1.3, for a subset of the technologies, EPA-sponsored 
research (discussed in Chapter 3.1.1.1 of the Joint TSD), which 
compared new technologies to existing ones at the level of individual 
components, found that labor use for those new technologies increased: 
those new fuel-saving technologies use more labor than the baseline 
technologies. For instance, switching from a conventional mid-size 
vehicle to a hybrid version of that vehicle involves an additional 
$395.85 in labor costs, which we estimate to require an additional 8.6 
hours per vehicle.\913\ For a subset of the technologies likely to be 
used to meet the standards in this rule, then, the factor shift effect 
increases labor demand, at least in the short run; in the long run, as 
with all technologies, the cost structure is likely to change due to 
learning, economies of scale, etc. The technologies examined in this 
research are, however, only a subset of the technologies that auto 
makers may use to comply with the standards. As a result, these results 
cannot be considered definitive evidence that the factor-shift effect 
increases employment for this rule. We therefore do not quantify the 
factor shift effect. Comments supported this approach and encouraged 
development of these estimates for more technologies. Because of the 
complexity of the estimation process, we are not presenting additional 
estimates in the RIA.
---------------------------------------------------------------------------

    \913\ FEV, Inc. ``Light-Duty Technology Cost Analysis, Power-
Split and P2 HEV Case Studies.'' EPA Report EPA-420-R-11--015, 
November 2011 (Docket EPA-HQ-OAR-2010-0799-1101).
---------------------------------------------------------------------------

(4) Summary of Employment Effects in the Auto Sector
    While we are not able to quantify the demand or factor shift 
effects, the cost effect results show that the employment effects of 
the increased spending in the regulated sector (and, possibly, the 
parts sector) are expected to be positive and on the order of a few 
thousand in the initial years of the program. As noted above, the motor 
vehicle and parts manufacturing sectors employed about 677,000 people 
in 2010, with automobile and light truck manufacturing accounting for 
about 129,000 of that total.
ii. Effects on Employment for Auto Dealers
    The effects of the standards on employment for auto dealers depend 
principally on the effects of the standards on light duty vehicle 
sales: increases in sales are likely to contribute to employment at 
dealerships, while reductions in sales are likely to have the opposite 
effect. In addition, auto dealers may be affected by changes in 
maintenance and service costs. Increases in those costs are likely to 
increase labor demand in dealerships, and reductions are likely to 
decrease labor demand.
    The Defour Group as part of its employment estimate (discussed in 
III.H.12.a) expressed concern about employment in this sector, due to 
the potential impacts of the rule on vehicle sales; they provide an 
estimate of 35,000 jobs lost at auto dealers due to their predicted 
sales reductions for MY 2025.\914\ As discussed in III.H.11, we do not 
at this point provide a quantitative estimate of the effects of this 
rule on vehicle sales. The National Automobile Dealers Association 
encouraged additional information to help consumers better understand 
the benefits of investing in improved fuel economy, and noted the 
information provided by the new fuel economy label developed by the 
agencies.\915\
---------------------------------------------------------------------------

    \914\ See footnote 906.
    \915\ Information on the label may be found at http://www.epa.gov/otaq/carlabel/index.htm.
---------------------------------------------------------------------------

    Although this rule predicts very small penetration of plug-in 
hybrids and electric vehicles, the uncertainty on consumer acceptance 
of such technology vehicles is even greater. As discussed in Section 
III.H.1.b, consumers may find some characteristics of electric vehicles 
and plug-in hybrid electric vehicles, such as the ability to fuel with 
electricity rather than gasoline, attractive; they may find other 
characteristics, such as the limited range for electric vehicles, 
undesirable. As a result, some consumers will find that EVs will meet 
their needs, but other buyers will choose more conventional vehicles. 
Auto dealers may play a major role in explaining the merits and 
disadvantages of these new technologies to vehicle buyers. There may be 
a temporary need for increased employment to train sales staff in the 
new technologies as the new technologies become available. We agree 
with the comment that consumer information has the potential to play an 
important role in consumer acceptance of vehicles subject to this rule.
iii. Effects on Employment in the Auto Parts Sector
    As discussed in the context of employment in the auto industry, 
some vehicle parts are made in-house by auto manufacturers; others are 
made by independent suppliers who are not directly regulated, but who 
will be affected by the standards as well. The additional expenditures 
on technologies are expected to have a positive effect on employment in 
the parts sector as well as the manufacturing sector; the breakdown in 
employment between the two sectors is difficult to predict. The effects 
on the parts sector also depend

[[Page 62957]]

on the effects of the standards on vehicle sales and on the labor 
intensity of the new technologies, qualitatively in the same ways as 
for the auto manufacturing sector. The United Auto Workers, Blue-Green 
Alliance, environmental organizations, and various others specifically 
noted the employment gains associated with development and use of these 
advanced technologies.
iv. Effects on Employment for Fuel Suppliers
    In addition to the effects on the auto manufacturing and parts 
sectors, these rules will result in changes in fuel use that lower GHG 
emissions. Fuel saving, principally reductions in liquid fuels such as 
gasoline and diesel, will affect employment in the fuel suppliers 
industry sectors throughout the supply chain, from refineries to 
gasoline stations. To the extent that the standards result in increased 
use of electricity, natural gas, or other fuels, employment effects 
will result from providing these fuels and developing the 
infrastructure to supply them to consumers.
    Expected petroleum fuel consumption reductions can be found in 
Section III.H.4. While those figures represent fuel savings for 
purchasers of fuel, it represents a loss in value of output for the 
petroleum refinery industry, fuel distribution, and gasoline stations. 
The loss of expenditures to petroleum fuel suppliers throughout the 
petroleum fuel supply chain, from the petroleum refiners to the 
gasoline stations, is likely to result in reduced employment in these 
sectors. Comments from the United Auto Workers (UAW), Blue-Green 
Alliance, environmental organizations, and Investor Network on Climate 
Risk suggested that, because other sectors are more labor-intensive 
than gasoline production and sales, reducing expenditures on gasoline 
and making them available for other consumer goods may increase 
employment. EPA has not estimated this effect.
    This rule is also expected to lead to increases in electricity 
consumption by vehicles, as discussed in Section III.H.4. This new fuel 
may require additional infrastructure, such as electricity charging 
locations. Providing this infrastructure will require some increased 
employment. In addition, the generation of electricity will also 
require some additional labor. We have insufficient information at this 
time to predict whether the increases in labor associated with 
increased infrastructure provision and fuel generation for these newer 
fuels will be greater or less than the employment reductions associated 
with reduced demand for petroleum fuels.
v. Effects on Employment Due to Impacts on Consumer Expenditures
    As a result of these standards, consumers will pay a higher up-
front cost for the vehicles, but they will recover those costs in a 
fairly short payback period (see Section III.H.5); indeed, people who 
finance their vehicles are expected to find that their fuel savings per 
month exceed the increase in the loan cost (except at very high 
interest rate levels). As a result, consumers will have additional 
money to spend on other goods and services (for those consumers who pay 
cash for their vehicles, it will occur after the initial payback 
period). These increased expenditures will support employment in those 
sectors where consumers spend their savings.
    These increased expenditures will occur in 2017 and beyond. If the 
economy returns to full employment by that time, any change in consumer 
expenditures would primarily represent a shift in employment among 
sectors. If, on the other hand, the economy still has substantial 
unemployment, these expenditures would contribute to employment through 
increased consumer demand.
    Environmental organizations, CFA, the National Association of Clean 
Air Agencies, American Council for an Energy-Efficient Economy (ACEEE), 
UAW, Business for Innovative Climate & Energy Policy (BICEP), Ceres, 
and some private citizens suggested in written comments and in public 
hearings that this rule would increase economic growth in the U.S. The 
Center for Biological Diversity, International Council for Clean 
Transportation, Natural Resources Defense Council, and Union of 
Concerned Scientists (UCS) recommended that EPA include an analysis of 
the economy-wide impacts of the rule, including impacts on U.S. gross 
domestic product (GDP) and consumption patterns. ACEEE, Ceres, BICEP, 
and UCS suggested that fuel savings from the rule would allow consumers 
to increase their spending on other goods and services in more 
productive sectors of the economy, which would likely increase GDP and 
consumption in the U.S. CFA specifically recommended that EPA use a GDP 
multiplier approach that recognizes that national output would increase 
from the rule as a result of reducing U.S. oil imports. Ceres, BICEP, 
UCS, and the National Wildlife Federation cited a report for Ceres by 
Management Information Services, Inc. that found that a 4% annual 
improvement in fuel economy would increase U.S. gross economic output 
by $21.3 billion, personal income by $14.2 billion, and revenue for 
federal, state, and local governments by $12.7 billion in 2030.\916\ On 
the other hand, other private citizens suggested the economy could be 
harmed as a result of this rule, but did not offer any specific data to 
support the claim. Analyzing the economy-wide impacts from this rule is 
challenging due to the inherent uncertainty in projecting a myriad of 
economic parameters into the future (e.g., levels of employment of 
labor and capital, the structure of the economy, prices of goods and 
services) and determining an appropriate economic framework to model 
(e.g., supply equaling demand in all markets and specific forms of 
market interactions). EPA has not been able to identify a widely agreed 
upon methodology and thus we continue to not quantify the impacts of 
the rule on overall economic patterns in the U.S.
---------------------------------------------------------------------------

    \916\ Management Information Services, Inc., July 2011, ``More 
Jobs Per Gallon: How Strong Fuel Economy/GHG Standards Will Fuel 
American Jobs'', A Ceres Report, Washington, DC.
---------------------------------------------------------------------------

d. Summary
    The primary employment effects of this rule are expected to be 
found throughout several key sectors: Auto manufacturers, auto dealers, 
auto parts manufacturing, fuel production and supply, and consumers. 
This rule initially takes effect in model year 2017, a time period 
sufficiently far in the future that the current sustained high 
unemployment at the national level may be moderated or ended. In an 
economy with full employment, the primary employment effect of a 
rulemaking is likely to be to move employment from one sector to 
another, rather than to increase or decrease employment. For that 
reason, we focus our partial quantitative analysis on employment in the 
regulated sector, to examine the impacts on that sector directly. We 
discuss the likely direction of other impacts in the regulated sector 
as well as in other directly related sectors, but we do not quantify 
those impacts, because they are more difficult to quantify with 
reasonable accuracy, particularly so far into the future.
    For the regulated sector, we have not quantified the demand effect. 
The cost effect is expected to increase employment by 700-3,200 jobs-
year in 2017 depending on the share of that employment that is in the 
auto manufacturing sector compared to the auto parts manufacturing 
sector. As mentioned above, some of these job

[[Page 62958]]

gains may occur earlier as auto manufacturers and parts suppliers hire 
staff to prepare to comply with the standard. Though we do not have 
estimates of the factor shift effect for all potential compliance 
technologies, the evidence which we do have for some technologies 
suggests that many of the technologies will have increased labor needs.
    Changes in vehicle sales are expected to affect labor needs in auto 
dealerships and in parts manufacturing. Increased expenditures for auto 
parts are expected to require increased labor to build parts, though 
this effect also depends on any changes in the labor intensity of 
production; as noted, the subset of potential compliance technologies 
for which data are available show increased labor requirements. Reduced 
fuel production implies less employment in the petroleum sectors. 
Finally, consumer spending is expected to affect employment through 
changes in expenditures in general retail sectors; net fuel savings by 
consumers are expected to increase demand (and therefore employment) in 
other sectors.

I. Statutory and Executive Order Reviews

a. Executive Order 12866: ``Regulatory Planning and Review and 
Executive Order 13563: Improving Regulation and Regulatory Review''
    Under section 3(f)(1) of Executive Order 12866 (58 FR 51735, 
October 4, 1993), this action is an ``economically significant 
regulatory action'' because it is likely to have an annual effect on 
the economy of $100 million or more. Accordingly, EPA submitted this 
action to the Office of Management and Budget (OMB) for review under 
Executive Orders 12866 and 13563 (76 FR 3821, January 21, 2011) and any 
changes made in response to OMB recommendations have been documented in 
the docket for this action as required by CAA section 307(d)(4)(B)(ii).
    In addition, EPA prepared an analysis of the potential costs and 
benefits associated with this action. This analysis is contained in the 
Final Regulatory Impact Analysis, which is available in the docket for 
this rulemaking and at the docket internet address listed under 
ADDRESSES above.
b. Paperwork Reduction Act
    The information collection requirements in this rule have been 
submitted for approval to the Office of Management and Budget (OMB) 
under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. The 
Information Collection Request (ICR) document prepared by EPA has been 
assigned EPA ICR number 0783.61. The information collection 
requirements are not enforceable until OMB approves them.
    The Agency is finalizing requirements for manufacturers to submit 
information to ensure compliance with the provisions in this rule. This 
includes a variety of requirements for vehicle manufacturers. Section 
208(a) of the Clean Air Act requires that vehicle manufacturers provide 
information the Administrator may reasonably require to determine 
compliance with the regulations; submission of the information is 
therefore mandatory. We will consider confidential all information 
meeting the requirements of section 208(c) of the Clean Air Act.
    As shown in Table III-108, the total annual reporting burden 
associated with this rule is about 5,700 hours and $1.4 million, based 
on a projection of 33 respondents. The estimated burden for vehicle 
manufacturers is a total estimate for new reporting requirements. 
Burden means the total time, effort, or financial resources expended by 
persons to generate, maintain, retain, or disclose or provide 
information to or for a Federal agency. This includes the time needed 
to review instructions; develop, acquire, install, and utilize 
technology and systems for the purposes of collecting, validating, and 
verifying information, processing and maintaining information, and 
disclosing and providing information; adjust the existing ways to 
comply with any previously applicable instructions and requirements; 
train personnel to be able to respond to a collection of information; 
search data sources; complete and review the collection of information; 
and transmit or otherwise disclose the information.

     Table III-108--Estimated Burden for Reporting and Recordkeeping
                              Requirements
------------------------------------------------------------------------
                                                 Annual
            Number of respondents             burden hours  Annual costs
------------------------------------------------------------------------
33..........................................        5,667    $1,399,632
------------------------------------------------------------------------

    An agency may not conduct or sponsor, and a person is not required 
to respond to a collection of information unless it displays a 
currently valid OMB control number. The OMB control numbers for EPA's 
regulations in 40 CFR are listed in 40 CFR part 9. In addition, EPA is 
amending the table in 40 CFR part 9 of currently approved OMB control 
numbers for various regulations to list the regulatory citations for 
the information requirements contained in this final rule.
    The American Petroleum Institute commented that EPA must seek 
approval for the paperwork burden associated with the information 
collection that the 2017 car rule could impose on stationary sources 
newly subject to permitting requirements. In response, this rule does 
not contain any paperwork requirements for entities other than the auto 
manufacturers discussed above.
c. Regulatory Flexibility Act
    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 substantial 
number of small entities. Small entities include small businesses, 
small organizations, and small governmental jurisdictions.
    For purposes of assessing the impacts of this rule on small 
entities, small entity is defined as: (1) A small business as defined 
by the Small Business Administration's (SBA) regulations at 13 CFR 
121.201 (see table below); (2) a small governmental jurisdiction that 
is a government of a city, county, town, school district or special 
district with a population of less than 50,000; and (3) a small 
organization that is any not-for-profit enterprise which is 
independently owned and operated and is not dominant in its field.
    Table III-109 provides an overview of the primary SBA small 
business categories included in the light-duty vehicle sector:

[[Page 62959]]

              Table III-109--Primary SBA Small Business Categories in the Light-Duty Vehicle Sector
----------------------------------------------------------------------------------------------------------------
                                                  Defined as small entity by SBA if
                 Industry \a\                           less than or equal to:              NAICS codes \b\
----------------------------------------------------------------------------------------------------------------
Vehicle manufacturers (including small volume   1,000 employees......................             336111, 336112
 manufacturers).
Independent commercial importers..............  $7 million annual sales..............     811111, 811112, 811198
                                                $23 million annual sales.............                     441120
                                                100 employees........................                     423110
Alternative Fuel Vehicle Converters...........  750 employees........................     336312, 336322, 336399
                                                1,000 employees......................                     335312
                                                $7 million annual sales..............                     811198
----------------------------------------------------------------------------------------------------------------
\a\ Light-duty vehicle entities that qualify as small businesses are not subject to this rule. We are exempting
  small business entities from the GHG standards.
\b\ North American Industrial Classification System.

    After considering the economic impacts of today's rule on small 
entities, EPA certifies that this action will not have a significant 
economic impact on a substantial number of small entities. Consistent 
with the MY 2012-2016 GHG standards, EPA is exempting manufacturers 
meeting SBA's definition of small business as described in 13 CFR 
121.201 due to unique issues involved with establishing appropriate GHG 
standards for these small businesses and the potential need to develop 
a program that would be structured differently for them (which would 
require more time), and the extremely small emissions contribution of 
these entities.
    Potentially affected small entities fall into three distinct 
categories of businesses for light-duty vehicles: small volume 
manufacturers (SVMs), independent commercial importers (ICIs), and 
alternative fuel vehicle converters. Based on our preliminary 
assessment, EPA has identified a total of about 24 entities that fit 
the Small Business Administration (SBA) criterion of a small business. 
There are about 5 small manufacturers; including three electric vehicle 
manufacturers, 8 ICIs, and 11 alternative fuel vehicle converters in 
the light-duty vehicle market which are small businesses (no major 
vehicle manufacturers meet the small-entity criteria as defined by 
SBA). EPA estimates that these small entities comprise less than 0.1 
percent of the total light-duty vehicle sales in the U.S., and 
therefore the exemption will have a negligible impact on the GHG 
emissions reductions from the standards.
    As discussed in Section III.B.7, EPA is allowing small businesses 
to waive their small entity exemption and optionally certify to the GHG 
standards. This will allow small business manufacturers to earn 
CO2 credits under the GHG program, if their actual fleetwide 
CO2 performance was better than their fleetwide 
CO2 target standard. Manufacturers may choose to opt-in as 
early as MY 2013. Once the small business manufacturer opting into the 
GHG program in MY 2013 completes certification for MY 2013, the company 
will also be eligible to generate GHG credits for their MY 2012 
production. Manufacturers waiving their small entity exemption must 
meet all aspects of the GHG standards and program requirements across 
their entire product line. However, the exemption waiver would be 
optional for small entities and presumably manufacturers would only opt 
into the GHG program if it is economically advantageous for them to do 
so, for example through the generation and sale of CO2 
credits. Therefore, EPA believes adding this voluntary option does not 
affect EPA's determination that the standards would impose no 
significant adverse impact on small entities.
    The American Petroleum Institute commented that EPA is obligated 
under the RFA to consider indirect impacts of the rules in assessing 
impacts on small businesses, in particular potential impacts on 
stationary sources that would not be directly regulated by the rule. 
EPA disagrees. When considering whether a rule should be certified, the 
RFA requires an agency to look only at the small entities to which the 
rule will apply and which will be subject to the requirement of the 
specific rule in question. 5 U.S.C. Sec.  603, 605 (b); Mid-Tex Elec. 
Coop. v. FERC, 773 F.3d 327, 342 (DC Cir. 1985). Reading section 605 in 
light of section 603, we conclude that an agency may properly certify 
that no regulatory flexibility analysis is necessary when it determines 
that the rule will not have a significant economic impact on a 
substantial number of small entities that are subject to the 
requirements of the rule; see also Cement Kiln Recycling Coalition, v. 
EPA, 255 F.3d 855, 869 (DC Cir. 2001). DC Circuit has consistently 
rejected the contention that the RFA applies to small businesses 
indirectly affected by the regulation of other entities.\917\
---------------------------------------------------------------------------

    \917\ In any case, any impacts on stationary sources arise 
because of express statutory requirements in the CAA, not as a 
result of vehicle GHG regulation. Moreover, GHGs have become subject 
to regulation under the CAA by virtue of other regulatory actions 
taken by EPA before this rule.
---------------------------------------------------------------------------

    Since the rule regulates exclusively large motor vehicle 
manufacturers and small vehicle manufacturers are exempted from the 
standards, EPA is properly certifying that the 2017-2025 standards will 
not have a significant economic impact on a substantial number of small 
entities directly subject to the rule or otherwise would have a 
positive economic effect on all of the small entities opting in to the 
rule.
d. Unfunded Mandates Reform Act
    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), P.L. 
104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector.
    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) for State, local, or tribal 
governments. The rule imposes no enforceable duty on any State, local 
or tribal governments. This action is also not subject to the 
requirements of section 203 of UMRA because EPA has determined that 
this rule contains no regulatory requirements that might significantly 
or uniquely affect small governments. EPA has determined that this rule 
contains a Federal mandate that may result in expenditures of $100 
million or more for the private sector in any one year. EPA believes 
that the rule represents the least costly, most cost-effective approach 
to revise the light duty vehicle standards as authorized by section 
202(a)(1). The costs and benefits associated with the rule are 
discussed above and in the Final Regulatory Impact Analysis, as 
required by the UMRA.
e. Executive Order 13132: ``Federalism''
    This action does not have federalism implications. It will not have 
substantial

[[Page 62960]]

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 various levels of government, as specified 
in Executive Order 13132. This rulemaking applies to manufacturers of 
motor vehicles and not to state or local governments; state and local 
governments that purchase new model year 2017 and later vehicles will 
enjoy substantial fuel savings from these more fuel efficient vehicles. 
Thus, Executive Order 13132 does not apply to this action. Although 
section 6 of Executive Order 13132 does not apply to this action, EPA 
did consult with representatives of state and local governments in 
developing this action.
    In the spirit of Executive Order 13132, and consistent with EPA 
policy to promote communications between EPA and State and local 
governments, EPA specifically solicited comments on the action from 
State and local officials. A number of State and local governments 
submitted public comments on the rule, the majority of which were 
supportive of the EPA's proposed action. However, these entities did 
not provide comments indicating there would be a substantial direct 
effect on State or local governments resulting from this rule.
f. Executive Order 13175: ``Consultation and Coordination With Indian 
Tribal Governments''
    This action does not have tribal implications, as specified in 
Executive Order 13175 (65 FR 67249, November 9, 2000). This rule will 
be implemented at the Federal level and impose compliance costs only on 
vehicle manufacturers. Tribal governments will be affected only to the 
extent they purchase and use regulated vehicles; tribal governments 
that purchase new model year 2017 and later vehicles will enjoy 
substantial fuel savings from these more fuel efficient vehicles. Thus, 
Executive Order 13175 does not apply to this rule.
g. Executive Order 13045: ``Protection of Children From Environmental 
Health Risks and Safety Risks''
    This action is subject to EO 13045 (62 FR 19885, April 23, 1997) 
because it is an economically significant regulatory action as defined 
by EO 12866, and EPA believes that the environmental health or safety 
risk addressed by this action may have a disproportionate effect on 
children. Climate change impacts, and in particular the determinations 
of the Administrator in the Endangerment and Cause or Contribute 
Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act 
(74 FR 66496, December 15, 2009), are summarized in Section III.F.2. In 
making those Findings, the Administrator placed weight on the fact that 
certain groups, including children, are particularly vulnerable to 
climate-related health effects. In those Findings, the Administrator 
determined that the health effects of climate change linked to observed 
and projected elevated concentrations of GHGs include the increased 
likelihood of more frequent and intense heat waves, increases in ozone 
concentrations over broad areas of the country, an increase of the 
severity of extreme weather events such as hurricanes and floods, and 
increasing severity of coastal storms due to rising sea levels. These 
effects can all increase mortality and morbidity, especially in 
vulnerable populations such as children, the elderly, and the poor. In 
addition, the occurrence of wildfires in North America have increased 
and are likely to intensify in a warmer future. PM emissions from these 
wildfires can contribute to acute and chronic illnesses of the 
respiratory system, including pneumonia, upper respiratory diseases, 
asthma, and chronic obstructive pulmonary disease, especially in 
children.
    EPA has estimated reductions in projected global mean surface 
temperature and sea level rise as a result of reductions in GHG 
emissions associated with the standards finalized in this action 
(Section III.F.3). Due to their vulnerability, children may receive 
disproportionate benefits from these reductions in temperature and the 
subsequent reduction of increased ozone and severity of weather events.
h. Executive Order 13211: ``Energy Effects''
    Executive Order 13211 \918\ applies to any rule that: (1) Is 
determined to be economically significant as defined under E.O. 12866, 
and is likely to have a significant adverse effect on the supply, 
distribution, or use of energy; or (2) that is designated by the 
Administrator of the Office of Information and Regulatory Affairs as a 
significant energy action. If the regulatory action meets either 
criterion, we must evaluate the adverse energy effects of the proposed 
rule and explain why the proposed regulation is preferable to other 
potentially effective and reasonably feasible alternatives considered 
by us.
---------------------------------------------------------------------------

    \918\ 66 FR 28355 (May 18, 2001).
---------------------------------------------------------------------------

    The action establishes passenger car and light truck fuel economy 
standards that will significantly reduce the consumption of petroleum, 
achieve energy security benefits, and have no adverse energy effects 
(Section III.H.8). In fact, this rule has a positive effect on energy 
supply and use. Because the GHG emission standards finalized today 
result in significant fuel savings, this rule encourages more efficient 
use of fuels. Accordingly, this rulemaking action is not designated as 
a significant energy action as defined by E.O. 13211.
i. National Technology Transfer Advancement Act
    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (``NTTAA''), Public Law 104-113, 12(d) (15 U.S.C. 272 note) 
directs EPA to use voluntary consensus standards in its regulatory 
activities unless to do so would be inconsistent with applicable law or 
otherwise impractical. Voluntary consensus standards are technical 
standards (e.g., materials, specifications, test methods, sampling 
procedures, and business practices) that are developed or adopted by 
voluntary consensus standards bodies. NTTAA directs EPA to provide 
Congress, through OMB, explanations when the Agency decides not to use 
available and applicable voluntary consensus standards.
    This rulemaking involves technical standards. Therefore the Agency 
conducted a search to identify potentially applicable voluntary 
consensus standards. For CO2, emissions, we identified no 
such standards, and none were brought to our attention in comments. 
Therefore, for CO2, emissions EPA is collecting data over 
the same tests that are used for the MY 2012-2016 CO2 
standards and for the CAFE program. This will minimize the amount of 
testing done by manufacturers, since manufacturers are already required 
to run these tests. For A/C credits, EPA is using a consensus 
methodology developed by the Society of Automotive Engineers (SAE) and 
also a new A/C test. EPA knows of no consensus standard available for 
the A/C test.
j. Executive Order 12898: ``Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations''
    Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes 
federal executive policy on environmental justice. Its main provision 
directs federal agencies, to the greatest extent practicable and 
permitted by law, to make environmental justice part of their mission 
by identifying and addressing, as appropriate, disproportionately high 
and adverse human health or

[[Page 62961]]

environmental effects of their programs, policies, and activities on 
minority populations and low-income populations in the United States.
    With respect to GHG emissions, EPA has determined that this final 
rule will not have disproportionately high and adverse human health or 
environmental effects on minority or low-income populations because it 
increases the level of environmental protection for all affected 
populations without having any disproportionately high and adverse 
human health or environmental effects on any population, including any 
minority or low-income population. The reductions in CO2 and 
other GHGs associated with the standards will affect climate change 
projections, and EPA has estimated reductions in projected global mean 
surface temperatures and sea-level rise (Section III.F.3). Within 
settlements experiencing climate change, certain parts of the 
population may be especially vulnerable; these include the poor, the 
elderly, those already in poor health, the disabled, those living 
alone, and/or indigenous populations dependent on one or a few 
resources.\919\ Therefore, these populations may receive 
disproportionate benefits from reductions in GHGs.
---------------------------------------------------------------------------

    \919\ U.S. EPA. (2009). Technical Support Document for 
Endangerment or Cause or Contribute Findings for Greenhouse Gases 
under Section 202(a) of the Clean Air Act. Washington, DC: U.S. EPA. 
Retrieved on April 21, 2009 from http://epa.gov/climatechange/endangerment/downloads/TSD_Endangerment.pdf.
---------------------------------------------------------------------------

    For non-GHG co-pollutants such as ozone, PM2.5, and 
toxics, EPA has concluded that it is not practicable to determine 
whether there would be disproportionately high and adverse human health 
or environmental effects on minority and/or low income populations from 
this rule.
k. Congressional Review Act
    The Congressional Review Act, 5 U.S.C. 801 et. seq., as added by 
the Small Business Regulatory Enforcement Fairness Act of 1996, 
generally provides that before a rule may take effect, the agency 
promulgating the rule must submit a rule report, which includes a copy 
of the rule, to each House of the Congress and to the Comptroller 
General of the United States. EPA will submit a report containing this 
rule and other required information to the U.S. Senate, the U.S. House 
of Representatives, and the Comptroller General of the United States 
prior to publication of the rule in the Federal Register. A Major rule 
cannot take effect until 60 days after it is published in the Federal 
Register. This action is a ``major rule'' as defined by 5 U.S.C. 
804(2). This rule will be effective [date], sixty days after date of 
publication in the Federal Register.

J. Statutory Provisions and Legal Authority

    Statutory authority for the vehicle controls finalized today is 
found in section 202(a) (which authorizes standards for emissions of 
pollutants from new motor vehicles which emissions cause or contribute 
to air pollution which may reasonably be anticipated to endanger public 
health or welfare), 202(d), 203-209, 216, and 301 of the Clean Air Act, 
42 U.S.C. 7521(a), 7521(d), 7522, 7523, 7524, 7525, 7541, 7542, 7543, 
7550, and 7601. Statutory authority for EPA to establish CAFE test 
procedures is found in section 32904(c) of the Energy Policy and 
Conservation Act, 49 U.S.C. 32904(c).

IV. NHTSA Final Rule for Passenger Car and Light Truck CAFE Standards 
for Model Years 2017 and Beyond

A. Executive Overview of NHTSA Final Rule

1. Introduction
    The National Highway Traffic Safety Administration (NHTSA) is 
establishing Corporate Average Fuel Economy (CAFE) standards for 
passenger automobiles (passenger cars) and nonpassenger automobiles 
(light trucks) for model years (MY) 2017-2021. NHTSA's final CAFE 
standards would, on average, require manufacturers' passenger car and 
light truck fleets to achieve a combined 40.3-41.0 mpg in MY 2021. This 
represents an average annual increase of 3.3-3.5 percent from the 
estimated 34.3-34.5 mpg expected to be required, on average, in MY 
2016. NHTSA is also presenting what we are describing as ``augural'' 
standards for MYs 2022-2025 in this final rule and accompanying 
regulatory documents. The National Program, of which this final rule is 
a part, covers 9 model years of standards--2017-2025--but NHTSA is 
directed by statute to set CAFE standards for ``at least 1, but not 
more than 5'' model years at a time.\920\ To facilitate longer-term 
product planning by industry and in the interest of harmonization, 
NHTSA is presenting the augural standards for MYs 2022-2025 in these 
rulemaking documents as representative of what levels of stringency the 
agency currently believes would be appropriate in those model years, 
based on the information before us today. The augural standards, if 
finalized, would require manufacturers' passenger car and light truck 
fleets to achieve an average of 48.7-49.7 mpg in MY 2025. Thus, for the 
entire 2017-2025 period, the final standards plus the augural standards 
represent an average annual increase of 4.0-4.1 percent from the 
estimated 34.3-34.5 mpg expected to be required, on average, in MY 
2016. The augural standards alone represent an average annual increase 
of 4.8-4.9 percent from the estimated 40.3-41.0 mpg expected to be 
required, on average, in MY 2021.
---------------------------------------------------------------------------

    \920\ 49 U.S.C. 32902(b)(3)(B).
---------------------------------------------------------------------------

    For brevity, information about the impacts of the standards will be 
provided throughout the document without distinguishing between the 
final standards and the augural standards, but we emphasize that the 
augural standards are not final, and that a future full rulemaking 
consistent with all applicable law will be necessary in order for NHTSA 
to establish final CAFE standards for MYs 2022-2025 passenger cars and 
light trucks.
    Because the overarching goal of the CAFE program is energy 
conservation, two of the most important impacts of the standards are 
reductions in U.S. petroleum consumption and the corresponding benefits 
to society of avoiding that petroleum consumption. Due to the combined 
final and augural standards, we project total fuel savings of 
approximately 180-184 billion gallons over the lifetimes of the 
vehicles sold in model years 2017-2025, with corresponding net societal 
benefits of over $498-507 billion using a 3 percent discount rate,\921\ 
or $372-377 billion using a 7 percent discount rate.
---------------------------------------------------------------------------

    \921\ This value is based on what NHTSA refers to as ``Reference 
Case'' inputs, which are based on the assumptions that NHTSA has 
employed for its main analysis (as opposed to sensitivity analyses 
to examine the effect of variations in the assumptions on costs and 
benefits). The Reference Case inputs include fuel prices based on 
the AEO 2012 Early Release Reference Case, a 3 percent and a 7 
percent discount rate, a 10 percent rebound effect, a value for the 
social cost of carbon (SCC) of $22/metric ton CO2 (in 
constant 2010 dollars for emissions occurring in 2010, rising to 
$47/metric ton in 2050, at a 3 percent discount rate), etc. For a 
full listing of the Reference Case input assumptions, see Section 
IV.C.3 below.
---------------------------------------------------------------------------

    While NHTSA has been setting fuel economy standards since the 
1970s, as discussed in Section I, NHTSA's final MYs 2017-2021 CAFE 
standards and augural MYs 2022-2025 CAFE standards are part of a 
National Program made up of complementary regulations by NHTSA and the 
Environmental Protection Agency. Today's standards build upon the 
success of the first phase of the National Program, finalized on May 7, 
2010, in which NHTSA and EPA set coordinated CAFE and greenhouse gas 
(GHG) standards for MYs 2012-2016 passenger cars and light trucks. 
Because of the very close relationship between improving fuel economy 
and reducing

[[Page 62962]]

carbon dioxide (CO2) tailpipe emissions, a large majority of 
the projected benefits are achieved jointly with EPA's GHG rule, which 
is described in detail above in Section III of this preamble. These 
CAFE standards are consistent with the President's National Fuel 
Efficiency Policy announcement of May 19, 2009, which called for 
harmonized rules for all automakers, instead of three overlapping and 
potentially inconsistent requirements from DOT, EPA, and the California 
Air Resources Board. And finally, the CAFE standards and the analysis 
supporting them also respond to President Obama's May 2010 memorandum 
requesting the agencies to develop, through notice and comment 
rulemaking, a coordinated National Program for passenger cars and light 
trucks for MYs 2017 to 2025.
2. Why does NHTSA set CAFE standards for passenger cars and light 
trucks?
    Improving vehicle fuel economy has been long and widely recognized 
as one of the key ways of achieving energy independence, energy 
security, and a low carbon economy.\922\ The significance accorded to 
improving fuel economy reflects several factors. Conserving energy, 
especially reducing the nation's dependence on petroleum, benefits the 
U.S. in several ways. Improving energy efficiency has benefits for 
economic growth and the environment, as well as other benefits, such as 
reducing pollution and improving security of energy supply. More 
specifically, reducing total petroleum use decreases our economy's 
vulnerability to oil price shocks. Reducing dependence on oil imports 
from regions with uncertain conditions enhances our energy security. 
Additionally, the emission of CO2 from the tailpipes of cars 
and light trucks due to the combustion of petroleum is one of the 
largest sources of U.S. CO2 emissions.\923\ Using vehicle 
technology to improve fuel economy, and thereby reducing tailpipe 
emissions of CO2, is one of the three main measures of 
reducing those tailpipe emissions of CO2.\924\ The two other 
measures for reducing the tailpipe emissions of CO2 are 
switching to vehicle fuels with lower carbon content, and changing 
driver behavior, i.e., inducing people to drive less.
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    \922\ Among the reports and studies noting this point are the 
following:
    John Podesta, Todd Stern and Kim Batten, ``Capturing the Energy 
Opportunity; Creating a Low-Carbon Economy,'' Center for American 
Progress (November 2007), pp. 2, 6, 8, and 24-29, available at: 
http://www.americanprogress.org/issues/2007/11/pdf/energy_chapter.pdf (last accessed Jun. 23, 2012).
    Sarah Ladislaw, Kathryn Zyla, Jonathan Pershing, Frank 
Verrastro, Jenna Goodward, David Pumphrey, and Britt Staley, ``A 
Roadmap for a Secure, Low-Carbon Energy Economy; Balancing Energy 
Security and Climate Change,'' World Resources Institute and Center 
for Strategic and International Studies (January 2009), pp. 21-22; 
available at: http://pdf.wri.org/secure_low_carbon_energy_economy_roadmap.pdf (last accessed Jun. 23, 2012).
    Alliance to Save Energy et al., ``Reducing the Cost of 
Addressing Climate Change Through Energy Efficiency'' (2009), 
available at: http://www.aceee.org/files/pdf/white-paper/ReducingtheCostofAddressingClimateChange_synopsis.pdf (last 
accessed Jun. 23, 2012).
    John DeCicco and Freda Fung, ``Global Warming on the Road; The 
Climate Impact of America's Automobiles,'' Environmental Defense 
(2006) pp. iv-vii; available at: http://www.edf.org/sites/default/files/5301_Globalwarmingontheroad_0.pdf (last accessed Jun. 23, 
2012).
    ``Why is Fuel Economy Important?,'' a Web page maintained by the 
Department of Energy and Environmental Protection Agency, available 
at http://www.fueleconomy.gov/feg/why.shtml (last accessed Jun. 23, 
2012).
    Robert Socolow, Roberta Hotinski, Jeffery B. Greenblatt, and 
Stephen Pacala, ``Solving The Climate Problem: Technologies 
Available to Curb CO2 Emissions,'' Environment, volume 
46, no. 10, 2004. pages 8-19, available at: http://www.princeton.edu/mae/people/faculty/socolow/ENVIRONMENTDec2004issue.pdf (last accessed Jun. 23, 2012).
    \923\ Inventory of U.S. Greenhouse Gas Emissions and Sinks: 
1990-2010 (April 2012), EPA-430-R-12-001, pp. ES-4 (Table ES-2), ES-
15, and 2-20 through 2-23. Available at http://www.epa.gov/climatechange/Downloads/ghgemissions/US-GHG-Inventory-2012-Main-Text.pdf (last accessed Jun. 23, 2012).
    \924\ Podesta et al., p. 25; Ladislaw et al. p. 21; DeCicco et 
al. p. vii; ``Reduce Climate Change, a Web page maintained by the 
Department of Energy and Environmental Protection Agency at http://www.fueleconomy.gov/feg/climate.shtml (last accessed Jun. 23, 2012).
---------------------------------------------------------------------------

a. Reducing Petroleum Consumption To Improve Energy Security and Save 
the U.S. Money
    In 1975, Congress enacted the Energy Policy and Conservation Act 
(EPCA), mandating that NHTSA establish and implement a regulatory 
program for motor vehicle fuel economy to meet the various facets of 
the need to conserve energy, including ones having energy independence 
and security, environmental, and foreign policy implications. Improving 
our energy and national security by reducing our dependence on foreign 
oil has been a national objective since the first oil price shocks in 
the 1970s, and the need to reduce energy consumption is even more 
crucial today than it was when EPCA was enacted. Net petroleum imports 
accounted for approximately 45 percent of U.S. petroleum consumption in 
2011.\925\ World crude oil production is highly concentrated, 
exacerbating the risks of supply disruptions and price shocks as the 
recent unrest in North Africa and the Persian Gulf highlights. The 
export of U.S. assets for oil imports continues to be an important 
component of U.S. trade deficits. Transportation accounted for about 71 
percent of U.S. petroleum consumption in 2009.\926\ Light-duty vehicles 
account for about 60 percent of transportation oil use,\927\ which 
means that they alone account for about 40 percent of all U.S. oil 
consumption.
---------------------------------------------------------------------------

    \925\ Energy Information Administration, ``How dependent are we 
on foreign oil?'' Available at http://www.eia.gov/cfapps/energy_in_brief/foreign_oil_dependence.cfm?featureclicked=3 (last 
accessed Jun. 23, 2012). EIA notes that U.S. dependence on imported 
oil has declined since peaking in 2005 as a result of a variety of 
factors, including improvements in efficiency as well as economic 
trends.
    \926\ Energy Information Administration, Annual Energy Outlook 
2011, ``Oil/Liquids.'' Available at http://www.eia.gov/forecasts/aeo/MT_liquidfuels.cfm (last accessed Jun. 23, 2012).
    \927\ Energy Information Administration, ``Use of Energy in the 
United States Explained, Energy Use for Transportation.'' Available 
at http://www.eia.gov/energyexplained/index.cfm?page=us_energy_transportation (last accessed Aug. 9, 2012).
---------------------------------------------------------------------------

    Gasoline consumption in the U.S. has historically been relatively 
insensitive to fluctuations in both price and consumer income, and 
people in most parts of the country tend to view gasoline consumption 
as a non-discretionary expense. Thus, when gasoline's share in consumer 
expenditures rises, the public experiences fiscal distress. Recent 
tight global oil markets led to prices over $100 per barrel, with 
gasoline reaching as high as $4 per gallon in many parts of the U.S., 
causing financial hardship for many families and businesses. This 
fiscal distress can, in some cases, have macroeconomic consequences for 
the economy at large.
    Additionally, since U.S. oil production is only affected by 
fluctuations in prices over a period of years, any changes in petroleum 
consumption (as through increased fuel economy levels for the on-road 
fleet) largely flow into changes in the quantity of imports. Since 
petroleum imports account for about 2 percent of GDP, increases in oil 
imports can create a discernible fiscal drag. As a consequence, 
measures that reduce petroleum consumption, like fuel economy 
standards, will directly benefit the balance-of-payments account, and 
strengthen the U.S. economy to some degree. And finally, U.S. foreign 
policy has been affected by decades by rising U.S. and world dependency 
on crude oil as the basis for modern transportation systems, although 
fuel economy standards have at best an indirect impact on U.S. foreign 
policy.

[[Page 62963]]

b. Reducing Petroleum Consumption To Reduce Climate Change Impacts
    CO2 is the natural by-product of the combustion of 
fossil fuel to power motor vehicles. The more fuel-efficient a vehicle 
is, the less fuel it needs to burn to travel a given distance. The less 
fuel it burns, the less CO2 it emits in traveling that 
distance.\928\ Since the amount of CO2 emissions is 
essentially constant per gallon combusted of a given type of fuel, the 
amount of fuel consumption per mile is closely related to the amount of 
CO2 emissions per mile. Transportation is the second largest 
GHG-emitting sector in the U.S. after electricity generation, and 
accounted for 27 percent of total U.S. GHG emissions in 2010; passenger 
cars and light trucks make up 62 percent of transportation sector GHG 
emissions.\929\ Concentrations of greenhouse gases are at unprecedented 
levels compared to the recent and distant past, which means that fuel 
economy improvements to reduce those emissions are a crucial step 
toward addressing the risks of global climate change. These risks are 
well documented in Section III of this notice, and in NHTSA's Final 
Environmental Impact Statement (EIS) accompanying this final rule.
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    \928\ Panel on Policy Implications of Greenhouse Warming, 
National Academy of Sciences, National Academy of Engineering, 
Institute of Medicine, ``Policy Implications of Greenhouse Warming: 
Mitigation, Adaptation, and the Science Base,'' National Academies 
Press, 1992, at 287. Available at http://www.nap.edu/catalog.php?record_id=1605 (last accessed Jun. 23, 2012).
    \929\ EPA Inventory of U.S. Greenhouse Gas Emissions and Sinks: 
1990-2010 (April 2012), p. 2-20. Available at http://www.epa.gov/climatechange/Downloads/ghgemissions/US-GHG-Inventory-2012-Chapter-2-Trends.pdf (last accessed Jun. 23, 2012).
---------------------------------------------------------------------------

    Fuel economy gains since 1975, due both to the standards and to 
market factors, have resulted in saving billions of barrels of oil and 
avoiding billions of metric tons of CO2 emissions. In 
December 2007, Congress enacted the Energy Independence and Security 
Act (EISA), amending EPCA to require substantial, continuing increases 
in fuel economy. NHTSA thus sets CAFE standards today under EPCA, as 
amended by EISA, in order to help the U.S. passenger car and light 
truck fleet save fuel to promote energy independence, energy security, 
and a low carbon economy.
3. Why is NHTSA presenting CAFE standards for MYs 2017-2025 now?
a. President's Memorandum
    During the public comment period for the MY 2012-2016 proposed 
rulemaking, many stakeholders encouraged NHTSA and EPA to begin working 
toward standards for MY 2017 and beyond in order to maintain a single 
nationwide program. After the publication of the final rule 
establishing MYs 2012-2016 CAFE and GHG standards, President Obama 
issued a Memorandum on May 21, 2010 requesting that NHTSA, on behalf of 
the Department of Transportation, and EPA work together to develop a 
national program for model years 2017-2025.\930\ Specifically, he 
requested that the agencies develop `` * * * a coordinated national 
program under the CAA [Clean Air Act] and the EISA [Energy Independence 
and Security Act of 2007] to improve fuel efficiency and to reduce 
greenhouse gas emissions of passenger cars and light-duty trucks of 
model years 2017-2025.'' The President recognized that our country 
could take a leadership role in addressing the global challenges of 
improving energy security and reducing greenhouse gas pollution, 
stating that ``America has the opportunity to lead the world in the 
development of a new generation of clean cars and trucks through 
innovative technologies and manufacturing that will spur economic 
growth and create high-quality domestic jobs, enhance our energy 
security, and improve our environment.''
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    \930\ The Presidential Memorandum is found at: http://www.whitehouse.gov/the-press-office/presidential-memorandum-regarding-fuel-efficiency-standards. For the reader's reference, the 
President also requested the Administrators of EPA and NHTSA to 
issue joint rules under the CAA and EISA to establish fuel 
efficiency and greenhouse gas emissions standards for commercial 
medium-and heavy-duty on-highway vehicles and work trucks beginning 
with the 2014 model year. The agencies promulgated final GHG and 
fuel efficiency standards for heavy duty vehicles and engines for 
MYs 2014-2018 in 2011. 76 FR 57106 (September 15, 2011).
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    The Presidential Memorandum stated ``The program should also seek 
to achieve substantial annual progress in reducing transportation 
sector greenhouse gas emissions and fossil fuel consumption, consistent 
with my Administration's overall energy and climate security goals, 
through the increased domestic production and use of existing, 
advanced, and emerging technologies, and should strengthen the industry 
and enhance job creation in the United States.'' Among other things, 
the agencies were tasked with researching and then developing standards 
for MYs 2017 through 2025 that would be appropriate and consistent with 
EPA's and NHTSA's respective statutory authorities, in order to 
continue to guide the automotive sector along the road to reducing its 
fuel consumption and GHG emissions, thereby ensuring corresponding 
energy security and environmental benefits. Several major automobile 
manufacturers and CARB sent letters to EPA and NHTSA in support of a 
MYs 2017 to 2025 rulemaking initiative as outlined in the President's 
May 21, 2010 announcement.\931\ The agencies began working immediately 
on the next phase of the National Program, work which has culminated in 
the standards for MYs 2017-2025 contained in this final rule.
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    \931\ These commitment letters in response to the May 21, 2010 
Presidential Memorandum are available at http://www.nhtsa.gov/
Laws+&+Regulations/CAFE+-+Fuel+Economy/
Stakeholder+Commitment+Letters (last accessed August 5, 2012).
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b. Benefits of Continuing the National Program
    The National Program is both needed and possible because the 
relationship between improving fuel economy and reducing CO2 
tailpipe emissions is a very close one. There is a single pool of 
technologies for reducing fuel consumption and CO2 
emissions. Using these technologies to minimize fuel consumption also 
minimizes CO2 emissions. While there are emission control 
technologies that can capture or destroy the pollutants that are 
produced by imperfect combustion of fuel (e.g., carbon monoxide), there 
are at present no such technologies for CO2. In fact, the 
only way at present to reduce tailpipe emissions of CO2 is 
by reducing fuel consumption. The National Program thus has dual 
benefits: it conserves energy by improving fuel economy, as required of 
NHTSA by EPCA and EISA; in the process, it necessarily reduces tailpipe 
CO2 emissions consonant with EPA's purposes and 
responsibilities under the Clean Air Act. While the vast majority of 
commenters strongly supported this goal, the Institute for Energy 
Research (IER) argued that because the agencies' analysis showed that 
the proposed standards would reduce global climate change by roughly 2/
100th of a degree Celsius in 2100, therefore EPA was not accomplishing 
the goal of reducing the risk of GHGs to public health and welfare, and 
should not be regulating GHGs for light-duty vehicles under the 
CAA.\932\ Environmental Consultants of Michigan commented similarly, 
and suggested that EPA regulate fuels rather than vehicles to reduce 
emissions more effectively.\933\ Competitive Enterprise Institute (CEI) 
\934\ also argued, as did the

[[Page 62964]]

U.S. Chamber of Commerce,\935\ the National Automobile Dealers 
Association,\936\ and joint comments from the American Petrochemical 
Institute (API), the National Manufacturers Association (NAM), and the 
American Fuel and Petrochemical Manufacturers Association (AFPM),\937\ 
that NHTSA should be setting CAFE standards and that EPA should not be 
concurrently setting GHG standards under the CAA. Some commenters, such 
as CEI \938\ and AFPM,\939\ further argued that standards for MYs 2017-
2025 should not be set at this time. Other commenters, such as the 
Natural Resources Defense Council (NRDC), strongly supported the joint 
action, pointing to EPA's relatively broad authority under the CAA to 
argue that a joint action can accomplish more than what NHTSA can 
accomplish under its EPCA/EISA authority.\940\ Consumer Federation of 
America also supported the joint action, stating that coordinated 
national standards reflecting a steady rate of increase in stringency 
over a long time give consumers and the industry certainty and time to 
adapt to change.\941\ Again, we note that of the hundreds of thousands 
of comments received to the proposals, the overwhelming majority were 
positive.
---------------------------------------------------------------------------

    \932\ IER, Docket No. EPA-HQ-OAR-2010-0799-9573, at 3-7.
    \933\ Environmental Consultants of Michigan, Docket No. NHTSA-
2010-0131-0166, at 1-4.
    \934\ CEI, Docket No. EPA-HQ-OAR-2010-0799-9552, at 1-2.
    \935\ U.S. Chamber of Commerce, Docket No. EPA-HQ-OAR-2010-0799-
9521, at 3-5.
    \936\ NADA, Docket No. NHTSA-2010-0131-0261, at 12.
    \937\ API/NAM/AFPM, Docket No. EPA-HQ-OAR-2010-0799-9509, at 8.
    \938\ CEI, Docket No. EPA-HQ-OAR-2010-0799-9552, at 1-2.
    \939\ AFPM, Docket No. EPA-HQ-OAR-2010-0799-9485, at 2.
    \940\ NRDC, Docket No. EPA-HQ-OAR-2010-0799-9472, at 2, 7-8.
    \941\ CFA, Docket No. EPA-HQ-OAR-2010-0799-9419, at 10.
---------------------------------------------------------------------------

    NHTSA believes that the benefits of the National Program extend far 
beyond the potential future reduction in global temperature that can be 
associated with the standards being finalized today. The fuel savings 
and related CO2 emissions reductions that will occur as a 
result of the standards will be real, and the fact that this rulemaking 
cannot, by itself, solve our energy security and climate change 
challenges does not obviate the agencies' need to act.\942\ NHTSA is 
required by Congress to set CAFE standards to promote energy 
conservation, and today's standards will meaningfully reduce consumers' 
future fuel expenses and the nation's exposure to economic and other 
risks related to petroleum consumption. Moreover, EPA, due to its 
Endangerment Finding, is required to prescribe standards under the CAA 
to reduce the risks associated with climate change. By setting 
harmonized Federal standards now to regulate both fuel economy and 
greenhouse gas emissions, the agencies are able to provide a 
predictable regulatory framework for the automotive industry while 
preserving the legal authorities of NHTSA, EPA, and the State of 
California. Consistent, harmonized, and streamlined requirements under 
the National Program, both for MYs 2012-2016 and for MYs 2017-2025, 
hold out the promise of continuing to deliver energy and environmental 
benefits, cost savings, and administrative efficiencies on a nationwide 
basis that might not be available under a less coordinated approach. 
The National Program makes it possible for the standards of two 
different Federal agencies and the standards of California and other 
``Section 177'' states to act in a unified fashion in providing these 
benefits. A harmonized approach to regulating passenger car and light 
truck fuel economy and GHG emissions is critically important given the 
interdependent goals of addressing climate change and ensuring energy 
independence and security. Additionally, a harmonized approach would 
help to mitigate the cost to manufacturers of having to comply with 
multiple sets of Federal and State standards.
---------------------------------------------------------------------------

    \942\ As the Supreme Court has stated, ``Agencies, like 
legislatures, do not generally resolve massive problems in one fell 
regulatory swoop. See Williamson v. Lee Optical of Okla, Inc., 349 
U.S. 483, 489 (1955) (``[A] reform may take one step at a time, 
addressing itself to the phase of the problem which seems most acute 
to the legislative mind''). They instead whittle away at them 
overtime, refining their preferred approach as circumstances change 
and as they develop a more nuanced understanding of how best to 
proceed.'' Massachusetts v. EPA, 549 U.S. 497, 524 (2007).
---------------------------------------------------------------------------

    One aspect of this phase of the National Program that is unique for 
NHTSA, however, is that the passenger car and light truck CAFE 
standards presented in this final rule for MYs 2022-2025 are augural, 
while EPA's standards for those model years will be legally binding 
when adopted in this round. As noted above, EISA requires NHTSA to 
issue CAFE standards for ``at least 1, but not more than 5, model 
years.'' To maintain the harmonization benefits of the National 
Program, NHTSA has finalized standards for MYs 2017-2021 and presented 
standards for MYs 2022-2025, but the last 4 years of standards are not 
legally binding as part of this rulemaking. The passenger car and light 
truck CAFE standards for MYs 2022-2025 will be determined with finality 
in a subsequent, de novo notice and comment rulemaking conducted in 
full compliance with EPCA/EISA and other applicable law--more than 
simply reviewing the analysis and findings in the present rulemaking to 
see whether they are still accurate and applicable, but taking a fresh 
look at all relevant factors based on the best and most current 
information available at that future time. Global Automakers commented 
that NHTSA should not include the passenger car and light truck 
standards for MYs 2022-2025 in its regulatory text for inclusion in the 
CFR, on the grounds that those standards must be finalized in the 
future de novo rulemaking.\943\ We are continuing to include the 
augural standards for MYs 2022-2025 in the regulatory text as part of 
this final rule, but we have clarified, as will be evident in NHTSA's 
revisions to 49 CFR Part 531 and Part 533 at the end of this preamble, 
that they are separate from the final standards for MYs 2017-2021. The 
proposed regulatory text already explained that the standards for MYs 
2022-2025 would only be applicable if NHTSA determines in the future 
rulemaking that they are maximum feasible; those provisions are made 
final in this rule. NAM and Toyota argued that the agencies should 
immediately rescind the standards for MYs 2022-2025 if they are 
determined to be inappropriate, leaving the MY 2021 standards in effect 
for those future model years until new standards are finalized.\944\ 
Since NHTSA's standards for MYs 2022-2025 are augural and must be 
finalized in a subsequent de novo rulemaking, this concern is not an 
issue for the CAFE program. Toyota suggested that NHTSA simply enact 
standards at the MY 2021 levels for MYs 2022-2025 if the future 
rulemaking is not completed prior to 18 months before the start of MY 
2022,\945\ but NHTSA does not intend to prejudge the outcome of that 
future rulemaking, and at any rate fully expects to complete it well in 
advance of the statutory lead-time requirement.
---------------------------------------------------------------------------

    \943\ Global Automakers, Docket No. NHTSA-2010-0131-0237, at 12.
    \944\ NAM, Docket No. EPA-HQ-OAR-2010-0799-9587, at 3; Toyota, 
Docket No. EPA-HQ-OAR-2010-0799-9586, at 8-9.
    \945\ Toyota, Docket No. EPA-HQ-OAR-2010-0799-9586, at 8-9.
---------------------------------------------------------------------------

    To facilitate that future rulemaking effort, NHTSA and EPA will 
concurrently conduct a comprehensive mid-term evaluation. Up to date 
information will be developed and compiled for the evaluation, through 
a collaborative, robust, and transparent process, including notice and 
comment. Toyota commented that it supported the participation of the 
California Air Resources Board (CARB) in the mid-

[[Page 62965]]

term evaluation process, and the conditioning of the CAA preemption 
waiver for CARB's MYs 2017-2025 GHG standards on CARB's acceptance of 
any changes to the EPA GHG standards for MYs 2022-2025 that may result 
from the mid-term evaluation.\946\ The agencies fully expect to conduct 
the mid-term evaluation in close coordination with the CARB, consistent 
with the agencies' commitment to maintaining a single national 
framework for regulation of fuel economy and GHG emissions.\947\ Prior 
to beginning NHTSA's rulemaking process and EPA's mid-term evaluation, 
the agencies plan to jointly prepare a draft Technical Assessment 
Report (TAR) to examine afresh the issues and, in doing so, conduct 
similar analyses and projections as those considered in the current 
rulemaking, including technical and other analyses and projections 
relevant to each agency's authority to set standards as well as any 
relevant new issues that may present themselves. The agencies plan to 
provide an opportunity for public comment on the draft TAR, and to 
arrange for appropriate peer review of underlying analyses, and to make 
the assumptions and modeling underlying the TAR available to the public 
to the extent consistent with law. The draft TAR is expected to be 
issued no later than November 15, 2017. The agencies plan to consult 
and coordinate as NHTSA develops its NPRM. NHTSA will ensure that the 
subsequent final rule will be timed to provide sufficient lead time for 
industry to make whatever changes to their products that the rulemaking 
analysis deems maximum feasible based on the new information available. 
At the very latest, NHTSA will complete its subsequent rulemaking on 
the standards with at least 18 months lead time as required by 
EPCA,\948\ but additional lead time may be provided.
---------------------------------------------------------------------------

    \946\ Toyota, Docket No. EPA-HQ-OAR-2010-0799-9586, at 9.
    \947\ The agencies also fully expect that any adjustments to the 
standards as a result of NHTSA's rulemaking and the mid-term 
evaluation process from the levels enumerated in the current 
rulemaking will be made with the participation of CARB and in a 
manner that continues the harmonization of state and Federal vehicle 
standards.
    \948\ 49 U.S.C. 32902(a).
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B. Background

1. Chronology of Events Since the MY 2012-2016 Final Rule Was Issued
    Section I above covers the chronology of events in considerable 
detail, and we refer the reader there.
2. How has NHTSA developed the CAFE standards since the President's 
announcement, and what has changed between the proposal and the final 
rule?
    The CAFE standards proposed in the NPRM and presented in this final 
rule are based on much more analysis conducted by the agencies since 
the TAR, including in-depth modeling analysis by DOT/NHTSA to support 
the CAFE standards, and further refinement of a number of our baseline, 
technology, and economic assumptions used to evaluate the standards and 
their impacts. While much of the analytical basis for the proposed 
standards was carried forward into the final rule analysis, some 
aspects of the final rule are different from the proposal, such as the 
following:
a. Programmatic Changes
     As discussed above and in more detail in Section IV.E 
below, NHTSA is clarifying in this final rule that the standards for 
MYs 2022-2025 are augural, and will be finalized in a future de novo 
rulemaking;
     Fuel consumption improvements due to A/C efficiency 
improvements--menu: the agencies had originally proposed that 
manufacturers must perform the A-to-B ``AC17'' test and report their 
full results in order to access the credit/fuel consumption improvement 
menu. For the final rule, manufacturers are required to report only 
results of the AC17 ``B'' testing for MY 2017-2019 in order to access 
the full menu credit for installed technologies. For MY 2020 and 
beyond, AC17 ``A'' test results or engineering analysis and AC17 ``B'' 
test results must be submitted to determine actual credit 
availability.\949\
---------------------------------------------------------------------------

    \949\ The fuel consumption improvement values in the A/C 
efficiency menu have not changed, but this procedural change has the 
effect of making it easier for manufacturers to demonstrate 
improvements in their A/C systems.
---------------------------------------------------------------------------

     As proposed, a manufacturer could obtain credit for 
installation of off-cycle technologies but had to meet a 10% 
penetration threshold requirement. The minimum penetration rate 
requirements have been eliminated for this final rule.
     NHTSA is adding to its regulations a description of the 
process it plans to use provide its views to EPA related to 
manufacturers' applications to use off-cycle technologies to improve 
their average CAFE performance values.
     To obtain credits for implementation of mild hybrids on 
large pick-up trucks, the installation rate has been reduced in the 
final rule from 30% and 40% to 20% and 30% for MYs 2017 and 2018, 
respectively.
    [cir] Certain proposed definitions have been revised to address 
comments and add further clarification:
    [cir] The base tire definition is revised to better align with the 
approach manufacturers use to determine model type target standards.
    [cir] Mild hybrid and strong hybrid vehicle definitions are no 
longer limited to gasoline-electric vehicles but may include non-
gasoline (i.e., diesel, ethanol, and CNG-fueled) hybrid vehicles.
     Proposed Part 537 reporting requirements have been revised 
to address comments and add further clarification:
    [cir] Manufacturers will be required to submit pre- and mid-model 
year reports containing purported confidential business information on 
CD-ROM (2-copies) versus email to a secure agency email address as 
stated in the NPRM.
    [cir] Aspects of the proposed requirement that manufacturers of 
light trucks provide specific data in the pre-model year report 
substantiating classification decisions have been clarified.
    [cir] Manufacturers taking advantage of technology incentives (A/C 
efficiency, off-cycle and large pick-up hybrid and efficiency 
improvement technology) are required to report cumulatively for the 
application of its vehicles versus for each vehicle configuration as 
was proposed.
    [cir] Modified requirements to include the provision that 
manufacturers can optionally report target standard values for each 
reported unique model type/footprint combination.
b. Analytical Changes
     NHTSA and EPA have revised the 2008-based baseline market 
forecast to correct some errors in the version used for the NPRM, and 
added a 2010-based baseline market forecast. Analysis throughout the 
NHTSA rulemaking documents reflects both forecasts.
     Battery costs: Argonne National Laboratories (ANL) updated 
its ``BatPaC'' battery cost model to include cost estimates of options 
for liquid or air thermal management with adequate surface area and 
cell spacing, the option of parallel subpacks or modules battery 
configuration, and NHTSA-estimated costs for a battery discharging 
system. Using these updates, EPA updated the battery costs for strong 
hybrids, PHEVs, and EVs, and the results are used in both agencies' 
analyses.
     Work with ANL: Between the NPRM and the final rule, DOT/
NHTSA contracted with ANL (separately from the battery cost work 
described above) to study some aspects of advanced

[[Page 62966]]

transmission and hybrid technology effectiveness. Based on the results 
from the ANL study, NHTSA updated the certain transmission technology 
effectiveness values in the CAFE model when advanced transmissions are 
matched with naturally aspirated engines. Additionally, based on ANL's 
work for DOT/NHTSA, both agencies have added mild hybrids (similar to 
GM's Buick eAssist) as an enabling technology applicable to all vehicle 
classes in their analyses for this final rule. The cost for the mild 
hybrid technology is derived based on the teardown study performed by 
FEV for EPA and battery costs from ANL's BatPaC model.
     Amount of mass reduction: Between the NPRM and the final 
rule, NHTSA updated the amount of mass reduction applied in the CAFE 
model as a result of updates to the safety coefficients from the most 
recent Kahane study, in order to achieve the maximum amount of mass 
reduction while maintaining a safety-neutral outcome.
     Updates to economic inputs:
    [cir] Fuel prices are now based on EIA's AEO 2012 Early Release 
forecasts
    [cir] VMT schedules and vehicle survival rates have been updated
    [cir] Changes to benefits associated with reduced refueling time
    [cir] Accounting for maintenance costs during the warranty period 
(sensitivity analysis to consider repair costs beyond the warranty 
period)
    [cir] Accounting for financing costs and insurance costs from the 
consumer perspective
    [cir] Updating all costs and benefits to 2010$
     Changes to the CAFE model:
    [cir] Corrections to incremental accounting for cost of diesel 
engines
    [cir] For purposes of selecting among available options to add 
technology incrementally, corrections to model to look at fuel prices 
during years following vehicle's sale, rather than before vehicle's 
sale
    [cir] Corrections to accounting for the fuel economy of dual-fueled 
E85-capable vehicles (often called ``flexible fuel vehicles'' or 
``FFVs'') to recognize technologies' fuel economy effectiveness when 
operating on E85
    [cir] Corrections to accounting for on-road energy consumption by 
EVs and PHEVs by removing Petroleum Equivalency Factor from on-road 
equivalent fuel economy
    [cir] Corrections to account for mobility benefit (value of travel) 
to account for value of fuel for travel attributable to the rebound 
effect
    [cir] Other changes to implement the analytic and programmatic 
changes listed above
    This final rule, the joint TSD, and NHTSA's FRIA and EPA's RIA 
contain much more information about the analysis underlying the final 
standards. The following sections in this preamble provide the basis 
for NHTSA's final passenger car and light truck CAFE standards for MYs 
2017-2021 and augural standards for MYs 2022-2025, the standards 
themselves, the estimated impacts of the standards, and much more 
information about the CAFE program relevant to the 2017-2025 timeframe.

C. Development and Feasibility of the Proposed Standards

1. How was the baseline vehicle fleet developed?
a. Why do the agencies establish a baseline and reference vehicle 
fleet?
    As also discussed in Section II.B above, in order to determine what 
levels of stringency are feasible in future model years, the agencies 
must project what vehicles will exist in those model years, and then 
evaluate what technologies can feasibly be applied to those vehicles in 
order to raise their fuel economy and lower their CO2 
emissions. The agencies therefore established two ``baseline'' vehicle 
fleets representing those vehicles, based on the best available 
transparent information. The agencies then developed two ``reference'' 
fleets, projecting the baseline fleet sales into MYs 2017-2025 and 
accounting for the effect that the MY 2012-2016 CAFE standards have on 
the baseline fleet.\950\ These reference fleets are then used for 
comparisons of technologies' incremental cost and effectiveness, as 
well as for other relevant comparisons in the rule.
---------------------------------------------------------------------------

    \950\ In order to calculate the impacts of the proposed future 
GHG and CAFE standards, it is necessary to estimate the composition 
of the future vehicle fleet absent those proposed standards in order 
to conduct comparisons. The first step in this process was to 
develop a fleet based on data from a given model year. This given-
model-year-based fleet includes vehicle sales volumes, GHG/fuel 
economy performance, and contains a listing of the base technologies 
on every vehicle sold in that model year. The second step was to 
project that given-model-year-based fleet volume into MYs 2017-2025. 
This is called the reference fleet, and it represents the fleet 
volumes (but, until later steps, not levels of technology) that the 
NHTSA and EPA expect would exist in MYs 2017-2025 absent any change 
due to regulation in 2017-2025.
    After determining the reference fleet, a third step is needed to 
account for technologies (and corresponding increases in cost and 
reductions in fuel consumption and CO2 emissions) that 
could be added to the given-model-year vehicles in the future, 
taking into previously-promulgated standards, and assuming MY 2016 
standards are extended through MY 2025. NHTSA accomplished this by 
using the CAFE model to add technologies to the MY 2008-based market 
forecast and the MY 2010-based market forecast such that each 
manufacturer's car and truck CAFE and average CO2 levels 
reflect baseline standards. The model's output, the reference case 
(or adjusted baseline, or no-action alternative), is the light-duty 
fleet estimated to exist in MYs 2017-2025 without new GHG/CAFE 
standards covering MYs 2017-2025. Section II above and Chapter 1 of 
the joint TSD provide additional information on development of the 
baseline and reference fleets for this final rule.
---------------------------------------------------------------------------

b. What data did the agencies use to construct the baseline, and how 
did they do so?
    As explained in Chapter 1 of the joint TSD, both agencies used 
baseline vehicle fleets constructed beginning with EPA fuel economy 
certification data for the 2008 and 2010 model years, the latter being 
the most recent model year for which final data is currently available 
from manufacturers. These data were used as the source for MY 2008 and 
MY 2010 production volumes and some vehicle engineering 
characteristics, such as fuel economy compliance ratings, engine sizes, 
numbers of cylinders, and transmission types.
    Some information important for analyzing new CAFE standards is not 
contained in the EPA fuel economy certification data. EPA staff 
estimated vehicle wheelbase and track widths using data from 
Motortrend.com and Edmunds.com. This information is necessary for 
estimating vehicle footprint, which is required for the analysis of 
footprint-based standards.
    Considerable additional information regarding vehicle engineering 
characteristics is also important for estimating the potential to add 
new technologies in response to new CAFE standards. In general, such 
information helps to avoid ``adding'' technologies to vehicles that 
already have the same or a more advanced technology. Examples include 
valvetrain configuration (e.g., OHV, SOHC, DOHC), presence of cylinder 
deactivation, and fuel delivery (e.g., MPFI, SIDI). To the extent that 
such engineering characteristics were not available in certification 
data, EPA staff relied on data published by Ward's Automotive, 
supplementing this with information from Internet sites such as 
Motortrend.com and Edmunds.com. NHTSA staff also added some more 
detailed engineering characteristics (e.g., type of variable valve 
timing) using data available from ALLDATA[supreg] Online. Combined with 
the certification data, all of this information yielded the MY 2008 and 
MY 2010 baseline vehicle fleets. NHTSA also reviewed information from

[[Page 62967]]

manufacturers' confidential product plans submitted to the agency, but 
did not rely on that information for developing the baseline or 
reference fleets.
    After the baseline was created the next step was to project the 
sales volumes for 2017-2025 model years. For the MY 2008-based 
forecast, the agencies used projected car and truck volumes for this 
period from Energy Information Administration's (EIA's) 2011 Interim 
Annual Energy Outlook (AEO).\951\ For the MY 2010-based forecast, the 
agencies used EIA's AEO 2012 Early Release. However, AEO projects sales 
only at the car and truck level, not at the manufacturer and model-
specific level, which are needed in order to estimate the effects new 
standards will have on individual manufacturers. Therefore, for the MY 
2008-based forecast EPA purchased data from CSM-Worldwide in 2009 and 
used their projections of the number of vehicles of each type predicted 
to be sold by manufacturers in 2017-2025. This provided the year-by-
year percentages of cars and trucks sold by each manufacturer as well 
as the percentages of each vehicle segment. Using these percentages 
normalized to the AEO projected volumes then provided the manufacturer-
specific market share and model-specific sales for model years 2011-
2016. For the MY 2010-based forecast, EPA purchased data from LMC in 
2011 and used its manufacturer- and segment-level forecasts.
---------------------------------------------------------------------------

    \951\ Both agencies regard AEO a credible source not only of 
such forecasts, but also of many underlying forecasts, including 
forecasts of the size of the future light vehicle market.
---------------------------------------------------------------------------

    The processes for constructing the MY 2008 and MY 2010 baseline 
vehicle fleets and subsequently adjusting sales volumes to construct 
the MY 2017-2025 baseline vehicle fleets are presented in detail in 
Chapter 1 of the joint TSD accompanying today's final rule.
    In the main analysis, the agencies assume that without adoption of 
the proposed rule, manufacturers will not improve fuel economy levels 
during the 2017-2025 period beyond the levels required in the MY 2016 
standards. However, it is possible that manufacturers may be driven by 
market forces to raise the fuel economy of their fleets. The recently-
adopted fuel economy and environment labels (``window stickers''), for 
example, may make consumers more aware of the benefits of higher fuel 
economy, and may cause them to demand more fuel-efficient vehicles 
during that timeframe. Moreover, the agencies' analysis indicates that 
some fuel-saving technologies may save money for manufacturers. In 
Chapter X of the FRIA, NHTSA examines the impact of an alternative 
``market-driven'' baseline, which estimates the potential that, insofar 
as sufficiently cost-effective opportunities to add technology are 
available, manufacturers might increase fuel economy beyond levels 
required by the MY 2016 standards. In the NPRM, NHTSA sought comment on 
what assumptions about fuel economy increases are most likely to 
accurately predict what would happen in the absence of the proposed 
rule. As discussed at greater length below in Section IV.G, some 
environmental organizations submitted comments relevant to this 
question, including (1) suggestions that buyers value fuel much more 
highly than assumed by NHTSA in either the main analysis or in the 
sensitivity analysis with the market-driven baseline; (2) suggestions 
that given stable standards, manufacturers might voluntarily increase 
fuel efficiency; (3) claims that the historical record indicates 
manufacturers would not voluntarily increase fuel economy; and (4) 
arguments that NHTSA should not account for voluntary fuel economy 
increase because doing so would reduce benefits attributable to the new 
standards. Having considered these comments, our central analysis 
follows the approach followed for the NPRM--that is, our central 
analysis and majority of our sensitivity analyses assume that 
manufacturers will never (e.g., even if gasoline is much more expensive 
than assumed for our central analysis) apply more technology than 
necessary to achieve compliance with fuel economy standards that remain 
unchanged from MY 2016 through MY 2025.
    In the NPRM, NHTSA also invited comment on the process used to 
develop the market forecast, and on whether the agencies should 
consider alternative approaches to producing a forecast at the 
necessary level of detail. While the agencies received comments on the 
characteristics of the market forecast supporting the NPRM, NHTSA did 
not receive any responses to our request for comments on the process 
for developing the market forecast. At this time, NHTSA, like EPA, is 
making use of market forecasts developed using the same process as 
applied for the NPRM and the MYs 2012-2016 rulemaking. However, NHTSA 
expects to revisit the market forecast development process during the 
future rulemaking to develop final standards for MYs 2022-2025 and the 
concurrent mid-term evaluation.
c. How is the development of baseline fleets for this final rule 
different from the baseline fleet that NHTSA used for proposed rule?
    The development of the baseline fleets for this rulemaking utilizes 
the same procedures used in the development of the baseline fleet for 
the proposed rule and, previously, the MY 2012-2016 rulemaking. For 
this final rule, we are using two baseline fleets. The first, as in the 
NPRM, is basically the same MY 2008 based file as the starting point in 
the MY 2012-2016 analysis, and simply using an updated AEO forecast and 
an updated CSM forecast (and, relative to the NPRM, correcting some 
erroneous footprint values, as discussed in Chapter 1 of the joint 
TSD). The second baseline used to analyze today's final rule was 
developed using essentially the same process, but making use of MY 2010 
CAFE certification data (rather than MY 2008), the AEO 2012 Early 
Release version of NEMS (rather than AEO 2011), and a manufacturer- and 
segment-level forecast provided to EPA in 2011 by LMC (rather than the 
forecast provided to EPA in 2009 by CSM). Of those, most differences 
(relative to the baseline supporting the MY 2012-2016 rulemaking) are 
in input assumptions rather than the basic approach and methodology. 
These include changes in various macroeconomic assumptions underlying 
the AEO, CSM, and LCM forecasts and the use of results obtained by 
using DOE's National Energy Modeling System (NEMS) to repeat the AEO 
2011 and AEO 2012 analysis without forcing increased passenger car 
volumes, and without assuming post-MY 2016 increases in the stringency 
of CAFE standards.\952\
---------------------------------------------------------------------------

    \952\ Similar to the analyses supporting the MYs 2012-2016 
rulemaking, the agencies have used the Energy Information 
Administration's (EIA's) National Energy Modeling System (NEMS) to 
estimate the future relative market shares of passenger cars and 
light trucks. However, NEMS methodology includes shifting vehicle 
sales volume, starting after 2007, away from fleets with lower fuel 
economy (the light-truck fleet) towards vehicles with higher fuel 
economies (the passenger car fleet) in order to facilitate 
compliance with CAFE and GHG MYs 2012-2016 standards. Because we use 
our market projection as a baseline relative to which we measure the 
effects of new standards, and we attempt to estimate the industry's 
ability to comply with new standards without changing product mix, 
the Interim AEO 2011- and Early Release AEO 2012-projected shifts in 
passenger car market share as a result of required fuel economy 
improvements create a circularity. Therefore, for the current 
analysis, the agencies developed new projections of passenger car 
and light truck sales shares by running scenarios from the Interim 
AEO 2011 and Early Release AEO 2012 reference cases that first 
deactivate the above-mentioned sales-volume shifting methodology and 
then hold post-2017 CAFE standards constant at MY 2016 levels. 
Incorporating these changes reduced the projected passenger car 
share of the light vehicle market by an average of about 5 percent 
during 2017-2025. NHTSA and EPA refer to this as the ``Unforced 
Reference Case.''

---------------------------------------------------------------------------

[[Page 62968]]

d. How are these baselines different quantitatively from the baseline 
that NHTSA used for the proposed rule?
    As discussed above, the current baselines were developed from 
adjusted MY 2008 and MY 2010 compliance data, respectively, and cover 
MY 2017-2025. This section describes, for the reader's comparison, some 
of the differences between the current baselines and baseline 
supporting the NPRM. These comparisons provide a basis for 
understanding general characteristics and measures of the difference 
between the three baselines. The current MY 2008-based baseline, while 
largely identical to that supporting the NPRM, reflects corrections to 
the footprint of some vehicle models, and corrections to the regulatory 
classification of a few General Motors vehicle models. The MY 2010-
based baseline reflects use of MY 2010 certification data, a newer 
commercially-available forecast purchased by EPA in 2011 from LMC 
(formerly J.D. Power), and total passenger car and light truck volumes 
based on use of EIA's National Energy Modeling System (NEMS) for AEO 
2012. The differences are in input assumptions rather than the basic 
approach and methodology.
e. Estimated Vehicle Sales During MYs 2017-2025
    The fleetwide sales forecasts, based on the Energy Information 
Administration's (EIA's) Early Annual Energy Outlooks for 2011 and 2012 
(Interim AEO 2011 and Early Release AEO 2012), used in the current MY 
2008-based and MY 2010-based baselines, respectively, indicate that the 
total number of light vehicles expected to be sold during MYs 2017-2025 
is 143-146 million, or about 15.9-16.2 million vehicles annually. 
NHTSA's NPRM forecast, also based on AEO 2011, of the total number of 
light vehicles likely to be sold during MY 2012 through MY 2016 was 146 
million, or about 16.2 million vehicles annually. Light trucks are 
expected to make up 34-35 percent of the MY 2017-2025 baseline market 
forecast in the current baselines, compared to 35 percent of the 
baseline market forecast in the proposed rule.
f. Estimated Manufacturer Market Shares in MY 2016
    Table IV-1 shows the agency's sales forecasts for passenger cars 
and light trucks under the current baselines and NPRM baseline. The MY 
2008-based baseline is nearly identical to the NPRM baseline. The MY 
2010-based baseline exhibits several significant differences, 
including, but not limited to, the following: A significant increase in 
Chrysler's market share; declines in some other manufacturers' (e.g., 
BMW's, Suzuki's, and Toyota's) market shares; relative declines in 
light trucks as a share of many manufacturers' total production; the 
exit of Saab from the light vehicle market; and a lack of MY 2010-based 
data for Tesla. Also, underlying the overall volumes reported below for 
some manufacturers are some significant brand-level differences between 
the MY 2008- and MY 2010-based fleets, reflecting significant changes 
in some manufacturers' offerings--changes that began in MY 2007/2008 
and were complete or in progress by MY 2010. In particular, the MY 
2010-based forecast for General Motors contains about 90% fewer Hummers 
and about 75% fewer Pontiacs than the MY 2008-based forecast, 
reflecting GM's discontinuation of those brands.

                                        Table IV-1--NHTSA Sales Forecasts
                              [Production for U.S. sale in MY 2016, thousand units]
----------------------------------------------------------------------------------------------------------------
                                                           NPRM baseline                 Current Baselines
          Manufacturer               Fleet MY    ---------------------------------------------------------------
                                                     Passenger     Non-passenger     Passenger     Non-passenger
----------------------------------------------------------------------------------------------------------------
Aston Martin....................            2008               1  ..............              1-              0-
                                            2010               1  ..............  ..............               0
BMW.............................            2008             383             184            383-            184-
                                            2010  ..............  ..............             317             107
Daimler.........................            2008             245             136            245-            136-
                                            2010  ..............  ..............             250              97
Fiat/Chrysler...................            2008             392             498            394-            495-
                                            2010  ..............  ..............             725             794
Ford............................            2008           1,393             930          1,393-            930-
                                            2010  ..............  ..............           1,354           1,039
Geely/Volvo.....................            2008              94              50             94-             50-
                                            2010  ..............  ..............              58              34
General Motors \953\............            2008           1,391           1,444          1,444-          1,391-
                                            2010  ..............  ..............           1,672           1,222
Honda...........................            2008             862             588            862-            588-
                                            2010  ..............  ..............           1,127             531
Hyundai.........................            2008             489              99            489-             99-
                                            2010  ..............  ..............             847             136
Kia.............................            2008             512             124            512-            124-
                                            2010  ..............  ..............             333              46
Lotus...........................            2008             0.3               -            0.3-            0.0-
                                            2010  ..............  ..............             0.4             0.0
Mazda...........................            2008             393              78            378-             93-
                                            2010  ..............  ..............             258              60
Mitsubishi......................            2008              80              60             98-             42-
                                            2010  ..............  ..............              57              13
Nissan..........................            2008             869             410            869-            410-
                                            2010  ..............  ..............             907             310

[[Page 62969]]

 
Porsche.........................            2008              30              18             30-             18-
                                            2010  ..............  ..............              19              20
Spkyer/Saab.....................            2008              18               2             18-              2-
                                            2010  ..............  ..............               0               0
Subaru..........................            2008             236              74            236-             74-
                                            2010  ..............  ..............             213              94
Suzuki..........................            2008              94              21             94-             21-
                                            2010  ..............  ..............              43               3
Tata............................            2008              59              46             59-             46-
                                            2010  ..............  ..............              29              53
Tesla...........................            2008              27               -             27-              0-
                                            2010  ..............  ..............  ..............  ..............
Toyota..........................            2008           2,043           1,159          2,043-          1,159-
                                            2010  ..............  ..............           1,532             970
Volkswagen......................            2008             528             134            528-            134-
                                            2010  ..............  ..............             486             104
                                 -------------------------------------------------------------------------------
    Total \954\.................            2008          10,140           6,055         10,198-          5,997-
                                            2010  ..............  ..............          10,227           5,635
----------------------------------------------------------------------------------------------------------------

g. Estimated Unadjusted Baseline Achieved Fuel Economy Levels in MY 
2016
---------------------------------------------------------------------------

    \953\ For this final rule, the MY 2008-based baseline was 
corrected to reassign the Chevrolet Blazer, GMC Envoy, and Pontiac 
Torrent to the General Motors passenger car fleet.
    \954\ For this final rule, the MY 2008-based baseline was 
corrected to reassign the Chevrolet Blazer, GMC Envoy, and Pontiac 
Torrent to the General Motors passenger car fleet.
---------------------------------------------------------------------------

    Table IV-2, below, compares unadjusted average fuel economy levels 
(i.e., levels reflecting vehicle model fuel economy levels the CAFE 
certification data and vehicle model sales volumes adjusted to produce 
estimated future baseline fleets) in the current market forecasts to 
those in the market forecast supporting the NPRM. Under the current 
baselines, average fuel economy for MY 2016 is 27.0-27.9 mpg, versus 
27.0 mpg under the baseline in the NPRM. The upward extension of this 
range relative to the value from the NPRM reflects a combination of 
changes in technology and fuel economy between MY 2008 and MY 2010 
(e.g., the introduction of Ford's ``Ecoboost'' engine). Manufacturer-
specific CAFE levels are shown below in Table IV-2, which does not 
count FFV credits that some manufacturers expect to earn. Table IV-3 
shows the combined averages of these planned CAFE levels in the 
respective baseline fleets. Because the agencies have, based today's 
market forecasts on vehicles in the MY 2008 and MY 2010 fleets, 
respectively, these CAFE levels the projected future vehicle mix, not 
changes in the fuel economy that might be achieved by individual 
vehicle models by MY 2016.

         Table IV-2--Current Baseline CAFE Levels in MY 2016 Versus MY 2012-2016 Rulemaking CAFE Levels
----------------------------------------------------------------------------------------------------------------
                                                           NPRM Baseline                 Current Baselines
          Manufacturer               Fleet MY    ---------------------------------------------------------------
                                                     Passenger     Non-passenger     Passenger     Non-passenger
----------------------------------------------------------------------------------------------------------------
Aston Martin....................            2008            18.8  ..............           18.8-  ..............
                                            2010  ..............  ..............            19.0  ..............
BMW.............................            2008            27.2            23.0           27.2-           23.0-
                                            2010  ..............  ..............            27.4            24.1
Daimler.........................            2008            25.5            21.1           25.5-           21.1-
                                            2010  ..............  ..............           24.7-           21.0-
Fiat/Chrysler...................            2008            27.7            22.2           27.7-           22.2-
                                            2010  ..............  ..............            28.2            21.7
Ford............................            2008            28.2            21.3           28.2-           21.3-
                                            2010  ..............  ..............            30.3            22.2
Geely/Volvo.....................            2008            25.9            21.1           25.9-           21.1-
                                            2010  ..............  ..............            28.2            22.8
General Motors..................            2008            28.4            21.4           28.2-           21.4-
                                            2010  ..............  ..............            30.3            22.5
Honda...........................            2008            33.8            25.0           33.8-           25.0-
                                            2010  ..............  ..............            34.5            25.1
Hyundai.........................            2008            31.7            24.3           31.7-           24.3-
                                            2010  ..............  ..............            32.9            28.2
Kia.............................            2008            32.7            23.8           32.7-           23.8-
                                            2010  ..............  ..............            35.2            25.0

[[Page 62970]]

 
Lotus...........................            2008            29.7  ..............           29.7-  ..............
                                            2010  ..............  ..............            26.7  ..............
Mazda...........................            2008            30.8            26.4           31.3-           25.6-
                                            2010  ..............  ..............            32.0            25.2
Mitsubishi......................            2008            28.8            23.6           27.5-           23.9-
                                            2010  ..............  ..............            32.5            28.1
Nissan..........................            2008            32.0            22.1           32.0-           22.1-
                                            2010  ..............  ..............            32.6            23.6
Porsche.........................            2008            26.2            20.0           26.2-           20.0-
                                            2010  ..............  ..............            25.4            20.5
Spkyer/Saab.....................            2008            26.6            19.8            26.6            19.8
                                            2010  ..............  ..............  ..............  ..............
Subaru..........................            2008            29.6            27.3           29.6-           27.3-
                                            2010  ..............  ..............            29.7            30.7
Suzuki..........................            2008            30.8            23.3           30.8-           23.3-
                                            2010  ..............  ..............            33.1            26.1
Tata............................            2008            24.6            19.7           24.6-           19.7-
                                            2010  ..............  ..............            23.3            18.9
Tesla...........................            2008           244.0  ..............           244.0  ..............
                                            2010  ..............  ..............  ..............  ..............
Toyota..........................            2008            35.2            24.3           35.2-           24.3-
                                            2010  ..............  ..............            35.4            24.1
Volkswagen......................            2008            28.9            20.2           28.9-           20.2-
                                            2010  ..............  ..............            31.8            24.0
                                 -------------------------------------------------------------------------------
    Total.......................            2008            30.7            22.6           30.6-           22.6-
                                            2010  ..............  ..............            31.6            23.1
----------------------------------------------------------------------------------------------------------------

    Table IV-3--Current Baseline CAFE Levels in MY 2016 Versus MY 2012-2016 Rulemaking CAFE Levels (Combined)
----------------------------------------------------------------------------------------------------------------
                                                                                                    Current
                         Manufacturer                             Fleet MY     NPRM  baseline      baselines
----------------------------------------------------------------------------------------------------------------
Aston Martin.................................................            2008            18.8              18.8-
                                                                         2010  ..............               19.0
BMW..........................................................            2008            25.7              25.7-
                                                                         2010  ..............               26.5
Daimler......................................................            2008            23.7              23.7-
                                                                         2010  ..............               23.6
Fiat/Chrysler................................................            2008            24.3              24.3-
                                                                         2010  ..............               24.4
Ford.........................................................            2008            25.0              25.0-
                                                                         2010  ..............               26.1
Geely/Volvo..................................................            2008            24.0              24.0-
                                                                         2010  ..............               25.9
General Motors...............................................            2008            24.4              24.4-
                                                                         2010  ..............               26.4
Honda........................................................            2008            29.6              29.6-
                                                                         2010  ..............               30.8
Hyundai......................................................            2008            30.2              30.2-
                                                                         2010  ..............               32.2
Kia..........................................................            2008            30.5              30.5-
                                                                         2010  ..............               33.5
Lotus........................................................            2008            29.7              29.7-
                                                                         2010  ..............               26.7
Mazda........................................................            2008            30.0              30.0-
                                                                         2010  ..............               30.5
Mitsubishi...................................................            2008            26.3              26.3-
                                                                         2010  ..............               31.6
Nissan.......................................................            2008            28.0              28.0-
                                                                         2010  ..............               29.7
Porsche......................................................            2008            23.5              23.5-
                                                                         2010  ..............               22.6
Spkyer/Saab..................................................            2008            25.7               25.7
                                                                         2010  ..............  .................
Subaru.......................................................            2008            29.0              29.0-

[[Page 62971]]

 
                                                                         2010  ..............               30.0
Suzuki.......................................................            2008            29.1              29.1-
                                                                         2010  ..............               32.5
Tata.........................................................            2008            22.2              22.2-
                                                                         2010  ..............               20.3
Tesla........................................................            2008           244.0              244.0
                                                                         2010  ..............  .................
Toyota.......................................................            2008            30.3              30.3-
                                                                         2010  ..............               30.0
Volkswagen...................................................            2008            26.6              26.6-
                                                                         2010  ..............               30.1
                                                              --------------------------------------------------
    Total....................................................            2008            27.0              27.0-
                                                                         2010  ..............               27.9
----------------------------------------------------------------------------------------------------------------

h. What sensitivity analyses is NHTSA conducting on the baseline?
    As discussed below in Section IV.G, when evaluating the potential 
impacts of new CAFE standards, NHTSA considered the potential that, 
depending on how the cost and effectiveness of available technologies 
compare to the price of fuel, manufacturers would add more fuel-saving 
technology than might be required solely for purposes of complying with 
CAFE standards. This reflects that agency's consideration that there 
could, in the future, be at least some market for fuel economy 
improvements beyond the required MY 2016 CAFE levels. In these 
sensitivity analyses, this causes some additional technology to be 
applied, more so under baseline standards than under the more stringent 
standards proposed today by the agency. Results of these sensitivity 
analyses are summarized in Section IV.G and in NHTSA's FRIA 
accompanying today's notice.
i. How else is NHTSA considering looking at the baseline in the future?
    Beyond the sensitivity analysis discussed above, NHTSA is also in 
the process of developing a vehicle choice model to estimate the extent 
to which sales volumes would shift in response to changes in vehicle 
prices and fuel economy levels. As discussed in IV.C.4 of the NPRM, the 
agency is currently sponsoring research directed toward developing such 
a model. However, that effort is still underway, so the agency has not 
integrated such a model into the CAFE modeling system. The agency may 
do so in the future, and use the integrated system for future analysis 
of potential CAFE standards. If the agency does so, we expect that the 
vehicle choice model would impact estimated fleet composition not just 
under new CAFE standards, but also under baseline CAFE standards.
    For today's rulemaking, the agency has, for purposes of the 
probabilistic uncertainty analysis documented in the accompanying FRIA, 
considered uncertainty regarding the future relative shares of 
passenger cars and light trucks. As discussed in the FRIA, we applied 
an approach relating these shares to, among other things, the price of 
fuel, such that shares varied as we varied fuel price, leading to 
changes in estimated outcomes such as fuel consumption and 
CO2 emissions.
2. How were the technology inputs developed?
    As discussed above in Section II.D, for developing the technology 
inputs for the proposed MYs 2017-2025 CAFE and GHG standards, which 
have been carried over largely unchanged since the NPRM, the agencies 
primarily began with the technology inputs used in the MYs 2012-2016 
CAFE final rule and in the 2010 TAR. For the NPRM, the agencies also 
updated information based on newly completed FEV tear-down studies and 
new vehicle simulation work conducted by Ricardo Engineering, both of 
which were contracted by EPA. The agencies also relied on a model 
developed by Argonne National Laboratory to estimate hybrid, plug-in 
hybrid and electric vehicle battery costs, which was updated between 
the NPRM and final rule. As another update for the final rule analysis, 
NHTSA used information from vehicle simulation work conducted by 
Argonne National Laboratory, which was contracted by the U.S. DOT Volpe 
Center to support CAFE rulemaking analyses. The Argonne work was used 
to inform several technology effectiveness estimates. More detail is 
available regarding how the agencies developed the technology inputs 
for the final rule above in Section II.D, in Chapter 3 of the Joint 
TSD, and in Chapter V of NHTSA's FRIA.
a. What technologies does NHTSA consider?
    For purposes of this final rule and as discussed in greater detail 
in the Joint TSD, NHTSA and EPA built upon the list of technologies 
used by the agencies for the MYs 2012-2016 CAFE and GHG standards. 
Section II.D.1 above describes the fuel-saving technologies considered 
by the agencies that manufacturers could use to improve the fuel 
economy of their vehicles during MYs 2017-2025. Many of the 
technologies described in this section are readily available, well 
known, and could be incorporated into vehicles once production 
decisions are made. Other technologies, added for this rulemaking 
analysis, are considered that are not currently in production, but are 
beyond the initial research phase, under development and are expected 
to be in production in the next 5-10 years. These new technologies 
include higher BMEP turbocharged and downsized engines, advanced diesel 
engines, higher efficiency transmissions, additional mass reduction 
levels, PHEVs, EVs, etc. As discussed, the technologies considered fall 
into five broad categories: engine technologies, transmission 
technologies, vehicle technologies, electrification/accessory 
technologies, and hybrid technologies. We note that one technology has 
been added since the NPRM--Integrated Starter Generator (or Mild 
Hybrid)--based on the Argonne work. This addition is discussed in more 
detail in Chapter V of the FRIA.
    Table IV-4 below lists all the technologies considered and provides 
the abbreviations used for them in the

[[Page 62972]]

CAFE model,\955\ as well as their year of availability, which for 
purposes of NHTSA's analysis means the first model year in the 
rulemaking period that the CAFE model is allowed to apply a technology 
to a manufacturer's fleet.\956\ ``Year of availability'' recognizes 
that technologies must achieve a level of technical viability before 
they can be implemented in the CAFE model, and are thus a means of 
constraining technology use until such time as it is considered to be 
technologically feasible. Year of availability may vary in NHTSA's 
analysis depending on whether the modeling runs are for purposes of 
evaluating whether a given regulatory alternative is maximum feasible 
(``standard-setting runs''), or for evaluating the real-world impacts 
of a given regulatory alternative (``real-world runs'')--the difference 
occurs because EPCA/EISA restricts NHTSA's ability to consider the 
availability of certain technologies in certain model years. For a more 
detailed description of each technology and their costs and 
effectiveness, we refer the reader to Chapter 3 of the Joint TSD and 
Chapter V of NHTSA's FRIA.
---------------------------------------------------------------------------

    \955\ The abbreviations are used in this section both for 
brevity and for the reader's reference if they wish to refer to the 
expanded decision trees and the model input and output sheets, which 
are available in Docket No. NHTSA-2010-0131 and at http://www.nhtsa.gov/fuel-economy.
    \956\ A date of 2007 or 2012 means the technology can be applied 
in all model years, while a date of 2020, for example, means the 
technology can only be applied in model years 2020 through 2025.

          Table IV-4--List of Technologies in NHTSA's Analysis
------------------------------------------------------------------------
           Technology              Model abbreviation    Year available
------------------------------------------------------------------------
Low Friction Lubricants--Level 1  LUB1...............               2007
Engine Friction Reduction--Level  EFR1...............               2007
 1.
Low Friction Lubricants and       LUB2--EFR2.........               2017
 Engine Friction Reduction--
 Level 2.
Variable Valve Timing (VVT)--     CCPS...............               2007
 Coupled Cam Phasing (CCP) on
 SOHC.
Discrete Variable Valve Lift      DVVLS..............               2007
 (DVVL) on SOHC.
Cylinder Deactivation on SOHC...  DEACS..............               2007
Variable Valve Timing (VVT)--     ICP................               2007
 Intake Cam Phasing (ICP).
Variable Valve Timing (VVT)--     DCP................               2007
 Dual Cam Phasing (DCP).
Discrete Variable Valve Lift      DVVLD..............               2007
 (DVVL) on DOHC.
Continuously Variable Valve Lift  CVVL...............               2007
 (CVVL).
Cylinder Deactivation on DOHC...  DEACD..............               2007
Stoichiometric Gasoline Direct    SGDI...............               2007
 Injection (GDI).
Cylinder Deactivation on OHV....  DEACO..............               2007
Variable Valve Actuation--CCP     VVA................               2007
 and DVVL on OHV.
Stoichiometric Gasoline Direct    SGDIO..............               2007
 Injection (GDI) on OHV.
Turbocharging and Downsizing--    TRBDS1--SD.........               2007
 Level 1 (18 bar BMEP)--Small
 Displacement.
Turbocharging and Downsizing--    TRBDS1--MD.........               2007
 Level 1 (18 bar BMEP)--Medium
 Displacement.
Turbocharging and Downsizing--    TRBDS1--LD.........               2007
 Level 1 (18 bar BMEP)--Large
 Displacement.
Turbocharging and Downsizing--    TRBDS2--SD.........               2012
 Level 2 (24 bar BMEP)--Small
 Displacement.
Turbocharging and Downsizing--    TRBDS2--MD.........               2012
 Level 2 (24 bar BMEP)--Medium
 Displacement.
Turbocharging and Downsizing--    TRBDS2--LD.........               2012
 Level 2 (24 bar BMEP)--Large
 Displacement.
Cooled Exhaust Gas Recirculation  CEGR1--SD..........               2012
 (EGR)--Level 1 (24 bar BMEP)--
 Small Displacement.
Cooled Exhaust Gas Recirculation  CEGR1--MD..........               2012
 (EGR)--Level 1 (24 bar BMEP)--
 Medium Displacement.
Cooled Exhaust Gas Recirculation  CEGR1--LD..........               2012
 (EGR)--Level 1 (24 bar BMEP)--
 Large Displacement.
Cooled Exhaust Gas Recirculation  CEGR2--SD..........               2017
 (EGR)--Level 2 (27 bar BMEP)--
 Small Displacement.
Cooled Exhaust Gas Recirculation  CEGR2--MD..........               2017
 (EGR)--Level 2 (27 bar BMEP)--
 Medium Displacement.
Cooled Exhaust Gas Recirculation  CEGR2--LD..........               2017
 (EGR)--Level 2 (27 bar BMEP)--
 Large Displacement.
Advanced Diesel--Small            ADSL--SD...........               2017
 Displacement.
Advanced Diesel--Medium           ADSL--MD...........               2017
 Displacement.
Advanced Diesel--Large            ADSL--LD...........               2017
 Displacement.
6-Speed Manual/Improved           6MAN...............               2007
 Internals.
High Efficiency Gearbox (Manual)  HETRANSM...........               2017
Improved Auto. Trans. Controls/   IATC...............               2007
 Externals.
6-Speed Trans with Improved       NAUTO..............               2007
 Internals (Auto).
6-Speed DCT.....................  DCT................               2007
8-Speed Trans (Auto or DCT).....  8SPD...............               2014
High Efficiency Gearbox (Auto or  HETRANS............               2017
 DCT).
Shift Optimizer.................  SHFTOPT............               2017
Electric Power Steering.........  EPS................               2007
Improved Accessories--Level 1...  IACC1..............               2007
Improved Accessories--Level 2 (w/ IACC2..............               2014
 Alternator Regen and 70%
 efficient alternator).
12V Micro-Hybrid (Stop-Start)...  MHEV...............               2007
Integrated Starter Generator      ISG................               2012
 (Mild Hybrid).
Strong Hybrid--Level 1..........  SHEV1..............               2012
Strong Hybrid--Level 2..........  SHEV2..............               2017
Plug-in Hybrid--30 mi range.....  PHEV1..............              *2020
Electric Vehicle (Early           EV1................             **2017
 Adopter)--75 mile range.
Electric Vehicle (Broad Market)-- EV4................             **2017
 150 mile range.
Mass Reduction--Level 1.........  MR1................               2007

[[Page 62973]]

 
Mass Reduction--Level 2.........  MR2................               2007
Mass Reduction--Level 3.........  MR3................               2007
Mass Reduction--Level 4.........  MR4................               2011
Mass Reduction--Level 5.........  MR5................               2016
Low Rolling Resistance Tires--    ROLL1..............               2007
 Level 1.
Low Rolling Resistance Tires--    ROLL2..............               2017
 Level 2.
Low Drag Brakes.................  LDB................               2007
Secondary Axle Disconnect.......  SAX................               2007
Aero Drag Reduction, Level 1....  AERO1..............               2007
Aero Drag Reduction, Level 2....  AERO2..............               2011
------------------------------------------------------------------------
* PHEV is applied in NHTSA's standard setting analysis starting from MY
  2020 and in the real-world analysis starting from MY 2017.
** EV is not applied in NHTSA's standard setting analysis and applied in
  the real-world analysis starting from MY 2017.

b. How did NHTSA determine the costs and effectiveness of each of these 
technologies for use in its modeling analysis?
    Building on the estimates developed for the MYs 2012-2016 CAFE and 
GHG final rule and the 2010 TAR, the agencies incorporated new cost and 
effectiveness estimates for the new technologies being considered and 
some of the technologies carried over from the MYs 2012-2016 final rule 
and 2010 TAR. This joint work is reflected in Chapter 3 of the Joint 
TSD and in Section II of this preamble, as summarized below. For more 
detailed information on the effectiveness and cost of fuel-saving 
technologies, please refer to Chapter 3 of the Joint TSD and Chapter V 
of NHTSA's FRIA.
    For costs, the FEV tear-down work was expanded between the 2012-
2016 final rule and the proposal to include an 8-speed DCT, a power-
split hybrid, which was used to determine a P2 hybrid cost, and a mild 
hybrid with stop-start technology; the estimates based on this work 
were carried forward into the final rule. Battery costs were revised 
between the 2012-2016 final rule and the NPRM using Argonne National 
Laboratory's battery cost model, which allows users to estimate unique 
battery pack cost using user customized input sets for different 
hybridization applications, such as strong hybrid, PHEV and EV. Argonne 
updated the model and EPA updated costs for battery packs between the 
NPRM and this final rule to account for air cooling (for HEVs) and 
parallel battery modules. EPA and NHTSA also modified how the indirect 
costs (using ICM factors) were derived and applied for the NPRM based 
on staff input and public feedback, and carried this change forward 
into the final rule. The updates are discussed at length in Chapter 3 
of the Joint TSD and in Chapter V of NHTSA's FRIA.
    Some of the effectiveness estimates for technologies applied in MYs 
2012-2016 and 2010 TAR have remained the same. However, nearly all of 
the effectiveness estimates for carryover technologies have been 
updated based on a newer version of EPA's lumped parameter model, which 
was calibrated by the vehicle simulation work performed by Ricardo 
Engineering. The Ricardo simulation study was also used to estimate the 
effectiveness for the technologies newly considered for this proposal, 
like higher BMEP turbocharged and downsized engine, advanced 
transmission technologies, and P2 hybrids. For the final rule, NHTSA 
conducted a vehicle simulation project with Argonne National Laboratory 
(ANL), described in more detail in NHTSA's FRIA, that performed 
additional analyses on mild hybrid technologies and advanced 
transmissions to help NHTSA develop effectiveness values better 
tailored for the CAFE model's incremental structure. The effectiveness 
values that were developed by ANL for the mild hybrid vehicles were 
applied by both agencies for the final rule. Additionally, NHTSA 
updated the effectiveness values of advanced transmissions when coupled 
with naturally-aspirated engines based on ANL's simulation work for the 
final rule. While NHTSA and EPA apply technologies differently, the 
agencies have sought to ensure that the resultant effectiveness of 
applying technologies is consistent between the two agencies.
    NHTSA notes that, in developing technology cost and effectiveness 
estimates, the agencies have made every effort to hold constant aspects 
of vehicle performance and utility typically valued by consumers, such 
as horsepower, carrying capacity, drivability, durability, noise, 
vibration and harshness (NVH) and towing and hauling capacity. For 
example, NHTSA includes in its analysis technology cost and 
effectiveness estimates that are specific to performance passenger cars 
(i.e., sports cars), as compared to non-performance passenger cars. 
NHTSA sought comment on the extent to which commenters believed that 
the agencies have been successful in holding constant these elements of 
vehicle performance and utility in developing the technology cost and 
effectiveness estimates.
    With respect to the cost estimates employed in the NPRM analysis, 
ICCT commented that technology costs continue to drop in the agencies' 
assessments over the past several rulemakings, which is evidence that 
technology will be even cheaper in the future.\957\ ICCT expressed 
optimism that reductions in technology costs could lead the agencies to 
set higher standards for MYs 2022-2025 as part of NHTSA's future 
rulemaking and the mid-term evaluation.\958\ With regard to the FEV 
tear-down studies in particular, ICCT stated that it was continuing to 
fund such work, and that it would share the cost estimates for P2 
hybrids, advanced diesel engines, basic start-stop systems, manual 
transmissions, and cooled EGR systems with the agencies when they 
became available.\959\ CBD concurred with ICCT's assessment.\960\ NACAA 
suggested that costs could be brought down more quickly if more 
technology was introduced earlier.\961\ NADA provided a number of 
comments related to cost, albeit focused on the broader issue of 
programmatic costs rather than on costs for specific technologies. NADA 
argued generally that attempting to estimate cost increases so far in 
advance was ``inherently suspect,'' given the uncertainty involved, and 
that

[[Page 62974]]

the agencies' cost estimates were very likely significantly 
undervalued.\962\ NRDC commented that NADA's cost estimates appeared to 
be incorrect and overstated.\963\ API commented that the agencies 
should review and use the technology cost estimates employed in AEO 
2011.\964\ BMW commented that the agencies' assessment of costs for BMW 
was understated, because BMW had already employed many of the 
technologies considered for BMW in the agencies' NPRM analysis, and 
thus further improvements will have to come from more advanced (and 
expensive) technologies than the agencies had estimated.\965\ In 
response, while we recognize that our cost analyses only identify one 
feasible path for manufacturers to comply with the standards and that 
individual manufacturers may pursue other approaches, we continue to 
believe that tear-down analyses are the most accurate method to 
estimate costs for purposes of rulemaking analysis. We also recognize 
the inherent uncertainty in estimating costs in the 2017-2025 
timeframe; to address some of this uncertainty, we are conducting 
sensitivity analyses to understand its magnitude with respect to costs 
and benefits. We will closely monitor the development of the 
technologies and their cost over the next several years, and will 
revisit these areas as needed during the future rulemaking to develop 
the MYs 2022-2025 standards and concurrent mid-term evaluation.
---------------------------------------------------------------------------

    \957\ ICCT, Docket No. NHTSA-2010-0131-0258, at 8.
    \958\ Id.
    \959\ Id.
    \960\ CBD, Docket No. NHTSA-2010-0131-0255, at 7.
    \961\ NACAA, Docket No. EPA-HQ-OAR-2010-0799-8084, at 3.
    \962\ NADA, Docket No. NHTSA-2010-0131-0261, at 3.
    \963\ NRDC, Docket No. EPA-HQ-OAR-2010-0799-9472, at 20.
    \964\ API, Docket No. NHTSA-2010-0131-0238, at 10.
    \965\ BMW, Docket No. NHTSA-2010-0131-0250, at 9-10.
---------------------------------------------------------------------------

    With respect to battery costs, ICCT commented that future versions 
of the BatPaC model should include the option to select either air or 
liquid cooling.\966\ Tesla commented that that while it thought the 
BatPaC model was helpful, Tesla rather ``supports a more comprehensive 
approach to assessing battery cost,'' i.e., by ``factor[ing] in all the 
costs of the battery and attendant systems including cell management, 
thermal management and the disconnect unit.'' \967\ Tesla stated that 
the battery systems in its Model S would cost only $350/kWh at 
production levels of 25,000/year, and that it expected its costs to 
come down in the future.\968\ Porsche, in contrast, argued that the 
battery costs used in the NPRM were significantly underestimated, which 
``inflates the apparent cost-effectiveness'' of the standards.\969\ As 
stated above, for the final rulemaking the agencies requested that ANL 
update the BatPaC model to allow for either air or liquid cooling. 
These updates were incorporated in the final rule analysis. 
Additionally, the agencies are accounting for the costs of cell 
management, thermal management, and battery disconnect. As mentioned 
above, recognizing that future battery costs are uncertain, we have run 
sensitivity analyses using upper and lower bounds of expected battery 
cost. The cost projections produced by BatPaC are sensitive to the 
inputs and assumptions the user provides. The battery pack cost 
projection from BatPaC model ranges from $160/kWh for EV150 for a large 
truck to $306/kWh for a PHEV40 for large passenger cars using NMC 
battery chemistry, and up to $376/kWh for a PHEV20 for large passenger 
cars using LMO battery chemistry.
---------------------------------------------------------------------------

    \966\ ICCT, Docket No. NHTSA-2010-0131-0258, at 21-22.
    \967\ Tesla, Docket No. NHTSA-2010-0131-0259, at 5.
    \968\ Id.
    \969\ Porsche, Docket No. NHTSA-2010-0131-0224, at 6.
---------------------------------------------------------------------------

    With respect to the cost estimate for mass reduction, ICCT 
commented that it expected costs to drop in the future as computer 
modeling improves manufacturers' ability to reduce mass.\970\ ICCT 
recommended that the agencies use the Lotus and FEV mass reduction 
studies for the final rule.\971\ VW, on the other hand, agreed that 
mass reduction costs were likely best represented by an exponential 
function, but argued that based on its experience, the agencies' cost 
curve was too shallow and should increase faster in general and even 
faster for passenger cars as compared to light trucks, since passenger 
cars are already lighter and may have fewer opportunities for simple 
mass removal.\972\ We agree, as VW implies, that the cost of mass 
reduction may vary between manufacturers, depending on what a 
manufacturer has already applied in its current fleet and the approach 
the OEMs take to address mass reduction, such as the material usage, 
manufacturing process, etc. As suggested by ICCT, the study sponsored 
by NHTSA took advantage of computer optimization, computer simulation, 
and advanced materials. The costs derived from NHTSA's study are based 
on a clean-sheet-of-paper approach and take advantage of secondary mass 
reduction. NHTSA's study is discussed in greater details in Chapter V 
of NHTSA's FRIA and Chapter 3 of the joint TSD.
---------------------------------------------------------------------------

    \970\ ICCT, Docket No. NHTSA-2010-0131-0258, at 8.
    \971\ Id. at 9.
    \972\ VW, Docket No. NHTSA-2010-0131-0247, at 17.
---------------------------------------------------------------------------

    As discussed in Section II.D above and Chapter 3 of the joint TSD, 
as well as in Chapter V of NHTSA's RIA, however, the agencies are 
continuing to employ the NPRM estimates for mass reduction costs in 
this final rule. The agencies considered updating cost estimates based 
on the studies that were underway when the NPRM was issued. Those 
studies included the EPA/ICCT funded Phase 2 Toyota Venza Low 
Development project and the NHTSA funded Honda Accord mass reduction 
project, which are described in the section titled ``What additional 
studies are the agencies conducting to inform our estimates of mass 
reduction amounts, cost, and effectiveness?'' However, these studies 
were in the middle of the peer review process and had not yet been 
finalized at the time when the inputs for the main analysis for this 
final rule were required. We continue to believe the NPRM estimates are 
reasonable and appropriate for several reasons. First, given what we 
know about how differently individual manufacturers may undertake mass 
reduction, coming up with a single cost curve applicable to the entire 
industry is inherently uncertain. The mass reduction amounts and costs 
derived by design studies are typically directly applicable to a 
particular vehicle model and may not be completely applicable to other 
vehicle models and vehicle subclasses. The NPRM estimates were 
developed by reviewing nearly every available information source for 
mass reduction costs, which gives the agency some confidence that even 
if the estimates are not exactly correct for every vehicle model and 
subclass, they are reasonable to some extent by virtue of being fully 
informed. Second, while NHTSA's study was not completed in time to 
incorporate its results in the final rule analysis, we note that 
NHTSA's study developed mass reduction cost estimates both for the 
glider only, and for the glider plus the powertrain. At 20 percent mass 
reduction, the NPRM cost essentially falls in between the two cost 
estimates from the NHTSA study. On balance, NHTSA believes that 
continuing to employ the NPRM estimates for mass reduction cost is a 
reasonable surrogate for the result that the agency might have obtained 
if it had been able to incorporate results from NHTSA's mass reduction 
study in time for the final rule analysis. Third, the agencies 
conducted sensitivity studies varying the cost for mass reduction using 
a 40% unit cost range, and found that even when using

[[Page 62975]]

costs at these limits, there was little change in the average vehicle 
technology cost. This supports that had the agencies used a different 
cost curve based on the completion of their studies, the use of the 
revised cost curve would have had very little effect on the results of 
agencies' analyses. Therefore, the agencies conclude that it is 
reasonable and appropriate to use the NPRM cost estimates for mass 
reduction in the final rule.
    The agency notes that the technology costs included in this final 
rule for the central analysis take into account only those associated 
with the initial build of the vehicle. Although comments were received 
to the MYs 2012-2016 rulemaking that suggested there could be 
additional maintenance required with some new technologies (e.g., 
turbocharging, hybrids, etc.), and that additional maintenance costs 
could occur as a result, in the proposal the agencies did not 
explicitly incorporate maintenance costs (or potential savings) as a 
separate element. The agency sought comments on this topic and 
undertook a more detailed review of these potential costs for the final 
rule. NADA commented that the agencies should evaluate the potential 
impact on a vehicle's total cost of ownership, including maintenance 
costs, in the final rule. In response, NHTSA identified a list of 
technologies for which sufficient data on frequency and cost of 
maintenance events exists to support quantification of changes in 
vehicle maintenance costs. This list includes costs associated with low 
rolling resistance tires, diesel fuel filters, and benefits resulting 
from electric vehicle characteristics that eliminate the need for oil 
changes as well as engine air filter changes. These repair costs during 
the warranty period that are identifiably different for new 
technologies were included in the central analysis for the final rule. 
The full list of technologies shown is in Chapter 3 of the joint TSD, 
along with the maintenance interval comparisons, and costs per 
maintenance event. In the final rule as in the NPRM, repair costs 
during the warranty period that are common for all vehicles remain a 
component of the indirect cost multiplier. A sensitivity analysis was 
added to the FRIA to examine repair costs in the post-warranty period, 
discussed further in Chapter X of NHTSA's FRIA. For example, EVs may 
have reduced total life compared to a conventional vehicle due to 
battery degradation. For the NPRM analysis, the agencies assumed that 
the batteries would last the full useful life of the vehicle. In the 
final rule analysis, NHTSA has considered a cost to estimate the value 
of the possibility for an EV to have a different lifetime than a 
conventional vehicle. NHTSA only applied this cost to ``broad-market'' 
EVs (those sold above a 5 percent penetration threshold), as it assumed 
that early-adopters would not be concerned by the possibility of 
earlier end-of-life (this is consistent with our previous assumption 
that early adopters would not be concerned by EVs' shorter driving 
range). This out-of-warranty cost is only included in a sensitivity 
analysis, not the central run. For further detail on how this cost is 
implemented in our analysis, please refer to Chapter VII of NHTSA's 
FRIA.
    For some of the technologies, NHTSA's inputs, which are designed to 
be as consistent as practicable with EPA's, indicate negative 
incremental costs. In other words, the agency is estimating that some 
technologies, if applied in a manner that holds performance and utility 
constant, will, following initial investment (for, e.g., R&D and 
tooling) by the manufacturer and its suppliers, incrementally improve 
fuel savings and reduce vehicle costs. Nonetheless, in the agency's 
central analysis, these and other technologies are applied only insofar 
as is necessary to achieve compliance with standards defining any given 
regulatory alternative (where the baseline no action alternative 
assumes CAFE standards are held constant after MY 2016). The agency has 
also performed a sensitivity analysis involving market-based 
application of technology--that is, the application of technology 
beyond the point needed to achieve compliance, if the cost of the 
technology is estimated to be sufficiently attractive relative to the 
accompanying fuel savings. NHTSA invited comment on all of its 
technology estimates, and specifically requested comment on the 
likelihood that each technology will, if applied in a manner that holds 
vehicle performance and utility constant, be able to both deliver the 
estimated fuel savings and reduce vehicle cost. NHTSA did not receive 
any comment on this aspect. The agency also invited comment on whether 
its central analysis should be revised to include estimated market-
driven application of technology. Some comments addressed this specific 
question; these will be summarized and discussed below.
    The agencies received several comments on the approach used to 
estimate indirect costs in the proposal. NADA argued that the ICM 
approach was not valid and an RPE approach was the only appropriate 
approach, and that the RPE factor should be 2.0 x direct costs \973\ 
rather than the 1.5 that is supported by filings to the Securities and 
Exchange Commission. ICCT agreed with the new ICM approach as presented 
in the proposal, but argued that sensitivity analyses examining the 
impact of using an RPE should be deleted from the final rule.\974\ Both 
agencies have conducted thorough analysis of the comments received on 
the RPE versus ICM approach. Regarding NADA's concerns about the 
accuracy of ICMs, although the agencies recognize that there is 
uncertainty regarding the impact of indirect costs on vehicle prices, 
they have retained ICMs for use in the central analysis because it 
offers the advantage of a disaggregated approach that better 
differentiates among technologies. The impact of using an RPE is 
examined in sensitivity analyses, and we note that even under the 
higher cost estimates that result from using the RPE, the rulemaking is 
highly cost beneficial. The agencies disagree with NADA's contention 
that the correct factor to reflect the RPE should be 2.0, and we cite 
data demonstrating that the overall RPE should average about 1.5. 
Regarding ICCT's contention that NHTSA should delete sensitivity 
analyses examining the impact of using an RPE, NHTSA disagrees based on 
both compliance with OMB guidance and good analytical practice. Further 
analysis of NADA's comments is summarized in Chapter 3 of the joint 
TSD. NHTSA's full response to both NADA and ICCT is presented in 
Chapter VII of NHTSA's FRIA. For this final rule, each agency is using 
an ICM approach with ICM factors identical to those used in the 
proposal. The impact of using an RPE rather than ICMs to calculate 
indirect costs is examined in sensitivity and uncertainty analyses in 
Chapters VII, X, and XII of NHTSA's FRIA.
---------------------------------------------------------------------------

    \973\ NADA, Docket No. NHTSA-2010-0131-0261, at 4.
    \974\ ICCT, Docket No. NHTSA-2010-0131-0258, at 19-20.
---------------------------------------------------------------------------

    With respect to technology effectiveness, ICCT commented generally 
in support of simulation modeling, but argued that the Ricardo work 
resulted in conservative effectiveness estimates because it is 
restricted to currently-available data and engine maps, and cannot 
account for future improvements that might result from CAD used in 
technology design and on-board vehicle controls that will increase 
technology effectiveness.\975\ ICCT stated that estimates for

[[Page 62976]]

technology effectiveness continue to improve, citing the example of 
turbocharging and downsizing, which ICCT said the agencies used to 
estimate at 5-7 percent and now estimate at closer to 12-20 percent 
effectiveness improvement.\976\ Therefore, ICCT stated, the agencies' 
technology effectiveness estimates were likely to be understated.\977\ 
Several commenters also discussed the agencies' effectiveness estimates 
for various technologies. For example, VW suggested that the 
effectiveness of high BMEP engines might be overstated, because the 
torque curve for future engines may be constrained over the rpm range 
by charging limits, exhaust temperature, peak cylinder pressures and 
mechanical forces that may limit the practicable increase in BMEP.\978\ 
VW also commented that the maximum cost-effective amount of mass 
reduction is likely closer to 10 percent instead of 20 percent. In 
response, NHTSA recognizes that different manufacturers may obtain 
different amounts of ``bang for their buck,'' at different costs, when 
they apply different technologies. We maintain that we analyze a 
possible feasible path for compliance with the standards, although we 
recognize that actual manufacturer compliance paths may vary due to 
their judgment of cost-effectiveness. We will continue to monitor 
changes in cost and effectiveness of technologies and will revisit all 
estimates during the mid-term review and future rulemaking for the MYs 
2022-2025.
---------------------------------------------------------------------------

    \975\ ICCT, Docket No. NHTSA-2010-0131-0258, at 4-7.
    \976\ ICCT, Docket No. NHTSA-2010-0131-0258,. at 7.
    \977\ Id.
    \978\ VW, Docket No. NHTSA-2010-0131-0247, at 19.
---------------------------------------------------------------------------

    The tables below provide examples of the incremental cost and 
effectiveness estimates employed by the agency in developing this final 
rule, according to the decision trees used in the CAFE modeling 
analysis. Thus, the effectiveness and cost estimates are not absolute 
to a single reference vehicle, but are incremental to the technology or 
technologies that precede it.

                                            Table IV-5--NHTSA Technology Effectiveness Estimates Employed in the CAFE Model for Certain Technologies
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                           Perform.   Perform.   Perform.
                                                               Subcomp.   Compact    Midsize   Large car   subcomp.   compact    midsize    Perform.   Minivan    Small LT   Midsize    Large LT
                                                                 car        car        car                   car        car        car     large car      LT                    LT
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 VEHICLE TECHNOLOGY INCREMENTAL FUEL CONSUMPTION REDUCTION (-%)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Low friction lubricants (level 1)...........................        0.5        0.5        0.7        0.8        0.5        0.5        0.7        0.8        0.7        0.6        0.7        0.7
Engine friction reduction (level 1).........................        2.0        2.0        2.6        2.7        2.0        2.0        2.6        2.7        2.6        2.0        2.6        2.4
VVT--Dual cam phasing (DCP).................................        2.0        2.0        2.5        2.7        2.0        2.0        2.5        2.7        2.6        2.0        2.6        2.4
Discrete variable valve lift (DVVL) on DOHC.................        2.8        2.8        3.6        3.9        2.8        2.8        3.6        3.9        3.5        2.8        3.5        3.4
Cylinder deactivation on OHV................................        4.7        4.7        5.9        6.3        4.7        4.7        5.9        6.3        5.9        4.7        5.9        5.5
Stoichiometric gasoline direct injection....................        1.6        1.6        1.5        1.5        1.6        1.6        1.5        1.5        1.5        1.6        1.5        1.5
Turbocharging and downsizing (level 1)......................        7.2        7.2        8.3        7.8        7.2        6.7        7.5        7.8        7.9        7.1        7.9        7.3
Turbocharging and downsizing (level 2)......................        2.9        2.9        3.5        3.7        2.9        2.9        3.5        3.7        3.4        2.9        3.4        3.4
Cooled exhaust gas recirculation (EGR)--(level 1)...........        3.6        3.6        3.5        3.5        3.6        3.6        3.5        3.5        3.6        3.6        3.6        3.6
Cooled exhaust gas recirculation (EGR)--(level 2)...........        1.0        1.0        1.4        1.4        1.0        1.0        1.4        1.4        1.1        1.0        1.1        1.2
Advanced Diesel.............................................        5.5        5.5        2.8        2.9        5.5        5.5        2.8        2.9        3.4        5.3        3.4        3.5
6-speed auto. trans. with improved internals................        1.9        1.9        2.0        2.0        1.9        1.9        2.0        2.0        2.0        2.0        2.0        2.1
6-speed DCT.................................................        4.0        4.0        4.1        3.8        4.0        3.4        4.1        3.8        n/a        3.8        n/a        n/a
High Efficiency Gearbox.....................................        2.2        2.2        2.7        2.6        2.2        2.2        2.7        2.6        3.1        2.5        3.1        3.7
Shift Optimizer.............................................        3.3        3.3        4.1        4.3        3.3        3.3        4.1        4.3        4.1        3.3        4.1        3.9
Electric power steering.....................................        1.5        1.5        1.3        1.1        1.5        1.5        1.3        1.1        1.0        1.2        1.0        0.8
12V micro-hybrid............................................        1.7        1.7        2.1        2.2        1.7        1.7        2.1        2.2        2.1        1.8        2.1        2.1
Integrated Starter-Generator (Mild Hybrid)..................        7.5        7.5        6.6        6.4        7.5        7.5        6.6        6.4        5.7        6.1        5.7        3.0
Strong Hybrid (level 2).....................................        3.0        3.0        0.1        0.6        3.0        3.0        0.1        0.6      (0.3)        4.3      (0.3)        1.6
Plug-in Hybrid..............................................       40.7       40.7       40.7       40.7       40.7       40.7       40.7       40.7       40.7       40.7       40.7       40.7

[[Page 62977]]

 
Electric Vehicle (Early Adopter)............................       68.5       68.5       68.5       68.5       68.5       68.5       68.5       68.5       68.5       68.5       68.5       68.5
Low Rolling Resistance Tires (level 1)......................        1.9        1.9        1.9        1.9        1.9        1.9        1.9        1.9        1.9        1.9        1.9        1.9
Low Rolling Resistance Tires (level 2)......................        2.0        2.0        2.0        2.0        2.0        2.0        2.0        2.0        2.0        2.0        2.0        2.0
Aero Drag Reduction (level 1)...............................        2.3        2.3        2.3        2.3        2.3        2.3        2.3        2.3        2.3        2.3        2.3        2.3
Aero Drag Reduction (level 2)...............................        2.5        2.5        2.5        2.5        2.5        2.5        2.5        2.5        2.5        2.5        2.5        2.5
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                                             Table IV-6 NHTSA Technology Cost Estimates Employed in the CAFE Model for Certain Technologies, MY 2017
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                           Perform.   Perform.   Perform.
                                                               Subcomp.   Compact    Midsize   Large car   subcomp.   compact    midsize    Perform.   Minivan    Small LT   Midsize    Large LT
                                                                 car        car        car                   car        car        car     large car      LT                    LT
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        VEHICLE TECHNOLOGY ICM COSTS PER VEHICLE (2010$)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Nominal baseline engine (for cost purposes).................   Inline 4   Inline 4   Inline 4         V6   Inline 4         V6         V6         V8         V6   Inline 4         V6         V8
Low friction lubricants (level 1)...........................          4          4          4          4          4          4          4          4          4          4          4          4
Engine friction reduction (level 1).........................         60         60         60         91         60         91         91        121         91         60         91        121
VVT--Dual cam phasing (DCP).................................         44         44         44         89         44         89         89         89         89         44         89         89
Discrete variable valve lift (DVVL) on DOHC.................        163        163        163        245        163        245        245        326        245        163        245        326
Cylinder deactivation on OHV................................        208        208        208        208        208        208        208        208        208        208        208        208
Stoichiometric gasoline direct injection....................        268        268        268        403        268        403        403        537        403        268        403        537
Turbocharging and downsizing (level 1)......................        494        494        494         19        494         19         19        621         19        494         19        621
Turbocharging and downsizing (level 2)......................         26         26         26        262         26        262        262        442        262         26        262        442
Cooled exhaust gas recirculation (EGR)--(level 1)...........        302        302        302        302        302        302        302        302        302        302        302        302
Cooled exhaust gas recirculation (EGR)--(level 2)...........        525        525        525        525        525        525        525      (300)        525        525        525      (300)
Advanced Diesel.............................................        889        889        889        855        889        855        855      1,710        855        889        855      1,710
6-speed auto. trans. with improved internals................       (39)       (39)       (39)       (39)       (39)       (39)       (39)       (39)       (39)       (39)       (39)       (39)
6-speed DCT.................................................      (109)      (109)       (75)       (75)       (75)       (75)       (75)       (75)          0       (75)          0          0
High Efficiency Gearbox.....................................        251        251        251        251        251        251        251        251        251        251        251        251
Shift Optimizer.............................................          2          2          2          2          2          2          2          2          2          2          2          2
Electric power steering.....................................        109        109        109        109        109        109        109        109        109        109        109        109
12V micro-hybrid............................................        325        351        385        414        325        351        385        414        414        366        424        480
Integrated Starter-Generator (Mild Hybrid)..................        976        976        976        976        976        976        976        976        976        976        976        976
Strong Hybrid (level 2).....................................      1,921      1,921      2,334      3,054      1,921      1,921      2,334      3,054      2,723      2,205      2,723      3,111

[[Page 62978]]

 
Plug-in Hybrid..............................................     11,043     11,043     13,449     18,538     11,043     11,043     13,449     18,538          0     12,828          0          0
Electric Vehicle (Early Adopter)............................      2,416      2,416      3,711      4,614      2,416      2,416      3,711      4,614          0      2,208          0          0
Low Rolling Resistance Tires (level 1)......................          7          7          7          7          7          7          7          7          7          7          7          7
Low Rolling Resistance Tires (level 2)......................         73         73         73         73         73         73         73         73         73         73         73         73
Aero Drag Reduction (level 1)...............................         49         49         49         49         49         49         49         49         49         49         49         49
Aero Drag Reduction (level 2)...............................        164        164        164        164        164        164        164        164        164        164        164        164
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

c. How does NHTSA use these assumptions in its modeling analysis?
    NHTSA relies on several inputs and data files to conduct the 
compliance analysis using the CAFE model, as discussed further below 
and in Chapter V of the FRIA. For the purposes of applying 
technologies, the CAFE model primarily uses three data files, one that 
contains data on the vehicles expected to be manufactured in the model 
years covered by the rulemaking and identifies the appropriate stage 
within the vehicle's life-cycle for the technology to be applied, one 
that contains data/parameters regarding the available technologies the 
model can apply, and one that contains economic assumption inputs for 
calculating the costs and benefits of the standards. The inputs for the 
first two data files are discussed below.
    As discussed above, the CAFE model begins with an initial state of 
the domestic vehicle market, which in this case is the market for 
passenger cars and light trucks to be sold during the period covered by 
the proposed standards. The vehicle market is defined on a year-by-
year, model-by-model, engine-by-engine, and transmission-by-
transmission basis, such that each defined vehicle model refers to a 
separately defined engine and a separately defined transmission. 
Comparatively, EPA's OMEGA model defines the vehicle market using 
representative vehicles at the vehicle platform level, which are binned 
into 5 year timeframes instead of year-by-year.
    For the current standards, which cover MYs 2017-2025, the light-
duty vehicle (passenger car and light truck) two sets of market 
forecast were developed jointly by NHTSA and EPA staff using MY 2008 
and 2010 CAFE compliance data. The 2008 data was used in the NPRM 
analysis, while both the 2008 and 2010 data are used in the final rule 
analysis. The MY 2008 compliance data includes about 1,100 vehicle 
models, about 400 specific engines, and about 200 specific 
transmissions, which is a somewhat lower level of detail in the 
representation of the vehicle market than that used by NHTSA in prior 
CAFE analyses--previous analyses would count a vehicle as ``new'' in 
any year when significant technology differences are made, such as at a 
redesign.\979\ However, within the limitations of information that can 
be made available to the public, it provides the foundation for a 
reasonable analysis of manufacturer-specific costs and the analysis of 
attribute-based CAFE standards, and is much greater than the level of 
detail used by many other models and analyses relevant to light-duty 
vehicle fuel economy.\980\ The MY 2010 compliance data includes about 
1,170 vehicle models, about 330 specific engines, and about 330 
specific transmissions, while the MY 2008 compliance data includes 
about 1,300 vehicle models, about 440 specific engines and about 210 
specific transmissions.
---------------------------------------------------------------------------

    \979\ The market file for the MY 2011 final rule, which included 
data for MYs 2011-2015, had 5500 vehicles, about 5 times what we are 
using in this analysis of the MY 2010 certification data.
    \980\ Because CAFE standards apply to the average performance of 
each manufacturer's fleet of cars and light trucks, the impact of 
potential standards on individual manufacturers cannot be credibly 
estimated without analysis of the fleets that manufacturers can be 
expected to produce in the future. Furthermore, because required 
CAFE levels under an attribute-based CAFE standard depend on 
manufacturers' fleet composition, the stringency of an attribute-
based standard cannot be predicted without performing analysis at 
this level of detail.
---------------------------------------------------------------------------

    In addition to containing data about each vehicle, engine, and 
transmission, this file contains information for each technology under 
consideration as it pertains to the specific vehicle (whether the 
vehicle is equipped with it or not), the estimated model year the 
vehicle is undergoing a refresh or redesign, and information about the 
vehicle's subclass for purposes of technology application. In essence, 
the model considers whether it is appropriate to apply a technology to 
a vehicle.
i. Is a vehicle already equipped, or can it not be equipped, with a 
particular technology?
    The market forecast file provides NHTSA the ability to identify, on 
a technology-by-technology basis, which technologies may already be 
present (manufactured) on a particular vehicle, engine, or 
transmission, or which technologies are not applicable (due to 
technical considerations or engineering constraints) to a particular 
vehicle, engine, or transmission. These identifications are made on a 
model-by-model, engine-by-engine, and transmission-by-transmission 
basis. For example, if the market forecast file indicates that 
Manufacturer X's Vehicle Y is manufactured with Technology Z, then for 
this vehicle Technology Z will be shown as used. Additionally, NHTSA 
has determined that some technologies are only suitable or unsuitable 
when certain vehicle, engine, or transmission conditions exist. For 
example, secondary axle disconnect is only suitable for 4WD vehicles 
and cylinder deactivation is unsuitable for any engine with fewer than 
6 cylinders. Similarly, comments received to the 2012-2016 NPRM 
indicated that cylinder deactivation could not likely be applied to 
vehicles equipped with manual transmissions during the rulemaking 
timeframe, due primarily to the cylinder

[[Page 62979]]

deactivation system not being able to anticipate gear shifts. The CAFE 
model employs ``engineering constraints'' to address issues like these, 
which are a programmatic method of controlling technology application 
that is independent of other constraints. Thus, the market forecast 
file would indicate that the technology in question should not be 
applied to the particular vehicle/engine/transmission (i.e., is 
unavailable). Since multiple vehicle models may be equipped with an 
engine or transmission, this may affect multiple models. In using this 
aspect of the market forecast file, NHTSA ensures the CAFE model only 
applies technologies in an appropriate manner, since before any 
application of a technology can occur, the model checks the market 
forecast to see if it is either already present or unavailable. NHTSA 
sought comment on the continued appropriateness of the engineering 
constraints used by the model, and specifically whether many of the 
technical constraints will be resolved (and therefore the engineering 
constraints should be changed) given the increased focus of engineering 
resources that will be working to solve these technical challenges. 
NHTSA did not receive any comments on this issue.
    Whether a vehicle can be equipped with a particular technology 
could also theoretically depend on certain technical considerations 
related to incorporating the technology into particular vehicles. For 
example, GM commented on the MY 2012-2016 NPRM that there are certain 
issues in implementing turbocharging and downsizing technologies on 
full-size trucks, like concerns related to engine knock, drivability, 
control of boost pressure, packaging complexity, enhanced cooling for 
vehicles that are designed for towing or hauling, and noise, vibration 
and harshness. NHTSA stated in response that we believed that such 
technical considerations are well recognized within the industry and it 
is standard industry practice to address each during the design and 
development phases of applying turbocharging and downsizing 
technologies. The cost and effectiveness estimates used in the final 
rule for MYs 2012-2016, as well as the cost and effectiveness estimates 
employed in this final rule, are based on analysis that assumes each of 
these factors is addressed prior to production implementation of the 
technologies. NHTSA sought comment on whether the engineering 
constraints should be used to address concerns like these (and if so, 
how), or alternatively, whether some of the things that the agency 
currently treats as engineering constraints should be (or actually are) 
accounted for in the cost and effectiveness estimates through 
assumptions like those described above, and whether the agency might be 
double-constraining the application of technology. The Pennsylvania 
Department of Environmental Protection and Clean Fuel Development 
Coalition both commented that the agencies should evaluate the benefits 
of higher octane fuels and whether or not they are required for some of 
the advanced engine technologies like turbocharging and downsizing. 
While the agencies agree that higher octane ratings could provide 
additional benefits, the agencies relied in the rulemaking analyses on 
the Ricardo simulation study, which assumed certification gasoline 
which typically has a Research Octane Number (RON) of approximately 95 
versus approximately 91 RON for regular grade 87 anti-knocking index 
gasoline, to determine the effectiveness of engine technologies. We 
note, however, that in the Ricardo simulation cooled EGR was included 
on higher BMEP engines and it as assumed that all of the 27-bar BMEP 
engine packages with cooled EGR would allow for the use of 91 RON 
(regular grade) fuels while reducing the need for enrichment and spark 
retard to prevent the onset of knocking combustion.
ii. Is a vehicle being redesigned or refreshed?
    Manufacturers typically plan vehicle changes to coincide with 
certain stages of a vehicle's life cycle that are appropriate for the 
change, or in this case the technology being applied. In the automobile 
industry there are two terms that describe when technology changes to 
vehicles occur: Redesign and refresh (i.e., freshening). Vehicle 
redesign usually refers to significant changes to a vehicle's 
appearance, shape, dimensions, contents, material usage and powertrain. 
Redesign is traditionally associated with the introduction of ``new'' 
vehicles into the market, often characterized as the ``next 
generation'' of a vehicle, or a new platform. Vehicle refresh usually 
refers to less extensive vehicle modifications, such as minor changes 
to a vehicle's appearance, a moderate upgrade to a powertrain system, 
or small changes to the vehicle's feature or safety equipment content. 
Refresh is traditionally associated with mid-cycle cosmetic changes to 
a vehicle, within its current generation, to make it appear ``fresh.'' 
Vehicle refresh generally occurs no earlier than two years after a 
vehicle redesign, or at least two years before a scheduled redesign. To 
be clear, this is a general description of how manufacturers manage 
their product lines and refresh and redesign cycles but in some cases 
the timeframes could be shorter and others longer depending on market 
factors, regulations, etc. For many of the technologies discussed 
today, manufacturers will only be able to apply them at a refresh or 
for a majority of the technologies at redesign, because their 
application would be significant enough to involve some level of 
engineering, testing, and calibration work.\981\
---------------------------------------------------------------------------

    \981\ For example, applying material substitution through weight 
reduction, or even something as simple as low rolling-resistance 
tires, to a vehicle will likely require some level of validation and 
testing to ensure that the vehicle may continue to be certified as 
compliant with NHTSA's Federal Motor Vehicle Safety Standards 
(FMVSS). Weight reduction might affect a vehicle's crashworthiness; 
low rolling-resistance tires might change a vehicle's braking 
characteristics or how it performs in crash avoidance tests.
---------------------------------------------------------------------------

    Some technologies (e.g., those that require significant revision) 
are nearly always applied only when the vehicle is expected to be 
redesigned, like turbocharging and engine downsizing, conversion to 
diesel or hybridization, or significant amounts of mass reduction. 
Other technologies, like cylinder deactivation, electric power 
steering, and low rolling resistance tires can be applied either when 
the vehicle is expected to be refreshed or when it is expected to be 
redesigned, while low friction lubricants can be applied at any time, 
regardless of whether a refresh or redesign event is conducted. 
Accordingly, the CAFE model will only apply a technology at the 
particular point deemed suitable. These constraints are intended to 
produce results consistent with how we assume manufacturers will apply 
technologies in the future based on how they have historically 
implemented new technologies. For each technology under consideration, 
NHTSA specifies whether it can be applied any time, at refresh/
redesign, or only at redesign. The data forms another input to the CAFE 
model. NHTSA develops redesign and refresh schedules for each of a 
manufacturer's vehicles included in the analysis, essentially based on 
the last known redesign year for each vehicle and projected forward 
using a 5- to 8-year redesign and a 2-3 year refresh cycle, and this 
data is also stored in the market forecast file. While most vehicles 
are projected to follow a 5-year redesign a few of the niche market or 
small-volume manufacturer vehicles (e.g., luxury and performance 
vehicles) and large trucks are assumed to have 6- to

[[Page 62980]]

8-year redesigns based on historic redesign schedules and the agency's 
understanding of manufacturers' intentions moving forward. This 
approach is used because of the nature of the current baseline, which 
as a single year of data does not contain its own refresh and redesign 
cycle cues for future model years, and to ensure the complete 
transparency of the agency's analysis. We note that this approach is 
different from what NHTSA has employed previously for determining 
redesign and refresh schedules, where NHTSA included the redesign and 
refresh dates in the market forecast file as provided by manufacturers 
in confidential product plans. Vehicle redesign/refresh assumptions are 
discussed in more detail in Chapter V of the FRIA and in Chapter 3 of 
the TSD.
    NHTSA has previously received comments stating that manufacturers 
do not necessarily adhere to strict five-year redesign cycles, and may 
add significant technologies by redesigning vehicles at more frequent 
intervals, albeit at higher costs. Conversely, other comments received 
stated that as compared to full-line manufacturers, small-volume 
manufacturers in fact may have 7- to 8-year redesign cycles.\982\ The 
agency believes that manufacturers can and will accomplish much 
improvement in fuel economy and GHG reductions while applying 
technology consistent with their redesign schedules. No comments were 
received on this specific issue.
---------------------------------------------------------------------------

    \982\ In the MY 2011 final rule, NHTSA noted that the CAR report 
submitted by the Alliance, prepared by the Center for Automotive 
Research and EDF, stated that ``For a given vehicle line, the time 
from conception to first production may span two and one-half to 
five years,'' but that ``The time from first production 
(``Job1'') to the last vehicle off the line (``Balance 
Out'') may span from four to five years to eight to ten years or 
more, depending on the dynamics of the market segment.'' The CAR 
report then stated that ``At the point of final production of the 
current vehicle line, a new model with the same badge and similar 
characteristics may be ready to take its place, continuing the 
cycle, or the old model may be dropped in favor of a different 
product.'' See NHTSA-2008-0089-0170.1, Attachment 16, at 8 (393 of 
pdf). NHTSA explained that this description, which states that a 
vehicle model will be redesigned or dropped after 4-10 years, was 
consistent with other characterizations of the redesign and 
freshening process, and supported the 5-year redesign and 2-3 year 
refresh cycle assumptions used in the MY 2011 final rule. See id., 
at 9 (394 of pdf). Given that the situation faced by the auto 
industry today is not so wholly different from that in March 2009, 
when the MY 2011 final rule was published, and given that the 
commenters did not present information to suggest that these 
assumptions are unreasonable (but rather simply that different 
manufacturers may redesign their vehicles more or less frequently, 
as the range of cycles above indicates), NHTSA believes that the 
assumptions remain reasonable for purposes of this NPRM analysis. 
See also ``Car Wars 2009-2012, The U.S. automotive product 
pipeline,'' John Murphy, Research Analyst, Merrill Lynch research 
paper, May 14, 2008 and ``Car Wars 2010-2013, The U.S. automotive 
product pipeline,'' John Murphy, Research Analyst, Bank of America/
Merrill Lynch research paper, July 15, 2009. Available at http://www.autonews.com/assets/PDF/CA66116716.PDF (last accessed Jul. 8, 
2012).
---------------------------------------------------------------------------

    Once the model indicates that a technology should be applied to a 
vehicle, the model must evaluate which technology should be applied. 
This will depend on the vehicle subclass to which the vehicle is 
assigned; what technologies have already been applied to the vehicle 
(i.e., where in the ``decision tree'' the vehicle is); when the 
technology is first available (i.e., year of availability); whether the 
technology is still available (i.e., ``phase-in caps''); and the costs 
and effectiveness of the technologies being considered. Technology 
costs may be reduced, in turn, by learning effects and short- vs. long-
term ICMs, while technology effectiveness may be increased or reduced 
by synergistic effects between technologies. In the technology input 
file, NHTSA has developed a separate set of technology data variables 
for each of the twelve vehicle subclasses. Each set of variables is 
referred to as an ``input sheet,'' so for example, the subcompact 
passenger car input sheet holds the technology data that is appropriate 
for the subcompact subclass. Each input sheet contains a list of 
technologies available for members of the particular vehicle subclass. 
The following items are provided for each technology: the name of the 
technology, its abbreviation, the decision tree with which it is 
associated, the (first) year in which it is available, the year-by-year 
cost estimates and effectiveness (fuel consumption reduction) 
estimates, its applicability and the consumer value loss. The phase-in 
values and the potential stranded capital costs are common for all 
vehicle subclasses and are thus listed in a separate input sheet that 
is referenced for all vehicle subclasses.
iii. To which vehicle subclass is the vehicle assigned?
    As part of its consideration of technological feasibility, the 
agency evaluates whether each technology could be implemented on all 
types and sizes of vehicles, and whether some differentiation is 
necessary in applying certain technologies to certain types and sizes 
of vehicles, and with respect to the cost incurred and fuel consumption 
and CO2 emissions reduction achieved when doing so. The 2010 
NAS Report differentiated technology application using eight vehicle 
``classes'' (4 car classes and 4 truck classes).\983\ NAS's purpose in 
separating vehicles into these classes was to create groups of ``like'' 
vehicles, i.e., vehicles similar in size, powertrain configuration, 
weight, and consumer use, and for which similar technologies are 
applicable. NAS also used these vehicle classes along with powertrain 
configurations (e.g., 4 cylinder, 6 cylinder or 8 cylinder engines) to 
determine unique cost and effectiveness estimates for each class of 
vehicles.
---------------------------------------------------------------------------

    \983\ The NAS classes included two-seater convertibles and 
coupes; small cars; intermediate and large cars; high-performance 
sedans; unit-body standard trucks; unit-body high-performance 
trucks; body-on-frame small and midsize trucks; and body-on-frame 
large trucks.
---------------------------------------------------------------------------

    NHTSA similarly differentiates vehicles by ``subclass'' for the 
purpose of applying technologies to ``like'' vehicles and assessing 
their incremental costs and effectiveness. NHTSA assigns each vehicle 
manufactured in the rulemaking period to one of 12 subclasses: for 
passenger cars, Subcompact, Subcompact Performance, Compact, Compact 
Performance, Midsize, Midsize Performance, Large, and Large 
Performance; and for light trucks, Small SUV/Pickup/Van, Midsize SUV/
Pickup/Van, Large SUV/Pickup/Van, and Minivan. The agency sought 
comment on the appropriateness of these 12 subclasses for the MYs 2017-
2025 timeframe. The agency also sought comment on the continued 
appropriateness of maintaining separate ``performance'' vehicle classes 
or if as fuel economy stringency increases the market for performance 
vehicles will decrease. NHTSA did not receive any comments on this 
issue.
    For this final rule, as in the NPRM, NHTSA divides the vehicle 
fleet into subclasses based on model inputs, and applies subclass-
specific estimates, also from model inputs, of the applicability, cost, 
and effectiveness of each fuel-saving technology. The model's estimates 
of the cost to improve the fuel economy of each vehicle model thus 
depend upon the subclass to which the vehicle model is assigned. Each 
vehicle's subclass is stored in the market forecast file. When 
conducting a compliance analysis, if the CAFE model seeks to apply 
technology to a particular vehicle, it checks the market forecast to 
see if the technology is available and if the refresh/redesign criteria 
are met. If these conditions are satisfied, the model determines the 
vehicle's subclass from the market data file, which it then uses to 
reference another input called the technology input file. NHTSA 
reviewed its methodology for dividing vehicles into subclasses for 
purposes of

[[Page 62981]]

technology application that it used in the MY 2011 final rule and for 
the MYs 2012-2016 rulemaking, and concluded that the same methodology 
would be appropriate for this final rule for MYs 2017-2025. Vehicle 
subclasses are discussed in more detail in Chapter V of the FRIA and in 
Chapter 3 of the TSD.
    For the reader's reference, the subclasses and example vehicles 
from the market forecast file are provided in Table IV-7 and Table IV-
8.

  Table IV-7--NHTSA Passenger Car Subclasses Example (MY 2008) Vehicles
------------------------------------------------------------------------
               Class                          Example vehicles
------------------------------------------------------------------------
Subcompact........................  Chevrolet Aveo, Hyundai Accent
Subcompact performance............  Mazda MX-5, BMW Z4
Compact...........................  Chevrolet Cobalt, Nissan Sentra and
                                     Altima
Compact performance...............  Audi S4, Mazda RX-8
Mid-size..........................  Chevrolet Impala, Toyota Camry,
                                     Honda Accord, Hyundai Azera
Mid-size performance..............  Chevrolet Corvette, Ford Mustang
                                     (V8), Nissan 350Z
Large.............................  Audi A8, Cadillac CTS and DTS
Large performance.................  Bentley Arnage, Mercedes-Benz CL600
------------------------------------------------------------------------

   Table IV-8--NHTSA Light Truck Subclasses Example (MY 2008) Vehicles
------------------------------------------------------------------------
               Class                          Example vehicles
------------------------------------------------------------------------
Minivans..........................  Dodge Grand Caravan, Toyota Sienna
Small SUV/Pickup/Van..............  Ford Escape and Ranger, Nissan Rogue
Mid-size SUV/Pickup/Van...........  Chevrolet Colorado, Jeep Wrangler,
                                     Toyota Tacoma
Large SUV/Pickup/Van..............  Chevrolet Silverado, Ford E-Series,
                                     Toyota Sequoia
------------------------------------------------------------------------

iv. What technologies have already been applied to the vehicle (i.e., 
where in the ``decision trees'' is it)?
    NHTSA's methodology for technology analysis evaluates the 
application of individual technologies and their incremental costs and 
effectiveness. Individual technologies are assessed relative to the 
prior technology state, which means that it is crucial to understand 
what technologies are already present on a vehicle in order to 
determine correct incremental cost and effectiveness values. The 
benefit of the incremental approach is transparency in accounting, 
insofar as when individual technologies are added incrementally to 
individual vehicles, it is clear and easy to determine how costs and 
effectiveness add up as technology levels increase and explicitly 
account for any synergies that exist between technologies which are 
already present on the vehicle and new technologies being applied.
    To keep track of incremental costs and effectiveness and to know 
which technology to apply and in which order, the CAFE model's 
architecture uses a logical sequence, which NHTSA refers to as 
``decision trees,'' for applying fuel economy-improving technologies to 
individual vehicles. For purposes of this proposal, NHTSA reviewed the 
MYs 2012-2016 final rule's technology sequencing architecture, which 
was based on the MY 2011 final rule's decision trees that were jointly 
developed by NHTSA and Ricardo, and, as appropriate, updated the 
decision trees to include new technologies that have been defined for 
the MYs 2017-2025 timeframe.
    In general, and as described in great detail in Chapter V of the 
current FRIA,\984\ each technology is assigned to one of the five 
following categories based on the system it affects or impacts: engine, 
transmission, electrification/accessory, hybrid or vehicle. Each of 
these categories has its own decision tree that the CAFE model uses to 
apply technologies sequentially during the compliance analysis. The 
decision trees were designed and configured to allow the CAFE model to 
apply technologies in a cost-effective, logical order that also 
considers ease of implementation. For example, software or control 
logic changes are implemented before replacing a component or system 
with a completely redesigned one, which is typically a much more 
expensive and integration-intensive option. In some cases, and as 
appropriate, the model may combine the sequential technologies shown on 
a decision tree and apply them simultaneously, effectively developing 
dynamic technology packages on an as-needed basis. For example, if 
compliance demands indicate, the model may elect to apply LUB, EFR, and 
ICP on a dual overhead cam engine, if they are not already present, in 
one single step. An example simplified decision tree for engine 
technologies is provided below; the other simplified decision trees may 
be found in Chapter V of the FRIA. Expanded decision trees are 
available in the docket for this final rule.
---------------------------------------------------------------------------

    \984\ Additional details about technologies are categorized can 
be found in the MY 2011 final rule.

---------------------------------------------------------------------------

[[Page 62982]]

[GRAPHIC] [TIFF OMITTED] TR15OC12.026

    Each technology within the decision trees has an incremental cost 
and an incremental effectiveness estimate associated with it, and 
estimates are specific to a particular vehicle subclass (see the tables 
in Chapter V of the FRIA). Each technology's incremental estimate takes 
into account its position in the decision tree path. If a technology

[[Page 62983]]

is located further down the decision tree, the estimates for the costs 
and effectiveness values attributed to that technology are influenced 
by the incremental estimates of costs and effectiveness values for 
prior technology applications. In essence, this approach accounts for 
``in-path'' effectiveness synergies, as well as cost effects that occur 
between the technologies in the same path. When comparing cost and 
effectiveness estimates from various sources and those provided by 
commenters in this and the previous CAFE rulemakings, it is important 
that the estimates evaluated are analyzed in the proper context, 
especially as concerns their likely position in the decision trees and 
other technologies that may be present or missing. Not all estimates 
available in the public domain or that have been (or will be) offered 
for the agencies' consideration can be evaluated in an ``apples-to-
apples'' comparison with those used by the CAFE model, since in some 
cases the order of application, or included technology content, is 
inconsistent with that assumed in the decision tree.
    The MY 2011 final rule discussed in detail the revisions and 
improvements made to the CAFE model and decision trees during that 
rulemaking process, including the improved handling and accuracy of 
valve train technology application and the development and 
implementation of a method for accounting path-dependent correction 
factors in order to ensure that technologies are evaluated within the 
proper context. The reader should consult the MY 2011 final rule 
documents for further information on these modeling techniques, all of 
which continued to be utilized in developing this proposal.\985\ To the 
extent that the decision trees have changed for purposes of the MYs 
2012-2016 final rule and this final rule, it was due not to revisions 
in the order of technology application, but rather to redefinitions of 
technologies or addition or subtraction of technologies.
---------------------------------------------------------------------------

    \985\ See, e.g., 74 FR 14238-46 (Mar. 30, 2009) for a full 
discussion of the decision trees in NHTSA's MY 2011 final rule, and 
Docket No. NHTSA-2009-0062-0003.1 for an expanded decision tree used 
in that rulemaking.
---------------------------------------------------------------------------

v. Is the next technology available in this model year?
    Some of technologies considered are available on vehicles today, 
and thus will be available for application (albeit in varying degrees) 
in the model starting in MY 2017. Other technologies, however, will not 
become available for purposes of NHTSA's analysis until later in the 
rulemaking time frame. When the model is considering whether to add a 
technology to a vehicle, it checks its year of availability--if the 
technology is available, it may be added; if it is not available, the 
model will consider whether to switch to a different decision tree to 
look for another technology, or will skip to the next vehicle in a 
manufacturer's fleet. The year of availability for each technology is 
provided above in Table IV-4.
    The agency has received comments previously stating that if a 
technology is currently available or available prior to the rulemaking 
timeframe that it should be immediately made available in the model. In 
response, as discussed above, technology ``availability'' is not 
determined based simply on whether the technology exists, but depends 
also on whether the technology has achieved a level of technical 
viability that makes it appropriate for widespread application. This 
depends in turn on component supplier constraints, capital investment 
and engineering constraints, and manufacturer product cycles, among 
other things. Moreover, even if a technology is available for 
application, it may not be available for every vehicle. Some 
technologies may have considerable fuel economy benefits, but are not 
applied to some vehicles due to technological constraints--for example, 
cylinder deactivation has not been applied to vehicles with current 4-
cylinder engines (because operating on three or fewer cylinders can 
cause unacceptable noise, vibration and harshness) or on vehicles with 
manual transmissions within the rulemaking timeframe. The agencies have 
provided for increases over time to reach the mpg level of the MY 2025 
standards precisely because of these types of constraints, because they 
have a real effect on how quickly manufacturers can apply technology to 
vehicles in their fleets. NHTSA sought comment on the appropriateness 
of the assumed years of availability. As discussed above, VW raised 
concerns with the viability of high BMEP engines.
vi. Has the technology reached the phase-in cap for this model year?
    Besides the refresh/redesign cycles used in the CAFE model, which 
constrain the rate of technology application at the vehicle level so as 
to ensure a period of stability following any modeled technology 
applications, the other constraint on technology application employed 
in NHTSA's analysis is ``phase-in caps.'' Unlike vehicle-level cycle 
settings, phase-in caps constrain technology application at the vehicle 
manufacturer level.\986\ They are intended to reflect a manufacturer's 
overall resource capacity available for implementing new technologies 
(such as engineering and development personnel and financial 
resources), thereby ensuring that resource capacity is accounted for in 
the modeling process. At a high level, phase-in caps and refresh/
redesign cycles work in conjunction with one another to avoid the 
modeling process out-pacing an OEM's limited pool of available 
resources during the rulemaking time frame and the years leading up to 
the rulemaking time frame, especially in years where many models may be 
scheduled for refresh or redesign. Even though this rulemaking is being 
proposed 5 years before it takes effect, OEMs will still be utilizing 
their limited resources to meet the MYs 2012-2016 CAFE standards. This 
helps to ensure technological feasibility and economic practicability 
in determining the stringency of the standards.
---------------------------------------------------------------------------

    \986\ While phase-in caps are expressed as specific percentages 
of a manufacturer's fleet to which a technology may be applied in a 
given model year, phase-in caps cannot always be applied as precise 
limits, and the CAFE model in fact allows ``override'' of a cap in 
certain circumstances. When only a small portion of a phase-in cap 
limit remains, or when the cap is set to a very low value, or when a 
manufacturer has a very limited product line, the cap might prevent 
the technology from being applied at all since any application would 
cause the cap to be exceeded. Therefore, the CAFE model evaluates 
and enforces each phase-in cap constraint after it has been exceeded 
by the application of the technology (as opposed to evaluating it 
before application), which can result in the described overriding of 
the cap.
---------------------------------------------------------------------------

    NHTSA has been developing the concept of phase-in caps for purposes 
of the agency's modeling analysis over the course of the last several 
CAFE rulemakings, as discussed in greater detail in the MY 2011 final 
rule,\987\ in the MY 2012-2016 final rule and in Chapter V of the FRIA 
and Chapter 3 of the Joint TSD. The MYs 2012-2016 final rule like the 
MY 2011 final rule employed non-linear phase-in caps (that is, caps 
that varied from year to year) that were designed to respond to 
previously received comments on technology deployment.
---------------------------------------------------------------------------

    \987\ 74 FR 14195-14456 (Mar. 30, 2009).
---------------------------------------------------------------------------

    For purposes of this final rule, as in the MY 2011 and MYs 2012-
2016 final rules, NHTSA combines phase-in caps for some groups of 
similar technologies, such as valve phasing technologies that are 
applicable to different forms of engine design (SOHC, DOHC, OHV), since 
they are very similar from an engineering and implementation 
standpoint. When the phase-in caps for two technologies are combined, 
the maximum total application of either or

[[Page 62984]]

both to any manufacturer's fleet is limited to the value of the 
cap.\988\
---------------------------------------------------------------------------

    \988\ See 74 FR 14270 (Mar. 30, 2009) for further discussion and 
examples.
---------------------------------------------------------------------------

    In developing phase-in cap values for purposes of this final rule, 
NHTSA reviewed the MYs 2012-2016 final rule's phase-in caps, which for 
the majority of technologies were set to reach 85 or 100 percent by MY 
2016, although more advanced technologies like diesels and strong 
hybrids reach only 15 percent by MY 2016. The phase-in caps used in the 
MYs 2012-2016 final were developed to harmonize with EPA's proposal and 
consider the fact that manufacturers, as part of the information shared 
during the discussions that occurred during summer 2011, appeared to be 
anticipating higher technology application rates than assumed in prior 
rules. NHTSA determined that these phase-in caps for MY 2016 were still 
reasonable and thus used those caps as the starting point for the MYs 
2017-2025 phase-in caps. For many of the carryover technologies this 
means that for MYs 2017-2025 the phase-in caps are assumed to be 100 
percent. NHTSA along with EPA used confidential OEM submissions, trade 
press articles, company publications and press releases to estimate the 
phase-in caps for the newly defined technologies that will be entering 
the market just before or during the MYs 2017-2025 time frame. For 
example, advanced cooled EGR engines have a phase-in cap of 3 percent 
per year through MY 2021 and then 10 percent per year through 2025. The 
agency sought comment on the appropriateness of both the carryover 
phase-in caps and the newly defined ones proposed in this NPRM. The 
only comment received on phase-in caps was from AFPM, who stated that 
the agencies should use lower phase-in caps for electrification 
technologies, and consider the 2011 NAS report in developing them. In 
our analyses for the final rule, the penetration of electrification 
technologies (from strong hybrid to EV) was significantly below the 
phase-in caps; thus, changing the phase-in caps would not affect the 
analysis. The agencies will continue to monitor the application of 
electrification technologies and will revisit the levels of the phase-
in caps for the future rulemaking to develop final standards for MYs 
2022-2025 and the concurrent mid-term evaluation.
vii. Is the technology less expensive due to learning effects?
    In the past two rulemakings NHTSA has explicitly accounted for the 
cost reductions a manufacturer might realize through learning achieved 
from experience in actually applying a technology. These cost 
reductions, due to learning effects, were taken into account through 
two kinds of mutually exclusive learning, ``volume-based'' and ``time-
based.'' NHTSA and EPA included a detailed description of the learning 
effect in the MYs 2012-2016 final rule and the more recent heavy-duty 
rule.\989\
---------------------------------------------------------------------------

    \989\ 76 FR 57106, 57320 (Sept. 15, 2011).
---------------------------------------------------------------------------

    Most studies of the effect of experience or learning on production 
costs appear to assume that cost reductions begin only after some 
initial volume threshold has been reached, but not all of these studies 
specify this threshold volume. The rate at which costs decline beyond 
the initial threshold is usually expressed as the percent reduction in 
average unit cost that results from each successive doubling of 
cumulative production volume, sometimes referred to as the learning 
rate. Many estimates of experience curves do not specify a cumulative 
production volume beyond which cost reductions would no longer occur, 
instead depending on the asymptotic behavior of the effect for learning 
rates below 100 percent to establish a floor on costs.
    In past rulemaking analyses, as noted above, both agencies have 
used a learning curve algorithm that applied a learning factor of 20 
percent for each doubling of production volume. NHTSA has used this 
approach in analyses supporting recent CAFE rules. In its analyses, EPA 
has simplified the approach by using an ``every two years'' based 
learning progression rather than a pure production volume progression 
(i.e., after two years of production it was assumed that production 
volumes would have doubled and, therefore, costs would be reduced by 20 
percent).\990\
---------------------------------------------------------------------------

    \990\ To clarify, EPA has simplified the steep portion of the 
volume learning curve by assuming that production volumes of a given 
technology will have doubled within two years time. This has been 
done largely to allow for a presentation of estimated costs during 
the years of implementation, without the need to conduct a feedback 
loop that ensures that production volumes have indeed doubled. If 
EPA was to attempt such a feedback loop, it would need to estimate 
first year costs, feed those into OMEGA, review the resultant 
technology penetration rate and volume increase, calculate the 
learned costs, feed those into OMEGA (since lower costs would result 
in higher penetration rates, review the resultant technology 
penetration rate and volume increase, etc., until an equilibrium was 
reached. To do this for the dozens of technologies considered in the 
analysis for this rulemaking was deemed not feasible. Instead, EPA 
estimated the effects of learning on costs, fed those costs into 
OMEGA, and reviewed the resultant penetration rates. The assumption 
that volumes have doubled after two years is based solely on the 
assumption that year two sales are of equal or greater number than 
year one sales and, therefore, have resulted in a doubling of 
production. This could be done on a daily basis, a monthly basis, or 
a yearly basis as was done for this analysis.
---------------------------------------------------------------------------

    In the MYs 2012-2016 final rule, the agencies employed an 
additional learning algorithm to reflect the volume-based learning cost 
reductions that occur further along on the learning curve. This 
additional learning algorithm was termed ``time-based'' learning simply 
as a means of distinguishing this algorithm from the volume-based 
algorithm mentioned above, although both of the algorithms reflect the 
volume-based learning curve supported in the literature. To avoid 
confusion, we are now referring to this learning algorithm as the 
``flat portion'' of the learning curve. This way, we maintain the 
clarity that all learning is, in fact, volume-based learning, and that 
the level of cost reductions depend only on where on the learning curve 
a technology's learning progression is. We distinguish the flat portion 
of the curve from the ``steep portion'' of the curve to indicate the 
level of learning taking place in the years following implementation of 
the technology. The agencies have applied the steep portion learning 
algorithm for those technologies considered to be newer technologies 
likely to experience rapid cost reductions through manufacturer 
learning, and the flat portion learning algorithm for those 
technologies considered to be mature technologies likely to experience 
only minor cost reductions through manufacturer learning. The agencies 
employ a number of different learning curves, depending on the nature 
of the technology. As an example, as noted above, the steep portion 
learning algorithm results in 20 percent lower costs after two full 
years of implementation (i.e., the MY 2016 costs are 20 percent lower 
than the MYs 2014 and 2015 costs). Once two steep portion learning 
steps have occurred (for technologies having the steep portion learning 
algorithm applied while flat portion learning would begin in year 2 for 
technologies having the flat portion learning algorithm applied), flat 
portion learning at 3 percent per year becomes effective for 5 years. 
Beyond 5 years of learning at 3 percent per year, 5 years of learning 
at 2 percent per year, then 5 at 1 percent per year become effective.
    Technologies assumed to be on the steep portion of the learning 
curve are hybrids and electric vehicles, while no learning is applied 
to technologies likely to be affected by commodity costs (LUB, ROLL) or 
that have loosely-

[[Page 62985]]

defined Bills of Materials (EFR, LDB), as was the case in the MY 2012-
2016 final rule. Chapter 3 of the Joint TSD and the Chapter 7 of the 
FRIA show the specific learning factors that NHTSA has applied in this 
analysis for each technology, and discuss learning factors, each 
agency's use of them and how much learning reduces the cost of each 
technology. EPA and NHTSA included discussion of learning cost 
assumptions in the FRIAs and TSD Chapter 3. Since the agencies had to 
project how learning will occur with new technologies over a long 
period of time, we requested comments on the assumptions of learning 
costs and methodology. In particular, we were interested in input on 
the assumptions for advanced 27-bar BMEP cooled EGR engines, which are 
currently still in the experimental stage and not expected to be 
available in volume production until 2017. For our analysis, we have 
based estimates of the costs of high-BMEP engines on current (or soon 
to be current) production engines, and assumed that learning (and the 
associated cost reductions) begins as early as 2012. We sought comment 
on the appropriateness of these pre-production applications of 
learning. There were no significant comments on the issue of learning 
curves.
viii. Is the technology more or less effective due to synergistic 
effects?
    When two or more technologies are added to a particular vehicle 
model to improve its fuel efficiency and reduce CO2 
emissions, the resultant fuel consumption reduction may sometimes be 
higher or lower than the product of the individual effectiveness values 
for those items.\991\ This may occur because one or more technologies 
applied to the same vehicle partially address the same source (or 
sources) of engine, drivetrain or vehicle losses. Alternately, this 
effect may be seen when one technology shifts the engine operating 
points, and therefore increases or reduces the fuel consumption 
reduction achieved by another technology or set of technologies. The 
difference between the observed fuel consumption reduction associated 
with a set of technologies and the product of the individual 
effectiveness values in that set is referred to for purposes of this 
rulemaking as a ``synergy.'' Synergies may be positive (increased fuel 
consumption reduction compared to the product of the individual 
effects) or negative (decreased fuel consumption reduction). An example 
of a positive synergy might be a vehicle technology that reduces road 
loads at highway speeds (e.g., lower aerodynamic drag or low rolling 
resistance tires), that could extend the vehicle operating range over 
which cylinder deactivation may be employed. An example of a negative 
synergy might be a variable valvetrain system technology, which reduces 
pumping losses by altering the profile of the engine speed/load map, 
and a six-speed automatic transmission, which shifts the engine 
operating points to a portion of the engine speed/load map where 
pumping losses are less significant.
---------------------------------------------------------------------------

    \991\ More specifically, the products of the differences between 
one and the technology-specific levels of effectiveness in reducing 
fuel consumption. For example, not accounting for interactions, if 
technologies A and B are estimated to reduce fuel consumption by 10 
percent (i.e., 0.1) and 20 percent (i.e., 0.2) respectively, the 
``product of the individual effectiveness values'' would be (1 - 
0.1) times (1 - 0.2), or 0.9 times 0.8, which equals 0.72, 
corresponding to a combined effectiveness of 28 percent rather than 
the 30 percent obtained by adding 10 percent to 20 percent. The 
``synergy factors'' discussed in this section further adjust these 
multiplicatively combined effectiveness values.
---------------------------------------------------------------------------

    As the complexity of the technology combinations is increased, and 
the number of interacting technologies grows accordingly, it becomes 
increasingly important to account for these synergies. NHTSA and EPA 
determined synergistic impacts for this proposed rule using EPA's 
``lumped parameter'' analysis tool, which EPA describes at length in 
Chapter 3 of the joint TSD. The lumped parameter tool is a spreadsheet 
model that represents energy consumption in terms of average 
performance over the fuel economy test procedure, rather than 
explicitly analyzing specific drive cycles. The tool begins with an 
apportionment of fuel consumption across several loss mechanisms and 
accounts for the average extent to which different technologies affect 
these loss mechanisms using estimates of engine, drivetrain and vehicle 
characteristics that are averaged over the 2-cycle CAFE drive cycle. 
Results of this analysis were generally consistent with those of full-
scale vehicle simulation modeling performed in 2010-2011 for EPA by 
Ricardo, Inc.
    For the current rulemaking, NHTSA is using an updated version of 
lumped parameter tool that incorporates results from simulation 
modeling performed in 2010-2011 by Ricardo, Inc. NHTSA and EPA 
incorporate synergistic impacts in their analyses in slightly different 
manners. Because NHTSA applies technologies individually in its 
modeling analysis, NHTSA incorporates synergistic effects between 
pairings of individual technologies. The use of discrete technology 
pair incremental synergies is similar to that in DOE's National Energy 
Modeling System (NEMS).\992\ Inputs to the CAFE model incorporate NEMS-
identified pairs, as well as additional pairs from the set of 
technologies considered in the CAFE model.
---------------------------------------------------------------------------

    \992\ U.S. Department of Energy, Energy Information 
Administration, Transportation Sector Module of the National Energy 
Modeling System: Model Documentation 2007, May 2007, Washington, DC, 
DOE/EIAM070(2007), at 29-30. Available at http://tonto.eia.doe.gov/ftproot/modeldoc/m070(2007).pdf (last accessed Sept. 25, 2011).
---------------------------------------------------------------------------

    NHTSA notes that synergies that occur within a decision tree are 
already addressed within the incremental values assigned and therefore 
do not require a synergy pair to address. For example, all engine 
technologies take into account incremental synergy factors of preceding 
engine technologies, and all transmission technologies take into 
account incremental synergy factors of preceding transmission 
technologies. These factors are expressed in the fuel consumption 
improvement factors in the input files used by the CAFE model.
    For applying incremental synergy factors in separate path 
technologies, the CAFE model uses an input table (see the tables in 
Chapter 3 of the TSD and in the FRIA) that lists technology pairings 
and incremental synergy factors associated with those pairings, most of 
which are between engine technologies and transmission/electrification/
hybrid technologies. When a technology is applied to a vehicle by the 
CAFE model, all instances of that technology in the incremental synergy 
table which match technologies already applied to the vehicle (either 
pre-existing or previously applied by the CAFE model) are summed and 
applied to the fuel consumption improvement factor of the technology 
being applied. Many of the synergies for the strong hybrid technology 
fuel consumption reductions are included in the incremental value for 
the specific hybrid technology block since the model applies all 
available electrification, engine and transmission technologies before 
applying strong hybrid technologies.
    As discussed in the proposal, the U.S. DOT Volpe Center has entered 
into a contract with Argonne National Laboratory (ANL) to provide full 
vehicle simulation modeling support for this MYs 2017-2025 rulemaking. 
While modeling was not complete in time for use in the NPRM, the ANL 
results were available for the final rule and were used to define the 
effectiveness of mild hybrids for both agencies, and NHTSA used the 
results to update the effectiveness of advanced transmission 
technologies coupled with naturally-aspirated engines for the CAFE 
analysis.

[[Page 62986]]

This simulation modeling was accomplished using ANL's full vehicle 
simulation tool called ``Autonomie,'' which is the successor to ANL's 
Powertrain System Analysis Toolkit (PSAT) simulation tool, and which 
includes sophisticated models for advanced vehicle technologies. The 
ANL simulation modeling process and results are discussed in greater 
detail in Chapter V of NHTSA's FRIA and fully documented in multiple 
reports that can be found in NHTSA's docket.\993\
---------------------------------------------------------------------------

    \993\ Moawad, A. and Rousseau, A., ``Impact of Transmission 
Technologies on Fuel Efficiency,'' Energy Systems Division, Argonne 
National Laboratory, ANL/ESD/12-6, August 2012, and Moawad, A. and 
Rousseau, A., ``Impact of Electric Drive Vehicle Technologies on 
Fuel Efficiency,'' Energy Systems Division, Argonne National 
Laboratory, ANL/ESD/12-7, August 2012, are available in Docket No. 
NHTSA-2010-0131.
---------------------------------------------------------------------------

d. Where can readers find more detailed information about NHTSA's 
technology analysis?
    Much more detailed information is provided in Chapter 5 of the 
FRIA, and a discussion of how NHTSA and EPA jointly reviewed and 
updated technology assumptions for purposes of this final rule is 
available in Chapter 3 of the TSD. Additionally, all of NHTSA's model 
input and output files are now public and available for the reader's 
review and consideration. The technology input files can be found in 
the docket for this final rule, Docket No. NHTSA-2010-0131, and on 
NHTSA's Web site. And finally, because much of NHTSA's technology 
analysis for purposes of this final rule builds on the work that was 
done for the MY 2011 and MYs 2012-2016 final rules, we refer readers to 
those documents as well for background information concerning how 
NHTSA's methodology for technology application analysis has evolved 
over the past several rulemakings, both in response to comments and as 
a result of the agency's growing experience with this type of 
analysis.\994\
---------------------------------------------------------------------------

    \994\ 74 FR 14233-308 (Mar. 30, 2009).
---------------------------------------------------------------------------

3. How did NHTSA develop its economic assumptions?
    NHTSA's analysis of alternative CAFE standards for the model years 
covered by this rulemaking relies on a range of forecast variables, 
economic assumptions, and parameter values. This section describes the 
sources of these forecasts, the rationale underlying each assumption, 
and the agency's choices of specific parameter values. These economic 
values play a significant role in determining the benefits of 
alternative CAFE standards, as they have for the last several CAFE 
rulemakings. Under those alternatives where standards would be 
established by reference to their costs and benefits, these economic 
values also affect the levels of the CAFE standards themselves. Some of 
these variables have more important effects on the level of CAFE 
standards and the benefits from requiring alternative increases in fuel 
economy than do others, and the following discussion places more 
emphasis on these inputs.
    In reviewing these variables and the agency's estimates of their 
values for purposes of this final rule, NHTSA considered comments 
received on the NPRM and also reviewed newly available literature. Many 
of the estimates have been carried forward from the NPRM without 
substantive change, and were based then on the agency's reconsideration 
of comments it had previously received on the NPRM for MYs 2012-16 CAFE 
standards and to the NOI/Interim Joint TAR, and newly available 
literature at that time. The agency elected to revise some of its 
economic assumptions and parameter estimates for this rulemaking, while 
retaining others.
    Between the final rule establishing CAFE standards for MY 2012-16 
passenger cars and light trucks and the proposed rule for MY 2017-25, 
the agency extensively revised its method for estimating benefits from 
less frequent refueling of vehicles with higher fuel economy, and also 
revised its forecasts of fuel prices and future growth in total vehicle 
use to be consistent with those reported in Annual Energy Outlook 2011. 
For this final rule, NHTSA made several changes to the economic 
assumptions it used to analyze the impacts of its proposed rule, 
including revising its technology cost estimates to reflect more 
recently available data; updating the estimated cost of owning a 
vehicle based to include additional categories of ownership costs and 
utilize newer data; updating its fuel price and transportation demand 
forecasts to be consistent with those presented in the Annual Energy 
Outlook (AEO) 2012 Early Release; and updating and revising its 
estimates of vehicle use (VMT) schedules, survival rates, and methods 
for projecting total VMT in future years. For the reader's reference, 
Table IV-9 below summarizes the values used to calculate the economic 
benefits from each alternative.

        Table IV-9--NHTSA Economic Values for Estimating Benefits
                                 [2010$]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Fuel Economy Rebound Effect..  10%
``Gap'' between test and on-   20%
 road MPG for liquid-fueled
 vehicles.
``Gap'' between test and on-   30%
 road wall electricity
 consumption for electric and
 plug-in hybrid electric
 vehicles.
Value of refueling time per    $21.45 cars
 ($ per vehicle-hour).
                               $21.81 trucks
Average tank volume refilled   65%
 during refueling stop.
Annual growth in average       0.6%
 vehicle use.
Fuel Prices (2017-50 average,
 $/gallon):
    Retail gasoline price....  $4.13
    Pre-tax gasoline price...  $3.78
Economic Benefits from
 Reducing Oil Imports ($/
 gallon):
    ``Monopsony'' Component..  $ 0.00
    Macroeconomic Disruption   $ 0.197 in 2025
     (``Price Shock'')
     Component.
    Military Security/SPR      $ 0.00
     Component.
    Total Economic Costs ($/   $ 0.197 in 2025
     gallon).
Emission Damage Costs (2020,
 $/short ton):
    Carbon monoxide..........  $ 0
    Volatile organic           $ 1,700
     compounds (VOC).
    Nitrogen oxides (NOX)--    $ 5,600
     vehicle use.
    Nitrogen oxides (NOX)--    $ 5,400
     fuel production and
     distribution.
    Particulate matter         $ 310,000
     (PM2.5)--vehicle use.

[[Page 62987]]

 
    Particulate matter         $ 250,000
     (PM2.5)--fuel production
     and distribution.
    Sulfur dioxide (SO2).....  $ 33,000
Annual CO2 Damage Cost (per    variable depending on discount rate and
 metric ton).                   year (see Table II-9 above for 2017
                                estimates)
External Costs from
 Additional Automobile Use ($/
 vehicle-mile):
    Congestion...............  $ 0.056
    Accidents................  $ 0.024
    Noise....................  $ 0.001
                              ------------------------------------------
        Total External Costs.  $ 0.081
External Costs from
 Additional Light Truck Use
 ($/vehicle-mile):
    Congestion...............  $0.050
    Accidents................  $0.027
    Noise....................  $0.001
                              ------------------------------------------
        Total External Costs.  $0.078
Discount Rates Applied to      3%, 7%
 Future Benefits.
------------------------------------------------------------------------

a. Costs of Fuel Economy-Improving Technologies
    Building on cost estimates developed for the MYs 2012-2016 CAFE and 
GHG final rule and the 2010 TAR, the agencies incorporated new cost 
estimates in the NPRM for the new technologies considered for the 
proposal and for some of the technologies carried over from the MYs 
2012-2016 final rule and 2010 TAR. This joint work is described in 
Chapter 3 of the joint TSD and in Section II of this preamble, as 
summarized below. For more detailed information on cost of fuel-saving 
technologies, please refer to Chapter 3 of the joint TSD and Chapter V 
of NHTSA's FRIA.
    The technology cost estimates used in this analysis are intended to 
represent manufacturers' direct costs for high-volume production of 
vehicles with these technologies. NHTSA explicitly accounts for the 
cost reductions a manufacturer might realize through learning achieved 
from experience in actually applying a technology, which means that 
technologies become cheaper over the rulemaking time frame; learning 
effects are described above and in Chapter 3 of the joint TSD and 
Chapters V and VII of NHTSA's FRIA. NHTSA notes that, in developing 
technology cost estimates, the agencies have made every effort to hold 
constant aspects of vehicle performance and utility typically valued by 
consumers, such as horsepower, carrying capacity, drivability, 
durability, noise, vibration and harshness (NVH) and towing and hauling 
capacity. For example, NHTSA includes in its analysis technology cost 
estimates that are specific to performance passenger cars (i.e., sports 
cars), as compared to conventional passenger cars, and its cost 
estimates for improving the fuel economy of performance cars are higher 
than those for other models because of the additional costs necessary 
to maintain the performance levels their buyers expect. NHTSA sought 
comment in the NPRM on the extent to which commenters believe that the 
agencies have been successful in holding constant these elements of 
vehicle performance and utility in developing the technology cost 
estimates. Few commenters addressed this issue, but comments regarding 
the agencies' cost estimates and the agency's response are presented in 
Section IV.C.2 above. Additionally, the agency notes that the 
technology costs included in this proposal take into account only those 
associated with the initial build of the vehicle, although comments 
were received to the MYs 2012-2016 rulemaking that suggested there 
could be additional maintenance required with some new technologies 
(e.g., turbocharging, hybrids, etc.), and that additional maintenance 
costs could occur as a result. The agency also sought comments on this 
topic in the NPRM and stated that it would undertake a more detailed 
review of these potential costs for the final rule. NHTSA did, in fact, 
receive comments regarding costs of ownership, and incorporated certain 
additional maintenance costs in the final rule analysis. More 
discussion of this topic is available in Section IV.C.2 above and in 
Chapter V of NHTSA's FRIA.
    Additionally, NHTSA recognizes that manufacturers' actual costs for 
employing these technologies include additional outlays for 
accompanying design or engineering changes to models that use them, 
development and testing of prototype versions, recalibrating engine 
operating parameters, and integrating the technology with other 
attributes of the vehicle. Manufacturers' indirect costs for employing 
these technologies also include expenses for product development and 
integration, modifying assembly processes and training assembly workers 
to install them, increased expenses for operation and maintaining 
assembly lines, higher initial warranty costs for new technologies, any 
added expenses for selling and distributing vehicles that use these 
technologies, and manufacturer and dealer profit. These indirect costs 
have been accounted for in this rulemaking through use of ICMs, which 
have been revised for this rulemaking as discussed above, in Chapter 3 
of the joint TSD, and in Chapters V and VII of NHTSA's FRIA. NHTSA also 
sought and received comments to the NPRM on the use of ICMs; those 
comments and the agency's response are presented above in Section 
IV.C.2 and in Chapter V of NHTSA's FRIA.
b. Potential Opportunity Costs of Improved Fuel Economy
    An important concern is whether achieving the fuel economy 
improvements required by the final CAFE standards will require 
manufacturers to modify the performance, carrying capacity, safety, or 
comfort of some vehicle models. To the extent that compliance with the 
standards requires such modifications, the resulting sacrifice in the 
value of those models represents an additional cost of achieving the 
required improvements in fuel economy. (This possibility is addressed 
in detail in Section IV.G.6.) Although exact dollar values that 
potential buyers attach to specific vehicle attributes are difficult to 
infer, differences in vehicle purchase prices and buyers' choices among 
competing models that feature varying

[[Page 62988]]

combinations of these characteristics clearly demonstrate that changes 
in these attributes affect the utility and economic value they offer to 
potential buyers.\995\
---------------------------------------------------------------------------

    \995\ See, e.g., Kleit A.N., 1990. ``The Effect of Annual 
Changes in Automobile Fuel Economy Standards.'' Journal of 
Regulatory Economics 2: 151-172 (Docket EPA-HQ-OAR-2009-0472-0015); 
Berry, Steven, James Levinsohn, and Ariel Pakes, 1995. ``Automobile 
Prices in Market Equilibrium,'' Econometrica 63(4): 841-940 (Docket 
NHTSA-2009-0059-0031); McCarthy, Patrick S., 1996. ``Market Price 
and Income Elasticities of New Vehicle Demands'', Review of 
Economics and Statistics 78: 543-547.
---------------------------------------------------------------------------

    NHTSA and EPA approached this potential problem by developing cost 
estimates for fuel economy-improving technologies that are intended to 
include any additional manufacturing costs that would be necessary to 
maintain the originally planned levels of performance, comfort, 
carrying capacity, and safety of any light-duty vehicle model to which 
those technologies are applied. In doing so, the agencies followed the 
precedent established by the 2002 NAS Report, which estimated 
``constant performance and utility'' costs for fuel economy 
technologies. NHTSA has followed this precedent in its efforts to 
refine the technology costs it uses to analyze alternative passenger 
car and light truck CAFE standards for MYs 2017-2025. Although the 
agency has reduced its estimates of manufacturers' costs for most 
technologies for use in this rulemaking, these revised estimates are 
still intended to represent costs that would allow manufacturers to 
maintain the performance, carrying capacity, and utility of vehicle 
models while improving their fuel economy.
    As NHTSA stated in the NPRM, while we believe that our cost 
estimates for fuel economy-improving technologies include adequate 
provisions for accompanying costs that are necessary to prevent any 
degradation in other vehicle attributes, it is possible that they do 
not include adequate allowance to prevent sacrifices in these 
attributes on all vehicle models. If this is the case, the true 
economic costs of achieving higher fuel economy should include the 
opportunity costs to vehicle owners of any accompanying reductions in 
vehicles' performance, carrying capacity, and utility, and omitting 
these will cause the agency's estimated technology costs to 
underestimate the true economic costs of improving fuel economy.
    It would be desirable to estimate explicitly the changes in vehicle 
buyers' welfare from the combination of higher prices for new vehicle 
models, increases in their fuel economy, and any accompanying changes 
in other vehicle attributes. The net change in buyer's welfare that 
results from the combination of these changes would provide a more 
accurate estimate of the true economic costs for improving fuel 
economy. The agency is in the process of developing an empirical model 
of potential vehicle buyers' decisions about whether to purchase a new 
car or light truck and their choices among available vehicle models, 
which will eventually allow it to conduct such an analysis. This 
process was not completed on a schedule that allowed it to be used in 
analyzing final CAFE standards for this rulemaking, as discussed in 
Section IV.C.4 below, but Section IV.G.6 below includes a detailed 
analysis and discussion of how omitting possible changes in vehicle 
attributes other than their prices and fuel economy might affect its 
estimates of benefits and costs resulting from the final standards.
c. The On-Road Fuel Economy ``Gap''
    Actual fuel economy levels achieved by light-duty vehicles in on-
road driving fall somewhat short of their levels measured under the 
laboratory-like test conditions used by EPA to establish its published 
fuel economy ratings for different models. In analyzing the fuel 
savings from alternative CAFE standards, NHTSA has previously adjusted 
the actual fuel economy performance of each light truck model downward 
from its rated value to reflect the expected size of this on-road fuel 
economy ``gap.'' On December 27, 2006, EPA adopted changes to its 
regulations on fuel economy labeling, which were intended to bring 
vehicles' rated fuel economy levels closer to their actual on-road fuel 
economy levels.\996\
---------------------------------------------------------------------------

    \996\ 71 FR 77871 (Dec. 27, 2006).
---------------------------------------------------------------------------

    In that final rule, however, EPA acknowledged that actual on-road 
fuel economy for light-duty vehicles averages approximately 20 percent 
lower than published fuel economy levels, somewhat larger than the 15 
percent shortfall it had previously assumed. For example, if the 
overall EPA fuel economy rating of a light truck is 20 mpg, EPA 
estimated that the on-road fuel economy actually achieved by a typical 
driver of that vehicle is expected to be only 80 percent of that 
figure, or 16 mpg (20*.80). NHTSA employed EPA's revised estimate of 
this on-road fuel economy gap in its analysis of the fuel savings 
resulting from alternative CAFE standards evaluated in the MY 2011 
final rule.
    In the course of developing its CAFE standards for MY 2012-16, 
NHTSA conducted additional analysis of this issue. The agency combined 
data on the number of passenger cars and light trucks of each model 
year that were registered for use during calendar years 2000 through 
2006, average rated fuel economy for passenger cars and light trucks 
produced during each model year, and estimates of average miles driven 
per year by cars and light trucks of different ages. It used these data 
to develop estimates of the average fuel economy that the U.S. light-
duty vehicle fleet would have achieved from 2000 through 2006 if cars 
and light trucks of each model year achieved the same fuel economy 
levels in actual on-road driving as they did under test conditions when 
new.
    Table IV-10 compares NHTSA's estimates of fleet-wide average fuel 
economy under test conditions for 2000 through 2006 to the Federal 
Highway Administration's (FHWA) published estimates of actual on-road 
fuel economy achieved by passenger cars and light trucks during each of 
those years.\997\ As it shows, FHWA's estimates of actual fuel economy 
for passenger cars ranged from 21-23 percent lower than NHTSA's 
estimates of its fleet-wide average value under test conditions over 
this period, and FHWA's estimates of actual fuel economy for light 
trucks ranged from 16-18 percent lower than NHTSA's estimates of its 
fleet-wide average value under test conditions. Thus, NHTSA concluded 
in the NPRM that these results appear to confirm that the 20 percent 
on-road fuel economy gap represents a reasonable estimate for use in 
evaluating the fuel savings likely to result from more stringent fuel 
economy and CO2 standards in MYs 2017-2025.
---------------------------------------------------------------------------

    \997\ Federal Highway Administration, Highway Statistics, 2000 
through 2006 editions, Table VM-1; See http://www.fhwa.dot.gov/policy/ohpi/hss/hsspubs.cfm (last accessed March 1, 2010).

[[Page 62989]]

  Table IV-10--NHTSA Estimated Fleet-Wide Fuel Economy of Passenger Cars and Light Trucks Compared to Reported
                                                  Fuel Economy
----------------------------------------------------------------------------------------------------------------
                                                Passenger cars                          Light trucks
                                   -----------------------------------------------------------------------------
               Year                    NHTSA         FHWA       Percent       NHTSA         FHWA       Percent
                                     estimated     reported    difference   estimated     reported    difference
                                      test MPG    actual MPG      (%)        test MPG    actual MPG      (%)
----------------------------------------------------------------------------------------------------------------
2000..............................         28.2         21.9        -22.2         20.8         17.4        -16.3
2001..............................         28.2         22.1        -21.7         20.8         17.6        -15.5
2002..............................         28.3         22.0        -22.3         20.9         17.5        -16.2
2003..............................         28.4         22.2        -21.9         21.0         17.2        -18.0
2004..............................         28.5         22.5        -21.1         21.0         17.2        -18.3
2005..............................         28.6         22.1        -22.8         21.1         17.7        -16.3
2006..............................         28.8         22.5        -21.8         21.2         17.8        -16.2
Avg., 2000-2006...................         28.4         22.2        -22.0         21.0         17.5        -16.7
----------------------------------------------------------------------------------------------------------------

    The comparisons reported in this table must be interpreted with 
some caution, however, because the estimates of annual car and truck 
use used to develop these estimates are submitted to FHWA by individual 
states, which use differing definitions of passenger cars and light 
trucks. (For example, some states classify minivans as cars, while 
others define them as light trucks.) At the same time, while total 
gasoline consumption can be reasonably estimated from excise tax 
receipts, separate estimates of gasoline consumption by cars and trucks 
are not available. For these reasons, NHTSA has chosen not to rely on 
its separate estimates of the on-road fuel economy gap for cars and 
light trucks. However, the agency stated in the NPRM that we do believe 
that these results confirm that the 20 percent on-road fuel economy 
discount represents a reasonable estimate for use in evaluating the 
fuel savings likely to result from CAFE standards for both cars and 
light trucks. NHTSA employed this value for vehicles operating on 
liquid fuels (gasoline, diesel, and gasoline/alcohol blends), and used 
it to analyze the impacts of proposed CAFE standards for model years 
2017-25 on the use of these fuels.
    In the 2010 TAR, EPA and NHTSA assumed that the overall energy 
shortfall for the vehicles employing electric drivetrains, including 
plug-in hybrid and battery-powered electric vehicles, is 30 percent. 
This value was derived from the agencies' engineering judgment based on 
the limited available information. During the stakeholder meetings 
conducted prior to the technical assessment, confidential business 
information (CBI) was supplied by several manufacturers which indicated 
that electrically powered vehicles had greater variability in their on-
road energy consumption than vehicles powered by internal combustion 
engines, although other manufacturers suggested that the on-road/
laboratory differential attributable to electric operation should 
approach that of liquid fuel operation in the future. Second, data from 
EPA's 2006 analysis of the ``five cycle'' fuel economy label as part of 
the rulemaking discussed above supported a larger on-road shortfall for 
vehicles with hybrid-electric drivetrains, partly because real-world 
driving tends to have higher acceleration/deceleration rates than are 
employed on the 2-cycle test. This diminishes the fuel economy benefits 
of regenerative braking, which can result in a higher test fuel economy 
for hybrids than is achieved under normal on-road conditions.\998\ 
Finally, heavy accessory load, extremely high or low temperatures, and 
aggressive driving have deleterious impacts of unknown magnitudes on 
battery performance. Consequently, the agencies judged that 30 percent 
was a reasonable estimate for use in the TAR, and NHTSA believes that 
it continues to represent the most reliable estimate for use in the 
current analysis.
---------------------------------------------------------------------------

    \998\ EPA, Fuel Economy Labeling of Motor Vehicles: Revisions To 
Improve Calculation of Fuel Economy Estimates; final rule, 40 CFR 
Parts 86 and 600, 71 FR 77872, 77879 (Dec. 27, 2006). Available at 
http://www.epa.gov/fedrgstr/EPA-AIR/2006/December/Day-27/a9749.pdf.
---------------------------------------------------------------------------

    One of the most significant factors responsible for the difference 
between test and on-road fuel economy is the use of air conditioning. 
While the air conditioner is turned off during the FTP and HFET tests, 
drivers often use air conditioning under warm, humid conditions. The 
air conditioning compressor can also be engaged during ``defrost'' 
operation of the heating system.\999\ In the MYs 2012-2016 rulemaking, 
EPA estimated the impact of an air conditioning system at approximately 
14.3 grams CO2/mile for an average vehicle without any of 
the improved air conditioning technologies discussed in that 
rulemaking. For a 27 mpg (330 g CO2/mile) vehicle, this 
would account for is approximately 20 percent of the total estimated 
on-road gap (or about 4 percent of total fuel consumption).
---------------------------------------------------------------------------

    \999\ EPA, Final Technical Support Document: Fuel Economy 
Labeling of Motor Vehicle Revisions to Improve Calculation of Fuel 
Economy Estimates, at 70. Office of Transportation and Air Quality 
EPA420-R-06-017 December 2006, Chapter II, http://www.epa.gov/fueleconomy/420r06017.pdf.
---------------------------------------------------------------------------

    In the MY 2012-2016 rule, EPA estimated that 85 percent of MY 2016 
vehicles would reduce their tailpipe CO2 emissions 
attributable to air conditioner efficiency by 40 percent through the 
use of advanced air conditioning technologies, and that incorporating 
this change would reduce the average on-road gap by about 2 
percent.\1000\ However, air conditioning-related fuel consumption does 
not decrease proportionally as engine efficiency improves, because the 
engine load due attributable to air conditioner operation is 
approximately constant across engine efficiency and technology. As a 
consequence, air conditioning operation represents an increasing 
percentage of vehicular fuel consumption as engine efficiency 
increases.\1001\ Because these two effects are expected approximately 
to counterbalance each other, NHTSA elected not to adjust its estimate 
of the on-road gap for use in the analysis for the proposal.
---------------------------------------------------------------------------

    \1000\ 4% of the on-road gap x 40% reduction in air conditioning 
fuel consumption x 85% of the fleet = ~2%.
    \1001\ As an example, the air conditioning load of 14.3 g/mile 
of CO2 is a smaller percentage (4.3%) of 330 g/mile than 260 (5.4%).
---------------------------------------------------------------------------

    NHTSA received only two comments to the NPRM regarding the on-road 
fuel economy gap. The Sierra Club commented that the agencies had 
pledged in the final rule establishing the MYs 2012-2016 standards to 
address the disparity between the standards and on-road mileage, but 
that given the timing of this rulemaking for MYs 2017-

[[Page 62990]]

2205, had not done so.\1002\ The Sierra Club stated that the disparity 
is further impacted by the inclusion of fuel economy improvements for 
A/C efficiency and off-cycle technologies in CAFE compliance.\1003\ The 
Sierra Club suggested that CAFE testing be reformed to reduce this 
disparity, but did not suggest revisions to the on-road fuel economy 
gap.\1004\ The U.S. Coalition for Advanced Diesel Cars suggested that 
the on-road gap used in the proposal was overly conservative, and that 
advanced technology vehicles may have on-road gaps larger than 20 
percent.\1005\ The agencies recognize this potential issue--future 
changes in driver behavior or vehicle technology may change the on-road 
gap. As an example, while some technologies such as electrification may 
increase the on-road gap, other off-cycle technologies such as tire 
pressure management systems, air conditioning improvements and 
aerodynamic improvements may decrease it. The agencies will continue to 
compare monitor the EPA fuel economy ratings for new vehicle models to 
other sources of data on their actual on-road fuel economy as these 
vehicles are incorporated into the fleet, in an effort to improve and 
update their estimate of the on-road gap. For purposes of evaluating 
this final rule, however, both NHTSA and EPA will continue to use the 
estimate of the on-road gap they employed in evaluating the proposed 
standards.
---------------------------------------------------------------------------

    \1002\ Sierra Club et al., Docket No. NHTSA-2010-0131-0053, at 
9.
    \1003\ Id.
    \1004\ Id. at 9-10.
    \1005\ U.S. Coalition for Advanced Diesel Cars, Docket No. 
NHTSA-2010-0131-0246, at 11-13.
---------------------------------------------------------------------------

d. Fuel Prices and the Value of Saving Fuel
    Future fuel prices are the single most important input into the 
economic analysis of the benefits of alternative CAFE standards because 
they determine the value of future fuel savings, which account for 
approximately 90 percent of the total economic benefits from requiring 
higher fuel economy. NHTSA relies on the most recent fuel price 
projections from the U.S. Energy Information Administration's (EIA) 
Annual Energy Outlook (AEO) to estimate the economic value of fuel 
savings projected to result from alternative CAFE standards: in the 
NPRM, the most recent edition of this publication was the AEO 2011 
Reference Case, while for the final rule, this is the AEO 2012 Early 
Release Reference Case. Although EIA released the final version of AEO 
2012 prior to the publication of this final rule, as of the time by 
which the analysis had to be completed, the AEO 2012 Early Release 
Reference Case projections of gasoline and diesel fuel prices 
represented EIA's most up-to-date estimate of the most likely course of 
future prices for petroleum products. EIA is widely recognized as an 
impartial and authoritative source of analysis and forecasts of U.S. 
energy production, consumption, and prices, and its forecasts are 
widely relied upon by federal agencies for use in regulatory analysis 
and for other purposes. Its forecasts are derived using EIA's National 
Energy Modeling System (NEMS), which includes detailed representations 
of supply pathways, sources of demand, and their interaction to 
determine prices for different forms of energy.
    As compared to the gasoline prices used in the NPRM, the AEO 2012 
Early Release Reference Case fuel prices are slightly higher through 
the year 2020, but slightly lower for most years thereafter. Expressed 
in constant 2010 dollars, the AEO 2012 Early Release Reference Case 
forecast of retail gasoline prices (which include federal, state, and 
local taxes) during 2017 is $3.62 per gallon, rising gradually to $4.08 
by the year 2035. However, valuing fuel savings over the full lifetimes 
of passenger cars and light trucks affected by the standards proposed 
for MYs 2017-25 requires fuel price forecasts that extend through 2060, 
approximately the last year during which a significant number of MY 
2025 vehicles will remain in service.\1006\ To obtain fuel price 
forecasts for the years 2036 through 2060, the agency assumes that 
retail fuel prices will continue to increase after 2035 at the average 
annual rate (0.8%) projected for 2017-2035 in the AEO 2012 Early 
Release Reference Case. This assumption results in a projected retail 
price of gasoline that reaches $4.94 in 2050. Over the entire period 
from 2017-2050, retail gasoline prices are projected to average $4.13, 
as Table IV-9 reported previously.
---------------------------------------------------------------------------

    \1006\ The agency defines the maximum lifetime of vehicles as 
the highest age at which more than 2 percent of those originally 
produced during a model year remain in service. In the case of light 
trucks, for example, this age has typically been 36 years for recent 
model years.
---------------------------------------------------------------------------

    The value of fuel savings resulting from improved fuel economy to 
buyers of light-duty vehicles is determined by the retail price of 
fuel, which includes Federal, State, and any local taxes imposed on 
fuel sales. Because fuel taxes represent transfers of resources from 
fuel buyers to government agencies, however, rather than real resources 
that are consumed in the process of supplying or using fuel, NHTSA 
deducts their value from retail fuel prices to determine the real 
economic value of fuel savings resulting from more stringent CAFE 
standards to the U.S. economy.
    NHTSA follows the assumptions used by EIA in AEO 2012 Early Release 
that State and local gasoline taxes will keep pace with inflation in 
nominal terms, and thus remain constant when expressed in constant 
dollars. In contrast, EIA assumes that Federal gasoline taxes will 
remain unchanged in nominal terms, and thus decline throughout the 
forecast period when expressed in constant dollars. These differing 
assumptions about the likely future behavior of Federal and State/local 
fuel taxes are consistent with recent historical experience, which 
reflects the fact that Federal as well as most State motor fuel taxes 
are specified on a cents-per-gallon rather than an ad valorem basis, 
and typically require legislation to change. Subtracting fuel taxes 
from the retail prices forecast in AEO 2012 results in projected values 
for saving gasoline of $3.22 per gallon during 2017, rising to $3.73 
per gallon by the year 2035, and to $4.61 by the year 2050. Over this 
entire period, pre-tax gasoline prices are projected to average $3.77 
per gallon.
    EIA also includes forecasts reflecting high and low global oil 
prices in each year's complete AEO, which reflect uncertainties 
regarding OPEC behavior as well as future levels of oil production and 
demand. However, the Early Release versions of AEO, including the AEO 
2012 Early Release relied upon by NHTSA for this analysis, does not 
include alternative forecasts reflecting high and low global oil price 
scenarios. In their absence, NHTSA constructed high and low fuel price 
forecasts that were consistent with the Reference Case forecast of fuel 
prices from the AEO 2012 Early Release, as well as with the 
relationship of the high and low fuel price forecasts to the Reference 
Case forecast in AEO 2011. These alternative scenarios project retail 
gasoline prices that range from a low of $2.46 to a high of $4.90 per 
gallon during 2020, and from $2.53 to $5.12 per gallon during 2035 (all 
figures in 2010 dollars). In conjunction with our assumption that fuel 
taxes will remain constant in real or inflation-adjusted terms over 
this period, these forecasts imply pre-tax values of saving fuel 
ranging from $2.07 to $4.51 per gallon during 2020, and from $2.18 to 
$4.77 per gallon in 2035 (again, all figures are in constant 2010 
dollars). In conducting the analysis of uncertainty in benefits and 
costs from

[[Page 62991]]

alternative CAFE standards required by OMB, NHTSA evaluated the 
sensitivity of its benefits estimates to these alternative forecasts of 
future fuel prices; detailed results and discussion of this sensitivity 
analysis can be found in Chapter X of NHTSA's FRIA. Generally, this 
analysis confirms that the primary economic benefit resulting from the 
rule--the value of fuel savings--is extremely sensitive to alternative 
forecasts of future fuel prices.
    Many environmental and consumer group commenters argued that the 
fuel price estimates employed in the NPRM were too low. Consumers Union 
\1007\ and UCS \1008\ stated that EIA consistently underestimates 
future gasoline prices. NRDC,\1009\ CFA,\1010\ and Sierra Club \1011\ 
also commented that AEO 2011 fuel price estimates were too low; UCS 
suggested that the agencies use the AEO 2012 Early Release estimates 
for the final rule because they were higher, and requested that the 
agencies try to account for gasoline price spikes in the fuel cost 
estimates.\1012\ UCS \1013\ and EDF\1014\ commented that the agencies 
should conduct sensitivity analysis using AEO's High Price Case. 
Pennsylvania's Department of Environmental Protection suggested that 
the agencies' analysis should include the additional cost of the higher 
octane gasoline that would be required as a result of the 
standards.\1015\
---------------------------------------------------------------------------

    \1007\ Consumers Union attachment, Docket No. EPA-HQ-OAR-2010-
0799-9454, at 1-2.
    \1008\ UCS, Docket No. EPA-HQ-OAR-2010-0799-9567, at 7.
    \1009\ NRDC, Docket No. EPA-HQ-OAR-2010-0799-9472, at 3.
    \1010\ CFA, Docket No. EPA-HQ-OAR-2010-0799-9419., at 15.
    \1011\ Sierra Club et al., Docket No. NHTSA-2010-0131-0068, at 
10.
    \1012\ UCS, Docket No. EPA-HQ-OAR-2010-0799-9567, at 7, 14.
    \1013\ Id. at 7.
    \1014\ EDF, Docket No. NHTSA-2010-0131-0302, at 9.
    \1015\ PA DEP, Docket No. EPA-HQ-OAR-2010-0799-7821, at 3.
---------------------------------------------------------------------------

    In keeping with its usual practice of employing fuel price 
forecasts from the most recently published version of AEO, NHTSA has 
elected to use the Reference Case fuel price forecast from the AEO 2012 
Early Release in its analysis of benefits form this final rule. As 
suggested by some commenters, NHTSA has also conducted sensitivity 
analyses using the high and low fuel price forecasts it constructed to 
be consistent with the AEO 2012 Early Release Reference Case forecast, 
although the agency notes that this is also its usual practice. The 
agency accounts separately for the economic costs associated with the 
potential for rapid increases in fuel prices (``price spikes'') or 
interruptions in the supply of petroleum products as part of the 
macroeconomic disruption costs of U.S. petroleum imports; these costs 
are discussed in Section IV.C.3.k.ii.
e. Consumer Valuation of Fuel Economy and Payback Period
    The agency uses slightly different assumptions about the length of 
time over which potential vehicle buyers consider fuel savings from 
higher fuel economy, and about how they discount those future fuel 
savings, in different aspects of its analysis. For most purposes, the 
agency assumes that buyers value fuel savings over the first five years 
of a new vehicle's lifetime; the five-year figure represents 
approximately the current average term of consumer loans to finance the 
purchase of new vehicles.
    To simulate manufacturers' assessment of the net change in the 
value of an individual vehicle model to prospective buyers from 
improving its fuel economy, NHTSA discounts fuel savings over the first 
five years of its lifetime using a 7 percent rate. The resulting value 
is deducted from the technology costs that would be incurred by its 
manufacturer to improve that model's fuel economy, in order to 
determine the change in its value to potential buyers. Since this is 
also the amount by which its manufacturer could expect to change that 
model's selling price, this difference can also be viewed as the 
``effective cost'' of the improvement from its manufacturers' 
perspective. The CAFE model uses these estimates of effective costs to 
identify the sequence in which manufacturers are likely to select 
individual models for improvements in fuel economy, as well as to 
identify the most cost-effective technologies for doing so.
    The effective cost to its manufacturer for increasing the fuel 
economy of a model also represents the change in its value from the 
perspective of potential buyers. Under the assumption that 
manufacturers change the selling price of each model by this amount, 
the effective cost of improving its fuel economy also represents the 
average change in its net or effective price to would-be buyers. As 
part of our sensitivity case analyzing the potential for manufacturers 
to over-comply with CAFE standards--that is, to produce a lineup of 
vehicle models whose sales-weighted average fuel economy exceeds that 
required by prevailing standards--NHTSA used the extreme assumption 
that potential buyers value fuel savings only during the first year 
they expect to own a new vehicle. This assumption produces an extremely 
conservative estimate of the extent to which manufacturers are likely 
to over-comply with the prevailing CAFE standard.
    Several commenters addressed the issue of payback periods. EDF 
commented that the payback period should be 5 years or greater, in 
order to ``accurately reflect the current and forecasted buying trends 
of consumers,'' including increases in the average length of ownership 
of new vehicles since the 2008 recession.\1016\ EDF argued that as a 
result, ``the period of time that potential vehicle buyers can be 
assumed to value fuel economy improvements in making their purchasing 
decisions may also be increasing.'' \1017\ The Sierra Club also 
supported the use of a 5 year payback period, noting increasing 
consumer interest in fuel economy.\1018\ NADA and VW commented that the 
real-life payback period for consumer decisions was likely shorter. 
NADA commented that the payback period should be ``at most'' 5 years, 
suggesting that even if consumers value fuel economy, they will still 
be in a hurry to recoup their costs.\1019\ VW commented that while the 
agencies had estimated that the average consumer would recoup his 
higher purchase price in ``just less than 4 years,'' the payback period 
``for a consumer purchasing a passenger car will be longer than a 
consumer purchasing a light truck,'' and suggested that consumers would 
likely choose vehicles with shorter payback periods.\1020\ NADA also 
suggested that the agencies' approach in the NPRM to estimating the 
payback period was too simplistic, and requested that the agencies 
account for ``real-world finance, opportunity, and additional 
maintenance costs'' in that estimate for the final rule.\1021\ ICCT 
commented that David Greene had found in 2010 that using reasonable 
estimates of the uncertainty in in-use fuel economy, future fuel 
prices, annual vehicle use, vehicle lifetime, and incremental vehicle 
price yielded an average customer payback period of roughly 3 
years.\1022\ In the context of the

[[Page 62992]]

sensitivity analysis looking at market-driven overcompliance, however, 
a number of environmental and consumer groups argued that the agency 
should not assume any such overcompliance. These comments will be 
summarized and addressed in Section IV.G below.
---------------------------------------------------------------------------

    \1016\ EDF, Docket No. NHTSA-2010-0131-0302, at 9.
    \1017\ Id.
    \1018\ Sierra Club et al., Docket No. NHTSA-2010-0131-0068, at 
3.
    \1019\ NADA, Docket No. NHTSA-2010-0131-0261, at 10.
    \1020\ VW, Docket No. NHTSA-2010-0131-0247, at 12.
    \1021\ NADA, Docket No. NHTSA-2010-0131-0261, at 10.
    \1022\ ICCT, Docket No. NHTSA-2010-0131-0258, at 16.
---------------------------------------------------------------------------

    After considering these comments, the agency has elected to retain 
the five-year payback period for use in most aspects of its analysis. 
In addition, NHTSA has elected to include increases in financing, 
insurance, and other components of the cost of vehicle ownership that 
would be expected to increase in proportion to increases in vehicle 
purchase prices in its analysis of the rule's impacts on individual 
buyers, as well as in its analysis of potential changes in total sales 
of new vehicles.
    The agency notes that these varying assumptions about future time 
horizons and discount rates for valuing fuel savings are used only to 
analyze manufacturers' responses to requiring higher fuel economy and 
buyers' behavior in response to manufacturers' compliance strategies. 
When estimating the aggregate value to the U.S. economy of fuel savings 
resulting from alternative increases in CAFE standards--or the 
``social'' value of fuel savings--the agency includes fuel savings over 
the entire expected lifetimes of vehicles that would be subject to 
higher standards, rather than over the shorter periods we assume 
manufacturers employ to represent the preferences of vehicle buyers, or 
that buyers are assumed to employ when assessing changes in the net 
price of purchasing and owning new vehicles. Valuing fuel savings over 
vehicles' entire lifetimes recognizes the savings in fuel costs that 
subsequent owners of vehicles will experience from higher fuel economy, 
even if their initial purchasers do not expect to recover the remaining 
value of fuel savings when they re-sell those vehicles, or for other 
reasons do not value fuel savings beyond the assumed five-year time 
horizon.
    The procedure the agency uses for calculating lifetime fuel savings 
is discussed in detail in the following section, while a more detailed 
analysis of the time horizon over which potential buyers may consider 
fuel savings in their vehicle purchasing decisions is provided in 
Section IV.G.6 below.
f. Vehicle Survival and Use Assumptions
    NHTSA's analysis of fuel savings and related benefits from adopting 
more stringent fuel economy standards for MYs 2017-2025 passenger cars 
and light trucks begins by estimating the resulting changes in fuel use 
over the entire lifetimes of the affected vehicles. The change in total 
fuel consumption by vehicles produced during each model year is 
calculated as the difference between their total fuel use over their 
lifetimes with a higher CAFE standard in effect, and their total 
lifetime fuel consumption under a baseline in which CAFE standards 
remained at their MY 2016 levels. The first step in estimating lifetime 
fuel consumption by vehicles of each model year is to calculate the 
number of vehicles originally produced during that model year that are 
expected to remain in service during each subsequent year.\1023\ This 
is calculated by multiplying the number of vehicles originally produced 
during a model year by the proportion typically expected to remain in 
service at their age during each later year, often referred to as a 
``survival rate.''
---------------------------------------------------------------------------

    \1023\ Vehicles are defined to be of age 1 during the calendar 
year corresponding to the model year in which they are produced; 
thus for example, model year 2000 vehicles are considered to be of 
age 1 during calendar year 2000, age 2 during calendar year 2001, 
and to reach their maximum age of 26 years during calendar year 
2025. NHTSA considers the maximum lifetime of vehicles to be the age 
after which less than 2 percent of the vehicles originally produced 
during a model year remain in service. Applying these conventions to 
vehicle registration data indicates that passenger cars have a 
maximum age of 26 years, while light trucks have a maximum lifetime 
of 36 years. See Lu, S., NHTSA, Regulatory Analysis and Evaluation 
Division, ``Vehicle Survivability and Travel Mileage Schedules,'' 
DOT HS 809 952, 8-11 (January 2006). Available at http://www-nrd.nhtsa.dot.gov/Pubs/809952.pdf (last accessed Jul. 9, 2012).
---------------------------------------------------------------------------

    As discussed in more detail in Section II.B.3 and in Chapter 1 of 
the TSD, to estimate production volumes of passenger cars and light 
trucks for individual manufacturers, NHTSA relied on a baseline market 
forecast constructed by EPA staff beginning with MY 2008 CAFE 
certification data. After constructing a MY 2008 baseline, EPA and 
NHTSA used projected car and truck volumes for this period from Energy 
Information Administration's (EIA's) Annual Energy Outlook (AEO) 2011 
in the NPRM analysis.\1024\ However, Annual Energy Outlook forecasts 
only total car and light truck sales, rather than sales at the 
manufacturer and model-specific level, which the agencies require in 
order to estimate the effects new standards will have on individual 
manufacturers.\1025\
---------------------------------------------------------------------------

    \1024\ Available at http://www.eia.gov/forecasts/aeo/index.cfm 
(last accessed Sept. 26, 2011). NHTSA and EPA made the simplifying 
assumption that projected sales of cars and light trucks during each 
calendar year from 2012 through 2016 represented the likely 
production volumes for the corresponding model year. The agency did 
not attempt to establish the exact correspondence between projected 
sales during individual calendar years and production volumes for 
specific model years.
    \1025\ Because AEO 2011's ``car'' and ``truck'' classes did not 
reflect NHTSA's recent reclassification (in March 2009 for 
enforcement beginning MY 2011) of many two wheel drive SUVs from the 
non-passenger (i.e., light truck) fleet to the passenger car fleet, 
EPA staff made adjustments to account for such vehicles in the 
baseline.
---------------------------------------------------------------------------

    To estimate sales of individual car and light truck models produced 
by each manufacturer, EPA purchased data from CSM Worldwide (for the MY 
2008-based market forecast) and LMC (for the MY 2010-based fleet) and 
used these firms' projections of the number of vehicles of each type 
(car or truck) that will be produced and sold by manufacturers in model 
years 2011 through 2025.\1026\ This provided year-by-year estimates of 
the percentage of cars and trucks sold by each manufacturer, as well as 
the sales percentages accounted for by each vehicle market segment. 
(The distributions of car and truck sales by manufacturer and by market 
segment for the 2016 model year and beyond were assumed to be the same 
as CSM's and LMC's forecasts for the 2025 calendar year.) Normalizing 
these percentages to the total car and light truck sales volumes 
projected for 2017 through 2025 in AEO 2011 (for the MY 2008-based 
market forecast) and AEO 2012 (for the MY 2010-based market forecast) 
provided manufacturer-specific market share and model-specific sales 
estimates for those model years.
---------------------------------------------------------------------------

    \1026\ EPA also considered other sources of similar information, 
such as J.D. Powers, and concluded that CSM and LMC were better able 
to provide forecasts at the requisite level of detail for most of 
the model years of interest.
---------------------------------------------------------------------------

    To estimate the number of passenger cars and light trucks 
originally produced during model years 2017 through 2025 that will 
remain in use during subsequent years, the agency applied age-specific 
survival rates for cars and light trucks to its forecasts of passenger 
car and light truck sales for each of those model years. For use in 
this final rule, NHTSA updated its previous estimates of car and light 
truck survival rates using registration data for vehicles produced for 
model years through 2010 from R.L. Polk, Inc, in order to ensure that 
they reflected recent increases in the durability and expected life 
spans of cars and light trucks. However, the agency does not attempt to 
forecast changes in those survival rates over the future.
    The next step in estimating fuel use is to calculate the total 
number of miles that cars and light trucks will be driven each year 
they remain in use. To estimate the total number of miles vehicles 
produced in a model year are

[[Page 62993]]

driven during each year of their lifetimes, the number projected to 
remain in use during that year is multiplied by the average number of 
miles vehicles are projected to be driven at the age they will have 
reached in that year. The agency estimated annual usage of household 
vehicles during 2008 using data from the Federal Highway 
Administration's 2009 National Household Travel Survey (NHTS), together 
with data on the use of fleet cars and light trucks from the Annual 
Energy Outlook for that same year.\1027\ Because these estimates 
reflect the gasoline prices that prevailed at the time, however, NHTSA 
adjusted them to account for the effect on vehicle use of the higher 
fuel prices projected over the lifetimes of model year 2017-25 cars and 
light trucks. Details of this adjustment are provided in Chapter VIII 
of the FRIA and Chapter 4 of the Joint TSD.
---------------------------------------------------------------------------

    \1027\ For a description of the Survey, see http://nhts.ornl.gov/introduction.shtml (last accessed Aug. 5, 2012). 
Because much of the survey was conducted during 2008, it was used to 
develop estimates of vehicle use for that year.
---------------------------------------------------------------------------

    The estimates of annual miles driven by vehicles of different 
vehicle ages during 2008 were also adjusted to reflect projected future 
growth in average use of vehicles over their entire lifetimes. 
Increases in average annual use of cars and light trucks, which have 
averaged approximately 1 percent annually over the past two decades, 
have been an important source of historical growth in the total number 
of miles they are driven each year. To estimate future growth in their 
average annual use for purposes of this rulemaking, NHTSA calculated 
the rate of growth in the adjusted mileage schedules derived for 2008 
that would be necessary for total car and light truck travel to 
increase at the rate forecast in the AEO 2012 Early release Reference 
Case.\1028\ This rate was calculated to be consistent with future 
changes in the overall size and age distributions of the U.S. passenger 
car and light truck fleets that result from the agency's forecasts of 
total car and light truck sales, and with the updated survival rates 
described above. The resulting growth rate in average annual car and 
light truck use is approximately 0.6 percent from 2017 through 2060. 
While the adjustment for forecast fuel prices reduces average annual 
mileage in most future years from the values derived for 2008, the 
adjustment for expected future growth in average vehicle use increases 
it. The net effect of these two adjustments is to increase expected 
lifetime mileage for MY 2017-25 passenger cars and light trucks by 
about 13 percent from the estimates originally derived for 2008.
---------------------------------------------------------------------------

    \1028\ This approach differs from that used in the MY 2011 final 
rule, where it was assumed that future growth in the total number of 
cars and light trucks in use resulting from projected sales of new 
vehicles was adequate by itself to account for growth in total 
vehicle use, without assuming continuing growth in average vehicle 
use.
---------------------------------------------------------------------------

    Finally, the agency estimates total fuel consumption by passenger 
cars and light trucks remaining in use each year by dividing the total 
number of miles surviving vehicles are driven by the fuel economy they 
are expected to achieve under each alternative CAFE standard. Each 
model year's total lifetime fuel consumption is the sum of fuel use by 
the cars or light trucks produced during that model year over their 
life span. In turn, the savings in lifetime fuel use by cars or light 
trucks produced during each model year affected by this proposed rule 
that will result from each alternative CAFE standard is the difference 
between its lifetime fuel use at the fuel economy level it attains 
under the Baseline alternative, and its lifetime fuel use at the higher 
fuel economy level it is projected to achieve under that alternative 
standard.\1029\
---------------------------------------------------------------------------

    \1029\ To illustrate these calculations, the agency's adjustment 
of the AEO 2009 Revised Reference Case forecast indicates that 9.26 
million passenger cars will be produced during 2012, and the 
agency's updated survival rates show that 83 percent of these 
vehicles, or 7.64 million, are projected to remain in service during 
the year 2022, when they will have reached an age of 10 years. At 
that age, passenger cars achieving the fuel economy level they are 
projected to achieve under the Baseline alternative are driven an 
average of about 800 miles, so surviving model year 2012 passenger 
cars will be driven a total of 82.5 billion miles (= 7.64 million 
surviving vehicles x 10,800 miles per vehicle) during 2022. Summing 
the results of similar calculations for each year of their 26-year 
maximum lifetime, model year 2012 passenger cars will be driven a 
total of 1,395 billion miles under the Baseline alternative. Under 
that alternative, they are projected to achieve a test fuel economy 
level of 32.4 mpg, which corresponds to actual on-road fuel economy 
of 25.9 mpg (= 32.4 mpg x 80 percent). Thus their lifetime fuel use 
under the Baseline alternative is projected to be 53.9 billion 
gallons (= 1,395 billion miles divided by 25.9 miles per gallon).
---------------------------------------------------------------------------

g. Accounting for the Fuel Economy Rebound Effect
    The fuel economy rebound effect refers to the fact that some of the 
fuel savings expected to result from higher fuel economy, including 
increases in fuel economy required by the adoption of higher CAFE 
standards, may be offset by additional vehicle use. The increase in 
vehicle use occurs because higher fuel economy reduces the fuel cost of 
driving, which is typically the largest single component of the 
monetary cost of operating a vehicle, and vehicle owners respond to 
this reduction in operating costs by driving more. Even with higher 
fuel economy, this additional driving consumes some fuel, so this 
effect reduces the fuel savings that result when raising CAFE standards 
requires manufacturers to improve fuel economy. The rebound effect 
refers to the fraction of fuel savings expected to result from 
increased fuel economy that is offset by additional driving.\1030\
---------------------------------------------------------------------------

    \1030\ Formally, the rebound effect is often expressed as the 
elasticity of vehicle use with respect to the cost per mile driven. 
Additionally, it is consistently expressed as a positive percentage 
(rather than as a negative decimal fraction, as this elasticity is 
normally expressed).
---------------------------------------------------------------------------

    The magnitude of the rebound effect is an important determinant of 
the actual fuel savings that are likely to result from adopting 
stricter CAFE standards. Research on the magnitude of the rebound 
effect in light-duty vehicle use dates to the early 1980s, and 
generally concludes that a significant rebound effect occurs when 
vehicle fuel efficiency improves.\1031\ The most common approach to 
estimating its magnitude has been to analyze survey data on household 
vehicle use, fuel consumption, fuel prices, household characteristics, 
and vehicle attributes to isolate the response of vehicle use to 
differences in the fuel efficiency of individual vehicles. Because this 
approach most closely matches the definition of the rebound effect, 
which is the response of vehicle use to changes in fuel economy, the 
agency regards such studies as likely to produce the most reliable 
estimates of the rebound effect.
---------------------------------------------------------------------------

    \1031\ Some studies estimate that the long-run rebound effect is 
significantly larger than the immediate response to increased fuel 
efficiency. Although their estimates of the adjustment period 
required for the rebound effect to reach its long-run magnitude 
vary, this long-run effect is probably more appropriate for 
evaluating the fuel savings and emissions reductions resulting from 
stricter standards that would apply to future model years.
---------------------------------------------------------------------------

    Other studies have relied on econometric analysis of annual U.S. 
data on vehicle use, fuel efficiency, fuel prices, and other variables 
influencing aggregate travel demand to estimate the response of total 
or average vehicle use to changes in fleet-wide average fuel economy or 
fuel cost per mile driven. More recent studies have analyzed yearly 
variation in vehicle ownership and use, fuel prices, and fuel economy 
among states over an extended time period in order to measure the 
response of vehicle use to changing fuel costs per mile.\1032\ A 
recurring problem with studies that use national or state-level 
aggregate data on vehicle use is that their measures of fuel efficiency 
are constructed from data on national or

[[Page 62994]]

state total fuel consumption and the same national or state measure of 
vehicle use that is used as their dependent variable. This means that 
their measures of fuel efficiency and fuel cost per mile are 
``definitionally'' related to their dependent variables, and that the 
usual statistical techniques for minimizing the effect of such joint 
causality cannot be fully effective. At the same time, their measures 
of aggregate VMT and average fuel economy obscure the shifting of 
travel among vehicles with different fuel economy levels during the 
time period (usually a year) they span, which means that both variables 
already incorporate the effect the model is attempting to measure. For 
these reasons, estimates of the rebound effect based on aggregate VMT 
data need to be interpreted cautiously.
---------------------------------------------------------------------------

    \1032\ In effect, these studies treat U.S. states as a data 
``panel'' by applying appropriate estimation procedures to data 
consisting of each year's average values of these variables for the 
separate states.
---------------------------------------------------------------------------

    It is also important to note that many studies attempting to 
measure the rebound effect using aggregate data on vehicle use actually 
quantify the price elasticity of gasoline demand, or the elasticity of 
VMT with respect to the per-gallon price of gasoline, rather than the 
elasticity of VMT with respect to fuel efficiency or the fuel cost per 
mile of driving. Because neither of these measures actually corresponds 
to the definition of the fuel economy rebound effect, these studies 
provide limited evidence of its actual magnitude. Another important 
distinction among studies of the rebound effect is whether they assume 
that the effect is constant, or instead allow it to vary in response to 
changes in fuel costs, personal income, or vehicle ownership. Most 
studies using aggregate annual data for the U.S. assume a constant 
rebound effect, although some of these studies test whether the effect 
varies as changes in retail fuel prices or average fuel efficiency 
alter fuel cost per mile driven. Studies using household survey data 
estimate significantly different rebound effects for households owning 
varying numbers of vehicles, with most concluding that the rebound 
effect is larger among households that own more vehicles. Finally, 
recent studies using state-level data conclude that the rebound effect 
varies directly in response to changes in personal income, the degree 
of urbanization of U.S. cities, and differences in traffic congestion 
levels, as well as fuel costs. Many studies conclude that the long-run 
rebound effect is significantly larger than the short-term response of 
vehicle use to increased fuel efficiency. Although their estimates of 
the time required for the rebound effect to reach its long-run 
magnitude vary, this long-run effect is probably more appropriate for 
evaluating the fuel savings likely to result from adopting stricter 
CAFE standards for future model years.
    In order to provide a more comprehensive overview of previous 
estimates of the rebound effect, NHTSA has updated its previous review 
of published studies of the rebound effect to include those conducted 
as recently as 2011. The agency performed a detailed analysis of 
several dozen separate estimates of the long-run rebound effect 
reported in these studies, which is summarized in Table IV-11 
below.\1033\ As the table indicates, these estimates range from as low 
as 7 percent to as high as 75 percent, with a mean value of 22 percent. 
Both the type of data used and authors' assumption about whether the 
rebound effect varies over time have important effects on its estimated 
magnitude. The 34 estimates derived from analysis of U.S. annual time-
series data produce a mean estimate of 18 percent for the long-run 
rebound effect, while the mean of 28 estimates based on household 
survey data is considerably larger (25 percent), and the mean of 15 
estimates based on pooled state data (23 percent) is close to that for 
the entire sample. The 48 estimates assuming a constant rebound effect 
produce a mean of 22 percent, identical to the mean of the 37 estimates 
reported in studies that allowed the rebound effect to vary in response 
to fuel prices and fuel economy levels, vehicle ownership, or household 
income. Updated to reflect the most recent available information on 
these variables, the mean of these estimates is 19 percent, as Table 
IV-11 reports.
---------------------------------------------------------------------------

    \1033\ In some cases, NHTSA derived summary estimates of the 
rebound effect from more detailed results reported in the studies. 
For example, where studies estimated different rebound effects for 
households owning different numbers of vehicles but did not report 
an overall value, the agency computed a weighted average of the 
reported values using the distribution of households among vehicle 
ownership categories.

                     Table IV-11--NHTSA Summary of Published Estimates of the Rebound Effect
----------------------------------------------------------------------------------------------------------------
                                                                           Range              Distribution
                                                                    --------------------------------------------
          Category of  estimates            Number of    Number of                                         Std.
                                             studies     estimates     Low      High    Median    Mean     dev.
                                                                     percent  percent  percent  percent  percent
----------------------------------------------------------------------------------------------------------------
All Estimates............................           27           87        6       75       19       22       13
Published Estimates......................           20           68        7       75       19       23       13
Authors' Preferred Estimates.............           20           20        9       75       22       22       15
U.S. Time-Series Estimates...............            7           34        7       45       14       18        9
Household Survey Estimates...............           17           38        6       75       22       25       15
Pooled U.S. State Estimates..............            3           15        8       58       22       23       12
Constant Rebound Effect (1)..............           18           48        6       75       16       22       15
Variable Rebound Effect (1) Reported                12           37       10       45       20       22        9
 Estimates...............................
Updated to Current Conditions............           12           37        7       56       16       19       12
----------------------------------------------------------------------------------------------------------------

    Some recent studies provide evidence that the rebound effect has 
been declining over time. This result appears plausible for two 
reasons: first, the responsiveness of vehicle use to variation in fuel 
costs would be expected to decline as they account for a smaller 
proportion of the total monetary cost of driving, which has been the 
case until recent years. Second, rising personal incomes would be 
expected to reduce the sensitivity of vehicle use to fuel costs as the 
hourly value of time spent driving--which is likely to be related to 
income levels--accounts for a larger fraction of the total cost of 
automobile travel. At the same time, however, rising incomes are 
strongly associated with higher auto ownership levels, which increase 
households' opportunities to substitute among those vehicles in 
response to varying fuel prices and differences in their fuel economy 
levels. This effect is likely to increase the sensitivity of 
households' overall vehicle use to differences in the fuel economy 
levels of

[[Page 62995]]

individual vehicles. Thus on balance, it is not clear how rising income 
levels are likely to affect the magnitude of the rebound effect.
    Small and Van Dender combined annual time series data on aggregate 
vehicle use, fuel prices, average fuel economy, and other variables for 
individual states to estimate the rebound effect, allowing its 
magnitude to vary in response to fuel prices, fleet-wide average fuel 
economy, the degree of urbanization of U.S. cities, and personal income 
levels.\1034\ The authors employ a model specification that allows the 
effect of fuel cost per mile on statewide average vehicle use to vary 
in response to changes in personal income levels and increasing 
urbanization of each state's population. For the time period 1966-2001, 
their analysis implied a long-run rebound effect of 22 percent, which 
is consistent with many previously published studies. Continued growth 
in personal incomes over this period reduces their estimate of the 
long-run rebound effect during its last five years (1997-2001) to 11 
percent, while an unpublished update through 2004 prepared by the 
authors reduced their estimate of the long-run rebound effect for the 
period 2000-2004 to 6 percent.\1035\
---------------------------------------------------------------------------

    \1034\ Small, K. and K. Van Dender, 2007a. ``Fuel Efficiency and 
Motor Vehicle Travel: The Declining Rebound Effect'', The Energy 
Journal, vol. 28, no. 1, pp. 25-51. Docket No. NHTSA-2010-0131-0130.
    \1035\ Small, K. and K. Van Dender, 2007b. ``Long Run Trends in 
Transport Demand, Fuel Price Elasticities and Implications of the 
Oil Outlook for Transport Policy,'' OECD/ITF Joint Transport 
Research Centre Discussion Papers 2007/16, OECD, International 
Transport Forum. Available at http://internationaltransportforum.org/jtrc/DiscussionPapers/DiscussionPaper16.pdf (last accessed Jul. 12, 2012).
---------------------------------------------------------------------------

    More recently, Hymel, Small and Van Dender extended the previous 
analysis to incorporate the effect on vehicle use of traffic congestion 
levels in urbanized areas.\1036\ Although controlling for the effect of 
congestion on vehicle use increased their estimates of the rebound 
effect, these authors also found that the rebound effect appeared to be 
declining over time. For the time period 1966-2004, their estimate of 
the long-run rebound effect was 24 percent, while for the last year of 
that period their estimate was 13 percent, significantly above the 
previous Small and Van Dender estimate of a 6 percent rebound effect 
for the period 2000-2004.
---------------------------------------------------------------------------

    \1036\ Hymel, Kent M., Kenneth A. Small, and Kurt Van Dender, 
``Induced demand and rebound effects in road transport,'' 
Transportation Research Part B: Methodological, Volume 44, Issue 10, 
December 2010, Pages 1220-1241, ISSN 0191-2615, DOI: 10.1016/
j.trb.2010.02.007. Docket No. NHTSA-2010-0131.
---------------------------------------------------------------------------

    Recent research by Greene (under contract to EPA) using U.S. 
national time-series data for the period 1966-2007 lends further 
support to the hypothesis that the rebound effect is declining over 
time.\1037\ Greene found that fuel prices generally had a statistically 
significant impact on VMT, yet fuel efficiency sometimes did not, and 
statistical testing rejected the hypothesis of equal elasticities of 
vehicle use with respect to gasoline prices and fuel efficiency. Greene 
also tested model formulations that allowed the effect of fuel cost per 
mile on vehicle use to decline with rising per capita income; his 
preferred form of this model produced estimates of the rebound effect 
that declined to 12 percent by 2007.
---------------------------------------------------------------------------

    \1037\ Greene, David, 2012. ``Rebound 2007: Analysis of National 
Light-Duty Vehicle Travel Statistics,'' Energy Policy 41: 14-28.
---------------------------------------------------------------------------

    More recent research provides contrasting evidence on the magnitude 
of the rebound effect. Bento et al. analyzed data on household vehicle 
ownership and use from the 2001 National Household Travel Survey using 
a complex model of household purchases, ownership, retirement, and use 
of both new and used vehicles.\1038\ These authors estimated that the 
rebound effect averaged 34 percent for all households, but varied 
widely among those owning different types and ages of automobiles, and 
among households with varying demographic characteristics. Gillingham 
used a large sample of vehicles registered in California and detailed 
estimates of local fuel prices to estimate elasticities of vehicle use 
with respect to gasoline prices and fuel economy. His estimate of the 
former elasticity was -0.17, while his corresponding estimate of the 
elasticity of vehicle use with respect to fuel economy was 0.06, 
corresponding to a rebound effect of 6 percent.\1039\
---------------------------------------------------------------------------

    \1038\ Bento, Antonio M., Lawrence H. Goulder, Mark R. Jacobsen, 
and Roger H. von Haefen, ``Distributional and Efficiency Impacts of 
Increased US Gasoline Taxes,'' American Economic Review 99 (2009), 
pp. 1-37. For information on the 2001 National Household Travel 
Survey, see http://nhts.ornl.gov/introduction.shtml#2001 (last 
accessed July 17, 2012).
    \1039\ Gillingham, Kenneth. ``The Consumer Response to Gasoline 
Price Changes: Empirical Evidence and Policy Implications.'' Ph.D. 
diss., Stanford University, 2011. See https://stacks.stanford.edu/file/druid:wz808zn3318/Gillingham_Dissertation-augmented.pdf (last 
accessed Aug 14, 2012). Docket NHTSA-2010-0131.
---------------------------------------------------------------------------

    West and Pickrell used a sample of nearly 300,000 vehicles from the 
2009 National Household Travel Survey to analyze vehicle use decisions 
among households owning different numbers of vehicles.\1040\ 
Controlling for vehicle type and age, as well as for household 
characteristics and location, they estimated that the fuel economy 
rebound effect ranged from 0-9 percent among single-vehicle households, 
10-26 percent among households owning two vehicles, and 26-34 percent 
among three-vehicle households. Most recently, Su\1041\ used quantile 
regression analysis to analyze variation in the rebound effect among 
households included in the 2009 National Household Travel Survey. Su's 
estimates of the rebound effect varied from 11 to 19 percent depending 
on the total number of miles driven annually by members of the 
household, with the smallest values applying to households at the 
extremes of the distribution of annual vehicle use, and the largest 
values to households in the middle of that distribution.
---------------------------------------------------------------------------

    \1040\ West, Rachel, and Don Pickrell, ``Factors Affecting 
Vehicle Use in Multiple-Vehicle Households,'' http://onlinepubs.trb.org/onlinepubs/conferences/2011/NHTS1/West.pdf (last 
accessed July 17, 2012). For information on the 2009 National 
Household Travel Survey, see http://nhts.ornl.gov/introduction.shtml 
(last accessed July 17, 2012).
    \1041\ Su, Qing, ``A Quantile Regresssion Analysis of the 
Rebound Effect: Evidence from the 2009 National Household 
Transportation Survey in the United States,'' Energy Policy 45 
(2012), pp. 368-377. See http://www.sciencedirect.com/science/article/pii/S0301421512001620 (last accessed on Aug 14, 2012). 
Docket NHTSA-2010-0131.
---------------------------------------------------------------------------

    In light of findings from recent research, the agencies judged that 
the apparent decline over time in the magnitude of the rebound effect 
justified using a value that is lower than previous estimates, which 
are concentrated within the 15-30 percent range. Thus, as we elected to 
do in our previous analysis of the effects of raising CAFE standards 
for MY 2012-16 cars and light trucks, NHTSA used a 10 percent rebound 
effect in its analysis of fuel savings and other benefits from the 
proposed CAFE standards that would apply to MY 2017-25 cars and light 
trucks. The 10 percent estimate lies between the 10-30 percent range of 
estimates for the rebound effect reported in most previous research, 
and is at the upper end of the 5-10 percent range of estimates for the 
future rebound effect reported in recent studies. Thus the 10 percent 
value was not derived from a single estimate or particular study, but 
instead represented a compromise between historical estimates and 
projected future estimates. Recognizing the wide range of uncertainty 
surrounding its correct value, however, the agency also employed 
estimates of the rebound effect ranging from 5 to 20 percent in its 
sensitivity testing.
    In their comments on the analysis of the proposed standards for MY 
2017-25,

[[Page 62996]]

CFA\1042\ and ICCT suggested that the agencies' estimate of the rebound 
effect should be smaller. ICCT argued that the 10 percent rebound 
effect estimate was based simply on compromise, and that only future 
projections of the rebound effect that include the impacts of personal 
income, vehicle efficiency, and fuel price should be used to calculate 
the future rebound effect.\1043\ ICCT suggested that only the recent 
Greene paper and the Small and Van Dender work from 2007 should be used 
for estimating the value for the final rule.\1044\ CFA suggested that 
``from the point of view of the individual consumer, the analysis must 
assume that all of the savings increase consumer welfare and that 
consumers choose to use those savings in a manner that maximizes their 
individual welfare.'' \1045\ Thus, CFA argued, ``the rebound effect 
should be subtracted in the national cost benefits analysis but not the 
consumer pocketbook analysis.'' \1046\
---------------------------------------------------------------------------

    \1042\ CFA, Docket No. EPA-HQ-OAR-2010-0799-9419, at 16.
    \1043\ ICCT, Docket No. NHTSA-2010-0131-0258, at 25-26.
    \1044\ Id.
    \1045\ CFA, Docket No. EPA-HQ-OAR-2010-0799-9419, at 16, 54.
    \1046\ Id.
---------------------------------------------------------------------------

    In response to the comments offered by CFA and ICCT, the agency 
notes that the effect of future growth in income levels on the 
magnitude of the rebound effect is uncertain, because rising incomes 
are associated with higher vehicle ownership levels, and there is 
evidence that the rebound effect is larger among households owning 
multiple vehicles. In addition, AEO 2012 and the agencies' 
extrapolation of its forecasts anticipate rising fuel prices throughout 
the lifetimes of cars and light trucks subject to this final rule, 
which by themselves would be expected to increase the magnitude of the 
rebound effect. Further, as the previous summary of published estimates 
of the rebound effect indicates, the Small-Van Dender and Greene 
studies must be considered in the context of many other studies of the 
fuel economy rebound effect that have published over the past three 
decades. In that context, these studies represent lower outliers in the 
distribution of reported estimates of the rebound effect, and for that 
reason should not be relied upon by themselves for estimates of its 
likely current or future magnitude. Thus the agency's estimate takes 
adequate account of the findings from the Small-Van Dender and Greene 
studies, while also giving due consideration to the large body of 
previous and subsequent research on the fuel economy rebound effect. 
NHTSA believes that it accords appropriate weight to estimates derived 
using different measurement approaches, estimation methods, data 
sources, and time periods, and is thus likely to represent a reliable 
estimate of increases in vehicle use resulting from the increases in 
fuel economy that this final rule requires manufacturers to achieve.
    In response to the observation by CFA, the agency notes that its 
analysis of the consumer impacts of the rule accounts for fuel 
consumption and fuel costs associated with increased driving due to the 
fuel economy rebound effect. At the same time, this analysis also 
accounts for the benefits that vehicle buyers derive from that 
additional travel, which clearly exceed the increased fuel costs they 
pay because they voluntarily elect to drive more. The nature of these 
benefits and the procedure the agency uses to estimate their value are 
described in the following section. Thus on balance, the additional 
vehicle use stemming from the rebound effect increases the welfare of 
individual vehicle buyers, and is properly included in the agency's 
analysis. NHTSA continues to include both the consumer benefits and 
higher fuel costs associated with additional vehicle use in its 
analyses of the individual (or private) and economy-wide (or social) 
impacts of this final rule.
h. Benefits From Increased Vehicle Use
    The increase in vehicle use resulting from the fuel economy rebound 
effect provides additional benefits to their users, who make more 
frequent trips or travel farther to reach more desirable destinations. 
This additional travel provides benefits to drivers and their 
passengers by improving their access to social and economic 
opportunities away from home. As evidenced by their decisions to make 
more frequent or longer trips when improved fuel economy reduces their 
costs for driving, the benefits from this additional travel exceed the 
fuel and other costs drivers and passengers incur in traveling these 
additional distances.
    The agency's analysis estimates the economic benefits from 
increased rebound-effect driving as the sum of fuel costs drivers incur 
plus the consumer surplus they receive from the additional 
accessibility it provides.\1047\ NHTSA estimates the value of the 
consumer surplus provided by added travel as one-half of the product of 
the decline in fuel cost per mile and the resulting increase in the 
annual number of miles driven, a standard approximation for changes in 
consumer surplus resulting from small changes in prices. Because the 
increase in travel depends on the extent of improvement in fuel 
economy, the value of benefits it provides differs among model years 
and alternative CAFE standards.
---------------------------------------------------------------------------

    \1047\ The consumer surplus provided by added travel is 
estimated as one-half of the product of the decline in fuel cost per 
mile and the resulting increase in the annual number of miles 
driven.
---------------------------------------------------------------------------

i. Benefits Due to Reduced Refueling Time
    Direct estimates of the value of extended vehicle range are not 
available in the literature, so the agencies instead calculate the 
reduction in the required annual number of refueling cycles due to 
improved fuel economy, and assess the economic value of the resulting 
benefits. Chief among these benefits is the time that owners save by 
spending less time both in search of fueling stations and in the act of 
pumping and paying for fuel.
    The economic value of refueling time savings was calculated by 
applying DOT-recommended valuations for travel time savings to 
estimates of how much time is saved.\1048\ The value of travel time 
depends on average hourly valuations of personal and business time, 
which are functions of total hourly compensation costs to employers. 
The total hourly compensation cost to employers, inclusive of benefits, 
in 2010$ is $29.68.\1049\ Table IV-12 below demonstrates the agencies' 
approach to estimating the value of travel time ($/hour) for both urban 
and rural (intercity) driving. This approach relies on the use of DOT-
recommended weights that assign a lesser valuation to personal travel 
time than to business travel time, as well as weights that adjust for 
the distribution between personal and business travel.
---------------------------------------------------------------------------

    \1048\ See http://ostpxweb.dot.gov/policy/Data/VOT97guid.pdf and 
http://ostpxweb.dot.gov/policy/Data/VOTrevision1_2-11-03.pdf (last 
accessed Aug. 5, 2012).
    \1049\ Total hourly employer compensation costs for 2010 
(average of quarterly observations across all occupations for all 
civilians). See http://www.bls.gov/ect/ (last accessed Aug. 5, 
2012).

[[Page 62997]]

     Table IV-12--NHTSA Estimates of the Value of Travel Time for Urban and Rural (Intercity) Travel \1050\
                                                    [$/hour]
----------------------------------------------------------------------------------------------------------------
                                                                  Personal travel    Business travel     Total
----------------------------------------------------------------------------------------------------------------
                                                  Urban Travel
----------------------------------------------------------------------------------------------------------------
Wage Rate ($/hour).............................................             $29.68             $29.68  .........
DOT-Recommended Value of Travel Time Savings, as % of Wage Rate                50%               100%  .........
Hourly Valuation (=Wage Rate * DOT-Recommended Value)..........             $14.84             $29.68  .........
% of Total Urban Travel........................................              94.4%               5.6%       100%
Hourly Valuation (Adjusted for % of Total Urban Travel)........             $14.01              $1.66     $15.67
----------------------------------------------------------------------------------------------------------------
                                            Rural (Intercity) Travel
----------------------------------------------------------------------------------------------------------------
Wage Rate ($/hour).............................................             $29.68             $29.68  .........
DOT-Recommended Value of Travel Time Savings, as % of Wage Rate                70%               100%  .........
Hourly Valuation (=Wage Rate * DOT-Recommended Value)..........             $20.77              $3.86  .........
% of Total Rural Travel........................................              87.0%              13.0%       100%
Hourly Valuation (Adjusted for % of Total Rural Travel)........             $18.07              $3.86     $21.93
----------------------------------------------------------------------------------------------------------------

    The estimates of the hourly value of urban and rural travel time 
($15.67 and $21.93, respectively) shown in Table IV-12 above must be 
adjusted to account for the nationwide ratio of urban to rural driving. 
By applying this adjustment (as shown in Table IV-13 below), an overall 
estimate of the hourly value of travel time--independent of urban or 
rural status--may be produced. Note that the calculations above assume 
only one adult occupant per vehicle. To fully estimate the average 
value of vehicle travel time, the presence of additional adult 
passengers during refueling trips must be accounted for. The agencies 
apply such an adjustment as shown in Table IV-13; this adjustment is 
performed separately for passenger cars and for light trucks, yielding 
occupancy-adjusted valuations of vehicle travel time during refueling 
trips for each fleet. Note that children (persons under age 16) are 
excluded from average vehicle occupancy counts, as it is assumed that 
the opportunity cost of children's time is zero.
---------------------------------------------------------------------------

    \1050\ Time spent on personal travel during rural (intercity) 
travel is valued at a greater rate than that of urban travel. There 
are several reasons behind the divergence in these values: 1) time 
is scarcer on a long trip; 2) a long trip involves complementary 
expenditures on travel, lodging, food, and entertainment, since time 
at the destination is worth such high costs.

                Table IV-13--NHTSA Estimates of the Value of Travel Time for Light-Duty Vehicles
                                                    [$/hour]
----------------------------------------------------------------------------------------------------------------
                                                          Unweighted value     Weight (% of    Weighted value of
                                                         of travel time ($/    total miles      travel time ($/
                                                               hour)          driven) \1051\         hour)
----------------------------------------------------------------------------------------------------------------
Urban Travel...........................................             $15.67              67.1%             $10.51
Rural Travel...........................................             $21.93              32.9%              $7.22
                                                        --------------------------------------------------------
    Total..............................................                 --             100.0%             $17.73
----------------------------------------------------------------------------------------------------------------

 
                                      Passenger cars      Light trucks
------------------------------------------------------------------------
Average Vehicle Occupancy During                 1.21               1.23
 Refueling Trips (persons)\1052\..
Weighted Value of Travel Time ($/              $17.73             $17.73
 hour)............................
Occupancy-Adjusted Value of                    $21.45             $21.81
 Vehicle Travel Time During
 Refueling Trips ($/hour).........
------------------------------------------------------------------------

    The agencies estimated the amount of refueling time saved using 
(preliminary) survey data gathered as part of our 2010-2011 National 
Automotive Sampling System's Tire Pressure Monitoring System (TPMS) 
study. \1053\ The study was conducted at fueling stations nationwide, 
and researchers made observations regarding a variety of 
characteristics of thousands of individual fueling station visits from 
August, 2010 through April, 2011.\1054\ Among these characteristics of 
fueling station visits is the total amount of time spent pumping and 
paying for fuel. From a separate sample (also part of the TPMS study), 
researchers conducted interviews at the pump to gauge the distances 
that drivers travel in transit to and from fueling stations, how long 
that transit takes, and how many gallons of fuel are being purchased.
---------------------------------------------------------------------------

    \1051\ Weights used for urban vs. rural travel are computed 
using cumulative 2011 estimates of urban vs. rural miles driven 
provided by the Federal Highway Administration. Available at http://www.fhwa.dot.gov/policyinformation/travel_monitoring/tvt.cfm (last 
accessed Aug. 5, 2012).
    \1052\ Source: National Automotive Sampling System 2010-2011 
Tire Pressure Monitoring System (TPMS) study. See next page for 
further background on the TPMS study. TPMS data are preliminary at 
this time and rates are subject to change pending availability of 
finalized TPMS data. Average occupancy rates shown here are specific 
to refueling trips, and do not include children under 16 years of 
age.
    \1053\ TPMS data are preliminary and not yet published. 
Estimates derived from TPMS data are therefore preliminary and 
subject to change. Observational and interview data are from 
distinct subsamples, each consisting of approximately 7,000 
vehicles. For more information on the National Automotive Sampling 
System and to access TPMS data when they are made available, see 
http://www.nhtsa.gov/NASS.
    \1054\ The data collection period for the TPMS study ranged from 
08/10/2010 to 04/15/2011.
---------------------------------------------------------------------------

    This analysis of refueling benefits considers only those refueling 
trips which interview respondents indicated the primary reason was due 
to a low

[[Page 62998]]

reading on the gas gauge.\1055\ This restriction was imposed so as to 
exclude drivers who refuel on a fixed (e.g., weekly) schedule and may 
be unlikely to alter refueling patterns as a result of increased 
driving range. The relevant TPMS survey data on average refueling trip 
characteristics are presented below in Table IV-14.
---------------------------------------------------------------------------

    \1055\ Approximately 60 percent of respondents indicated ``gas 
tank low'' as the primary reason for the refueling trip in question.

          Table IV-14--NHTSA Average Refueling Trip Characteristics for Passenger Cars and Light Trucks
----------------------------------------------------------------------------------------------------------------
                                                         Round-trip
                                                          distance    Round-trip  time    Time to
                                            Gallons of    to/from     to/from  fueling   fill  and    Total time
                                               fuel       fueling         station           pay       (minutes)
                                            purchased     station        (minutes)       (minutes)
                                                          (miles)
----------------------------------------------------------------------------------------------------------------
Passenger Cars...........................          9.8         0.97               2.28         4.10         6.38
Light Trucks.............................         13.0         1.08               2.53         4.30         6.83
----------------------------------------------------------------------------------------------------------------

    As an illustration of how we estimate the value of extended 
refueling range, assume a small light truck model has an average fuel 
tank size of approximately 20 gallons, and a baseline actual on-road 
fuel economy of 24 mpg (its assumed level in the absence of a higher 
CAFE standard for the given model year). TPMS survey data indicate that 
drivers who indicated the primary reason for their refueling trips was 
a low reading on the gas gauge typically refuel when their tanks are 35 
percent full (i.e. as shown in Table IV-14, with 7.0 gallons in 
reserve, and the consumer purchases 13 gallons). By this measure, a 
typical driver would have an effective driving range of 312 miles (= 
13.0 gallons x 24 mpg) before he or she is likely to refuel. Increasing 
this model's actual on-road fuel economy from 24 to 25 mpg would 
therefore extend its effective driving range to 325 miles (= 13.0 
gallons x 25 mpg). Assuming that the truck is driven 12,000 miles/
year,\1056\ this 1 mpg improvement in actual on-road fuel economy 
reduces the expected number of refueling trips per year from 38.5 (= 
12,000 miles per year/312 miles per refueling) to 36.9 (= 12,000 miles 
per year/325 miles per refueling), or by 1.6 refuelings per year. If a 
typical fueling cycle for a light truck requires a total of 6.83 
minutes, then the annual value of time saved due to that 1 mpg 
improvement would amount to $3.97 (= (6.83/60) x $21.81 x 1.6).
---------------------------------------------------------------------------

    \1056\ Source of annual vehicle mileage: U.S. Department of 
Transportation, Federal Highway Administration, 2009 National 
Household Travel Survey (NHTS). See http://nhts.ornl.gov/2009/pub/stt.pdf (table 22, p.48). 12,000 miles/year is an approximation of a 
light duty vehicle's annual mileage during its initial decade of use 
(the period in which the bulk of benefits are realized). The Volpe 
model estimates VMT by model year and vehicle age, taking into 
account the rebound effect, secular growth rates in VMT, and fleet 
survivability; these complexities are omitted in the above example 
for simplicity.
---------------------------------------------------------------------------

    In the central analysis, this calculation was repeated for each 
future calendar year that light-duty vehicles of each model year 
affected by the standards considered in this rule would remain in 
service. The resulting cumulative lifetime valuations of time savings 
account for both the reduction over time in the number of vehicles of a 
given model year that remain in service and the reduction in the number 
of miles (VMT) driven by those that stay in service. We also adjust the 
value of time savings that will occur in future years both to account 
for expected annual growth in real wages \1057\ and to apply a discount 
rate to determine the net present value of time saved.\1058\ A further 
adjustment is made to account for evidence from the interview-based 
portion of the TPMS study which suggests that 40 percent of refueling 
trips are for reasons other than a low reading on the gas gauge. It is 
therefore assumed that only 60 percent of the theoretical refueling 
time savings will be realized, as it was assumed that owners who refuel 
on a fixed schedule will continue to do. NHTSA sought feedback from 
peer reviewers (one from DOT's Office of the Secretary, one from DOT's 
Research and Innovative Technology Adminstration, and one from West 
Virginia University's Department of Economics) regarding the NPRM 
analysis of refueling time savings and has updated its analysis and 
discussion to address peer reviewers' comments.\1059\ NHTSA's and EPA's 
approaches to assessing future fuel tank sizes and the associated 
benefit to refueling are explained in the agencies' respective RIAs 
(EPA RIA Chapter 7 and NHTSA RIA Chapter VIII).
---------------------------------------------------------------------------

    \1057\ A 1.1 percent annual rate of growth in real wages is used 
to adjust the value of travel time per vehicle ($/hour) for future 
years for which a given model is expected to remain in service. This 
rate is supported by a BLS analysis of growth in real wages from 
2000-2009. See http://www.bls.gov/opub/ted/2011/ted_20110224.htm.
    \1058\ Note that here, as elsewhere in the analysis, discounting 
is applied on a mid-year basis. For example, at a 3% discount rate, 
the sequence of discount factors is calculated as: {1/
((1+0.03)-(0.5)), 1/((1+0.03)-(1.5)), * * * , 1/((1+0.03)-(T-
0.5)){time} . NHTSA utilized mid-year discounting to reflect the 
fact that a given model year's vehicles are sold over the course of 
one or more years, therefore costs and benefits do not begin to 
fully accrue on January 1st of the model year.
    \1059\ Peer review materials, peer reviewer backgrounds, 
comments, and NHTSA responses are available at Docket NHTSA-2012-
0001.
---------------------------------------------------------------------------

    Since a reduction in the expected number of annual refueling trips 
leads to a decrease in miles driven to and from fueling stations, we 
can also calculate the value of consumers' fuel savings associated with 
this decrease. As shown in Table IV-14, the typical incremental round-
trip mileage per refueling cycle is 1.08 miles for light trucks and 
0.97 miles for passenger cars. Going back to the earlier example of a 
light truck model, a decrease of 1.6 in the number of refuelings per 
year leads to a reduction of 1.73 miles driven per year (= 1.6 
refuelings x 1.08 miles driven per refueling). Again, if this model's 
actual on-road fuel economy was 24 mpg, the reduction in miles driven 
yields an annual savings of approximately 0.07 gallons of fuel (= 1.73 
miles/24 mpg), which at $3.77/gallon\1060\ results in a savings of 
$0.27 per year to the owner. Note that this example is illustrative 
only of the approach the agencies use to quantify this benefit. In 
practice, the societal value of this benefit excludes fuel taxes (as 
they are transfer payments) from the calculation, and is modeled using 
fuel price forecasts specific to each year the given fleet will remain 
in service.
---------------------------------------------------------------------------

    \1060\ Estimate of $3.77/gallon is in 2010$. This figure is an 
average of forecasted cost per gallon (including taxes, as 
individual consumers consider reduced tax expenditures to be 
savings) for motor gasoline for years 2017 to 2027. Source of price 
forecasts: U.S. Energy Information Administration, Annual Energy 
Outlook Early Release 2012 (see table VIII-9a).
---------------------------------------------------------------------------

    The annual savings to each consumer shown in the above example may 
seem like a small amount, but the reader should recognize that the 
valuation of the cumulative lifetime benefit of this

[[Page 62999]]

savings to owners is determined separately for passenger car and light 
truck fleets and then aggregated to show the net benefit across all 
light-duty vehicles--which is much more significant at the macro level. 
Calculations of benefits realized in future years are adjusted for 
expected real growth in the price of gasoline, for the decline in the 
number of vehicles of a given model year that remain in service as they 
age, for the decrease in the number of miles (VMT) driven by those that 
stay in service, and for the percentage of refueling trips that occur 
for reasons other than a low reading on the gas gauge; a discount rate 
is also applied in the valuation of future benefits. The agencies 
considered using this direct estimation approach to quantify the value 
of this benefit by model year, however concluded that the value of this 
benefit is implicitly captured in the separate measure of overall 
valuation of fuel savings. Therefore direct estimates of this benefit 
are not added to net benefits calculations.\1061\ We note that there 
are other benefits resulting from the reduction in miles driven to and 
from fueling stations, such as a reduction in greenhouse gas 
emissions--CO2 in particular--which, as per the case of fuel 
savings discussed in the preceding paragraph, are implicitly accounted 
for elsewhere.
---------------------------------------------------------------------------

    \1061\ Estimates of the net present value of fuel savings are 
presented in the agencies' respective RIAs (EPA RIA Chapter 7 and 
NHTSA RIA Chapter VIII).
---------------------------------------------------------------------------

    Special mention must be made with regard to the value of refueling 
time savings benefits to owners of electric and plug-in electric (both 
referred to here as EV) vehicles. EV owners who routinely drive daily 
distances that do not require recharging on-the-go may eliminate the 
need for trips to fueling or charging stations. It is likely that early 
adopters of EVs will factor this benefit into their purchasing 
decisions and maintain driving patterns that require once-daily at-home 
recharging (a process which takes two to six hours for a full charge). 
However, EV owners who regularly or periodically need to drive 
distances further than the fully-charged EV range may need to recharge 
at fixed locations. A distributed network of charging stations (e.g., 
in parking lots, at parking meters) may allow some EV owners to 
recharge their vehicles while at work or while shopping, yet the 
lengthy charging cycles of current charging technology may pose a cost 
to owners due to the value of time spent waiting for EVs to charge. 
Moreover, EV owners who primarily recharge their vehicles at home will 
still experience some level of inconvenience due to their vehicle being 
either unavailable for unplanned use, or to its range being limited 
during this time should they interrupt the charging process. Therefore, 
at present EVs hold potential in offering significant time savings to 
owners with driving patterns optimally suited for EV characteristics. 
If fast-charging technologies emerge and a widespread network of fast-
charging stations is established, it is expected that a larger segment 
of EV vehicle owners will fully realize the potential refueling time 
savings benefits that EVs offer. This is an area of significant 
uncertainty.
j. Added Costs From Congestion, Crashes and Noise
    Increased vehicle use associated with the rebound effect also 
contributes to increased traffic congestion, motor vehicle accidents, 
and highway noise. To estimate the economic costs associated with these 
consequences of added driving, NHTSA applies estimates of per-mile 
congestion, accident, and noise costs caused by increased use of 
automobiles and light trucks developed previously by the Federal 
Highway Administration.\1062\ These values are intended to measure the 
increased costs resulting from added congestion and the delays it 
causes to other drivers and passengers, property damages and injuries 
resulting from traffic accidents, and noise levels contributed by 
automobiles and light trucks. NHTSA previously employed these estimates 
in its analysis accompanying the MY 2011 final CAFE rule, as well as in 
its analysis of the effects of higher CAFE standards for MY 2012-16. 
After reviewing the procedures used by FHWA to develop them and 
considering other available estimates of these values, and recognizing 
that no commenters addressed these costs directly, the agency continues 
to find them appropriate for use in this final rule. The agency 
multiplies FHWA's estimates of per-mile costs by the annual increases 
in automobile and light truck use from the rebound effect to yield the 
estimated increases in total congestion, accident, and noise 
externality costs during each year over the lifetimes of MY 2017-25 
cars and light trucks.
---------------------------------------------------------------------------

    \1062\ These estimates were developed by FHWA for use in its 
1997 Federal Highway Cost Allocation Study; See http://www.fhwa.dot.gov/policy/hcas/final/index.htm (last accessed Jul. 9, 
2012).
---------------------------------------------------------------------------

k. Petroleum Consumption and Import Externalities
i. Changes in Petroleum Imports
    Based on a detailed analysis of differences in fuel consumption, 
petroleum imports, and imports of refined petroleum products among 
alternative scenarios presented in AEO 2011,\1063\ NHTSA estimates that 
approximately 50 percent of the reduction in fuel consumption resulting 
from adopting higher CAFE standards is likely to be reflected in 
reduced U.S. imports of refined fuel, while the remaining 50 percent 
would reduce domestic fuel refining.\1064\ Of this latter figure, 90 
percent is anticipated to reduce U.S. imports of crude petroleum for 
use as a refinery feedstock, while the remaining 10 percent is expected 
to reduce U.S. domestic production of crude petroleum.\1065\ Thus on 
balance, each 100 gallons of fuel saved as a consequence of higher CAFE 
standards is anticipated to reduce total U.S. imports of crude 
petroleum or refined fuel by 95 gallons.\1066\
---------------------------------------------------------------------------

    \1063\ The AEO 2012 Early Release did not contain the ``side 
cases'' that NHTSA used to conduct this analysis, so the agency 
relied on AEO 2011 for the work discussed in this section.
    \1064\ Differences in forecast annual U.S. imports of crude 
petroleum and refined products among the Reference, High Oil Price, 
and Low Oil Price scenarios analyzed in EIA's Annual Energy Outlook 
2011 range from 35-74 percent of differences in projected annual 
gasoline and diesel fuel consumption in the U.S. These differences 
average 53 percent over the forecast period spanned by AEO 2011.
    \1065\ Differences in forecast annual U.S. imports of crude 
petroleum among the Reference, High Oil Price, and Low Oil Price 
scenarios analyzed in EIA's Annual Energy Outlook 2011 range from 
67-104 percent of differences in total U.S. refining of crude 
petroleum, and average 90 percent over the forecast period spanned 
by AEO 2011.
    \1066\ This figure is calculated as 50 gallons + 50 gallons*90% 
= 50 gallons + 45 gallons = 95 gallons.
---------------------------------------------------------------------------

ii. Benefits From Reducing U.S. Petroleum Imports
    U.S. consumption and imports of petroleum products impose costs on 
the domestic economy that are not reflected in the market price for 
crude petroleum, or in the prices paid by consumers of refined 
petroleum products such as gasoline. These costs include (1) higher 
prices for petroleum products resulting from the effect of U.S. 
petroleum demand on the world oil price; (2) increased risk of 
disruptions to the U.S. economy caused by sudden reductions in the 
supply of imported oil to the U.S.; and (3) expenses for maintaining a 
U.S. military presence to secure imported oil supplies from unstable 
regions, and for maintaining the strategic petroleum reserve (SPR) to 
cushion against

[[Page 63000]]

resulting price increases.\1067\ Higher U.S. imports of crude oil or 
refined petroleum products increase the magnitude of these external 
economic costs, thus increasing the true economic cost of supplying 
transportation fuels above their market prices. Conversely, lowering 
U.S. imports of crude petroleum or refined fuels by reducing domestic 
fuel consumption can reduce these external costs, and any reduction in 
their total value that results from improved fuel economy represents an 
economic benefit of more stringent CAFE standards, in addition to the 
value of saving fuel itself.
---------------------------------------------------------------------------

    \1067\ See, e.g., Bohi, Douglas R. and W. David Montgomery 
(1982). Oil Prices, Energy Security, and Import Policy Washington, 
DC: Resources for the Future, Johns Hopkins University Press; Bohi, 
D.R., and M.A. Toman (1993). ``Energy and Security: Externalities 
and Policies,'' Energy Policy 21:1093-1109, Docket NHTSA-2009-0062-
24; and Toman, M.A. (1993). ``The Economics of Energy Security: 
Theory, Evidence, Policy,'' in A.V. Kneese and J.L. Sweeney, eds. 
(1993) Docket NHTSA-2009-0062-23. Handbook of Natural Resource and 
Energy Economics, Vol. III. Amsterdam: North-Holland, pp. 1167-1218.
---------------------------------------------------------------------------

    The first component of the external costs imposed by U.S. petroleum 
consumption and imports (often termed the ``monopsony cost'' of U.S. 
oil imports), measures the increase in payments from domestic oil 
consumers to foreign oil suppliers beyond the increased purchase price 
of petroleum itself that results when increased U.S. import demand 
raises the world price of petroleum.\1068\ However, this monopsony cost 
or premium represents a financial transfer from consumers of petroleum 
products to oil producers, and does not consume real economic 
resources. Thus, the decline in its value that occurs when reduced U.S. 
demand for petroleum products causes a reduction in global petroleum 
prices produces no savings in economic resources globally or 
domestically, although it does reduce the value of the financial 
transfer from U.S. consumers of petroleum products to foreign suppliers 
of petroleum. Accordingly, NHTSA's analysis of the benefits from 
adopting proposed CAFE standards for MY 2017-2025 cars and light trucks 
excluded the reduced value of monopsony payments by U.S. oil consumers 
that would result from lower fuel consumption.
---------------------------------------------------------------------------

    \1068\ The reduction in payments from U.S. oil purchasers to 
domestic petroleum producers is not included as a benefit, since it 
represents a transfer that occurs entirely within the U.S. economy.
---------------------------------------------------------------------------

    ACEEE stated that not including an estimate for monopsony value was 
a ``departure from previous rules,'' and argued that monopsony effects 
should be counted among the final rule's economic benefits, because (1) 
reduction in the price of petroleum would bring a net benefit in terms 
of job creation due to the low labor intensity of the energy sector, 
and (2) reduced demand means that the most expensive sources of 
petroleum are not used, which also reduces the price of all 
petroleum.\1069\ CFA commented simply that the monopsony effect is a 
true consumption externality, and should be included for the final rule 
at a value of $0.30/gallon.\1070\ SAFE suggested that even if reducing 
domestic demand for oil does not necessarily lead to lower fuel prices, 
it might lead to production levels that are adjusted downward based on 
expectations that increased fuel economy will reduce aggregate 
demand.\1071\ UCS argued that if the purpose of the CAFE program is 
conserve energy and improve energy security by raising fuel economy 
standards, NHTSA must include a value for the monopsony effect in the 
final rule or risk ``abdication of [its] statutory responsibility.'' 
\1072\ NHTSA also received comments from the Department of Energy 
during interagency review of the final rule suggesting that we consider 
including the monopsony effect not in the current analysis, but in 
future analyses, stating that doing so would be appropriate because (1) 
U.S. efforts to reduce CO2 emissions will be accompanied by 
similar efforts in other nations, (2) climate change could promote 
political instability in other parts of the world that could be harmful 
to the U.S., and (3) the U.S. should value preservation of biodiversity 
and reduction of environmental impacts around the world and not just in 
the U.S.
---------------------------------------------------------------------------

    \1069\ ACEEE, Docket No. EPA-HQ-OAR-2010-0799-9528, at 1-2.
    \1070\ CFA, Docket No EPA-HQ-OAR-2010-0799-9419, at 16, 54-55.
    \1071\ SAFE, Docket No. NHTSA-2010-0131-0259, at 4.
    \1072\ UCS, Docket No. NHTSA-2010-0131, at 6-7.
---------------------------------------------------------------------------

    In response to ACEEE, NHTSA previously excluded any reduction in 
these monopsony costs resulting from lower U.S. fuel consumption in its 
analyses of CAFE standards for MY 2008-11 light trucks, MY 2011 
passenger cars and light trucks, and MY 2012-16 cars and light trucks. 
The rationale for doing so--namely that these costs represent a 
financial transfer rather than a use of real economic resources, and 
that reducing them does not provide a savings in the use of economic 
resources--is thus well-established, remains sound, and is consistent 
with the global perspective of NHTSA's analysis of this final rule. The 
agency also notes that job ``creation'' is not among the economic 
benefits attributable to higher CAFE standards (and in any case 
increased employment represents the consumption of additional economic 
resources, which is an economic cost rather than a benefit), and that 
any reduction in the price of petroleum that continues to be purchased 
after a decline in total demand also represents a financial transfer 
rather than a true economic benefit.
    In response to the assertion by CFA, the monopsony effect does not 
meet the definition of a consumption externality, because it is 
transmitted completely through the price mechanism and does not 
directly affect the welfare of individuals or the production functions 
of firms. Further, the economic benefit resulting from any decline in 
production levels of crude petroleum is already accounted for in the 
agency's estimates of the (pre-tax) value of fuel savings. Finally, by 
excluding any reduction in monopsony payments from its analysis of 
benefits from higher fuel economy, the agency is simply being 
consistent with the usual principles of economic analysis and with OMB 
guidelines for conducting regulatory analysis, and is thus in no way 
failing to meet its statutory responsibilities. With respect to the 
comment by UCS, NHTSA agrees that the overarching purpose of EPCA/EISA 
is energy conservation, but disagrees that the statute requires us to 
include the monopsony effect in our calculation of benefits associated 
with higher fuel economy standards, particularly when the level of the 
standards is not driven by benefit-cost considerations. As explained 
above, NHTSA has consistently excluded the monopsony value in its 
rulemakings since it has used a global SCC value, and continues to 
believe that doing so is appropriate for this final rule. With respect 
to the comments by DOE about including a monopsony effect in future 
analyses, we reiterate that any future analyses will represent a 
totally fresh look at all relevant factors. If the situation in future 
rulemaking changes such that including a value for the monopsony effect 
is appropriate, NHTSA would certainly consider one at that time.
    The second component of external costs imposed by U.S. petroleum 
consumption and imports reflects the potential costs to the U.S. 
economy from disruptions in the supply of imported petroleum. These 
costs arise because interruptions in the supply of petroleum products 
reduce U.S. economic output while (and potentially after) they occur, 
as well as because firms incur real economic costs in attempting to 
adjust prices, output levels, and their use of

[[Page 63001]]

energy, labor and other inputs rapidly in response to sudden changes in 
prices for petroleum products caused by interruptions in their supply. 
Reducing U.S. petroleum consumption and imports lowers these potential 
costs and may also reduce the probability that U.S. petroleum imports 
will be disrupted, and both of these effects reduce the probabilistic 
``expected value'' of the costs of oil supply disruptions to the U.S. 
economy. The amount by which it does so represents an economic benefit 
in addition to the savings in resources from producing and distributing 
fuel that results from higher fuel economy. NHTSA estimated and 
included this value in its NPRM analysis of the economic benefits from 
adopting higher CAFE standards for MY 2017-2025 cars and light trucks.
    Several environmental group and other NGO commenters suggested that 
the standards would have significant energy security benefits in terms 
of avoiding macroeconomic disruption. UCS stated that ``No other 
federal policy has delivered greater oil savings, energy security 
benefits, or greenhouse gas emissions reductions to the country,'' and 
requested that we monetize improved energy security through reduced oil 
consumption and lower carbon emissions for the final rule 
analysis.\1073\ EDF described a study by Jamie Fine that found ``that 
cost savings from avoided gasoline and diesel use in the event of an 
energy price shock in 2020 could be in the range of $2.4 to $5.2 
billion for the state of California alone'' under California's plan to 
reduce GHGs to 1990 levels by 2020, and requested that the agencies at 
least report a range of estimates for benefits associated with energy 
security.\1074\ EDF suggested that the agencies ``consider cost 
estimation proposals such as that included in Sen. Richard Lugar's (R-
Ind.) Practical Energy and Climate Plan, S. 3464,'' which ``included 
both an extensive list of potential impacts of energy security to be 
considered and an alternative approximation valuation methodology for 
the ``external cost of petroleum use'' (i.e. this does not include the 
actual fuel savings).'' \1075\ EDF stated that ``For inputs that the 
agencies cannot quantify, the final rule should include a list and 
explain that the benefits of the rule are likely undervalued due to 
such factors.'' \1076\ SAFE commented simply that electrification of 
the fleet is good for energy security because it reduces the risk of 
macroeconomic disruptions, as a domestic fuel source.\1077\
---------------------------------------------------------------------------

    \1073\ UCS, Docket No. EPA-HQ-OAR-2010-0799-9567, at 5-6.
    \1074\ EDF, Docket No. NHTSA-2010-0131-0302, at 3-4, 15.
    \1075\ Id. at 15.
    \1076\ Id.
    \1077\ SAFE, Docket No. NHTSA-2010-0131-0259, at 6-7.
---------------------------------------------------------------------------

    In response to these comments, the agency notes that its estimate 
of benefits from reducing U.S. petroleum consumption and imports 
incorporates both the potential economic cost of oil supply disruptions 
and the reduced probability that such disruptions will occur, exactly 
as advocated by UCS and other commenters. In addition, the agency 
analyzes the sensitivity of its benefit estimates to plausible 
variation in the per-gallon value of reduced macroeconomic disruption 
costs that result from lowering U.S. petroleum consumption and imports. 
The agency relies on estimates of this value and the range of 
uncertainty surrounding it prepared by Oak Ridge National Laboratories, 
which are described in detail in Chapter 4 of the joint TSD 
accompanying this rulemaking.
    The third component of external costs imposed by U.S. petroleum 
consumption and imports includes expenses for maintaining a U.S. 
military presence to secure imported oil supplies from unstable 
regions, and for maintaining the strategic petroleum reserve (SPR) to 
cushion against resulting price increases. NHTSA recognizes that 
potential national and energy security risks exist due to the 
possibility of tension over oil supplies. Much of the world's oil and 
gas supplies are located in countries facing social, economic, and 
demographic challenges, thus making them even more vulnerable to 
potential local instability. Because of U.S. dependence on oil, the 
military could be called on to protect energy resources through such 
measures as securing shipping lanes from foreign oil fields. Thus, to 
the degree to which the proposed rules reduce reliance upon imported 
energy supplies or promote the development of technologies that can be 
deployed by either consumers or the nation's defense forces, the United 
States could expect benefits related to national security, reduced 
energy costs, and increased energy supply.
    As discussed in the NPRM, although NHTSA recognizes that there 
would clearly be significant economic benefits from eliminating the 
nation's dependence on foreign oil, no serious analysis has been able 
to estimate the potential reduction in U.S. military activity and 
spending that is likely to result exclusively from the fuel savings and 
reductions in U.S. petroleum imports this final rule is expected to 
produce by itself. Two principal difficulties that have prevented 
researchers from developing credible estimates of the potential 
reduction in military activity that might accompany a significant 
reduction in U.S. oil imports are isolating the specific missions that 
are intended to secure foreign oil supplies and transportation routes, 
and anticipating how extensively they would be scaled back in response 
to a decline in U.S. petroleum imports. Analysts have been unable to 
answer either of these questions with sufficient confidence to produce 
reliable estimates of potential savings in U.S. military outlays. As a 
consequence, the agency has included only the macroeconomic disruption 
portion of the energy security benefits to estimate the economic value 
of the total energy security benefits of this program. We have 
calculated energy security benefits in very specific terms, as the 
reduction of both financial and strategic risks caused by potential 
sudden disruptions in the supply of imported petroleum to the U.S. 
Reducing the amount of oil imported reduces those risks, and thus 
increases the nation's energy security.
    Similarly, while the costs for building and maintaining the SPR are 
more clearly attributable to U.S. petroleum consumption and imports, 
these costs have not varied historically in response to changes in U.S. 
oil import levels. Thus the agency has not estimated the potential 
reduction in the cost for maintaining the SPR that might result from 
lower U.S. petroleum imports, or to include an estimate of this value 
among the benefits of reducing petroleum consumption through higher 
CAFE standards.
    Comments addressing the potential benefits from a reduced military 
presence as a result of higher CAFE standards were mixed. While API 
agreed with NHTSA's discussion in the NPRM and supported a reiteration 
of such discussion for the final rule (and sensitivity analysis in the 
FRIA),\1078\ other commenters strongly supported developing a specific 
estimate of potential savings in U.S. military spending that would 
accompany reduced petroleum imports. AGA/

[[Page 63002]]

ANGA,\1079\ CBD,\1080\ CFA,\1081\ and UCS \1082\ commented that the 
difficulty of quantifying the costs of maintaining a military presence 
abroad to protect oil resources did not obviate the need to attempt to 
do so. SAFE also provided a number of citations regarding how much the 
U.S. spends to import oil and maintain an overseas military 
presence.\1083\
---------------------------------------------------------------------------

    \1078\ API attachment, Docket No. NHTSA-2010-0131-0238, at 11-
12.
    \1079\ AGA/ANGA provided the example of the Navy's Fifth Fleet, 
``reestablished in 1995 and based in Bahrain,'' which it said exists 
``to secure the Persian Gulf sea-lanes,'' at an ``annual cost * * * 
in the billions of dollars.'' AGA/ANGA, Docket No. NHTSA-2010-0131-
0237, at 5-6.
    \1080\ CBD, Docket No. NHTSA-2010-0131-0255, at 7.
    \1081\ CFA, Docket No. EPA-HQ-OAR-2010-0799-9419, at 16.
    \1082\ UCS provided the example of ``a recent peer-reviewed 
study [that] found that the U.S. military spent $7.3 trillion 
maintaining aircraft carriers in the Persian Gulf from 1976-2007,'' 
stating that ``Since this presence is largely purposed to protect 
key oil shipping lanes, it provides an indication of the significant 
cost to the U.S. economy as a result of our reliance on oil.'' UCS, 
Docket No.EPA-HQ-OAR-2010-0799-9567, at 7.
    \1083\ SAFE, Docket No. NHTSA-2010-0131-0259, at 2-6.
---------------------------------------------------------------------------

    The agency believes that eliminating or significantly reducing U.S. 
consumption and imports of petroleum would provide an opportunity to 
reduce military activities that are dedicated to the purposes of 
securing oil supplies in unstable regions of the globe, and protecting 
international transportation routes. However, NHTSA has been unable to 
identify research that reports credible estimates of the extent to 
which these opportunities would arise and be acted upon as a 
consequence of reductions in U.S. petroleum consumption of the 
magnitude projected to result from this final rule, either alone or in 
conjunction with its previous actions to establish higher CAFE 
standards. This conclusion was echoed in a recent study conducted for 
EPA by Oak Ridge National Laboratory, the results of which are 
described in detail in Chapter 4 of the Final TSD accompanying this 
rulemaking. Thus as indicated previously, NHTSA's analysis of benefits 
from adopting this final rule includes only the reduction in economic 
disruption costs that is anticipated to result from reduced consumption 
of petroleum-based fuels and the associated decline in U.S. petroleum 
imports.
    In analyzing benefits from its recent actions to increase light 
truck CAFE standards for model years 2005-07 and 2008-11, NHTSA relied 
on a 1997 study by Oak Ridge National Laboratory (ORNL) to estimate the 
value of reduced economic externalities from petroleum consumption and 
imports.\1084\ More recently, ORNL updated its estimates of the value 
of these externalities, using the analytic framework developed in its 
original 1997 study, in conjunction with recent estimates of the 
variables and parameters that determine their value.\1085\ The updated 
ORNL study was subjected to a detailed peer review commissioned by EPA, 
and ORNL's estimates of the value of oil import externalities were 
subsequently revised to reflect the comments and recommendations 
provided by peer reviewers.\1086\ Finally, at the request of EPA, ORNL 
has repeatedly revised its estimates of external costs from U.S. oil 
imports to reflect changes in the outlook for world petroleum prices, 
as well as continuing changes in the structure and characteristics of 
global petroleum supply and demand. ORNL's updated analysis reports 
that this benefit, which is in addition to the savings in costs for 
producing fuel itself, is most likely to amount to $0.197 per gallon of 
fuel saved by requiring MY 2017-25 cars and light trucks to achieve 
higher fuel economy. However, considerable uncertainty surrounds this 
estimate, and ORNL's updated analysis also indicates that a range of 
values extending from a low of $0.096 per gallon to a high of $0.284 
per gallon should be used to reflect this uncertainty. We note that the 
calculation of energy security benefits does not include any 
consideration of potential energy security costs associated with 
increased reliance on foreign sources of lithium and rare earth metals 
for HEVs and EVs. Any such costs would partially offset the energy 
security benefits from reducing U.S. petroleum imports. The agencies 
sought public input that would enable us to develop such an estimate, 
but received no useful information to support the necessary analysis.
---------------------------------------------------------------------------

    \1084\ Leiby, Paul N., Donald W. Jones, T. Randall Curlee, and 
Russell Lee, Oil Imports: An Assessment of Benefits and Costs, ORNL-
6851, Oak Ridge National Laboratory, November 1, 1997. Available at 
http://www.esd.ornl.gov/eess/energy_analysis/files/ORNL6851.pdf 
(last accessed October 11, 2011).
    \1085\ Leiby, Paul N. ``Estimating the Energy Security Benefits 
of Reduced U.S. Oil Imports,'' Oak Ridge National Laboratory, ORNL/
TM-2007/028, Revised July 23, 2007. Available at http://www.esd.ornl.gov/eess/energy_analysis/files/Leiby2007%20Estimating%20the%20Energy%20Security%20Benefits%20of%20Reduced%20U.S.%20Oil%20Imports%20ornl-tm-2007-028%20rev2007Jul25.pdf 
(last accessed October 11, 2011).
    \1086\ Peer Review Report Summary: Estimating the Energy 
Security Benefits of Reduced U.S. Oil Imports, ICF, Inc., September 
2007. Available at Docket No. NHTSA-2009-0059-0160.
---------------------------------------------------------------------------

l. Air Pollutant Emissions
i. Changes in Criteria Air Pollutant Emissions
    Criteria air pollutants include carbon monoxide (CO), hydrocarbon 
compounds (usually referred to as ``volatile organic compounds,'' or 
VOC), nitrogen oxides (NOX), fine particulate matter 
(PM2.5), and sulfur oxides (SOX). These 
pollutants are emitted during vehicle storage and use, as well as 
throughout the fuel production and distribution system. While 
reductions in domestic fuel refining, storage, and distribution that 
result from lower fuel consumption will reduce emissions of these 
pollutants, additional vehicle use associated with the fuel economy 
rebound effect will increase their emissions. The net effect of 
stricter CAFE standards on total emissions of each criteria pollutant 
depends on the relative magnitudes of reductions in its emissions 
during fuel refining and distribution, and increases in its emissions 
resulting from additional vehicle use. Because the relationship between 
emissions in fuel refining and vehicle use is different for each 
criteria pollutant, the net effect of fuel savings from the proposed 
standards on total emissions of each pollutant is likely to differ.
    With the exception of SO2, NHTSA calculated annual 
emissions of each criteria pollutant resulting from vehicle use by 
multiplying its estimates of car and light truck use during each year 
over their expected lifetimes by per-mile emission rates for each 
vehicle class, fuel type, model year, and age. These emission rates 
were developed by U.S. EPA using its Motor Vehicle Emission Simulator 
(MOVES 2010a).\1087\ Emission rates for SO2 were calculated 
by NHTSA using estimates of average fuel sulfur content supplied by 
EPA, together with the assumption that the entire sulfur content of 
fuel is emitted in the form of SO2.\1088\ Total 
SO2 emissions under each alternative CAFE standard were 
calculated by applying the resulting emission rates directly to 
estimated annual gasoline and diesel fuel use by cars and light trucks. 
Changes in emissions of criteria air pollutants resulting from 
alternative increases in CAFE standards for MY 2017-2025 cars

[[Page 63003]]

and light trucks are calculated as the difference between emissions 
under each alternative increase in CAFE standards, and emissions under 
the baseline alternative.
---------------------------------------------------------------------------

    \1087\ The MOVES model assumes that the per-mile rates at which 
these pollutants are emitted are determined by EPA regulations and 
the effectiveness of catalytic after-treatment of engine exhaust 
emissions, and are thus unaffected by changes in car and light truck 
fuel economy.
    \1088\ These are 30 and 15 parts per million (ppm, measured on a 
mass basis) for gasoline and diesel respectively, which produces 
emission rates of 0.17 grams of SO2 per gallon of 
gasoline and 0.10 grams per gallon of diesel.
---------------------------------------------------------------------------

    Emissions of criteria air pollutants also occur during each phase 
of fuel production and distribution, including crude oil extraction and 
transportation, fuel refining, and fuel storage and transportation. 
NHTSA estimates the reductions in criteria pollutant emissions from 
producing and distributing fuel that would occur under alternative CAFE 
standards using emission rates obtained by EPA using Argonne National 
Laboratories' Greenhouse Gases and Regulated Emissions in 
Transportation (GREET) model, which provides estimates of air pollutant 
emissions that occur during different phases of fuel production and 
distribution 1089,1090 EPA modified the GREET model to 
change certain assumptions about emissions during crude petroleum 
extraction and transportation, as well as to update its emission rates 
to reflect adopted and pending EPA emission standards.
---------------------------------------------------------------------------

    \1089\ Argonne National Laboratories, The Greenhouse Gas and 
Regulated Emissions from Transportation (GREET) Model, Version 
1.8c.0, April 2008. This version of the model is no longer 
available; for updated versions, see http://greet.es.anl.gov/greet_1_series (last accessed July 12, 2012).
    \1090\ Emissions that occur during vehicle refueling at retail 
gasoline stations (primarily evaporative emissions of volatile 
organic compounds, or VOCs) are already accounted for in the 
``tailpipe'' emission factors used to estimate the emissions 
generated by increased light truck use. GREET estimates emissions in 
each phase of gasoline production and distribution in mass per unit 
of gasoline energy content; these factors are then converted to mass 
per gallon of gasoline using the average energy content of gasoline.
---------------------------------------------------------------------------

    NHTSA used the resulting emission rates, together with its previous 
estimates of how reductions in total fuel use would be reflected in 
reductions in domestic fuel refining and crude petroleum production, to 
calculate emissions of each criteria pollutant that would occur during 
domestic fuel production, as well as in the distribution of domestic 
and imported fuel within the U.S. The agency's analysis assumes that 
reductions in imports of refined fuel would reduce domestic emissions 
of criteria pollutants during the fuel storage and distribution stages 
only. Reductions in domestic fuel refining using imported crude oil are 
assumed to reduce emissions during fuel refining, as well as during 
fuel storage and distribution. Finally, reduced domestic fuel refining 
using domestically-produced crude oil is assumed to reduce emissions 
during all phases of fuel production and distribution.\1091\ As with 
emissions from vehicle use, the impact of alternative CAFE standards on 
total emissions from fuel production and distribution is estimated as 
the difference between emissions under the baseline alternative, and 
emissions with a higher CAFE standard in effect.
---------------------------------------------------------------------------

    \1091\ In effect, this assumes that the distances crude oil 
travels to U.S. refineries are approximately the same regardless of 
whether it travels from domestic oilfields or import terminals, and 
that the distances that gasoline travels from refineries to retail 
stations are approximately the same as those from import terminals 
to gasoline stations. We note that while assuming that all changes 
in upstream emissions result from a decrease in petroleum production 
and transport, our analysis of downstream criteria pollutant impacts 
assumes no change in the composition of the gasoline fuel supply.
---------------------------------------------------------------------------

    Finally, NHTSA calculated the net changes in domestic emissions of 
each criteria pollutant by combining the increases in emissions 
projected to result from increased vehicle use with the reductions 
anticipated to result from lower domestic fuel refining and 
distribution.\1092\ As indicated previously, the effect of adopting 
higher CAFE standards on total emissions of each criteria pollutant 
depends on the relative magnitudes of the resulting reduction in 
emissions from fuel refining and distribution, and the increase in 
emissions from additional vehicle use. Although these net changes vary 
significantly among individual criteria pollutants, the agency projects 
that on balance, adopting higher CAFE standards for MY 2017-25 cars and 
light trucks would reduce emissions of all criteria air pollutants 
except carbon monoxide (CO).
---------------------------------------------------------------------------

    \1092\ All emissions from increased vehicle use are assumed to 
occur within the U.S., since CAFE standards would apply only to 
vehicles produced for sale in the U.S.
---------------------------------------------------------------------------

    The net changes in direct emissions of fine particulates 
(PM2.5) and other criteria pollutants that contribute to the 
formation of ``secondary'' fine particulates in the atmosphere (such as 
NOX, SOX, and VOCs) are converted to economic 
values using estimates of the reductions in health damage costs per ton 
of emissions of each pollutant that would be avoided, which were 
developed by EPA. These savings represent reductions in the value of 
damages to human health resulting from lower atmospheric concentrations 
and population exposure to air pollution that result from lower when 
emissions of each pollutant that contributes to atmospheric 
PM2.5 concentrations. The value of reductions in the risk of 
premature death due to exposure to fine particulate pollution 
(PM2.5) account for the majority of EPA's estimated values 
of reducing criteria pollutant emissions, although the value of 
avoiding other health impacts is also included in these estimates.
    These values do not include a number of unquantified benefits, such 
as reductions in the impacts of PM2.5 pollution on the 
natural environment, or reductions in health and welfare impacts 
related to other criteria air pollutants (ozone, NO2, and 
SO2) and air toxics. EPA estimates different per-ton values 
for reducing emissions of PM2.5 and other criteria 
pollutants from vehicle use than for reductions in emissions of those 
same pollutants during fuel production and distribution; differences in 
these values primarily reflect differences in population exposure to 
these separate sources of emissions.\1093\ NHTSA applies these separate 
values to its estimates of changes in emissions from vehicle use and 
from fuel production and distribution to determine the net change in 
total economic damages from emissions of these pollutants.
---------------------------------------------------------------------------

    \1093\ These reflect differences in the typical geographic 
distributions of emissions of each pollutant, their contributions to 
ambient PM2.5 concentrations, pollution levels 
(predominantly those of PM2.5), and resulting changes in 
population exposure.
---------------------------------------------------------------------------

    EPA projects that the per-ton values for reducing emissions of 
criteria pollutants from both mobile sources (including motor vehicles) 
and stationary sources such as fuel refineries and storage facilities 
will increase rapidly over time. These projected increases reflect 
rising income levels, which are assumed to increase affected 
individuals' willingness to pay for reduced exposure to health threats 
from air pollution. They also reflect expected future population 
growth, which is anticipated to increase population exposure to 
potentially harmful levels of air pollution.
    The commenter Growth Energy urged the agency to evaluate the effect 
of increased use of gasoline direct injection technology on emissions 
of fine particulate matter, as well as the potential for more 
widespread ethanol use and after-treatment technologies to decrease 
such emissions. In response, NHTSA reiterates that this final rule does 
not require vehicle manufacturers to employ specific technologies; 
instead, it specifies the fuel economy levels they must achieve, while 
leaving decisions about the use of available technologies to individual 
manufacturers. In making these choices, manufacturers must continue to 
comply with EPA's standards for emissions of fine particulate matter 
and other criteria air pollutants, and this requirement limits the 
potential impact of their choices on

[[Page 63004]]

fleet-wide average emissions of each pollutant.
ii. Reductions in CO2 Emissions
    Emissions of carbon dioxide and other greenhouse gases (GHGs) occur 
throughout the process of producing and distributing transportation 
fuels, as well as from fuel combustion itself. Emissions of GHGs also 
occur in generating electricity, which NHTSA's analysis anticipates 
will account for a small but growing share of energy consumption by 
cars and light trucks produced in the model years that would be subject 
to the final standards. By reducing the volume of fuel consumed by 
passenger cars and light trucks, higher CAFE standards will reduce GHG 
emissions generated by fuel combustion, as well as throughout the fuel 
supply system. Lowering these emissions is likely to slow the projected 
pace and reduce the ultimate extent of future changes in the global 
climate, thus reducing future economic damages that changes in the 
global climate are expected to cause. By reducing the probability that 
climate changes with potentially catastrophic economic or environmental 
impacts will occur, lowering GHG emissions may also result in economic 
benefits that exceed the resulting reduction in the expected future 
economic costs caused by more gradual changes in the earth's climatic 
systems.
    Quantifying and monetizing benefits from reducing GHG emissions is 
thus an important step in estimating the total economic benefits likely 
to result from establishing higher CAFE standards. Because carbon 
dioxide emissions account for nearly 95 percent of total GHG emissions 
that result from fuel combustion during vehicle use, NHTSA's analysis 
of the effect of higher CAFE standards on GHG emissions focuses mainly 
on estimating changes in emissions of CO2. The agency 
estimates emissions of CO2 from passenger car and light 
truck use by multiplying the number of gallons of each type of fuel 
(gasoline and diesel) they are projected to consume under alternative 
CAFE standards by the mass of CO2 emissions released per 
gallon of fuel consumed. This calculation assumes that the entire 
carbon content of each fuel is converted to CO2 emissions 
during the combustion process. For other GHGs, NHTSA calculates annual 
emissions from vehicle use by multiplying its estimates of car and 
light truck use during each future year by per-mile emission rates for 
each vehicle class, fuel type, model year, and age.
    NHTSA estimates emissions of CO2 and other GHGs that 
occur during fuel production and distribution using emission rates for 
each stage of this process (feedstock production and transportation, 
fuel refining and fuel storage and distribution) derived from Argonne 
National Laboratories' Greenhouse Gases and Regulated Emissions in 
Transportation (GREET) model. For liquid fuels, NHTSA converts these 
rates to a per-gallon basis using the energy content of each fuel, and 
multiplies them by the number of gallons of each type of fuel produced 
and consumed under alternative standards to estimate total GHG 
emissions from fuel production and distribution. GREET supplies 
emission rates for electricity generation that are expressed as grams 
of CO2 per unit of energy, so these rates are simply 
multiplied by the estimates of electrical energy used to charge the on-
board storage batteries of plug-in hybrid and battery electric 
vehicles.
    As with other effects of alternative CAFE standards, the reductions 
in emissions of CO2 and other GHGs resulting from each 
alternative increase is measured by the difference in total emissions 
from producing and consuming fuel energy used by MY 2017-25 cars and 
light trucks with a higher CAFE standard in effect, and total emissions 
from supplying and using fuel energy consumed under the baseline 
alternative. Unlike criteria pollutants, the agency's estimates of GHG 
emissions include those occurring in overseas production of petroleum 
and refined fuel for export to the U.S., as well as during domestic 
fuel production and consumption. Overseas emissions are included 
because GHG emissions throughout the world contribute equally to the 
potential for future changes in the global climate.
iii. Economic Value of Reducing CO2 Emissions
    NHTSA takes the economic benefits from reducing CO2 
emissions into account in developing and analyzing the alternative CAFE 
standards it has considered for MY 2017-25. Because research on the 
impacts of climate change does not produce direct estimates of the 
economic benefits from reducing CO2 or other GHG emissions, 
these benefits are assumed to be the ``mirror image'' of the estimated 
incremental costs resulting from increases in emissions. Thus the 
benefits from reducing CO2 emissions are usually measured by 
the savings in estimated economic damages that an equivalent increase 
in emissions would otherwise have caused, although they can also be 
measured in other ways. While the agency did not include estimates of 
the economic benefits from reducing GHGs other than CO2 in 
its analysis of alternative CAFE standards for the NPRM, in response to 
comments from CBD \1094\ and EDF,\1095\ we have added a sensitivity 
analysis that estimates these benefits using the ``GWP method'' for the 
final rule; see Chapter X of the Final RIA for details and results.
---------------------------------------------------------------------------

    \1094\ CBD, Docket No. NHTSA-2010-0131-0255, at 7.
    \1095\ EDF, Docket No. NHTSA-2010-0131-0302, at 11-14.
---------------------------------------------------------------------------

    NHTSA estimates the value of the reductions in emissions of 
CO2 resulting from adopting alternative CAFE standards using 
a measure usually referred to as the ``social cost of carbon'' (or 
SCC). The SCC is intended to provide a monetary measure of the 
additional economic impacts likely to result from changes in the global 
climate that would result from an incremental increase in 
CO2 emissions. These potential effects include changes in 
agricultural productivity, the economic damages caused by adverse 
effects on human health, property losses and damages resulting from 
rising sea levels, and the value of ecosystem services. The SCC is 
expressed in (constant) dollars per additional metric ton of 
CO2 emissions occurring during a specific future year. The 
SCC is higher for more distant future years, because the climate-
related economic damages caused by an additional ton of emissions are 
projected to increase as larger concentrations of CO2 
accumulate in the earth's atmosphere.
    Reductions in CO2 emissions that are projected to result 
from lower fuel production and consumption during each year over the 
lifetimes of MY 2017-25 cars and light trucks are multiplied by the 
estimated SCC appropriate for that year to determine the economic 
benefit from reducing emissions during that year. The net present value 
of these annual benefits is calculated using a discount rate that is 
consistent with that used to develop each alternative estimate of the 
SCC. This calculation is repeated for the reductions in CO2 
emissions projected to result from each alternative increase in CAFE 
standards.
    NHTSA's evaluates the economic benefits from reducing 
CO2 emissions using estimates of the SCC developed by an 
interagency working group convened for the specific purpose of 
developing new estimates for use by U.S. Federal agencies in regulatory 
evaluations. The group's purpose in developing new estimates of the SCC 
was to allow Federal agencies to incorporate the

[[Page 63005]]

social benefits of reducing CO2 emissions into cost-benefit 
analyses of regulatory actions that have individually modest impacts on 
cumulative global emissions, as most Federal regulatory actions can be 
expected to have. NHTSA previously relied on the SCC estimates 
developed by this interagency group to analyze the alternative CAFE 
standards it considered for MY 2012-16 cars and light trucks, as well 
as the fuel efficiency standards it adopted for MY 2014-18 heavy-duty 
vehicles.
    The interagency group convened on a regular basis over the period 
from June 2009 through February 2010, to explore technical literature 
in relevant fields and develop key inputs and assumptions necessary to 
generate estimates of the SCC. Agencies participating in the 
interagency process included the Environmental Protection Agency and 
the Departments of Agriculture, Commerce, Energy, Transportation, and 
Treasury. This process was convened by the Council of Economic Advisers 
and the Office of Management and Budget, with active participation and 
regular input from the Council on Environmental Quality, National 
Economic Council, Office of Energy and Climate Change, and Office of 
Science and Technology Policy.
    The interagency group's main objective was to develop a range of 
SCC values using clearly articulated input assumptions grounded in the 
existing scientific and economic literatures, in conjunction with a 
range of models that employ different representations of climate change 
and its economic impacts. The group clearly acknowledged the many 
uncertainties that its process identified, and recommended that its 
estimates of the SCC should be updated periodically to incorporate 
developing knowledge of the science and economics of climate impacts. 
The group ultimately selected four SCC values for use in federal 
regulatory analyses. Three values were based on the average of SCC 
estimates developed using three different climate economic models 
(referred to as integrated assessment models), using discount rates of 
2.5, 3, and 5 percent. The fourth value, which represents the 95th 
percentile SCC estimate from the combined distribution of values 
generated by the three models at a 3 percent discount rate, represents 
the possibility of extreme climate impacts from the accumulation of 
GHGs in the earth's atmosphere, and the consequently larger economic 
damages.
    Table IV-15 summarizes the interagency group's estimates of the SCC 
during various future years, which the agency has updated to 2010 
dollars to correspond to the other values it uses to estimate economic 
benefits from the alternative CAFE standards considered in this final 
rule.\1096\
---------------------------------------------------------------------------

    \1096\ The SCC estimates reported in the table assume that the 
damages resulting from increased emissions are constant for small 
departures from the baseline emissions forecast incorporated in each 
estimate, an approximation that is reasonable for policies with 
projected effects on CO2 emissions that are small 
relative to cumulative global emissions.

           Table IV-15--NHTSA Estimate of Social Cost of CO[ihel2] Emissions for Selected Future Years
                                             [2010$ per metric ton]
----------------------------------------------------------------------------------------------------------------
                           Discount rate                                5%         3%        2.5%         3%
----------------------------------------------------------------------------------------------------------------
Source                                                                    Average of estimates              95th
                                                                                                      percentile
                                                                                                        estimate
----------------------------------------------------------------------------------------------------------------
2012..............................................................      $5.33     $23.26     $37.87       $70.88
2015..............................................................       5.97      24.82      39.94        75.77
2017..............................................................       6.39      25.86      41.32        79.10
2020..............................................................       7.03      27.42      43.38        83.99
2025..............................................................       8.59      30.77      47.73        94.09
2030..............................................................      10.14      34.12      52.07       104.08
2035..............................................................      11.70      37.48      56.42       114.17
2040..............................................................      13.26      40.83      60.76       124.16
2045..............................................................      14.82     43.794      64.22       133.01
2050..............................................................      16.38      46.76      67.68       141.75
----------------------------------------------------------------------------------------------------------------

    As Table IV-15 shows, the four SCC estimates selected by the 
interagency group for use in regulatory analyses are $6, $26, $41, and 
$79 per metric ton (in 2010 dollars) for emissions that occurr during 
the year 2017. The value that the interagency group centered its 
attention on is the average SCC estimate developed using different 
models and a 3 percent discount rate, which corresponds to the $26 per 
metric ton figure shown in the table for 2017. To capture the 
uncertainties involved in regulatory impact analysis, however, the 
group emphasized the importance of considering the full range of 
estimated SCC values. As the table also shows, the SCC estimates also 
rise over time; for example, the average SCC at the 3 percent discount 
rate increases to $27 per metric ton of CO2 by 2020, and 
reaches $47 per metric ton of CO2 in 2050.
    Details of the process used by the interagency group to develop its 
SCC estimates, complete results including year-by-year estimates of 
each of the four values, and a thorough discussion of their intended 
use and limitations is provided in the document Social Cost of Carbon 
for Regulatory Impact Analysis Under Executive Order 12866, Interagency 
Working Group on Social Cost of Carbon, United States Government, 
February 2010.\1097\
---------------------------------------------------------------------------

    \1097\ This document is available in the docket for the 2012-
2016 rulemaking (NHTSA-2009-0059).
---------------------------------------------------------------------------

    The agencies received a number of lengthy, detailed comments on the 
SCC values recommended by the interagency group, as well as on the 
process the group used to develop them. Most of these comments 
addressed the topics of incorporating updated knowledge about climate 
impacts, more fully considering the potential for catastrophic impacts 
of future climate change, valuing the population's presumed aversion to 
the risk of significant climate impacts on economic well-being, and the 
discount rate used to convert distant future economic impacts to their 
present values. EDF, NRDC, and IPI each urged the agency to revise its 
estimates of the SCC to incorporate recent improvements in 
understanding the range and severity of economic impacts from climate 
change. NRDC and EDF noted that the three integrated assessment models 
used

[[Page 63006]]

by the federal interagency group to develop the SCC estimates used to 
analyze the proposed rule have been updated to reflect recent estimates 
of climate sensitivity to GHG accumulations and to expand the range of 
monetized economic damages resulting from climate change, and 
encouraged the agency to update its estimates of the SCC using these 
newest versions of these models. NRDC further recommended that these 
models be updated to reflect recent research identifying adverse 
climate impacts on agricultural productivity. EDF and IPI recommended 
that the agency provide a complete listing of known and potential 
economic damages resulting from climate change, identify which of these 
were monetized in the interagency group's estimates of the SCC, and 
explicitly note which of them were excluded. NRDC urged NHTSA to 
develop ``multipliers'' that could be applied to reductions in the use 
value of natural resources and ecosystem services to account for 
accompanying reductions in their non-use values (that is, the value 
that non-users attached to the option of having them available).
    All three commenters also urged the agency to revise its SCC 
estimates to more fully reflect the potential for catastrophic economic 
damages resulting from future climate change. NRDC recommended doing so 
by integrating such damages directly into the three integrated 
assessment models used by the interagency group, while IPI recommended 
adjusting those models' estimates of benefits from reducing GHG 
emissions to account for their undervaluation of the risk and magnitude 
of catastrophic damages. EDF urged revisions to the mathematical form 
of the models' functions relating GHG accumulations to changes in 
global climate indicators and resulting economic damages, in order to 
remedy what EDF views as their underestimation of the probability that 
such damages will result. NRDC also recommended that the agency report 
the magnitude of extremely low-probability economic damages in order to 
inform the public and decision-makers about the impact of catastrophic 
scenarios. NRDC also urged the agency to conduct sensitivity analysis 
of the SCC using various ``equity weights,'' which would increase the 
value of climate damages likely to be experienced by lower-income 
regions of the world.
    IPI, EDF, and NRDC each urged the agency to incorporate the 
economic value of the population's aversion to the risk of large losses 
in welfare in its SCC estimates. Specifically, the commenters 
recommended that the SCC be revised to include a measure of the typical 
consumer's willingness to sacrifice current income to avoid being 
exposed to the risk of a large welfare loss from potential climate 
change. Including such a ``risk premium,'' which would be in addition 
to the conventional expected value of damages from different degrees of 
potential climate change, could increase the agency's estimates of the 
SCC significantly. IPI noted that such a risk premium could be 
approximated by reducing the discount rate applied to future climate-
related economic damages if it could not be estimated directly, while 
NRDC referred the agency to published research describing a recently-
developed alternative method for incorporating the value of risk 
aversion.
    Finally, all three of the same commenters urged NHTSA to base its 
estimates of the SCC on lower discount rates than those the interagency 
group applied to future economic damages, which would increase the 
agency's SCC values. NRDC noted that OMB Circular A-4 recommends a 1% 
rate as a lower bound for discounting where future benefits or costs 
will be experienced by future generations, and also pointed out that 
short-term interest rates are currently well below this figure. As an 
alternative, NRDC recommended using declining future discount rates to 
account for more fully for long-run uncertainty about interest rates 
than the procedure used by the interagency group. EDF similarly 
encouraged the agency to reduce the discount rates incorporated in the 
interagency group's SCC estimates below 3%, and also to consider using 
declining discount rates to account more appropriately for scientific 
and economic uncertainty surrounding the correct social discount rate 
for use over long time periods.
    Finally, NRDC noted than an alternative to using the SCC to value 
reductions in GHG emissions would be to estimate the cost of achieving 
the final reduction in emissions necessary to reach a target emissions 
level (or ``marginal abatement cost'') that is consistent with the 
maximum acceptable degree of climate change. While NRDC acknowledged 
that the determination of what constitutes an acceptable degree of 
climate change would ultimately be a political decision, the associated 
level of emissions and the marginal cost of reducing emissions to that 
level from today's baseline could be determined scientifically with 
reasonable accuracy and allowing some margin for error.
    The agency appreciates the careful thought and detailed analyses 
that are reflected in the extensive comments it received on the SCC. In 
the time frame for evaluating and adopting this final rule, however, 
NHTSA judged that it would be impractical to replicate the detailed 
process the federal interagency group used to produce its recommended 
values for the SCC, and to develop the updated input assumptions and 
revised modeling procedures advocated by the commenters. Additionally, 
other federal agencies use the SCC estimates to analyze benefits of 
rulemakings, and consistency across government analyses is useful in 
this regard. If the SCC estimates are to be updated in the future, an 
interagency-group approach is likely to be a more fruitful way of 
accomplishing that than NHTSA attempting the process on its own. 
Recognizing this, the agency has elected to continue using the 
interagency group's recommended SCC values to estimate the economic 
benefits stemming from the reductions in GHG emissions that are 
projected to result from this final rule.
m. Discounting Future Benefits and Costs
    Discounting future fuel savings and other benefits is intended to 
account for the reduction in their value when they are deferred or will 
not occur until some future date, rather than received immediately. The 
value of benefits that are not expected to occur until the future is 
lower partly because people value current consumption more highly than 
equivalent consumption at some future date--stated simply, they are 
impatient--and partly because they expect their living standards to be 
higher in the future, so the same amount of additional consumption will 
improve their well-being by more today than it will in the future. The 
discount rate expresses the percent decline in the value of these 
benefits--as viewed from today's perspective--for each year they are 
deferred into the future. In evaluating the benefits from alternative 
increases in CAFE standards for MY 2017-2025 passenger cars and light 
trucks, NHTSA employs discount rates of both 3 and 7 percent per year, 
in accordance with OMB guidance.
    While we present results that reflect both discount rates, NHTSA 
believes that the 3 percent rate is more appropriate for discounting 
future benefits from increased CAFE standards, because the agency 
expects that most or all of vehicle manufacturers' costs for complying 
with higher CAFE standards will ultimately be reflected in higher 
selling prices for their new vehicle models. By increasing sales prices 
for new cars and light trucks, CAFE regulations will thus primarily 
affect

[[Page 63007]]

vehicle purchases and other private consumption decisions. Both 
economic theory and OMB guidance on discounting indicate that the 
future benefits and costs of regulations that mainly affect private 
consumption should be discounted at consumers' rate of time 
preference.\1098\
---------------------------------------------------------------------------

    \1098\ For example, OMB Circular A-4 states that ``When 
regulation primarily and directly affects private consumption (e.g., 
through higher consumer prices for goods and services), a lower 
[than 7 percent] discount rate is appropriate. The alternative most 
often used is sometimes called the ``social rate of time 
preference.'' This simply means the rate at which ``society'' 
discounts future consumption flows to their present value. Available 
at http://www.whitehouse.gov/omb/circulars_a004_a-4 (last accessed 
Jul. 10, 2012).
---------------------------------------------------------------------------

    Current OMB guidance further indicates that savers appear to 
discount future consumption at an average real (that is, adjusted to 
remove the effect of inflation) rate of about 3 percent when they face 
little risk about the future. Since the real interest rate that savers 
require to persuade them to defer consumption into the future 
represents a reasonable estimate of consumers' rate of time preference, 
NHTSA believes that the 3 percent rate is more appropriate for 
discounting projected future benefits and costs resulting from higher 
CAFE standards.
    Because there is some uncertainty about whether vehicle 
manufacturers will completely recover their costs for complying with 
higher CAFE standards by increasing vehicle sales prices, however, 
NHTSA also presents benefit and cost estimates discounted using a 
higher rate. To the extent that manufacturers are unable to recover 
their costs for meeting higher CAFE standards by increasing new vehicle 
prices, these costs are likely to displace other investment 
opportunities available to them. OMB guidance indicates that the real 
economy-wide opportunity cost of capital is the appropriate discount 
rate to apply to future benefits and costs when the primary effect of a 
regulation is ``* * * to displace or alter the use of capital in the 
private sector,'' and OMB estimates that this rate currently averages 
about 7 percent.\1099\ Thus the agency's analysis of alternative 
increases in CAFE standards for MY 2017-25 cars and light trucks also 
reports benefits and costs discounted at a 7 percent rate.
---------------------------------------------------------------------------

    \1099\ Id.
---------------------------------------------------------------------------

    UCS supported the agencies' use of 3 and 7 percent discount rates 
in the analysis for the final rule,\1100\ while API commented that EIA 
used a discount rate of 15 percent in the analysis for AEO 2011 when 
evaluating the cost-effectiveness of vehicle fuel efficiency-improving 
technology, and stated that a similar rate employed in the CAFE 
analysis would reduce the present value of fuel savings by about 40-50 
percent.\1101\ NHTSA notes that the 15 percent rate recommended by API 
is more than double the higher rate prescribed by OMB for use in 
regulatory analysis. It is thus likely to be more appropriate for 
evaluating investments in future fuel-saving technologies that are as 
yet unknown or unproven, and are consequently viewed as extremely risky 
from today's perspective. Thus the agency has elected to retain the 3 
and 7 percent discount rates in its evaluation of future benefits from 
adopting this final rule.
---------------------------------------------------------------------------

    \1100\ UCS, Docket No. EPA-HQ-OAR-2010-0799-9567, at 13.
    \1101\ API attachment, Docket No. NHTSA-2010-0131-0238, at 10.
---------------------------------------------------------------------------

    One important exception to the agency's use of 3 percent and 7 
percent discount rates is arises in discounting benefits from reducing 
CO2 emissions over the lifetimes of MY 2017-2025 cars and 
light trucks to their present values. In order to ensure consistency in 
the derivation and use of the interagency group's estimates of the unit 
values of reducing CO2 emissions (or SCC), the benefits from 
reducing CO2 emissions during each future year are 
discounted using the same ``intergenerational'' discount rates that 
were used to derive each of the alternative values. As indicated in 
Table IV-15 above, these rates are 2.5 percent, 3 percent, and 5 
percent depending on which estimate of the SCC is being employed.\1102\
---------------------------------------------------------------------------

    \1102\ The fact that the 3 percent discount rate used by the 
interagency group to derive its central estimate of the SCC is 
identical to the 3 percent short-term or ``intra-generational'' 
discount rate used by NHTSA to discount future benefits other than 
reductions in CO2 emissions is coincidental, and should 
not be interpreted as a required condition that must be satisfied in 
future rulemakings.
---------------------------------------------------------------------------

n. Accounting for Uncertainty in Benefits and Costs
    In analyzing the uncertainty surrounding its estimates of benefits 
and costs from alternative CAFE standards, NHTSA considers alternative 
estimates of those assumptions and parameters that are subject to the 
most uncertainty, and where alternative values are likely to have the 
largest effect. These include the distribution of sales of MY 2017-25 
vehicles between passenger cars and light trucks, expected lifetime 
utilization of cars and light trucks, the payback period assumed by 
manufacturers when choosing to adopt fuel economy technologies, 
projected costs of fuel economy-improving technologies and their 
anticipated effectiveness in reducing fuel consumption, forecasts of 
future fuel prices, the magnitude of the rebound effect, the value of 
reducing CO2 emissions (the SCC), and the reduction in 
external economic costs resulting from lower U.S. oil imports. The 
range for each of these variables employed in the uncertainty analysis 
was previously identified in the sections of this notice discussing 
each variable.
    The uncertainty analysis was conducted by assuming either 
independent normal or beta probability distributions for each of these 
variables, using the low and high estimates for each variable as the 
limits between which 90 percent of observed values are expected to 
fall. In cases where the data on the possible distribution of 
parameters was relatively sparse, making the choice of distributions 
difficult, a beta distribution is commonly employed to give more weight 
to both tails than would be the case had a normal distribution been 
employed. Each trial of the uncertainty analysis employed a set of 
values randomly drawn from these probability distributions, under the 
assumption that the value of each variable is independent from those of 
the others. Benefits and costs of each alternative standard were 
estimated using each combination of variables, and a total of nearly 
40,000 trials were used to estimate the likely range of estimated 
benefits and costs for each alternative standard.
o. Where can readers find more information about the economic 
assumptions?
    Much more detailed information is provided in Chapter VIII of the 
FRIA, and a discussion of how NHTSA and EPA jointly reviewed and 
updated economic assumptions for purposes of this final rule is 
available in Chapter 4 of the Joint TSD. In addition, all of NHTSA's 
model input and output files are now public and available for the 
reader's review and consideration. The economic input files can be 
found in the docket for this final rule, NHTSA-2010-0131, and on 
NHTSA's Web site.\1103\
---------------------------------------------------------------------------

    \1103\ See http://www.nhtsa.gov/fuel-economy.
---------------------------------------------------------------------------

    Finally, because much of NHTSA's economic analysis for purposes of 
this final rule builds on the work that was done for the final rule 
establishing CAFE standards for MYs 2012-16, we refer readers to that 
document as well. It contains valuable background information 
concerning how NHTSA's assumptions regarding economic inputs for CAFE 
analysis have evolved over the past several rulemakings, both in 
response to comments and as a result of

[[Page 63008]]

the agency's growing experience with this type of analysis.\1104\
---------------------------------------------------------------------------

    \1104\ 74 FR 14308-14358 (Mar. 30, 2009).
---------------------------------------------------------------------------

4. How does NHTSA use the assumptions in its modeling analysis?
    In developing today's CAFE standards, NHTSA has made significant 
use of results produced by the CAFE Compliance and Effects Model 
(commonly referred to as ``the CAFE Model'' or ``the Volpe model''), 
which DOT's Volpe National Transportation Systems Center developed, 
expanded, and refined over time specifically to support NHTSA's CAFE 
rulemakings. The model, which has been constructed specifically for the 
purpose of analyzing potential CAFE standards, integrates the following 
core capabilities:
    (1) Estimating how manufacturers could apply technologies in 
response to new fuel economy standards,
    (2) Estimating the costs that would be incurred in applying these 
technologies,
    (3) Estimating the physical effects resulting from the application 
of these technologies, such as changes in travel demand, fuel 
consumption, and emissions of carbon dioxide and criteria pollutants, 
and
    (4) Estimating the monetized societal benefits of these physical 
effects.
    An overview of the model follows below. Separate model 
documentation provides a detailed explanation of the functions the 
model performs, the calculations it performs in doing so, and how to 
install the model, construct inputs to the model, and interpret the 
model's outputs. Documentation of the model, along with model 
installation files, source code, and sample inputs are available at 
NHTSA's Web site.\1105\ The model documentation is also available in 
the docket for today's rule, as are inputs for and outputs from 
analysis of today's CAFE standards.\1106\
---------------------------------------------------------------------------

    \1105\ http://www.nhtsa.gov/fuel-economy.
    \1106\ Docket No. NHTSA-2010-0131.
---------------------------------------------------------------------------

a. How does the model operate?
    As discussed above, the agency uses the CAFE model to estimate how 
manufacturers could attempt to comply with a given CAFE standard by 
adding technology to fleets that the agency anticipates they will 
produce in future model years. This exercise constitutes a simulation 
of manufacturers' decisions regarding compliance with CAFE standards.
    This compliance simulation begins with the following inputs: (a) 
the baseline and reference market forecasts discussed above in Section 
IV.C.1 and Chapter 1 of the TSD, (b) technology-related estimates 
discussed above in Section IV.C.2 and Chapter 3 of the TSD, (c) 
economic inputs discussed above in Section IV.C.3 and Chapter 4 of the 
TSD, and (d) inputs defining baseline and potential new CAFE standards. 
For each manufacturer, the model applies technologies in a sequence 
that follows a defined engineering logic (``decision trees,'' discussed 
in the MY 2011 final rule and in the model documentation) and a cost-
minimizing strategy in order to identify a set of technologies the 
manufacturer could apply in response to new CAFE standards.\1107\ The 
model applies technologies to each of the projected individual vehicles 
in a manufacturer's fleet, considering the combined effect of 
regulatory and market incentives. Depending on how the model is 
exercised, it will apply technology until one of the following occurs:
---------------------------------------------------------------------------

    \1107\ NHTSA does its best to remain scrupulously neutral in the 
application of technologies through the modeling analysis, to avoid 
picking technology ``winners.'' The technology application 
methodology has been reviewed by the agency over the course of 
several rulemakings, and commenters have been generally supportive 
of the agency's approach. See, e.g., 74 FR 14238-14246 (Mar. 30, 
2009).
---------------------------------------------------------------------------

    (1) The manufacturer's fleet achieves compliance \1108\ with the 
applicable standard, and continuing to add technology in the current 
model year would be attractive neither in terms of stand-alone (i.e., 
absent regulatory need) cost-effectiveness nor in terms of facilitating 
compliance in future model years; \1109\
---------------------------------------------------------------------------

    \1108\ Prior to the NPRM, DOT modified the model to provide the 
ability--as an option--to account for credit mechanisms (i.e., 
carry-forward, carry-back, transfers, and trades) when determining 
whether compliance has been achieved. For purposes of determining 
the effect of maximum feasible CAFE standards, NHTSA cannot consider 
these mechanisms, and exercises the CAFE model without enabling 
these options.
    \1109\ In preparation for the MYs 2012-2016 rulemaking, the 
model was modified in order to apply additional technology in early 
model years if doing so will facilitate compliance in later model 
years. This is designed to simulate a manufacturer's decision to 
plan for CAFE obligations several years in advance (often described 
as ``multi-year planning''). NHTSA believes that integrating multi-
year planning in the modeling analysis better informs the agency 
with regard to what levels of standards may be maximum feasible in 
each model year, as required by EPCA/EISA, because it better 
replicates manufacturers' actual behavior as compared to the year-
by-year evaluation which EPCA/EISA would otherwise imply.
---------------------------------------------------------------------------

    (2) The manufacturer ``exhausts'' \1110\ available technologies; or
---------------------------------------------------------------------------

    \1110\ In a given model year, the model makes additional 
technologies available to each vehicle model within several 
constraints, including (a) whether or not the technology is 
applicable to the vehicle model's technology class, (b) whether the 
vehicle is undergoing a redesign or freshening in the given model 
year, (c) whether engineering aspects of the vehicle make the 
technology unavailable (e.g., secondary axle disconnect cannot be 
applied to two-wheel drive vehicles), and (d) whether technology 
application remains within ``phase in caps'' constraining the 
overall share of a manufacturer's fleet to which the technology can 
be added in a given model year. Once enough technology is added to a 
given manufacturer's fleet in a given model year that these 
constraints make further technology application unavailable, the 
CAFE model concludes that technologies are ``exhausted'' for that 
manufacturer in that model year.
---------------------------------------------------------------------------

    (3) For manufacturers estimated to be willing to pay civil 
penalties, the manufacturer reaches the point at which doing so would 
be more cost-effective (from the manufacturer's perspective) than 
adding further technology.\1111\
---------------------------------------------------------------------------

    \1111\ This possibility was added to the model to account for 
the fact that under EPCA/EISA, manufacturers must pay civil 
penalties if they do not achieve compliance with applicable CAFE 
standards. 49 U.S.C. 32912(b). NHTSA recognizes that some 
manufacturers will find it more cost-effective to pay civil 
penalties than to achieve compliance, and believes that to assume 
these manufacturers would exhaust available technologies before 
paying civil penalties would cause unrealistically high estimates of 
market penetration of expensive technologies such as diesel engines 
and strong HEVs, as well as correspondingly inflated estimates of 
both the costs and benefits of any potential CAFE standards. NHTSA 
thus includes the possibility of manufacturers choosing to pay civil 
penalties in its modeling analysis in order to achieve what the 
agency believes is a more realistic simulation of manufacturer 
decision-making. Unlike flex-fuel and other credits, NHTSA is not 
barred by statute from considering fine-payment in determining 
maximum feasible standards under EPCA/EISA. 49 U.S.C. 32902(h).
---------------------------------------------------------------------------

    As discussed below, the model has also been modified in order to--
as an option--apply more technology than may be necessary for a 
manufacturer to achieve compliance in a given model year, or to 
facilitate compliance in later model years. This ability to simulate 
``market-driven overcompliance'' reflects the potential that 
manufacturers will apply some technologies to some vehicles if doing so 
would be sufficiently inexpensive compared to the expected reduction in 
owners' outlays for fuel.
    The model accounts explicitly for each model year, applying most 
technologies when vehicles are scheduled to be redesigned or freshened, 
and carrying forward technologies between model years once they are 
applied (until, if applicable, they are superseded by other 
technologies). The CAFE model accounts explicitly for each model year 
because EPCA/EISA requires that NHTSA make a year-by-year determination 
of the appropriate level of stringency and then set the standard at 
that level, while ensuring ratable increases in average fuel 
economy.\1112\

[[Page 63009]]

The multi-year planning capability, (optional) simulation of ``market-
driven overcompliance,'' and EPCA credit mechanisms increase the 
model's ability to simulate manufacturers' real-world behavior, 
accounting for the fact that manufacturers will seek out compliance 
paths for several model years at a time, while accommodating the year-
by-year requirement.
---------------------------------------------------------------------------

    \1112\ 49 U.S.C. 32902(a) states that at least 18 months before 
the beginning of each model year, the Secretary of Transportation 
shall prescribe by regulation average fuel economy standards for 
automobiles manufactured by a manufacturer in that model year, and 
that each standard shall be the maximum feasible average fuel 
economy level that the Secretary decides the manufacturers can 
achieve in that year. NHTSA has long interpreted this statutory 
language to require year-by-year assessment of manufacturer 
capabilities. 49 U.S.C. 32902(b)(2)(C) also requires that standards 
increase ratably between MY 2011 and MY 2020.
---------------------------------------------------------------------------

    The model also calculates the costs, effects, and benefits of 
technologies that it estimates could be added in response to a given 
CAFE standard.\1113\ It calculates costs by applying the cost 
estimation techniques discussed above in Section IV.C.2 (i.e., 
incrementally accumulating additive incremental technology costs 
specified separately for discrete technological steps along several 
``decision trees,'' and applying adjustments to account for, among 
other things, ``learning'' effects), and by accounting for the number 
of affected vehicles. It accounts for effects such as changes in 
vehicle travel, changes in fuel consumption, and changes in greenhouse 
gas and criteria pollutant emissions. It does so by applying the fuel 
consumption estimation techniques also discussed in Section IV.C.2 
(i.e., incrementally accumulating multiplicative incremental technology 
fuel consumption reductions specified separately for discrete 
technological steps along several ``decision trees,'' and applying 
``synergy'' factors to account for interactions between some 
technologies), and the vehicle survival and mileage accumulation 
forecasts, the rebound effect estimate and the fuel properties and 
emission factors discussed in Section IV.C.3. Considering changes in 
travel demand and fuel consumption, the model estimates the monetized 
value of accompanying benefits to society, as discussed in Section 
IV.C.3. The model calculates both the undiscounted and discounted value 
of benefits that accrue over time in the future.
---------------------------------------------------------------------------

    \1113\ As for all of its other rulemakings, NHTSA is required by 
Executive Order 12866 (as amended by Executive Order 13563) and DOT 
regulations to analyze the costs and benefits of CAFE standards. 
Executive Order 12866, 58 FR 51735 (Oct. 4, 1993); DOT Order 2100.5, 
``Regulatory Policies and Procedures,'' 1979, available at http://regs.dot.gov/rulemakingrequirements.htm (last accessed July 4, 
2012).
---------------------------------------------------------------------------

    The CAFE model has other capabilities that facilitate the 
development of a CAFE standard. The integration of (a) compliance 
simulation and (b) the calculation of costs, effects, and benefits 
facilitates the agency's analysis of the sensitivity of results to 
model inputs. The model can also be used to evaluate many (e.g., 200 
per model year) potential levels of stringency sequentially, and to 
identify the stringency at which specific criteria are met. For 
example, it can identify the stringency at which net benefits to 
society are maximized, the stringency at which a specified total cost 
is reached, or the stringency at which a given estimated average 
required fuel economy level is attained. This allows the agency to 
compare more easily the impacts in terms of fuel savings, emissions 
reductions, and costs and benefits of achieving different levels of 
stringency according to different criteria. The model can also be used 
to perform uncertainty analysis (i.e., Monte Carlo simulation), in 
which input estimates are varied randomly according to specified 
probability distributions, such that the uncertainty of key measures 
(e.g., fuel consumption, costs, benefits) can be evaluated.
b. Has NHTSA considered other models?
    As discussed in the most recent CAFE rulemaking, while nothing in 
EPCA requires NHTSA to use the CAFE model, and in principle, NHTSA 
could perform all of these tasks through other means, the model's 
capabilities have greatly increased the agency's ability to rapidly, 
systematically, transparently, and reproducibly conduct key analyses 
relevant to the formulation and evaluation of new CAFE standards.\1114\
---------------------------------------------------------------------------

    \1114\ 75 FR 25598-25599.
---------------------------------------------------------------------------

    NHTSA notes that the CAFE model not only has been formally peer-
reviewed and tested and reviewed through three rulemakings (not include 
the current rulemaking), but also has some features especially 
important for the analysis of CAFE standards under EPCA/EISA. Among 
these are the ability to perform year-by-year analysis, and the ability 
to account for engineering differences between specific vehicle models.
    EPCA requires that NHTSA set CAFE standards for each model year at 
the level that would be ``maximum feasible'' for that year. This 
requires the ability to analyze each model year covered by the 
regulatory period to account for the interdependency in terms of the 
appropriate levels of stringency for every model year. Also, as part of 
the evaluation of the economic practicability of the standards, as 
required by EPCA, NHTSA has traditionally assessed the annual costs and 
benefits of the standards. In response to comments regarding an early 
version of the CAFE model, DOT modified the CAFE model in order to 
account for dependencies between model years and to better represent 
manufacturers' planning cycles, in a way that still allowed NHTSA to 
comply with the statutory requirement to determine the appropriate 
level of the standards for each model year.
    The CAFE model is also able to account for important engineering 
differences between specific vehicle models by combining technologies 
incrementally and on a model-by-model basis, and thus reduce the risk 
of creating unlikely technology combinations by applying technologies 
that may be incompatible with or already present on a given vehicle 
model. The CAFE model produces a single vehicle-level output file that, 
for each vehicle model, shows which technologies were present at the 
outset of modeling, which technologies were superseded by other 
technologies, and which technologies were ultimately present at the 
conclusion of modeling. For each vehicle, the same file shows resultant 
changes in vehicle weight, fuel economy, and cost. This provides for 
efficient identification, analysis, and correction of errors, a task 
with which members of the public can assist the agency if they are so 
inclined, since all inputs and outputs are public.
    Such considerations, as well as those related to the efficiency 
with which the CAFE model is able to analyze attribute-based CAFE 
standards and changes in vehicle classification, and to perform higher-
level analysis such as stringency estimation (to meet predetermined 
criteria), sensitivity analysis, and uncertainty analysis, lead the 
agency to conclude that the model remains the best available to the 
agency for the purposes of analyzing potential new CAFE standards.
c. What changes has DOT made to the model?
    Between promulgation of the MY 2012-2016 CAFE standards and last 
year's proposal regarding MY 2017-2025 standards, the CAFE model was 
revised to make some minor improvements, and to add some significant 
new capabilities: (1) Accounting for electricity used to charge 
electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs), 
(2) accounting for use of ethanol blends in flexible-fuel vehicles 
(FFVs), (3) accounting for costs (i.e., ``stranded capital'') related 
to early replacement of technologies, (4) accounting for

[[Page 63010]]

previously-applied technology when determining the extent to which a 
manufacturer could expand use of the technology, (5) applying 
technology-specific estimates of changes in consumer value, (6) 
simulating the extent to which manufacturers might utilize EPCA's 
provisions regarding generation and use of CAFE credits, (7) applying 
estimates of fuel economy adjustments (and accompanying costs) 
reflecting increases in air conditioner efficiency, (8) reporting 
privately-valued benefits, (9) simulating the extent to which 
manufacturers might voluntarily apply technology beyond levels needed 
for compliance with CAFE standards, and (10) estimating changes in 
highway fatalities attributable to any applied reductions in vehicle 
mass. These capabilities are described below, and in greater detail in 
the CAFE model documentation.
    To support evaluation of the effects that electric vehicles (EVs) 
and plug-in hybrid vehicles (PHEVs) could have on energy consumption 
and associated costs and environmental effects, DOT expanded the CAFE 
model to estimate the amount of electricity that would be required to 
charge these vehicles (accounting for the potential that PHEVs can also 
run on gasoline), taking into account input assumptions regarding the 
share of PHEV operation that would rely on electricity. The model 
calculates the cost of this electricity, as well as the accompanying 
upstream criteria pollutant and greenhouse gas emissions. Related 
inputs applied for today's analysis are presented in chapters V and 
VIII of the FRIA.
    Similar to this expansion to account for the potential that PHEVs 
can be refueled with gasoline or recharged with electricity, DOT 
expanded the CAFE model to account for the potential that other 
flexible-fuel vehicles (FFVs) can be operated on multiple fuels. In 
particular, the model can account for ethanol FFVs consuming E85 or 
gasoline, taking into account input assumptions regarding the share of 
FFV operation that would rely on E85 (see chapters V and VIII of the 
FRIA), and report consumption of both fuels, as well as corresponding 
costs and upstream emissions.
    Among the concerns raised in the past regarding how technology 
costs are estimated has been one that stranded capital costs be 
considered. Capital becomes ``stranded'' when capital equipment is 
retired or its use is discontinued before the equipment has been fully 
depreciated and the equipment still retains some value or usefulness. 
DOT modified the CAFE model to apply a stream of costs representing the 
stranded capital cost of a replaced technology when that technology is 
replaced by a newly applied technology, if specified for a given 
technology. This cost is in addition to the cost for producing the 
newly applied technology in the first year of production. Stranded 
capital costs are discussed more generally in Section II.D above, in 
Chapter 3 of the joint TSD, and in Chapter V of NHTSA's FRIA.
    As documented in prior CAFE rulemakings and in Chapter V of NHTSA's 
FRIA, the CAFE model applies ``phase-in caps'' to constrain technology 
application at the vehicle manufacturer level. These caps are intended 
to reflect a manufacturer's overall resource capacity available for 
implementing new technologies (such as engineering and development 
personnel and financial resources), thereby ensuring that resource 
capacity is accounted for in the modeling process. This helps to ensure 
technological feasibility and economic practicability in determining 
the stringency of the standards. In the MY 2012-2016 rulemaking 
analysis, the model performed the relevant test by comparing a given 
phase-in cap to the amount (i.e., the share of the manufacturer's 
fleet) to which the technology had been added by the model. DOT 
subsequently modified the CAFE model to take into account the extent to 
which a given manufacturer has already applied the technology (i.e., as 
reflected in the market forecast specified as a model inputs), and to 
apply the relevant test based on the total application of the 
technology. In NHTSA's judgment, doing so better represents constraints 
on the rates at which each manufacturer can add various technologies, 
thereby providing a better means of accounting for technological 
feasibility and economic practicability of potential standards.
    The CAFE model requires inputs defining the technology-specific 
cost and effectiveness (i.e., percentage reduction of fuel 
consumption). Considering that some technologies may offer owners 
greater or lesser value (beyond that related to fuel outlays, which the 
model calculates internally based on vehicle fuel type and fuel 
economy), the CAFE accepts and applies technology-specific estimates of 
any value gain realized or loss incurred by vehicle purchasers.\1115\
---------------------------------------------------------------------------

    \1115\ For example, a value gain could be specified for a 
technology expected to improve ride quality, and a value loss could 
be specified for a technology expected to reduce vehicle range.
---------------------------------------------------------------------------

    For the MYs 2012-2016 CAFE rulemaking analysis, DOT modified the 
CAFE model to accommodate specification and accounting for credits a 
manufacturer is assumed to earn by producing flexible fuel vehicles 
(FFVs). Although NHTSA cannot consider such credits when determining 
maximum feasible CAFE standards, the agency presented an analysis that 
included FFV credits, in order to communicate the extent to which use 
of such credits might cause actual costs, effects, and benefits to be 
lower than estimated in NHTSA's primary analysis. As DOT explained at 
the time, it was unable to account for other EPCA credit mechanisms, 
because attempts to do so had been limited by complex interactions 
between those mechanisms and the multi-year planning aspects of the 
CAFE model. DOT subsequently modified the CAFE model to provide the 
ability to account for any or all of the following flexibilities 
provided by EPCA: FFV credits, credit carry-forward and carry-back 
(between model years), credit transfers (between passenger car and 
light truck fleets), and credit trades (between manufacturers). The 
model accounts for EPCA-specified limitations applicable to these 
flexibilities (e.g., limits on the amount of credit that can be 
transferred between passenger car and light truck fleets). These 
capabilities in the model provide a basis for more accurately 
estimating costs, effects, and benefits that may actually result from 
new CAFE standards. Insofar as some manufacturers actually do earn and 
use CAFE credits, this provides NHTSA with the ability to examine 
outcomes more realistically than EPCA allows for purposes of setting 
new CAFE standards.
    NHTSA is today promulgating CAFE standards reflecting EPA's 
changing fuel economy calculation procedures such that a vehicle's fuel 
consumption improvement will be accounted for if the vehicle has 
technologies that reduce the amount of energy needed to power the air 
conditioner. To facilitate analysis of these standards, DOT modified 
the CAFE model to account for these adjustments, based on inputs 
specifying the average amount of improvement anticipated, and the 
estimated average cost to apply the underlying technology. Similarly, 
NHTSA's new CAFE standards reflect EPA's further changing fuel economy 
calculation procedures to account for some other technologies that 
reduce fuel consumption under conditions not represented by the city or 
highway test procedures. While DOT was not able to modify the CAFE 
model

[[Page 63011]]

prior to the NPRM to account for these adjustments, it has since done 
so.
    Considering that past CAFE rulemakings indicate that most of the 
benefits of CAFE standards are realized by vehicle owners, DOT modified 
the CAFE model prior to the NPRM in order to estimate not just social 
benefits, but also private benefits. The model accommodates separate 
discount rates for these two valuation methods (e.g., a 3% rate for 
social benefits with a 7% rate for private benefits). When calculating 
private benefits, the model includes changes in outlays for fuel taxes 
(which, as economic transfers, are excluded from social benefits) and 
excludes changes in economic externalities (e.g., monetized criteria 
pollutant and greenhouse gas emissions). Since the NPRM, DOT has 
further modified the CAFE model to provide the ability to account for 
owners' operating costs including financing, insurance, scheduled 
maintenance, and out-of-warranty repairs in response to comment from 
NADA suggesting that the agencies should evaluate the effect of the 
rulemaking on a vehicle's total cost of ownership.\1116\ Among these, 
the model includes only scheduled maintenance and out-of-warranty 
repairs in overall estimates of societal costs.
---------------------------------------------------------------------------

    \1116\ NADA, Docket No. NHTSA-2010-0131-0261, at 10.
---------------------------------------------------------------------------

    Since 2003, the CAFE model, and its predecessors, have provided the 
ability to estimate the extent to which a manufacturer with a history 
of paying civil penalties allowed under EPCA might decide to add some 
fuel-saving technology, but not enough to comply with CAFE standards. 
In simulating this decision-making, the model considers the cost to add 
the technology, the calculated reduction in civil penalties, and the 
calculated present value (at the time of vehicle purchase) of the 
change in fuel outlays over a specified ``payback period'' (e.g., 5 
years). For a manufacturer assumed to be willing to pay civil 
penalties, the model stops adding technology once paying penalties 
becomes more attractive than continuing to add technology, considering 
these three factors. As an extension of this simulation approach, DOT 
has modified the CAFE model to simulate, if specified, the potential 
that a manufacturer would add more technology than required for 
purposes of compliance with CAFE standards. When set to operate in this 
manner, the model will continue to apply technology to a manufacturer's 
fleet, even if it already complies with the CAFE standard in that model 
year, until applying further technology will incur more in cost than it 
will yield in calculated fuel savings over a specified ``payback 
period'' (this payback period is set separately from the payback period 
that is applicable until compliance is achieved).
    In its analysis supporting MY 2012-2016 standards adopted in 2010, 
NHTSA estimated the extent to which reductions in vehicle mass might 
lead to changes in the number of highway fatalities occurring over the 
useful life of the MY 2012-2016 fleet. At that time, NHTSA performed 
these calculations outside the CAFE model (using vehicle-specific mass 
reduction calculations from the model), based on agency analysis of 
relevant highway safety data. DOT has since modified the CAFE model to 
perform these calculations based on the underlying statistical analysis 
of the safety impacts of vehicle mass reductions discussed in Section 
II.G above and in Chapter IX of the FRIA. The model also applies an 
input value indicating the economic value of a statistical life, and 
includes resultant benefits (or disbenefits) in the calculation of 
total social benefits.
    In comments on recent NHTSA rulemakings, some reviewers have 
suggested that the CAFE model should be modified to estimate the extent 
to which new CAFE standards would induce changes in the mix of vehicles 
in the new vehicle fleet. NHTSA agrees that a ``market shift'' model, 
also called a consumer vehicle choice model, could provide useful 
information regarding the possible effects of potential new CAFE 
standards. NHTSA has contracted with the Brookings Institution (which 
has subcontracted with researchers at U.C. Davis and U.C. Irvine) to 
develop a vehicle choice model estimated at the vehicle configuration 
level that can be implemented as part of DOT's CAFE model. As discussed 
further in Chapter V of the FRIA for MYs 2012-2016, past efforts by DOT 
staff demonstrated that a vehicle could be added to the CAFE model, but 
did not yield credible coefficients specifying such a model. While the 
NHTSA-sponsored effort is still underway and was not completed in time 
to incorporate in the analysis for this final rule, if a suitable and 
credibly calibrated vehicle choice model becomes available in the 
future, DOT may integrate a vehicle choice model into the CAFE model to 
support future rulemakings.
    NHTSA anticipates this integration of a vehicle choice model would 
be structurally and operationally similar to the integration we 
implemented previously. As in today's analysis, the CAFE model would 
begin with an agency-estimated market forecast, estimate to what extent 
manufacturers might apply additional fuel-saving technology to each 
vehicle model in consideration of future fuel prices and baseline or 
alternative CAFE standards and fuel prices, and calculate resultant 
changes in the fuel economy (and possibly fuel type) and price of 
individual vehicle models. With an integrated vehicle choice model, the 
CAFE model would then estimate how the sales volumes of individual 
vehicle models would change in response to changes in fuel economy 
levels and prices throughout the light vehicle market, possibly taking 
into account interactions with the used vehicle market. Having done so, 
the model would replace the sales estimates in the original inputted 
market forecast with those reflecting these model-estimated shifts, 
repeating the entire modeling cycle until converging on a stable 
solution.
    Based on past experience, we anticipate that this recursive 
simulation will be necessary to ensure consistency between sales 
volumes and modeled fuel economy standards, because achieved CAFE 
levels depend on sales mix and, under attribute-based CAFE standards, 
required CAFE levels also depend on sales mix. NHTSA anticipates, 
therefore, that application of a vehicle choice model would impact 
estimates of all of the following for a given schedule of CAFE 
standards: overall market volume, individual manufacturer market shares 
and product mix, required and achieved CAFE levels, technology 
application rates and corresponding incurred costs, fuel consumption, 
greenhouse gas emissions, and criteria pollutant emissions, changes in 
highway fatalities, and economic benefits.
    Past testing by DOT/NHTSA staff did not indicate major shifts in 
broad measures (e.g., in total costs or total benefits), but that 
testing emphasized shorter modeling periods (e.g., 1-5 model years) 
with less lead time and relatively less stringent standards than 
reflected in today's final rule. Especially without knowing the 
characteristics of a future vehicle choice model, it is difficult to 
anticipate the potential degree to which its inclusion would impact 
analytical outcomes.
    NHTSA invited comment on changes made to the CAFE model prior to 
the NPRM's release, and regarding the above-mentioned prospects for 
inclusion of a vehicle choice model. The agency only received comments 
regarding the possibility of utilizing a vehicle choice model. Two 
environmental organizations--the

[[Page 63012]]

National Resources Defense Council (NRDC) and the Union of Concerned 
Scientists (UCS)--urged the agency not to include any vehicle choice 
model in its analysis, citing concerns regarding uncertainties 
surrounding such models, and in NRDC's case, the potential that use of 
a choice model would lead NHTSA to adopt less stringent standards than 
if the agency continues not to analyze potential market effects.\1117\ 
NRDC argued that vehicle choice models may be useful for analyzing the 
potential result of some market-based policies, but not for standards 
that drive the adoption of technology. NRDC suggested that choice 
models rely on stated and/or revealed preferences that are based only 
on existing vehicles, not a future market in which vehicles widely 
offer higher fuel economy than today's vehicles. On the other hand, the 
American Fuel and Petrochemical Manufacturers (AFPM) expressed concern 
that the proposal was based on an analysis that did not incorporate a 
vehicle choice model, citing this as a serious deficiency that must be 
addressed to properly understand the implications of the 
proposal.\1118\ AFPM suggested that the proposed standards were not 
feasible, and indicated that use of a peer-reviewed consumer choice 
model would show less reliance on HEVs, PHEVs, and EVs, and that a 
corresponding new proposal would assist NHTSA's development of a 
revised proposal that is feasible and coincides with Congress' mandate 
in this area.\1119\ The Alliance supported NHTSA's development of a 
vehicle choice model to inform the planned mid-term evaluation and 
forthcoming rulemaking to establish final standards for MYs 2022-2025, 
stating that such a model should use real-world data, be developed in a 
transparent manner with full peer review, and assess uncertainties in 
its predictions.\1120\ IPI commented that a vehicle choice model should 
incorporate positional goods theory (a theory describing the value of a 
product as significantly determined by the product's value to others), 
and be used to explain why the agency's cost estimates are not likely 
to underestimate consumer welfare losses, but rather predict that the 
cost projections are more likely to be overestimates (because they do 
not reflect that the positional aspect of light vehicles--that is, 
their role in defining owners' ``status''--artificially inflates the 
value of vehicle performance and utility).\1121\
---------------------------------------------------------------------------

    \1117\ NRDC, Docket No EPA-HQ-OAR-2010-0799-9472, at 19, UCS, 
Docket No. EPA-HQ-OAR-2010-0799-9567, at 14.
    \1118\ AFPM, Docket No EPA-HQ-OAR-2010-0799-9485, at 4.
    \1119\ AFPM, at 8.
    \1120\ Alliance, Docket No. NHTSA-2010-0131-0262, at 19.
    \1121\ IPI, Docket No.EPA-HQ-OAR-2010-0799-9480, at 19.
---------------------------------------------------------------------------

    As mentioned above, we do not yet have available a credible vehicle 
choice model suitable for integration with our CAFE modeling system. 
However, we disagree with NRDC's comment that vehicle choice models are 
not useful toward evaluation of standards that drive the adoption of 
technology: market effects are among the range of consequences that--
intended or not--could be real, important, and warranting evaluation. 
NHTSA also disagrees with NRDC's suggestion that that choice models 
based on current vehicles cannot reasonably be applied to future 
vehicle markets, and with UCS's suggestion that application of a choice 
model should be rejected out of hand. While we acknowledge that future 
consumer preferences could be different from those evidenced by 
currently-available data, we disagree that these potential differences 
provide an a priori basis not to use a choice model to estimate 
potential market impacts of fuel economy standards. In our judgment, 
such uncertainties should be instead considered and, as practicable, 
addressed through sensitivity analysis (e.g., to test a choice model's 
sensitivity to changes in defining coefficients). We also disagree with 
NRDC that application of a vehicle choice model would lead the agency 
to adopt less stringent standards. We expect that a choice model would 
show sales shifting among different vehicle models and among 
manufacturers, and that specific characteristics of such shifts would 
depend heavily on different model inputs, not just on standards. While 
such shifts would impact results relevant to consideration of statutory 
factors governing decisions regarding maximum feasible stringency, we 
consider it just as likely that such shifts could support more 
stringent standards as that they could support less stringent 
standards.
    Nor do we agree with AFPM that the proposed standards were beyond 
maximum feasible; the agency's assessment of why the final standards, 
which are identical to the proposed standards, are maximum feasible is 
discussed below in Section IV.F. We do not agree with AFPM that a 
choice model would, by definition, indicate less reliance on HEVs, 
PHEVs, or EVs: a choice model could show shifts either toward such 
technologies or away from such technologies, based on a range of model 
inputs and on comparative implications for specific vehicle models. In 
any event, we also disagree with AFPM's suggestion that such shifts 
would necessarily indicate that maximum feasible standards would be 
less stringent than we proposed in the NPRM and are promulgating today, 
just as we disagree with NRDC's suggestion that application of a choice 
model would lead the agency to promulgate less stringent standards.
    We agree with the Alliance that NHTSA should continue efforts to 
develop a vehicle choice model suitable for integration with the CAFE 
modeling system and application toward informing the planned mid-term 
evaluation and future rulemaking for MYs 2022-2025. NHTSA considers it 
possible that a vehicle choice model would be informed by consideration 
of economic theory regarding ``positional goods,'' and has provided 
copies of IPI's comments on this theory to the U.C. Davis and U.C. 
Irvine researchers supporting NHTSA. However, in our judgment, IPI's 
comments prejudge the applicability, relevance, and implications of 
such theory in this context. Section IV.G, below, discusses IPI's 
comments regarding the theory's relevance to estimates of consumer 
benefits of fuel economy standards.
    The researchers supporting NHTSA in the development of a vehicle 
choice model suitable for use in the analysis of CAFE standards have 
made significant progress collecting and integrating data to support 
the estimation of a choice model, developing options for structuring 
such a model in a manner that allows for integration with DOT's CAFE 
modeling system, and developing and testing algorithms to statistically 
estimate coefficients defining a choice model. NHTSA is hopeful that 
continuation of this effort will lead to development of a vehicle 
choice model that can be integrated with the CAFE modeling system and 
used for CAFE rulemaking analysis.
    In preparation for today's analysis, DOT also made some further 
(i.e., beyond those discussed above) changes to the CAFE modeling 
system. To facilitate external analysis, the CAFE model now produces 
``flat'' text files (comma separated value or ``CSV'', format) as model 
output. DOT also corrected some errors DOT staff identified in the 
version of the model supporting the NPRM, the most significant of which 
include the following: First, the model was corrected to ensure that 
advanced diesel technology is not applied without accounting for 
incremental costs and effects of TURB2, CEGR1, or CEGR2--

[[Page 63013]]

engine technologies placed before diesels on the model's decision tree 
for engine technologies. Second, the model was corrected to ensure that 
when fuel-saving technologies are applied to a flexible fuel vehicle 
(FFV), the vehicle's fuel economy when operating on E85 is increased in 
parallel with its fuel economy when operating on gasoline. Third, the 
model was corrected to ensure that, when calculating the ``effective 
cost'' for purposes of deciding among potential technology 
applications, the model refers to fuel prices estimated to prevail 
after the vehicle's purchase. Further details regarding the model's 
design and operation are presented in the model documentation available 
on NHTSA's Web site.
d. Does the model set the standards?
    Since NHTSA began using the CAFE model in CAFE analysis, some 
commenters have interpreted the agency's use of the model as the way by 
which the agency chooses the maximum feasible fuel economy standards. 
As the agency explained in the final rule establishing CAFE standards 
for MYs 2012-2016, this is incorrect.\1122\ Although NHTSA currently 
uses the CAFE model as a tool to inform its consideration of potential 
CAFE standards, the CAFE model does not determine the CAFE standards 
that NHTSA proposes or promulgates as final regulations. The results it 
produces are completely dependent on inputs selected by NHTSA, based on 
the best available information and data available in the agency's 
estimation at the time standards are set. Ultimately, NHTSA's selection 
of appropriate CAFE standards is governed and guided by the statutory 
requirements of EPCA, as amended by EISA: NHTSA sets the standard at 
the maximum feasible average fuel economy level that it determines is 
achievable during a particular model year, considering technological 
feasibility, economic practicability, the effect of other standards of 
the Government on fuel economy, and the need of the nation to conserve 
energy, among other factors.
---------------------------------------------------------------------------

    \1122\ 75 FR 25600.
---------------------------------------------------------------------------

e. How does NHTSA make the model available and transparent?
    Model documentation, which is publicly available in the rulemaking 
docket and on NHTSA's Web site, explains how the model is installed, 
how the model inputs (all of which are available to the public) \1123\ 
and outputs are structured, and how the model is used. The model can be 
used on any Windows-based personal computer with Microsoft Office 2003 
or 2007 and the Microsoft .NET framework installed (the latter 
available without charge from Microsoft). The executable version of the 
model and the underlying source code are also available at NHTSA's Web 
site. The input files used to conduct the core analysis documented in 
today's final rule are available to the public at Docket No. NHTSA-
2010-0131, which can be accessed at http://www.regulations.gov. With 
the model and these input files, anyone is capable of independently 
running the model to repeat, evaluate, and/or modify the agency's 
analysis.
---------------------------------------------------------------------------

    \1123\ We note, however, that files from any supplemental 
analysis conducted that relied in part on confidential manufacturer 
product plans cannot be made public, see 49 CFR part 512.
---------------------------------------------------------------------------

    Because the model is available on NHTSA's Web site, the agency has 
no way of knowing how widely the model has been used. The agency is, 
however, aware that the model has been used by other federal agencies, 
vehicle manufacturers, private consultants, academic researchers, and 
foreign governments. Some of these individuals have found the model 
complex and challenging to use. Insofar as the model's sole purpose is 
to help DOT staff efficiently analyze potential CAFE standards, DOT has 
not expended significant resources trying to make the model as ``user 
friendly'' as commercial software intended for wide use, but we 
continue to encourage interested parties to contact the agency if they 
encounter difficulties using the model or have questions about it that 
are not answered here or in the model documentation.
    NHTSA arranged for a formal peer review of an older version of the 
model, has responded to reviewers' comments, and has considered and 
responded to model-related comments received over the course of four 
CAFE rulemakings. In the agency's view, this steady and expanding 
outside review over the course of nearly a decade of model development 
has helped DOT to significantly strengthen the model's capabilities and 
technical quality, and has greatly increased transparency, such that 
all model code is publicly available, and all model inputs and outputs 
are publicly available in a form that should allow reviewers to 
reproduce the agency's analysis. NHTSA plans to arrange for a formal 
peer review of the CAFE model after the pending integration of a 
vehicle choice model. All relevant materials will be docketed as part 
of that peer review, and NHTSA expects to re-release a new version of 
the integrated CAFE model once the peer review is completed.

D. Statutory Requirements

1. EPCA, as Amended by EISA
a. Standard Setting
    EPCA, as amended by EISA, contains a number of provisions regarding 
how NHTSA must set CAFE standards. NHTSA must establish separate CAFE 
standards for passenger cars and light trucks \1124\ for each model 
year,\1125\ and each standard must be the maximum feasible that NHTSA 
believes the manufacturers can achieve in that model year.\1126\ When 
determining the maximum feasible level achievable by the manufacturers, 
EPCA requires that the agency consider the four statutory factors of 
technological feasibility, economic practicability, the effect of other 
motor vehicle standards of the Government on fuel economy, and the need 
of the United States to conserve energy.\1127\ In addition, the agency 
has the authority to and traditionally does consider other relevant 
factors, such as the effect of the CAFE standards on motor vehicle 
safety. The ultimate determination of what standards can be considered 
maximum feasible involves a weighing and balancing of these factors, 
and the balance may shift depending on the information before the 
agency about the expected circumstances in the model years covered by 
the rulemaking. Always in conducting that balancing, however, the 
implication of the ``maximum feasible'' requirement is that it calls 
for setting a standard that exceeds what might be the minimum 
requirement if the agency determines that the manufacturers can achieve 
a higher level, and that the agency's decision support the overarching 
purpose of EPCA, energy conservation.\1128\
---------------------------------------------------------------------------

    \1124\ 49 U.S.C. 32902(b)(1).
    \1125\ 49 U.S.C. 32902(a).
    \1126\ Id.
    \1127\ 49 U.S.C. 32902(f).
    \1128\ Center for Biological Diversity v. NHTSA, 538 F.3d 1172, 
1197 (9th Cir. 2008) (``Whatever method it uses, NHTSA cannot set 
fuel economy standards that are contrary to Congress' purpose in 
enacting the EPCA--energy conservation.'').
---------------------------------------------------------------------------

    Besides the requirement that standards be maximum feasible for the 
fleet in question, EPCA/EISA also contains several other requirements. 
The standards must be attribute-based and expressed in the form of a 
mathematical function: NHTSA has thus far based standards on vehicle 
footprint, and for this rulemaking has expressed them in the form of a 
constrained linear function that generally sets higher (more stringent) 
mpg targets for smaller-

[[Page 63014]]

footprint vehicles and lower (less stringent) mpg targets for larger-
footprint vehicles. Second, the standards are subject to a minimum 
requirement regarding stringency: they must be set at levels high 
enough to ensure that the combined U.S. passenger car and light truck 
fleet achieves an average fuel economy level of not less than 35 mpg 
not later than MY 2020.\1129\ Third, between MY 2011 and MY 2020, the 
standards must ``increase ratably'' in each model year.\1130\ This 
requirement does not have a precise mathematical meaning, particularly 
because it must be interpreted in conjunction with the requirement to 
set the standards for each model year at the level determined to be the 
maximum feasible level for that model year. Generally speaking, the 
requirement for ratable increases means that the annual increases 
should not be disproportionately large or small in relation to each 
other. The second and third requirements no longer apply after MY 2020, 
at which point standards must simply be maximum feasible. And fourth, 
EISA requires NHTSA to issue CAFE standards for ``at least 1, but not 
more than 5, model years.'' \1131\ This issue is discussed in section 
IV.A above.
---------------------------------------------------------------------------

    \1129\ 49 U.S.C. 32902(b)(2)(A).
    \1130\ 49 U.S.C. 32902(b)(2)(C).
    \1131\ 49 U.S.C. 32902(b)(3)(B).
---------------------------------------------------------------------------

    Commenters raised a number of issues regarding NHTSA's authority to 
set CAFE standards under EPCA/EISA, which will be discussed throughout 
this section. For example, Securing America's Energy Future (SAFE) 
commented that NHTSA should consider setting CAFE standards in gallons 
per mile rather than miles per gallon, because consumers often do not 
understand mpg and the agency could more effectively incentivize 
alternative fuel vehicles by using gallons per mile, since the 
numerator of ``gallons'' would be zero.\1132\ In response, NHTSA is 
required by statute to set CAFE standards in terms of miles per 
gallon--``fuel economy,'' as expressly defined in EPCA, means ``the 
average number of miles traveled by an automobile for each gallon of 
gasoline (or equivalent amount of other fuel) used.'' \1133\ NHTSA 
agrees that gallons per mile, as a metric, may more accurately describe 
to consumers the fuel savings impacts of their vehicle choices, which 
is why the newly-revised fuel economy and environment label for which 
NHTSA is also responsible under EISA contains a gallons per mile 
metric. NHTSA does not, however, currently have discretion under the 
statute to set CAFE standards in terms of anything but mpg. NHTSA 
agrees with SAFE that changing this requirement would be up to 
Congress. The agency has, however, presented the estimated required mpg 
levels in this final rule in terms of gallons per mile in Section IV.G, 
for the reader's reference.
---------------------------------------------------------------------------

    \1132\ SAFE, Docket No. NHTSA-2010-0131-0259, at 16-18.
    \1133\ 49 U.S.C. 32901(a)(10).
---------------------------------------------------------------------------

    Two commenters, CBD and ICCT, stated that the agencies should set a 
single footprint curve for both passenger cars and light trucks, to 
avoid manufacturers deliberately classifying their vehicles as light 
trucks in order to obtain a less stringent target.\1134\ Ford, in 
contrast, commented in support of separate footprint curves for 
passenger cars and light trucks, providing the example of the different 
towing (and thus fuel economy) capabilities of the Ford Taurus (a 
passenger car) and the Ford Edge (a light truck) as a reason why 
targets should be different for cars and trucks even if they have the 
same footprint.\1135\ NHTSA continues to interpret the clear statutory 
requirement that separate standards be set for passenger cars and for 
light trucks in each model year \1136\ as indicating Congress' intent 
that the separate standards reflect the distinct capabilities of those 
fleets of vehicles, particularly given that NHTSA must balance the four 
statutory factors each time it determines maximum feasible average fuel 
economy.\1137\ Given that requirement, if a consistent approach to 
balancing is taken for the separate passenger car and light truck 
fleets, then the agency believes that the passenger car and light truck 
standards in a given model year could only be identical (in terms of 
both the shape of the function and the given mpg values at each 
footprint target) if the capabilities of each fleet happened to be 
identical, which is highly unlikely given the differences between those 
fleets. To the extent that CBD and ICCT mean to comment on the related 
question of the classification of vehicles as passenger cars or light 
trucks, those issues will be addressed in Section IV.H below.
---------------------------------------------------------------------------

    \1134\ CBD, Docket No. NHTSA-2010-0131-0255, at 17; ICCT, Docket 
No. NHTSA-2010-0131-0258, at 50-51.
    \1135\ Ford, Docket No. NHTSA-2010-0131-0235, at 8.
    \1136\ 49 U.S.C. 32902(b)(1)(A) and (b)(1)(B); 32902(b)(2)(A), 
etc.
    \1137\ 49 U.S.C. 32902(g).
---------------------------------------------------------------------------

    CBD also expressed concern that the fleet would not meet the 
required 35 mpg average in 2020 because the standards would encourage 
manufacturers to build larger passenger cars and light trucks, which 
would lower the overall achieved levels given the attribute-based 
nature of the standards.\1138\ It is true that attribute-based 
standards do not, by themselves, guarantee that the industry will 
achieve a particular mpg level, but NHTSA disagrees that the proposed 
standards (and the final standards, which are identical to the 
proposal) create any incentive for manufacturers to essentially 
backslide as CBD suggests. The MY 2010 unadjusted composite fleet fuel 
economy, according to EPA, is a record high 28.3 miles per 
gallon.\1139\ Market trends indicate that as fuel prices remain high 
and as manufacturers are providing more and more vehicle offerings with 
better fuel economy, consumers are responding by prioritizing fuel 
economy, and its associated cost savings, as a key purchase 
consideration.\1140\ Even under the agency's analysis, which is based 
on market forecasts purchased in 2009 and 2011, and therefore may not 
fully incorporate the most recent trends, we currently estimate that 
manufacturers will achieve an average fleet fuel economy of 33.9-34.1 
mpg by MY 2016, and of 39.9-40.8 mpg by MY 2020. We have also evaluated 
the extent to which we believe the target curves might incentivize 
vehicle upsizing beyond what the market could demand--see Section II.C 
and Chapter 2 of the joint TSD--and we continue to disagree that this 
is likely.
---------------------------------------------------------------------------

    \1138\ CBD, Docket No. NHTSA-2010-0131-0255, at 15.
    \1139\ ``Light-Duty Automotive Technology, Carbon Dioxide 
Emissions, and Fuel Economy Trends: 1975 Through 2011,'' at iv. 
Available at http://www.epa.gov/oms/cert/mpg/fetrends/2012/420r12001a.pdf (last accessed July 11, 2012).
    \1140\ ``Fuel Economy, GHG, Other Emissions, and Alternative 
Fuels Consumer Education Program: Quantitative Survey Report,'' 
available at Docket No. NHTSA-2011-0126.
---------------------------------------------------------------------------

    Moreover, NHTSA has the authority to revise CAFE standards at any 
time, up or down, given sufficient lead-time. If the market changes to 
the extent feared by CBD, it is well within NHTSA's authority to revise 
the standards to ensure that the 35 mpg fleetwide achieved levels 
occur--indeed, we believe that is what Congress intended. Thus, we 
disagree that the final standards would be likely to result in 
fleetwide average fuel economy levels that fall below the 35-in-2020 
requirement.
    CBD further commented that NHTSA's proposed truck standards did not 
increase ratably, because the targets for the largest light trucks 
remain the same for several years, and because the average increase in 
stringency for light trucks is ``a mere 0.6 mpg * * * per year from 
2017 to 2020,'' and then ``jump[s] to 2.1 mpg in 2021, a near four-fold 
increase, and stays in a higher

[[Page 63015]]

range for the remaining rulemaking period * * *.'' \1141\ Because those 
increases did not meet the agency's definition of ratable as 
``increases that are not disproportionately large or small in relation 
to each other,'' either temporally or between passenger cars and light 
trucks, CBD argued that NHTSA had failed to propose ratable 
standards.\1142\ CBD mistakes the statutory requirement: EISA clearly 
states that standards must only increase ratably ``beginning with model 
year 2011 and ending with model year 2020.'' \1143\ Thus, if the 
standards increase at different rates between 2017-2020 and 2021 and 
thereafter, as long as they are maximum feasible, there is no other 
statutory requirement with respect to the rate of their increase. NHTSA 
explained above that the agency interprets the requirement for ratable 
increases to mean that the annual increases should not be 
disproportionately large or small in relation to each other. NHTSA 
believes that the increases in light truck stringency from 2017-2020 
are indeed ratable, increasing slowly but proportionately during those 
model years at rates between 0.2 and 0.6 mpg. It is also an inaccurate 
reading of the statute to focus on increases in target stringency for a 
particular subset of vehicles--the increases that must be ratable are 
increases in the standards, and the standards are corporate average 
requirements that apply to the fleet as a whole, not to particular 
subsets of the fleet, or even to every subset of the fleet. Moreover, 
the plain language of the statute indicates that the question of 
whether increases are ratable applies separately to cars and trucks--
that is, the question is not whether increases in stringency for cars 
are ratable compared to increases in stringency for trucks, or vice 
versa, but only whether the increases in stringency for cars (or for 
trucks) are themselves ratable. 49 U.S.C. 32902(b)(2)(C) states that 
NHTSA ``shall prescribe annual fuel economy standard increases that 
increase the applicable average fuel economy standard ratably * * *.'' 
Average fuel economy standards are set separately for (are separately 
applicable to) passenger cars and light trucks. NHTSA therefore 
disagrees that Congress intended for the ratable requirement to apply 
between cars and trucks rather than within cars and within trucks 
separately.
---------------------------------------------------------------------------

    \1141\ Id., at 10.
    \1142\ Id.
    \1143\ 49 U.S.C. 32902(b)(2)(C).
---------------------------------------------------------------------------

    The following sections discuss the statutory factors behind 
``maximum feasible'' in more detail.
i. Statutory Factors Considered in Determining the Achievable Level of 
Average Fuel Economy
    As none of the four factors is defined in EPCA and each remains 
interpreted only to a limited degree by case law, NHTSA has 
considerable latitude in interpreting them. NHTSA interprets the four 
statutory factors as set forth below.
(1) Technological Feasibility
    ``Technological feasibility'' refers to whether a particular 
technology for improving fuel economy is available or can become 
available for commercial application in the model year for which a 
standard is being established. Thus, the agency is not limited in 
determining the level of new standards to technology that is already 
being commercially applied at the time of the rulemaking. It can, 
instead, set technology-forcing standards, i.e., ones that make it 
necessary for manufacturers to engage in research and development in 
order to bring a new technology to market. There are certain 
technologies that the agency has considered for this rulemaking, for 
example, that we know to be in the research phase now but which we are 
fairly confident can be commercially applied by the rulemaking 
timeframe, and very confident by the end of the rulemaking timeframe.
    CBD commented that given the extended timeframe of the rulemaking, 
NHTSA must set technology forcing standards. CBD argued that standards 
set so far in advance could not reasonably be set based on technology 
already in use today or projected to be in use a few years from today, 
and that NHTSA is required to drive technology innovation and force 
manufacturers to invent new technologies.\1144\ CBD further argued that 
uncertainty about future technologies is not an excuse for failing to 
set more technology-forcing standards, and the agency should ``assess 
those uncertainties within reasonable ranges, and include the clearly 
foreseeable impact of technological innovations rather than to 
disregard research-stage technology altogether,'' by assuming that 
technological innovation in the rulemaking timeframe will proceed at 
the same rate as it has in the past decade.\1145\ NADA, in contrast, 
commented that technological feasibility directly relates to what 
manufacturers can accomplish and when they can accomplish it, and that 
the further in the future the standards are set, the less likely NHTSA 
is to have credible information to accurately predict technological 
feasibility.\1146\ NADA therefore argued that setting standards too far 
in advance significantly increases the risk that they will turn out to 
be technologically infeasible.\1147\
---------------------------------------------------------------------------

    \1144\ CBD, Docket No. NHTSA-2010-0131-0255, at 5.
    \1145\ CBD, Docket No. NHTSA-2010-0131-0255, at 20.
    \1146\ NADA, Docket No. NHTSA-2010-0131-0261, at 11.
    \1147\ Id.
---------------------------------------------------------------------------

    NHTSA agrees with CBD that given the timeframe of the rulemaking, 
the technological feasibility factor may encourage the agency to look 
toward more technology-forcing standards, which could certainly be 
appropriate given EPCA's overarching purpose of energy conservation 
depending on the rulemaking. For example, in the analysis for this 
final rule, the agency is projecting that manufacturers could meet the 
standards by using research-stage high Brake Mean Effective Pressure 
engines across a significant portion of the fleet by MY 2021. At the 
same time, however, it would not be reasonable for the agency to 
predicate stringency on completely unforeseen future improvements in 
unknown technologies. It is important to remember that technological 
feasibility must also be balanced with the other of the four statutory 
factors. Thus, while ``technological feasibility'' can drive standards 
higher by assuming the use of technologies that are not yet commercial, 
``maximum feasible'' is still also defined in terms of economic 
practicability, for example, which might caution the agency against 
basing standards (even fairly distant future standards) entirely on 
such technologies. NHTSA believes that this is what NADA refers to by 
arguing that setting the standards too far in advance could result in 
standards that are technologically infeasible, which we do not believe 
we have done in this rulemaking. By setting standards at levels 
consistent with an analysis that assumes the use of these nascent 
technologies at levels that seem reasonable, the agency believes a more 
reasonable balance is ensured. Nevertheless, as the ``maximum 
feasible'' balancing may vary depending on the circumstances at hand 
for the model years in which the standards are set, the extent to which 
technological feasibility is simply met or plays a more dynamic role 
may also shift. Moreover, as will be true for all of the factors, NHTSA 
will have the opportunity to revisit the technological feasibility of 
the augural MYs 2022-2025 standards in the future rulemaking concurrent 
with the mid-term evaluation.

[[Page 63016]]

(2) Economic Practicability
    ``Economic practicability'' refers to whether a standard is one 
``within the financial capability of the industry, but not so stringent 
as to'' lead to ``adverse economic consequences, such as a significant 
loss of jobs or the unreasonable elimination of consumer choice.'' 
\1148\ The agency has explained in the past that this factor can be 
especially important during rulemakings in which the automobile 
industry is facing significantly adverse economic conditions (with 
corresponding risks to jobs). Consumer acceptability is also an element 
of economic practicability, one which is particularly difficult to 
gauge during times of uncertain fuel prices.\1149\ In a rulemaking such 
as the present one, looking out into the more distant future, economic 
practicability is a way to consider the uncertainty surrounding future 
market conditions and consumer demand for fuel economy in addition to 
other vehicle attributes. In an attempt to ensure the economic 
practicability of attribute-based standards, NHTSA considers a variety 
of factors, including the annual rate at which manufacturers can 
increase the percentage of their fleet that employ a particular type of 
fuel-saving technology, the specific fleet mixes of different 
manufacturers, and assumptions about the cost of the standards to 
consumers and consumers' valuation of fuel economy, among other things.
---------------------------------------------------------------------------

    \1148\ 67 FR 77015, 77021 (Dec. 16, 2002).
    \1149\ See, e.g., Center for Auto Safety v. NHTSA (CAS), 793 
F.2d 1322 (D.C. Cir. 1986) (Administrator's consideration of market 
demand as component of economic practicability found to be 
reasonable); Public Citizen v. NHTSA, 848 F.2d 256 (Congress 
established broad guidelines in the fuel economy statute; agency's 
decision to set lower standard was a reasonable accommodation of 
conflicting policies).
---------------------------------------------------------------------------

    At the same time, however, the law does not preclude a CAFE 
standard that poses considerable challenges to any individual 
manufacturer. The Conference Report for EPCA, as enacted in 1975, makes 
clear, and the case law affirms, ``(A) determination of maximum 
feasible average fuel economy should not be keyed to the single 
manufacturer which might have the most difficulty achieving a given 
level of average fuel economy.'' \1150\ Instead, the agency is 
compelled ``to weigh the benefits to the nation of a higher fuel 
economy standard against the difficulties of individual automobile 
manufacturers.'' \1151\ The law permits CAFE standards exceeding the 
projected capability of any particular manufacturer as long as the 
standard is economically practicable for the industry as a whole. Thus, 
while a particular CAFE standard may pose difficulties for one 
manufacturer, it may also present opportunities for another. NHTSA has 
long held that the CAFE program is not necessarily intended to maintain 
the relative competitive positioning of each particular company. 
Rather, it is intended to enhance the fuel economy of the vehicle fleet 
on American roads, while protecting motor vehicle safety and being 
mindful of the risk to the overall United States economy.
---------------------------------------------------------------------------

    \1150\ CEI-I, 793 F.2d 1322, 1352 (D.C. Cir. 1986).
    \1151\ Id.
---------------------------------------------------------------------------

    Consequently, ``economic practicability'' must be considered in the 
context of the competing concerns associated with different levels of 
standards. Prior to the MY 2005-2007 rulemaking, the agency generally 
sought to ensure the economic practicability of standards in part by 
setting them at or near the capability of the ``least capable 
manufacturer'' with a significant share of the market, i.e., typically 
the manufacturer whose vehicles were, on average, the heaviest and 
largest. In the first several rulemakings establishing attribute-based 
standards, the agency applied marginal cost-benefit analysis. This 
ensured that the agency's application of technologies was limited to 
those technologies that would pay for themselves and thus should have 
significant appeal to consumers. We note that for this rulemaking, the 
agency can and has limited its application of technologies to those 
that are projected to be cost-effective within the rulemaking time 
frame, with or without the use of such analysis.
    Whether the standards maximize net benefits has thus been a 
touchstone in the past for NHTSA's consideration of economic 
practicability. Executive Order 12866, as amended by Executive Order 
13563, states that agencies should ``select, in choosing among 
alternative regulatory approaches, those approaches that maximize net 
benefits * * *.'' In practice, however, agencies, including NHTSA, must 
consider situations in which the modeling of net benefits does not 
capture all of the relevant considerations of feasibility. In this 
case, the NHTSA balancing of the statutory factors, discussed in 
Section IV.F below, suggests that the maximum feasible stringency for 
this rulemaking points to another level besides the modeled net 
benefits maximum, and such a situation is well within the guidance 
provided by Executive Orders 12866 and 13563.\1152\
---------------------------------------------------------------------------

    \1152\ See 70 FR 51435 (Aug. 30, 2005); CBD v. NHTSA, 538 F.3d 
at 1197 (9th Cir. 2008).
---------------------------------------------------------------------------

    The agency's consideration of economic practicability depends on a 
number of factors. Expected availability of capital to make investments 
in new technologies matters; manufacturers' expected ability to sell 
vehicles with new technologies matters; likely consumer choices matter; 
and so forth. NHTSA's analysis of the impacts of this rulemaking does 
incorporate assumptions to capture aspects of consumer preferences, 
vehicle attributes, safety, and other factors relevant to an impacts 
estimate; however, it is difficult to capture every such constraint. 
Therefore, it is well within the agency's discretion to deviate from 
the level at which modeled net benefits are maximized in the face of 
evidence of economic impracticability, and if the agency concludes that 
the level at which modeled net benefits are maximized would not 
represent the maximum feasible level for future CAFE standards. 
Economic practicability is a complex factor, and like the other factors 
must also be considered in the context of the overall balancing and 
EPCA's overarching purpose of energy conservation. Depending on the 
conditions of the industry and the assumptions used in the agency's 
analysis of alternative stringencies, NHTSA could well find that 
standards that maximize net benefits, or that are higher or lower, 
could be at the limits of economic practicability, and thus potentially 
the maximum feasible level, depending on the other factors to be 
balanced.
    Comments varied on whether the proposed standards were at, or above 
or below, the limits of economic practicability. CBD suggested that the 
proposed standards were below the economically practicable levels, 
commenting that NHTSA had unduly focused on consumer choice in 
tentatively determining the proposed maximum feasible standards, and 
that the agency should not be seeking through its stringency 
determination to preserve the same mix of vehicles that are currently 
in the marketplace or the current mix of vehicle attributes available 
to consumers.\1153\ CBD stated that the purpose of EPCA/EISA is to 
drive market forces ``toward the conservation of energy,'' and that 
instead, NHTSA had proposed standards ``that will create the market 
forces that drive increased production of the least energy efficient 
vehicles on our highways.'' \1154\ CBD further argued that the fact 
that the rulemaking's benefits

[[Page 63017]]

``exceed its costs by hundreds of billions of dollars'' was evidence 
that NHTSA had ``left substantial, achievable fuel economy improvements 
and public benefits unrealized due to industry objections,'' which was 
contrary to EPCA/EISA.\1155\
---------------------------------------------------------------------------

    \1153\ CBD, Docket No. NHTSA-2010-0131-0255, at 4.
    \1154\ Id., at 12-13.
    \1155\ Id., at 8.
---------------------------------------------------------------------------

    Growth Energy (a biofuels company) and NADA, in contrast, argued 
that the standards may be beyond the limits of economic practicability. 
Growth Energy argued that the proposed standards' feasibility depended 
heavily on sales of grid-electricity-powered vehicles, the cost of 
which Growth Energy argued the agencies had underestimated.\1156\ Given 
that the agencies had, in its view, underestimated the costs of 
implementing such a crucial technology, Growth Energy argued that NHTSA 
could not establish the economic practicability of the proposed 
standards. NADA argued more generally that while it was confident that 
manufacturers would be able to ``research, design, manufacture, and 
incorporate technologies and designs aimed to meet the proposed 
standards, serious questions exist regarding whether they will be able 
to do so in a cost effective or economically practicable manner.'' 
\1157\ Therefore, NADA argued, given how many variables are involved 
with the reasonable modeling of economic practicability, such as fuel 
costs, materials costs, general economic conditions, interest rates, 
and so forth, standards should be set only for MYs 2017-2021, and not 
for MYs 2022-2025.
---------------------------------------------------------------------------

    \1156\ Growth Energy, Docket No. EPA-HQ-OAR-2010-0799-9540, at 
2.
    \1157\ NADA, Docket No. NHTSA-2010-0131-0261, at 11.
---------------------------------------------------------------------------

    NHTSA agrees that many variables are involved in assessing economic 
practicability, and, as required by statute, is setting final standards 
only for MYs 2017-2021. That said, NHTSA does not believe that the 
consideration of consumer demand for fuel economy during the rulemaking 
timeframe leads, in any way, to the standards being below the maximum 
feasible level. As the Ninth Circuit has noted, NHTSA may consider 
consumer demand, as long as it does not ``rely on consumer demand to 
such an extent that it ignore[s] the overarching goal of energy 
conservation.'' \1158\ As the D.C. Circuit has held, however, ``[a]t 
the other extreme, a standard with harsh economic consequences for the 
auto industry also would represent an unreasonable balancing of EPCA's 
policies.'' \1159\ By the test of whether the standards conserve 
energy, there can be no question that they do: NHTSA estimates that the 
final standards for MYs 2017-2021 will save 65-67 billion gallons of 
fuel over the lifetimes of the vehicles subject to those standards, and 
when combined with the augural standards for MYs 2022-2025, that number 
rises to 169-171 billion gallons. This would be more than a decade's 
total petroleum imports from Venezuela, for example.\1160\ By the test 
of whether more stringent standards would conserve more energy, our 
analysis suggests that they would, but they could only do so if 
manufacturers are able to sell the vehicles that they build to meet 
those higher standards. As discussed below in Section IV.F, NHTSA 
continues to believe that the evidence presented by manufacturers 
during the summer of 2011 warrants consideration in choosing the 
appropriate levels of the final standards. Therefore, the agency cannot 
reasonably avoid consideration of consumer demand as part of its 
analysis of economic practicability, and thus as part of its analysis 
of what standards will be maximum feasible.
---------------------------------------------------------------------------

    \1158\ CBD v. NHTSA, 538 F.3d 1172, 1197 (9th Cir. 2008).
    \1159\ Center for Auto Safety v. NHTSA, 793 F.2d 1322, 1340 
(D.C. Cir. 1986).
    \1160\ EIA indicates U.S. imports of Venezuelan crude oil and 
petroleum products averaged 912 thousand barrels per day in 2011. 
(Data obtained July 12, 2012 from http://www.eia.gov/dnav/pet/pet_move_neti_dc_NUS-NVE_mbblpd_a.htm).
---------------------------------------------------------------------------

    NHTSA also notes that Growth Energy's comment is misplaced--grid-
electricity-powered vehicles do not play such a significant role in the 
agency's analysis. In fact, our analysis assumes that in order to meet 
the standards, the industry as a whole need produce no grid-powered 
PHEVs or EVs in MY 2021, and only up to 3 percent in MY 2025. Moreover, 
NHTSA is statutorily prohibited from considering the fuel economy of 
dedicated alternative fuel vehicles like EVs in determining the maximum 
feasible levels of the standards, so manufacturers' ability to sell EVs 
is actually irrelevant to our determination of stringency. Thus, NHTSA 
disagrees that the standards are not economically practicable because 
they ``rely too heavily'' on PHEVs and EVs.
(3) The Effect of Other Motor Vehicle Standards of the Government on 
Fuel Economy
    ``The effect of other motor vehicle standards of the Government on 
fuel economy,'' involves an analysis of the effects of compliance with 
emission, safety, noise, or damageability standards on fuel economy 
capability and thus on average fuel economy. In previous CAFE 
rulemakings, the agency has said that pursuant to this provision, it 
considers the adverse effects of other motor vehicle standards on fuel 
economy. It said so because, from the CAFE program's earliest years 
\1161\ until present, the effects of such compliance on fuel economy 
capability over the history of the CAFE program have been negative 
ones. In those instances in which the effects are negative, NHTSA has 
said that it is called upon to ``mak[e] a straightforward adjustment to 
the fuel economy improvement projections to account for the impacts of 
other Federal standards, principally those in the areas of emission 
control, occupant safety, vehicle damageability, and vehicle noise. 
However, only the unavoidable consequences should be accounted for. The 
automobile manufacturers must be expected to adopt those feasible 
methods of achieving compliance with other Federal standards which 
minimize any adverse fuel economy effects of those standards.'' \1162\ 
For example, safety standards that have the effect of increasing 
vehicle weight lower vehicle fuel economy capability and thus decrease 
the level of average fuel economy that the agency can determine to be 
feasible.
---------------------------------------------------------------------------

    \1161\ 42 FR 63184, 63188 (Dec. 15, 1977). See also 42 FR 33534, 
33537 (Jun. 30, 1977).
    \1162\ 42 FR 33534, 33537 (Jun. 30, 1977).
---------------------------------------------------------------------------

    The ``other motor vehicle standards'' consideration has thus in 
practice functioned in a fashion similar to the provision in EPCA, as 
originally enacted, for adjusting the statutorily-specified CAFE 
standards for MY 1978-1980 passengers cars.\1163\ EPCA did not permit 
NHTSA to amend those standards based on a finding that the maximum 
feasible level of average fuel economy for any of those three years was 
greater or less than the standard specified for that year. Instead, it 
provided that the agency could only reduce the standards and only on 
one basis: if the agency found that there had been a Federal standards 
fuel economy reduction, i.e., a reduction in fuel economy due to 
changes in the Federal vehicle standards, e.g., emissions and safety, 
relative to the year of enactment, 1975.
---------------------------------------------------------------------------

    \1163\ That provision was deleted as obsolete when EPCA was 
codified in 1994.
---------------------------------------------------------------------------

    The ``other motor vehicle standards'' provision is broader than the 
Federal standards fuel economy reduction provision. Although the 
effects analyzed to date under the ``other motor vehicle standards'' 
provision have been negative, there could be circumstances in which the 
effects are positive. In the event that the agency encountered such

[[Page 63018]]

circumstances, it would be required to consider those positive effects. 
For example, if changes in vehicle safety technology led to NHTSA's 
amending a safety standard in a way that permits manufacturers to 
reduce the weight added in complying with that standard, that weight 
reduction would increase vehicle fuel economy capability and thus 
increase the level of average fuel economy that could be determined to 
be feasible.
    In the wake of Massachusetts v. EPA and of EPA's endangerment 
finding, granting of a waiver to California for its motor vehicle GHG 
standards, and its own establishment of GHG standards, NHTSA is 
confronted with the issue of how to treat those standards under EPCA/
EISA, such as in the context of the ``other motor vehicle standards'' 
provision. To the extent the GHG standards result in increases in fuel 
economy, they would do so almost exclusively as a result of inducing 
manufacturers to install the same types of technologies used by 
manufacturers in complying with the CAFE standards.
    NHTSA sought comment on whether and in what way the effects of the 
California and EPA standards should be considered under EPCA/EISA, 
e.g., under the ``other motor vehicle standards'' provision, consistent 
with NHTSA's independent obligation under EPCA/EISA to issue CAFE 
standards. The Sierra Club commented in response, and stated that ``the 
process of joint standard setting with California and EPA carries out 
the Mass. v. EPA decision.'' \1164\ Thus, NHTSA believes that further 
consideration of this issue is unnecessary.
---------------------------------------------------------------------------

    \1164\ Sierra Club et al., Docket No. EPA-HQ-OAR-2010-0799-9549, 
at 10.
---------------------------------------------------------------------------

(4) The Need of the United States To Conserve Energy
    ``The need of the United States to conserve energy'' means ``the 
consumer cost, national balance of payments, environmental, and foreign 
policy implications of our need for large quantities of petroleum, 
especially imported petroleum.'' \1165\ Environmental implications 
principally include those associated with reductions in emissions of 
criteria pollutants and CO2. A prime example of foreign 
policy implications are energy independence and energy security 
concerns.
---------------------------------------------------------------------------

    \1165\ 42 FR 63184, 63188 (1977).
---------------------------------------------------------------------------

ii. Fuel Prices and the Value of Saving Fuel
    Projected future fuel prices are a critical input into the economic 
analysis of alternative CAFE standards, because they determine the 
value of fuel savings both to new vehicle buyers and to society, which 
is related to the consumer cost (or rather, benefit) of our need for 
large quantities of petroleum. In this rule, NHTSA relies on fuel price 
projections from the U.S. Energy Information Administration's (EIA) 
Annual Energy Outlook (AEO) 2012 Early Release for this analysis. 
Federal government agencies generally use EIA's projections in their 
assessments of future energy-related policies. A number of commenters 
discussed our use of the AEO in the proposal, generally stating that we 
should use a higher price forecast; these comments and NHTSA's response 
are discussed fully in Section IV.C.3 above.
iii. Petroleum Consumption and Import Externalities
    U.S. consumption and imports of petroleum products impose costs on 
the domestic economy that are not reflected in the market price for 
crude petroleum, or in the prices paid by consumers of petroleum 
products such as gasoline. These costs include (1) higher prices for 
petroleum products resulting from the effect of U.S. oil import demand 
on the world oil price; (2) the risk of disruptions to the U.S. economy 
caused by sudden reductions in the supply of imported oil to the U.S.; 
and (3) expenses for maintaining a U.S. military presence to secure 
imported oil supplies from unstable regions, and for maintaining the 
strategic petroleum reserve (SPR) to provide a response option should a 
disruption in commercial oil supplies threaten the U.S. economy, to 
allow the United States to meet part of its International Energy Agency 
obligation to maintain emergency oil stocks, and to provide a national 
defense fuel reserve. Higher U.S. imports of crude oil or refined 
petroleum products increase the magnitude of these external economic 
costs, thus increasing the true economic cost of supplying 
transportation fuels above the resource costs of producing them. 
Conversely, reducing U.S. imports of crude petroleum or refined fuels 
or reducing fuel consumption can reduce these external costs. A number 
of commenters raised the issue of petroleum consumption and import 
externalities; these comments and NHTSA's response are discussed fully 
in Section IV.C.3 above.
iv. Air Pollutant Emissions
    While reductions in domestic fuel refining and distribution that 
result from lower fuel consumption will reduce U.S. emissions of 
various pollutants, additional vehicle use associated with the rebound 
effect \1166\ from higher fuel economy will increase emissions of these 
pollutants. Thus, the net effect of stricter CAFE standards on 
emissions of each pollutant depends on the relative magnitudes of its 
reduced emissions in fuel refining and distribution, and increases in 
its emissions from vehicle use.\1167\ Fuel savings from stricter CAFE 
standards also result in lower emissions of CO2, the main 
greenhouse gas emitted as a result of refining, distribution, and use 
of transportation fuels. Reducing fuel consumption reduces carbon 
dioxide emissions directly, because the primary source of 
transportation-related CO2 emissions is fuel combustion in 
internal combustion engines. A number of commenters noted this point as 
well, and cited the agencies' estimates of the considerable GHG-
reducing benefits of the proposed standards.
---------------------------------------------------------------------------

    \1166\ The ``rebound effect'' refers to the tendency of drivers 
to drive their vehicles more as the cost of doing so goes down, as 
when fuel economy improves.
    \1167\ See Section IV.G below for NHTSA's evaluation of this 
effect.
---------------------------------------------------------------------------

    NHTSA has considered environmental issues, both within the context 
of EPCA and the National Environmental Policy Act, in making decisions 
about the setting of standards from the earliest days of the CAFE 
program. As courts of appeal have noted in three decisions stretching 
over the last 20 years,\1168\ NHTSA defined the ``need of the Nation to 
conserve energy'' in the late 1970s as including ``the consumer cost, 
national balance of payments, environmental, and foreign policy 
implications of our need for large quantities of petroleum, especially 
imported petroleum.'' \1169\ In 1988, NHTSA included climate change 
concepts in its CAFE notices and prepared its first environmental 
assessment addressing that subject.\1170\ It cited concerns about 
climate change as one of its reasons for limiting the extent of its 
reduction of the CAFE standard for MY 1989 passenger cars.\1171\ Since 
then, NHTSA has considered the benefits of reducing tailpipe carbon 
dioxide emissions in its fuel economy rulemakings pursuant to the 
statutory requirement to consider

[[Page 63019]]

the nation's need to conserve energy by reducing fuel consumption.
---------------------------------------------------------------------------

    \1168\ Center for Auto Safety v. NHTSA, 793 F.2d 1322, 1325 n. 
12 (D.C. Cir. 1986); Public Citizen v. NHTSA, 848 F.2d 256, 262-3 n. 
27 (D.C. Cir. 1988) (noting that ``NHTSA itself has interpreted the 
factors it must consider in setting CAFE standards as including 
environmental effects''); and Center for Biological Diversity v. 
NHTSA, 538 F.3d 1172 (9th Cir. 2007).
    \1169\ 42 FR 63184, 63188 (Dec. 15, 1977).
    \1170\ 53 FR 33080, 33096 (Aug. 29, 1988).
    \1171\ 53 FR 39275, 39302 (Oct. 6, 1988).
---------------------------------------------------------------------------

v. Other Factors Considered by NHTSA
    The agency historically has considered the potential for adverse 
safety consequences in setting CAFE standards. This practice is 
recognized approvingly in case law. As the courts have recognized, 
``NHTSA has always examined the safety consequences of the CAFE 
standards in its overall consideration of relevant factors since its 
earliest rulemaking under the CAFE program.'' Competitive Enterprise 
Institute v. NHTSA, 901 F.2d 107, 120 n. 11 (DC Cir. 1990) (``CEI I'') 
(citing 42 FR 33534, 33551 (June 30, 1977)). The courts have 
consistently upheld NHTSA's implementation of EPCA in this manner. See, 
e.g., Competitive Enterprise Institute v. NHTSA, 956 F.2d 321, 322 (DC 
Cir. 1992) (``CEI II'') (in determining the maximum feasible fuel 
economy standard, ``NHTSA has always taken passenger safety into 
account.'') (citing CEI I, 901 F.2d at 120 n. 11); Competitive 
Enterprise Institute v. NHTSA, 45 F.3d 481, 482-83 (DC Cir. 1995) 
(``CEI III'') (same); Center for Biological Diversity v. NHTSA, 538 
F.3d 1172, 1203-04 (9th Cir. 2008) (upholding NHTSA's analysis of 
vehicle safety issues associated with weight in connection with the MY 
2008-11 light truck CAFE rule). Thus, in evaluating what levels of 
stringency would result in maximum feasible standards, NHTSA assesses 
the potential safety impacts and considers them in balancing the 
statutory considerations and to determine the maximum feasible level of 
the standards.
    Under the universal or ``flat'' CAFE standards that NHTSA was 
previously authorized to establish, manufacturers were encouraged to 
respond to higher standards by building smaller, less safe vehicles in 
order to ``balance out'' the larger, safer vehicles that the public 
generally preferred to buy, which resulted in a higher mass 
differential between the smallest and the largest vehicles, with a 
correspondingly greater risk to safety. Under the attribute-based 
standards being established today, that risk is reduced because 
building smaller vehicles would tend to raise a manufacturer's overall 
CAFE obligation, rather than only raising its fleet average CAFE, and 
because all vehicles are required to continue improving their fuel 
economy. In prior rulemakings, NHTSA limited the application of mass 
reduction in our modeling analysis to vehicles over 5,000 lbs 
GVWR,\1172\ but for purposes of today's final standards, NHTSA has 
revised its modeling analysis to allow some application of mass 
reduction for most types of vehicles, although it is concentrated in 
the largest and heaviest vehicles, because we believe that this is more 
consistent with how manufacturers will actually respond to the 
standards. However, as discussed above, NHTSA does not mandate the use 
of any particular technology by manufacturers in meeting the standards. 
A number of commenters raised issues related to the potential safety 
effects of the CAFE standards and on the agency's approach to mass 
reduction. More information on the approach to modeling manufacturer 
use of mass reduction is available in Chapter 3 of the Joint TSD and in 
Chapter V of the FRIA; and the estimated safety effects that may be due 
to the final MY 2017-2021 CAFE standards and augural MY 2022-2025 CAFE 
standards are described in Section II.G above and Section IV.G below.
---------------------------------------------------------------------------

    \1172\ See 74 FR 14396-14407 (Mar. 30, 2009).
---------------------------------------------------------------------------

vi. Factors That NHTSA Is Prohibited From Considering
    EPCA also provides that in determining the level at which it should 
set CAFE standards for a particular model year, NHTSA may not consider 
the ability of manufacturers to take advantage of several EPCA 
provisions that facilitate compliance with the CAFE standards and 
thereby reduce the costs of compliance.\1173\ As discussed further 
below, manufacturers can earn compliance credits by exceeding the CAFE 
standards and then use those credits to achieve compliance in years in 
which their measured average fuel economy falls below the standards. 
EPCA also provides that manufacturers can increase their CAFE levels 
through MY 2019 by producing dual-fueled alternative fuel vehicles. 
EPCA provides an incentive for producing these vehicles by specifying 
that their fuel economy is to be determined using a special calculation 
procedure that results in those vehicles being assigned a high fuel 
economy level.
---------------------------------------------------------------------------

    \1173\ 49 U.S.C. 32902(h).
---------------------------------------------------------------------------

    The effect of the prohibitions against considering these statutory 
flexibilities in setting the CAFE standards is that the flexibilities 
remain voluntarily-employed measures. If the agency were instead to 
assume manufacturer use of those flexibilities in setting new 
standards, that assumption would result in higher standards and thus 
tend to require manufacturers to use those flexibilities. By keeping 
NHTSA from including them in our stringency determination, the 
provision ensures that the statutory credits described above remain 
true compliance flexibilities.
    On the other hand, NHTSA does not believe that flexibilities other 
than those expressly identified in EPCA are similarly prohibited from 
being included in the agency's determination of what standards would be 
maximum feasible. In order to better meet EPCA's overarching purpose of 
energy conservation, the agency has therefore considered manufacturers' 
ability to increase the calculated fuel economy levels of their 
vehicles through A/C efficiency improvements, as finalized by EPA, in 
the presented CAFE stringency levels for passenger cars and light 
trucks for MYs 2017-2025. NHTSA similarly considers manufacturers' 
ability to raise their fuel economy using off-cycle technologies as 
potentially relevant to our determination of maximum feasible CAFE 
standards, but because we and EPA did not believe that we could 
reasonably predict an average amount by which manufacturers will take 
advantage of this opportunity, the agencies did not include off-cycle 
credits in our stringency determination for the proposal. Since the 
proposal, the agencies have developed estimates for the cost and 
effectiveness of two off-cycle technologies, active aerodynamics and 
stop-start. For the final rule analysis, NHTSA assumed that these two 
technologies are available to manufacturers for compliance with the 
standards, similar to all of the other fuel economy-improving 
technologies that the analysis assumes are available. The costs and 
benefits of these technologies are included in the analysis, similar to 
all other available technologies, and NHTSA has consequently included 
the assessment of some amount of off-cycle credits in the determination 
of the maximum feasible standards.
    Additionally, because we interpret the prohibition against 
including the defined statutory credits in our determination of maximum 
feasible standards as applying only to the flexibilities expressly 
identified in 49 U.S.C. 32902(h), NHTSA must, for the first time in 
this rulemaking, determine how to consider the fuel economy of dual-
fueled automobiles after the statutory credit sunsets in MY 2019. Once 
there is no statutory credit to protect as a compliance flexibility, it 
does not seem reasonable to NHTSA to continue to interpret the statute 
as prohibiting the agency from setting maximum feasible standards at a 
higher level, if possible, by considering the fuel economy of dual-
fueled automobiles as measured by EPA. The overarching purpose of EPCA 
is better served by

[[Page 63020]]

interpreting 32902(h)(2) as moot once the statutory credits provided 
for in 49 U.S.C. 32905 and 32906 have expired.
    49 U.S.C. 32905(b) and (d) state that the special fuel economy 
measurement prescribed by Congress for dual-fueled automobiles applies 
only ``in model years 1993 through 2019.'' 49 U.S.C. 32906(a) also 
provides that the section 32905 calculation will sunset in 2019, as 
evidenced by the phase-out of the allowable increase due to that 
credit; it is clear that the phase-out of the allowable increase in a 
manufacturer's CAFE levels due to use of dual-fueled automobiles 
relates only to the special statutory calculation (and not to other 
ways of incorporating the fuel economy of dual-fueled automobiles into 
the manufacturer's fleet calculation) by virtue of language in section 
32906(b), which states that ``in applying subsection (a) [i.e., the 
phasing out maximum increase], the Administrator of the Environmental 
Protection Agency shall determine the increase in a manufacturer's 
average fuel economy attributable to dual fueled automobiles by 
subtracting from the manufacturer's average fuel economy calculated 
under section 32905(e) the number equal to what the manufacturer's 
average fuel economy would be if it were calculated by the formula 
under section 32904(a)(1) * * *.'' By referring back to the special 
statutory calculation, Congress makes clear that the phase-out applies 
only to increases in fuel economy attributable to dual-fueled 
automobiles due to the special statutory calculation in sections 
32905(b) and (d). Similarly, we interpret Congress' statement in 
section 32906(a)(7) that the maximum increase in fuel economy 
attributable to dual-fueled automobiles is ``0 miles per gallon for 
model years after 2019'' within the context of the introductory 
language of section 32906(a) and the language of section 32906(b), 
which, again, refers clearly to the statutory credit, and not to dual-
fueled automobiles generally. It would be an unreasonable result if the 
phase-out of the credit meant that manufacturers would be effectively 
penalized, in CAFE compliance, for building dual-fueled automobiles 
like plug-in hybrid electric vehicles, which may be important 
``bridge'' vehicles in helping consumers move toward full electric 
vehicles.
    NHTSA has therefore considered the fuel economy of plug-in hybrid 
electric vehicles, which are the only dual-fueled automobiles that we 
predict in significant numbers in MY 2020 and beyond; E85-capable FFVs 
are not predicted in great numbers after the statutory credit sunsets, 
and we do not have sufficient information about potential dual-fueled 
CNG/gasoline vehicles to make reasonable estimates now of their numbers 
in that time frame in determining the maximum feasible level of the MY 
2020-2025 CAFE standards for passenger cars and light trucks.
vii. Determining the Level of the Standards by Balancing the Factors
    As discussed further below in Section IV.F, NHTSA has broad 
discretion in balancing the above factors in determining the 
appropriate levels of average fuel economy at which to set the CAFE 
standards for each model year. Congress ``specifically delegated the 
process of setting * * * fuel economy standards with broad guidelines 
concerning the factors that the agency must consider.'' \1174\ The 
breadth of those guidelines, the absence of any statutorily prescribed 
formula for balancing the factors and other considerations, the fact 
that the relative weight to be given to the various factors may change 
from rulemaking to rulemaking as the underlying facts change, and the 
fact that the factors may often be conflicting with respect to whether 
they militate toward higher or lower standards give NHTSA broad 
discretion to decide what weight to give each of the competing policies 
and concerns and then determine how to balance them. The exercise of 
that discretion is subject to the need to ensure that NHTSA's balancing 
supports the fundamental purpose of EPCA, energy conservation,\1175\ as 
long as that balancing reasonably accommodates ``conflicting policies 
that were committed to the agency's care by the statute.'' \1176\ The 
balancing of the factors in any given rulemaking depends highly on the 
factual and policy context of that rulemaking and the agency's 
assumptions about the factual and policy context during the time frame 
covered by the standards at issue. Given the changes over time in facts 
bearing on assessment of the various factors, such as those relating to 
economic conditions, fuel prices, and the state of climate change 
science, the agency recognizes that what was a reasonable balancing of 
competing statutory priorities in one rulemaking may or may not be a 
reasonable balancing of those priorities in another rulemaking.\1177\ 
Nevertheless, the agency retains substantial discretion under EPCA to 
choose among reasonable alternatives.
---------------------------------------------------------------------------

    \1174\ Center for Auto Safety v. NHTSA, 793 F.2d 1322, 1341 
(C.A.D.C. 1986).
    \1175\ Center for Biological Diversity v. NHTSA, 538 F.3d 1172, 
1195 (9th Cir. 2008).
    \1176\ CAS, 1338 (quoting Chevron U.S.A., Inc. v. Natural 
Resources Defense Council, Inc., 467 U.S. 837, 845).
    \1177\ CBD v. NHTSA, 538 F.3d 1172, 1198 (9th Cir. 2008).
---------------------------------------------------------------------------

    EPCA neither requires nor precludes the use of any type of cost-
benefit analysis as a tool to help inform the balancing process. As 
discussed above, while NHTSA used marginal cost-benefit analysis in the 
first two rulemakings to establish attribute-based CAFE standards, it 
was not required to do so and is not required to continue to do so. 
Regardless of what type of analysis is or is not used, considerations 
relating to costs and benefits remain an important part of CAFE 
standard setting.
    Because the relevant considerations and factors can reasonably be 
balanced in a variety of ways under EPCA, and because of uncertainties 
associated with the many technological and cost inputs, NHTSA considers 
a wide variety of alternative sets of standards, each reflecting a 
different balancing of those policies and concerns, to aid it in 
discerning the maximum feasible fuel economy levels. Among the 
alternatives providing for an increase in the standards in this 
rulemaking, the alternatives range in stringency from a set of 
standards that increase, on average, 2 percent annually to a set of 
standards that increase, on average, 7 percent annually.
viii. Other Standards
(1) Minimum Domestic Passenger Car Standard
    The minimum domestic passenger car standard was added to the CAFE 
program through EISA, when Congress gave NHTSA explicit authority to 
set universal standards for domestically-manufactured passenger cars at 
the level of 27.5 mpg or 92 percent of the average fuel economy of the 
combined domestic and import passenger car fleets in that model year, 
whichever was greater.\1178\ This minimum standard was intended to act 
as a ``backstop,'' ensuring that domestically-manufactured passenger 
cars reached a given mpg level even if the market shifted in ways 
likely to reduce overall fleet mpg. Congress was silent as to whether 
the agency could or should develop similar backstop standards for 
imported passenger cars and light trucks. NHTSA has struggled with this 
question since EISA was enacted.
---------------------------------------------------------------------------

    \1178\ 49 U.S.C. 32902(b)(4).
---------------------------------------------------------------------------

    NHTSA proposed minimum standards for domestically-manufactured 
passenger cars in Section IV.E of the NPRM, but we also sought

[[Page 63021]]

comment on whether to consider, for the final rule, the possibility of 
minimum standards for imported passenger cars and light trucks. NHTSA 
stated that although we were not proposing such standards, it may be 
prudent to explore this concept again given the considerable amount of 
time between now and 2017-2025 (particularly the later years), and the 
accompanying uncertainty in our market forecast and other assumptions, 
that might make such minimum standards relevant to help ensure that 
currently-expected fuel economy improvements occur during that time 
frame. To help commenters' consideration of this question, Section IV.E 
presented illustrative levels of minimum standards for those other 
fleets.
    In the MY 2011 final rule, having received comments split fairly 
evenly between support and opposition to additional backstop standards, 
NHTSA noted Congress' silence with respect to minimum standards for 
imported passenger cars and light trucks and ``accept[ed] at least the 
possibility that * * * [it] could be reasonably interpreted as 
permissive rather than restrictive,'' but concluded, based on the 
record for that rulemaking as a whole, that additional minimum 
standards were not necessary for MY 2011, given the lack of leadtime 
for manufacturers to change their MY 2011 vehicles, the apparently-
growing public preference for smaller vehicles, and the anti-
backsliding characteristics of the footprint-based curves.\1179\
---------------------------------------------------------------------------

    \1179\ 74 FR 14412 (Mar. 30, 2009).
---------------------------------------------------------------------------

    In the MYs 2012-2016 final rule where NHTSA declined to set minimum 
standards for imported passenger cars and light trucks, the agency did 
so not because we believed that we did not have authority to do so, but 
because we believed that our assumptions about the future fleet mix 
were reliable within the rulemaking time frame, and that backsliding 
was very unlikely and would not be sufficient to warrant the regulatory 
burden of additional minimum standards for those fleets.\1180\ NHTSA 
also expressed concern about the possibility of additional minimum 
standards imposing inequitable regulatory burdens of the kind that 
attribute-based standards sought to avoid, stating that:
---------------------------------------------------------------------------

    \1180\ 75 FR 25324, at 25368-70 (May 7, 2010).

    Unless the backstop was at a very weak level, above the high end 
of this range, then some percentage of manufacturers would be above 
the backstop even if the performance of the entire industry remains 
fully consistent with the emissions and fuel economy levels 
projected for the final standards. For these manufacturers and any 
other manufacturers who were above the backstop, the objectives of 
an attribute-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 backstop 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. An example of this kind of industry-wide situation could be 
when there is a significant shift to larger vehicles across the 
industry as a whole, 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 traditional backstop acts as a 
manufacturer-specific standard.\1181\
---------------------------------------------------------------------------

    \1181\ Id. at 25369.

    NHTSA explained in the NPRM that the agency continued to believe 
that the risk of additional minimum standards imposing inequitable 
regulatory burdens on certain manufacturers is real, but at the same 
time, to recognize that given the time frame of the current rulemaking, 
the agency cannot be as certain about the unlikelihood of future market 
changes. Depending on the price of fuel and consumer preferences, the 
``kind of industry-wide situation'' described in the MYs 2012-2016 rule 
could be possible in the 2017-2025 time frame, particularly in the 
later years.
    Thus, because the agency did not have sufficient information at the 
time of the NPRM regarding what tradeoffs might be associated with 
additional minimum standards, specifically, whether the risk of 
backsliding during MYs 2017-2025 sufficiently outweighed the 
possibility of imposing inequitable regulatory burdens on certain 
manufacturers, we sought comment in the NPRM on these issues but did 
not propose additional minimum standards. We also sought comment on how 
to structure additional minimum standards (e.g., whether they should be 
flat or attribute-based, and if the latter, how that would work), and 
at what level additional minimum standards should potentially be set.
    Industry commenters opposed the inclusion of additional backstop 
standards for imported passenger cars and for light trucks. The 
Alliance commented that it disagreed that NHTSA might have authority to 
adopt backstop standards for those other fleets, and argued that doing 
so would be inconsistent with the principle of attribute-based 
standards, because they could ``unduly limit[ ] consumer choice and 
hamper[ ] the industry's ability to achieve the goals of continuing the 
national program as cost-effectively as possible.'' \1182\ While the 
Alliance agreed with NHTSA that future uncertainty could lead to market 
shifts, it maintained that the appropriate way to address such issues 
was through the future rulemaking to develop final standards for MYs 
2022-2025, rather than through adding new regulatory 
requirements.\1183\ Daimler \1184\ and Toyota \1185\ made similar 
arguments. The UAW neither opposed nor encouraged the adoption of 
additional backstop standards, but simply approved of what the agency 
had proposed as being consistent with EISA.
---------------------------------------------------------------------------

    \1182\ Alliance, at 87.
    \1183\ Id. at 87-88.
    \1184\ Daimler, at 21.
    \1185\ Toyota, at 6.
---------------------------------------------------------------------------

    Environmental and consumer group commenters, on the other hand, 
strongly supported the inclusion of additional backstop standards for 
imported passenger cars and light trucks. CBD expressed concern that 
without a backstop, manufacturers would be encouraged by the footprint-
based target curves to increase the size of their vehicles and would 
take advantage of numerous available flexibilities, and thus undermine 
the anticipated fuel economy and GHG gains estimated by the 
agencies.\1186\ CBD further stated that the amount of lead time 
provided by the agencies in this rulemaking gave manufacturers ample 
time to adjust their fleets to obtain lower targets, and argued that 
given so much lead time, a backstop could not be unduly burdensome to 
industry, because industry would have ample time to adjust to the new 
requirements.\1187\ CBD insisted that NHTSA determine whether or not to 
adopt a backstop based on the four statutory factors of technological 
feasibility, economic practicability, the effect of other motor vehicle 
standards of the Government on fuel economy, and the need of the nation 
to conserve energy.\1188\ The Sierra Club \1189\ and NRDC expressed 
similar concerns; NRDC recommended that NHTSA ``adopt manufacturer-
specific backstops on the combined car and light truck standards that 
that bar an individual automaker from exceeding its forecast * * * fuel 
economy levels by

[[Page 63022]]

approximately 0.5 mpg,'' allowing a manufacturer ``no more than three 
years to make up any exceedance in its manufacturer-specific backstop 
standard.'' \1190\ UCS and Consumers Union, in contrast, suggested that 
a backstop include ``an automatic re-computation or `ratchet' of 
stringencies for subsequent years,'' so that total anticipated oil 
savings are fully achieved in 2025 regardless of outcomes in earlier 
years.\1191\ All of the commenters supporting additional backstop 
standards strongly urged NHTSA to revisit this question as part of its 
future rulemaking to develop final standards for MYs 2022-2025.
---------------------------------------------------------------------------

    \1186\ CBD, at 18-19.
    \1187\ Id.
    \1188\ Id., citing CBD v. NHTSA, 538 F.3d at 1206.
    \1189\ Sierra Club, at 5-6.
    \1190\ NRDC, at 17.
    \1191\ UCS, at 8; Consumers Union, at 7.
---------------------------------------------------------------------------

    As proposed, the agency will not be establishing any additional 
backstop standards as part of this final rule. We continue to agree 
with the environmental and consumer group commenters that we have 
authority to adopt additional backstop standards if we deem it 
appropriate to do so. However, we also continue to conclude that 
insufficient time has passed in which manufacturers have been subject 
to the attribute-based standards to assess whether or not backstops 
would in fact help ensure that fuel savings anticipated by the agency 
at the time of the final rule are met, and even if they did, whether 
the benefits of that insurance outweigh potential impacts consumer 
choice that could occur by heading down the road that Congress rejected 
when it required CAFE standards to be attribute-based. If we determined 
that backstops for imported passenger cars and light trucks were 
necessary, it would be because consumers are choosing different (likely 
larger) vehicles in the future than the agencies assumed in this 
rulemaking analysis. Imposing additional backstop standards for those 
fleets would require manufacturers to build vehicles which the majority 
of consumers (under this scenario) would presumably not want. Vehicles 
that cannot be sold are the essence of economic impracticability, and 
vehicles that do not sell cannot save fuel or reduce emissions, because 
they are not on the roads, and thus do not meet the need of the nation 
to conserve fuel.
    On the other hand, based on the assumptions underlying the analysis 
for this rulemaking, consumers will experience significant benefits as 
a result of buying the vehicles manufactured to meet these standards. 
We have no reason to expect that consumers will turn a blind eye to 
these benefits, and recent trends indicate that fuel economy is rising 
in importance as a factor in vehicle purchasing decisions. We thus 
conclude, for purposes of this final rule, that imposing additional 
backstop standards for imported passenger cars and light trucks would 
be premature. As stated in the NPRM, NHTSA will continue to monitor 
vehicle sales trends and manufacturers' response to the standards, and 
we will revisit this issue as part of the future rulemaking to develop 
final standards for MYs 2022-2025.
(2) Alternative standards for certain manufacturers
    Because EPCA states that standards must be set for ``* * * 
automobiles manufactured by manufacturers,'' \1192\ and because 
Congress provided specific direction on how small-volume manufacturers 
could obtain exemptions from the passenger car standards, NHTSA has 
long interpreted its authority as pertaining to setting standards for 
the industry as a whole. Prior to the NPRM, some manufacturers raised 
with NHTSA the possibility of NHTSA and EPA setting alternate standards 
for part of the industry that met certain (relatively low) sales volume 
criteria--specifically, that separate standards be set so that 
``intermediate-size,'' limited-line manufacturers do not have to meet 
the same levels of stringency that larger manufacturers have to meet 
until several years later. These manufacturers argued that the same 
level of standards would not be technologically feasible or 
economically practicable in the same time frame for them, due to their 
inability to spread compliance burden across a larger product lineup, 
and difficulty in obtaining fuel economy-improving technologies quickly 
from suppliers. NHTSA sought comment in the NPRM on whether or how 
EPCA, as amended by EISA, could be interpreted to allow such alternate 
standards for certain parts of the industry.
---------------------------------------------------------------------------

    \1192\ 49 U.S.C. 32902(b)(1)(A) and (B).
---------------------------------------------------------------------------

    Two commenters, Daimler and Volkswagen, requested that both NHTSA 
and EPA consider allowing manufacturers to meet an ``alternate 
stringency pathway'' for the passenger car standards. Both defined the 
alternate pathway in terms of a ``slower ramp-up'' in stringency, with 
lower increases in stringency in early years and higher increases in 
later years (which Volkswagen clarified would only occur ``should 
technology and market factors make this feasible'').\1193\ The 
increases would lead manufacturers who chose this approach to meet the 
same rough mpg level in, for example, MY 2021 as the rest of the 
manufacturers in the passenger car fleet, but would provide additional 
flexibility through the less stringent requirements in the earlier 
model years,\1194\ although that flexibility would presumably disappear 
as the standards grew tighter to make up for the slower start. 
Volkswagen suggested that this approach was similar to what the 
agencies had already proposed for the truck fleet in terms of 
stringency increases over time.\1195\ Neither commenter provided legal 
analysis in response to the agency's request.
---------------------------------------------------------------------------

    \1193\ Daimler, Docket No. EPA-HQ-OAR-2010-0799-9483, at 2, 4-5; 
Volkswagen, Docket No. NHTSA-2010-0131-0247, at 28.
    \1194\ Id.
    \1195\ Volkswagen, Docket No. NHTSA-2010-0131-0247, at 28.
---------------------------------------------------------------------------

    NHTSA continues to interpret EPCA, as amended by EISA, as directing 
the agency to set only one passenger car and one light truck standard 
for each model year that applies to the fleet as a whole, with the 
exception of the small volume manufacturer standards permitted by 49 
U.S.C. 32902(d) and the minimum standard for domestically manufactured 
passenger cars required under 49 U.S.C. 32902(b)(4). While there have 
been instances in the past when NHTSA allowed multiple standards for 
light trucks to co-exist in a given model year, such as the ``flat'' 
and ``Reformed'' options for the MYs 2008-2010 light truck standards, 
or the different light truck standards for 2WD, 4WD, and captive import 
light trucks in MYs 1979-1981, NHTSA believes that those situations are 
distinguishable from the ``alternate pathway'' standards sought by 
Daimler and Volkswagen for several reasons.
    First, when NHTSA previously allowed different classes of light 
trucks to meet different standards, or when NHTSA allowed different 
options for complying with light truck standards, we did that under 
statutory language that expressly authorized the agency to set multiple 
standards for light trucks if the agency deemed that appropriate.\1196\ 
The EISA revisions removed that language, so it is not clear that 
Congress intended the agency to continue offering separate standards 
for different classes of light trucks, and even less clear that the 
agency would have authority to offer separate standards for different 
types of passenger cars, when we never had such authority to begin 
with. Moreover, the EISA revisions already added ways in which there 
can be multiple standards

[[Page 63023]]

for passenger cars in a given model year: there is the backstop 
standard of 32902(b)(4) for domestically-manufactured passenger 
cars,\1197\ and there is the exemption provision of 32902(d) for low-
volume manufacturers. The latter is the provision that speaks most 
clearly to this question of whether Congress has considered the 
possibility of multiple standards being ``maximum feasible'' for the 
passenger car fleet--NHTSA has the authority to set alternate ``maximum 
feasible'' standards for passenger cars, but only for manufacturers 
producing fewer than 10,000 cars in a model year.
---------------------------------------------------------------------------

    \1196\ Under EPCA prior to the EISA revisions, 49 U.S.C. 
32902(a) expressly stated that separate standards could be 
prescribed for different classes of non-passenger automobiles.
    \1197\ We note that taking the ``doesn't say we can't'' approach 
with backstop authority (i.e., that just because Congress 
established a backstop requirement for domestic cars doesn't mean we 
can't also create backstop standards for import cars and light 
trucks) is different from taking the same approach with multiple 
standards being maximum feasible for the same fleet in a single 
model year. Having additional backstops for other fleets does not 
defeat the purpose of the Congressionally-required backstop. Having 
multiple standards be simultaneously ``maximum feasible'' for 
passenger cars seems to defeat the purpose of ``maximum,'' which is 
inherently singular.
---------------------------------------------------------------------------

    Second, the fact patterns under which NHTSA previously set multiple 
standards for a compliance category in the same model year are 
different from the fact pattern presented in the current rulemaking for 
the ``alternate pathway'' standards. In the most recent example, the 
MYs 2008-2011 rulemaking, NHTSA was changing both the structure of CAFE 
standards (from the flat MY 2007 standard to the attribute-based MY 
2011 standard) and changing the technical approach to determining 
maximum feasible stringency (from a ``stage analysis''/``least-
capable'' approach in MY 2007 to an industry-wide net benefit 
maximizing approach in MY 2011). To manage this change, the ``flat'' 
and ``reformed'' light truck standards co-existing during MYs 2008-2010 
were set with reference to each other: specifically, the agency first 
used the ``stage analysis'' approach to determine the maximum feasible 
``flat'' standard in each model year, and then used the CAFE model to 
set the stringency of the ``reformed'' standard in each model year at a 
level producing approximately the same level of cost to the industry as 
a whole. After this transition period, the MY 2011 standard was 
promulgated as a single attribute-based standard, the stringency of 
which was set at a level estimated to maximize net benefits to society. 
This cost equalization between the two sets of standards established 
for MYs 2008-2010 helped ensure that the reformed standards would be 
feasible for the industry as a whole, and was intended to avoid a 
situation in which one form of the standards would be so much easier to 
meet than the other that all manufacturers would choose that form and 
not gain experience with the other. Both sets of standards, thus, were 
designed to require a similar ``lift'' from the industry as a whole in 
any given model year. The fact pattern for the ``alternate pathway'' 
would be designed to require exactly the opposite: the ``alternate 
pathway'' standards would be much easier in some years, and much more 
difficult in others, than the ``main pathway'' standards. EPCA/EISA 
expressly requires that standards must be maximum feasible in each 
separate model year. Based on the suggestions from Daimler and 
Volkswagen, there is no indication that the ``main pathway'' and 
``alternate pathway'' standards would be similar in any given year in 
terms of costs, technology required, fuel saved, or any other metric 
that NHTSA considers for determining maximum feasible. It is difficult 
to see how two completely different standards can both be maximum 
feasible for the industry as a whole in the same model year.
    And finally, NHTSA did not suggest in the NPRM that it might be 
considering setting multiple ``maximum feasible'' passenger car 
standards for MYs 2017-2021, and nothing in NHTSA's past practice 
\1198\ suggests that this might be something the agency would consider 
in the CAFE context, particularly for passenger car standards. Since 
first promulgating attribute-based CAFE standards, NHTSA has 
interpreted the maximum feasible requirement as no longer requiring a 
``least capable manufacturer'' approach, and the proposed standards 
were consistent with that interpretation by being maximum feasible for 
the industry as a whole, if not necessarily feasible for every 
manufacturer in every model year. EPCA/EISA expressly provides a 
solution for the manufacturers who cannot meet the main standards in 
the civil penalty provisions of Sec.  32912. If NHTSA had to account 
for the traditional fine payers in determining the maximum feasible 
standards, we would fundamentally be precluded from pushing the rest of 
the industry as far as we thought it could go. The NPRM was based on 
this interpretation, as is the final rule, and the analysis supporting 
both rulemaking documents accounted for it.
---------------------------------------------------------------------------

    \1198\ Having allowed multiple light truck CAFE standards and 
having allowed alternate phase-ins for safety standards would not be 
sufficient indication that NHTSA might suddenly be considering 
multiple passenger car CAFE standards.
---------------------------------------------------------------------------

    For these reasons, NHTSA is not finalizing the ``alternate 
pathway'' approach requested by the commenters. If commenters wish to 
pursue this issue again in the future rulemaking to develop final 
standards for MYs 2022-2025, NHTSA again requests that they provide 
legal analysis of EPCA/EISA in support of their position.
2. Administrative Procedure Act
    To be upheld under the ``arbitrary and capricious'' standard of 
judicial review in the APA, an agency rule must be rational, based on 
consideration of the relevant factors, and within the scope of the 
authority delegated to the agency by the statute. The agency must 
examine the relevant data and articulate a satisfactory explanation for 
its action including a ``rational connection between the facts found 
and the choice made.'' Burlington Truck Lines, Inc. v. United States, 
371 U.S. 156, 168 (1962).
    Statutory interpretations included in an agency's rule are 
subjected to the two-step analysis of Chevron, U.S.A., Inc. v. Natural 
Resources Defense Council, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 
(1984). Under step one, where a statute ``has directly spoken to the 
precise question at issue,'' id. at 842, 104 S.Ct. 2778, the court and 
the agency ``must give effect to the unambiguously expressed intent of 
Congress,'' id. at 843, 104 S.Ct. 2778. If the statute is silent or 
ambiguous regarding the specific question, the court proceeds to step 
two and asks ``whether the agency's answer is based on a permissible 
construction of the statute.'' Id.
    If an agency's interpretation differs from the one that it has 
previously adopted, the agency need not demonstrate that the prior 
position was wrong or even less desirable. Rather, the agency would 
need only to demonstrate that its new position is consistent with the 
statute and supported by the record, and acknowledge that this is a 
departure from past positions. The Supreme Court emphasized this 
recently in FCC v. Fox Television, 129 S.Ct. 1800 (2009). When an 
agency changes course from earlier regulations, ``the requirement that 
an agency provide a reasoned explanation for its action would 
ordinarily demand that it display awareness that it is changing 
position,'' but ``need not demonstrate to a court's satisfaction that 
the reasons for the new policy are better than the reasons for the old 
one; it suffices that the new policy is permissible under the statute, 
that there are good reasons for it, and that the agency believes it to 
be better, which the conscious change of course adequately indicates.'' 
\1199\ The APA also requires

[[Page 63024]]

that agencies provide notice and comment to the public when proposing 
regulations,\1200\ as we did in the NPRM.
---------------------------------------------------------------------------

    \1199\ Ibid., 1181.
    \1200\ 5 U.S.C. 553.
---------------------------------------------------------------------------

3. National Environmental Policy Act
    As discussed above, EPCA requires the agency to determine the level 
at which to set CAFE standards for each model year by considering the 
four factors of technological feasibility, economic practicability, the 
effect of other motor vehicle standards of the Government on fuel 
economy, and the need of the United States to conserve energy. The 
National Environmental Policy Act (NEPA) directs that environmental 
considerations be integrated into that process.\1201\ To accomplish 
that purpose, NEPA requires an agency to compare the potential 
environmental impacts of its proposed action to those of a reasonable 
range of alternatives.
---------------------------------------------------------------------------

    \1201\ NEPA is codified at 42 U.S.C. Sec. Sec.  4321-47.
---------------------------------------------------------------------------

    To explore the environmental consequences of the agency's action in 
depth, NHTSA has prepared a Final Environmental Impact Statement 
(``Final EIS''). The purpose of an EIS is to ``provide full and fair 
discussion of significant environmental impacts and [to] inform 
decisionmakers and the public of the reasonable alternatives which 
would avoid or minimize adverse impacts or enhance the quality of the 
human environment.'' 40 CFR 1502.1.
    NEPA is ``a procedural statute that mandates a process rather than 
a particular result.'' Stewart Park & Reserve Coal., Inc. v. Slater, 
352 F.3d 545, 557 (2nd Cir. 2003). The agency's overall EIS-related 
obligation is to ``take a `hard look' at the environmental consequences 
before taking a major action.'' Baltimore Gas & Elec. Co. v. Natural 
Res. Def. Council, Inc., 462 U.S. 87, 97, 103 S.Ct. 2246, 76 L.Ed.2d 
437 (1983). Significantly, ``[i]f the adverse environmental effects of 
the proposed action are adequately identified and evaluated, the agency 
is not constrained by NEPA from deciding that other values outweigh the 
environmental costs.'' Robertson v. Methow Valley Citizens Council, 490 
U.S. 332, 350, 109 S.Ct. 1835, 104 L.Ed.2d 351 (1989).
    The agency must identify the ``environmentally preferable'' 
alternative, but need not adopt it. ``Congress in enacting NEPA * * * 
did not require agencies to elevate environmental concerns over other 
appropriate considerations.'' Baltimore Gas and Elec. Co. v. Natural 
Resources Defense Council, Inc., 462 U.S. 87, 97 (1983). Instead, NEPA 
requires an agency to develop alternatives to the proposed action in 
preparing an EIS. 42 U.S.C. Sec.  4332(2)(C)(iii). The statute does not 
command the agency to favor an environmentally preferable course of 
action, only that it make its decision to proceed with the action after 
taking a hard look at environmental consequences.
    This final rule contains the Record of Decision (ROD) for NHTSA's 
rulemaking action, pursuant to NEPA and the Council on Environmental 
Quality's (CEQ) implementing regulations, in Section IV.J.\1202\ See 40 
CFR Sec.  1505.2. The ROD explains NHTSA's decision and the 
considerations relevant to NHTSA's decision, including the information 
contained in the Final EIS. Id.
---------------------------------------------------------------------------

    \1202\ CEQ NEPA implementing regulations are codified at 40 Code 
of Federal Regulations (CFR) Parts 1500-08.
---------------------------------------------------------------------------

E. What are the CAFE standards?

1. Form of the Standards
    Each of the CAFE standards that NHTSA is promulgating today for 
passenger cars and light trucks is expressed as a mathematical function 
that defines a fuel economy target applicable to each vehicle model 
and, for each fleet, establishes a required CAFE level determined by 
computing the sales-weighted harmonic average of those targets.\1203\
---------------------------------------------------------------------------

    \1203\ Required CAFE levels shown here are estimated required 
levels based on NHTSA's current projection of manufacturers' vehicle 
fleets in MYs 2017-2025, given the MY 2008-based and MY 2010-based 
market forecasts. Actual required levels are not determined until 
the end of each model year, when all of the vehicles produced by a 
manufacturer in that model year are known and their compliance 
obligation can be determined with certainty. The target curves, as 
defined by the constrained linear function, and as embedded in the 
function for the sales-weighted harmonic average, are the real 
``standards'' being promulgated today.
---------------------------------------------------------------------------

    As discussed above in Section II.C, NHTSA has determined passenger 
car fuel economy targets using a constrained linear function defined 
according to the following formula:
[GRAPHIC] [TIFF OMITTED] TR15OC12.027

    Here, TARGET is the fuel economy target (in mpg) applicable to 
vehicles of a given footprint (FOOTPRINT, in square feet), b and a are 
the function's lower and upper asymptotes (also in mpg), respectively, 
c is the slope (in gallons per mile per square foot) of the sloped 
portion of the function, and d is the intercept (in gallons per mile) 
of the sloped portion of the function (that is, the value the sloped 
portion would take if extended to a footprint of 0 square feet). The 
MIN and MAX functions take the minimum and maximum, respectively, of 
the included values.
    NHTSA is establishing, consistent with the standards for MYs 2011-
2016, that the CAFE level required of any given manufacturer be 
determined by calculating the production-weighted harmonic average of 
the fuel economy targets applicable to each vehicle model:
[GRAPHIC] [TIFF OMITTED] TR15OC12.028

    PRODUCTIONi is the number of units produced for sale in 
the United States of each ith unique footprint within each model type 
produced for sale in the United States, and TARGETi is the 
corresponding fuel economy target (according to the equation shown 
above and based on the corresponding footprint), and the summations in 
the numerator and denominator are both performed over all unique 
footprint and model type combinations in the fleet in question.
    The final standards for passenger cars are, therefore, specified by 
the four coefficients defining fuel economy targets:

a = upper limit (mpg)

[[Page 63025]]

b = lower limit (mpg)
c = slope (gallon per mile per square foot)
d = intercept (gallon per mile)

    For light trucks, NHTSA is defining fuel economy targets in terms 
of a mathematical function under which the target is the maximum of 
values determined under each of two constrained linear functions. The 
second of these establishes a ``floor'' reflecting the MY 2016 
standard, after accounting for estimated adjustments reflecting 
increased air conditioner efficiency. This prevents the target at any 
footprint from declining between model years. The resultant 
mathematical function is as follows:
[GRAPHIC] [TIFF OMITTED] TR15OC12.029

    The final standards for light trucks are, therefore, specified by 
the eight coefficients defining fuel economy targets:

a = upper limit (mpg)
b = lower limit (mpg)
c = slope (gallon per mile per square foot)
d = intercept (gallon per mile)
e = upper limit (mpg) of ``floor''
f = lower limit (mpg) of ``floor''
g = slope (gallon per mile per square foot) of ``floor''
h = intercept (gallon per mile) of ``floor''
2. Passenger Car Standards for MYs 2017-2025
    For passenger cars, NHTSA is establishing CAFE standards for MYs 
2017-2021 and presenting augural standards for MYs 2022-2025 defined by 
the following coefficients:

                          Table IV-16--NHTSA Coefficients Defining Final MYs 2017-2025 Fuel Economy Targets for Passenger Cars
--------------------------------------------------------------------------------------------------------------------------------------------------------
                 Coefficient                     2017        2018        2019        2020        2021        2022        2023        2024        2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
a (mpg).....................................  43.61       45.21       46.87       48.74       50.83       53.21       55.71       58.32       61.07
b (mpg).....................................  32.65       33.84       35.07       36.47       38.02       39.79       41.64       43.58       45.61
c (gpm/sf)..................................   0.0005131   0.0004954   0.0004783   0.0004603   0.0004419   0.0004227   0.0004043   0.0003867   0.0003699
d (gpm).....................................   0.001896    0.001811    0.001729    0.001643    0.001555    0.001463    0.001375    0.001290    0.001210
--------------------------------------------------------------------------------------------------------------------------------------------------------

    For reference, the coefficients defining the MYs 2012-2016 
passenger car standards are also provided below:

      Table IV-17--NHTSA Coefficients Defining Final MYs 2012-2016 Fuel Economy Targets for Passenger Cars
----------------------------------------------------------------------------------------------------------------
                     Coefficient                         2012        2013        2014        2015        2016
----------------------------------------------------------------------------------------------------------------
a (mpg).............................................  35.95       36.80       37.75       39.24       41.09
b (mpg).............................................  27.95       28.46       29.03       29.90       30.96
c (gpm/sf)..........................................   0.0005308   0.0005308   0.0005308   0.0005308   0.0005308
d (gpm).............................................   0.0060507   0.005410    0.004725    0.003719    0.002573
----------------------------------------------------------------------------------------------------------------

    Section II.C above and Chapter 2 of the Joint TSD discusses how the 
coefficients in Table IV-16 were developed for this final rule. The 
coefficients result in the footprint-dependent targets shown 
graphically below for MYs 2017-2025. The MY 2012-2016 final standards 
are also shown for comparison.

[[Page 63026]]

[GRAPHIC] [TIFF OMITTED] TR15OC12.030

    As discussed, the CAFE levels ultimately required of individual 
manufacturers will depend on the mix of vehicles they produce for sale 
in the United States. Based on the market forecasts of future sales 
that NHTSA has used to examine today's final and augural CAFE 
standards, the agency currently estimates that the target curves shown 
above will result in the following average required fuel economy levels 
for individual manufacturers during MYs 2017-2025 (an updated estimate 
of the average required fuel economy level under the final MY 2016 
standard is also shown for comparison).\1204\ This table has changed 
since the NPRM in that it now shows the estimated required levels 
starting from both the MY 2008-based market forecast and the MY 2010-
based market forecast, as follows:
---------------------------------------------------------------------------

    \1204\ In the May 2010 final rule establishing MYs 2012-2016 
standards for passenger cars and light trucks, NHTSA estimated that 
the required fuel economy levels for passenger cars would average 
37.8 mpg under the MY 2016 passenger car standard. Based on the 
agency's current forecast of the MY 2016 passenger car market, NHTSA 
estimates that the average required fuel economy level for passenger 
cars will be 38.2-38.7 mpg in MY 2016.

[[Page 63027]]

  Table IV-18--NHTSA Estimated Average Fuel Economy Required Under Final MY 2016 and Final and Augural MYs 2017-2025 CAFE Standards for Passenger Cars
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                  MY baseline      2016       2017       2018       2019       2020       2021      2022      2023      2024      2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Aston Martin...................  2008.........  39.0-....  40.5-....  41.9-....  43.5-....  45.2-....  47.2-....  49.4-...  51.7-...  54.1-...  56.6-
                                 2010.........  37.4.....  38.8.....  40.2.....  41.6.....  43.3.....  45.1.....  47.3....  49.5....  51.8....  54.2
BMW............................  2008.........  38.0-....  39.4-....  40.9-....  42.4-....  44.1-....  46.0-....  48.1-...  50.4-...  52.7-...  55.2-
                                 2010.........  37.9.....  39.4.....  40.8.....  42.3.....  43.9.....  45.8.....  47.9....  50.1....  52.5....  55.0
Daimler........................  2008.........  37.3-....  38.6-....  39.9-....  41.4-....  43.0-....  44.9-....  47.0-...  49.2-...  51.4-...  53.9-
                                 2010.........  36.7.....  38.0.....  39.4.....  40.9.....  42.5.....  44.3.....  46.4....  48.5....  50.9....  53.2
Fiat...........................  2008.........  37.3-....  39.1-....  40.6-....  42.1-....  43.7-....  45.7-....  47.9-...  50.2-...  52.6-...  55.1-
                                 2010.........  37.3.....  38.7.....  39.9.....  41.4.....  43.0.....  44.9.....  47.0....  49.2....  51.6....  54.0
Ford...........................  2008.........  37.9-....  39.1-....  40.6-....  42.1-....  43.7-....  45.6-....  47.7-...  49.9-...  52.3-...  54.7-
                                 2010.........  38.1.....  39.5.....  41.0.....  42.5.....  44.1.....  46.0.....  48.2....  50.4....  52.8....  55.3
Geely..........................  2008.........  37.4-....  38.8-....  40.3-....  41.7-....  43.4-....  45.3-....  47.4-...  49.6-...  51.9-...  54.4-
                                 2010.........  38.7.....  40.1.....  41.5.....  43.0.....  44.7.....  46.6.....  48.7....  50.9....  53.3....  55.8
General Motors.................  2008.........  37.9-....  39.6-....  41.1-....  42.6-....  44.3-....  46.2-....  48.4-...  50.7-...  53.1-...  55.6-
                                 2010.........  37.9.....  39.3.....  40.8.....  42.2.....  43.9.....  45.7.....  47.9....  50.1....  52.5....  54.9
Honda..........................  2008.........  38.9-....  40.4-....  41.9-....  43.4-....  45.2-....  47.1-....  49.3-...  51.6-...  54.0-...  56.6-
                                 2010.........  38.2.....  39.7.....  41.1.....  42.6.....  44.2.....  46.1.....  48.3....  50.5....  52.9....  55.4
Hyundai........................  2008.........  39.0-....  40.4-....  41.9-....  43.4-....  45.2-....  47.1-....  49.3-...  51.6-...  54.1-...  56.6-
                                 2010.........  38.3.....  39.8.....  41.3.....  42.7.....  44.5.....  46.4.....  48.6....  50.8....  53.2....  55.7
Kia............................  2008.........  39.9-....  41.1-....  42.6-....  44.2-....  46.0-....  48.0-....  50.3-...  52.6-...  55.1-...  57.7-
                                 2010.........  39.4.....  40.8.....  42.3.....  43.8.....  45.6.....  47.5.....  49.8....  52.1....  54.5....  57.1
Lotus..........................  2008.........  42.0-....  43.6-....  45.2-....  46.9-....  48.7-....  50.8-....  53.2-...  55.7-...  58.3-...  61.1-
                                 2010.........  40.3.....  41.8.....  43.3.....  44.9.....  46.7.....  48.7.....  51.0....  53.4....  55.9....  58.5
Mazda..........................  2008.........  39.9-....  41.5-....  43.0-....  44.5-....  46.3-....  48.3-....  50.6-...  53.0-...  55.5-...  58.1-
                                 2010.........  38.7.....  40.1.....  41.6.....  43.0.....  44.7.....  46.6.....  48.8....  51.1....  53.5....  56.0
Mitsubishi.....................  2008.........  38.9-....  40.5-....  42.0-....  43.6-....  45.3-....  47.3-....  49.5-...  51.8-...  54.2-...  56.8-
                                 2010.........  40.3.....  41.8.....  43.3.....  44.9.....  46.7.....  48.7.....  51.0....  53.4....  55.9....  58.6
Nissan.........................  2008.........  38.4-....  39.8-....  41.2-....  42.8-....  44.4-....  46.3-....  48.5-...  50.7-...  53.1-...  55.6-
                                 2010.........  38.2.....  39.6.....  41.0.....  42.5.....  44.2.....  46.0.....  48.2....  50.4....  52.8....  55.2
Porsche........................  2008.........  42.0-....  43.6-....  45.2-....  46.9-....  48.7-....  50.8-....  53.2-...  55.7-...  58.3-...  61.1-
                                 2010.........  37.6.....  39.1.....  40.5.....  42.0.....  43.6.....  45.4.....  47.5....  49.7....  52.1....  54.5
Spyker/Saab....................  2008.........  39.6-....  41.1-....  42.6-....  44.2-....  46.0-....  47.9-....  50.2-...  52.5-...  55.0-...  57.6-
                                 2010.........  0.0......  0.0......  0.0......  0.0......  0.0......  0.0......  0.0.....  0.0.....  0.0.....  0.0
Subaru.........................  2008.........  41.1-....  42.6-....  44.2-....  45.8-....  47.6-....  49.7-....  52.0-...  54.4-...  57.0-...  59.6-
                                 2010.........  39.6.....  41.1.....  42.6.....  44.1.....  45.8.....  47.7.....  49.9....  52.2....  54.7....  57.2
Suzuki.........................  2008.........  41.7-....  43.3-....  44.9-....  46.5-....  48.4-....  50.5-....  52.8-...  55.3-...  57.9-...  60.6-
                                 2010.........  40.6.....  42.1.....  43.6.....  45.2.....  46.9.....  48.9.....  51.2....  53.6....  56.1....  58.7
Tata...........................  2008.........  35.6-....  36.9-....  38.3-....  39.7-....  41.2-....  43.0-....  45.0-...  47.1-...  49.3-...  51.7-
                                 2010.........  36.0.....  37.4.....  38.8.....  40.4.....  41.9.....  43.8.....  45.9....  48.0....  50.3....  52.7
Tesla..........................  2008.........  42.0-....  43.6-....  45.2-....  46.9-....  48.7-....  50.8-....  53.2-...  55.7-...  58.3-...  61.1-
                                 2010.........  0.0......  0.0......  0.0......  0.0......  0.0......  0.0......  0.0.....  0.0.....  0.0.....  0.0
Toyota.........................  2008.........  39.2-....  40.6-....  42.1-....  43.7-....  45.4-....  47.4-....  49.6-...  51.9-...  54.3-...  56.9-
                                 2010.........  38.3.....  39.7.....  41.2.....  42.7.....  44.3.....  46.2.....  48.4....  50.7....  53.0....  55.5
Volkswagen.....................  2008.........  39.9-....  41.4-....  43.0-....  44.5-....  46.3-....  48.3-....  50.6-...  52.9-...  55.4-...  58.0-
                                 2010.........  39.0.....  40.5.....  41.9.....  43.5.....  45.2.....  47.1.....  49.3....  51.6....  54.1....  56.6
Average........................  2008.........  38.7-....  40.1-....  41.6-....  43.1-....  44.8-....  46.8-....  49.0-...  51.2-...  53.6-...  56.2-
                                 2010.........  38.2.....  39.6.....  41.1.....  42.5.....  44.2.....  46.1.....  48.2....  50.5....  52.9....  55.3
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Because a manufacturer's required average fuel economy level for a 
model year under the final standards will be based on its actual 
production numbers in that model year, its official required fuel 
economy level will not be known until the end of that model year. 
However, because the targets for each vehicle footprint will be 
established in advance of the model year, a manufacturer should be able 
to estimate its required level accurately. Readers should remember that 
the mpg levels describing the ``estimated required standards'' shown 
throughout this section are not necessarily the ultimate mpg level with 
which manufacturers will have to comply, for the reasons explained 
above, and that the mpg level designated as ``estimated required'' is 
exactly that, an estimate.
3. Minimum Domestic Passenger Car Standards
    EISA expressly requires each manufacturer to meet a minimum flat 
fuel economy standard for domestically manufactured passenger cars in 
addition to meeting the standards set by NHTSA. According to the 
statute (49 U.S.C. 32902(b)(4)), the minimum standard shall be the 
greater of (A) 27.5 miles per gallon; or (B) 92 percent of the average 
fuel economy projected by the Secretary for the combined domestic and 
nondomestic passenger automobile fleets manufactured for sale in the 
United States by all manufacturers in the model year. The agency must 
publish the projected minimum standards in the Federal Register when 
the passenger car standards for the model year in question are 
promulgated. As a practical matter, as standards for both cars and 
trucks continue to rise over time, 49 U.S.C. 32902(b)(4)(A) will likely 
eventually cease to be relevant.
    As discussed in the final rule establishing the MYs 2012-2016 CAFE 
standards, because 49 U.S.C. 32902(b)(4)(B) states that the minimum 
domestic passenger car standard shall be 92 percent of the projected 
average fuel economy for the passenger car fleet, ``which projection 
shall be published in the Federal Register when the standard

[[Page 63028]]

for that model year is promulgated in accordance with this section,'' 
NHTSA interprets EISA as indicating that the minimum domestic passenger 
car standard should be based on the agency's fleet assumptions when the 
passenger car standard for that year is promulgated.
    However, we note that we do not read this language to preclude any 
change, ever, in the minimum standard after it is first promulgated for 
a model year. As long as the 18-month lead-time requirement of 49 
U.S.C. 32902(a) is respected, NHTSA believes that the language of the 
statute suggests that the 92 percent should be determined anew any time 
the passenger car standards are revised. This issue will be 
particularly relevant for the current rulemaking, given the 
considerable lead-time involved and the necessity of a new rulemaking 
to develop and establish the MYs 2022-2025 standards. We sought comment 
in the NPRM on this interpretation, and on whether or not the agency 
should consider instead for MYs 2017-2025 designating the minimum 
domestic passenger car standards proposed as ``estimated,'' just as the 
passenger car standards are ``estimated,'' and waiting until the end of 
each model year to finalize the 92 percent mpg value. While NHTSA 
received a number of comments on the topic of ``backstops'' generally, 
no commenters addressed this particular question. We are therefore 
finalizing the approach proposed, but we will continue to monitor this 
issue going forward to assess whether the difference between the final 
required passenger car standards and the minimum standards promulgated 
today grows over time.
    We note also that in the MYs 2012-2016 final rule, we interpreted 
EISA as indicating that the 92 percent minimum standard should be based 
on the estimated required CAFE level rather than, as suggested by the 
Alliance, the estimated achieved CAFE level (which would likely be 
lower than the estimated required level if it reflected manufacturers' 
use of dual-fuel vehicle credits under 49 U.S.C. 32905, at least in the 
context of the MYs 2012-2016 standards). No comments were received on 
this position as stated in the NPRM, and NHTSA continues to believe 
that this interpretation is appropriate for the final rule.
    The determination of the minimum domestic passenger car standard is 
complicated somewhat in this final rule by the fact that the 92 percent 
calculation depends on the agency's assessment of the estimated 
required passenger car mpg level in a given model year--with two 
baseline market forecasts, the estimated required mpg levels are 
presented throughout this document as a range. The minimum domestic 
passenger car standard, however, must be a single mpg level. Given the 
uncertainty associated with the baseline market forecasts that led the 
agencies to use both for the final rule analysis, the agency concluded 
that it would be reasonable to determine 92 percent of the estimated 
required level in each year under both the MY 2008-based market 
forecast and the MY 2010-based market forecast, and average the two. 
Table IV-19 below shows the 92 percent mpg levels for both forecasts:

       Table IV-19--NHTSA Values for 92 Percent of the Estimated Required MYs 2017-2025 MPG Levels for Passenger Cars Under Both Market Forecasts
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          2017       2018       2019       2020       2021       2022       2023       2024       2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
MY 2008..............................................       36.9       38.3       39.7       41.2       43.0       45.0       47.1       49.4       51.7
MY 2010..............................................       36.4       37.8       39.1       40.6       42.4       44.4       46.4       48.6       50.9
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The final minimum standards for domestically manufactured passenger 
cars for MYs 2017-2021 and the augural standards for MYs 2022-2025 
(and, for comparison, the final MY 2016 minimum domestic passenger car 
standard) are presented below in Table IV-20.

 Table IV-20--NHTSA Estimated Minimum Standard for Domestically Manufactured Passenger Cars Under Final MY 2016 and Final and Augural MYs 2017-2025 CAFE
                                                              Standards for Passenger Cars
--------------------------------------------------------------------------------------------------------------------------------------------------------
     2016            2017            2018            2019            2020           2021           2022           2023           2024           2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
       34.7            36.7            38.0            39.4            40.9           42.7           44.7           46.8           49.0           51.3
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As discussed in Section IV.D, NHTSA also sought comment on whether 
to consider, for the final rule, the possibility of minimum standards 
for imported passenger cars and light trucks. Although we did not 
propose such standards, we explored this concept again in the NPRM in 
light of the considerable amount of time between now and 2017-2025 
(particularly the later years), and the accompanying uncertainty in our 
market forecast and other assumptions, which we explained might make 
such minimum standards relevant to help ensure that currently-expected 
fuel economy improvements occur during that time frame. Comments 
received on this question were decidedly mixed; NHTSA's full discussion 
of this issue is presented in Section IV.D. In summary, NHTSA believes 
it is likely most prudent to wait until we are able to observe 
potential market changes during the implementation of the MYs 2012-2016 
standards and to consider additional minimum standards in a future 
rulemaking action. Any additional minimum standards for MYs 2022-2025 
that may be set in the future would, like the primary standards, be a 
part of the future rulemaking concurrent with the mid-term evaluation, 
and potentially revised at that time.
4. Light Truck Standards
    For light trucks, NHTSA is promulgating final CAFE standards for 
MYs 2017-2021 and presenting augural standards for MYs 2022-2025 
defined by the following coefficients:

[[Page 63029]]

                     Table IV-21--NHTSA Coefficients Defining Final and Augural MYs 2017-2025 Fuel Economy Targets for Light Trucks
--------------------------------------------------------------------------------------------------------------------------------------------------------
                 Coefficient                     2017        2018        2019        2020        2021        2022        2023        2024        2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
a (mpg).....................................  36.26       37.36       38.16       39.11       41.80       43.79       45.89       48.09       50.39
b (mpg).....................................  25.09       25.20       25.25       25.25       25.25       26.29       27.53       28.83       30.19
c (gpm/sf)..................................   0.0005484   0.0005358   0.0005265   0.0005140   0.0004820   0.0004607   0.0004404   0.0004210   0.0004025
d (gpm).....................................   0.005097    0.004797    0.004623    0.004494    0.004164    0.003944    0.003735    0.003534    0.003343
e (mpg).....................................  35.10       35.31       35.41       35.41       35.41       35.41       35.41       35.41       35.41
f (mpg).....................................  25.09       25.20       25.25       25.25       25.25       25.25       25.25       25.25       25.25
g (gpm/sf)..................................   0.0004546   0.0004546   0.0004546   0.0004546   0.0004546   0.0004546   0.0004546   0.0004546   0.0004546
h (gpm).....................................   0.009851    0.009682    0.009603    0.009603    0.009603    0.009603    0.009603    0.009603    0.009603
--------------------------------------------------------------------------------------------------------------------------------------------------------

    For reference, the coefficients defining the MYs 2012-2016 light 
truck standards (which did not include a ``floor'' term, defined by 
coefficients e, f, g, and h) are also provided below:

       Table IV-22--NHTSA Coefficients Defining Final MYs 2012-2016 Fuel Economy Targets for Light Trucks
----------------------------------------------------------------------------------------------------------------
                     Coefficient                         2012        2013        2014        2015        2016
----------------------------------------------------------------------------------------------------------------
a (mpg).............................................  29.82       30.67       31.38       32.72       34.42
b (mpg).............................................  22.27       22.74       23.13       23.85       24.74
c (gpm/sf)..........................................   0.0004546   0.0004546   0.0004546   0.0004546   0.0004546
d (gpm).............................................   0.014900    0.013968    0.013225    0.011920    0.010413
----------------------------------------------------------------------------------------------------------------

    The coefficients result in the footprint-dependent targets shown 
graphically below for MYs 2017-2025. MYs 2012-2016 final standards are 
shown for comparison.

[[Page 63030]]

[GRAPHIC] [TIFF OMITTED] TR15OC12.031

    Again, given these targets, the CAFE levels required of individual 
manufacturers will depend on the mix of vehicles they produce for sale 
in the United States. Based on the market forecasts that NHTSA has used 
to examine today's final and augural CAFE standards, the agency 
currently estimates that the target curves shown above will result in 
the following average required fuel economy levels for individual 
manufacturers during MYs 2017-2025 (an updated estimate of the average 
required fuel economy level under the final MY 2016 standard is shown 
for comparison).\1205\ This table has changed since the NPRM in that it 
now shows the estimated required levels starting from both the MY 2008-
based market forecast and the MY 2010-based market forecast, as 
follows:
---------------------------------------------------------------------------

    \1205\ In the May 2010 final rule establishing MYs 2012-2016 
standards for passenger cars and light trucks, NHTSA estimated that 
the required fuel economy levels for light trucks would average 28.8 
mpg under the MY 2016 light truck standard. Based on the agency's 
current forecasts of the MY 2016 light truck market, NHTSA estimates 
that the required fuel economy levels will average 28.9-29.2 mpg in 
MY 2016. The agency has made no changes to MY 2016 standards and 
projects no changes in fleet-specific average requirements (although 
within-fleet market shifts could, under an attribute-based standard, 
produce such changes).

[[Page 63031]]

                       Table IV-23--NHTSA Estimated Average Fuel Economy Required Under Final MY 2016 and Final and Augural MYs 2017-2025 CAFE Standards for Light Trucks
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                  MY baseline        2016           2017           2018           2019           2020           2021          2022          2023          2024          2025
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Aston Martin...................  2008.........  0.0-.........  0.0-.........  0.0-.........  0.0-.........  0.0-.........  0.0-.........  0.0-........  0.0-........  0.0-........  0.0-
                                 2010.........  0.0..........  0.0..........  0.0..........  0.0..........  0.0..........  0.0..........  0.0.........  0.0.........  0.0.........  0.0
BMW............................  2008.........  30.7-........  30.6-........  31.4-........  32.1-........  32.9-........  35.1-........  36.7-.......  38.4-.......  40.2-.......  42.1-
                                 2010.........  31.0.........  31.2.........  32.0.........  32.7.........  33.5.........  35.8.........  37.5........  39.3........  41.1........  43.1
Daimler........................  2008.........  29.5-........  29.1-........  29.6-........  30.2-........  30.9-........  32.9-........  34.5-.......  36.1-.......  37.8-.......  39.5-
                                 2010.........  30.0.........  30.1.........  30.8.........  31.4.........  32.2.........  34.4.........  36.0........  37.7........  39.5........  41.4
Fiat...........................  2008.........  29.4-........  29.6-........  30.2-........  30.8-........  31.5-........  33.7-........  35.3-.......  37.0-.......  38.8-.......  40.6-
                                 2010.........  29.5.........  29.6.........  30.2.........  30.7.........  31.5.........  33.6.........  35.2........  36.9........  38.6........  40.4
Ford...........................  2008.........  28.5-........  28.6-........  29.1-........  29.6-........  30.0-........  32.0-........  33.5-.......  35.2-.......  37.0-.......  38.8-
                                 2010.........  27.3.........  27.5.........  27.8.........  28.0.........  28.4.........  30.2.........  31.7........  33.1........  34.7........  36.4
Geely..........................  2008.........  31.0-........  31.1-........  32.1-........  32.7-........  33.5-........  35.8-........  37.5-.......  39.3-.......  41.2-.......  43.1-
                                 2010.........  31.2.........  31.4.........  32.4.........  33.0.........  33.9.........  36.2.........  37.9........  39.7........  41.6........  43.6
General Motors.................  2008.........  27.7-........  28.0-........  28.5-........  29.1-........  29.6-........  31.7-........  33.2-.......  34.9-.......  36.6-.......  38.4-
                                 2010.........  27.7.........  27.8.........  28.1.........  28.6.........  29.2.........  31.2.........  32.8........  34.3........  36.0........  37.8
Honda..........................  2008.........  30.9-........  31.0-........  31.7-........  32.3-........  33.1-........  35.4-........  37.0-.......  38.8 -......  40.7-.......  42.6-
                                 2010.........  30.2.........  30.4.........  31.1.........  31.7.........  32.5.........  34.7.........  36.4........  38.1........  39.9........  41.8
Hyundai........................  2008.........  31.2-........  31.3-........  32.1-........  32.8-........  33.6-........  35.9-........  37.6-.......  39.4-.......  41.3-.......  43.2-
                                 2010.........  31.7.........  32.1.........  33.0.........  33.7.........  34.6.........  36.9.........  38.7........  40.5........  42.5........  44.5
Kia............................  2008.........  30.0-........  30.0-........  30.6-........  31.2-........  32.0-........  34.2-........  35.8-.......  37.5-.......  39.3-.......  41.1-
                                 2010.........  30.1.........  30.3.........  31.0.........  31.7.........  32.5.........  34.8.........  36.5........  38.3........  40.1........  42.1
Lotus..........................  2008.........  0.0-.........  0.0-.........  0.0-.........  0.0-.........  0.0-.........  0.0-.........  0.0-........  0.0-........  0.0-........  0.0-
                                 2010.........  0.0..........  0.0..........  0.0..........  0.0..........  0.0..........  0.0..........  0.0.........  0.0.........  0.0.........  0.0
Mazda..........................  2008.........  31.7-........  31.4-........  32.4-........  33.1-........  33.8-........  35.9-........  37.6-.......  39.3-.......  41.2-.......  43.2-
                                 2010.........  31.3.........  31.6.........  32.5.........  33.1.........  33.9.........  36.2.........  38.0........  39.8........  41.7........  43.6
Mitsubishi.....................  2008.........  32.5-........  32.9-........  33.9-........  34.6-........  35.5-........  37.9-........  39.7-.......  41.6-.......  43.6-.......  45.7-
                                 2010.........  33.4.........  34.1.........  35.1.........  35.9.........  36.7.........  39.3.........  41.1........  43.1........  45.2........  47.3
Nissan.........................  2008.........  29.4-........  29.6-........  30.3-........  30.9-........  31.6-........  33.5-........  35.1-.......  36.8-.......  38.7-.......  40.6-
                                 2010.........  29.4.........  29.6.........  30.1.........  30.5.........  31.1.........  33.1.........  34.6........  36.2........  37.9........  39.7
Porsche........................  2008.........  30.3-........  30.3-........  31.2-........  31.8-........  32.6-........  34.8-........  36.5-.......  38.2-.......  40.0-.......  41.9-
                                 2010.........  30.2.........  30.3.........  31.1.........  31.8.........  32.6.........  34.8.........  36.4........  38.2........  40.0........  41.9
Spyker/Saab....................  2008.........  31.1-........  31.2-........  32.1-........  32.8-........  33.6-........  35.9-........  37.6-.......  39.4-.......  41.3-.......  43.3-
                                 2010.........  0.0..........  0.0..........  0.0..........  0.0..........  0.0..........  0.0..........  0.0.........  0.0.........  0.0.........  0.0
Subaru.........................  2008.........  33.7-........  34.4-........  35.4-........  36.1-........  37.1-........  39.6-........  41.5-.......  43.5-.......  45.5-.......  47.7-
                                 2010.........  34.0.........  34.9.........  35.9.........  36.7.........  37.6.........  40.2.........  42.1........  44.1........  46.2........  48.4
Suzuki.........................  2008.........  31.9-........  32.2-........  33.2-........  33.9-........  34.7-........  37.1-........  38.9-.......  40.7-.......  42.7-.......  44.7-
                                 2010.........  33.5.........  34.2.........  35.2.........  36.0.........  36.9.........  39.4.........  41.3........  43.3........  45.3........  47.5
Tata...........................  2008.........  31.8-........  32.1-........  33.1-........  33.8-........  34.6-........  37.0-........  38.8-.......  40.6-.......  42.6-.......  44.6-
                                 2010.........  31.4.........  31.6.........  32.5.........  33.2.........  34.0.........  36.3.........  38.1........  39.9........  41.8........  43.8
Tesla..........................  2008.........  0.0-.........  0.0-.........  0.0-.........  0.0-.........  0.0-.........  0.0-.........  0.0-........  0.0-........  0.0-........  0.0-
                                 2010.........  0.0..........  0.0..........  0.0..........  0.0..........  0.0..........  0.0..........  0.0.........  0.0.........  0.0.........  0.0
Toyota.........................  2008.........  29.5-........  29.7-........  30.4-........  31.0-........  31.6-........  33.7-........  35.3-.......  37.0-.......  38.9-.......  40.7-
                                 2010.........  29.2.........  29.4.........  30.0.........  30.5.........  31.1.........  32.9.........  34.4........  36.1........  37.8........  39.6
Volkswagen.....................  2008.........  29.7-........  29.5-........  30.1-........  30.8-........  31.5-........  33.5-........  35.1-.......  36.7-.......  38.5-.......  40.3-
                                 2010.........  30.7.........  30.9.........  31.7.........  32.4.........  33.2.........  35.4.........  37.1........  38.9........  40.8........  42.7
Average........................  2008.........  29.2-........  29.4-........  30.0-........  30.6-........  31.2-........  33.3-........  34.9-.......  36.6-.......  38.5-.......  40.3-
                                 2010.........  28.9.........  29.1.........  29.6.........  30.0.........  30.6.........  32.6.........  34.2........  35.8........  37.5........  39.3
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    As discussed above with respect to the estimated final passenger 
cars standards, we note that a manufacturer's required light truck fuel 
economy level for a model year under the ultimate final standards will 
be based on its actual production numbers in that model year.

F. How do the final standards fulfill NHTSA's statutory obligations?

1. Overview
    The discussion that follows is necessarily complex, but the central 
points are straightforward. NHTSA has concluded that the standards 
presented above in Section IV.E are the maximum feasible standards for 
passenger cars and light trucks in MYs 2017-2021. EPCA/EISA requires 
NHTSA to consider four statutory factors in determining the maximum 
feasible CAFE standards in a rulemaking: specifically, technological 
feasibility, economic practicability, the effect of other motor vehicle 
standards of the Government on fuel economy, and the need of the nation 
to conserve energy. The agency considered a number of regulatory 
alternatives in its analysis of potential CAFE standards for those 
model years, including several that increase stringency on average at 
set percentages each year, one that approximates the point at which the 
modeled net benefits are maximized in each model year, and one that 
approximates the point at which the modeled total costs equal total 
benefits in each model year. Some of those alternatives represent 
standards that would be more stringent than the final standards,\1206\ 
and some are less

[[Page 63032]]

stringent.\1207\ As the discussion below explains, we conclude that the 
correct balancing of the relevant factors that the agency must consider 
in determining the maximum feasible standards recognizes economic 
practicability concerns as discussed below, and sets standards 
accordingly. Additionally, consistent with Executive Order 13563, the 
agency believes that the benefits of the preferred alternative amply 
justify the costs; indeed, the monetized benefits exceed the monetized 
costs by $137-192 billion over the lifetime of the vehicles covered by 
the final standards for MYs 2017-2021.\1208\ In full consideration of 
all of the information currently before the agency, we have weighed the 
statutory factors carefully and selected final passenger car and light 
truck standards that we believe are the maximum feasible for MYs 2017-
2021. We have also conducted a similar analysis for the augural 
standards presented for MYs 2022-2025, which represent the agency's 
best estimate of what standards would be maximum feasible, based on the 
information currently before us, had we the authority to set standards 
for 9 model years at a time.
---------------------------------------------------------------------------

    \1206\ We recognize that more stringent standards would help the 
need of the nation to conserve more energy and might potentially be 
technologically feasible (in the narrowest sense) during those model 
years, but based on our analysis and the evidence presented by the 
industry, we do not believe that higher standards would not 
represent the proper balancing for MYs 2017-2025 cars and trucks, 
because they would raise serious questions about economic 
practicability. As explained above, NHTSA's modeled estimates 
necessarily do not perfectly capture all of the factors of economic 
practicability, and this conclusion regarding net benefits versus 
economic practicability is similar to the conclusion reached in the 
MY 2012-2016 analysis.
    \1207\ We also recognize that less stringent standards might be 
less burdensome on the industry, but considering the environmental 
impacts of the different regulatory alternatives as required under 
NEPA and the need of the nation to conserve energy, we do not 
believe they would have represented the appropriate balancing of the 
relevant factors, because they would have left technology, fuel 
savings, and emissions reductions on the table unnecessarily, and 
not contributed as much as possible to reducing our nation's energy 
security and climate change concerns. They would also have lower net 
benefits than the Preferred Alternative.
    \1208\ This range represents the agency's estimates of monetized 
net benefits under both a 3% and a 7% discount rate. For purposes of 
monetized net benefits associated with both the final and augural 
standards (MYs 2017-2025, aggregated), the range becomes $372-507 
billion, under both a 3% and a 7% discount rate.
---------------------------------------------------------------------------

2. What are NHTSA's statutory obligations?
    As discussed above in Section IV.D, NHTSA sets CAFE standards under 
EPCA, as amended by EISA, and is also subject to the APA and NEPA in 
developing and promulgating CAFE standards.
    NEPA requires the agency to develop and consider the findings of an 
Environmental Impact Statement (EIS) for ``major Federal actions 
significantly affecting the quality of the human environment.'' NHTSA 
has prepared an EIS to inform its development and consideration of the 
final standards. The agency has evaluated the environmental impacts of 
a range of regulatory alternatives in the Final EIS and this final 
rule, and integrated the results of that consideration into our 
balancing of the EPCA/EISA factors, as discussed below.
    The APA and relevant case law requires our rulemaking decision to 
be rational, based on consideration of the relevant factors, and within 
the scope of the authority delegated to the agency by EPCA/EISA. The 
relevant factors are those required by EPCA/EISA and the additional 
factors approved in case law as those historically considered by the 
agency in determining the maximum feasible CAFE standards, such as 
safety. The statute requires us to set standards at the maximum 
feasible level for passenger cars and light trucks for each model year, 
and the agency concludes that the final standards would satisfy this 
requirement. NHTSA has carefully examined the relevant data and other 
considerations, as discussed below in the explanation of our conclusion 
that the final standards are the maximum feasible levels for MYs 2017-
2021 based on our evaluation of the information before us for this 
final rule.
    As discussed in Section IV.D, EPCA/EISA requires that NHTSA 
establish separate passenger car and light truck standards at ``the 
maximum feasible average fuel economy level that it decides the 
manufacturers can achieve in that model year,'' based on the agency's 
consideration of four statutory factors: technological feasibility, 
economic practicability, the effect of other standards of the 
Government on fuel economy, and the need of the nation to conserve 
energy.\1209\ NHTSA has developed definitions for these terms over the 
course of multiple CAFE rulemakings \1210\ and determines the 
appropriate weight and balancing of the terms given the circumstances 
in each CAFE rulemaking.\1211\ For MYs 2011-2020, EPCA further requires 
that separate standards for passenger cars and for light trucks be set 
at levels high enough to ensure that the CAFE of the industry-wide 
combined fleet of new passenger cars and light trucks reaches at least 
35 mpg not later than MY 2020. For model years after 2020, standards 
need simply be set at the maximum feasible level.
---------------------------------------------------------------------------

    \1209\ As explained in Section IV.D, EPCA also provides that in 
determining the level at which it should set CAFE standards for a 
particular model year, NHTSA may not consider the ability of 
manufacturers to take advantage of several statutory provisions that 
facilitate compliance with the CAFE standards and thereby reduce the 
costs of compliance. Specifically, in determining the maximum 
feasible level of fuel economy for passenger cars and light trucks, 
NHTSA cannot consider the fuel economy benefits of ``dedicated'' 
alternative fuel vehicles (like battery electric vehicles or natural 
gas vehicles), must consider dual-fueled automobiles to be operated 
only on gasoline or diesel fuel (at least through MY 2019), and may 
not consider the ability of manufacturers to use, trade, or transfer 
credits. This provision limits, to some extent, the fuel economy 
levels that NHTSA can find to be ``maximum feasible''--if NHTSA 
cannot consider the fuel economy of electric vehicles, for example, 
NHTSA cannot set standards predicated on manufacturers' usage of 
electric vehicles to meet the standards.
    \1210\ These factors are defined in Section IV.D; for brevity, 
we do not repeat those definitions here.
    \1211\ Public Citizen v. NHTSA, 848 F.2d 256 (Congress 
established broad guidelines in the fuel economy statute; agency's 
decision to set lower standard was a reasonable accommodation of 
conflicting policies).
---------------------------------------------------------------------------

    The agency thus balances the relevant factors to determine the 
maximum feasible level of the CAFE standards for each fleet, in each 
model year. The next section discusses briefly how the agency balanced 
the factors for the proposal, and why we tentatively concluded at that 
time that the proposed standards were the maximum feasible; the 
following section discusses the comments received on that tentative 
conclusion; and the final section discusses how the agency balanced the 
factors for this final rule and why the agency believes that the final 
standards are, indeed, maximum feasible.
3. How did the agency balance the factors for the NPRM?
    In the NPRM, the agency explained that there are numerous ways in 
which the relevant factors can be balanced to determine what standards 
would be maximum feasible, depending on the information and the policy 
priorities before the agency at the time. We explained that standards 
that may meet the objectives of one factor, such as technological 
feasibility, may not meet the objectives of other factors, such as 
economic practicability, and may thus not be maximum feasible. We 
discussed the preliminary analysis conducted following the first SNOI 
and prior to the second SNOI--thus, between the end of 2010 and July 
2011, in which the agency tentatively concluded that the 5%, 6%, 7%, 
MNB, and TC=TB alternatives were likely beyond the level of economic 
practicability based on the information available to the agency at the 
time, but that the alternatives including up to 4% per year for cars 
and 4% per year for trucks should reasonably remain under 
consideration. We further discussed the intensive discussions with 
stakeholders, including many individual manufacturers, between June 21, 
2011 and July 27, 2011, to determine whether additional information 
would aid NHTSA in further consideration. Manufacturer stakeholders 
provided

[[Page 63033]]

comments, much of which was confidential business information, which 
included projections of how they might comply with concept standards, 
the challenges that they expected, and their recommendations on program 
stringency and provisions.\1212\
---------------------------------------------------------------------------

    \1212\ Feedback from these stakeholder meetings is summarized in 
section IV.B and documents that are referenced in that section.
---------------------------------------------------------------------------

    Regarding passenger cars, in meetings prior to the NPRM, 
manufacturers generally suggested that the most significant challenges 
to meeting a constant 4% (or faster) year-over-year increase in the 
passenger car standards related to their ability to implement the new 
technologies quickly enough to achieve the required levels, based on 
the following considerations: their need to implement fuel economy 
improvements in both the passenger car and light truck fleets 
concurrently; challenges related to the cadence of redesign and refresh 
schedules; the pace at which new technology can be implemented 
considering economic factors such as availability of engineering 
resources to develop and integrate the technologies into products; and 
the pace at which capital costs can be incurred to acquire and 
integrate the manufacturing and production equipment necessary to 
increase the production volume of the technologies. Manufacturers often 
expressed concern that the 4% levels could require greater numbers of 
advanced technology vehicles than they thought they would be able to 
sell in that time frame, given their belief that the cost of some 
technologies was much higher than the agencies had estimated and their 
observations of current consumer acceptance of and willingness to pay 
for advanced technology vehicles that are available now in the 
marketplace. A number of manufacturers argued that they did not believe 
that they could create a sustainable business case under passenger car 
standards that increased at the rate required by the 4% alternative.
    Most manufacturers expressed significantly greater concerns over 
the 4% alternative for light trucks than for passenger cars. Many 
argued that increases in light truck standard stringency should be 
slower than increases in passenger car standard stringency, based on, 
among other things, the greater payload, cargo capacity and towing 
utility requirements of light trucks, and what they perceived to be 
lower consumer acceptance of certain (albeit not all) advanced 
technologies on light trucks. Many also commented that redesign cycles 
are longer on trucks than they are on passenger cars, which reduces the 
frequency at which significant changes can be made cost-effectively to 
comply with increasing standards, and that the significant increases in 
stringency in the MY 2012-2016 program \1213\ in combination with 
redesign schedules would not make it possible to comply with the 4% 
alternative in the earliest years of the MY 2017-2025 program, such 
that only significantly lower stringencies in those years would be 
feasible in their estimation. Manufacturers generally stated that the 
most significant challenges to meeting a constant 4% (or faster) year-
over-year increase in the light truck standards were similar to what 
they had described for passenger cars as enumerated in the paragraph 
above, but were compounded by concerns that applying technologies to 
meet the 4% alternative standards would result in trucks that were more 
expensive and provided less utility to consumers. Manufacturers argued 
that their technology cost estimates were higher than the agencies' and 
consumers are less willing to accept/pay for some advanced technologies 
in trucks than in cars, and that they were not optimistic that they 
could recoup the costs through higher prices for vehicles with the 
technologies that would be needed to comply with the 4% alternative. 
Given their concerns about having to reduce utility and raise truck 
prices, and about their ability to apply technologies quickly enough 
given the longer redesign periods for trucks, a number of manufacturers 
argued that they did not believe that they could create a sustainable 
business case under light truck standards that increased at the rate 
required by the 4% alternative.
---------------------------------------------------------------------------

    \1213\ Some manufacturers indicated that their light truck fleet 
fuel economy would be below what they anticipated their required 
fuel economy level would be in MY 2016, and that they currently 
expect that they will need to employ available flexibilities to 
comply with that standard.
---------------------------------------------------------------------------

    Prior to the NPRM, other stakeholders, such as environmental and 
consumer groups, consistently stated that stringent standards are 
technologically achievable and critical to important national 
interests, such as improving energy independence, reducing climate 
change, and enabling the domestic automobile industry to remain 
competitive in the global market. Labor interests stressed the need to 
carefully consider economic impacts and the opportunity to create and 
support new jobs, and consumer advocates emphasized the economic and 
practical benefits to consumers of improved fuel economy and the need 
to preserve consumer choice. In addition, a number of stakeholders 
stated that the standards under development should not have an adverse 
impact on safety.
    We thus explained in the NPRM that, in collaboration with EPA and 
in coordination with CARB, NHTSA carefully considered the inputs 
received from all stakeholders, conducted additional independent 
analyses, and deliberated over the feedback received on the agencies' 
analyses. Based on our own analysis of manufacturers' capabilities and 
based on that feedback, particularly as it concerned consumer 
acceptance of some advanced technologies and consumers' willingness to 
pay for improved fuel economy, we tentatively concluded that the 
agency's preliminary analysis supporting consideration of standards 
that increased up to 4%/year may not have captured fully the level of 
uncertainty that surrounds economic practicability in these future 
model years. Nevertheless, while we believe there may be some 
uncertainty, we do not agree that it is nearly as significant as a 
number of manufacturers maintained, especially for passenger cars. The 
most persuasive information received from stakeholders for passenger 
cars concerned practicability issues in MYs 2017-2021, so the agency 
tentatively concluded that the maximum feasible stringency levels for 
passenger cars are only slightly different from the 4%/year levels 
suggested as the high end preliminarily considered by the agency; 
increasing on average 3.7%/year in MYs 2017-2021, and on average 4.5%/
year in MYs 2022-2025. For the overall MYs 2017-2025 period, the 
maximum feasible stringency curves increase on average at 4.1%/year, 
and our analysis in the proposal indicated that the costs and benefits 
attributable to the 4% alternative and the preferred alternative for 
passenger cars are very similar: the preferred alternative was 8.8 
percent less expensive for manufacturers than the 4% alternative 
(estimated total costs were $113 billion for the preferred alternative 
and $124 billion for the 4% alternative), and achieved only $20 billion 
less in total benefits than the 4% alternative (estimated total 
benefits are $310 billion for the preferred alternative and $330 
billion for the 4% alternative), which the agency stated was a very 
small difference given that benefits are spread across the entire 
lifetimes of all vehicles subject to the standards. The analysis also 
showed that the lifetime cumulative fuel savings was only 5 percent 
higher for the 4% alternative than the preferred alternative (the 
estimated fuel savings was 104 billion

[[Page 63034]]

gallons for the preferred alternative, and 110 billion gallons for the 
4% alternative). At the same time, the increase in average vehicle cost 
in MY 2025 in the NPRM was 9.4 percent higher for the 4% alternative 
(the estimated cost increase for the average vehicle was $2,023 for the 
preferred alternative, and $2,213 for the 4% alternative).\1214\
---------------------------------------------------------------------------

    \1214\ See discussion at 76 FR 75243 et seq.
---------------------------------------------------------------------------

    NHTSA explained in the NPRM that we were concerned that requiring 
manufacturers to invest that capital to meet higher standards in MYs 
2017-2021, rather than allowing them to increase fuel economy in those 
years slightly more slowly, would reduce the levels that would be 
feasible in the second phase of the program by diverting research and 
development resources to those earlier model years. Thus, after 
considerable deliberation with EPA and consultation with CARB, NHTSA 
tentatively selected the preferred alternative as the maximum feasible 
alternative for MYs 2017-2025 passenger cars based on consideration of 
inputs from manufacturers and the agency's independent analysis, which 
reaches the stringency levels of the 4% alternative in MY 2025, but has 
a slightly slower ramp up rate in the earlier years.
    Regarding light trucks, we explained that while NHTSA did not agree 
with the manufacturer's overall cost assessments and believed that our 
technology cost and effectiveness methodology allowed manufacturers to 
preserve all necessary vehicle utility, the agency also believed there 
was merit to some of the concerns raised in stakeholder feedback. 
Specifically, concerns about longer redesign schedules for trucks, 
compounded by the need to invest simultaneously in raising passenger 
car fuel economy, may not have been fully captured in NHTSA's 
preliminary analysis, which could lead manufacturers to implement 
technologies that do not maintain vehicle utility, based on the cadence 
of the standards under the 4% alternative. A number of manufacturers 
repeatedly stated, in providing feedback, that the MYs 2012-2016 
standards for trucks, while feasible, required significant investment 
to reach the required levels, and that given the redesign schedule for 
trucks, that level of investment throughout the entire MYs 2012-2025 
time period was not sustainable. Based on the confidential business 
information that manufacturers provided to the agencies through that 
feedback, NHTSA explained that we believed that this point may be 
valid. If the agency pushes CAFE increases that require considerable 
sustained investment at a faster rate than industry redesign cycles, 
adverse economic consequences could ensue. The best information that 
the agency had at the NPRM, therefore, indicated that requiring light 
truck fuel economy improvements at the 4% annual rate could create 
potentially severe economic consequences. Our NRPM analysis indicated 
that the preferred alternative had 48 percent lower cost than the 4% 
alternative (estimated total costs were $44 billion for the preferred 
alternative and $83 billion for the 4% alternative), and the total 
benefits of the preferred alternative were 30 percent lower ($87 
billion lower) than the 4% alternative (estimated total benefits were 
$206 billion for the preferred alternative and $293 billion for the 4% 
alternative), spread across the entire lifetimes of all vehicles 
subject to the standards. The analysis also showed that the lifetime 
cumulative fuel savings was 42 percent higher for the 4% alternative 
than the preferred alternative (the estimated fuel savings was 69 
billion gallons for the preferred alternative, and 98 billion gallons 
for the 4% alternative). At the same time, the increase in average 
vehicle cost in MY 2025 in the NPRM was 54 percent higher for the 4% 
alternative (the estimated cost increase for the average vehicle was 
$1,578 for the preferred alternative, and $2,423 for the 4% 
alternative).
    Thus, evaluating the inputs from stakeholders and the agency's 
independent analysis, the agency also considered further how it thought 
the factors should be balanced to determine the maximum feasible light 
truck standards for MYs 2017-2025. Based on that consideration of the 
information before the agency and how it informs our balancing of the 
factors, NHTSA tentatively concluded in the NPRM that 4%/year CAFE 
stringency increases for light trucks in MYs 2017-2021 were likely 
beyond maximum feasible, and in fact, in the earliest model years of 
the MY 2017-2021 period, that the 3%/year and 2%/year alternatives for 
trucks were also likely beyond maximum feasible. NHTSA therefore 
tentatively concluded that the preferred alternative, which would in 
MYs 2017-2021 increase on average 2.6%/year, and in MYs 2022-2025 would 
increase on average 4.6%/year, was the maximum feasible level that the 
industry can reach in those model years. For the overall MY 2017-2025 
period, the maximum feasible stringency curves would increase on 
average 3.5%/year.
    The agency also explained that NHTSA had accounted for the effect 
of EPA's standards in light of the agencies' close coordination and the 
fact that both sets of standards were developed together to harmonize 
as part of the National Program. Given the close relationship between 
fuel economy and CO2 emissions, and the efforts NHTSA and 
EPA made to conduct joint analysis and jointly deliberate on 
information and tentative conclusions,\1215\ the agencies have sought 
to harmonize and align their proposed standards to the greatest extent 
possible, consistent with their respective statutory authorities. Thus, 
NHTSA tentatively concluded that the standards represented by the 
preferred alternative were the maximum feasible standards for passenger 
cars and light trucks in MYs 2017-2025, based on the information before 
the agency at the time of the NPRM. We explained that while we 
recognized that higher standards would help the need of the nation to 
conserve more energy and might potentially be technologically feasible 
(in the narrowest sense) during those model years, based on our 
analysis and the evidence presented by the industry, higher standards 
would not appear to represent the proper balancing for MYs 2017-2025 
cars and trucks. We therefore concluded in the NPRM that the correct 
balancing would recognize economic practicability concerns as discussed 
above, and proposed standards based on the preferred alternative for 
MYs 2017-2025.
---------------------------------------------------------------------------

    \1215\ NHTSA and EPA conducted joint analysis and jointly 
deliberated on information and tentative conclusions related to 
technology cost, effectiveness, manufacturers' capability to 
implement technologies, the cadence at which manufacturers might 
support the implementation of technologies, economic factors, and 
the assessment of comments from manufacturers.
---------------------------------------------------------------------------

4. What comments did the agency receive regarding the proposed maximum 
feasible levels?
    Of the several hundred thousand commenters, including industry and 
union commenters, environmental and consumer groups, national security 
interest groups, U.S. senators and representatives, State legislators, 
State and local government organizations and representatives, and many 
individual citizens, the considerable majority supported the proposed 
levels of stringency, citing the significant benefits associated with 
the standards.
    However, many commenters urged the agencies to set more stringent 
standards. Individual commenters sent in thousands of form letters 
calling on the agencies to set standards that require 60 mpg in 2025, 
which they described as equivalent to a 6 percent/year rate of

[[Page 63035]]

increase.\1216\ NESCAUM also supported a 6 percent/year rate of 
increase,\1217\ as did UCS, which stated that the agencies' analysis 
showed that many current vehicles already meet the targets that would 
apply to them under the future standards, and that the technology 
exists to set standards that increase at 6 percent/year.\1218\ 
Ceres,\1219\ Consumers Union,\1220\ and UCS \1221\ argued that the 
higher the standards, the greater the economic benefits (both to 
consumers individually in terms of fuel savings and to the economy as a 
whole), and therefore the final standards should be as stringent as 
possible. NRDC commented that the agencies' determination of stringency 
should account for the higher fuel price projections in the AEO 2012 
Early Release, and that higher fuel prices would justify more 
application of technology, and thus more stringent standards.\1222\ 
ACEEE commented that the agencies' analyses appeared to show that more 
stringent alternatives than the one proposed were feasible for the 
majority of the industry, and that the agencies' rejection of those 
more stringent alternatives was insufficient given the relatively low 
cost and considerable benefits associated with them.\1223\ ACEEE 
suggested that the agencies show the cost of compliance in each year 
for each manufacturer rather than focusing on MYs 2021 and 2025.\1224\ 
ICCT supported the proposed stringency increases, but expressed concern 
that the proposed rule was not sufficiently technology-forcing, and 
that credits and incentives might undermine the projected fuel savings 
and emissions reductions.\1225\
---------------------------------------------------------------------------

    \1216\ See, e.g., Care2 form letters, Docket No. NHTSA-2010-
0131-0190; Sierra Club member form letters, Docket No. NHTSA-2010-
0131-0189.
    \1217\ NESCAUM, Docket No. EPA-HQ-OAR-2010-0799-9476, at 1-2.
    \1218\ UCS, Docket No. EPA-HQ-OAR-2010-0799-9567, at 6-8.
    \1219\ Ceres, Docket No. EPA-HQ-OAR-2010-0799-9475, at 3.
    \1220\ Consumers Union, Docket No. EPA-HQ-OAR-2010-0799-9454, at 
6.
    \1221\ UCS at 6.
    \1222\ NRDC, Docket No. EPA-HQ-OAR-2010-0799-9472, at 9.
    \1223\ ACEEE, Docket No. EPA-HQ-OAR-2010-0799-9528, at 7.
    \1224\ Id.
    \1225\ ICCT, Docket No. NHTSA-2010-0131-0258, at 2.
---------------------------------------------------------------------------

    CBD provided extensive comments regarding why it thought the final 
standards should be more stringent, commenting that the most stringent 
alternative analyzed by NHTSA was the maximum feasible alternative, 
since that is the only alternative that CBD believed would actually 
reduce emissions.\1226\ CBD stated that given that much fuel economy-
improving technology already exists today (including mass reduction, 
which CBD said should be mandated in greater amounts \1227\), given 
that real-life technology costs will be much lower than the agencies 
estimate, and given the tremendous benefits associated with the most 
stringent alternative, therefore the most stringent alternative 
represented the best balancing of the EPCA factors,\1228\ and choosing 
the proposed alternative would leave ``substantial, achievable fuel 
economy improvements and public benefits unrealized due to industry 
objections.'' \1229\ CBD argued that the agencies appeared to be over-
emphasizing the importance of consumer choice ``and the continued 
production of every vehicle in its current form over the need to 
conserve energy,'' as evidenced by what CBD saw ``as soon as increased 
FE begins to affect any attribute of any existing vehicle, stringency 
increases cease.'' \1230\ CBD further argued that without an analysis 
of ``maximized social benefits, where the benefits most optimally 
compare to the anticipated costs,'' ``there is no rigorous analysis of 
economic feasibility that justifies rejecting [the most stringent 
alternative] as the appropriate standard for this rulemaking.'' \1231\ 
As discussed above in Section IV.D, CBD asserted that the proposed 
standards were below the maximum feasible level because they were not 
sufficiently technology-forcing, and because the agency had given too 
much weight in the balancing of relevant factors to consumer demand.
---------------------------------------------------------------------------

    \1226\ CBD, Docket No. NHTSA-2010-0131-0255, at 23.
    \1227\ Id. at 6.
    \1228\  Id. at 23.
    \1229\ Id. at 8.
    \1230\ Id. at 4
    \1231\ Id. at 23.
---------------------------------------------------------------------------

    Other commenters argued that the final standards should be less 
stringent than what was proposed. AFPM argued that because the agencies 
had not employed a vehicle choice model in the NPRM analysis, the 
agencies had chosen an alternative that required too much in the way of 
electrification technologies, stating that ``[t]he agency predicts that 
annual sales of hybrids, plug-in hybrids and all electric vehicles 
could represent 15% of new sales by 2025,'' while ``[i]n reality, EVs, 
HEVs, etc have been a huge disappointment for automakers.'' \1232\ AFPM 
stated that therefore the standards were beyond maximum feasible. 
Environmental Consultants of Michigan similarly argued that the 
proposed standards are arbitrary and capricious because most vehicles 
in existence today could not meet the 2025 standards, and the few that 
could are all HEVs, PHEVs, or EVs, which cost significantly more than 
the agencies' per-vehicle cost estimates for the 2025 standards, and 
the agencies' cost estimates must therefore be incorrect.\1233\
---------------------------------------------------------------------------

    \1232\ AFPM, Docket No. EPA-HQ-OAR-2010-0799-9485, at 4-5.
    \1233\ Environmental Consultants of Michigan, NHTSA-2010-0131-
0166, at 5-6.
---------------------------------------------------------------------------

    The Alliance commented that its members supported the proposed 
increases in stringency, but that consumers had to purchase the 
vehicles that were made to meet those standards,\1234\ while several 
individual industry commenters argued that the standards were very 
challenging and possibly too stringent as applied to them. BMW, for 
example, commented that because its vehicles are very ``content-
heavy,'' it had already implemented much of the technology examined by 
the agencies, and thus would have to work harder than other 
manufacturers to meet the standards.\1235\ BMW stated that in order to 
comply, it would have to build significant numbers of EVs, which might 
need government subsidies to encourage consumers to purchase 
them.\1236\ VW presented analysis to make a similar argument for 
itself,\1237\ and commented that the standards for cars were 
significantly more stringent than the standards for trucks, and that 
the car standards exceeded what VW would consider to be feasible and 
balanced.\1238\ VW further stated that the standards for MYs 2022-2025 
were too aggressive, and based on ``critical assumptions about the 
market and technologies which are simply too uncertain to appropriately 
comprehend.'' \1239\
---------------------------------------------------------------------------

    \1234\ Alliance, Docket No. NHTSA-2010-0131-0262, at 3.
    \1235\ BMW, Docket No. NHTSA-2010-0131-0250, at 3-4.
    \1236\ Id. at 2.
    \1237\ VW, Docket No. NHTSA-2010-0131-0247, at 10-12.
    \1238\ Id. at 8.
    \1239\ Id.
---------------------------------------------------------------------------

    Many commenters focused on the stringency of the truck standards. 
Some argued that the truck standards should be more stringent, and 
suggested that the agencies should have required more improvements in 
the largest trucks rather than implementing the curve adjustments and 
technology incentives proposed for those vehicles. Many of these 
commenters focused on the relative burden of the standards on small 
trucks versus large trucks, or on

[[Page 63036]]

the burden on cars versus on trucks. VW, for example, commented that 
the lower stringency for larger trucks,\1240\ ``combined with segment-
exclusive credit opportunities has the potential to distort the future 
light duty market,'' and that even if the agencies are correct that 
``work trucks have special needs,'' ``the agencies could have still 
created a regulation that was more equitable with equal stringency for 
cars and trucks.'' \1241\ VW suggested that both the car and the truck 
standards should increase at roughly 4 percent/year, and that 
manufacturers who struggle with the truck standards could simply over-
comply with the car standards and transfer credits.\1242\ Nissan, in 
contrast, stated that it would not be feasible to rely on transfers of 
car credits to cover truck fleet shortfalls under CAFE, since EISA 
limits the amount of credits that can be transferred in a given 
year.\1243\ VW stated that the difference in stringency between trucks 
and cars ``may disproportionately drive cost into passenger cars versus 
trucks and may ultimately discourage customer consideration of lower 
CO2-emitting passenger cars,'' which VW stated ``seems 
counterintuitive to environmental and energy goals.'' \1244\ Sierra 
Club \1245\ and CBD \1246\ provided similar comments. VW suggested that 
the agencies may have underestimated the domestic manufacturers' future 
truck share.\1247\
---------------------------------------------------------------------------

    \1240\ VW stated that while EPA described the average annual 
truck stringency increase as 3.5 percent/year, the increase for the 
larger trucks was 1 percent or less in the first several years of 
the program. Id. at 20-21.
    \1241\ Id. at 8-9.
    \1242\ Id.
    \1243\ Nissan, Docket No. EPA-HQ-OAR-2010-0799-9471, at 8.
    \1244\ VW at 9.
    \1245\ Sierra Club et al., Docket No. EPA-HQ-OAR-2010-0799-9549, 
at 6.
    \1246\ CBD, Docket No. NHTSA-2010-0131-0255, at 13.
    \1247\ VW at 12.
---------------------------------------------------------------------------

    Toyota \1248\ and Honda objected to the relative stringency of the 
truck curve for small trucks as compared to large trucks, with Honda 
stating that based on its review of EPA's analysis, a small footprint 
light truck like a Honda CR-V and a large truck like a Ford F150 may 
receive similar technology ``packages'' at similar costs, but based on 
the target curves, the small truck's proposed target would require an 
18 percent increase in stringency, while the large truck's target would 
require an increase of less than 5 percent.\1249\ Consumers Union took 
a slightly different approach, arguing that while it is 
``counterintuitive and counterproductive to let the least fuel 
efficient models improve more slowly than more efficient models,'' the 
light truck curve should be made more stringent overall: not just for 
larger light trucks, but also for smaller light trucks (more similar to 
the car standards), so that manufacturers of CUVs are not encouraged to 
reclassify cars as trucks.\1250\
---------------------------------------------------------------------------

    \1248\ Toyota, Docket No. EPA-HQ-OAR-2010-0799-9586, at 5.
    \1249\ Honda, Docket No. NHTSA-2010-0131-0239, at 1.
    \1250\ Consumers Union, Docket No. EPA-HQ-OAR-2010-0799-9454, at 
6.
---------------------------------------------------------------------------

    CBD commented that the proposed standards ``substantially and 
improperly favor light trucks, particularly the largest and least fuel 
efficient trucks,'' and argued that the shape of the curves and the 
rate of increase of the truck standards would encourage manufacturers 
to build more and larger trucks, thus undermining the goals of the 
program.\1251\ NACAA expressed similar concern.\1252\ CBD stated that 
the Ricardo analysis of technology effectiveness showed that 
manufacturers should be capable of improving the fuel economy of their 
large trucks while maintaining towing and hauling, so the agencies 
should not cite the need to preserve truck utility in setting the truck 
standards, and that since big trucks are the most profitable vehicles, 
the cost of applying technology should not be a factor for the agencies 
in determining the rate of stringency increase for those 
vehicles.\1253\ CBD argued that the light truck curve should increase 
at the same rate as the passenger car curve in order to ``comport with 
Congressional intent'' that the standards be ratable and conserve 
energy.\1254\
---------------------------------------------------------------------------

    \1251\ CBD, Docket No. NHTSA-2010-0131-0255, at 9-10.
    \1252\ NACAA, Docket No. EPA-HQ-OAR-2010-0799-8084, at 3.
    \1253\ CBD at 11-12.
    \1254\ Id. at 14.
---------------------------------------------------------------------------

    In contrast, some commenters described the MYs 2022-2025 targets 
for the largest light trucks as especially challenging, arguing that 
the cost feasibility of applying the advanced technologies necessary to 
meet the standards in that time frame may be limited, given the cost 
sensitivity of buyers in that market segment, and suggesting that sales 
may be impacted.\1255\ Ford provided extensive comments on the utility 
requirements of large trucks, and argued that consumers who purchase 
these trucks do so for the utility, and consumers who purchase these 
trucks without a need for the utility will dwindle over the rulemaking 
timeframe.\1256\
---------------------------------------------------------------------------

    \1255\ Nissan, Docket No. EPA-HQ-OAR-2010-0799-9471, at 8; RVIA, 
Docket No. EPA-HQ-OAR-2010-0799-9550, at 1-2.
    \1256\ Ford, Docket No. NHTSA-2010-0131-0235, at 9.
---------------------------------------------------------------------------

    And finally, a number of industry commenters commented that NHTSA's 
standards would harmonize better with EPA's standards if NHTSA allowed 
additional credit flexibilities or modified its curves to make the 
standards less difficult in case manufacturers were relying heavily on 
the flexibilities provided by EPA. For example, the Alliance argued 
that because NHTSA does not offer certain flexibilities that EPA 
offers, ``While the impact of the program differences is relatively 
small in the early years of the program, it will increase with the 
passage of time, particularly as manufacturers rely more and more on 
vehicle electrification in order to comply with the standards.'' \1257\ 
The Alliance further stated that ``Unless this imbalance is corrected, 
it will result in significant disharmony in the middle and later years 
of the time period covered by this proposal.'' \1258\ Toyota provided 
similar comments; \1259\ GM supported the Alliance comments.\1260\
---------------------------------------------------------------------------

    \1257\ Alliance, Docket No. NHTSA-2010-0131-0262, at 14-15.
    \1258\ Id. at 15.
    \1259\ Toyota, Docket No. EPA-HQ-OAR-2010-0799-9586, at 6
    \1260\ GM, Docket No. NHTSA-2010-0131-0236, at 2.
---------------------------------------------------------------------------

5. How has the agency balanced the factors for this final rule?
a. What alternatives did the agency consider, and why?
    The relevant factors (and thus the weight given to each factor) can 
be balanced in many different ways depending on the agency's policy 
priorities and on the information before the agency regarding any given 
model year. The agency thus considered a range of alternatives that 
represent different regulatory options that seemed potentially 
reasonable for purposes of this rulemaking. For this final rule, as for 
the proposal, the agency considered nine regulatory alternatives, 
including what we describe as the ``preferred alternative'' in the 
Draft and Final EIS, which is what the agency proposed and is 
finalizing. The other regulatory alternatives include six in which fuel 
economy levels increase annually, on average, at set rates as follows:
     2%/year,
     3%/year,
     4%/year,
     5%/year,
     6%/year, and

[[Page 63037]]

     7%/year.\1261\
---------------------------------------------------------------------------

    \1261\ This is an approach similar to that used by the agency in 
the MY 2012-2016 rulemaking, in which we also considered several 
alternatives that increased annually, on average, at 3%, 4%, 5%, 6% 
and 7%/year. The ``percent-per-year'' alternatives in this proposal 
are somewhat different from those considered in the MY 2012-2016 
rulemaking, however, in terms of how the annual rate of increase is 
applied. For this final rule, as for the proposal, the stringency 
curves are themselves advanced directly by the annual increase 
amount, without reference to any yearly changes in the fleet mix. In 
the 2012-2016 rule, the annual increases for the stringency 
alternatives reflected the estimated required fuel economy of the 
fleet which accounted for both the changes in the target curves and 
changes in the fleet mix.
---------------------------------------------------------------------------

    We considered these alternatives because analysis of these various 
rates of increase effectively encompasses the entire range of fuel 
economy improvements that, based on information currently available to 
the agency, could conceivably fall within the statutory boundary of 
``maximum feasible'' standards. The regulatory alternatives also 
include two that are based on benefit-cost criteria: one in which 
standards would be set at the point where the modeled net benefits 
would be maximized for each fleet in each year (``MNB''), and another 
in which standards would be set at the point at which total costs would 
be most nearly equal to total benefits for each fleet in each year 
(``TC=TB'').\1262\ These alternatives are discussed in more detail in 
Chapter III of the FRIA accompanying this final rule.\1263\ Because the 
agency could conceivably select any of the regulatory alternatives 
above, all of which fall between 2%/year and 7%/year, inclusive, the 
Final EIS that informed this final rule analyzes these lower and upper 
bounds as well as the preferred alternative. Additionally, the Final 
EIS analyzes a ``No Action Alternative,'' which assumes that, for MYs 
2017 and beyond, NHTSA would set standards at the same level as MY 
2016. The No Action Alternative provides a baseline for comparing the 
environmental impacts of the other alternatives.
---------------------------------------------------------------------------

    \1262\ We included the MNB and TC=TB alternatives in part for 
the reference of commenters familiar with NHTSA's past several CAFE 
rulemakings--these alternatives represent balancings carefully 
considered by the agency in past rulemaking actions as potentially 
maximum feasible--and because Executive Orders 12866 and 13563 focus 
attention on an approach that maximizes net benefits. The assessment 
of maximum net benefits is challenging in the context of setting 
CAFE standards, in part because standards which maximize net 
benefits for each fleet, for each model year, would not necessarily 
be the standards that lead to the greatest net benefits over the 
entire rulemaking period.
    \1263\ Chapter III of the FRIA contains an extensive discussion 
of the relative impacts of the alternatives in terms of fuel 
savings, costs (both per-vehicle and aggregate), carbon dioxide 
emissions avoided, and many other metrics.
---------------------------------------------------------------------------

    This approach to selecting regulatory alternatives clearly 
communicates the level of stringency of each alternative and allows us 
to identify alternatives that would represent different ways to balance 
the relevant factors. Each of the alternatives represents, in part, a 
different way in which NHTSA could conceivably balance different 
policies and considerations in setting the standards that achieve the 
maximum feasible levels. For example, the 2% Alternative, the least 
stringent alternative, (other than No Action), would represent a 
balancing in which economic practicability--which include concerns 
about availability of technology, capital, and consumer preferences for 
vehicles built to meet the future standards--weighs more heavily in the 
agency's consideration, and other factors weigh less heavily. In 
contrast, under the 7% Alternative, one of the most stringent, the need 
of the nation to conserve energy--which includes energy conservation 
and climate change considerations--would weigh more heavily in the 
agency's consideration, and other factors would weigh less heavily. 
Whether different alternatives may be maximum feasible can also be 
influenced by differences and uncertainties in the way in which key 
economic factors (e.g., the price of fuel and the social cost of 
carbon) and technological inputs could be assessed and valued. While 
NHTSA believes that our analysis for this final rule uses the best and 
most transparent technology-related inputs and economic assumption 
inputs that the agencies could derive for MYs 2017-2025, we recognize 
that there is uncertainty in these inputs, and the balancing could be 
different if the inputs were different. When the agency undertakes the 
future rulemaking to develop final standards for MYs 2022-2025, for 
example, we expect that much new information will inform that future 
analysis, which may potentially lead us to choose different standards 
than the augural ones presented today.\1264\
---------------------------------------------------------------------------

    \1264\ We emphasize, nevertheless, that the augural standards 
for MYs 2022-2025 represent the agency's best judgment of what 
standards would be maximum feasible for those model years, based on 
the information before us today, if the agency had authority to set 
standards for 9 model years at a time.
---------------------------------------------------------------------------

    This is the first CAFE rulemaking in which the agency has looked 
this far into the future, which makes our traditional approach to 
balancing more challenging than in past (even recent past) rulemakings. 
The following discussion explains what we believe each factor means in 
the context of this rulemaking, and how the agency therefore balanced 
the factors for determining the maximum feasible final and augural 
passenger car and light truck standards.
b. What does technological feasibility mean in the context of this 
rulemaking?
    Technological feasibility, as the agency defines it, is less 
constraining in this rulemaking than it has been in the past in light 
of the rulemaking time frame. ``Technological feasibility'' refers to 
whether a particular method of improving fuel economy can be available 
for commercial application in the model year for which a standard is 
being established. In previous CAFE rulemakings, it has been more 
difficult for the agency to say that the most advanced technologies 
would be available for commercial application in the model years in 
question. For this longer term rulemaking, NHTSA has considered all 
types of technologies that improve real-world fuel economy, including 
air-conditioner efficiency and other off-cycle technology, PHEVs, EVs, 
and highly-advanced internal combustion engines not yet in production. 
The agencies expect all of these to be commercially applicable by the 
rulemaking time frame. In terms of what would be technologically 
feasible, then, on the one hand, we recognize that some technologies 
that currently have limited commercial use cannot be deployed on every 
vehicle model in MY 2017, but require a realistic schedule for 
widespread commercialization to be feasible. On the other hand, 
however, based on our analysis, all of the alternatives appear as 
though they could narrowly be considered technologically feasible, in 
that they could be achieved based on the existence or projected future 
existence of technologies that could be incorporated on future 
vehicles. Any of the alternatives could thus be achieved on a technical 
basis alone if the level of resources that might be required to 
implement the technologies is not considered. If all alternatives are 
at least theoretically technologically feasible in the MY 2017-2025 
timeframe, and the need of the nation is best served by pushing 
standards as stringent as possible, then the agency might be inclined 
to select the alternative that results in the very most stringent 
standards considered.
    Many commenters agreed with this assessment, and urged the agency 
to set more stringent standards than those we proposed. If the 
technology exists or is projected to exist, and if the agency's 
assessment is that benefits (fuel savings and emissions avoided) only 
increase as

[[Page 63038]]

stringency increases, why would the most stringent standards assessed 
not be maximum feasible? The reason they might not is that the agency 
must also consider what is required to practically implement 
technologies, which is part of economic practicability, and to which 
the most stringent alternatives give little weight.
c. What does economic practicability mean in the context of this 
rulemaking?
    ``Economic practicability'' refers to whether a standard is one 
``within the financial capability of the industry, but not so stringent 
as to lead to adverse economic consequences, such as a significant loss 
of jobs or the unreasonable elimination of consumer choice.'' Consumer 
acceptability is also an element of economic practicability, one that 
is particularly difficult to gauge during times of uncertain fuel 
prices.\1265\ In a rulemaking such as this, determining economic 
practicability requires consideration of the uncertainty surrounding 
relatively distant future market conditions and consumer demand for 
fuel economy in addition to other vehicle attributes. In an attempt to 
evaluate the economic practicability of attribute-based standards, 
NHTSA includes a variety of factors in its modeling analysis, including 
the annual rate at which manufacturers can increase the percentage of 
their fleet that employ a particular type of fuel-saving technology, 
the specific fleet mixes of different manufacturers, and assumptions 
about the cost of the standards to consumers and consumers' valuation 
of fuel economy, among other things. Ensuring that a reasonable amount 
of lead time exists to make capital investments and to devote the 
resources and time to design and prepare for commercial production of a 
more fuel efficient fleet is also relevant. Yet there are some aspects 
of economic practicability that the agency's analysis is not able to 
capture at this time--for example, the computer model that we use to 
analyze alternative standards does not account for all aspects of 
uncertainty, in part because the agency cannot know what cannot be 
known. The agency must thus account for uncertainty in the context of 
economic practicability in other ways as best as we can, given the 
entire record before us.
---------------------------------------------------------------------------

    \1265\ See, e.g., Center for Auto Safety v. NHTSA (CAS), 793 
F.2d 1322 (D.C. Cir. 1986) (Administrator's consideration of market 
demand as component of economic practicability found to be 
reasonable).
---------------------------------------------------------------------------

    The agency does not believe that there is necessarily a bright-line 
test for whether a regulatory alternative is economically practicable, 
but there are several metrics that we discuss below that we find useful 
for making the assessment, as follows:
     Compliance ``shortfalls''--The difference between the 
required fuel economy level that applies to a manufacturer's fleet and 
the level of fuel economy that the agency projects the manufacturer 
would achieve in that year, based on our analysis, is called a 
``compliance shortfall.'' \1266\ If it appears, in our modeling 
analysis, that a significant portion of the industry cannot meet the 
standards defined by a regulatory alternative in a model year, given 
that our modeling analysis accounts for manufacturers' expected ability 
to design, produce, and sell vehicles (through redesign cycle cadence, 
technology costs and benefits, etc.), then that suggests that the 
standards may not be economically practicable.
---------------------------------------------------------------------------

    \1266\ The agency's modeling estimates how the application of 
technologies could increase vehicle costs, reduce fuel consumption, 
and reduce CO2 emissions, and affect other factors. In 
response to comments suggesting that the agency mandate higher 
levels of certain technologies, such as mass reduction, as CAFE 
standards are performance-based, NHTSA does not mandate that 
specific technologies be used for compliance. CAFE modeling, 
therefore projects one way that manufacturers could comply. 
Manufacturers may choose a different mix of technologies based on 
their unique circumstances and products.
---------------------------------------------------------------------------

     Application rate of technologies--even if shortfalls are 
not extensive, whether it appears that a regulatory alternative would 
impose undue burden on manufacturers in either or both the near and 
long term in terms of how much and which technologies might be 
required. For example, NHTSA currently estimates that the cumulative 
effect of CAFE standards promulgated under the previous and current 
administrations will require considerable technology and cost beyond 
that reflected by technology present in the most recent fleet (MY 2010) 
for which complete transparent information is available.
     Other technology-related considerations--related to the 
application rate of technologies, whether it appears that the burden on 
several or more manufacturers might cause them to respond to the 
standards in ways that compromise, for example, vehicle safety, or 
other aspects of performance that are important to consumer acceptance 
of new products.
     Cost of meeting the standards--even if the technology 
exists and it appears that manufacturers can apply it consistent with 
their product cadence, if meeting the standards will raise per-vehicle 
cost more than we believe consumers are likely to accept, which could 
negatively impact sales and employment in this sector, the standards 
may not be economically practicable.
     Uncertainty and consumer acceptance of technologies--
considerations not accounted for expressly in our modeling analysis, 
but important to an assessment of economic practicability given the 
time frame of this rulemaking.
    We discuss below how some of the alternatives compare in terms of 
these metrics.
d. What do other motor vehicle standards of the government mean in the 
context of this rulemaking?
    As discussed in Section IV.D above, ``other motor vehicle standards 
of the government'' involves an analysis of the effects of compliance 
with emission, safety, noise, or damageability standards on fuel 
economy capability and thus on average fuel economy. In addition to the 
expected and possible NHTSA safety standards and known EPA emissions 
standards, in developing this joint final rule with EPA, NHTSA has also 
sought to harmonize the final and augural standards with EPA's.
e. What does the need of the nation to conserve energy mean in the 
context of this rulemaking?
    ``The need of the United States to conserve energy'' means ``the 
consumer cost, national balance of payments, environmental, and foreign 
policy implications of our need for large quantities of petroleum, 
especially imported petroleum.'' Environmental implications principally 
include those associated with reductions in emissions of criteria 
pollutants, mobile source air toxics, and GHGs (including 
CO2). NHTSA has been informed regarding the environmental 
implications of the final and augural standards by the Final EIS, which 
analyzes the environmental impacts of the regulatory alternatives 
discussed above. A prime example of foreign policy implications are 
energy independence and energy security concerns.
    A number of commenters raised environmental and energy security 
concerns as paramount for the agency's consideration, and urged the 
agency both to quantify impacts related to these concerns and to set as 
stringent standards as possible to address them. The need of the nation 
to conserve energy has long operated to push the balancing toward more 
stringent standards, given that the overarching purpose of EPCA is 
energy conservation.

[[Page 63039]]

In this final rule, then, the question raised by this factor, combined 
with technological feasibility, becomes ``how stringent can NHTSA set 
standards before economic practicability concerns intercede?''
f. Given what the factors mean in the context of this rulemaking, which 
alternative is maximum feasible for the final standards, and why?
    If the need of the nation to conserve energy always pushes the 
balancing toward greater stringency and technological feasibility is 
not particularly limiting in a given rulemaking, then maximum feasible 
standards would be represented by the mpg levels that we could require 
of the industry before we reach a tipping point that presents risk of 
significantly adverse economic consequences. While determination of 
that tipping point is within the agency's discretion to balance the 
relevant factors, standards that are lower than that point would likely 
not be maximum feasible, because such standards would leave fuel-saving 
technologies on the table unnecessarily; standards that are higher than 
that point would likely be beyond what the agency would consider 
economically practicable, and therefore beyond what we would consider 
maximum feasible, even if they might be technologically feasible or 
better meet the need of the nation to conserve energy. The agency does 
not believe that standards are balanced if they weight one or two 
factors so heavily as to ignore another.
    The question of the tipping point is slightly different in the 
context of the final standards and augural standards. The final 
standards for MYs 2017-2021 are nearer-term, albeit still several years 
away; the augural standards for MYs 2022-2025, clearly, are even more 
distant, and the inputs that inform our balancing are less certain. 
Based on the information currently before the agency, we continue to 
believe that the standards as proposed are maximum feasible for MYs 
2017-2025.
    For the final standards, the annual rate of increase in the 
passenger car and light truck standards is as follows (in terms of 
average required fuel economy levels estimated using the MY 2010-based 
market forecast):

   Table IV-24--NHTSA Annual Rate of Increase in the Stringency of the
          Final Standards for Each Model Year From 2017 to 2021
------------------------------------------------------------------------
                                           Passenger car    Light truck
               Model year                    (percent)       (percent)
------------------------------------------------------------------------
2017....................................             3.7             0.6
2018....................................             3.6             1.7
2019....................................             3.6             1.5
2020....................................             3.9             2.1
2021....................................             4.2             6.5
2017-2021...............................             3.8             2.5
------------------------------------------------------------------------

    For the augural standards, the annual rate of increase in the 
passenger car and light truck standards is as follows:

   Table IV-25--NHTSA Annual Rate of Increase in the Stringency of the
         Augural Standards for Each Model Year From 2022 to 2025
------------------------------------------------------------------------
                                           Passenger car    Light truck
               Model year                    (percent)       (percent)
------------------------------------------------------------------------
2022....................................             4.8             4.9
2023....................................             4.6             4.7
2024....................................             4.7             4.8
2025....................................             4.7             4.8
------------------------------------------------------------------------

    As the tables show, in terms of the average rate of increase over 
the MYs 2017-2021 period, the final passenger car standards fall 
between the 3/yr and 4/yr alternatives, while the final light truck 
standards fall between the 2/yr and the 3/yr alternatives. The average 
rate of increase for the augural passenger car and light truck 
standards for MYs 2022-2025 falls between the 4/y and 5/y alternatives.
    The overall average annual rate of increase over the different 
periods covered by this rulemaking, for the reader's reference, is thus 
as follows:

   Table IV-26--NHTSA Annual Rate of Increase in the Stringency of the
            Final and Augural Standards Over Various Periods
------------------------------------------------------------------------
                                           Passenger car    Light truck
               Model years                   (percent)       (percent)
------------------------------------------------------------------------
2017-2021...............................             3.8             2.5
2022-2025...............................             4.7             4.8
2017-2025...............................             4.2             3.5
------------------------------------------------------------------------

[[Page 63040]]

    Part of the way that we try to evaluate economic practicability, 
and thus where the tipping point in the balancing of factors might be 
for a given model year, is through a variety of model inputs, such as 
phase-in caps (the annual rate at which we estimate that manufacturers 
can increase the percentage of their fleet that employ a particular 
type of fuel-saving technology) and redesign schedules to account for 
needed lead time. These inputs limit how much technology can be applied 
to a manufacturer's fleet in the agency's analysis, which attempts to 
simulate a way for the manufacturer to comply with different regulatory 
alternatives. If a sufficient number of manufacturers do not appear 
able to meet the standards in a given model year; if the amounts of 
technology or per-vehicle cost increases required to meet the standards 
appear to be beyond what we believe the market would bear, or if the 
limits (and technology cost-effectiveness) prevent enough manufacturers 
from meeting the required levels of stringency,\1267\ the agency may 
decide that the standards under consideration may not be economically 
practicable. We underscore again that the modeling analysis does not 
dictate the ``answer,'' it is merely one source of information among 
others that aids the agency's balancing of the standards.
---------------------------------------------------------------------------

    \1267\ The difference between the required fuel economy level 
that applies to a manufacturer's fleet and the level of fuel economy 
that the agency projects the manufacturer would achieve in that 
year, based on our analysis, is called a ``compliance shortfall.'' 
The agency's modeling estimates how the application of technologies 
could increase vehicle costs, reduce fuel consumption, and reduce 
CO2 emissions, and affect other factors. In response to 
comments suggesting that the agency mandate higher levels of certain 
technologies, such as mass reduction, as CAFE standards are 
performance-based, NHTSA does not mandate that specific technologies 
be used for compliance. CAFE modeling, therefore projects one way 
that manufacturers could comply. Manufacturers may choose a 
different mix of technologies based on their unique circumstances 
and products.
---------------------------------------------------------------------------

g. Compliance Shortfalls
    In looking at the projected compliance shortfall results from our 
modeling analysis, the agency concludes, based on the information 
before us at the time, that for both passenger car and for light 
trucks, the MNB and TC=TB alternatives, 6/Year and 7/Year alternatives 
do not appear to be economically practicable, and are thus likely 
beyond maximum feasible levels for MYs 2017-2025. In other words, 
despite the theoretical technological feasibility of achieving these 
levels, various manufacturers would likely lack the financial and 
engineering resources and sufficient lead time to do so.\1268\
---------------------------------------------------------------------------

    \1268\ Lead time is incorporated into our modeling analysis 
through redesign/refresh schedules, phase-in caps, estimates of the 
first model year by which some technologies (e.g., high BMEP 
engines) are assumed to be available for commercial application, 
consideration of stranded capital costs, and representation of 
multi-year planning effects. However, there are many factors related 
to lead time that, though considered generally when specifying 
phase-in caps, we are not able to represent explicitly, and that 
introduce uncertainty and risk vis-[agrave]-vis the rate at which 
CAFE standards can feasibly be increased. Examples include, but are 
not limited to the following: availability and cost of capital, 
supply and cost of engineering and other labor resources, capability 
and extent of supporting infrastructure (e.g., maintenance and 
repair facilities), and consumer acceptance.
---------------------------------------------------------------------------

    For purposes of passenger cars, the agency's analysis indicates the 
following levels of compliance shortfall, by manufacturer and by model 
year, for the following regulatory alternatives (a dash indicating 
cases where the manufacturer exceeds a standard):

           Table IV-27--NHTSA--Estimated Annual Compliance Shortfalls (mpg) for Passenger Cars by Manufacturer Under the Preferred Alternative
--------------------------------------------------------------------------------------------------------------------------------------------------------
                     Manufacturer                         2017       2018       2019       2020       2021       2022       2023       2024       2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiat.................................................  .........        0.0  .........  .........  .........  .........  .........  .........        0.0
Ford.................................................  .........  .........  .........  .........  .........  .........  .........        0.0        0.0
General Motors.......................................  .........  .........  .........  .........  .........  .........  .........        0.0  .........
Honda................................................  .........  .........  .........  .........  .........  .........  .........  .........        0.0
Hyundai..............................................  .........  .........  .........  .........  .........  .........  .........  .........        0.0
Kia..................................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Mazda................................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Mitsubishi...........................................  .........  .........        0.5  .........  .........  .........  .........  .........        0.8
Nissan...............................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Subaru...............................................        1.9        2.6  .........  .........  .........        0.1        1.7  .........  .........
Suzuki...............................................  .........  .........  .........  .........  .........  .........  .........        1.1        0.0
Toyota...............................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
--------------------------------------------------------------------------------------------------------------------------------------------------------

              Table IV-28--NHTSA Estimated Annual Compliance Shortfalls (mpg) for Passenger Cars by Manufacturer Under the 5%/y Alternative
--------------------------------------------------------------------------------------------------------------------------------------------------------
                     Manufacturer                         2017       2018       2019       2020       2021       2022       2023       2024       2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiat.................................................  .........  .........  .........  .........  .........  .........        0.0        2.5        0.2
Ford.................................................  .........  .........  .........  .........  .........  .........        2.1  .........        0.3
General Motors.......................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Honda................................................  .........  .........  .........  .........  .........  .........  .........  .........        0.0
Hyundai..............................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Kia..................................................  .........  .........  .........  .........  .........  .........  .........  .........        0.0
Mazda................................................  .........  .........  .........  .........        0.0  .........  .........  .........        2.6
Mitsubishi...........................................  .........        0.5        2.8  .........  .........        0.8        3.8        6.9        1.7
Nissan...............................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Subaru...............................................        2.6        4.0        0.7  .........        0.9        3.8        6.0        8.3        9.0
Suzuki...............................................  .........  .........  .........  .........  .........  .........  .........  .........        0.5
Toyota...............................................  .........  .........  .........  .........  .........  .........  .........  .........        0.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 63041]]

              Table IV-29--NHTSA Estimated Annual Compliance Shortfalls (mpg) for Passenger Cars by Manufacturer Under the 6%/y Alternative
--------------------------------------------------------------------------------------------------------------------------------------------------------
                     Manufacturer                         2017       2018       2019       2020       2021       2022       2023       2024       2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiat.................................................  .........  .........  .........  .........        0.1        3.2        5.4        8.8        7.7
Ford.................................................  .........  .........  .........  .........        0.3        2.9        6.3        4.2        6.6
General Motors.......................................  .........  .........  .........  .........  .........        0.8        3.9        6.5        6.7
Honda................................................  .........  .........  .........  .........  .........  .........  .........  .........        1.3
Hyundai..............................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Kia..................................................  .........  .........  .........  .........  .........  .........  .........        0.8        2.9
Mazda................................................  .........  .........  .........  .........        0.8        1.1        3.6        7.2        0.7
Mitsubishi...........................................  .........        1.5        4.4  .........  .........        0.1        3.9        8.0       12.1
Nissan...............................................  .........  .........  .........  .........  .........  .........        1.6        2.8        6.1
Subaru...............................................        3.0        5.0        2.3        0.4        3.8        7.4       10.5       13.8       15.6
Suzuki...............................................  .........  .........  .........  .........  .........  .........        0.9        5.1        7.8
Toyota...............................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
--------------------------------------------------------------------------------------------------------------------------------------------------------

            Table IV-30--NHTSA Estimated Annual Compliance Shortfalls (mpg) for Passenger Cars by Manufacturer Under the ``MNB'' Alternative
--------------------------------------------------------------------------------------------------------------------------------------------------------
                     Manufacturer                         2017       2018       2019       2020       2021       2022       2023       2024       2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiat.................................................        1.4        2.2        1.0  .........  .........        0.3  .........  .........        0.0
Ford.................................................        0.3        2.4        2.4        0.1        0.9        0.2        1.0  .........        0.0
General Motors.......................................        1.9        0.4        1.9  .........  .........  .........  .........  .........        0.0
Honda................................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Hyundai..............................................  .........  .........  .........  .........  .........  .........  .........  .........        0.0
Kia..................................................  .........  .........  .........  .........  .........  .........  .........  .........        0.0
Mazda................................................        0.0        1.4        2.8  .........  .........  .........  .........  .........  .........
Mitsubishi...........................................        2.6        5.2        7.5  .........  .........  .........  .........        1.9        2.6
Nissan...............................................  .........        0.0  .........  .........  .........  .........        0.0  .........        0.0
Subaru...............................................        7.0        8.7        5.3        1.9        3.3        4.2        4.6        6.2        5.8
Suzuki...............................................  .........        2.3  .........  .........  .........  .........        0.0        2.4        2.2
Toyota...............................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
--------------------------------------------------------------------------------------------------------------------------------------------------------

           Table IV-31--NHTSA Estimated Annual Compliance Shortfalls (mpg) for Passenger Cars by Manufacturer Under the ``TC=TB'' Alternative
--------------------------------------------------------------------------------------------------------------------------------------------------------
                     Manufacturer                         2017       2018       2019       2020       2021       2022       2023       2024       2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiat.................................................        2.1        2.5        1.0  .........        0.4        1.7  .........        1.2        0.4
Ford.................................................        1.0        2.6        2.4        0.1        1.4        1.6        2.7        1.8        1.1
General Motors.......................................        2.6        0.6        1.9  .........  .........        0.7  .........        0.5  .........
Honda................................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Hyundai..............................................  .........  .........  .........        0.0  .........  .........  .........  .........  .........
Kia..................................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Mazda................................................        0.7        1.6        2.8  .........  .........  .........  .........  .........        0.0
Mitsubishi...........................................        3.3        5.5        7.5  .........  .........  .........        0.5        3.5        4.2
Nissan...............................................  .........        0.1  .........  .........  .........  .........        0.8  .........        0.8
Subaru...............................................        7.7        8.9        5.3        1.9        3.9        5.7        6.4        8.6        8.3
Suzuki...............................................        0.5        2.5  .........  .........  .........        0.9        1.7        4.8        4.8
Toyota...............................................  .........  .........  .........  .........  .........  .........  .........  .........        0.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Thus, for alternatives that increase at 6%/y and faster, the 
majority of the industry would face compliance shortfalls for passenger 
cars, according to our analysis, which seems to indicate economic 
impracticability.\1269\ Standards that increase less rapidly, such as 
under the 5%/y and slower alternatives, thus remain under consideration 
for being economically practicable for passenger cars. We note that the 
maximizing net benefits alternative, while showing relatively little 
shortfalling by industry in later years of the rulemaking time frame, 
shows considerable shortfalling for a number of major manufacturers' 
passenger car fleets early in the program. This is due to the fact that 
the maximizing net benefits standards are fairly front-loaded and 
require more rapid increases at first, which we believe would be 
exceedingly difficult for manufacturers following the challenging MYs 
2012-2016 standards, as discussed further below,\1270\ and likely 
beyond economically practicable levels.
---------------------------------------------------------------------------

    \1269\ We note here that even if manufacturers could conceivably 
comply through use of credits, the agency is barred by statute from 
considering availability of credits in the determination of maximum 
feasible standards.
    \1270\ It should be noted that in discussing the MYs 2012-2016 
standards, NHTSA is not reconsidering those standards. Rather, 
NHTSA's analysis of today's post-MY 2016 standards considers impacts 
the baseline standards could have after MY 2016, as well as impacts 
today's post-MY 2016 standards could have prior to MY 2017 (due to 
multiyear planning effects).
---------------------------------------------------------------------------

    For purposes of light trucks, the agency's analysis indicates the

[[Page 63042]]

following levels of compliance shortfall, by manufacturer and by model 
year, for the following regulatory alternatives:

            Table IV-32--NHTSA Estimated Annual Compliance Shortfalls (mpg) for Light Trucks by Manufacturer Under the Preferred Alternative
--------------------------------------------------------------------------------------------------------------------------------------------------------
                     Manufacturer                         2017       2018       2019       2020       2021       2022       2023       2024       2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiat.................................................  .........  .........  .........  .........  .........        0.5  .........  .........        0.0
Ford.................................................  .........  .........  .........  .........  .........  .........  .........  .........        0.0
General Motors.......................................  .........  .........  .........  .........  .........  .........  .........  .........        0.0
Honda................................................  .........  .........  .........  .........  .........  .........  .........  .........        0.0
Hyundai..............................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Kia..................................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Mazda................................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Mitsubishi...........................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Nissan...............................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Subaru...............................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Suzuki...............................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Toyota...............................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
--------------------------------------------------------------------------------------------------------------------------------------------------------

               Table IV-33--NHTSA Estimated Annual Compliance Shortfalls (mpg) for Light Trucks by Manufacturer Under the 5%/y Alternative
--------------------------------------------------------------------------------------------------------------------------------------------------------
                     Manufacturer                         2017       2018       2019       2020       2021       2022       2023       2024       2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiat.................................................        0.0        1.7        2.9        2.2        3.5        5.5        1.3        3.4        4.3
Ford.................................................  .........  .........  .........  .........  .........  .........  .........        0.2        2.4
General Motors.......................................  .........        0.1  .........  .........  .........  .........        1.0        2.6        0.1
Honda................................................  .........  .........  .........  .........  .........  .........  .........  .........        0.7
Hyundai..............................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Kia..................................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Mazda................................................        0.2  .........  .........  .........  .........  .........  .........  .........  .........
Mitsubishi...........................................  .........  .........        1.9        4.2  .........  .........  .........  .........        1.4
Nissan...............................................  .........        0.0  .........  .........  .........  .........  .........  .........        0.0
Subaru...............................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Suzuki...............................................  .........  .........        0.7        2.9  .........  .........        1.1        3.9        6.8
Toyota...............................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
--------------------------------------------------------------------------------------------------------------------------------------------------------

               Table IV-34--NHTSA Estimated Annual Compliance Shortfalls (mpg) for Light Trucks by Manufacturer Under the 6%/y Alternative
--------------------------------------------------------------------------------------------------------------------------------------------------------
                     Manufacturer                         2017       2018       2019       2020       2021       2022       2023       2024       2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiat.................................................        0.3        2.4        4.1        3.8        5.7        8.3        4.7        7.5        9.3
Ford.................................................  .........  .........        0.5        1.1  .........        0.2        2.8        4.8        5.3
General Motors.......................................  .........        0.8  .........  .........  .........        1.2        3.2        5.3        4.0
Honda................................................  .........  .........  .........  .........  .........  .........  .........  .........        2.8
Hyundai..............................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Kia..................................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Mazda................................................        0.6  .........  .........  .........  .........        1.2        1.6        2.8        6.4
Mitsubishi...........................................  .........        0.7        3.3        6.1  .........  .........  .........        1.5        5.4
Nissan...............................................  .........  .........  .........  .........  .........        0.1        2.7        1.7        4.5
Subaru...............................................  .........  .........  .........  .........  .........        0.1        3.5  .........  .........
Suzuki...............................................  .........        0.2        2.1        4.9  .........        1.8        5.2        8.9       12.8
Toyota...............................................  .........  .........  .........  .........  .........  .........  .........  .........        2.4
--------------------------------------------------------------------------------------------------------------------------------------------------------

             Table IV-35--NHTSA Estimated Annual Compliance Shortfalls (mpg) for Light Trucks by Manufacturer Under the ``MNB'' Alternative
--------------------------------------------------------------------------------------------------------------------------------------------------------
                     Manufacturer                         2017       2018       2019       2020       2021       2022       2023       2024       2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiat.................................................        1.6        2.4        4.3        3.9        6.8        7.4        1.8        2.4        2.1
Ford.................................................  .........  .........        0.7        1.2  .........  .........  .........  .........  .........
General Motors.......................................        0.8        0.8  .........  .........        0.0        0.2        0.5        0.7        0.0
Honda................................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Hyundai..............................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Kia..................................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Mazda................................................        1.9  .........  .........  .........        1.0        1.7  .........  .........  .........
Mitsubishi...........................................  .........        0.7        3.5        6.2  .........  .........  .........  .........  .........
Nissan...............................................  .........        0.0  .........  .........  .........  .........  .........  .........        0.0
Subaru...............................................  .........  .........  .........  .........  .........  .........  .........  .........  .........

[[Page 63043]]

 
Suzuki...............................................  .........        0.3        2.3        5.0  .........        0.7        1.7        2.8        4.2
Toyota...............................................  .........  .........  .........  .........  .........  .........  .........  .........        0.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

            Table IV-36--NHTSA Estimated Annual Compliance Shortfalls (mpg) for Light Trucks by Manufacturer Under the ``TC=TB'' Alternative
--------------------------------------------------------------------------------------------------------------------------------------------------------
                     Manufacturer                         2017       2018       2019       2020       2021       2022       2023       2024       2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiat.................................................        1.9        2.8        4.3        3.9        7.0        7.6        2.0        2.4        2.3
Ford.................................................  .........        0.0        0.7        1.2  .........  .........  .........        0.0  .........
General Motors.......................................        1.1        1.2  .........  .........        0.2        0.4        0.7        0.7  .........
Honda................................................  .........  .........  .........  .........  .........  .........  .........  .........        0.0
Hyundai..............................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Kia..................................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Mazda................................................        2.3  .........  .........  .........  .........        0.1  .........  .........  .........
Mitsubishi...........................................        0.1        1.1        3.5        6.2  .........  .........  .........  .........  .........
Nissan...............................................  .........        0.0  .........  .........  .........  .........        0.0  .........        0.0
Subaru...............................................  .........  .........  .........  .........  .........  .........  .........  .........  .........
Suzuki...............................................  .........        0.7        2.3        5.0        0.1        0.9        2.0        2.8        4.5
Toyota...............................................  .........  .........  .........  .........  .........  .........  .........  .........        0.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

    For light trucks, the 5%/y alternative appears to present 
significant risk of several manufacturers facing shortfalls in most 
model years. Thus, for alternatives that increase at 5%/y and faster, 
the majority of the industry would face compliance shortfalls for light 
trucks, according to our analysis, which indicates economic 
impracticability. Standards that increase less rapidly, such as under 
the 4%/y and slower alternatives, thus remain under consideration for 
being economically practicable for light trucks. Again, we note that 
the maximizing net benefits alternative, while showing relatively 
little shortfalling by industry in later years of the rulemaking time 
frame, shows considerable shortfalling for a number of major 
manufacturers' light truck fleets early in the program. This is due to 
the fact that the maximizing net benefits standards are fairly front-
loaded and require more rapid increases at first, which we believe 
would be exceedingly difficult for manufacturers following the 
challenging MYs 2012-2016 standards, as discussed further below, and 
likely beyond economically practicable levels.
h. Application Rate of Technologies
    As discussed above, when considering the economic practicability of 
a regulatory alternative in terms of how much technology manufacturers 
have to apply in order to meet it, the agency must consider both which 
technologies appear to be necessary and when they would have to be 
applied, given manufacturers' product redesign cadence. While the need 
of the nation to conserve energy encourages the agency to be more 
technology-forcing in its balancing, and while technological 
feasibility is arguably less limiting in this rulemaking given its time 
frame, regulatory alternatives that require extensive application of 
very advanced technologies (that may have known or unknown consumer 
acceptance issues) or that require manufacturers to apply additional 
technology in earlier model years, in which meeting the standards is 
already challenging, may not be economically practicable, and thus may 
be beyond maximum feasible.
    The first issue is timing of technology application. The MYs 2012-
2016 standards, in the agency's view, are feasible but challenging, and 
represent some of the most rapid increases in stringency in the history 
of the CAFE program. In NHTSA's judgment, technology deployment 
necessitated by these baseline standards poses a considerable challenge 
to the industry, at least through MY 2016. Most manufacturers indicated 
during meetings with the agency that, even considering flexibilities 
(e.g., FFV credits, credit transfers, and credit carry-forward) that 
the agency may not consider for purposes of determining maximum 
feasible stringency, CAFE standards already in place through MY 2016 
will require significant application of technology and will leave some 
manufacturers' reserves of CAFE credits largely depleted going into MY 
2017. Tables IV-37 through IV-40 show significant additional 
application of technology during those earlier model years to enable 
compliance with the more stringent post-MY 2016 standards defined by 
the Preferred Alternative and some of the other regulatory alternatives 
the agency has considered. Many commenters noted the lead time 
available in this rulemaking, since the first standards would not be 
effective until MY 2017, and suggested that such ample lead time should 
certainly make higher standards economically practicable in that time 
frame. While consideration of future model years in isolation might 
suggest manufacturers have ample lead time to make further 
improvements, NHTSA does not consider model years in isolation, because 
that is not consistent with how industry responds to standards, and 
thus would not accurately reflect practicability. NHTSA's analysis 
tries to estimate manufacturers' product ``cadence,'' representing them 
in terms of estimated schedules for redesigning and ``freshening'' 
vehicles, and assuming that significant technology changes will be 
implemented during vehicle redesigns, and that once applied, a 
technology will be carried forward to future model years until 
superseded by a more advanced technology. If manufacturers are already 
applying technology widely and intensively to meet standards in earlier 
years, requiring manufacturers to add yet more technology in those 
model years in order to meet future standards may not be economically 
practicable. The question is not whether a standard is economically 
practicable in the model year in which the standard is effective, but 
whether getting to that model year's standard (in part, through the

[[Page 63044]]

application of technologies in earlier model years) is economically 
practicable. The tables below illustrate how the agency has modeled 
that process of manufacturers applying technologies in order to comply 
with different alternative standards; the technologies are described in 
more detail in Section IV.D and in Chapter V of NHTSA's FRIA:

                                    Table IV-37--NHTSA Estimated Application of Selected Technologies--Passenger Cars
--------------------------------------------------------------------------------------------------------------------------------------------------------
                      Technology                       Standards   2014 (%)   2015 (%)   2016 (%)   2017 (%)   2018 (%)   2019 (%)   2020 (%)   2021 (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
SGDI.................................................   Baseline         10         11         13         16         18         18         18         18
                                                         2%/Year         14         20         24         30         37         40         41         42
                                                         3%/Year         17         24         32         40         48         60         63         71
                                                       Preferred         21         29         41         48         57         69         72         78
                                                         4%/Year         18         27         38         47         58         70         72         78
                                                         5%/Year         25         37         47         55         68         72         75         78
Turbocharging........................................   Baseline         13         15         17         19         21         20         20         21
                                                         2%/Year         20         25         28         33         39         43         46         46
                                                         3%/Year         23         33         40         46         53         66         71         80
                                                       Preferred         29         36         47         54         63         74         82         88
                                                         4%/Year         25         34         45         54         65         76         82         88
                                                         5%/Year         32         45         53         62         74         78         85         88
Cooled EGR...........................................   Baseline          0          0          2          2          2          2          2          2
                                                         2%/Year          0          0          2          2          2          3          3          3
                                                         3%/Year          0          0          2          2          3          5          5          6
                                                       Preferred          0          0          2          2          4          7         11         15
                                                         4%/Year          0          0          4          4          5          6         15         19
                                                         5%/Year          0          1          4          5          7         15         20         27
High BMEP............................................   Baseline          0          0          0          0          0          0          0          0
                                                         2%/Year          0          0          0          0          0          0          0          0
                                                         3%/Year          0          0          0          0          0          0          0          1
                                                       Preferred          0          0          0          0          0          0          1          2
                                                         4%/Year          0          0          0          0          0          1          2          2
                                                         5%/Year          0          0          0          0          0          1          4          5
Diesel...............................................   Baseline          0          0          0          0          0          0          0          0
                                                         2%/Year          0          0          0          0          0          0          0          0
                                                         3%/Year          0          0          0          0          0          0          0          0
                                                       Preferred          0          0          0          0          0          0          0          0
                                                         4%/Year          0          0          0          0          0          1          1          1
                                                         5%/Year          0          0          0          0          0          1          1          3
Advanced Transmissions...............................   Baseline         24         31         36         36         38         38         39         38
                                                         2%/Year         23         30         35         36         41         47         52         58
                                                         3%/Year         24         31         36         39         47         63         65         70
                                                       Preferred         24         31         36         39         47         61         66         70
                                                         4%/Year         28         39         45         47         59         69         69         70
                                                         5%/Year         26         33         45         51         63         79         80         76
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                    Table IV-38--NHTSA Estimated Application of Selected Technologies--Passenger Cars
--------------------------------------------------------------------------------------------------------------------------------------------------------
                      Technology                       Standards   2014 (%)   2015 (%)   2016 (%)   2017 (%)   2018 (%)   2019 (%)   2020 (%)   2021 (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Electric Power Steering..............................   Baseline         15         26         37         38         38         38         38         38
                                                         2%/Year         20         31         48         52         53         60         61         64
                                                         3%/Year         20         31         47         50         51         60         63         64
                                                       Preferred         17         28         43         46         52         62         62         62
                                                         4%/Year         28         39         56         60         62         63         63         66
                                                         5%/Year         28         39         58         62         64         65         65         66
Micro & Mild Hybrids.................................   Baseline          2          3          4          4          4          4          4          4
                                                         2%/Year          2          4          4          4          4          4          4          4
                                                         3%/Year          2          4          4          4          5          5          6          6
                                                       Preferred          2          4          5          5          5          6         11         12
                                                         4%/Year          3          4          5          5          6          6         11         11
                                                         5%/Year          4         10         10         10         16         26         36         46
Strong Hybrid........................................   Baseline          0          0          0          0          0          0          0          0
                                                         2%/Year          0          0          0          0          0          0          0          0
                                                         3%/Year          0          0          0          0          0          0          0          0
                                                       Preferred          0          0          0          0          0          0          0          0
                                                         4%/Year          0          0          0          0          0          1          1          1
                                                         5%/Year          0          0          0          0          0          1          1          1
15-20% Mass Reduction................................   Baseline          0          2          3          3          3          3          3          3
                                                         2%/Year          0          2          3          4          5          6          8          8
                                                         3%/Year          0          2          3          4          5          5          5          6
                                                       Preferred          0          2          3          4          5          7          8         10
                                                         4%/Year          0          2          3          4          6         10         11         12

[[Page 63045]]

 
                                                         5%/Year          0          2          3          4          6          8         12         13
Aerodynamic Improvements.............................   Baseline         40         50         68         74         77         80         80         80
                                                         2%/Year         40         50         68         74         80         82         85         85
                                                         3%/Year         40         50         68         74         82         84         85         85
                                                       Preferred         40         50         68         74         82         84         85         85
                                                         4%/Year         40         50         68         74         82         84         85         85
                                                         5%/Year         40         50         68         74         82         84         85         85
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                     Table IV-39--NHTSA Estimated Application of Selected Technologies--Light Trucks
--------------------------------------------------------------------------------------------------------------------------------------------------------
                      Technology                       Standards  2014  (%)  2015  (%)  2016  (%)  2017  (%)  2018  (%)  2019  (%)  2020  (%)  2021  (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
SGDI.................................................   Baseline         27         32         39         40         41         41         40         40
                                                         2%/Year         32         47         56         59         63         64         64         66
                                                         3%/Year         34         43         57         60         67         72         71         75
                                                       Preferred         29         36         42         45         49         57         61         73
                                                         4%/Year         33         43         56         61         64         69         69         72
                                                         5%/Year         35         45         57         63         68         72         72         75
Turbocharging........................................   Baseline         34         42         50         52         52         52         52         52
                                                         2%/Year         45         62         70         73         74         75         76         78
                                                         3%/Year         47         63         72         74         79         84         85         88
                                                       Preferred         37         47         55         58         60         69         73         84
                                                         4%/Year         47         63         72         75         76         83         83         86
                                                         5%/Year         49         65         74         77         79         85         84         88
Cooled EGR...........................................   Baseline          0          0          4          5          5          5          5          5
                                                         2%/Year          0          0          4          5          5          5          5          6
                                                         3%/Year          0          0          4          5          7          7          7          7
                                                       Preferred          0          0          4          5          5          6          6          6
                                                         4%/Year          0          0          4          5          7         16         23         34
                                                         5%/Year          0          0          4          5          6         14         20         35
High BMEP............................................   Baseline          0          0          0          0          0          0          0          0
                                                         2%/Year          0          0          0          0          0          0          0          1
                                                         3%/Year          0          0          0          0          0          0          0          0
                                                       Preferred          0          0          0          0          0          0          0          0
                                                         4%/Year          0          0          0          0          0          1          1          8
                                                         5%/Year          0          0          0          0          0          1          2         12
Diesel...............................................   Baseline          0          0          0          0          0          0          0          0
                                                         2%/Year          0          0          0          0          0          0          0          0
                                                         3%/Year          0          0          0          0          0          1          1          1
                                                       Preferred          0          0          0          0          0          0          1          1
                                                         4%/Year          0          0          0          0          0          1          1          1
                                                         5%/Year          0          0          0          0          2          2          4          4
Advanced Transmissions...............................   Baseline          6          6         10         11         11         14         15         15
                                                         2%/Year          6          7         11         13         16         29         45         56
                                                         3%/Year          8         10         15         17         21         36         42         53
                                                       Preferred          6          6         11         13         18         33         47         62
                                                         4%/Year          8         10         17         22         30         45         53         56
                                                         5%/Year          6          8         15         22         30         46         51         53
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                     Table IV-40--NHTSA Estimated Application of Selected Technologies--Light Trucks
--------------------------------------------------------------------------------------------------------------------------------------------------------
                      Technology                       Standards   2014 (%)   2015 (%)   2016 (%)   2017 (%)   2018 (%)   2019 (%)   2020 (%)   2021 (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
EPS..................................................   Baseline         18         36         60         64         64         64         64         65
                                                         2%/Year         18         35         61         67         70         73         73         78
                                                         3%/Year         18         35         61         67         68         70         72         81
                                                       Preferred         17         35         60         64         64         69         70         79
                                                         4%/Year         18         35         66         72         76         79         80         81
                                                         5%/Year         19         37         67         74         78         80         80         83
Micro & Mild Hybrids.................................   Baseline          4          4          4          3          3          3          3          3
                                                         2%/Year          7          9         12         13         12         13         13         13
                                                         3%/Year          8          9         13         13         13         14         15         15
                                                       Preferred          4          6          9         10         10         10         15         14
                                                         4%/Year         13         18         21         22         23         24         26         26
                                                         5%/Year         24         40         44         45         47         53         59         65
Strong Hybrid........................................   Baseline          0          0          0          0          0          0          0          0
                                                         2%/Year          0          0          0          0          0          0          0          0

[[Page 63046]]

 
                                                         3%/Year          0          0          0          0          0          0          0          1
                                                       Preferred          0          0          0          0          0          0          0          1
                                                         4%/Year          0          0          0          0          0          0          0          0
                                                         5%/Year          0          0          0          0          0          0          0          1
15-20% Mass Reduction................................   Baseline          1          1          5          6          6          6          6          6
                                                         2%/Year          1          1          5         10         11         12         12         12
                                                         3%/Year          1          1          6         10         11         13         14         22
                                                       Preferred          1          1          6          7          7          8          8         16
                                                         4%/Year          1          1          6         10         20         26         37         39
                                                         5%/Year          1          1          6         11         20         27         41         49
Aerodynamic Improvements.............................   Baseline         57         64         67         76         76         75         76         76
                                                         2%/Year         57         64         67         76         77         79         81         84
                                                         3%/Year         57         64         67         76         77         79         81         84
                                                       Preferred         57         64         67         76         77         79         81         84
                                                         4%/Year         57         64         67         76         77         79         83         86
                                                         5%/Year         57         64         67         76         77         79         83         86
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Although NHTSA's analysis is intended to estimate ways 
manufacturers could respond to new standards, not to predict how 
manufacturers will respond to new standards, manufacturers have 
indicated in meetings with the agency, and in confidential product 
planning data submitted to the agency, that they do engage in strategic 
timing of the application of technology, relating product planning 
cycles to future increases in the stringency of CAFE standards. Thus, 
insofar as we have estimated that manufacturers will redesign vehicles 
during MYs 2012-2016, our analysis indicates that many manufacturers 
may need to add further technology (i.e., more than would be 
necessitated solely by MYs 2012-2016 standards) in order to facilitate 
compliance with post-MY 2016 standards.\1271\ As discussed below, our 
selection of the preferred alternative is informed, in part, by 
consideration of additional technology and corresponding costs that may 
be incurred in the near term (prior to MY 2017) in order to enable 
compliance with future standards.
---------------------------------------------------------------------------

    \1271\ As NHTSA has long recognized in CAFE rulemakings, while 
it may be technologically feasible for manufacturers to add 
technology to their vehicles outside of their normal product 
redesign and refresh cycles, doing so tends to be significantly more 
complicated and expensive than adding technology at redesigns and 
refresh. See Section IV.C.2.c.ii for more information about NHTSA's 
consideration of product development cycles in its modeling 
analysis.
---------------------------------------------------------------------------

    Given that technology that could be applied in response to the 
baseline standards poses a considerable challenge to the industry, at 
least through MY 2016, NHTSA is concerned that regulatory alternatives 
more stringent than the Preferred Alternative would require even 
further application of technology, including much in earlier model 
years--beyond levels the agency judges economically practicable. This 
is the second issue described above: that greater and earlier 
application of advanced technologies (which may have known or unknown 
consumer acceptance issues) could affect the economic practicability of 
certain alternatives. For example, under the 4%/Year Alternative for 
passenger cars, the agency's analysis indicates that currently-
experimental high BMEP engines might need to appear a year earlier and 
on twice as many vehicles in MY 2020 as under the Preferred 
Alternative; that diesels and strong hybrids might need to be added 
beginning MY 2019, versus not at all under the Preferred Alternative; 
that many more advanced transmissions (e.g., 25% more in MY 2016) and 
electric power steering (EPS) systems (e.g., 30% more in MY 2016) might 
need to be applied in early model years as under the Preferred 
Alternative, and that from MY 2018 forward, and more passenger cars 
might need to receive significant mass reduction (15-20%) than under 
the Preferred Alternative.
    Much as for passenger cars, NHTSA's analysis indicates that 
regulatory alternatives more stringent than the Preferred Alternative 
for light trucks might also need to entail significant increases in 
technology application--including in earlier model years--beyond that 
reflected by the Preferred Alternative and, even more so, the baseline 
standards. In addition to many of the technologies discussed above 
(e.g., advanced transmissions, EPS, significant mass reduction), the 
agency's analysis of even the 3%/year alternative for light trucks also 
shows high early-MY application of technologies such as SGDI (35% more 
in MY 2016), turbocharging with engine downsizing (31% more in MY 
2016), cooled EGR (gradually reaching more than five times as many 
units in MY 2021), and micro and mild hybrid systems (44% more in MY 
2016).
    This assessment of technology application is important in response 
to comments suggesting that if technology to meet future standards 
exists today, and if vehicles currently on the market might be able to 
meet or exceed their targets in future model years, that must mean that 
the standards defining such targets are feasible. There is a 
significant difference in the level of capital and resources required 
to implement one or more new technologies on a single vehicle model, 
and the level of capital and resources required to implement those same 
technologies across the entire vehicle fleet. NHTSA's analysis tries to 
estimate both manufacturers' redesign cadence which affects when 
significant new technologies may be most economically added to 
individual vehicle models as well as the capital, engineering, and 
manufacturing capacity resource constraints that affect how quickly new 
technologies may be expanded across manufacturers' products. As 
illustrated in the discussion of compliance shortfalls, when 
considering these resource constraints, it would not be economically 
practicable to expand some the most advanced technologies to every 
vehicle in the fleet within the rulemaking timeframe, although it 
should be possible to increase the application of advanced technologies 
across the fleet in a progression that accounts for those resource 
constraints. That is what NHTSA's analysis tries to do.

[[Page 63047]]

i. Other Technology Considerations
    The discussion above covers application of technology that the 
agency projects manufacturers may use to meet the standards defined by 
different regulatory alternatives, but the agency emphasizes that it 
models only one path to compliance, and we recognize that each 
manufacturer will pursue their own path which may or may not align with 
the one we model for them, as they may focus on a different mix of 
technologies. In terms of how manufacturers will meet the passenger car 
standards under different alternatives, the agency is concerned that 
increasing the stringency of passenger cars beyond the Preferred 
Alternative would increase the risk that manufacturers might reduce the 
mass of passenger cars beyond the safety-neutral levels evaluated by 
the agency. Tables IV-37 through IV-40 show the agency's estimates of 
the rates at which a number of key technologies could be applied in 
response to standards defined by the No-Action Alternative, the 
Preferred Alternative, and alternatives specified as annual rates of 
increase ranging from 2% to 6%. Most of these technologies are already 
in use on some vehicles available for sale today in the United States 
(a few, notably high-BMEP (27 bar) cooled EGR engines, are not). 
However, these technologies are not currently applied throughout the 
light vehicle fleet and in meetings with the agency manufacturers have 
expressed concern regarding the potential to increase application rates 
given constraints such as component supply, engineering resources, and 
consumer acceptance. While, in the agency's judgment, most of these 
technologies can become common in the marketplace by MY 2025, we expect 
that there are limitations on the rates at which adoption of these 
technologies can be increased, and we consider the outlook for 
widespread adoption through MY 2025 to be uncertain. At stringencies 
that require the application of several, but not all, advanced 
technologies, if a given technology is not as successful as currently 
assumed in NHTSA's analysis, manufacturers could likely compensate by 
substituting one or more of the other advanced technologies, and apply 
mass reduction levels more in line with NHTSA's analysis. However, for 
regulatory alternatives more stringent than the Preferred Alternative, 
the agency is concerned that there would be less ``headroom,'' 
increasing the risk that some manufacturers would resort to mass 
reduction in ways that could compromise highway safety. This suggests 
that passenger car standards defined by the 4%/year and faster (in 
terms of the pace of stringency increases) regulatory alternatives may 
not be economically practicable, and thus may be beyond the maximum 
feasible levels for MYs 2017-2025.
    Similarly, for light trucks, while many of these powertrain 
technologies are already achieving notable marketplace success, some 
(e.g., high BMEP) are not proven in load- and towing-intensive 
applications, and the agency is concerned that widespread simultaneous 
increases in the application of many of these advanced technologies is 
likely to leave manufacturers little room to adjust should some 
technologies not be as successful as currently reflected in NHTSA's 
analysis. This suggests that light truck standards defined by the 3%/
year and faster (in terms of the pace of stringency increases) 
regulatory alternatives may not be economically practicable, and thus 
may be beyond the maximum feasible levels for MYs 2017-2025.
j. Cost of Meeting the Standards
    Another consideration for economic practicability is the extent to 
which new standards could increase the average cost to acquire new 
vehicles, because even insofar as the underlying application of 
technology leads to reduced outlays for fuel over the useful lives of 
the affected vehicles, these per-vehicle cost increases provide both a 
measure of the degree of challenge faced by manufacturers, and also the 
degree of adjustment, in the form of potential vehicle price increases, 
that will ultimately be required of vehicle purchasers. Tables IV-41 
through IV-44, below, show the agency's estimates of average cost 
increase under the Preferred Alternative for passenger cars and light 
trucks. Because our analysis includes estimates of manufacturers' 
indirect costs and profits, as well as civil penalties some 
manufacturers (as allowed under EPCA/EISA) might elect to pay in lieu 
of achieving compliance with CAFE standards, we report cost increases 
as estimated average increases in vehicle price (as MSRP). These are 
average values, and the agency does not expect that the prices of every 
vehicle would increase by the same amount; rather, the agency's 
underlying analysis shows unit costs varying widely between different 
vehicle models. For example, while our analysis shows (as indicated 
below) an average cost increase of $1,400 for Fiat/Chrysler's MY 2019 
passenger cars under the Preferred Alternative, that $1,400 value is 
the production-weighted average of values ranging from $0 to $3,282. 
While we recognize that manufacturers might distribute regulatory costs 
throughout their fleet in order to maximize profit, we have not 
attempted to estimate strategic pricing. To provide an indication of 
potential increase relative to today's vehicles, we report increases 
relative to the market forecast using technology in the MY 2010 fleet--
the most recent actual fleet for which we have information sufficient 
for use in our analysis. We provide results starting in MY 2014 in part 
to illustrate the cost impacts in the first model year that we believe 
manufacturers might actually be able to change their products in 
preparation for compliance with standards in MYs 2017 and beyond:

   Table IV-41--NHTSA Estimated Total (vs. MY 2010 Technology) Average MSRP Increases During MYs 2014-2019 Under Preferred Alternative--Passenger Cars
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               2014            2015            2016            2017            2018            2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry................................................             537             711             934           1,044           1,166           1,286
Aston Martin............................................           1,753           1,832           2,250           3,397           3,437           3,281
BMW.....................................................             490             814           1,104           1,205           1,642           1,579
Daimler.................................................           1,033           1,128           1,516           1,616           1,670           1,607
Fiat....................................................             794             941           1,256           1,250           1,287           1,400
Ford....................................................             601             997           1,081           1,285           1,291           1,319
Geely...................................................             896           1,031           1,120           1,229           1,538           1,752
General Motors..........................................             569             928           1,146           1,148           1,369           1,304
Honda...................................................             401             400             760             901           1,069           1,079
Hyundai.................................................             408             449             903           1,096           1,076           1,354
Kia.....................................................             197             374             428             616             675           1,007
Lotus...................................................             709           1,502           1,590           1,879           1,942           2,894

[[Page 63048]]

 
Mazda...................................................             645             660           1,302           1,292           1,394           1,278
Mitsubishi..............................................           1,153           1,811           1,778           1,749           1,791           1,667
Nissan..................................................             836             857             948           1,192           1,275           1,450
Porsche.................................................             728           1,045           1,123           1,480           1,650           1,756
Spyker..................................................  ..............  ..............  ..............  ..............  ..............  ..............
Subaru..................................................           1,381           1,551           1,497           1,568           1,660           2,271
Suzuki..................................................             932           1,265           1,365           1,349           1,356           1,963
Tata....................................................             864             974           1,201           1,616           2,212           2,109
Tesla...................................................  ..............  ..............  ..............  ..............  ..............  ..............
Toyota..................................................             235             295             418             482             621             996
Volkswagen..............................................             234             445             692             802           1,066           1,099
--------------------------------------------------------------------------------------------------------------------------------------------------------

   Table IV-42--NHTSA Estimated Total (vs. MY 2010 Technology) Average MSRP Increases During MYs 2020-2025 Under Preferred Alternative--Passenger Cars
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               2020            2021            2022            2023            2024            2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry................................................           1,480           1,608           1,699           1,821           2,074           2,153
Aston Martin............................................           3,338           3,963           4,026           4,296           4,765           4,719
BMW.....................................................           1,652           1,792           1,996           2,128           2,594           2,595
Daimler.................................................           1,821           1,893           2,157           2,476           2,566           2,905
Fiat....................................................           1,623           1,878           1,888           2,314           2,464           2,666
Ford....................................................           1,814           1,850           2,018           2,020           2,477           2,588
Geely...................................................           1,784           1,868           1,961           2,123           2,327           2,472
General Motors..........................................           1,562           1,659           1,661           1,831           1,981           2,268
Honda...................................................           1,067           1,257           1,255           1,490           1,493           1,460
Hyundai.................................................           1,362           1,503           1,662           1,689           1,832           1,833
Kia.....................................................           1,234           1,324           1,571           1,554           1,538           1,730
Lotus...................................................           2,952           3,022           3,109           3,339           3,439           3,381
Mazda...................................................           1,586           1,568           1,970           2,073           2,067           2,251
Mitsubishi..............................................           2,766           3,052           3,016           2,983           2,950           3,017
Nissan..................................................           1,506           1,528           1,647           1,752           2,108           2,071
Porsche.................................................           1,834           2,018           2,336           2,457           2,571           2,600
Spyker..................................................  ..............  ..............  ..............  ..............  ..............  ..............
Subaru..................................................           2,758           2,694           2,645           2,694           5,228           4,457
Suzuki..................................................           2,203           2,533           2,526           2,501           2,522           2,666
Tata....................................................           2,188           2,216           2,296           2,633           2,724           2,889
Tesla...................................................  ..............  ..............  ..............  ..............  ..............  ..............
Toyota..................................................           1,111           1,341           1,397           1,397           1,640           1,578
Volkswagen..............................................           1,298           1,460           1,570           1,707           1,932           2,257
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table IV-43--NHTSA Estimated Total (vs. MY 2010 Technology) Average MSRP Increases During MYs 2014-2019 Under Preferred Alternative--Light Trucks
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               2014            2015            2016            2017            2018            2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry................................................             705             931           1,159           1,226           1,264           1,377
Aston Martin............................................  ..............  ..............  ..............  ..............  ..............  ..............
BMW.....................................................             581             694           1,223           1,751           1,727           1,614
Daimler.................................................             838           1,038           1,117           2,162           2,269           2,115
Fiat....................................................           1,102           1,499           2,035           2,064           2,046           1,982
Ford....................................................             445           1,146           1,140           1,141           1,153           1,145
Geely...................................................             833           1,055           1,217           1,257           1,958           1,828
General Motors..........................................             775             844             977           1,006           1,034           1,385
Honda...................................................             638             709             883             995           1,032           1,018
Hyundai.................................................             380             406             405             747             751           1,360
Kia.....................................................             285             430           1,070           1,119           1,118           1,146
Lotus...................................................  ..............  ..............  ..............  ..............  ..............  ..............
Mazda...................................................             842             855           1,046           1,037           1,771           1,612
Mitsubishi..............................................           1,406           1,362           1,341           1,323           1,317           1,215
Nissan..................................................             818             870           1,091           1,309           1,313           1,440
Porsche.................................................             705           1,294           1,328           1,355           1,434           2,379
Spyker..................................................  ..............  ..............  ..............  ..............  ..............  ..............
Subaru..................................................             962             954             938             989           1,005           1,399
Suzuki..................................................           1,002           1,110           1,360           1,344           1,329           1,209
Tata....................................................             798           1,022           2,260           2,276           2,302           2,235
Tesla...................................................  ..............  ..............  ..............  ..............  ..............  ..............
Toyota..................................................             610             615             978             968           1,038           1,166

[[Page 63049]]

 
Volkswagen..............................................             398             642             731             725             874             957
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table IV-44--NHTSA Estimated Total (vs. MY 2010 Technology) Average MSRP Increases During MYs 2020-2025 Under Preferred Alternative--Light Trucks
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               2020            2021            2022            2023            2024            2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry................................................           1,599           1,866           1,893           1,991           2,070           2,125
Aston Martin............................................  ..............  ..............  ..............  ..............  ..............  ..............
BMW.....................................................           1,620           1,772           2,094           2,055           2,050           2,063
Daimler.................................................           2,104           2,078           2,524           2,546           2,582           2,551
Fiat....................................................           2,629           2,719           2,708           3,119           3,074           3,126
Ford....................................................           1,242           2,074           2,037           2,016           2,005           2,074
Geely...................................................           1,800           1,795           1,992           2,592           2,585           2,537
General Motors..........................................           1,828           1,803           1,776           1,774           1,842           2,025
Honda...................................................           1,037           1,435           1,563           1,575           1,698           1,663
Hyundai.................................................           1,392           1,370           1,607           1,603           1,836           1,774
Kia.....................................................           1,133           1,584           1,531           1,831           1,794           1,733
Lotus...................................................  ..............  ..............  ..............  ..............  ..............  ..............
Mazda...................................................           1,603           1,570           1,549           1,778           1,917           1,853
Mitsubishi..............................................           1,197           2,439           2,380           2,346           2,313           2,206
Nissan..................................................           1,621           1,682           1,779           1,762           1,971           1,939
Porsche.................................................           2,341           2,302           2,303           2,625           2,672           2,620
Spyker..................................................  ..............  ..............  ..............  ..............  ..............  ..............
Subaru..................................................           1,378           1,359           1,379           1,344           1,656           1,607
Suzuki..................................................           1,193           2,671           2,607           2,569           2,532           2,406
Tata....................................................           2,247           2,822           2,899           2,967           3,031           3,020
Tesla...................................................  ..............  ..............  ..............  ..............  ..............  ..............
Toyota..................................................           1,168           1,480           1,492           1,695           1,882           1,875
Volkswagen..............................................           1,193           1,173           1,177           1,344           1,673           1,890
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Relative to current vehicles (as represented here by technology in 
the MY 2010 fleet, the most recent for which NHTSA has complete data), 
NHTSA judges these cost increases to be significant, but considering 
the accompanying fuel savings, likely to be accepted by consumers well 
enough to avoid undue distortion (e.g., significant shifts--
attributable to today's standards--in manufacturers' respective market 
shares) of the light vehicle market.
    However, relative to the Preferred Alternative, NHTSA noted 
significant further cost increases for several major manufacturers--
even in MY 2016--under the 3%/y and 4%/y alternatives for light trucks. 
Tables IV-45 and IV-46 below show additional costs estimated to be 
incurred under the 3%/y and 4%/y alternatives as compared to the 
preferred alternative:

 Table IV-45--NHTSA Estimated Difference Between Estimated Average MSRP Increase Under 3%/y and Preferred Alternatives for Selected Manufacturers' Light
                                                                         Trucks
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                    2014         2015         2016         2017         2018         2019         2020          2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry......................................          116          173          173          210          261          201          120             8
Fiat..........................................          164           63           56          139          159          222          (72)           22
Ford..........................................           75          481          474          460          487          408          446            (6)
General Motors................................          278          251          245          279          335          244           (3)           (7)
Mazda.........................................          496          443          450          439          177          142          147           153
Mitsubishi....................................          591          580          517          515          636          600          622           (46)
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table IV-46--NHTSA Estimated Difference Between Estimated Average MSRP Increases Under 4%/y and Preferred Alternatives for Selected Manufacturers' Light
                                                                         Trucks
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      2014         2015         2016         2017         2018         2019         2020         2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry........................................          148          224          246          288          374          448          455          387
Fiat............................................          173           73           93          179          230          309          142          228
Ford............................................           75          525          517          507          495          541          694          520
General Motors..................................          426          449          454          486          646          790          735          720
Mazda...........................................          650          576          596          587          536          480          459          459
Mitsubishi......................................          733          718          652          647          636          633          716          476
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 63050]]

    For example, in MY 2016, NHTSA estimates that compliance with 
already-promulgated light truck CAFE standards could increase average 
MSRP by $1,053, as mentioned above; under the preferred alternative, we 
estimate that cumulative compliance costs increase to $1,159 due to 
early application of technology in order to meet future anticipated 
standards; under the 3%/y and 4%/y alternatives, we estimate this 
amount would increase to $1,333 and $1,405, respectively. For some 
manufacturers (e.g., Ford, GM, Mazda, Mitsubishi), these increases are 
large even prior to MY 2016. Particularly during the earlier model 
years, the agency is concerned that these further costs represent 
significant increases in ``lift'' beyond levels anticipated when the 
MYs 2012-2016 standards were promulgated in MY 2010. In the agency's 
judgment, these additional costs augment the basis--discussed above in 
terms of technology application--to determine that light truck 
standards increasing at a pace of 3%/year or faster after MY2016 are 
beyond the maximum feasible levels for MYs 2017-2021.
    The above considerations relate to matters of technological 
feasibility and economic practicability--two of the factors NHTSA must 
take into account when determining the maximum feasible stringency of 
each standard in each model year. The agency must also consider the 
need of the nation to conserve energy. Two of the regulatory 
alternatives the agency has considered--the maximum net benefit (MNB) 
and total cost = total benefit (TC=TB) alternatives--are defined in 
terms of explicit quantitative means of weighing all the social costs 
NHTSA has attempted to quantify against all of the corresponding 
monetized social benefits (e.g., reduced fuel outlays, reduced 
environmental damages from motor vehicle GHG emissions) of energy 
conservation achieved through increases in the stringency of fuel 
economy standards. As discussed above, the agency has determined that, 
considering resultant technology application and costs, the standards 
defined by these two regulatory alternatives exceed maximum feasible 
levels. Although NHTSA has quantified all regulatory alternatives in 
terms of their respective costs and monetized benefits, the agency also 
considers it appropriate to compare alternatives more simply in terms 
of total fuel savings and average per-vehicle costs. Below, Tables IV-
47 through IV-50 present the agency's findings on this basis for 
passenger cars and light trucks, respectively. Fuel savings are 
expressed in terms of cumulative incremental fuel savings throughout 
the useful lives of fleets in all affected model years through MY 2021, 
measuring savings relative to fuel consumption estimated to occur under 
the baseline standards defined by the No-Action Alternative. Costs are 
measured in terms of average incremental MSRP increases relative to 
average prices estimated to result under the baseline standards defined 
by the No-Action Alternative.

                       Table IV-47--NHTSA Estimated Passenger Car Cumulative Lifetime Fuel Savings Through MY 2021 and Average Vehicle Cost Increases During MYs 2014-2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             Ave. MSRP increase relative to no-action alternative
           Alternative                 Fleet MY basis    --------------------------------------------------------------------------------------------   Fuel savings (b.      Fuel savings (b.
                                                                   2022                   2023                   2024                   2025            gal.) MY2022-2025   gal.) through MY2025
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2%...............................  2008.................  566-.................  611-.................  628-.................  644-.................  30-.................  53-
                                   2010.................  650..................  705..................  728..................  730..................  28..................  50
3%...............................  2008.................  840-.................  883-.................  958-.................  1,059-...............  43-.................  78-
                                   2010.................  961..................  1,027................  1,102................  1,125................  41..................  70
Final Standards..................  2008.................  951-.................  997-.................  1,081-...............  1,183-...............  46-.................  71-
                                   2010.................  948..................  1,056................  1,148................  1,226................  42..................  63
4%...............................  2008.................  1,300-...............  1,370-...............  1,530-...............  1,654-...............  54-.................  101-
                                   2010.................  1,375................  1,500................  1,620................  1,746................  52..................  88
MNB..............................  2008.................  2,149-...............  2,226-...............  2,383-...............  2,525-...............  62-.................  133-
                                   2010.................  2,000................  2,120................  2,212................  2,247................  57..................  101
TC=TB............................  2008.................  2,137-...............  2,258-...............  2,430-...............  2,532-...............  62-.................  133-
                                   2010.................  1,979................  2,097................  2,182................  2,272................  57..................  102
5%...............................  2008.................  1,991-...............  2,151-...............  2,462-...............  2,619-...............  63-.................  118-
                                   2010.................  1,882................  2,070................  2,313................  2,498................  57..................  98
6%...............................  2008.................  2,493-...............  2,741-...............  3,104-...............  3,250-...............  67-.................  131-
                                   2010.................  2,302................  2,585................  2,889................  3,168................  60..................  104
7%...............................  2008.................  2,831-...............  3,127-...............  3,504-...............  3,632-...............  68-.................  136-
                                   2010.................  2,510................  2,817................  3,267................  3,538................  62..................  109
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                               Table IV-48--NHTSA Estimated Passenger Car Cumulative Lifetime Fuel Savings and Average Vehicle Cost Increases During MYs 2022-2025
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             Ave. MSRP increase relative to no-action alternative
           Alternative                 Fleet MY basis    --------------------------------------------------------------------------------------------   Fuel savings (b.      Fuel savings (b.
                                                                   2022                   2023                   2024                   2025            gal.) MY2022-2025   gal.) through MY2025
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2%...............................  2008.................  638-.................  677-.................  730-.................  758-.................  40-.................  65-
                                   2010.................  575..................  629..................  675..................  683..................  39..................  66
3%...............................  2008.................  897-.................  949-.................  1,110-...............  1,174-...............  56-.................  93-
                                   2010.................  868..................  939..................  1,009................  1,037................  57..................  99
Final Standards..................  2008.................  1,272-...............  1,394-...............  1,751-...............  1,827-...............  68-.................  113-
                                   2010.................  1,091................  1,221................  1,482................  1,578................  69..................  118
4%...............................  2008.................  1,341-...............  1,469-...............  1,779-...............  1,865-...............  69-.................  121-
                                   2010.................  1,153................  1,292................  1,487................  1,577................  70..................  124
MNB..............................  2008.................  1,739-...............  1,810-...............  1,964-...............  1,943-...............  73-.................  148-

[[Page 63051]]

 
                                   2010.................  1,593................  1,772................  2,096................  2,104................  78..................  154
TC=TB............................  2008.................  2,041-...............  2,189-...............  2,568-...............  2,475-...............  80-.................  158-
                                   2010.................  1,755................  2,086................  2,524................  2,488................  82..................  159
5%...............................  2008.................  1,797-...............  2,152-...............  2,730-...............  2,719-...............  81-.................  141-
                                   2010.................  1,599................  1,970................  2,624................  2,648................  82..................  146
6%...............................  2008.................  2,245-...............  2,677-...............  3,391-...............  3,513-...............  86-.................  152-
                                   2010.................  2,183................  2,408................  3,315................  3,461................  88..................  159
7%...............................  2008.................  2,938-...............  3,579-...............  4,223-...............  4,121-...............  92-.................  164-
                                   2010.................  3,091................  3,514................  3,977................  3,970................  95..................  172
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                        Table IV-49--NHTSA Estimated Light Truck Cumulative Lifetime Fuel Savings Through MY 2021 and Average Vehicle Cost Increases During MYs 2014-2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       Ave. MSRP increase relative to no-action alternative                                        Fuel savings
          Alternative             Fleet MY basis --------------------------------------------------------------------------------------------------------------------------------    (b. gal.)
                                                       2014            2015            2016            2017            2018            2019            2020            2021       through MY2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2%.............................  2008...........  62-...........  85-...........  101-..........  177-..........  244-..........  335-..........  429-..........  522-..........  24-
                                 2010...........  113...........  231...........  266...........  327...........  378...........  452...........  533...........  607...........  22
3%.............................  2008...........  88-...........  168-..........  197-..........  270-..........  371-..........  506-..........  633-..........  767-..........  35-
                                 2010...........  129...........  242...........  280...........  357...........  458...........  598...........  750...........  916...........  29
Final Standards................  2008...........  04-...........  07-...........  14-...........  78-...........  192-..........  423-..........  622-..........  854-..........  25-
                                 2010...........  13............  69............  106...........  147...........  196...........  397...........  629...........  908...........  21
4%.............................  2008...........  134-..........  248-..........  300-..........  393-..........  546-..........  788-..........  998-..........  1,201-........  46-
                                 2010...........  161...........  294...........  353...........  435...........  571...........  845...........  1,085.........  1,295.........  36
MNB............................  2008...........  595-..........  823-..........  973-..........  1,296-........  1,535-........  1,684-........  1,915-........  2,025-........  71-
                                 2010...........  260...........  473...........  535...........  705...........  854...........  1,222.........  1,593.........  1,957.........  44
TC=TB..........................  2008...........  618-..........  845-..........  999-..........  1,354-........  1,572-........  1,708-........  1,938-........  2,062-........  71-
                                 2010...........  273...........  482...........  558...........  742...........  903...........  1,260.........  1,610.........  1,943.........  45
5%.............................  2008...........  223-..........  348-..........  413-..........  550-..........  770-..........  1,125-........  1,556-........  1,845-........  56-
                                 2010...........  249...........  459...........  504...........  607...........  806...........  1,100.........  1,434.........  1,737.........  41
6%.............................  2008...........  379-..........  538-..........  654-..........  774-..........  1,042-........  1,344-........  1,907-........  2,313-........  64-
                                 2010...........  283...........  477...........  539...........  664...........  906...........  1,262.........  1,630.........  2,005.........  44
7%.............................  2008...........  438-..........  626-..........  739-..........  878-..........  1,190-........  1,565-........  2,263-........  2,622-........  68-
                                 2010...........  296...........  486...........  566...........  719...........  1,018.........  1,528.........  1,906.........  2,316.........  47
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                                 Table IV-50--NHTSA Estimated Light Truck Cumulative Lifetime Fuel Savings and Average Vehicle Cost Increases During MY2022-2025
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             Ave. MSRP increase relative to no-action alternative
           Alternative                 Fleet MY basis    --------------------------------------------------------------------------------------------   Fuel savings (b.      Fuel savings (b.
                                                                   2022                   2023                   2024                   2025            gal.) MY2022-2025   gal.) through MY2025
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2%...............................  2008.................  566-.................  611-.................  628-.................  644-.................  30-.................  53-
                                   2010.................  650..................  705..................  728..................  730..................  28..................  50
3%...............................  2008.................  840-.................  883-.................  958-.................  1,059-...............  43-.................  78-
                                   2010.................  961..................  1,027................  1,102................  1,125................  41..................  70
Final Standards..................  2008.................  951-.................  997-.................  1,081-...............  1,183-...............  46-.................  71-
                                   2010.................  948..................  1,056................  1,148................  1,226................  42..................  63
4%...............................  2008.................  1,300-...............  1,370-...............  1,530-...............  1,654-...............  54-.................  101-
                                   2010.................  1,375................  1,500................  1,620................  1,746................  52..................  88
MNB..............................  2008.................  2,149-...............  2,226-...............  2,383-...............  2,525-...............  62-.................  133-
                                   2010.................  2,000................  2,120................  2,212................  2,247................  57..................  101
TC=TB............................  2008.................  2,137-...............  2,258-...............  2,430-...............  2,532-...............  62-.................  133-
                                   2010.................  1,979................  2,097................  2,182................  2,272................  57..................  102
5%...............................  2008.................  1,991-...............  2,151-...............  2,462-...............  2,619-...............  63-.................  118-
                                   2010.................  1,882................  2,070................  2,313................  2,498................  57..................  98
6%...............................  2008.................  2,493-...............  2,741-...............  3,104-...............  3,250-...............  67-.................  131-
                                   2010.................  2,302................  2,585................  2,889................  3,168................  60..................  104
7%...............................  2008.................  2,831-...............  3,127-...............  3,504-...............  3,632-...............  68-.................  136-
                                   2010.................  2,510................  2,817................  3,267................  3,538................  62..................  109
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 63052]]

    Through MY 2021, the Preferred Alternative for passenger cars is 
more stringent than the 2%/Year and 3%/Year alternatives. In MY 2021, 
the Preferred Alternative for light trucks is more stringent than the 
2%/Year alternative, but it is less stringent than the 2%/Year 
alternative in earlier model years. During MYs 2022-2025, the preferred 
alternatives for passenger cars and light trucks are both more than the 
corresponding 2%/Year and 3%/Year alternatives.The tables above show 
that, according to our analysis, the Preferred Alternative for 
passenger cars achieves considerably more in fuel savings through MY 
2021 and during MYs 2022-2025 than the less stringent alternatives, 
still at a cost that the agency deems to be economically practicable if 
it was passed directly on to consumers in the form of MSRP increases. 
For light trucks, the agency's analysis indicates that, through MY 
2012, the Preferred Alternative achieves fuel savings very similar to 
the 2%/Year alternative, while incurring early-MY costs the agency 
considers economically practicable. During MYs 2022-2025, our analysis 
indicates the Preferred Alternative for light trucks achieves greater 
fuel savings than the 3%/Year alternative, while still incurring costs 
the agency considers economically practicable.
    Based on recent EIA estimates of future fuel prices, the fuel 
savings presented above will significantly reduce future outlays for 
fuel purchases, and will significiantly reduce future CO2 
emissions. Setting aside outlays for fuel taxes (which, as explained 
below, are economic transfers), accounting for estimated economic 
externalities associated with petroleum use and CO2 
emissions, and accounting for other impacts (e.g., increased 
congestion, reduced VOC emissions) with estimable economic value, we 
have also estimated the total social costs and benefits relative to the 
baseline standards. Chapter X of the FRIA accompanying today's notice 
documents these estimates for each regulatory alternative. While the 
FRIA presents year-by-year results, Tables IV-51 and IV-52, below, 
summarize cumulative results for model years covered by today's final 
(i.e., through MY 2021) and augural (i.e., during MYs 2022-2025) 
standards.

                         Table IV-51--NHTSA Estimated Benefits and Costs ($b) Relative to Preferred Alternative--Passenger Cars
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       Through MY2021                         MY2022-2025                       Through MY2025
                                           -------------------------------------------------------------------------------------------------------------
    Regulatory alternative       MY Basis                                 Net                                 Net                                 Net
                                              Benefits      Costs      benefits    Benefits      Costs     benefits    Benefits      Costs     benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
2%/Year......................  2008.......  90-........  23-........  67-.......  145-......  35-.......  111-......  235-......  57-.......  178-
                               2010.......  97.........  24.........  73........  142.......  31........  111.......  239.......  56........  184
--------------------------------------------------------------------------------------------------------------------------------------------------------
3%/Year......................  2008.......  131-.......  32-........  100-......  203-......  48-.......  155-......  334-......  80-.......  255-
                               2010.......  148........  34.........  114.......  208.......  44........  163.......  356.......  79........  277
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preferred....................  2008.......  158-.......  40-........  118-......  246-......  71-.......  175-......  404-......  111-......  293-
                               2010.......  170........  42.........  128.......  250.......  60........  190.......  420.......  102.......  317
--------------------------------------------------------------------------------------------------------------------------------------------------------
4%/Year......................  2008.......  180-.......  47-........  133-......  249-......  73-.......  176-......  429-......  120-......  309-
                               2010.......  188........  46.........  142.......  255.......  61........  193.......  443.......  107.......  336
--------------------------------------------------------------------------------------------------------------------------------------------------------
5%/Year......................  2008.......  208-.......  60-........  148-......  281-......  104-......  177-......  489-......  164-......  326-
                               2010.......  222........  61.........  162.......  288.......  96........  192.......  510.......  156.......  354
--------------------------------------------------------------------------------------------------------------------------------------------------------

                          Table IV-52--NHTSA Estimated Benefits and Costs ($b) Relative to Preferred Alternative--Light Trucks
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        Through MY2021                         MY2022-2025                       Through MY2025
                                           -------------------------------------------------------------------------------------------------------------
    Regulatory alternative       MY basis                                 Net                                   Net                                Net
                                              Benefits      Costs       benefits     Benefits      Costs     benefits    Benefits      Costs    benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
2%/Year......................  2008.......  82-........  12-........  70-........  109-.......  16-.......  92-.......  191-......  29-.......  162-
                               2010.......  75.........  17.........  59.........  101........  17........  84........  177.......  34........   143
--------------------------------------------------------------------------------------------------------------------------------------------------------
3%/Year......................  2008.......  122-.......  18-........  104-.......  155-.......  24-.......  131-......  277-......  42-.......  235-
                               2010.......  101........  21.........  79.........  145........  25........  120.......  246.......  46........   200
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preferred....................  2008.......  88-........  13-........  74-........  165-.......  26-.......  139-......  253-......  40-.......  213-
                               2010.......  71.........  14.........  57.........  150........  26........  124.......  221.......  40........   181
--------------------------------------------------------------------------------------------------------------------------------------------------------
4%/Year......................  2008.......  160-.......  28-........  133-.......  197-.......  35-.......  161-......  357-......  63-.......  294-
                               2010.......  124........  28.........  95.........  183........  36........  147.......  307.......  64........   243
--------------------------------------------------------------------------------------------------------------------------------------------------------
5%/Year......................  2008.......  192-.......  41-........  151-.......  222-.......  54-.......  168-......  414-......  95-.......  319-
                               2010.......  139........  39.........  100........  202........  49........  153.......  340.......  88........   253
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Our analysis indicates that both through MY 2021 and during MYs 
2022-2025, the Preferred Alternative for passenger cars yields 
significantly greater net benefits than the 3%/Year alternative, and 
yields almost as much net benefit as the 4%/Year alternative. Through 
MY 2021, our analysis indicates that the Preferred Alternative for 
light trucks yields greater net benefits that the 2%/Year alternative, 
at similar social cost. Our analysis also indicates net benefits 
through MY 2021 would be higher under the 3%/Year alternative for light 
trucks, but the social

[[Page 63053]]

costs would potentially be 50% higher than under the Preferred 
Alternative. During MYs 2022-2025, our analysis indicates that the 
Preferred Alternative would produce greater net benefits than the 3%/
Year alternative, and would do so at very similar cost. Our analysis 
also that net benefits during MYs 2022-2025 would be higher under the 
4%/Year alternative for light trucks, but that social costs would be 
more than 30% higher than under the Preferred Alternative.
    Alternatives less stringent than the Preferred Alternatives would 
still be economically practicable, but in terms of the technology that 
they might leave on the table, the agency concludes that they would not 
meet the need of the nation to conserve energy, and would thus be below 
maximum feasible.
k. Uncertainty and Consumer Acceptance of Technologies
    In evaluating economic practicability, while NHTSA considered 
individual manufacturers' redesign cycles and, where available, the 
level of technologies planned for their future products that improve 
fuel economy, as well as some estimation of the resources that would 
likely be needed to support those plans and the potential future 
standards, the agency also considered whether we agreed with 
manufacturers that there could conceivably be compromises to vehicle 
utility depending on the technologies chosen to meet the potential new 
standards. NHTSA considered feedback on consumer acceptance of some 
advanced technologies and consumers' willingness to pay for improved 
fuel economy. In addition, the agency carefully considered whether 
manufacturer assertions about potential uncertainties in the agency's 
technical, economic, and consumer acceptance assumptions and estimates 
were potentially valid, and if so, what the potential effects of these 
uncertainties might be on economic practicability.
    Regarding passenger cars, after considering the feedback from 
stakeholders received prior to and in response to the NPRM, the agency 
considered further how it thought the factors should be balanced to 
determine the maximum feasible passenger car standards for MYs 2017-
2025. Based on that consideration of the information before the agency 
and how it informs our balancing of the factors, NHTSA concludes that 
the points raised by stakeholders support NHTSA's careful consideration 
of the factors described above, which take into account a level of 
uncertainty that surrounds economic practicability in these future 
model years. We believe the level of uncertainty that we have factored 
into the analysis is reasonable and do not agree that uncertainty 
levels are nearly as significant as a number of manufacturers 
maintained, especially for passenger cars that would suggest that the 
preferred alternative is not economically practicable. The most 
persuasive information received from stakeholders for passenger cars 
concerned practicability issues in MYs 2017-2021, which the agency's 
analysis generally supports. We are concerned that requiring 
manufacturers to invest that capital to meet higher standards in MYs 
2017-2021, rather than allowing them to increase fuel economy in those 
years slightly more slowly, would impact their ability to also support 
the development and implementation of technologies across their light 
truck fleet, and well as to conduct the engineering development and 
future investment necessary comply with the preferred alternative's 
more stringent standards in the later years. Thus, after considerable 
deliberation, we conclude that the stringency levels required by the 
Preferred Alternative for passenger cars, which increase on average 
3.6%/y in MYs 2017-2021 (only slightly different from the 4%/y levels) 
are economically practicable, but that the 4%/y alternative and higher 
alternatives are likely not economically practicable.
    Regarding light trucks, while NHTSA does not agree with the 
manufacturers' overall cost assessments expressed to us last summer 
prior to issuance of the NPRM, and believes, based on our analysis 
using our technology cost and effectiveness assumptions, that 
manufacturers should be able to preserve all necessary vehicle utility. 
NHTSA does believe there is merit to some of the concerns raised in 
stakeholder feedback. Specifically, concerns about longer redesign 
schedules for trucks, compounded by the need to invest simultaneously 
in raising passenger car fuel economy, and we have incorporated those 
considerations into our assessment for this final rule. Based on our 
assessment, we believe that alternatives more stringent than the 
preferred alternative could lead manufacturers to implement 
technologies that do not maintain vehicle utility, based on the cadence 
of the standards under the more stringent alternatives. As discussed 
above, a number of manufacturers repeatedly stated, in providing 
feedback, that the MYs 2012-2016 standards for trucks, while feasible, 
required significant investment to reach the required levels, and that 
given the redesign schedule for trucks, that level of investment 
throughout the entire MYs 2012-2025 time period was not sustainable. 
Based on the confidential business information that manufacturers 
provided to us, we believe that this point is valid. If the agency 
pushes CAFE increases that require considerable sustained investment at 
a faster rate than industry redesign cycles, adverse economic 
consequences could ensue. Especially for light trucks, these risks 
appear most pronounced during MYs 2017-2021, as evidenced by the 
agency's analysis indicating that, given our expectations regarding 
manufacturers' product cadence (i.e., redesign schedules) increasing 
stringency beyond baseline standards during the few model years 
following MY 2016 could necessitate considerable additional technology 
and cost even prior to MY 2016. The best information that the agency 
has at this time, therefore, indicates that requiring light truck fuel 
economy improvements at rates more stringent than the preferred 
alternative could create potentially severe economic consequences, and 
likely would not be economically practicable.
    Thus, evaluating the inputs from stakeholders and the agency's 
independent analysis, the agency also considered further how it thought 
the factors should be balanced to determine the maximum feasible light 
truck standards for MYs 2017-2021. Based on that consideration of the 
information before the agency and how it informs our balancing of the 
factors, NHTSA has concluded for the final standards for MYs 2017-2021 
that 4%/y CAFE stringency increases for passenger cars and 3%/y 
stringency increases for light trucks are economically impracticable. 
NHTSA therefore concludes that the preferred alternative, which would 
in MYs 2017-2021 increase on average 3.8%/y for passenger cars and 
2.5%/y for light trucks, is the most stringent alternative that is 
still economically practicable in those model years.
    As discussed above, the question of the tipping point is slightly 
different in the context of the final standards and augural standards. 
The augural standards for MYs 2022-2025 are distant, and while 
manufacturers benefit from regulatory certainty, no manufacturer has 
begun to plan in earnest for vehicles that they expect to produce in 
that time frame. Moreover, the inputs that inform our balancing are 
less certain. We reiterate that the agency's assessment of what augural 
standards would be maximum feasible is based on the best, most 
transparent information available to the agency today, and that the 
final standards for

[[Page 63054]]

MYs 2022-2025 will be determined in a future rulemaking, at which time 
the agency expects to have much new information that may affect how it 
chooses to balance the relevant factors at that time.
    Recognizing that the augural standards are distant, and that 
manufacturers do not yet have fixed plans for those model years, the 
agency believes that despite considerable uncertainty, economic 
practicability may not necessarily be as limiting for MYs 2022-2025 as 
we conclude it is for MYs 2017-2021. Our analysis showed that 
shortfalls did not begin to accrue for the passenger car standards 
until the 5%/y alternative, for example, as the table below 
demonstrates. For light trucks, the analysis showed increasing 
shortfall risk for more manufacturers in MYs 2022-2025 under the 5%/y 
alternative. Other indicators of economic practicability confirmed that 
the 5%/y alternative was likely not economically practicable in MYs 
2022-2025, but that the 4%/y and slower alternatives would likely leave 
technology on the table unnecessarily. NHTSA therefore concludes that 
the preferred alternative, which would in MYs 2022-2025 increase on 
average 4.7%/y for passenger cars and 4.8%/y for light trucks, is the 
most stringent alternative that would still be economically practicable 
in those model years.
    The reader will likely note that in most model years, the 
difference between the final/augural standards and the next most 
stringent alternative is minor. The agency grappled with whether the 
4%/y alternative for the final passenger car standards, the 3%/y 
alternative for the final light truck standards, and the 5%/y 
alternative for the augural standards might be maximum feasible, given 
that they would save 5-7% and 8-11% more fuel, respectively, for 
passenger cars and light trucks, respectively, for 5-8% and 5-15% more 
cost, respectively, as compared to the final and augural standards 
presented here.
    As discussed above, while consideration of future model years in 
isolation might suggest manufacturers have ample lead time to make 
further improvements, that is not how industry responds to standards, 
and NHTSA thus tries to account for manufacturers' product cadence and 
use of multiyear planning in its analysis in order to improve how 
accurately we reflect practicability. NHTSA now has standards in place 
for MY 2012, the current model year, through MY 2016, is finalizing 
standards for MYs 2017-2021, and is presenting a potential road map of 
standards for MYs 2022-2025. Manufacturers will be making concurrent 
and continual fuel economy improvements to both their car and truck 
fleets in response to these standards for well beyond their current 
product plans. The agency's analysis includes an assumption of market-
driven improvements to fuel economy across a manufacturer's fleet 
(i.e., improvements beyond those required by the standards); if this is 
the case, then all of these improvements will be made along with, or at 
the expense of, improvements to every other facet of vehicle 
performance during the 2012-2025 time frame. We expect that the 
standards will therefore cause manufacturers to be more resource-
constrained in the future than they may have been in the past, given 
that improvements will be required in every year for over ten years, 
and given uncertainty with regard to future fuel prices and consumer 
demand for fuel economy, and thus manufacturers' ability to sell the 
vehicles that they make in response to the standards. This uncertainty 
is inherent in the agency's analysis of alternative standards: We model 
only one path to compliance, and we cannot possibly have perfect 
information about every input to that analysis, even if the information 
is the best and most transparent available. NHTSA believes that 
standards set at the finalized levels for MYs 2017-2021 will help 
address concerns raised by manufacturer stakeholders and reduce the 
risk for adverse economic consequences during that time frame. Given 
the year-over-year challenge of the standards and the ``lift'' required 
to meet the final standards for MYs 2017-2021, NHTSA believes that the 
final standards, as proposed, are maximum feasible for those model 
years.
    With regard to the augural standards for MYs 2022-2025, the time 
frame and the uncertainty makes evaluation of maximum feasible levels 
more challenging, but NHTSA believes that the provisions for incentives 
for advanced technologies to encourage their development and 
implementation, and the agencies' expectation that some of the 
uncertainties surrounding consumer acceptance of new technologies in 
light trucks should have resolved themselves by that time frame based 
on consumers' experience with the advanced technologies, will enable 
considerable increases in stringency by then, and help to ensure most 
of the substantial improvements in fuel efficiency initially envisioned 
over the entire period and supported by other stakeholders. This helps 
give NHTSA more confidence that a balancing that weights the need of 
the nation to conserve energy slightly more heavily and economic 
practicability slightly less heavily in MYs 2022-2025 is maximum 
feasible for the augural standards.
    The final and augural standards also account for the effect of 
EPA's standards, in light of the agencies' close coordination and the 
fact that both sets of standards were developed together to harmonize 
as part of the National Program. Given the close relationship between 
fuel economy and CO2 emissions, and the efforts NHTSA and 
EPA have made to conduct joint analysis and jointly deliberate on 
information and tentative conclusions,\1272\ the agencies have sought 
to harmonize and align their proposed standards to the greatest extent 
possible, consistent with their respective statutory authorities. In 
comparing the final standards, the agencies' stringency curves are 
equivalent, except for the fact that the stringency of EPA's passenger 
car standards reflect the ability to improve GHG emissions through 
reductions in A/C system refrigerant leakage and the use of lower GWP 
refrigerants (direct A/C improvements),\1273\ and that EPA provides 
incentives for PHEV, EV and FCV vehicles, which NHTSA does not provide 
because statutory incentives have already been defined for these 
technologies. The stringency of NHTSA's final standards for passenger 
cars for MYs 2017-2025 align with the stringency of EPA's equivalent 
standards when these differences are considered.
---------------------------------------------------------------------------

    \1272\ NHTSA and EPA conducted joint analysis and jointly 
deliberated on information and tentative conclusions related to 
technology cost, effectiveness, manufacturers' capability to 
implement technologies, the cadence at which manufacturers might 
support the implementation of technologies, economic factors, and 
the assessment of comments from manufacturers.
    \1273\ As these A/C system improvements do not influence fuel 
economy, the stringency of NHTSA's preferred alternatives do not 
reflect the availability of these technologies.
---------------------------------------------------------------------------

    We note, however, that the alignment is based on the assumption 
that manufacturers implement the same level of direct A/C system 
improvements as EPA currently forecasts for those model years, and on 
the assumption of PHEV, EV, and FCV penetration at specific levels. If 
a manufacturer implements a higher level of direct A/C improvement 
technology (although EPA predicts 100% of manufacturers will use 
substitute refrigerants by MY 2021, and the GHG standards assume this 
rate of substitution) and/or a higher penetration of PHEVs, EVs and 
FCVs,

[[Page 63055]]

then NHTSA's standards would effectively be more stringent than EPA's. 
Conversely, if a manufacturer implements a lower level of direct A/C 
improvement technology and/or a lower penetration of PHEVs, EVs and 
FCVs, then EPA's proposed standards would effectively be more stringent 
than NHTSA's. Several manufacturers commented on this point and 
suggested that this meant that the standards were not aligned, because 
NHTSA's standards might be more stringent in some years than EPA's. 
This reflects a misunderstanding of the agencies' purpose. The agencies 
have sought to craft harmonized standards such that manufacturers may 
build a single fleet of vehicles to meet both agencies' requirements. 
That is the case for these final standards. Manufacturers will have to 
plan their compliance strategies considering both the NHTSA standards 
and the EPA standards and assure that they are in compliance with both, 
but they can still build a single fleet of vehicles to accomplish that 
goal. NHTSA is thus finalizing the preferred alternative based on the 
tentative determination of maximum feasibility as described earlier in 
the section, but, based on efforts NHTSA and EPA have made to conduct 
joint analysis and jointly deliberate on information and tentative 
conclusions, NHTSA has also aligned the final and augural CAFE 
standards with EPA's final standards.
    Thus, NHTSA has concluded that the standards represented by the 
preferred alternative are the maximum feasible standards for passenger 
cars and light trucks in MYs 2017-2021, and that the augural standards 
presented for MYs 2022-2025 would be maximum feasible in those model 
years, based on the information currently before the agency, had we the 
authority to finalize them at this time. We recognize that higher 
standards would help the need of the nation to conserve more energy and 
might potentially be technologically feasible (in the narrowest sense) 
during those model years, but based on our analysis and the evidence 
presented by the industry, we conclude that higher standards would not 
represent the proper balancing for MYs 2017-2025 cars and trucks.\1274\ 
We conclude that the correct balancing recognizes economic 
practicability concerns as discussed above, and sets standards at the 
levels that the agency is promulgating in this final rule for MYs 2017-
2021 and presenting for MYs 2022-2025.\1275\ In the same vein, lower 
standards might be less burdensome on the industry, but considering the 
environmental impacts of the different regulatory alternatives as 
required under NEPA and the need of the nation to conserve energy, we 
do not believe they would represent the appropriate balancing of the 
relevant factors, because they would have left technology, fuel 
savings, and emissions reductions on the table unnecessarily, and not 
contributed as much as possible to reducing our nation's energy 
security and climate change concerns. Additionally, consistent with 
Executive Order 13563, the agency believes that the benefits of the 
preferred alternative amply justify the costs; indeed, the monetized 
benefits exceed the monetized costs by $185-192 billion over the 
lifetime of the vehicles covered by the final standards for MYs 2017-
2021, and by $314 billion over the lifetime of the vehicles covered by 
the final standards for MYs 2022-2025. In full consideration of all of 
the information currently before the agency, we have weighed the 
statutory factors carefully and selected final passenger car and light 
truck standards for MYs 2017-2021 and presented augural passenger car 
and light truck standards for MYs 2022-2025 that we believe are the 
maximum feasible.
---------------------------------------------------------------------------

    \1274\ We note, for example, that while Executive Orders 12866 
and 13563 focus attention on an approach that maximizes net 
benefits, both Executive Orders recognize that this focus is subject 
to the requirements of the governing statute. In this rulemaking, 
the standards represented by the ``MNB'' alternative are more 
stringent than what NHTSA has concluded would be maximum feasible 
for MYs 2017-2025, and thus setting standards at that level would be 
inconsistent with the requirements of EPCA/EISA to set maximum 
feasible standards.
    \1275\ We underscore that the agency's decision regarding what 
standards would be maximum feasible for MYs 2017-2025 is made with 
reference to the rulemaking time frame and circumstances of this 
final rule. Each CAFE rulemaking (indeed, each stage of any given 
CAFE rulemaking) presents the agency with new information that may 
affect how we balance the relevant factors.
---------------------------------------------------------------------------

G. Impacts of the Final CAFE standards

1. How will these standards improve fuel economy and reduce GHG 
emissions for MY 2017-2025 vehicles?
    As discussed above, the CAFE level required under an attribute-
based standard depends on the mix of vehicles produced for sale in the 
U.S. Based on the market forecast that NHTSA and EPA have used to 
develop and analyze the final and augural CAFE and CO2 
emissions standards, NHTSA estimates that the final and augural CAFE 
standards would lead average required fuel consumption (fuel 
consumption is the inverse of fuel economy) levels to increase by an 
average of 4.0 percent annually through MY 2025, reaching a combined 
average fuel economy requirement of between 48.7 and 49.7 mpg in that 
model year:

                        Table IV-53--NHTSA Estimated Required Average Fuel Economy (mpg) under the Final Standards--MYs 2017-2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2017                2018                2019                2020                2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008-..............  40.1-.............  41.6-.............  43.1-.............  44.8-.............  46.8-
                                 2010...............  39.6..............  41.1..............  42.5..............  44.2..............  46.1
Light trucks...................  2008-..............  29.4-.............  30.0-.............  30.6-.............  31.2-.............  33.3-
                                 2010...............  29.1..............  29.6..............  30.0..............  30.6..............  32.6
Combined.......................  2008-..............  35.4-.............  36.5-.............  37.7-.............  38.9-.............  41.0-
                                 2010...............  35.1..............  36.1..............  37.1..............  38.3..............  40.3
--------------------------------------------------------------------------------------------------------------------------------------------------------

                       Table IV-54--NHTSA Estimated Required Average Fuel Economy (mpg) Under the Augural Standards--MYs 2022-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                          MY Baseline                2022                    2023                    2024                   2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars....................  2008-2010.............  49.0-48.2.............  51.2-50.5.............  53.6-52.9............  56.2-55.3
Light trucks......................  2008-2010.............  34.9-34.2.............  36.6-35.8.............  38.5-37.5............  40.3-39.3
Combined..........................  2008-2010.............  43.0-42.3.............  45.1-44.3.............  47.4-46.5............  49.7-48.7
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 63056]]

    Accounting for differences between fuel economy levels under 
laboratory conditions and operating conditions in the real world, NHTSA 
estimates that these requirements would translate into the following 
required average on-road fuel economy levels using on-road fuel 
economy:

                    Table IV-55--NHTSA Estimated Required Average Fuel Economy (On-Road mpg) Under the Final Standards--MYs 2017-2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2017                2018                2019                2020                2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008-2010..........  32.1-31.7.........  33.3-32.8.........  34.5-34.0.........  35.9-35.3.........  37.4-36.8
Light trucks...................  2008-2010..........  23.6-23.3.........  24.0-23.7.........  24.5-24.0.........  24.9-24.5.........  26.6-26.1
Combined.......................  2008-2010..........  28.3-28.1.........  29.2-28.9.........  30.1-29.7.........  31.1-30.6.........  32.8-32.3
--------------------------------------------------------------------------------------------------------------------------------------------------------

                   Table IV-56--NHTSA Estimated Required Average Fuel Economy (On-Road mpg) Under the Augural Standards--MYs 2022-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                          MY Baseline                2022                    2023                    2024                   2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars....................  2008-2010.............  39.2-38.6.............  41.0-40.4.............  42.9-42.3............  44.9-44.3
Light trucks......................  2008-2010.............  27.9-27.4.............  29.3-28.7.............  30.8-30.0............  32.2-31.5
Combined..........................  2008-2010.............  34.4-33.9.............  36.1-35.5.............  37.9-37.2............  39.8-39.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

    For the reader's reference, these mpg levels would translate to the 
following in gallons per mile:

                        Table IV-57--NHTSA Estimated Required Average Fuel Economy (gpm) Under the Final Standards--MYs 2017-2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2017                2018                2019                2020                2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008-2010..........  0.0249-0.0252.....  0.0240-0.0244.....  0.0232-0.0235.....  0.0223-0.0226.....  0.0214-0.0217
Light trucks...................  2008-2010..........  0.0340-0.0344.....  0.0333-0.0338.....  0.0327-0.0333.....  0.0321-0.0326.....  0.0300-0.0306
Combined.......................  2008-2010..........  0.0282-0.0285.....  0.0274-0.0277.....  0.0265-0.0270.....  0.0257-0.0261.....  0.0244-0.0248
--------------------------------------------------------------------------------------------------------------------------------------------------------

                       Table IV-58--NHTSA Estimated Required Average Fuel Economy (gpm) Under the Augural Standards--MYs 2022-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                          MY Baseline                2022                    2023                    2024                   2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars....................  2008..................  0.0204 -..............  0.0195 -..............  0.0187 -.............  0.0178 -
                                    2010..................  0.0207................  0.0198................  0.0189...............  0.0181
Light trucks......................  2008..................  0.0287-...............  0.0273-...............  0.0260-..............  0.0248-
                                    2010..................  0.0292................  0.0279................  0.0266...............  0.0254
Combined..........................  2008..................  0.0233-...............  0.0222-...............  0.0211-..............  0.0201-
                                    2010..................  0.0236................  0.0226................  0.0215...............  0.0205
--------------------------------------------------------------------------------------------------------------------------------------------------------

    If manufacturers apply technology only as far as necessary to 
comply with CAFE standards, NHTSA estimates that, setting aside factors 
the agency cannot consider for purposes of determining maximum feasible 
CAFE standards,\1276\ average achieved fuel economy levels would 
correspondingly increase through MY 2025, but that manufacturers would, 
on average, under-comply \1277\ in some model years and over-comply 
\1278\ in others, reaching a combined average fuel economy in a range 
from 48.1 mpg to 48.8 mpg (taking into account estimated adjustments 
reflecting improved air conditioner efficiency) in MY 2025:
---------------------------------------------------------------------------

    \1276\ 49 U.S.C. 32902(h) states that NHTSA may not consider the 
fuel economy of dedicated alternative fuel vehicles, the 
alternative-fuel portion of dual-fueled automobile fuel economy, or 
the ability of manufacturers to earn and use credits for over-
compliance, in determining the maximum feasible stringency of CAFE 
standards.
    \1277\ ``Under-compliance'' with CAFE standards can be mitigated 
either through use of FFV credits, use of existing or ``banked'' 
credits, or through fine payment. Although, as mentioned above, 
NHTSA cannot consider availability of statutorily-provided credits 
in setting standards, NHTSA is not prohibited from considering fine 
payment. Therefore, the estimated achieved CAFE levels presented 
here include the assumption that Aston Martin, BMW, Daimler (i.e., 
Mercedes), Geely (i.e., Volvo), Lotus, Porsche, Spyker (i.e., Saab), 
and, Tata (i.e., Jaguar and Rover), and Volkswagen will only apply 
technology up to the point that it would be less expensive to pay 
civil penalties.
    \1278\ In NHTSA's analysis, ``over-compliance'' occurs through 
multi-year planning: manufacturers apply some ``extra'' technology 
in early model years (e.g., MY 2014) in order to carry that 
technology forward and thereby facilitate compliance in later model 
years (e.g., MY 2016).

[[Page 63057]]

                        Table IV-59--NHTSA Estimated Achieved Average Fuel Economy (mpg) Under the Final Standards--MYs 2017-2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2017                2018                2019                2020                2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  40.4-.............  42.6-.............  44.7-.............  47.2-.............  49.0-
                                 2010...............  40.3..............  41.8..............  44.1..............  46.3..............  48.1
Light trucks...................  2008...............  30.0-.............  31.1-.............  33.0-.............  34.5-.............  36.8-
                                 2010...............  29.8..............  30.2..............  31.8..............  33.3..............  35.5
Combined.......................  2008...............  35.9-.............  37.6-.............  39.7-.............  41.9-.............  43.9-
                                 2010...............  35.8..............  36.8..............  38.8..............  40.8..............  42.9
--------------------------------------------------------------------------------------------------------------------------------------------------------

                       Table IV-60--NHTSA Estimated Achieved Average Fuel Economy (mpg) Under the Augural Standards--MYs 2022-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                          MY Baseline                2022                    2023                    2024                   2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars....................  2008..................  50.2-.................  51.2-.................  53.0-................  54.4-
                                    2010..................  49.2..................  50.9..................  52.7.................  54.1
Light trucks......................  2008..................  37.7-.................  38.4-.................  39.4-................  40.3-
                                    2010..................  36.2..................  37.3..................  38.4.................  39.3
Combined..........................  2008..................  45.0-.................  46.0-.................  47.6-................  48.8-
                                    2010..................  43.8..................  45.3..................  46.8.................  48.1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    For the reader's reference, these mpg levels would translate to the 
following in gallons per mile:

                        Table IV-61--NHTSA Estimated Achieved Average Fuel Economy (gpm) Under the Final Standards--MYs 2017-2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2017                2018                2019                2020                2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  0.0245-...........  0.0233-...........  0.0222-...........  0.0212-...........  0.0204-
                                 2010...............  0.0248............  0.0239............  0.0227............  0.0216............  0.0208
Light trucks...................  2008...............  0.0324-...........  0.0312-...........  0.0295-...........  0.0284-...........  0.0273-
                                 2010...............  0.0336............  0.0331............  0.0315............  0.0300............  0.0281
Combined.......................  2008...............  0.0274-...........  0.0261-...........  0.0248-...........  0.0237-...........  0.0228-
                                 2010...............  0.0279............  0.0272............  0.0258............  0.0245............  0.0233
--------------------------------------------------------------------------------------------------------------------------------------------------------

                       Table IV-62--NHTSA Estimated Achieved Average Fuel Economy (gpm) Under the Augural Standards--MYs 2022-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                          MY Baseline                2022                    2023                    2024                   2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars....................  2008..................  0.0199-...............  0.0195-...............  0.0188-..............  0.0184-
                                    2010..................  0.0203................  0.0197................  0.0190...............  0.0185
Light trucks......................  2008..................  0.0266-...............  0.0261-...............  0.0254-..............  0.0249-
                                    2010..................  0.0276................  0.0268................  0.0261...............  0.0255
Combined..........................  2008..................  0.0222-...............  0.0218-...............  0.0210-..............  0.0205-
                                    2010..................  0.0228................  0.0221................  0.0214...............  0.0208
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The estimated achieved average fuel economy levels presented above 
all derive from analysis that does not attempt to estimate the 
potential that today's attribute-based standards might induce shifts in 
vehicle footprint--shifts that would change manufacturers' average 
required and achieved fuel economy levels. As discussed above in 
Sections II.C and IV.D, the agency judges today's standards unlikely to 
induce significant shifts in vehicle footprint. We note, however, that 
comments by CBD, ACEEE, NACAA, and an individual, Yegor Tarazevich, 
referenced a 2011 study by Whitefoot and Skerlos, ``Design incentives 
to increase vehicle size created from the U.S. footprint-based fuel 
economy standards.'' \1279\ This study concluded that MY 2014 
standards, as proposed, ``create an incentive to increase vehicle size 
except when consumer preference for vehicle size is near its lower 
bound and preference for acceleration is near its upper bound.'' \1280\ 
The commenters who cited this study generally did so as part of 
arguments in favor of flatter standards (i.e., curves that are flatter 
across the range of footprints) for MYs 2017-2025. While NHTSA 
considers the concept of the Whitefoot and Skerlos analysis to have 
some potential merits, it is also important to note that, among other 
things, the authors assumed different inputs than NHTSA actually used 
in the MYs 2012-2016 rule regarding the baseline fleet, the cost and 
efficacy of potential future technologies, and the relationship between 
vehicle footprint and fuel economy.
---------------------------------------------------------------------------

    \1279\ Available at http://energy.umich.edu/wp-content/uploads/Whitefoot_Skerlos_CAFE-SIZE.pdf, last accessed August 3, 2012.
    \1280\ Ibid, pg 9.

---------------------------------------------------------------------------

[[Page 63058]]

    Were NHTSA to use the Whitefoot and Skerlos methodology (e.g., 
methods to simulate manufacturers' potential decisions to increase 
vehicle footprint) with the actual inputs to the MYs 2012-2016 rules, 
the agencies would likely obtain different findings. Underlining the 
potential uncertainty, the authors obtained a wide range of results in 
their analyses. Insofar as Whitefoot and Skerlos found, for some 
scenarios, that manufacturers might respond to footprint-based 
standards by deliberately increasing vehicle footprint, these findings 
are attributable to a combination of (a) the assumed baseline market 
characteristics, (b) the assumed cost and fuel economy impacts involved 
in increasing vehicle footprint, (c) the footprint-based fuel economy 
targets, and (d) the assumed consumer preference for vehicle size. 
Changes in any of these assumptions could yield different analytic 
results, and potentially result in different technical implications for 
NHTSA action. As the authors note when interpreting their results: 
``designing footprint-based fuel-economy standards in practice such 
that manufacturers have no incentive to adjust the size of their 
vehicles appears elusive at best and impossible at worst.''
    Regarding the cost impacts of footprint increases, that authors 
make an ad hoc assumption that footprint changes would incur costs 
linearly, such that a 1% change in footprint would entail a 1% increase 
in production costs. The authors refer to this as a conservative 
assumption, but present no supporting evidence. NHTSA has not attempted 
to estimate the engineering cost to increase vehicle footprint, but we 
expect that it would be considerably nonlinear, with costs increasing 
rapidly once increases available through small incremental changes--
most likely in track width--have been exhausted.\1281\ Moreover, we 
expect that were a manufacturer to deliberately increase footprint in 
order to ease compliance burdens, it would confine any significant 
changes to coincide with vehicle redesigns, and engaging in multiyear 
planning, would consider how the shifts would impact compliance burdens 
and consumer desirability in ensuing model years. With respect to the 
standards promulgated today, the standards become flatter over time, 
thereby diminishing any ``reward'' for deliberately increasing 
footprint beyond normal market expectations.
---------------------------------------------------------------------------

    \1281\ See, e.g., 71 FR 17595 (Apr. 6, 2006).
---------------------------------------------------------------------------

    Regarding the fuel economy impacts of footprint increases, the 
authors present a regression analysis based on which increases in 
footprint are estimated to entail increases in weight which are, in 
turn, estimated to entail increases in fuel consumption. However, this 
relationship was not the relationship the agencies used to develop the 
MY 2014 standards the authors examine in that study. Where the target 
function's slope is similar to that of the tendency for fuel 
consumption to increase with footprint, fuel economy should tend to 
decrease approximately in parallel with the fuel economy target, 
thereby obviating the ``benefit'' of deliberate increases in vehicle 
footprint. NHTSA's analysis supporting today's final rule indicates 
relatively wide ranges wherein the relationship between fuel 
consumption and footprint may reasonably be specified. The underlying 
slopes selected for purposes of defining MY 2017 and beyond standards 
fall toward the flatter end of those reasonable ranges. Therefore, 
while the agencies expect the standards to have little tendency to 
induce deliberate changes in vehicle size, the agencies would have more 
reason to expect that such changes would be slightly in the direction 
of reducing vehicle footprint in order to increase achieved fuel 
economy levels by more than the increase in the corresponding fuel 
economy targets.
    Nonetheless, NHTSA considers the concept of the authors' 
investigation to have merits. In support of today's rulemaking, NHTSA 
considered including footprint increases as a ``technology'' available 
in its analysis, such that its CAFE model would increase footprint in 
cases where the cost to do so would be attractive considering both the 
accompanying decrease in the fuel economy target (if the vehicle is not 
on the flat portion of the target function) and the accompanying 
decrease in vehicle fuel economy. However, NHTSA was unable to estimate 
the underlying cost function and complete and test this approach in 
time to support today's final rule. In support of future NHTSA 
rulemakings, NHTSA plans to further investigate methods to estimate the 
potential that standards might tend to induce changes in the footprint.
    Accounting for differences between fuel economy levels under 
laboratory conditions and real-world driving behavior, NHTSA estimates 
that these requirements would translate into the following achieved 
average on-road fuel economy levels:

                    Table IV-63--NHTSA Estimated Achieved Average Fuel Economy (On-Road mpg) Under the Final Standards--MYs 2017-2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2017                2018                2019                2020                2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  32.3-.............  34.1-.............  35.7-.............  37.8-.............  39.2-
                                 2010...............  32.2..............  33.4..............  35.3..............  37.0..............  38.5
Light trucks...................  2008...............  24-...............  24.9-.............  26.4-.............  27.6-.............  29.4-
                                 2010...............  23.8..............  24.2..............  25.4..............  26.6..............  28.4
Combined.......................  2008...............  28.7-.............  30.1-.............  31.7-.............  33.5-.............  35.1-
                                 2010...............  28.6..............  29.4..............  31.0..............  32.6..............  34.3
--------------------------------------------------------------------------------------------------------------------------------------------------------

                   Table IV-64--NHTSA Estimated Achieved Average Fuel Economy (On-Road mpg) Under the Augural Standards--MYs 2022-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                          MY Baseline                2022                    2023                    2024                   2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars....................  2008..................  40.1-.................  41-...................  42.4-................  43.5-
                                    2010..................  39.4..................  40.7..................  42.2.................  43.3
Light trucks......................  2008..................  30.1-.................  30.7-.................  31.5-................  32.2-
                                    2010..................  29....................  29.8..................  30.7.................  31.4
Combined..........................  2008..................  36.0-.................  36.8-.................  38.1-................  39.0-

[[Page 63059]]

 
                                    2010..................  35.0..................  36.2..................  37.4.................  38.5
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Setting aside the potential to produce additional EVs (or, prior to 
MY 2020, PHEVs) or take advantage of EPCA's provisions regarding CAFE 
credits, NHTSA estimates that today's final standards could increase 
achieved fuel economy levels by average amounts of up to 0.7 mpg during 
the few model years leading into MY 2017, as manufacturers apply 
technology during redesigns leading into model years covered by today's 
new standards.\1282\ As shown below, these ``early'' fuel economy 
increases yield corresponding reductions in fuel consumption and 
greenhouse gas emissions, and incur corresponding increases in 
technology outlays.
---------------------------------------------------------------------------

    \1282\ This outcome is a direct result of revisions, made to 
DOT's CAFE model in preparation for the MY 2012-2016 rule, to 
simulate ``multiyear planning'' effects--that is, the potential that 
manufacturers will apply ``extra'' technology in one model year if 
doing so will be sufficiently advantageous with respect to the 
ability to comply with CAFE standards in later model years. For 
example, for today's rulemaking analysis, NHTSA has estimated that 
Ford will redesign the F-150 pickup truck in MY 2015, and again in 
MY 2021. As explained in Chapter V of the RIA, NHTSA's expects that 
many technologies would be applied as part of a vehicle redesign. 
Therefore, in NHTSA's analysis, if Ford does not anticipate ensuing 
standards when redesigning the MY 2015 F-150, Ford may find it more 
difficult to comply with light truck standard during MY 2016-2020. 
Through simulation of multiyear planning effects, NHTSA's analysis 
indicates that Ford could apply more technology to the MY 2015 F-150 
if standards continue to increase after MY 2016 than Ford need apply 
if standards remain unchanged after MY 2016, and that this 
additional technology would yield further fuel economy improvements 
of up to 1.3 mpg, depending on pickup configuration.
---------------------------------------------------------------------------

    Within the context EPCA requires NHTSA to apply for purposes of 
determining maximum feasible stringency of CAFE standards (i.e., 
setting aside EVs, pre-MY 2020 PHEVs, and all statutory CAFE credit 
provisions), NHTSA estimates that these fuel economy increases would 
lead to fuel savings totaling a range from 180 billion to 184 billion 
gallons during the useful lives of vehicles manufactured in MYs 2017-
2025 and the few MYs preceding MY 2017:

                             Table IV-65--NHTSA Estimated Fuel Saved (Billion Gallons) Under the Final and Augural Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
          Model year           MY Baseline   Earlier    2017      2018      2019      2020      2021      2022      2023      2024      2025      Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
PC...........................  2008.......  5.3-....  2.8-....  5.3-....  7.7-....  10.9-...  13.0-...  14.4-...  15.8-...  18.0-...  19.7-...  112.9-
                               2010.......  7.7.....  3.6.....  5.3.....  8.3.....  10.8....  13.0....  14.3....  16.2....  18.3....  20.0....  117.4
LT...........................  2008.......  0.5-....  1.0-....  2.5-....  4.8-....  6.8-....  9.4-....  10.3-...  10.9-...  11.8-...  12.7-...  70.7-
                               2010.......  0.9.....  0.8.....  1.5.....  3.7.....  5.6.....  8.2.....  8.9.....  10.0....  11.1....  12.1....  62.9
Combined.....................  2008.......  5.9-....  3.9-....  7.8-....  12.5-...  17.7-...  22.3-...  24.7-...  26.7-...  29.8-...  32.4-...  183.5-
                               2010.......  8.6.....  4.4.....  6.7.....  12.0....  16.4....  21.1....  2.32....  26.2....  29.5....  32.1....  180.3
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The agency also estimates that these new CAFE standards would lead 
to corresponding reductions of CO2 emissions totaling a 
range from 1,950 million metric tons (mmt) to 1,990 mmt during the 
useful lives of vehicles sold in MYs 2017-2025 and the few MYs 
preceding MY 2017:

                        Table IV-66--NHTSA Estimated Carbon Dioxide Emissions Avoided (mmt) Under the Final and Augural Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
          Model year           MY Baseline   Earlier    2017      2018      2019      2020      2021      2022      2023      2024      2025      Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
PC...........................  2008.......  58-.....  31-.....  58-.....  84-.....  117-....  140-....  156-....  171-....  193-....  211-....  1,218-
                               2010.......  84......  40......  57......  90......  117.....  141.....  156.....  176.....  199.....  216.....  1,276
LT...........................  2008.......  6-......  11-.....  27-.....  52-.....  74-.....  102-....  112-....  119-....  129-....  138-....  769-
                                2010......  10......  9.......  16......  40......  60......  88......  96......  108.....  120.....  131.....  677
Combined.....................  2008.......  64-.....  42-.....  85-.....  136-....  191-....  242-....  268-....  290-....  321-....  349-....  1,987-
                               2010.......  94......  48......  73......  130.....  178.....  229.....  252.....  284.....  318.....  347.....  1,953
--------------------------------------------------------------------------------------------------------------------------------------------------------

2. How will these standards improve fleet-wide fuel economy and reduce 
GHG emissions beyond MY 2025?
    Under the assumption that CAFE standards at least as stringent as 
those being presented today for MY 2025 would be established for 
subsequent model years, the effects of the standards on fuel 
consumption and GHG emissions will continue to increase for many years. 
This will occur because over time, a growing fraction of the U.S. 
light-duty vehicle fleet will be comprised of cars and light trucks 
that meet at least the MY 2025 standard. The impact of the new 
standards on fuel use and GHG emissions would therefore continue to 
grow through approximately 2060, when virtually all cars and light 
trucks in service will have met standards as stringent as those 
established for MY 2025.
    As Table IV-67 shows, NHTSA estimates that the fuel economy 
increases resulting from the final standards will lead to reductions in 
total fuel consumption by cars and light trucks of 3 billion gallons 
during 2020, increasing to a range from 38 billion to 44 billion 
gallons by 2060. Over the period from 2017, when the final standards 
would begin to take effect, through 2060, cumulative fuel savings would 
total between 1,080 billion and 1,190 billion gallons, as Table IV-67 
also indicates.

[[Page 63060]]

                            Table IV-67--NHTSA Estimated Reduction in Fleet-Wide Fuel Use (Billion Gasoline Gallon Equivalents) Under the Final and Augural Standards
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline                2020                   2030                   2040                   2050                  2060            Total  2017-2060
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  2-...................  11-..................  17-..................  20-..................  23-.................  620-
                                   2010.................  2....................  11...................  16...................  18...................  20..................  572
Light trucks.....................  2008.................  1-...................  10-..................  16-..................  19-..................  22-.................  574-
                                   2010.................  1....................  9....................  14...................  16...................  18..................  506
Combined.........................  2008.................  3-...................  21-..................  32-..................  39-..................  44-.................  1,194-
                                   2010.................  3....................  20...................  30...................  34...................  38..................  1,078
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    The energy security analysis conducted for this rule estimates that 
the world price of oil will fall modestly in response to lower U.S. 
demand for refined fuel. One potential result of this decline in the 
world price of oil would be an increase in the consumption of petroleum 
products outside the U.S., which would in turn lead to a modest 
increase in emissions of greenhouse gases, criteria air pollutants, and 
airborne toxics from their refining and use. While additional 
information would be needed to analyze this ``leakage effect'' in 
detail, NHTSA provides a sample estimate of its potential magnitude in 
its Final EIS. This analysis indicates that the leakage effect is 
likely to offset only a very small fraction of the reductions in fuel 
use and emissions projected to result from the rule.
    As a consequence of these reductions in fleet-wide fuel 
consumption, the agency also estimates that the new CAFE standards for 
MYs 2017-2025 would lead to corresponding reductions in CO2 
emissions from the U.S. light-duty vehicle fleet. Specifically, NHTSA 
estimates that total annual CO2 emissions associated with 
passenger car and light truck use in the U.S. would decline by between 
36 million metric tons (mmt) and 38 mmt in 2020 as a consequence of the 
new CAFE standards, as Table IV-68 reports. The table also shows that 
this annual reduction is estimated to grow to a range from 409 mmt to 
475 mmt by the year 2060, and will total between 11.6 billion and 12.8 
billion metric tons over the period from 2017, when the final and 
augural standards would take effect, through 2060.

                Table IV-68--NHTSA Estimated Reduction in Fleet-Wide Carbon Dioxide Emissions (mmt) From Passenger Car and Light Truck Use Under the Final and Augural Standards
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline                2020                   2030                   2040                   2050                  2060            Total  2017-2060
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  21-..................  117-.................  180-.................  212-.................  240-................  6,593-
                                   2010.................  21...................  115..................  172..................  195..................  215.................  6,195
Light trucks.....................  2008.................  15-..................  107-.................  169-.................  204-.................  235-................  6,239-
                                   2010.................  16...................  100..................  148..................  174..................  194.................  5,446
Combined.........................  2008.................  36-..................  224-.................  349-.................  416-.................  475-................  12,832-
                                   2010.................  38...................  215..................  320..................  369..................  409.................  11,641
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    These reductions in fleet-wide CO2 emissions, together 
with corresponding reductions in other GHG emissions from fuel 
production and use, would lead to small but significant reductions in 
projected changes in the future global climate. These changes, based on 
analysis documented in the Final EIS that informed the agency's 
decisions regarding this final rule, are summarized in Table IV-69 
below.

          Table IV-69--NHTSA Estimated Effects of Reduction in Fleet-Wide Carbon Dioxide Emissions (mmt) on Projected Changes in Global Climate
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                    Projected change in measure
                                                                                                         -----------------------------------------------
                  Measure                               Units                  Date         MY Baseline                     With final
                                                                                                             No action       standards      Difference
--------------------------------------------------------------------------------------------------------------------------------------------------------
Atmospheric CO2 concentration.............  Ppm.........................            2100            2008           677.8           673.8             4.0
                                                                                                    2010           677.8           674.3             3.5
Increase in global mean surface             [deg]C......................            2100            2008           2.564           2.548           0.016
 temperature.
                                            ............................  ..............            2010           2.564           2.550           0.014
Sea level rise............................  Cm..........................            2100            2008           33.42           33.29            0.13
                                            ............................  ..............            2010           33.42           33.30            0.12
Global mean precipitation.................  % change from 1980-1999 avg.            2090            2008           3.89%           3.87%           0.02%
                                                                                                    2010           3.89%           3.87%           0.02%
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 63061]]

3. How will these standards impact non-GHG emissions and their 
associated effects?
    Under the assumption that CAFE standards at least as stringent as 
those presented for MY 2025 would be established for subsequent model 
years, the effects of the new standards on air quality and its 
associated health effects will continue to be felt over the foreseeable 
future. This will occur because over time a growing fraction of the 
U.S. light-duty vehicle fleet will be comprised of cars and light 
trucks that meet the MY 2025 standard, and this growth will continue 
until approximately 2060.
    Increases in the fuel economy of light-duty vehicles required by 
the new CAFE standards will cause a slight increase in the number of 
miles they are driven, through the fuel economy ``rebound effect.'' In 
turn, this increase in vehicle use will lead to increases in emissions 
of criteria air pollutants and some airborne toxics, since these are 
products of the number of miles vehicles are driven.
    At the same time, however, the projected reductions in fuel 
production and use reported in Tables IV-65 and IV-67 above will lead 
to corresponding reductions in emissions of these pollutants that occur 
during fuel production and distribution (``upstream'' emissions). For 
most of these pollutants, the reduction in upstream emissions resulting 
from lower fuel production and distribution will outweigh the increase 
in emissions from vehicle use, resulting in a net decline in their 
total emissions.\1283\
---------------------------------------------------------------------------

    \1283\ As stated elsewhere, while the agency's analysis assumes 
that all changes in upstream emissions result from a decrease in 
petroleum production and transport, the analysis of non-GHG 
emissions in future calendar years also assumes that retail gasoline 
composition is unaffected by this rule; as a result, the impacts of 
this rule on downstream non-GHG emissions (more specifically, on air 
toxics) may be underestimated. See also Section III.G above for more 
information.
---------------------------------------------------------------------------

    Table IV-70 and Table IV-71 report estimated reductions in 
emissions of selected criteria air pollutants (or their chemical 
precursors) and airborne toxics expected to result from the final and 
augural standards during calendar year 2040. By that date, cars and 
light trucks meeting the MY 2025 CAFE standards will account for the 
majority of light-duty vehicle use, so these reductions provide a 
useful index of the long-term impact of the final standards on air 
pollution and its consequences for human health. In the tables below, 
positive values indicate increases in emissions, while negative values 
indicate reductions.

                   Table IV-70--NHTSA Projected Changes in Emissions of Criteria Air Pollutants From Passenger Car and Light Truck Use
                                                               [calendar year 2040; tons]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                              Criteria air pollutant
                                                                                         ---------------------------------------------------------------
                                                                                                                                             Volatile
               Vehicle class                     Source of emissions        MY Baseline      Nitrogen       Particulate    Sulfur oxides      organic
                                                                                           oxides (NOX)   matter (PM2.5)       (SOX)         compounds
                                                                                                                                               (VOC)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars............................  Vehicle use.................            2008        3,433.80          140.75       -2,775.59        1,615.82
                                                                                    2010        7,108.88          360.68       -2,519.62        4,148.13
                                            Fuel production and                     2008      -20,396.77       -3,040.73         -117.30      -48,321.79
                                             distribution                           2010      -26,394.68       -3,083.65      -12,990.78      -44,119.22
                                            All sources.................            2008      -16,962.97       -2,899.98       -2,892.89      -46,705.98
                                                                                    2010      -19,285.80       -2,722.97      -15,510.40      -39,971.09
Light trucks..............................  Vehicle use.................            2008        5,988.04          432.25       -2,445.61        3,607.27
                                                                                    2010        8,643.21          316.07       -2,134.45        2,920.02
                                            Fuel production and                     2008      -26,580.28       -3,042.32      -14,005.44      -42,674.17
                                             distribution.
                                                                                    2010      -24,256.73       -2,682.23      -13,277.14      -38,331.48
                                            All sources.................            2008      -20,592.23       -2,610.07      -16,451.05      -39,066.90
                                                                                    2010      -15,613.51       -2,366.16      -15,411.59      -35,411.46
Total.....................................  Vehicle use.................            2008        9,421.85          573.00       -5,221.20        5,223.09
                                                                                    2010       15,752.09          676.75       -4,654.06        7,068.15
                                            Fuel production and                     2008      -46,977.04       -6,083.05      -14,122.74      -90,995.96
                                             distribution.                          2010      -50,651.41       -5,765.88      -26,267.93      -82,450.70
                                            All sources.................            2008      -37,555.20       -5,510.05      -19,343.94      -85,772.87
                                                                                    2010      -34,899.31       -5,089.13      -30,921.99      -75,382.56
--------------------------------------------------------------------------------------------------------------------------------------------------------

   Table IV-71--NHTSA Projected Changes in Emissions of Airborne Toxics From Passenger Car and Light Truck Use
                                           [calendar year 2040; tons]
----------------------------------------------------------------------------------------------------------------
                                                                                Toxic air pollutant
         Vehicle class              Source of       MY Baseline  -----------------------------------------------
                                    emissions                         Benzene      1,3-Butadiene   Formaldehyde
----------------------------------------------------------------------------------------------------------------
Passenger cars................  Vehicle use.....            2008           40.38            9.33           58.94
                                                            2010          121.78           23.50           97.25
                                Fuel production             2008         -215.10           -2.30          -78.85
                                 and                        2010         -195.05           -2.09          -71.49
                                 distribution.
                                All sources.....            2008         -174.72            7.03          -19.91
                                                            2010          -73.27           21.41           25.77
Light trucks..................  Vehicle use.....            2008          117.46           20.06           49.05
                                                            2010           60.36           17.42          147.09

[[Page 63062]]

 
                                Fuel production             2008         -188.73           -2.04          -69.87
                                 and                        2010         -164.99           -1.73          -59.28
                                 distribution.
                                All sources.....            2008          -71.26           18.02          -20.81
                                                            2010         -104.64           15.69           87.82
Total.........................  Vehicle use.....            2008          157.85           29.39          108.00
                                                            2010          182.13           40.91          244.35
                                Fuel production             2008         -403.83           -4.34         -148.71
                                 and                        2010         -360.04           -3.82         -130.76
                                 distribution.
                                All sources.....            2008         -245.98           25.05          -40.72
                                                            2010         -177.90           37.10          113.58
----------------------------------------------------------------------------------------------------------------

    In turn, the reductions in emissions reported in the tables above 
are projected to result in significant declines in the adverse health 
effects that result from population exposure to these pollutants. Table 
IV-72 reports the estimated reductions in selected PM2.5-
related human health impacts that are expected to result from reduced 
population exposure to unhealthful atmospheric concentrations of 
PM2.5. The estimates reported in Table IV-72 based on 
analysis documented in the Final EIS that informed the agency's 
decisions regarding this final rule, are derived from PM2.5-
related dollar-per-ton estimates that reflect the quantifiable 
reductions in health impacts likely to result from reduced population 
exposure to particular matter (PM2.5). They do not include 
all health impacts related to reduced exposure to PM, nor do they 
include any reductions in health impacts resulting from lower 
population exposure to other criteria air pollutants (particularly 
ozone) and air toxics. The table displays results using both baseline 
fleets as well as both a reference electricity emissions case and a 
cleaner alternative side-case. The table also illustrates mortality 
impacts from the rule using two different source values for marginal 
mortality rates.
    There may be localized air quality and health impacts associated 
with this rulemaking that are not reflected in the estimates of 
aggregate air quality changes and health impacts reported in this 
analysis. Emissions changes and dollar-per-ton estimates alone are not 
necessarily a good indication of local or regional air quality and 
health impacts, because the atmospheric chemistry governing formation 
and accumulation of ambient concentrations of PM2.5, ozone, 
and air toxics is very complex. Full-scale photochemical modeling would 
provide the necessary spatial and temporal detail to more completely 
and accurately estimate the changes in ambient levels of these 
pollutants and their associated health and welfare impacts. Due to 
timing issues with the analysis, NHTSA conducted such modeling for 
purposes of the FEIS using data from the NPRM, and we refer the readers 
to the FEIS for more information.

 Table IV-72--NHTSA Projected Reductions in Health Impacts From Exposure to Criteria Air Pollutants Due to Final
                                              and Augural Standards
                                              [Calendar year 2040]
----------------------------------------------------------------------------------------------------------------
                                                                                                    Projected
                Health impact                             Measure                MY Baseline        reduction
                                                                                                     (2040)
----------------------------------------------------------------------------------------------------------------
Mortality (ages 30 and older), Pope et al.    premature deaths per year.....              2008           360/420
 (2002).                                                                                  2010           390/420
Mortality (ages 30 and older), Laden et al.   premature deaths per year.....              2008         920/1,100
 (2006).                                                                                  2010       1,000/1,100
Chronic bronchitis..........................  cases per year................              2008           230/270
                                                                                          2010           250/260
Emergency room visits for asthma............  number per year...............              2008           320/370
                                                                                          2010           350/370
Work loss...................................  workdays per year.............              2008     40,000/46,000
                                                                                          2010     43,000/46,000
----------------------------------------------------------------------------------------------------------------

4. What are the estimated costs and benefits of these standards?
    NHTSA estimates that the final and augural standards could entail 
significant additional technology beyond the levels that could be 
applied under baseline CAFE standards (i.e., the application of MY 2016 
CAFE standards to MYs 2017-2025). This additional technology will lead 
to increases in costs to manufacturers and vehicle buyers, as well as 
fuel savings to vehicle buyers. Also, as discussed above, NHTSA 
estimates that today's standards could induce manufacturers to apply 
technology during redesigns leading into model years covered by today's 
new standards, and to incur corresponding increases in technology 
outlays.
    Technology costs are assumed to change over time due to the 
influence of cost learning and the conversion from short- to long-term 
ICMs. Table IV-73 represents the CAFE model inputs for MY 2012, MY 
2017, MY 2021 and MY 2025 approximate net (accumulated)

[[Page 63063]]

technology costs for some of the key enabling technologies as applied 
to Midsize passenger cars.\1284\ Additional details on technology cost 
estimates can be found in Chapter V of NHTSA's FRIA and Chapter 3 of 
the Joint TSD.
---------------------------------------------------------------------------

    \1284\ The net (accumulated) technology costs represent the 
costs from a baseline vehicle (i.e. the top of the decision tree) to 
each of the technologies listed in the table. The baseline vehicle 
is assumed to utilize a fixed-valve naturally aspirated inline 4 
cylinder engine, 5-speed transmission and no electrification/
hybridization improvements.

                                       Table IV-73--NHTSA Estimated Net (Accumulated) Technology Costs, Midsize PC
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
   Final technology (as compared to baseline vehicle    MY Baseline.......         2012                2017                2021               2025
           prior to technology application)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Stoichiometric Gasoline Direct  SGDIc.................  2008..............  $75-..............  $67-..............  $58-.............  $55-
 Injection (GDI).                                       2010..............  $75...............  $67...............  $58..............  $55
Turbocharging and Downsizing--  TRBDS1................  2008..............  $542-.............  $494-.............  $420-............  $398-
 Level 1 (18 bar BMEP).                                 2010..............  $542..............  $494..............  $420.............  $398
Turbocharging and Downsizing--  TRBDS2................  2008..............  $18-..............  $26-..............  $20-.............  $5-
 Level 2 (24 bar BMEP).                                 2010..............  $18...............  $26...............  $20..............  $5
Cooled Exhaust Gas              CEGR1.................  2008..............  $336-.............  $302-.............  $285-............  $247-
 Recirculation (EGR)--Level 1                           2010..............  $336..............  $302..............  $285.............  $247
 (24 bar BMEP).
Cooled Exhaust Gas              CEGR2.................  2008..............  $583-.............  $525-.............  $495-............  $428-
 Recirculation (EGR)--Level 2                           2010..............  $583..............  $525..............  $495.............  $428
 (27 bar BMEP).
Advanced Diesel...............  ADSL..................  2008..............  $1,031-...........  $889-.............  $911-............  $702-
                                                        2010..............  $1,031............  $889..............  $911.............  $702
6-speed DCT...................  DCT...................  2008..............  ($94)-............  ($75)-............  ($79)-...........  ($70)-
                                                        2010..............  ($94).............  ($75).............  ($79)............  ($70)
8-Speed Trans (Auto or DCT)...  8SPD..................  2008..............  $286-.............  $257-.............  $223-............  $210-
                                                        2010..............  $286..............  $257..............  $223.............  $210
Shift Optimizer...............  SHFTOPT...............  2008..............  $2-...............  $2-...............  $2-..............  $1-
                                                        2010..............  $2................  $2................  $2...............  $1
12V Micro-Hybrid (Stop-Start).  MHEV..................  2008..............  $561-.............  $385-.............  $325-............  $296-
                                                        2010..............  $561..............  $385..............  $325.............  $296
Strong Hybrid--Level 2........  SHEV2.................  2008..............  $2,619-...........  $2,290-...........  $1,830-..........  $1,669-
                                                        2010..............  $2,671............  $2,334............  $1,867...........  $1,702
Plug-in Hybrid--30 mi range...  PHEV1.................  2008..............  $17,415-..........  $13,060-..........  $9,727-..........  $7,772-
                                                        2010..............  $17,915...........  $13,449...........  $10,019..........  $8,015
Electric Vehicle (Early         EV1...................  2008..............  $6,089-...........  $3,577-...........  $2,655-..........  $1,188-
 Adopter)--75 mile range.
                                                        2010..............  $6,280............  $3,711............  $2,779...........  $1,254
Electric Vehicle (Broad         EV4...................  2008..............  $14,970-..........  $10,526-..........  $7,682-..........  $5,640-
 Market)--150 mile range.
                                                        2010..............  $15,145...........  $10,648...........  $7,771...........  $5,705
--------------------------------------------------------------------------------------------------------------------------------------------------------

    In order to pay for this additional technology (and, for some 
manufacturers, civil penalties), NHTSA estimates that the cost of an 
average passenger car will increase relative to levels resulting from 
compliance with baseline (MY 2016) standards by between $244 and $364 
in MY to between $1,577 and $1,826 in MY 2025. Similarly, light truck 
prices are estimated to rise from between $77 and $147 in MY 2017 to 
between $1,185 and $1,228 in MY 2025. The following tables summarize 
the agency's estimates of average cost increases for each 
manufacturer's passenger car, light truck, and overall fleets (with 
corresponding averages for the industry):

                 Table IV-74--NHTSA Estimated Average Passenger Car Incremental Cost Increases ($) Under Final Standards--MYs 2017-2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
         Manufacturer                 MY baseline              2017                2018                2019                2020               2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry Average..............  2008..................  244-..............  454-..............  630-..............  929-.............  1,141-
                                2010..................  364...............  483...............  659...............  857..............  991
Aston Martin..................  2008..................  79-...............  156-..............  244-..............  337-.............  447-
                                2010..................  73................  150...............  227...............  321..............  420
BMW...........................  2008..................  96-...............  149-..............  209-..............  297-.............  492-
                                2010..................  88................  255...............  325...............  407..............  501
Daimler.......................  2008..................  97-...............  175-..............  244-..............  585-.............  687-
                                2010..................  79................  158...............  225...............  308..............  387
Fiat..........................  2008..................  278-..............  644-..............  628-..............  1,088-...........  1,114-
                                2010..................  338...............  372...............  579...............  811..............  1,077
Ford..........................  2008..................  390-..............  443-..............  755-..............  1,515-...........  1,854-
                                2010..................  309...............  326...............  438...............  945..............  993
Geely.........................  2008..................  69-...............  361-..............  700-..............  727-.............  848-
                                2010..................  66................  146...............  504...............  555..............  640
General Motors................  2008..................  144-..............  526-..............  630-..............  1,015-...........  1,185-
                                2010..................  225...............  462...............  486...............  758..............  868
Honda.........................  2008..................  228-..............  484-..............  510-..............  513-.............  1,100-
                                2010..................  632...............  805...............  825...............  816..............  1,009
Hyundai.......................  2008..................  510-..............  549-..............  844-..............  920-.............  969-

[[Page 63064]]

 
                                2010..................  605...............  591...............  898...............  913..............  1,060
KIA...........................  2008..................  13-...............  94-...............  339-..............  780-.............  915-
                                2010..................  353...............  414...............  759...............  988..............  1,081
Lotus.........................  2008..................  90-...............  178-..............  255-..............  354-.............  469-
                                2010..................  242...............  322...............  1,228.............  1,306............  1,396
Mazda.........................  2008..................  337-..............  447-..............  423-..............  767-.............  758-
                                2010..................  737...............  845...............  773...............  1,086............  1,073
Mitsubishi....................  2008..................  500-..............  1,015-............  988-..............  1,299-...........  1,737-
                                2010..................  575...............  634...............  603...............  1,722............  2,022
Nissan........................  2008..................  409-..............  645-..............  1,054-............  1,100-...........  1,125-
                                2010..................  565...............  653...............  864...............  926..............  953
Porsche.......................  2008..................  86-...............  286-..............  382-..............  474-.............  572-
                                2010..................  64................  95................  190...............  286..............  397
Spyker........................  2008..................  79-...............  222-..............  325-..............  408-.............  529-
                                2010..................  0.................  0.................  0.................  0................  0
Subaru........................  2008..................  173-..............  257-..............  542-..............  1,191-...........  1,161-
                                2010..................  50................  126...............  895...............  1,407............  1,367
Suzuki........................  2008..................  13-...............  20-...............  1,420-............  1,555-...........  1,666-
                                2010..................  84................  109...............  825...............  1,080............  1,426
Tata..........................  2008..................  95-...............  434-..............  431-..............  527-.............  582-
                                2010..................  66................  133...............  217...............  261..............  378
Tesla.........................  2008..................  2-................  2-................  2-................  2-...............  2-
                                2010..................  0.................  0.................  0.................  0................  0
Toyota........................  2008..................  220-..............  507-..............  657-..............  852-.............  1,082-
                                2010..................  322...............  460...............  840...............  957..............  1,189
Volkswagen....................  2008..................  78-...............  162-..............  248-..............  639-.............  789-
                                2010..................  84................  397...............  484...............  686..............  851
--------------------------------------------------------------------------------------------------------------------------------------------------------

                Table IV-75--NHTSA Estimated Average Passenger Car Incremental Cost Increases ($) Under Augural Standards--MYs 2022-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
           Manufacturer                   MY Baseline                2022                    2023                    2024                   2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry Average..................  2008..................  1,271-................  1,391-................  1,748-...............  1,826-
                                    2010..................  1,090.................  1,219.................  1,480................  1,577
Aston Martin......................  2008..................  568-..................  695-..................  827-.................  964-
                                    2010..................  541...................  662...................  783..................  915
BMW...............................  2008..................  651-..................  789-..................  1,293-...............  1,367-
                                    2010..................  750...................  882...................  1,357................  1,427
Daimler...........................  2008..................  951-..................  1,177-................  1,288-...............  1,608-
                                    2010..................  627...................  957...................  1,088................  1,499
Fiat..............................  2008..................  1,349-................  1,692-................  1,770-...............  2,045-
                                    2010..................  1,103.................  1,530.................  1,692................  1,910
Ford..............................  2008..................  2,075-................  2,076-................  3,345-...............  2,961-
                                    2010..................  1,172.................  1,184.................  1,651................  1,780
Geely.............................  2008..................  944-..................  1,203-................  1,365-...............  1,446-
                                    2010..................  757...................  945...................  1,164................  1,360
General Motors....................  2008..................  1,189-................  1,475-................  1,739-...............  2,010-
                                    2010..................  879...................  1,062.................  1,220................  1,531
Honda.............................  2008..................  1,132-................  1,309-................  1,310-...............  1,284-
                                    2010..................  1,009.................  1,249.................  1,254................  1,229
Hyundai...........................  2008..................  1,126-................  1,133-................  1,585-...............  1,501-
                                    2010..................  1,226.................  1,259.................  1,408................  1,419
KIA...............................  2008..................  999-..................  1,154-................  1,163-...............  1,447-
                                    2010..................  1,330.................  1,316.................  1,302................  1,497
Lotus.............................  2008..................  601-..................  739-..................  882-.................  1,036-
                                    2010..................  1,503.................  758...................  894..................  1,025
Mazda.............................  2008..................  1,676-................  1,784-................  1,875-...............  2,070-
                                    2010..................  1,481.................  1,589.................  1,589................  1,782
Mitsubishi........................  2008..................  1,686-................  1,734-................  2,080-...............  3,757-
                                    2010..................  2,001.................  1,982.................  1,962................  2,051
Nissan............................  2008..................  1,368-................  1,440-................  1,851-...............  1,805-
                                    2010..................  1,080.................  1,191.................  1,555................  1,531
Porsche...........................  2008..................  609-..................  748-..................  867-.................  1,031-
                                    2010..................  649...................  839...................  991..................  1,094
Spyker............................  2008..................  700-..................  983-..................  1,274-...............  1,355-
                                    2010..................  0.....................  0.....................  0....................  0
Subaru............................  2008..................  1,235-................  1,331-................  2,144-...............  3,356-
                                    2010..................  1,337.................  1,389.................  3,963................  3,231
Suzuki............................  2008..................  1,687-................  1,689-................  1,820-...............  2,283-
                                    2010..................  1,435.................  1,426.................  1,462................  1,630
Tata..............................  2008..................  833-..................  1,090-................  1,199-...............  1,323-

[[Page 63065]]

 
                                    2010..................  483...................  848...................  961..................  1,192
Tesla.............................  2008..................  2-....................  2-....................  2-...................  2-
                                    2010..................  0.....................  0.....................  0....................  0
Toyota............................  2008..................  1,125-................  1,115-................  1,276-...............  1,265-
                                    2010..................  1,247.................  1,248.................  1,493................  1,433
Volkswagen........................  2008..................  932-..................  1,110-................  1,267-...............  1,639-
                                    2010..................  960...................  1,099.................  1,337................  1,670
--------------------------------------------------------------------------------------------------------------------------------------------------------

                  Table IV-76--NHTSA Estimated Average Light Truck Incremental Cost Increases ($) Under Final Standards--MYs 2017-2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
          Manufacturer               MY Baseline             2017                2018                2019                2020                2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry Average...............  2008...............  77-...............  193-..............  424-..............  623-..............  858-
                                 2010...............  147...............  197...............  398...............  631...............  912
Aston Martin...................  2008...............  0-................  0-................  0-................  0-................  0-
                                 2010...............  0.................  0.................  0.................  0.................  0
BMW............................  2008...............  416-..............  489-..............  495-..............  513-..............  654-
                                 2010...............  321...............  378...............  394...............  428...............  661
Daimler........................  2008...............  438-..............  453-..............  446-..............  491-..............  510-
                                 2010...............  187...............  335...............  338...............  361...............  406
Fiat...........................  2008...............  100-..............  108-..............  173-..............  939-..............  1,013-
                                 2010...............  469...............  468...............  538...............  1,199.............  1,316
Ford...........................  2008...............  7-................  85-...............  97-...............  297-..............  1,089-
                                 2010...............  87................  116...............  195...............  303...............  1,150
Geely..........................  2008...............  128-..............  404-..............  502-..............  494-..............  496-
                                 2010...............  34................  499...............  474...............  470...............  524
General Motors.................  2008...............  1-................  162-..............  656-..............  993-..............  957-
                                 2010...............  1.................  40................  471...............  921...............  905
Honda..........................  2008...............  196-..............  199-..............  345-..............  395-..............  688-
                                 2010...............  210...............  252...............  310...............  336...............  741
Hyundai........................  2008...............  288-..............  301-..............  423-..............  418-..............  408-
                                 2010...............  272...............  282...............  911...............  949...............  932
KIA............................  2008...............  49-...............  103-..............  229-..............  342-..............  833-
                                 2010...............  316...............  324...............  369...............  365...............  825
Mazda..........................  2008...............  4-................  561-..............  509-..............  532-..............  502-
                                 2010...............  15................  762...............  686...............  690...............  669
Mitsubishi.....................  2008...............  284-..............  319-..............  269-..............  269-..............  2,092-
                                 2010...............  276...............  283...............  275...............  254...............  1,509
Nissan.........................  2008...............  237-..............  252-..............  481-..............  609-..............  993-
                                 2010...............  178...............  201...............  414...............  608...............  682
Porsche........................  2008...............  -2-...............  27-...............  481-..............  459-..............  513-
                                 2010...............  -0................  48................  928...............  912...............  927
Spyker.........................  2008...............  52-...............  93-...............  101-..............  104-..............  497-
                                 2010...............  0.................  0.................  0.................  0.................  0
Subaru.........................  2008...............  -49-..............  102-..............  685-..............  644-..............  615-
                                 2010...............  810...............  854...............  1,238.............  1,218.............  1,200
Suzuki.........................  2008...............  1-................  13-...............  594-..............  585-..............  745-
                                 2010...............  252...............  251...............  231...............  228...............  1,719
Tata...........................  2008...............  18-...............  75-...............  96-...............  143-..............  768-
                                 2010...............  10................  79................  108...............  179...............  550
Toyota.........................  2008...............  13-...............  234-..............  402-..............  479-..............  749-
                                 2010...............  6.................  88................  313...............  327...............  650
Volkswagen.....................  2008...............  10-...............  131-..............  669-..............  684-..............  742-
                                 2010...............  52................  184...............  341...............  587...............  590
--------------------------------------------------------------------------------------------------------------------------------------------------------

                 Table IV--77 NHTSA Estimated Average Light Truck Incremental Cost Increases ($) Under Augural Standards--MYs 2022-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
           Manufacturer                   MY Baseline                2022                    2023                    2024                   2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry Average                    2008..................  954-..................  1,001-................  1,086-...............  1,185-
                                    2008..................  949...................  1,061.................  1,151................  1,228
Aston Martin......................  2008..................  0-....................  0-....................  0-...................  0-
                                    2010..................  0.....................  0.....................  0....................  0
BMW...............................  2008..................  1,407-................  1,413-................  1,472-...............  1,416-
                                    2010..................  887...................  909...................  935..................  962
Daimler...........................  2008..................  1,366-................  1,381-................  1,389-...............  1,339-

[[Page 63066]]

 
                                    2010..................  866...................  925...................  940..................  944
Fiat..............................  2008..................  992-..................  1,286-................  1,324-...............  1,611-
                                    2010..................  1,314.................  1,747.................  1,726................  1,816
Ford..............................  2008..................  1,166-................  1,187-................  1,198-...............  1,389-
                                    2010..................  1,126.................  1,118.................  1,120................  1,209
Geely.............................  2008..................  765-..................  1,090-................  1,114-...............  1,131-
                                    2010..................  727...................  1,334.................  1,340................  1,306
General Motors....................  2008..................  940-..................  928-..................  974-.................  1,233-
                                    2010..................  887...................  894...................  972..................  1,169
Honda.............................  2008..................  911-..................  978-..................  959-.................  945-
                                    2010..................  878...................  897...................  1,025................  1,002
Hyundai...........................  2008..................  901-..................  865-..................  1,288-...............  1,254-
                                    2010..................  1,174.................  1,175.................  1,413................  1,369
KIA...............................  2008..................  818-..................  934-..................  919-.................  936-
                                    2010..................  780...................  1,089.................  1,060................  1,016
Mazda.............................  2008..................  488-..................  739-..................  811-.................  793-
                                    2010..................  661...................  901...................  1,051................  1,008
Mitsubishi........................  2008..................  2,020-................  1,986-................  1,958-...............  1,824-
                                    2010..................  1,462.................  1,441.................  1,421................  1,337
Nissan............................  2008..................  1,221-................  1,172-................  1,256-...............  1,415-
                                    2010..................  791...................  786...................  1,007................  997
Porsche...........................  2008..................  611-..................  1,296-................  1,321-...............  1,297-
                                    2010..................  972...................  1,276.................  1,322................  1,311
Spyker............................  2008..................  481-..................  559-..................  659-.................  738-
                                    2010..................  0.....................  0.....................  0....................  0
Subaru............................  2008..................  674-..................  734-..................  1,351-...............  1,245-
                                    2010..................  1,225.................  1,233.................  1,501................  1,464
Suzuki............................  2008..................  712-..................  702-..................  712-.................  1,015-
                                    2010..................  1,668.................  1,643.................  1,618................  1,504
Tata..............................  2008..................  806-..................  889-..................  990-.................  1,039-
                                    2010..................  704...................  801...................  898..................  984
Toyota............................  2008..................  776-..................  817-..................  938-.................  895-
                                    2010..................  674...................  887...................  1,086................  1,095
Volkswagen........................  2008..................  760-..................  1,022-................  1,487-...............  1,367-
                                    2010..................  640...................  824...................  1,135................  1,411
--------------------------------------------------------------------------------------------------------------------------------------------------------

                Table IV-78--NHTSA Estimated Average Incremental Cost Increases ($) by Manufacturer Under Final Standards--MYs 2017-2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
          Manufacturer               MY Baseline             2017                2018                2019                2020                2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry Average...............  2008...............  183-..............  360-..............  557-..............  823-..............  1,043-
                                 2010...............  287...............  382...............  567...............  779...............  964
Aston Martin...................  2008...............  79-...............  156-..............  244-..............  337-..............  447-
                                 2010...............  73................  150...............  227...............  321...............  420
BMW............................  2008...............  194-..............  248-..............  288-..............  354-..............  535-
                                 2010...............  146...............  285...............  342...............  412...............  538
Daimler........................  2008...............  177-..............  240-..............  292-..............  563-..............  643-
                                 2010...............  110...............  213...............  259...............  324...............  393
Fiat...........................  2008...............  192-..............  385-..............  412-..............  1,020-............  1,069-
                                 2010...............  405...............  420...............  559...............  999...............  1,191
Ford...........................  2008...............  248-..............  313-..............  525-..............  1,098-............  1,596-
                                 2010...............  212...............  235...............  333...............  672...............  1,059
Geely..........................  2008...............  88-...............  375-..............  637-..............  654-..............  739-
                                 2010...............  54................  273...............  493...............  526...............  601
General Motors.................  2008...............  78-...............  355-..............  642-..............  1,004-............  1,077-
                                 2010...............  130...............  282...............  480...............  828...............  884
Honda..........................  2008...............  217-..............  392-..............  458-..............  477-..............  972-
                                 2010...............  496...............  631...............  662...............  669...............  928
Hyundai........................  2008...............  465-..............  497-..............  755-..............  817-..............  855-
                                 2010...............  561...............  551...............  900...............  917...............  1,045
KIA............................  2008...............  22-...............  96-...............  313-..............  680-..............  897-
                                 2010...............  348...............  404...............  715...............  920...............  1,054
Lotus..........................  2008...............  90-...............  178-..............  255-..............  354-..............  469-
                                 2010...............  242...............  322...............  1,228.............  1,306.............  1,396
Mazda..........................  2008...............  260-..............  475-..............  443-..............  710-..............  693-
                                 2010...............  600...............  829...............  757...............  1,016.............  1,002
Mitsubishi.....................  2008...............  446-..............  842-..............  813-..............  1,052-............  1,822-
                                 2010...............  520...............  566...............  540...............  1,442.............  1,925
Nissan.........................  2008...............  351-..............  517-..............  872-..............  948-..............  1,084-

[[Page 63067]]

 
                                 2010...............  466...............  535...............  746...............  843...............  884
Porsche........................  2008...............  62-...............  221-..............  406-..............  471-..............  558-
                                 2010...............  30................  70................  582...............  615...............  673
Spyker.........................  2008...............  75-...............  202-..............  289-..............  364-..............  524-
                                 2010...............  0.................  0.................  0.................  0.................  0
Subaru.........................  2008...............  116-..............  217-..............  578-..............  1,057-............  1,030-
                                 2010...............  291...............  355...............  1,001.............  1,349.............  1,316
Suzuki.........................  2008...............  11-...............  19-...............  1,266-............  1,380-............  1,502-
                                 2010...............  96................  119...............  778...............  1,015.............  1,449
Tata...........................  2008...............  56-...............  254-..............  263-..............  338-..............  675-
                                 2010...............  30................  97................  146...............  208...............  488
Tesla..........................  2008...............  2-................  2-................  2-................  2-................  2-
                                 2010...............  0.................  0.................  0.................  0.................  0
Toyota.........................  2008...............  134-..............  398-..............  559-..............  710-..............  952-
                                 2010...............  200...............  315...............  636...............  717...............  985
Volkswagen.....................  2008...............  65-...............  156-..............  338-..............  649-..............  779-
                                 2010...............  78................  359...............  458...............  668...............  804
--------------------------------------------------------------------------------------------------------------------------------------------------------

               Table IV--79 NHTSA Estimated Average Incremental Cost Increases ($) by Manufacturer Under Augural Standards--MYs 2022-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
           Manufacturer                   MY Baseline                2022                    2023                    2024                   2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry Average..................  2008..................  1,162-................  1,259-................  1,528-...............  1,616-
                                    2010..................  1,042.................  1,165.................  1,370................  1,461
Aston Martin......................  2008..................  568-..................  695-..................  827-.................  964-
                                    2010..................  541...................  662...................  783..................  915
BMW...............................  2008..................  851-..................  952-..................  1,342-...............  1,380-
                                    2010..................  782...................  888...................  1,264................  1,326
Daimler...........................  2008..................  1,055-................  1,229-................  1,313-...............  1,546-
                                    2010..................  701...................  947...................  1,042................  1,325
Fiat..............................  2008..................  1,188-................  1,509-................  1,575-...............  1,861-
                                    2010..................  1,202.................  1,630.................  1,707................  1,868
Ford..............................  2008..................  1,770-................  1,790-................  2,671-...............  2,478-
                                    2010..................  1,153.................  1,157.................  1,433................  1,547
Geely.............................  2008..................  889-..................  1,169-................  1,290-...............  1,353-
                                    2010..................  747...................  1,073.................  1,222................  1,343
General Motors....................  2008..................  1,072-................  1,222-................  1,389-...............  1,655-
                                    2010..................  883...................  990...................  1,114................  1,377
Honda.............................  2008..................  1,065-................  1,210-................  1,208-...............  1,185-
                                    2010..................  970...................  1,146.................  1,189................  1,166
Hyundai...........................  2008..................  1,081-................  1,079-................  1,525-...............  1,452-
                                    2010..................  1,220.................  1,250.................  1,408................  1,413
KIA...............................  2008..................  959-..................  1,106-................  1,110-...............  1,338-
                                    2010..................  1,273.................  1,293.................  1,278................  1,450
Lotus.............................  2008..................  601-..................  739-..................  882-.................  1,036-
                                    2010..................  1,503.................  758...................  894..................  1,025
Mazda.............................  2008..................  1,372-................  1,518-................  1,610-...............  1,761-
                                    2010..................  1,339.................  1,472.................  1,497................  1,652
Mitsubishi........................  2008..................  1,765-................  1,793-................  2,052-...............  3,319-
                                    2010..................  1,899.................  1,880.................  1,862................  1,918
Nissan............................  2008..................  1,323-................  1,358-................  1,672-...............  1,690-
                                    2010..................  1,006.................  1,088.................  1,416................  1,396
Porsche...........................  2008..................  610-..................  876-..................  969-.................  1,088-
                                    2010..................  817...................  1,065.................  1,163................  1,207
Spyker............................  2008..................  670-..................  926-..................  1,193-...............  1,274-
                                    2010..................  0.....................  0.....................  0....................  0
Subaru............................  2008..................  1,104-................  1,192-................  1,962-...............  2,880-
                                    2010..................  1,303.................  1,342.................  3,214................  2,691
Suzuki............................  2008..................  1,516-................  1,518-................  1,628-...............  2,066-
                                    2010..................  1,454.................  1,442.................  1,474................  1,620
Tata..............................  2008..................  820-..................  991-..................  1,099-...............  1,191-
                                    2010..................  623...................  819...................  922..................  1,063
Tesla.............................  2008..................  2-....................  2-....................  2-...................  2-
                                    2010..................  0.....................  0.....................  0....................  0
Toyota............................  2008..................  991-..................  1,003-................  1,152-...............  1,130-
                                    2010..................  1,033.................  1,115.................  1,344................  1,311
Volkswagen........................  2008..................  898-..................  1,092-................  1,312-...............  1,586-
                                    2010..................  902...................  1,050.................  1,301................  1,623
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 63068]]

    These cost estimates reflect the potential that a given 
manufacturer's efforts to minimize overall regulatory costs could focus 
technology where the most fuel can be saved at the least cost, and not 
necessarily, for example, where the cost to add technology would be 
smallest relative to baseline production costs. Therefore, if average 
incremental vehicle cost increases (including any civil penalties) are 
measured as increases relative to baseline prices (estimated by adding 
baseline costs to MY 2008 prices), the agency's analysis shows relative 
cost increases declining as baseline vehicle price increases. Figure 
IV-4 shows the trend for MY 2025, for vehicles with estimated baseline 
prices up to $100,000:
[GRAPHIC] [TIFF OMITTED] TR15OC12.032

    If manufacturers pass along these costs rather than reducing 
profits, and pass these costs along where they are incurred rather than 
``cross-subsidizing'' among products, the quantity of vehicles produced 
at different price levels would change. Shifts in production may 
potentially occur, which could create marketing challenges for 
manufacturers that are active in certain segments. We recognize, 
however, that many manufacturers do in fact cross-subsidize to some 
extent, and take losses on some vehicles while continuing to make 
profits from others. NHTSA has no evidence to indicate that 
manufacturers will inevitably shift production plans in response to 
these final standards, but nevertheless believes that this issue is 
worth monitoring in the market going forward. NHTSA continues to seek 
comment on potential market effects related to this issue.
    As mentioned above, these estimated costs derive primarily from the 
additional application of technology under the final and augural 
standards. The following three tables summarize the incremental extent 
to which the agency estimates technologies could be added to the 
passenger car, light truck, and overall fleets in each model year in 
response to the standards. Percentages reflect the technology's 
additional application in the market, relative to the estimated 
application under baseline standards (i.e., application of MY 2016 
standards through MY 2025), and are negative in cases where one 
technology is superseded (i.e., displaced) by another. For example, the 
agency estimates that manufacturers could apply many improvements to 
transmissions (e.g., dual clutch transmissions, denoted below by 
``DCT'') through MY 2025 under baseline standards. However, the agency 
also estimates that manufacturers could apply even more advanced high 
efficiency transmissions (denoted below by ``HETRANS'') under the final 
and augural standards, and that these transmissions would supersede 
DCTs and other transmission advances. Therefore, as shown in the 
following three tables, the incremental application of DCTs under the 
standards is negative.

[[Page 63069]]

      Table IV-80--NHTSA Estimated Incremental Application of Technologies to Passenger Car Fleet Under Final and Augural Standards--MYs 2017-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
          Technology           Baseline MY   2017  (%)    2018  (%)    2019  (%)   2020  (%)   2021  (%)   2022  (%)   2023  (%)   2024  (%)   2025  (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
LUB1.........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  (0)........  (0)........  (0).......  (0).......  (0).......  (0).......  (0).......  (0).......  (0)
EFR1.........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  4..........  5..........  6.........  6.........  6.........  6.........  6.........  6.........  6
LUB2--EFR2...................  2008.......  8-.........  13-........  19-.......  27-.......  37-.......  45-.......  48-.......  52-.......  54-
                               2010.......  0..........  0..........  1.........  4.........  8.........  9.........  11........  19........  24
CCPS.........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  (0).......  (0).......  (0).......  (0).......  (0).......  (0)
DVVLS........................  2008.......  0-.........  (0)-.......  (0)-......  (0)-......  (0)-......  (0)-......  (0)-......  (0)-......  (0)-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
DEACS........................  2008.......  (1)-.......  (1)-.......  (1)-......  (1)-......  (2)-......  (2)-......  (2)-......  (2)-......  (2)-
                               2010.......  (1)........  (1)........  (2).......  (2).......  (2).......  (2).......  (2).......  (2).......  (3)
ICP..........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
DCP..........................  2008.......  12-........  13-........  13-.......  12-.......  12-.......  12-.......  12-.......  12-.......  12-
                               2010.......  10.........  10.........  10........  10........  10........  10........  10........  10........  10
DVVLD........................  2008.......  11-........  13-........  13-.......  13-.......  14-.......  14-.......  14-.......  14-.......  14-
                               2010.......  8..........  9..........  9.........  9.........  9.........  9.........  9.........  10........  9
CVVL.........................  2008.......  4-.........  4-.........  4-........  6-........  6-........  6-........  6-........  6-........  6-
                               2010.......  7..........  7..........  9.........  9.........  9.........  9.........  9.........  9.........  9
DEACD........................  2008.......  (1)-.......  (1)-.......  (1)-......  (2)-......  (2)-......  (2)-......  (3)-......  (5)-......  (5)-
                               2010.......  (2)........  (2)........  (4).......  (6).......  (8).......  (8).......  (8).......  (9).......  (9)
SGDI.........................  2008.......  12-........  16-........  23-.......  28-.......  37-.......  41-.......  45-.......  50-.......  50-
                               2010.......  31.........  38.........  49........  52........  57........  59........  60........  61........  62
DEACO........................  2008.......  0-.........  (1)-.......  (2)-......  (4)-......  (5)-......  (4)-......  (4)-......  (4)-......  (4)-
                               2010.......  0..........  (2)........  (2).......  (2).......  (2).......  (2).......  (2).......  (2).......  (2)
VVA..........................  2008.......  0-.........  0-.........  1-........  1-........  1-........  1-........  1-........  1-........  1-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
SGDIO........................  2008.......  0-.........  2-.........  2-........  4-........  5-........  4-........  4-........  4-........  4-
                               2010.......  0..........  2..........  2.........  2.........  3.........  2.........  2.........  3.........  3
TRBDS1--SD...................  2008.......  6-.........  6-.........  5-........  4-........  10-.......  7-........  8-........  0-........  (6)-
                               2010.......  29.........  29.........  32........  32........  32........  28........  22........  15........  9
TRBDS1--MD...................  2008.......  2-.........  5-.........  7-........  10-.......  8-........  6-........  5-........  0-........  (3)-
                               2010.......  4..........  8..........  11........  14........  16........  16........  15........  13........  8
TRBDS1--LD...................  2008.......  0-.........  1-.........  1-........  1-........  0-........  0-........  (1)-......  (1)-......  (1)-
                               2010.......  0..........  1..........  1.........  1.........  1.........  1.........  1.........  (0).......  (0)
TRBDS2--SD...................  2008.......  (0)-.......  1-.........  4-........  4-........  5-........  6-........  5-........  8-........  9-
                               2010.......  0..........  1..........  3.........  3.........  6.........  6.........  11........  11........  12
TRBDS2--MD...................  2008.......  0-.........  1-.........  1-........  1-........  0-........  2-........  3-........  5-........  6-
                               2010.......  2..........  2..........  2.........  2.........  0.........  1.........  2.........  3.........  3
TRBDS2--LD...................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
CEGR1--SD....................  2008.......  2-.........  3-.........  6-........  11-.......  13-.......  18-.......  21-.......  26-.......  29-
                               2010.......  0..........  2..........  4.........  8.........  8.........  13........  14........  20........  25
CEGR1--MD....................  2008.......  0-.........  1-.........  1-........  2-........  2-........  4-........  6-........  10-.......  10-
                               2010.......  (0)........  0..........  0.........  0.........  3.........  3.........  3.........  5.........  9
CEGR1--LD....................  2008.......  0-.........  0-.........  0-........  (0)-......  (0)-......  (0)-......  (0)-......  (0)-......  (0)-
                               2010.......  0..........  0..........  0.........  0.........  0.........  (0).......  0.........  0.........  0
CEGR2--SD....................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  1-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  1.........  1.........  1
CEGR2--MD....................  2008.......  0-.........  0-.........  0-........  0-........  2-........  3-........  3-........  3-........  3-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  1
CEGR2--LD....................  2008.......  0-.........  0-.........  1-........  2-........  2-........  2-........  3-........  3-........  2-
                               2010.......  0..........  0..........  0.........  1.........  1.........  2.........  3.........  3.........  2
ADSL--SD.....................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
ADSL--MD.....................  2008.......  0-.........  0-.........  0-........  1-........  1-........  1-........  1-........  1-........  1-
                               2010.......  0..........  (0)........  0.........  0.........  0.........  0.........  0.........  0.........  0
ADSL--LD.....................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
6MAN.........................  2008.......  0-.........  0-.........  (0)-......  (1)-......  (1)-......  (1)-......  (1)-......  (1)-......  (1)-
                               2010.......  0..........  0..........  0.........  (0).......  (0).......  (0).......  (1).......  (1).......  (1)
HETRANSM.....................  2008.......  1-.........  2-.........  3-........  5-........  6-........  7-........  7-........  7-........  7-
                               2010.......  0..........  0..........  0.........  2.........  2.........  3.........  4.........  4.........  4
IATC.........................  2008.......  3-.........  3-.........  (0)-......  (0)-......  (1)-......  (1)-......  (1)-......  (1)-......  (1)-
                               2010.......  0..........  0..........  0.........  0.........  0.........  (0).......  (0).......  (0).......  (0)
NAUTO........................  2008.......  5-.........  2-.........  2-........  (0)-......  (1)-......  (2)-......  (2)-......  (2)-......  (2)-
                               2010.......  1..........  4..........  5.........  4.........  4.........  4.........  (1).......  (1).......  (1)
DCT..........................  2008.......  0-.........  (6)-.......  (14)-.....  (22)-.....  (30)-.....  (31)-.....  (32)-.....  (31)-.....  (32)-
                               2010.......  (1)........  1..........  3.........  (7).......  (8).......  (12)......  (18)......  (26)......  (27)

[[Page 63070]]

 
8SPD.........................  2008.......  4-.........  4-.........  3-........  (2)-......  (7)-......  (9)-......  (10)-.....  (11)-.....  (13)-
                               2010.......  3..........  6..........  10........  12........  10........  9.........  5.........  2.........  1
HETRANS......................  2008.......  9-.........  22-........  35-.......  47-.......  59-.......  65-.......  68-.......  65-.......  64-
                               2010.......  0..........  2..........  10........  23........  29........  39........  47........  56........  54
SHFTOPT......................  2008.......  9-.........  22-........  35-.......  49-.......  66-.......  71-.......  76-.......  73-.......  69-
                               2010.......  0..........  0..........  12........  23........  36........  44........  58........  59........  60
EPS..........................  2008.......  4-.........  9-.........  9-........  9-........  13-.......  13-.......  13-.......  13-.......  13-
                               2010.......  8..........  14.........  24........  24........  24........  24........  25........  27........  28
IACC1........................  2008.......  9-.........  12-........  17-.......  21-.......  36-.......  39-.......  44-.......  45-.......  45-
                               2010.......  6..........  9..........  17........  18........  28........  29........  34........  38........  45
IACC2........................  2008.......  7-.........  12-........  20-.......  31-.......  38-.......  53-.......  64-.......  67-.......  69-
                               2010.......  3..........  7..........  17........  27........  37........  41........  50........  59........  63
MHEV.........................  2008.......  1-.........  0-.........  2-........  7-........  10-.......  11-.......  12-.......  13-.......  10-
                               2010.......  0..........  0..........  0.........  2.........  3.........  3.........  4.........  5.........  5
ISG..........................  2008.......  0-.........  1-.........  3-........  6-........  7-........  11-.......  15-.......  19-.......  26-
                               2010.......  1..........  1..........  2.........  4.........  5.........  6.........  8.........  12........  17
SHEV1........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
SHEV1--2.....................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  1.........  1.........  1.........  1
SHEV2........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  3-........  6-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  2.........  5
PHEV1........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  2-........  2-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  1.........  1
PHEV2........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
EV1..........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
EV2..........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
EV3..........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
EV4..........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
FCV..........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
MR1..........................  2008.......  5-.........  6-.........  5-........  5-........  5-........  5-........  6-........  6-........  5-
                               2010.......  10.........  13.........  19........  20........  21........  20........  21........  20........  21
MR2..........................  2008.......  8-.........  17-........  25-.......  29-.......  29-.......  29-.......  30-.......  30-.......  29-
                               2010.......  2..........  10.........  25........  28........  32........  33........  38........  41........  42
MR3..........................  2008.......  3-.........  5-.........  6-........  9-........  9-........  9-........  11-.......  11-.......  11-
                               2010.......  1..........  2..........  5.........  6.........  7.........  6.........  9.........  10........  11
MR4..........................  2008.......  2-.........  3-.........  3-........  3-........  3-........  3-........  4-........  5-........  8-
                               2010.......  1..........  2..........  3.........  3.........  3.........  3.........  4.........  4.........  7
MR5..........................  2008.......  1-.........  2-.........  2-........  4-........  5-........  5-........  6-........  7-........  10-
                               2010.......  0..........  0..........  1.........  3.........  4.........  4.........  4.........  6.........  7
ROLL1........................  2008.......  0-.........  2-.........  3-........  4-........  4-........  4-........  4-........  4-........  4-
                               2010.......  1..........  2..........  2.........  3.........  3.........  3.........  3.........  3.........  3
ROLL2........................  2008.......  0-.........  16-........  33-.......  42-.......  50-.......  59-.......  62-.......  63-.......  63-
                               2010.......  0..........  0..........  21........  35........  44........  55........  71........  81........  87
ROLL3........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
LDB..........................  2008.......  0-.........  1-.........  1-........  1-........  1-........  1-........  1-........  1-........  1-
                               2010.......  0..........  1..........  1.........  1.........  2.........  2.........  2.........  2.........  2
SAX..........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
AERO1........................  2008.......  0-.........  3-.........  4-........  4-........  4-........  4-........  4-........  4-........  4-
                               2010.......  0..........  5..........  5.........  5.........  5.........  5.........  5.........  5.........  5
AERO2........................  2008.......  2-.........  13-........  23-.......  29-.......  32-.......  33-.......  34-.......  34-.......  33-
                               2010.......  8..........  21.........  31........  40........  44........  47........  48........  49........  51
--------------------------------------------------------------------------------------------------------------------------------------------------------

       Table IV-81--NHTSA Estimated Incremental Application of Technologies to Light Truck Fleet Under Final and Augural Standards--MYs 2017-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
          Technology           Baseline MY   2017  (%)    2018  (%)    2019  (%)   2020  (%)   2021  (%)   2022  (%)   2023  (%)   2024  (%)   2025  (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
LUB1.........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0

[[Page 63071]]

 
EFR1.........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  2..........  2..........  2.........  4.........  4.........  4.........  4.........  4.........  4
LUB2--EFR2...................  2008.......  1-.........  14-........  31-.......  40-.......  56-.......  66-.......  73-.......  84-.......  86-
                               2010.......  0..........  0..........  11........  24........  41........  44........  48........  56........  63
CCPS.........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  2..........  1..........  1.........  1.........  1.........  1.........  1.........  2.........  2
DVVLS........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  1..........  1..........  1.........  1.........  1.........  1.........  1.........  1.........  1
DEACS........................  2008.......  (1)-.......  (1)-.......  (3)-......  (3)-......  (11)-.....  (12)-.....  (12)-.....  (12)-.....  (12)-
                               2010.......  (1)........  (2)........  (3).......  (2).......  (11)......  (11)......  (13)......  (12)......  (13)
ICP..........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
DCP..........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  1..........  1..........  1.........  1.........  1.........  1.........  1.........  1.........  1
DVVLD........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  1-........  1-
                               2010.......  0..........  0..........  0.........  0.........  0.........  1.........  1.........  1.........  1
CVVL.........................  2008.......  0-.........  1-.........  1-........  1-........  1-........  1-........  1-........  1-........  1-
                               2010.......  1..........  1..........  1.........  1.........  1.........  1.........  1.........  1.........  1
DEACD........................  2008.......  (4)-.......  (6)-.......  (7)-......  (9)-......  (14)-.....  (15)-.....  (15)-.....  (22)-.....  (22)-
                               2010.......  (0)........  (1)........  (3).......  (3).......  (5).......  (6).......  (7).......  (8).......  (8)
SGDI.........................  2008.......  4-.........  5-.........  8-........  11-.......  25-.......  26-.......  27-.......  34-.......  34-
                               2010.......  5..........  8..........  12........  12........  24........  25........  26........  28........  28
DEACO........................  2008.......  (0)-.......  (1)-.......  (2)-......  (4)-......  (4)-......  (4)-......  (5)-......  (5)-......  (6)-
                               2010.......  0..........  (0)........  (5).......  (10)......  (10)......  (10)......  (10)......  (9).......  (9)
VVA..........................  2008.......  0-.........  0-.........  2-........  3-........  2-........  2-........  2-........  2-........  2-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
SGDIO........................  2008.......  0-.........  1-.........  5-........  12-.......  11-.......  11-.......  11-.......  11-.......  14-
                               2010.......  0..........  0..........  5.........  8.........  9.........  9.........  11........  11........  11
TRBDS1--SD...................  2008.......  0-.........  0-.........  0-........  0-........  0-........  (3)-......  (3)-......  (4)-......  (6)-
                               2010.......  2..........  2..........  3.........  3.........  2.........  2.........  2.........  1.........  (4)
TRBDS1--MD...................  2008.......  4-.........  7-.........  9-........  17-.......  21-.......  18-.......  14-.......  15-.......  (1)-
                               2010.......  3..........  5..........  6.........  6.........  8.........  8.........  7.........  2.........  (7)
TRBDS1--LD...................  2008.......  2-.........  2-.........  6-........  8-........  13-.......  12-.......  12-.......  11-.......  14-
                               2010.......  1..........  1..........  7.........  12........  22........  22........  25........  25........  23
TRBDS2--SD...................  2008.......  0-.........  0-.........  0-........  0-........  0-........  2-........  2-........  3-........  4-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  1.........  6
TRBDS2--MD...................  2008.......  (0)-.......  (0)-.......  1-........  1-........  2-........  3-........  7-........  10-.......  24-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  1.........  8.........  16
TRBDS2--LD...................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  2
CEGR1--SD....................  2008.......  0-.........  0-.........  0-........  0-........  0-........  1-........  1-........  1-........  3-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
CEGR1--MD....................  2008.......  0-.........  0-.........  1-........  1-........  5-........  7-........  8-........  11-.......  13-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  1.........  1.........  2
CEGR1--LD....................  2008.......  0-.........  0-.........  0-........  0-........  (0)-......  (0)-......  (0)-......  (0)-......  (0)-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
CEGR2--SD....................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
CEGR2--MD....................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
CEGR2--LD....................  2008.......  0-.........  0-.........  0-........  0-........  1-........  2-........  2-........  3-........  3-
                               2010.......  0..........  0..........  0.........  0.........  0.........  1.........  1.........  1.........  1
ADSL--SD.....................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
ADSL--MD.....................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  1.........  1.........  1.........  1.........  1.........  1
ADSL--LD.....................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
6MAN.........................  2008.......  0-.........  (0)-.......  (0)-......  (0)-......  (0)-......  (0)-......  (0)-......  (0)-......  (0)-
                               2010.......  0..........  0..........  (0).......  (0).......  (0).......  (0).......  (0).......  (0).......  (0)
HETRANSM.....................  2008.......  0-.........  0-.........  1-........  1-........  1-........  2-........  2-........  2-........  2-
                               2010.......  0..........  0..........  1.........  1.........  1.........  1.........  1.........  1.........  1
IATC.........................  2008.......  (6)-.......  (7)-.......  (15)-.....  (16)-.....  (22)-.....  (22)-.....  (22)-.....  (22)-.....  (23)-
                               2010.......  0..........  (0)........  (1).......  (1).......  (4).......  (3).......  (5).......  (5).......  (5)
NAUTO........................  2008.......  2-.........  (1)-.......  (11)-.....  (12)-.....  (14)-.....  (17)-.....  (17)-.....  (16)-.....  (16)-
                               2010.......  (1)........  (2)........  (2).......  (6).......  (9).......  (9).......  (13)......  (18)......  (18)
DCT..........................  2008.......  1-.........  0-.........  (1)-......  (5)-......  (5)-......  (5)-......  (5)-......  (6)-......  (6)-
                               2010.......  0..........  2..........  1.........  (3).......  (4).......  (4).......  (4).......  (6).......  (6)
8SPD.........................  2008.......  3-.........  3-.........  (1)-......  (6)-......  (17)-.....  (19)-.....  (22)-.....  (23)-.....  (23)-
                               2010.......  1..........  3..........  7.........  10........  7.........  7.........  6.........  0.........  (6)

[[Page 63072]]

 
HETRANS......................  2008.......  4-.........  16-........  36-.......  52-.......  69-.......  78-.......  82-.......  83-.......  83-
                               2010.......  1..........  1..........  12........  24........  43........  47........  58........  69........  73
SHFTOPT......................  2008.......  3-.........  10-........  31-.......  46-.......  62-.......  70-.......  84-.......  87-.......  90-
                               2010.......  0..........  0..........  15........  27........  31........  35........  43........  62........  70
EPS..........................  2008.......  6-.........  7-.........  10-.......  12-.......  16-.......  19-.......  23-.......  23-.......  24-
                               2010.......  (0)........  1..........  5.........  6.........  15........  15........  14........  16........  16
IACC1........................  2008.......  2-.........  2-.........  7-........  9-........  23-.......  25-.......  28-.......  31-.......  33-
                               2010.......  7..........  11.........  18........  22........  29........  31........  31........  31........  32
IACC2........................  2008.......  3-.........  4-.........  17-.......  22-.......  25-.......  27-.......  38-.......  49-.......  54-
                               2010.......  4..........  10.........  21........  27........  37........  41........  43........  52........  55
MHEV.........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  4..........  4..........  4.........  8.........  8.........  8.........  8.........  8.........  7
ISG..........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  1-
                               2010.......  3..........  3..........  3.........  4.........  4.........  4.........  4.........  4.........  5
SHEV1........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
SHEV1--2.....................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
SHEV2........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
PHEV1........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
PHEV2........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
EV1..........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
EV2..........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
EV3..........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
EV4..........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
FCV..........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
MR1..........................  2008.......  2-.........  2-.........  5-........  8-........  9-........  9-........  9-........  9-........  9-
                               2010.......  4..........  5..........  9.........  18........  27........  27........  28........  32........  32
MR2..........................  2008.......  10-........  17-........  23-.......  31-.......  35-.......  34-.......  34-.......  35-.......  40-
                               2010.......  4..........  11.........  19........  24........  35........  36........  38........  45........  58
MR3..........................  2008.......  (0)-.......  (0)-.......  3-........  7-........  11-.......  20-.......  25-.......  30-.......  33-
                               2010.......  1..........  1..........  2.........  4.........  22........  26........  30........  36........  55
MR4..........................  2008.......  (0)-.......  (0)-.......  (0)-......  1-........  5-........  11-.......  12-.......  20-.......  25-
                               2010.......  1..........  2..........  2.........  2.........  9.........  10........  15........  17........  22
MR5..........................  2008.......  (0)-.......  (0)-.......  (0)-......  (0)-......  5-........  7-........  8-........  12-.......  18-
                               2010.......  0..........  0..........  0.........  0.........  1.........  2.........  5.........  5.........  8
ROLL1........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  2.........  3.........  3.........  3.........  3.........  3
ROLL2........................  2008.......  1-.........  15-........  33-.......  47-.......  59-.......  74-.......  76-.......  83-.......  84-
                               2010.......  0..........  0..........  14........  29........  47........  52........  66........  81........  91
ROLL3........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
LDB..........................  2008.......  2-.........  2-.........  3-........  4-........  5-........  6-........  9-........  9-........  9-
                               2010.......  1..........  2..........  3.........  3.........  6.........  6.........  6.........  6.........  6
SAX..........................  2008.......  0-.........  2-.........  7-........  9-........  14-.......  17-.......  18-.......  18-.......  18-
                               2010.......  5..........  7..........  10........  10........  10........  12........  12........  12........  12
AERO1........................  2008.......  0-.........  2-.........  2-........  2-........  3-........  3-........  3-........  3-........  3-
                               2010.......  0..........  2..........  4.........  4.........  4.........  4.........  4.........  4.........  4
AERO2........................  2008.......  2-.........  6-.........  15-.......  25-.......  31-.......  35-.......  36-.......  36-.......  36-
                               2010.......  0..........  2..........  11........  22........  24........  28........  31........  33........  41
--------------------------------------------------------------------------------------------------------------------------------------------------------

         Table IV-82--NHTSA Estimated Incremental Application of Technologies to Overall Fleet Under Final and Augural Standards--MYs 2017-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
          Technology           Baseline MY    2017 (%)     2018 (%)    2019 (%)    2020 (%)    2021 (%)    2022 (%)    2023 (%)    2024 (%)    2025 (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
LUB1.........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  (0)........  (0)........  (0).......  (0).......  (0).......  (0).......  (0).......  (0).......  (0)
EFR1.........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  3..........  4..........  4.........  5.........  5.........  5.........  5.........  5.........  5

[[Page 63073]]

 
LUB2--EFR2...................  2008.......  6-.........  14-........  23-.......  31-.......  44-.......  52-.......  57-.......  62-.......  65-
                               2010.......  0..........  0..........  5.........  11........  20........  21........  23........  32........  37
CCPS.........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  1..........  1..........  1.........  0.........  0.........  0.........  0.........  0.........  0
DVVLS........................  2008.......  0-.........  (0)-.......  (0)-......  (0)-......  (0)-......  (0)-......  (0)-......  (0)-......  (0)-
                               2010.......  0..........  0..........  1.........  1.........  1.........  1.........  1.........  1.........  1
DEACS........................  2008.......  (1)-.......  (1)-.......  (1)-......  (2)-......  (5)-......  (5)-......  (5)-......  (5)-......  (5)-
                               2010.......  (1)........  (1)........  (2).......  (2).......  (5).......  (5).......  (6).......  (6).......  (6)
ICP..........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
DCP..........................  2008.......  8-.........  8-.........  8-........  8-........  8-........  8-........  8-........  8-........  8-
                               2010.......  7..........  6..........  6.........  6.........  6.........  6.........  6.........  7.........  7
DVVLD........................  2008.......  7-.........  8-.........  8-........  9-........  9-........  9-........  9-........  9-........  9-
                               2010.......  5..........  6..........  6.........  6.........  6.........  6.........  6.........  7.........  6
CVVL.........................  2008.......  2-.........  2-.........  3-........  4-........  4-........  4-........  4-........  4-........  4-
                               2010.......  5..........  5..........  6.........  6.........  6.........  6.........  7.........  7.........  7
DEACD........................  2008.......  (2)-.......  (3)-.......  (3)-......  (5)-......  (6)-......  (6)-......  (7)-......  (10)-.....  (11)-
                               2010.......  (1)........  (2)........  (3).......  (5).......  (7).......  (8).......  (8).......  (9).......  (9)
SGDI.........................  2008.......  9-.........  12-........  18-.......  22-.......  33-.......  36-.......  39-.......  45-.......  45-
                               2010.......  22.........  27.........  36........  38........  46........  48........  49........  50........  50
DEACO........................  2008.......  (0)-.......  (1)-.......  (2)-......  (4)-......  (4)-......  (4)-......  (5)-......  (4)-......  (5)-
                               2010.......  0..........  (1)........  (3).......  (5).......  (5).......  (5).......  (5).......  (5).......  (5)
VVA..........................  2008.......  0-.........  0-.........  1-........  2-........  2-........  2-........  2-........  2-........  2-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
SGDIO........................  2008.......  0-.........  1-.........  3-........  7-........  7-........  7-........  7-........  6-........  7-
                               2010.......  0..........  1..........  3.........  4.........  5.........  5.........  5.........  5.........  5
TRBDS1--SD...................  2008.......  4-.........  4-.........  3-........  3-........  6-........  3-........  4-........  (1)-......  (6)-
                               2010.......  19.........  19.........  22........  22........  22........  20........  15........  10........  5
TRBDS1--MD...................  2008.......  3-.........  5-.........  8-........  12-.......  12-.......  10-.......  8-........  5-........  (2)-
                               2010.......  4..........  7..........  9.........  11........  13........  13........  13........  9.........  3
TRBDS1--LD...................  2008.......  1-.........  1-.........  3-........  3-........  5-........  4-........  4-........  3-........  4-
                               2010.......  1..........  1..........  3.........  5.........  8.........  8.........  9.........  8.........  8
TRBDS2--SD...................  2008.......  (0)-.......  1-.........  3-........  3-........  3-........  5-........  4-........  6-........  7-
                               2010.......  0..........  0..........  2.........  2.........  4.........  4.........  7.........  8.........  10
TRBDS2--MD...................  2008.......  (0)-.......  0-.........  1-........  1-........  1-........  2-........  4-........  6-........  12-
                               2010.......  1..........  1..........  1.........  1.........  0.........  1.........  1.........  4.........  7
TRBDS2--LD...................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  1
CEGR1--SD....................  2008.......  2-.........  2-.........  4-........  7-........  9-........  12-.......  14-.......  18-.......  20-
                               2010.......  0..........  1..........  3.........  5.........  5.........  9.........  10........  13........  17
CEGR1--MD....................  2008.......  0-.........  1-.........  1-........  2-........  3-........  5-........  7-........  10-.......  11-
                               2010.......  (0)........  0..........  0.........  0.........  2.........  2.........  2.........  3.........  7
CEGR1--LD....................  2008.......  0-.........  0-.........  0-........  (0)-......  (0)-......  (0)-......  (0)-......  (0)-......  (0)-
                               2010.......  0..........  0..........  0.........  0.........  0.........  (0).......  0.........  0.........  0
CEGR2--SD....................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  1.........  1.........  1
CEGR2--MD....................  2008.......  0-.........  0-.........  0-........  0-........  2-........  2-........  2-........  2-........  2-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
CEGR2--LD....................  2008.......  0-.........  0-.........  0-........  1-........  2-........  2-........  3-........  3-........  2-
                               2010.......  0..........  0..........  0.........  1.........  1.........  2.........  2.........  2.........  2
ADSL--SD.....................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
ADSL--MD.....................  2008.......  0-.........  0-.........  0-........  1-........  1-........  1-........  1-........  1-........  1-
                               2010.......  0..........  (0)........  0.........  1.........  1.........  1.........  1.........  0.........  0
ADSL--LD.....................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
6MAN.........................  2008.......  0-.........  (0)-.......  (0)-......  (1)-......  (1)-......  (1)-......  (1)-......  (1)-......  (1)-
                               2010.......  0..........  0..........  0.........  (0).......  (0).......  (0).......  (0).......  (0).......  (0)
HETRANSM.....................  2008.......  0-.........  1-.........  2-........  3-........  5-........  5-........  5-........  5-........  5-
                               2010.......  0..........  0..........  1.........  1.........  2.........  2.........  3.........  3.........  3
IATC.........................  2008.......  0-.........  (0)-.......  (5)-......  (6)-......  (8)-......  (8)-......  (8)-......  (8)-......  (8)-
                               2010.......  0..........  0..........  (0).......  (0).......  (1).......  (1).......  (2).......  (2).......  (2)
NAUTO........................  2008.......  4-.........  1-.........  (3)-......  (4)-......  (5)-......  (7)-......  (7)-......  (7)-......  (7)-
                               2010.......  0..........  2..........  2.........  1.........  (0).......  (1).......  (5).......  (7).......  (7)
DCT..........................  2008.......  0-.........  (4)-.......  (9)-......  (16)-.....  (21)-.....  (22)-.....  (23)-.....  (23)-.....  (23)-
                               2010.......  (1)........  1..........  2.........  (6).......  (6).......  (9).......  (13)......  (19)......  (20)
8SPD.........................  2008.......  4-.........  4-.........  2-........  (4)-......  (11)-.....  (13)-.....  (14)-.....  (15)-.....  (16)-
                               2010.......  3..........  5..........  9.........  11........  9.........  8.........  6.........  2.........  (1)
HETRANS......................  2008.......  7-.........  20-........  35-.......  49-.......  62-.......  70-.......  73-.......  71-.......  70-
                               2010.......  0..........  2..........  11........  23........  34........  42........  51........  60........  61

[[Page 63074]]

 
SHFTOPT......................  2008.......  7-.........  18-........  34-.......  48-.......  65-.......  71-.......  79-.......  77-.......  76-
                               2010.......  0..........  0..........  13........  25........  34........  41........  53........  60........  63
EPS..........................  2008.......  5-.........  8-.........  9-........  10-.......  14-.......  15-.......  16-.......  16-.......  16-
                               2010.......  5..........  9..........  17........  18........  21........  21........  21........  23........  24
IACC1........................  2008.......  6-.........  8-.........  13-.......  17-.......  32-.......  34-.......  39-.......  40-.......  41-
                               2010.......  6..........  10.........  17........  19........  28........  30........  33........  36........  41
IACC2........................  2008.......  6-.........  9-.........  19-.......  28-.......  34-.......  44-.......  55-.......  61-.......  64-
                               2010.......  4..........  8..........  19........  27........  37........  41........  48........  57........  60
MHEV.........................  2008.......  0-.........  0-.........  2-........  5-........  7-........  7-........  8-........  8-........  7-
                               2010.......  2..........  2..........  2.........  4.........  4.........  5.........  5.........  6.........  6
ISG..........................  2008.......  0-.........  1-.........  2-........  4-........  5-........  7-........  10-.......  13-.......  18-
                               2010.......  1..........  2..........  2.........  4.........  5.........  5.........  7.........  9.........  13
SHEV1........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
SHEV1--2.....................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  1.........  1
SHEV2........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  2-........  4-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  2.........  3
PHEV1........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  1-........  1-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
PHEV2........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
EV1..........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
EV2..........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
EV3..........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
EV4..........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
FCV..........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
MR1..........................  2008.......  4-.........  4-.........  5-........  6-........  7-........  7-........  7-........  7-........  7-
                               2010.......  8..........  10.........  15........  19........  23........  23........  23........  24........  24
MR2..........................  2008.......  8-.........  17-........  24-.......  30-.......  31-.......  31-.......  31-.......  31-.......  33-
                               2010.......  3..........  10.........  23........  26........  33........  34........  38........  42........  47
MR3..........................  2008.......  2-.........  3-.........  5-........  8-........  10-.......  13-.......  15-.......  17-.......  19-
                               2010.......  1..........  2..........  4.........  5.........  12........  13........  16........  19........  26
MR4..........................  2008.......  1-.........  2-.........  2-........  2-........  4-........  6-........  7-........  10-.......  14-
                               2010.......  1..........  2..........  3.........  3.........  5.........  6.........  7.........  9.........  12
MR5..........................  2008.......  1-.........  1-.........  1-........  3-........  5-........  6-........  6-........  9-........  12-
                               2010.......  0..........  0..........  1.........  2.........  3.........  3.........  5.........  6.........  7
ROLL1........................  2008.......  0-.........  1-.........  2-........  2-........  2-........  2-........  2-........  2-........  2-
                               2010.......  0..........  1..........  1.........  2.........  3.........  3.........  3.........  3.........  3
ROLL2........................  2008.......  0-.........  16-........  33-.......  44-.......  53-.......  64-.......  67-.......  69-.......  70-
                               2010.......  0..........  0..........  19........  33........  45........  54........  69........  81........  88
ROLL3........................  2008.......  0-.........  0-.........  0-........  0-........  0-........  0-........  0-........  0-........  0-
                               2010.......  0..........  0..........  0.........  0.........  0.........  0.........  0.........  0.........  0
LDB..........................  2008.......  1-.........  1-.........  2-........  2-........  2-........  3-........  4-........  3-........  4-
                               2010.......  1..........  1..........  2.........  2.........  3.........  3.........  3.........  3.........  3
SAX..........................  2008.......  0-.........  1-.........  2-........  3-........  5-........  6-........  6-........  6-........  6-
                               2010.......  2..........  2..........  4.........  4.........  4.........  4.........  4.........  4.........  4
AERO1........................  2008.......  0-.........  3-.........  3-........  4-........  4-........  4-........  4-........  4-........  4-
                               2010.......  0..........  4..........  4.........  5.........  5.........  5.........  4.........  4.........  4
AERO2........................  2008.......  2-.........  11-........  20-.......  28-.......  32-.......  34-.......  35-.......  35-.......  34-
                               2010.......  5..........  14.........  24........  34........  37........  41........  42........  44........  48
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Based on the agencies' estimates of manufacturers' future sales 
volumes, and taking into account early outlays attributable to 
multiyear planning effects (discussed above), the cost increases 
associated with this additional application of technology will lead to 
a total of between $134 billion and $140 billion in incremental outlays 
during MYs 2017-2025 (and model years leading up to MY 2017) for 
additional technology attributable to the final and augural standards:

[[Page 63075]]

                                              Table IV-83--NHTSA Estimated Incremental Technology Outlays ($M) Under Final Standards--MYs 2017-2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
           Manufacturer                 MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Industry Average.................  2008.................  4.0-.................  2.8-.................  5.4-.................  8.4-.................  12.8-...............  16.5-
                                   2010.................  8.7..................  4.4..................  5.8..................  8.7..................  11.9................  14.9
Aston Martin.....................  2008.................  0.0-.................  0.0-.................  0.0-.................  0.0-.................  0.0-................  0.0-
                                   2010.................  0.0..................  0.0..................  0.0..................  0.0..................  0.0.................  0.0
BMW..............................  2008.................  0.0-.................  0.1-.................  0.1-.................  0.1-.................  0.1-................  0.1-
                                   2010.................  0.0..................  0.0..................  0.1..................  0.1..................  0.1.................  0.1
Daimler..........................  2008.................  0.0-.................  0.0-.................  0.0-.................  0.0-.................  0.2-................  0.2-
                                   2010.................  0.0..................  0.0..................  0.0..................  0.0..................  0.0.................  0.0
Fiat.............................  2008.................  0.3-.................  0.2-.................  0.3-.................  0.3-.................  0.8-................  0.8-
                                   2010.................  1.2..................  0.6..................  0.6..................  0.8..................  1.5.................  1.8
Ford.............................  2008.................  0.8-.................  0.5-.................  0.6-.................  1.1-.................  2.3-................  3.4-
                                   2010.................  0.7..................  0.5..................  0.6..................  0.8..................  1.6.................  2.5
Geely............................  2008.................  0.0-.................  0.0-.................  0.0-.................  0.1-.................  0.1-................  0.1-
                                   2010.................  0.0..................  0.0..................  0.0..................  0.0..................  0.0.................  0.0
General Motors...................  2008.................  0.5-.................  0.2-.................  1.0-.................  1.9-.................  3.1-................  3.3-
                                   2010.................  1.2..................  0.4..................  0.8..................  1.4..................  2.3.................  2.5
Honda............................  2008.................  0.1-.................  0.4-.................  0.7-.................  0.8-.................  0.8-................  1.7-
                                   2010.................  1.8..................  0.8..................  1.1..................  1.1..................  1.1.................  1.6
Hyundai..........................  2008.................  0.4-.................  0.3-.................  0.4-.................  0.6-.................  0.6-................  0.7-
                                   2010.................  0.6..................  0.6..................  0.5..................  0.9..................  0.9.................  1.0
KIA..............................  2008.................  -0.0-................  0.0-.................  0.0-.................  0.1-.................  0.3-................  0.4-
                                   2010.................  0.2..................  0.1..................  0.2..................  0.3..................  0.3.................  0.4
Lotus............................  2008.................  0.0-.................  0.0-.................  0.0-.................  0.0-.................  0.0-................  0.0-
                                   2010.................  0.0..................  0.0..................  0.0..................  0.0..................  0.0.................  0.0
Mazda............................  2008.................  0.2-.................  0.1-.................  0.2-.................  0.1-.................  0.2-................  0.2-
                                   2010.................  0.4..................  0.2..................  0.3..................  0.2..................  0.3.................  0.3
Mitsubishi.......................  2008.................  0.2-.................  0.0-.................  0.1-.................  0.1-.................  0.1-................  0.2-
                                   2010.................  0.1..................  0.0..................  0.0..................  0.0..................  0.1.................  0.1
Nissan...........................  2008.................  0.2-.................  0.5-.................  0.7-.................  1.1-.................  1.2-................  1.4-
                                   2010.................  1.0..................  0.6..................  0.6..................  0.9..................  1.0.................  1.0
Porsche..........................  2008.................  0.0-.................  0.0-.................  0.0-.................  0.0-.................  0.0-................  0.0-
                                   2010.................  0.0..................  -0.0.................  -0.0.................  0.0..................  0.0.................  0.0
Spyker...........................  2008.................  0.0-.................  0.0-.................  0.0-.................  0.0-.................  0.0-................  0.0-
                                   2010.................  0.0..................  0.0..................  0.0..................  0.0..................  0.0.................  0.0
Subaru...........................  2008.................  0.1-.................  0.0-.................  0.0-.................  0.1-.................  0.3-................  0.3-
                                   2010.................  0.2..................  0.1..................  0.1..................  0.3..................  0.4.................  0.4
Suzuki...........................  2008.................  0.0-.................  0.0-.................  0.0-.................  0.1-.................  0.2-................  0.2-
                                   2010.................  0.0..................  0.0..................  0.0..................  0.0..................  0.0.................  0.1
Tata.............................  2008.................  0.0-.................  0.0-.................  0.0-.................  0.0-.................  0.0-................  0.1-
                                   2010.................  0.0..................  0.0..................  0.0..................  0.0..................  0.0.................  0.0
Tesla............................  2008.................  0.0-.................  0.0-.................  0.0-.................  0.0-.................  0.0-................  0.0-
                                   2010.................  0.0..................  0.0..................  0.0..................  0.0..................  0.0.................  0.0
Toyota...........................  2008.................  1.3-.................  0.4-.................  1.2-.................  1.7-.................  2.2-................  3.0-
                                   2010.................  1.3..................  0.5..................  0.8..................  1.6..................  1.8.................  2.4
Volkswagen.......................  2008.................  0.0-.................  0.0-.................  0.0-.................  0.1-.................  0.4-................  0.4-
                                   2010.................  0.0..................  0.0..................  0.2..................  0.2..................  0.3.................  0.4
Passenger Car....................  2008.................  3.9-.................  2.3-.................  4.3-.................  6.1-.................  9.4-................  11.7-
                                   2010.................  7.7..................  3.6..................  4.8..................  6.5..................  8.5.................  9.9
Light Truck......................  2008.................  0.1-.................  0.4-.................  1.1-.................  2.3-.................  3.4-................  4.8-
                                   2010.................  1.1..................  0.8..................  1.1..................  2.2..................  3.4.................  4.9
                                  --------------------------------------------------------------------------------------------------------------------------------------------------------------
Total............................  2008.................  4.0-.................  2.8-.................  5.4-.................  8.4-.................  12.8-...............  16.5-
                                   2010.................  8.7..................  4.4..................  5.8..................  8.7..................  11.9................  14.9
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

           Table IV-84--NHTSA Estimated Incremental Technology Outlays ($M) Under Augural Standards--MYs 2022-2025 (and total through MY 2025)
--------------------------------------------------------------------------------------------------------------------------------------------------------
          Manufacturer               MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry Average...............  2008...............  18.5-.............  20.2-.............  24.9-.............  26.8-.............  140.3-
                                 2010...............  16.1..............  18.1..............  21.7..............  23.3..............  133.7
Aston Martin...................  2008...............  0.0-..............  0.0-..............  0.0-..............  0.0-..............  0.0-
                                 2010...............  0.0...............  0.0...............  0.0...............  0.0...............  0.0
BMW............................  2008...............  0.3-..............  0.3-..............  0.5-..............  0.5-..............  1.9-
                                 2010...............  0.2...............  0.2...............  0.4...............  0.3...............  1.5
Daimler........................  2008...............  0.3-..............  0.4-..............  0.4-..............  0.5-..............  2.1-
                                 2010...............  0.1...............  0.2...............  0.2...............  0.3...............  1.1
Fiat...........................  2008...............  0.9-..............  1.2-..............  1.2-..............  1.4-..............  7.6-
                                 2010...............  1.9...............  2.6...............  2.7...............  3.0...............  16.8
Ford...........................  2008...............  3.8-..............  3.9-..............  5.9-..............  5.5-..............  27.7-

[[Page 63076]]

 
                                 2010...............  2.7...............  2.8...............  3.5...............  3.8...............  19.4
Geely..........................  2008...............  0.1-..............  0.1-..............  0.1-..............  0.1-..............  0.8-
                                 2010...............  0.1...............  0.1...............  0.1...............  0.1...............  0.5
General Motors.................  2008...............  3.3-..............  3.8-..............  4.3-..............  5.3-..............  26.9-
                                 2010...............  2.5...............  2.9...............  3.3...............  4.1...............  21.3
Honda..........................  2008...............  1.9-..............  2.2-..............  2.2-..............  2.2-..............  12.9-
                                 2010...............  1.7...............  2.0...............  2.1...............  2.1...............  15.3
Hyundai........................  2008...............  0.8-..............  0.9-..............  1.3-..............  1.2-..............  7.1-
                                 2010...............  1.2...............  1.3...............  1.5...............  1.5...............  10.0
KIA............................  2008...............  0.4-..............  0.5-..............  0.5-..............  0.6-..............  2.8-
                                 2010...............  0.5...............  0.5...............  0.5...............  0.6...............  3.5
Lotus..........................  2008...............  0.0-..............  0.0-..............  0.0-..............  0.0-..............  0.0-
                                 2010...............  0.0...............  0.0...............  0.0...............  0.0...............  0.0
Mazda..........................  2008...............  0.5-..............  0.5-..............  0.6-..............  0.6-..............  3.3-
                                 2010...............  0.4...............  0.5...............  0.5...............  0.5...............  3.5
Mitsubishi.....................  2008...............  0.2-..............  0.2-..............  0.2-..............  0.4-..............  1.6-
                                 2010...............  0.1...............  0.1...............  0.2...............  0.2...............  1.1
Nissan.........................  2008...............  1.8-..............  1.9-..............  2.3-..............  2.4-..............  13.4-
                                 2010...............  1.2...............  1.3...............  1.7...............  1.7...............  11.0
Porsche........................  2008...............  0.0-..............  0.0-..............  0.0-..............  0.0-..............  0.1-
                                 2010...............  0.0...............  0.0...............  0.0...............  0.0...............  0.2
Spyker.........................  2008...............  0.0-..............  0.0-..............  0.0-..............  0.0-..............  0.1-
                                 2010...............  0.0...............  0.0...............  0.0...............  0.0...............  0.0
Subaru.........................  2008...............  0.3-..............  0.3-..............  0.6-..............  0.9-..............  3.0-
                                 2010...............  0.4...............  0.4...............  1.0...............  0.8...............  4.1
Suzuki.........................  2008...............  0.2-..............  0.2-..............  0.2-..............  0.3-..............  1.3-
                                 2010...............  0.1...............  0.1...............  0.1...............  0.1...............  0.5
Tata...........................  2008...............  0.1-..............  0.1-..............  0.1-..............  0.1-..............  0.5-
                                 3020...............  0.0...............  0.0...............  0.0...............  0.0...............  0.1
Tesla..........................  2008...............  0.0-..............  0.0-..............  0.0-..............  0.0-..............  0.0-
                                 2010...............  0.0...............  0.0...............  0.0...............  0.0...............  0.0\1285\
Toyota.........................  2008...............  3.2-..............  3.3-..............  3.8-..............  3.8-..............  23.8-
                                 2010...............  2.6...............  2.8...............  3.4...............  3.3...............  10.4
Volkswagen.....................  2008...............  0.5-..............  0.6-..............  0.6-..............  0.8-..............  3.4-
                                 2010...............  0.4...............  0.5...............  0.6...............  0.8...............   3.4
Passenger Car..................  2008...............  13.1-.............  14.6-.............  18.8-.............  20.2-.............  104.4-
                                 2010...............  11.0..............  12.4..............  15.5..............  16.7..............  96.6
Light Truck....................  2008...............  5.4-..............  5.6-..............  6.1-..............  6.6-..............  35.9-
                                 2010...............  5.1...............  5.7...............  6.2...............  6.6...............  37.1
                                ------------------------------------------------------------------------------------------------------------------------
    Total......................  2008...............  18.5-.............  20.2-.............  24.9-.............  26.8-.............  140.3-
                                 2010...............  16.1..............  18.1..............  21.7..............  23.3..............  133.7
--------------------------------------------------------------------------------------------------------------------------------------------------------

    NHTSA notes that these estimates of the economic costs for meeting 
higher CAFE standards omit certain potentially important categories of 
costs, and may also reflect underestimation (or possibly 
overestimation) of some costs that are included. For example, although 
the agency's analysis is intended--with very limited exceptions\1286\--
to hold vehicle performance, capacity, and utility constant when 
applying fuel-saving technologies to vehicles, the analysis imputes no 
cost to any actual reductions in vehicle performance, capacity, and 
utility that may result from manufacturers' efforts to comply with the 
final and augural CAFE standards. Although these costs are difficult to 
estimate accurately, they nonetheless represent a notable category of 
omitted costs if they have not been adequately accounted for in the 
cost estimates. Similarly, the agency's estimates of net benefits for 
meeting higher CAFE standards includes estimates of the economic value 
of potential changes in motor vehicle fatalities that could result from 
reductions in the size or weight of vehicles, but not of changes in 
non-fatal injuries that could result from reductions in vehicle size 
and/or weight.
---------------------------------------------------------------------------

    \1285\ Tesla is not included in the agencies 2010 baseline 
fleet.
    \1286\ For example, the agencies have assumed no cost changes 
due to our assumption that HEV towing capability is not maintained; 
due to potential drivability issues with the P2 HEV; and due to 
potential drivability and NVH issues with the shift optimizer.
---------------------------------------------------------------------------

    Finally, while NHTSA is confident that the cost estimates are the 
best available and appropriate for purposes of this final rule, it is 
possible that the agency may have underestimated or overestimated 
manufacturers' direct costs for applying some fuel economy 
technologies, or the increases in manufacturer's indirect costs 
associated with higher vehicle manufacturing costs. In either case, the 
technology outlays reported here will not correctly represent the costs 
of meeting higher CAFE standards.
    Since the NPRM, NHTSA has revised its analysis to incorporate the 
social cost associated with the incremental cost of maintaining more 
technologically advanced vehicles. Table IV-85 below summarizes these 
incremental costs by regulatory class, and illustrates that increased 
maintenance costs contribute about another $10 billion to the cost of 
the rule.

[[Page 63077]]

                               Table IV-85--NHTSA Estimated Incremental Maintenance Costs Associated With Technology Applied To Meet CAFE Standards, MY 2017-2025
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                  MY baseline        2017           2018           2019           2020           2021           2022          2023          2024          2025          Total
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008.........  0-...........  0.2-.........  0.5-.........  0.7-.........  0.8-.........  0.9-.........  1.0-........  1.0-........  1.1-........  6.2-
                                 2010.........  0.0..........  0.0..........  0.3..........  0.5..........  0.6..........  0.8..........  1.1.........  1.2.........  1.3.........  5.9
Light trucks...................  2008.........  0.0-.........  0.1-.........  0.3-.........  0.4-.........  0.5-.........  0.6-.........  0.6-........  0.7-........  0.7-........  3.8-
                                 2010.........  0.0..........  0.0..........  0.1..........  0.3..........  0.4..........  0.4..........  0.5.........  0.7.........  0.8.........  3.2
Combined.......................  2008.........  0.0-.........  0.3-.........  0.7-.........  1.0-.........  1.3-.........  1.5-.........  1.6-........  1.7-........  1.8-........  10.0-
                                 2010.........  0.0..........  0.0..........  0.4..........  0.8..........  1.0..........  1.2..........  1.6.........  1.9.........  2.1.........  9.0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Similarly, NHTSA's estimates of increased costs of congestion, 
accidents, and noise associated with added vehicle use are drawn from a 
1997 study, and the correct magnitude of these values may have changed 
since they were developed. If this is the case, the costs of increased 
vehicle use associated with the fuel economy rebound effect will differ 
from the agency's estimates in this analysis. Thus, like the agency's 
estimates of economic benefits, estimates of total compliance costs 
reported here may underestimate or overestimate the true economic costs 
of the final standards.
    However, offsetting these costs, the achieved increases in fuel 
economy will also produce significant benefits to society. Most of 
these benefits are attributable to reductions in fuel consumption; fuel 
savings are valued using forecasts of pretax prices in EIA's reference 
case forecast from the AEO 2012 Early Release. The total benefits also 
include other benefits and dis-benefits, examples of which include the 
social values of reductions in CO2 and criteria pollutant 
emissions, the value of additional travel (induced by the rebound 
effect), and the social costs of additional congestion, accidents, and 
noise attributable to that additional travel. The FRIA accompanying 
today's final rule presents a detailed analysis of the rule's specific 
benefits.
    As Tables IV-86 and IV-87 show, NHTSA estimates that at the 
discount rates of 3 percent prescribed in OMB guidance for regulatory 
analysis, the present value of total benefits from the final and 
augural CAFE standards over the lifetimes of MY 2017-2025 (and, 
accounting for multiyear planning effects discussed above, model years 
leading up to MY 2017) passenger cars and light trucks will be in a 
range from $671 billion to $688 billion.

                              Table IV-86--NHTSA Estimated Present Value of Benefits ($b) Under Final Standards Using 3 Percent Discount Rate--MYs 2017-2021\1287\
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020               2021\1287\
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  19.2-................  10.4-................  19.6-................  28.6-................  40.2-...............  48.4-
                                   2010.................  27.5.................  13.2.................  19.3.................  30.5.................  40.1................  48.5
Light trucks.....................  2008.................  1.9-.................  3.7-.................  8.9-.................  17.3-................  24.8-...............  34.4-
                                   2010.................  3.3..................  2.8..................  5.3..................  13.1.................  19.9................  29.4
Combined.........................  2008.................  21.1-................  14.1-................  28.5-................  45.9-................  65.0-...............  82.8-
                                   2010.................  30.8.................  16...................  24.5.................  43.6.................  60..................  77.9
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

 Table IV-87--NHTSA Estimated Present Value of Benefits ($b) Under Augural Standards Using 3 Percent Discount Rate--MYs 2022-2025 (and Total Through MY
                                                                          2025)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  54.2-.............  60.1-.............  68.6-.............  75.9-.............  425.3-
                                 2010...............  54................  61.6..............  70.1..............  77................  441.9
Light trucks...................  2008...............  38.1-.............  40.7-.............  44.5-.............  48.3-.............  262.6-
                                 2010...............  32.4..............  36.7..............  41.3..............  45.6..............  229.9
Combined.......................  2008...............  92.3-.............  100.7-............  113.1-............  124.2-............  687.5-
                                 2010...............  86.4..............  98.3..............  111.3.............  122.5.............  671.4
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The tables below report that the present value of total benefits 
from requiring cars and light trucks to achieve the fuel economy levels 
specified in the final and augural CAFE standards for MYs 2017-25 will 
range from $536 billion to $549 billion when discounted at the 7 
percent rate also required by OMB guidance. Thus the present value of 
fuel savings and other benefits over the lifetimes of the vehicles 
covered by the final and augural standards is about 20 percent lower 
when discounted at a 7 percent annual rate than when discounted using 
the 3 percent annual rate.\1288\
---------------------------------------------------------------------------

    \1287\ Unless otherwise indicated, all tables in Section IV 
report benefits calculated using the Reference Case input 
assumptions, with future benefits resulting from reductions in 
carbon dioxide emissions discounted at the 3 percent rate deemed 
central by in the interagency guidance on the social cost of carbon.
    \1288\ For tables that report total or net benefits using a 7 
percent discount rate, future benefits from reducing carbon dioxide 
emissions are discounted at 3 percent in order to maintain 
consistency with the discount rate used to develop the reference 
case estimate of the social cost of carbon. All other future 
benefits reported in these tables are discounted using the 7 percent 
rate.

[[Page 63078]]

                                 Table IV-88--NHTSA Estimated Present Value of Benefits ($b) Under Final Standards Using 7 Percent Discount Rate--MYs 2017-2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  15.3-................  8.3-.................  15.7-................  22.9-................  32.2-...............  38.8-
                                   2010.................  22...................  10.6.................  15.5.................  24.5.................  32.1................  38.9
Light trucks.....................  2008.................  1.5-.................  2.9-.................  7.0-.................  13.7-................  19.7-...............  27.3-
                                   2010.................  2.6..................  2.2..................  4.2..................  10.4.................  15.8................  23.4
Combined.........................  2008.................  16.8-................  11.2-................  22.7-................  36.6-................  51.9-...............  66.0-
                                   2010.................  24.7.................  12.8.................  19.6.................  34.8.................  47.9................  62.2
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

   Table IV-89--NHTSA Estimated Present Value of Benefits ($b) Under Augural Standards Using 7 Percent Discount Rate--MYs 2022-2025 (and Total Through
                                                                         MY2025)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  43.4-.............  48.2-.............  55.0-.............  60.8-.............  340.7-
                                 2010...............  43.3..............  49.4..............  56.2..............  61.7..............  354.1
Light trucks...................  2008...............  30.2-.............  32.3-.............  35.3-.............  38.3-.............  208.2-
                                 2010...............  25.7..............  29.1..............  32.8..............  36.1..............  182.3
Combined.......................  2008...............  73.6-.............  80.4-.............  90.3-.............  99.1-.............  548.6-
                                 2010...............  69................  78.4..............  88.8..............  97.8..............  536
--------------------------------------------------------------------------------------------------------------------------------------------------------

    For both the passenger car and light truck fleets, NHTSA estimates 
that the benefits of today's standards will exceed the corresponding 
costs in every model year, so that the net social benefits from 
requiring higher fuel economy--the difference between the total 
benefits that result from higher fuel economy and the technology 
outlays required to achieve it--will be substantial. Because the 
technology outlays required to achieve the fuel economy levels required 
by the standards are incurred during the model years when the vehicles 
are produced and sold, however, they are not subject to discounting, so 
that their present value does not depend on the discount rate used. 
Thus the net benefits of the standards differ depending on whether the 
3 percent or 7 percent discount rate is used, but only because the 
choice of discount rates affects the present value of total benefits, 
and not that of technology costs.
    As Tables IV-90 and IV-91 show, over the lifetimes of the affected 
(MY 2017-2025, and MYs leading up to MY 2017) vehicles, the agency 
estimates that when the benefits of the standards are discounted at a 3 
percent rate, they will exceed the costs of the final and augural 
standards by between $498 billion and $507 billion:

                               Table IV-90--NHTSA Estimated Present Value of Net Benefits ($b) Under Final Standards Using 3 Percent Discount Rate--MYs 2017-2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  14-..................  8-...................  14-..................  21-..................  28-.................  34-
                                   2010.................  18...................  9....................  14...................  22...................  29..................  35
Light trucks.....................  2008.................  2-...................  3-...................  7-...................  14-..................  20-.................  28-
                                   2010.................  2....................  2....................  4....................  10...................  16..................  23
Combined.........................  2008.................  16-..................  11-..................  21-..................  35-..................  48-.................  61-
                                   2010.................  21...................  11...................  18...................  32...................  45..................  59
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

 Table IV-91--NHTSA Estimated Present Value of Net Benefits ($b) Under Augural Standards Using 3 Percent Discount Rate--MYs 2022-2025 (and Total Through
                                                                        MY 2025)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  37-...............  42-...............  45-...............  51-...............  293-
                                 2010...............  40................  45................  50................  55................  317
Light trucks...................  2008...............  31-...............  33-...............  36-...............  39-...............  213-
                                 2010...............  26................  29................  33................  36................  181
Combined.......................  2008...............  68-...............  74-...............  82-...............  90-...............  507-
                                 2010...............  65................  74................  83................  92................  498
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As indicated previously, when fuel savings and other future 
benefits resulting from the standards are discounted at the 7 percent 
rate prescribed in OMB guidance, they are about 20% lower than when the 
3 percent discount rate is applied. Nevertheless, Tables IV-92 and IV-
93 show that the net benefits from requiring passenger cars and light 
trucks to achieve higher fuel economy are still substantial even when 
future benefits are discounted at the higher rate, totaling $372-377 
billion over MYs 2017-25. Net benefits are thus about a quarter lower 
when future benefits are discounted at a 7 percent annual rate than at 
a 3 percent rate.

[[Page 63079]]

                               Table IV-92--NHTSA Estimated Present Value of Net Benefits ($b) Under Final Standards Using 7 Percent Discount Rate--MYs 2017-2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  11-..................  6-...................  10-..................  15-..................  21-.................  25-
                                   2010.................  13...................  6....................  10...................  17...................  22..................  27
Light trucks.....................  2008.................  1-...................  2-...................  6-...................  11-..................  15-.................  21-
                                   2010.................  1....................  1....................  3....................  8....................  12..................  17
Combined.........................  2008.................  12-..................  8-...................  16-..................  26-..................  36-.................  46-
                                   2010.................  15...................  8....................  13...................  24...................  33..................  44
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

 Table IV-93--NHTSA Estimated Present Value of Net Benefits ($b) Under Augural Standards Using 7 Percent Discount Rate--MYs 2022-2025 (and Total Through
                                                                        MY 2025)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  27-...............  30-...............  33-...............  37-...............  215-
                                 2010...............  30................  34................  37................  41................  236
Light trucks...................  2008...............  23-...............  25-...............  27-...............  30-...............  162-
                                 2010...............  19................  22................  25................  28................  136
Combined.......................  2008...............  51-...............  55-...............  60-...............  67-...............  377-
                                 2010...............  49................  56................  62................  69................  372
--------------------------------------------------------------------------------------------------------------------------------------------------------

    NHTSA's estimates of economic benefits from establishing higher 
CAFE standards are subject to considerable uncertainty. Most important, 
the agency's estimates of the fuel savings likely to result from 
adopting higher CAFE standards depend critically on the accuracy of the 
estimated fuel economy levels that will be achieved under both the 
baseline scenario, which assumes that manufacturers will continue to 
comply with the MY 2016 CAFE standards, and under alternative increases 
in the standards that apply to MYs 2017-25 passenger cars and light 
trucks. Specifically, if the agency has underestimated the fuel economy 
levels that manufacturers would have achieved under the baseline 
scenario--or is too optimistic about the fuel economy levels that 
manufacturers will actually achieve under the standards--its estimates 
of fuel savings and the resulting economic benefits attributable to 
this rule will be too large.
    Another major source of potential overestimation in the agency's 
estimates of benefits from requiring higher fuel economy stems from its 
reliance on the Reference Case fuel price forecasts reported in AEO 
2012, Early Release. Although NHTSA believes that these forecasts are 
the most reliable that are available, they are nevertheless 
significantly higher than the fuel price projections reported in most 
previous editions of EIA's Annual Energy Outlook, and reflect 
projections of world oil prices that are well above forecasts issued by 
other firms and government agencies. If the future fuel prices 
projected in AEO 2012 prove to be too high, the agency's estimates of 
the value of future fuel savings--the major component of benefits from 
this rule--will also be too high.
    However, it is also possible that NHTSA's estimates of economic 
benefits from establishing higher CAFE standards underestimate the true 
economic benefits of the fuel savings the standards would produce. If 
the AEO 2012 Early Release projections of fuel prices prove to be too 
low, for example, NHTSA will have underestimated the value of fuel 
savings that will result from adopting higher CAFE standards for MY 
2017-25. As another example, the agency's estimate of benefits from 
reducing the threat of economic damages from disruptions in the supply 
of imported petroleum to the U.S. applies to calendar year 2020. If the 
magnitude of this estimate would be expected to grow after 2015 in 
response to increases in U.S. petroleum imports, growth in the level of 
U.S. economic activity, or increases in the likelihood of disruptions 
in the supply of imported petroleum, the agency may have underestimated 
the benefits from the reduction in petroleum imports expected to result 
from adopting higher CAFE standards.
    NHTSA's benefit estimates could also be too low because they 
exclude or understate the economic value of certain potentially 
significant categories of benefits from reducing fuel consumption. As 
one example, EPA's estimates of the economic value of reduced damages 
to human health resulting from lower exposure to criteria air 
pollutants includes only the effects of reducing population exposure to 
PM2.5 emissions. Although this is likely to be the most 
significant component of health benefits from reduced emissions of 
criteria air pollutants, it excludes the value of reduced damages to 
human health and other impacts resulting from lower emissions and 
reduced population exposure to other criteria air pollutants, including 
ozone and nitrous oxide (N2O), as well as to airborne 
toxics. EPA's estimates exclude these benefits because no reliable 
dollar-per-ton estimates of the health impacts of criteria pollutants 
other than PM2.5 or of the health impacts of airborne toxics 
were available to use in developing estimates of these benefits.
    Similarly, the agency's estimate of the value of reduced climate-
related economic damages from lower emissions of GHGs excludes many 
sources of potential benefits from reducing the pace and extent of 
global climate change.\1289\ For example, none of the three models used 
to value climate-related economic damages includes those resulting from 
ocean acidification or loss of species and wildlife. The models also 
may not adequately capture certain other impacts, including potentially 
abrupt changes in climate associated with thresholds that govern 
climate system responses, interregional interactions such as global 
security impacts of extreme warming, or limited near-term 
substitutability between damage to natural systems and increased 
consumption. Including monetized estimates of benefits from reducing 
the extent of climate change and these associated impacts would 
increase the

[[Page 63080]]

agency's estimates of benefits from adopting higher CAFE standards.
---------------------------------------------------------------------------

    \1289\ Social Cost of Carbon for Regulatory Impact Analysis 
Under Executive Order 12866, Interagency Working Group on Social 
Cost of Carbon, United States Government, February 2010. Available 
in Docket No. NHTSA-2009-0059.
---------------------------------------------------------------------------

    The following tables present itemized costs and benefits for the 
combined passenger car and light truck fleets for each model year 
affected by the standards and for all model years combined, using both 
discount rates prescribed by OMB regulatory guidance. Tables IV-94 and 
IV-95 report technology outlays, each separate component of benefits 
(including costs associated with additional driving due to the rebound 
effect, labeled ``dis-benefits''), the total value of benefits, and net 
benefits using the 3 percent discount rate. (Numbers in parentheses 
represent negative values.)

 Table IV-94--NHTSA Estimated Present Value of Net Benefits ($b) Under Final Standards Using 3 Percent Discount
                                               Rate--MYs 2017-2021
----------------------------------------------------------------------------------------------------------------
                                  MY
                               Baseline     Earlier      2017        2018        2019        2020        2021
----------------------------------------------------------------------------------------------------------------
Technology costs............  2008......  4.0-......  2.8-......  5.4-......  8.4-......  12.8-.....  16.5-
                              2010......  8.7.......  4.4.......  5.8.......  8.4.......  11.9......  14.9
Additional cost of            2008......  0.0-......  0.0-......  0.3-......  0.7-......  1.0-......  1.3-
 maintaining more advanced
 vehicles.
                              2010......  0.0.......  0.0.......  0.0.......  0.4.......  0.8.......  1.0
Savings in lifetime fuel      2008......  15.8-.....  10.7-.....  21.7-.....  35.0-.....  49.6-.....  63.3-
 expenditures.
                              2010......  23.3......  12.2......  18.7......  33.4......  46.0......  59.6
Consumer surplus from         2008......  1.6-......  1.0-......  2.0-......  3.2-......  4.6-......  5.7-
 additional driving.
                              2010......  2.3.......  1.2.......  1.8.......  3.1.......  4.2.......  5.5
Value of savings in           2008......  0.7-......  0.4-......  0.8-......  1.2-......  1.6-......  2.0-
 refueling time.
                              2010......  0.9.......  0.4.......  0.6.......  1.1.......  1.3.......  1.7
Reduction in petroleum        2008......  0.9-......  0.6-......  1.2-......  1.9-......  2.7-......  3.4-
 market externalities.
                              2010......  1.3.......  0.7.......  1.0.......  1.8.......  2.4.......  3.1
Reduction in climate-related  2008......  1.5-......  1.0-......  2.1-......  3.4-......  4.9-......  6.3-
 damages from lower CO2
 emissions.
                              2010......  2.2.......  1.2.......  1.8.......  3.3.......  4.6.......  6.0
Value of reduced highway      2008......  (0.1)-....  0.0-......  0.0-......  0.0-......  0.0-......  0.0-
 fatalities from changes in
 vehicle mass.
                              2010......  0.0.......  0.0.......  0.0.......  -0.1......  0.0.......  0.1
----------------------------------------------------------------------------------------------------------------
                Reduction in health damage costs from lower emissions of criteria air pollutants
----------------------------------------------------------------------------------------------------------------
CO..........................  2008......  0.0-......  0.0-......  0.0-......  0.0-......  0.0-......  0.0-
                              2010......  0.0.......  0.0.......  0.0.......  0.0.......  0.0.......  0.0
VOC.........................  2008......  0.0-......  0.0-......  0.0-......  0.0-......  0.1-......  0.1-
                              2010......  0.0.......  0.0.......  0.0.......  0.0.......  0.1.......  0.1
NOX.........................  2008......  0.0-......  0.0-......  0.1-......  0.1-......  0.1-......  0.1-
                              2010......  0.1.......  0.0.......  0.0.......  0.1.......  0.1.......  0.1
PM..........................  2008......  0.2-......  0.2-......  0.3-......  0.5-......  0.8-......  1.0-
                              2010......  0.4.......  0.2.......  0.3.......  0.5.......  0.7.......  0.9
SOX.........................  2008......  0.2-......  0.1-......  0.3-......  0.5-......  0.6-......  0.8-
                              2010......  0.3.......  0.2.......  0.2.......  0.4.......  0.6.......  0.8
----------------------------------------------------------------------------------------------------------------
                                       Dis-benefits from increased driving
----------------------------------------------------------------------------------------------------------------
Congestion costs............  2008......  0.7-......  0.4-......  0.9-......  1.4-......  1.9-......  2.4-
                              2010......  1.0.......  0.5.......  0.8.......  1.3.......  1.8.......  2.3
Noise costs.................  2008......  0.0-......  0.0-......  0.0-......  0.0-......  0.0-......  0.0-
                              2010......  0.0.......  0.0.......  0.0.......  0.0.......  0.0.......  0.0
Crash costs.................  2008......  0.3-......  0.2-......  0.4-......  0.6-......  0.9-......  1.1-
                              2010......  0.5.......  0.2.......  0.4.......  0.6.......  0.8.......  1.1
Total benefits..............  2008......  21.1-.....  14.1-.....  28.5-.....  45.9-.....  65.0-.....  82.8-
                              2010......  30.8......  16........  24.5......  43.6......  60........  77.9
Net benefits................  2008......  15.9-.....  10.6-.....  21.4-.....  34.7-.....  48.3-.....  61.4-
                              2010......  20.6......  10.8......  17.6......  32.5......  44.6......  58.5
----------------------------------------------------------------------------------------------------------------

Table IV-95--NHTSA Estimated Present Value of Net Benefits ($b) Under Augural Standards Using 3 Percent Discount
                                    Rate--MYs 2022-2025 and Total for All MYs
----------------------------------------------------------------------------------------------------------------
                                 MY Baseline      2022          2023          2024          2025        Total
----------------------------------------------------------------------------------------------------------------
Technology costs..............  2008........  18.5-.......  20.2-.......  24.9-.......  26.8-......  140.3-
                                2010........  16.1........  18.1........  21.7........  23.3.......  133.7
Additional cost of maintaining  2008........  1.5-........  1.6-........  1.7-........  1.8-.......  10.0-
 more advanced vehicles.
                                2010........  1.2.........  1.6.........  1.9.........  2.1........  9.0
Savings in lifetime fuel        2008........  70.5-.......  76.9-.......  86.5-.......  94.9-......  524.9-
 expenditures.
                                2010........  66.0........  75.1........  85.1........  93.6.......  512.9
Consumer surplus from           2008........  6.4-........  7.0-........  7.8-........  8.5-.......  47.8-
 additional driving.
                                2010........  6.1.........  7.0.........  7.8.........  8.6........  47.5
Value of savings in refueling   2008........  2.3-........  2.5-........  2.8-........  3.1-.......  17.3-
 time.
                                2010........  1.9.........  2.2.........  2.5.........  2.7........  15.5
Reduction in petroleum market   2008........  3.7-........  4.0-........  4.5-........  4.9-.......  27.7-
 externalities.
                                2010........  3.4.........  3.9.........  4.4.........  4.7........  26.7
Reduction in climate-related    2008........  7.2-........  7.9-........  8.9-........  9.9-.......  53.2-
 damages from lower CO2
 emissions.

[[Page 63081]]

 
                                2010........  6.7.........  7.8.........  8.9.........  9.9........  52.2
Value of reduced highway        2008........  0.0-........  0.0-........  0.1-........  0.2-.......  0.3-
 fatalities from changes in
 vehicle mass.
                                2010........  0.1.........  0.1.........  0.1.........  0.2........  0.4
----------------------------------------------------------------------------------------------------------------
                Reduction in health damage costs from lower emissions of criteria air pollutants
----------------------------------------------------------------------------------------------------------------
CO............................  2008........  0.0-........  0.0-........  0.0-........  0.0-.......  0.0-
                                2010........  0.0.........  0.0.........  0.0.........  0.0........  0.0
VOC...........................  2008........  0.1-........  0.1-........  0.1-........  0.1-.......  0.7-
                                2010........  0.1.........  0.1.........  0.1.........  0.1........  0.6
NOX...........................  2008........  0.2-........  0.2-........  0.2-........  0.2-.......  1.2-
                                2010........  0.2.........  0.2.........  0.2.........  0.2........  1.2
PM............................  2008........  1.1-........  1.2-........  1.3-........  1.4-.......  8.0-
                                2010........  1.0.........  1.1.........  1.3.........  1.4........  7.7
SOX...........................  2008........  0.9-........  1.0-........  0.9-........  0.9-.......  6.2-
                                2010........  0.9.........  1.0.........  1.0.........  1.1........  6.5
----------------------------------------------------------------------------------------------------------------
                                       Dis-benefits from increased driving
----------------------------------------------------------------------------------------------------------------
Congestion costs..............  2008........  2.7-........  3.0-........  3.3-........  3.7-.......  20.3-
                                2010........  2.6.........  2.9.........  3.3.........  3.6........  20.2
Noise costs...................  2008........  0.1-........  0.1-........  0.1-........  0.1-.......  0.4-
                                2010........  0.0.........  0.1.........  0.1.........  0.1........  0.4
Crash costs...................  2008........  1.3-........  1.4-........  1.6-........  1.7-.......  9.6-
                                2010........  1.2.........  1.4.........  1.6.........  1.7........  9.4
Total benefits................  2008........  92.3-.......  100.7-......  113.1-......  124.2-.....  687.5-
                                2010........  86.4........  98.3........  111.3.......  122.5......  671.4
Net benefits..................  2008........  68.2-.......  74.5-.......  81.6-.......  90.2-......  507.0-
                                2010........  65.2........  74.2........  82.8........  91.7.......  498.0
----------------------------------------------------------------------------------------------------------------

    Similarly, Tables IV-96 and IV-97 below report technology outlays, 
the individual components of benefits (including ``dis-benefits'' 
resulting from additional driving) and their total and net benefits 
using the 7 percent discount rate. (Again, numbers in parentheses 
represent negative values.)

 Table IV-96--NHTSA Estimated Present Value of Net Benefits ($b) Under Final Standards Using 7 Percent Discount
                                               Rate--MYs 2017-2021
----------------------------------------------------------------------------------------------------------------
                                  MY
                               Baseline     Earlier      2017        2018        2019        2020        2021
----------------------------------------------------------------------------------------------------------------
Technology costs............  2008......  4.0-......  2.8-......  5.4-......  8.4-......  12.8-.....  16.5-
                              2010......  8.7.......  4.4.......  5.8.......  8.4.......  11.9......  14.9
Additional cost of            2008......  0.0-......  0.0-......  0.3-......  0.7-......  1.0-......  1.3-
 maintaining more advanced
 vehicles.
                              2010......  0.0.......  0.0.......  0.0.......  0.4.......  0.8.......  1.0
Savings in lifetime fuel      2008......  12.4-.....  8.4-......  16.9-.....  27.3-.....  38.7-.....  49.3-
 expenditures.
                              2010......  18.3......  9.5.......  14.6......  26.1......  35.9......  46.5
Consumer surplus from         2008......  1.3-......  0.8-......  1.6-......  2.5-......  3.6-......  4.5-
 additional driving.
                              2010......  1.8.......  0.9.......  1.4.......  2.4.......  3.3.......  4.3
Value of savings in           2008......  0.5-......  0.3-......  0.6-......  0.9-......  1.3-......  1.6-
 refueling time.
                              2010......  0.7.......  0.4.......  0.5.......  0.8.......  1.1.......  1.4
Reduction in petroleum        2008......  0.7-......  0.5-......  0.9-......  1.5-......  2.1-......  2.6-
 market externalities.
                              2010......  1.0.......  0.5.......  0.8.......  1.4.......  1.9.......  2.5
Reduction in climate-related  2008......  1.5-......  1.0-......  2.1-......  3.4-......  4.9-......  6.3-
 damages from lower CO2
 emissions.
                              2010......  2.2.......  1.2.......  1.8.......  3.3.......  4.6.......  6.0
Value of reduced highway      2008......  -0.1-.....  0.0-......  0.0-......  0.0-......  0.0-......  0.0-
 fatalities from changes in
 vehicle mass.
                              2010......  0.0.......  0.0.......  0.0.......  0.0.......  0.0.......  0.1
----------------------------------------------------------------------------------------------------------------
                Reduction in health damage costs from lower emissions of criteria air pollutants
----------------------------------------------------------------------------------------------------------------
CO..........................  2008......  0.0-......  0.0-......  0.0-......  0.0-......  0.0-......  0.0-
                              2010......  0.0.......  0.0.......  0.0.......  0.0.......  0.0.......  0.0
VOC.........................  2008......  0.0-......  0.0-......  0.0-......  0.0-......  0.1-......  0.1-
                              2010......  0.0.......  0.0.......  0.0.......  0.0.......  0.0.......  0.1
NOX.........................  2008......  0.0-......  0.0-......  0.0-......  0.1-......  0.1-......  0.1-
                              2010......  0.1.......  0.0.......  0.0.......  0.1.......  0.1.......  0.1
PM..........................  2008......  0.2-......  0.1-......  0.3-......  0.4-......  0.6-......  0.8-
                              2010......  0.3.......  0.1.......  0.2.......  0.4.......  0.6.......  0.7
SOX.........................  2008......  0.2-......  0.1-......  0.2-......  0.4-......  0.5-......  0.6-

[[Page 63082]]

 
                              2010......  0.3.......  0.1.......  0.2.......  0.3.......  0.5.......  0.6
----------------------------------------------------------------------------------------------------------------
                                       Dis-benefits from increased driving
----------------------------------------------------------------------------------------------------------------
Congestion costs............  2008......  0.6-......  0.3-......  0.7-......  1.1-......  1.5-......  1.9-
                              2010......  (0.8).....  0.4.......  0.6.......  1.1.......  1.4.......  1.8
Noise costs.................  2008......  0.0-......  0.0-......  0.0-......  0.0-......  0.0-......  0.0-
                              2010......  0.0.......  0.0.......  0.0.......  0.0.......  0.0.......  0.0
Crash costs.................  2008......  0.2-......  0.2-......  0.3-......  0.5-......  0.7-......  0.9-
                              2010......  0.4.......  0.2.......  0.3.......  0.5.......  0.7.......  0.9
Total benefits..............  2008......  16.8-.....  11.2-.....  22.7-.....  36.6-.....  51.9-.....  66.0-
                              2010......  24.7......  12.8......  19.6......  34.8......  47.9......  62.2
Net benefits................  2008......  11.9-.....  7.9-......  16.1-.....  26.1-.....  36.0-.....  45.8-
                              2010......  14.7......  7.8.......  12.9......  24.2......  33.3......  43.8
----------------------------------------------------------------------------------------------------------------

 Table IV-97--NHTSA Estimated Present Value of Net Benefits ($b) Under Augural Standards Using 7 Percent Discount Rate--MYs 2022-2025 and Total for All
                                                                           MYs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Technology costs...............  2008...............  18.5-.............  20.2-.............  24.9-.............  26.8-.............  140.3-
                                 2010...............  16.1..............  18.1..............  21.7..............  23.3..............  133.7
Additional cost of maintaining   2008...............  1.5-..............  1.6-..............  1.7-..............  1.8-..............  10.0-
 more advanced vehicles.
                                 2010...............  1.2...............  1.6...............  1.9...............  2.1...............  9.0
Savings in lifetime fuel         2008...............  55.0-.............  60.0-.............  67.4-.............  74.0-.............  409.5-
 expenditures.
                                 2010...............  51.5..............  58.6..............  66.3..............  72.9..............  400.3
Consumer surplus from            2008...............  5.0-..............  5.4-..............  6.1-..............  6.6-..............  37.3-
 additional driving.
                                 2010...............  4.8...............  5.4...............  6.1...............  6.7...............  37.1
Value of savings in refueling    2008...............  1.8-..............  2.0-..............  2.2-..............  2.4-..............  13.6-
 time.
                                 2010...............  1.5...............  1.7...............  2.0...............  2.2...............  12.2
Reduction in petroleum market    2008...............  2.9-..............  3.2-..............  3.6-..............  3.9-..............  21.9-
 externalities.
                                 2010...............  2.7...............  3.1...............  3.4...............  3.7...............  21.1
Reduction in climate-related     2008...............  7.2-..............  7.9-..............  8.9-..............  9.9-..............  53.2-
 damages from lower CO2
 emissions.
                                 2010...............  6.7...............  7.8...............  8.9...............  9.9...............  52.2
Value of reduced highway         2008...............  0.0-..............  0.0-..............  0.1-..............  0.2-..............  0.2-
 fatalities from changes in
 vehicle mass.
                                 2010...............  0.1...............  0.0...............  0.1...............  0.2...............  0.3
Reduction in health damage
 costs from lower emissions of
 criteria air pollutants.
CO.............................  2008...............  0.0-..............  0.0-..............  0.0-..............  0.0-..............  0.0-
                                 2010...............  0.0...............  0.0...............  0.0...............  0.0...............  0.0
VOC............................  2008...............  0.1-..............  0.1-..............  0.1-..............  0.1-..............  0.5-
                                 2010...............  0.1...............  0.1...............  0.1...............  0.1...............  0.5
NOX............................  2008...............  0.1-..............  0.1-..............  0.2-..............  0.2-..............  1.0-
                                 2010...............  0.1...............  0.1...............  0.2...............  0.2...............  1.0
PM.............................  2008...............  0.9-..............  0.9-..............  1.0-..............  1.1-..............  6.4-
                                 2010...............  0.8...............  0.9...............  1.0...............  1.1...............  6.2
SOX............................  2008...............  0.7-..............  0.8-..............  0.7-..............  0.7-..............  4.9-
                                 2010...............  0.7...............  0.8...............  0.8...............  0.9...............  5.1
Dis-benefits from increased
 driving:.
Congestion costs...............  2008...............  2.1-..............  2.3-..............  2.6-..............  2.9-..............  16.0-
                                 2010...............  2.0...............  2.3...............  2.6...............  2.9...............  15.9
Noise costs....................  2008...............  0.0-..............  0.0-..............  0.0-..............  0.1-..............  0.3-
                                 2010...............  0.0...............  0.0...............  0.0...............  0.1...............  0.3
Crash costs....................  2008...............  1.0-..............  1.1-..............  1.2-..............  1.4-..............  7.5-
                                 2010...............  1.0...............  1.1...............  1.2...............  1.3...............  7.4
Total benefits.................  2008...............  73.6-.............  80.4-.............  90.3-.............  99.1-.............  548.6-
                                 2010...............  69................  78.4..............  88.8..............  97.8..............  536
Net benefits...................  2008...............  50.8-.............  55.5-.............  60.2-.............  66.7-.............  376.9-
                                 2010...............  48.9..............  55.7..............  61.9..............  68.6..............  371.8
--------------------------------------------------------------------------------------------------------------------------------------------------------

    These benefit and cost estimates do not reflect the availability 
and use of certain flexibility mechanisms, such as compliance credits 
and credit trading, because EPCA prohibits NHTSA from considering the 
effects of those mechanisms in setting CAFE standards. However, the 
agency notes that, in reality, manufacturers are likely to rely

[[Page 63083]]

to some extent on flexibility mechanisms and would thereby reduce the 
cost of complying with the standards to a meaningful extent.
    As discussed in the FRIA, NHTSA has performed an analysis to 
estimate costs and benefits taking into account EPCA's provisions 
regarding EVs, PHEVs produced before MY 2020, FFV credits, and other 
CAFE credit provisions. Accounting for these provisions indicates that 
achieved fuel economies would be 1.4-2.1 mpg lower than when these 
provisions are not considered:

                          Table IV-98--NHTSA Estimated Average Achieved Fuel Economy (mpg) Under Final Standards--MYs 2017-2021
                                                          [With EPCA AFV and credit provisions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2017                2018                2019                2020                2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  39.5-.............  41.5-.............  43.8-.............  46.3-.............  47.9-
                                 2010...............  39.4-.............  41.1-.............  43.3-.............  45.1-.............  47.1-
Light trucks...................  2008...............  29.3-.............  30.3-.............  31.9-.............  33.3-.............  35.2-
                                 2010...............  28.8-.............  29.3-.............  31.3-.............  32.8-.............  34.9-
Combined.......................  2008...............  35.0-.............  36.6-.............  38.7-.............  40.8-.............  42.6-
                                 2010...............  34.8-.............  36.0-.............  38.2-.............  39.9-.............  42.0-
--------------------------------------------------------------------------------------------------------------------------------------------------------

                         Table IV-99--NHTSA Estimated Average Achieved Fuel Economy (mpg) Under Augural Standards--MYs 2022-2025
                                                          [With EPCA AFV and credit provisions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                          MY Baseline                2022                    2023                    2024                   2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars....................  2008..................  49.3-.................  50.0-.................  51.5-................  52.9-
                                    2010..................  48.1..................  49.6..................  51.3.................  52.1
Light trucks......................  2008..................  36.1-.................  36.8-.................  37.9-................  39.0-
                                    2010..................  35.5..................  36.5..................  37.4.................  37.6
Combined..........................  2008..................  43.8-.................  44.6-.................  46.0-................  47.4-
                                    2010..................  42.9..................  44.2..................  45.6.................  46.2
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As a result, NHTSA estimates that, when EPCA AFV and credit 
provisions are taken into account, fuel savings will total about 170 
billion gallons, as compared to the 180-184 billion gallons estimated 
when these flexibilities are not considered:

                                                 Table IV-100--NHTSA Estimated Fuel Saved (Billion Gallons) Under Final Standards--MYs 2017-2021
                                                                              [With EPCA AFV and credit provisions]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  6-...................  3-...................  5-...................  8-...................  10-.................  12-
                                   2010.................  6....................  4....................  5....................  8....................  10..................  12
Light trucks.....................  2008.................  1-...................  1-...................  2-...................  4-...................  6-..................  8-
                                   2010.................  2....................  1....................  2....................  4....................  6...................  8
Combined.........................  2008.................  6-...................  4-...................  7-...................  12-..................  16-.................  20-
                                   2010.................  8....................  5....................  7....................  12...................  15..................  20
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                            Table IV-101--NHTSA Estimated Fuel Saved (Billion Gallons) Under Augural Standards--MYs 2022-2025
                                                          [With EPCA AFV and credit provisions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  14-...............  15-...............  17-...............  19-...............  107-
                                 2010...............  13................  15................  17................  18................  108
Light trucks...................  2008...............  9-................  10-...............  11-...............  12-...............  63-
                                 2010...............  8.................  9.................  10................  11................  62
Combined.......................  2008...............  23-...............  25-...............  28-...............  31-...............  170-
                                 2010...............  22................  24................  28................  29................  169
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The agency similarly estimates CO2 emissions reductions 
will total 1,832-1,843 million metric tons (mmt), as compared to the 
1,953-1,987 mmt estimated when these EPCA provisions are not 
considered:\1290\
---------------------------------------------------------------------------

    \1290\ Differences in the application of diesel engines and 
plug-in hybrid electric vehicles lead to differences in the 
percentage changes in fuel consumption and carbon dioxide emissions 
between the with- and without-credit cases.

[[Page 63084]]

                                            Table IV-102--NHTSA Estimated Avoided Carbon Dioxide Emissions (mmt) Under Final Standards--MYs 2017-2021
                                                                              [With EPCA AFV and credit provisions]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  60-..................  32-..................  55-..................  82-..................  112-................  131-
                                   2010.................  66...................  39...................  56...................  85...................  105.................  130
Light trucks.....................  2008.................  8-...................  10-..................  24-..................  44-..................  64-.................  86-
                                   2010.................  22...................  13...................  18...................  46...................  60..................  82
Combined.........................  2008.................  68-..................  43-..................  79-..................  126-.................  176-................  217-
                                   2010.................  89...................  52...................  73...................  131..................  166.................  213
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                       Table IV-103--NHTSA Estimated Avoided Carbon Dioxide Emissions (mmt) under Augural Standards--MYs 2022-2025
                                                          [With EPCA AFV and credit provisions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  149-..............  161-..............  181-..............  197-..............  1,158-
                                 2010...............  144...............  163...............  185...............  197...............  1,171
Light trucks...................  2008...............  98-...............  105-..............  116-..............  128-..............  684-
                                 2010...............  91................  102...............  112...............  115...............  662
Combined.......................  2008...............  247-..............  266-..............  297-..............  325-..............  1,843-
                                 2010...............  234...............  265...............  298...............  312...............  1,832
--------------------------------------------------------------------------------------------------------------------------------------------------------

    This analysis further indicates that significant reductions in 
outlays for additional technology will result when EPCA's AFV and 
credit provisions are taken into account. Tables IV-104 and IV-105 
below show that, total technology costs are estimated to decline to 
about $120 billion as a result of manufacturers' use of these 
provisions, as compared to the $134-140 billion estimated when 
excluding these flexibilities:

                                          Table IV-104--NHTSA Estimated Incremental Technology Outlays ($ Billion) Under Final Standards--MYs 2017-2021
                                                                              [With EPCA AFV and credit provisions]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  3-...................  2-...................  4-...................  6-...................  8-..................  11-
                                   2010.................  5....................  3....................  4....................  6....................  8...................  9
Light trucks.....................  2008.................  0-...................  1-...................  1-...................  2-...................  3-..................  4-
                                   2010.................  2....................  1....................  1....................  2....................  3...................  5
Combined.........................  2008.................  4-...................  2-...................  5-...................  7-...................  11-.................  14-
                                   2010.................  6....................  4....................  5....................  8....................  11..................  14
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                     Table IV-105--NHTSA Estimated Incremental Technology Outlays ($ Billion) Under Augural Standards--MYs 2022-2025
                                                          [With EPCA AFV and credit provisions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  12-...............  13-...............  16-...............  17-...............  92-
                                 2010...............  10................  11................  14................  14................  85
Light trucks...................  2008...............  4-................  5-................  5-................  6-................  30-
                                 2010...............  5.................  5.................  6.................  6.................  35
Combined.......................  2008...............  16-...............  18-...............  21-...............  23-...............  121-
                                 2010...............  15................  17................  20................  20................  120
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Because NHTSA's analysis indicated that these EPCA provisions will 
modestly reduce fuel savings and related benefits, the agency's 
estimate of the present value of total benefits is $629-639 billion 
when discounted at a 3 percent annual rate, as Tables IV-106 and IV-107 
below report. This estimate of total benefits is lower than the $671-
688 billion reported previously for the analysis that excluded these 
provisions:

[[Page 63085]]

                            Table IV-106--NHTSA Estimated Present Value of Benefits ($ Billion) Under Final Standards Using a 3 Percent Discount Rate-- MYs 2017-2021
                                                                              [With EPCA AFV and credit provisions]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  19.7-................  10.8-................  18.7-................  27.8-................  38.4-...............  45.2-
                                   2010.................  21.8.................  12.9.................  18.7.................  28.9.................  36..................  44.9
Light trucks.....................  2008.................  2.7-.................  3.4-.................  8.0-.................  14.8-................  21.5-...............  29.2-
                                   2010.................  7.2..................  4.4..................  5.9..................  15...................  19.9................  27.6
Combined.........................  2008.................  22.4-................  14.2-................  26.6-................  42.5-................  59.8-...............  74.4-
                                   2010.................  29...................  17.3.................  24.6.................  43.8.................  55.8................  72.4
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

       Table IV-107--NHTSA Estimated Present Value of Benefits ($ Billion) Under Augural Standards Using a 3 Percent Discount Rate-- MYs 2022-2025
                                                          [With EPCA AFV and credit provisions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  51.9-.............  56.8-.............  64.4-.............  71.1-.............  404.8-
                                 2010...............  49.9..............  57................  65.4..............  70.2..............  405.6
Light trucks...................  2008...............  33.4-.............  36.0-.............  40.3-.............  44.8-.............  234.2-
                                 2010...............  30.6..............  34.7..............  38.7..............  40.2..............  224.1
Combined.......................  2008...............  85.2-.............  92.7-.............  104.6-............  115.9-............  638.5-
                                 2010...............  80.3..............  91.6..............  104...............  110.2.............  629.1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Similarly, NHTSA estimates that the present value of total benefits 
will decline modestly from its previous estimate when future fuel 
savings and other benefits are discounted at the higher 7 percent rate. 
Tables IV-108 and IV-109 report that the present value of benefits from 
requiring higher fuel economy for MY 2017-25 cars and light trucks will 
total $502-510 billion when discounted using a 7 percent rate, as 
compared to the previous $536-549 billion estimate of total benefits 
when FFV credits were not permitted:

                            Table IV-108--NHTSA Estimated Present Value of Benefits ($ Billion) Under Final Standards Using a 7 Percent Discount Rate-- MYs 2017-2021
                                                                              [With EPCA AFV and credit provisions]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  15.8-................  8.7-.................  15.0-................  22.3-................  30.8-...............  36.2-
                                   2010.................  17.4.................  10.3.................  15...................  23.1.................  28.8................  36
Light trucks.....................  2008.................  2.1-.................  2.7-.................  6.3-.................  11.8-................  17.1-...............  23.2-
                                   2010.................  5.7..................  3.5..................  4.7..................  11.9.................  15.8................  21.9
Combined.........................  2008.................  17.9-................  11.4-................  21.3-................  34.0-................  47.8-...............  59.4-
                                   2010.................  23.2.................  13.8.................  19.6.................  35...................  44.6................  57.8
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

       Table IV-109--NHTSA Estimated Present Value of Benefits ($ Billion) Under Augural Standards Using a 7 Percent Discount Rate--MYs 2022-2025
                                                          [With EPCA AFV and credit provisions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  41.6-.............  45.5-.............  51.6-.............  57.0-.............  324.3-
                                 2010...............  40................  45.7..............  52.5..............  56.2..............  325
Light trucks...................  2008...............  26.5-.............  28.6-.............  32.0-.............  35.5-.............  185.7-
                                 2010...............  24.3..............  27.5..............  30.7..............  31.8..............  177.7
Combined.......................  2008...............  68.0-.............  74.0-.............  83.5-.............  92.5-.............  509.7-
                                 2010...............  64.1..............  73.1..............  83................  88................  502.2
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Although the discounted present value of total benefits will be 
modestly lower when EPCA AFV and credit provisions are taken into 
account, the agency estimates that these provisions will reduce net 
benefits by a smaller proportion. As Tables IV-110 and IV-111 show, the 
agency estimates that these will reduce net benefits from the CAFE 
standards to $475-483 billion from the previously-reported estimate of 
$498-507 billion without those credits.

[[Page 63086]]

                          Table IV-110--NHTSA Estimated Present Value of Net Benefits ($ Billion) Under Final Standards Using a 3 Percent Discount Rate--MYs 2017-2021
                                                                              [With EPCA AFV and credit provisions]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  15 -.................  8 -..................  14 -.................  20 -.................  28 -................  32 -
                                   2010.................  16...................  9....................  14...................  21...................  26..................  33
Light trucks.....................  2008.................  2 -..................  3 -..................  7 -..................  12 -.................  18 -................  24 -
                                   2010.................  5....................  3....................  5....................  12...................  16..................  22
Combined.........................  2008.................  18 -.................  11 -.................  21 -.................  33 -.................  45 -................  56 -
                                   2010.................  21...................  13...................  18...................  33...................  42..................  55
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

     Table IV-111--NHTSA Estimated Present Value of Net Benefits ($ Billion) Under Augural Standards Using a 3 Percent Discount Rate--MYs 2022-2025
                                                          [With EPCA AFV and credit provisions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  37 -..............  40 -..............  45 -..............  50 -..............  289 -
                                 2010...............  36................  42................  47................  51................  296
Light trucks...................  2008...............  28 -..............  30 -..............  34 -..............  37 -..............  194 -
                                 2010...............  24................  28................  31................  33................  179
Combined.......................  2008...............  64 -..............  70 -..............  79 -..............  87 -..............  483 -
                                 2010...............  61................  70................  78................  84................  475
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Similarly, Tables IV-112 and IV-113 below show that NHTSA estimates 
manufacturers' use of EPCA AFV and credit provisions will reduce net 
benefits from requiring higher fuel economy for MY 2017-25 cars and 
light trucks--to $356-362 billion--if a 7 percent discount rate is 
applied to future benefits. This estimate is approximately 4% less than 
the previously-reported $372-377 billion estimate of net benefits 
without the availability of EPCA AFV and credit provisions using that 
same discount rate.

                          Table IV-112--NHTSA Estimated Present Value of Net Benefits ($ Billion) Under Final Standards Using a 7 Percent Discount Rate--MYs 2017-2021
                                                                              [With EPCA AFV and credit provisions]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  12-..................  6-...................  11-..................  15-..................  20-.................  24-
                                   2010.................  12...................  7....................  10...................  16...................  20..................  24
Light trucks.....................  2008.................  2-...................  2-...................  5-...................  9-...................  14-.................  19-
                                   2010.................  4....................  2....................  3....................  9....................  12..................  16
Combined.........................  2008.................  13-..................  8-...................  16-..................  25-..................  34-.................  42-
                                   2010.................  16...................  9....................  13...................  25...................  32..................  41
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

     Table IV-113--NHTSA Estimated Present Value of Net Benefits ($ Billion) Under Augural Standards Using a 7 Percent Discount Rate--MYs 2022-2025
                                                          [With EPCA AFV and credit provisions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  27-...............  30-...............  33-...............  36-...............  214-
                                 2010...............  27................  31................  35................  38................  221
Light trucks...................  2008...............  21-...............  23-...............  26-...............  28-...............  148-
                                 2010...............  18................  21................  23................  25................  135
Combined.......................  2008...............  48-...............  52-...............  59-...............  65-...............  362-
                                 2010...............  46................  52................  59................  63................  356
--------------------------------------------------------------------------------------------------------------------------------------------------------

    For this final rule, NHTSA has included an analysis that accounts 
for the cumulative costs and benefits of the final fuel economy 
standards that affect MY 2011-2021 vehicles and the augural standards 
that affect MY 2022-2025 vehicles. This analysis enables the agency to 
assess the cumulative effects of previously adopted CAFE standards for 
MY 2011 and MY 2012-2016, as well as the final standards for MY 2017-
2021 and augural standards for MY 2022-2025 that this final rule 
presents. The table below shows the total fuel savings, reductions in 
carbon dioxide emissions, and social costs and benefits resulting from 
the sequence of CAFE standards established for MYs 2011-21, as well as 
program totals with the inclusion of the augural standards for MY 2022-
2025. Each of these impacts is measured against a baseline that assumes 
the CAFE standards for MY 2010 would have been extended to

[[Page 63087]]

apply to MYs 2011-25 if the agency had not developed standards for 
those model years.
    As is the case elsewhere in this preamble, the table below 
represents the estimated impact of the CAFE rules based on required 
fuel economy levels, excluding consideration of credit banking, 
transfers and trading, dedicated alternative fuel vehicles, and dual 
fuel vehicles operating on alternative fuels, as required under EPCA/
EISA. The technology costs reported in the table represent the costs of 
technologies used by manufacturers to increase fuel economy to the 
levels required by the higher standards. (These cost estimates are the 
same whether we use a 3 percent or 7 percent discount rate to discount 
future benefits or costs, because they occur at the time the vehicle is 
purchased, so no discounting is involved.) The discounted social costs 
include the technology costs associated with the sequence of standards, 
as well monetized social costs associated with any increases in traffic 
congestion, noise, accidents and fatalities that occur in response to 
the increases in fuel economy resulting from compliance with the 
standards.
    Instead of using the estimated impacts from previous regulatory 
analyses accompanying the standards for MY 2011 and MYs 2012-16, the 
costs and benefits provided in this analysis are estimated using the 
current version of the CAFE model. Thus, they are based on the agency's 
most up-to-date estimates of the costs of technologies that are 
available to improve fuel economy. All costs from previous years are 
adjusted to 2010 dollars using the implicit price deflator for gross 
domestic product (GDP).
    Table IV-114 illustrates that the combined effects of the 
previously established CAFE standards for MY 2011 and MY 2012-2016, 
together with the final CAFE standards for MY 2017-2021 and augural 
CAFE standards for MY 2022-2025 presented in this final rule, would be 
to save 450-520 billion gallons of fuel, reduce CO2 
emissions by 4.9-5.7 billion metric tons, and provide net economic 
benefits in excess of $1 trillion.

               Table IV-114--NHTSA Summary of Estimated Impacts From All Final and Augural Standards for MY 2011-2025 Light Duty Vehicles
                                                     [Compared to Continuation of MY 2010 Standards]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          2011-2016                            2011-2021                           2011-2025
                               MY baseline -------------------------------------------------------------------------------------------------------------
                                                 PC           LT       Combined       PC          LT       Combined       PC          LT       Combined
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fuel saved (b gallons).......  2008.......  59-........  41-........  100-......  176-......  118-......  294-......  313-......  208-......  520-
                               2010.......  42.........  33.........  75........  144.......  102.......  246.......  266.......  183.......  449
Oil saved (billion barrels)..  2008.......  1.4-.......  1.0-.......  2.4-......  4.2-......  2.8-......  7.0-......  7.5-......  5.0-......  12.4-
                               2010.......  1.0........  0.8........  1.8.......  3.4.......  2.4.......  5.9.......  6.3.......  4.4.......  10.7
Retail fuel savings,           2008.......  177-.......  121-.......  298-......  541-......  358-......  899-......  980-......  642-......  1,622-
 discounted at 3% ($B).        2010.......  126........  96.........  222.......  444.......  305.......  749.......  835.......  562.......  1,397
CO2 saved (mmt)..............  2008.......  645-.......  447-.......  1,092-....  1,914-....  1,286-....  3,200-....  3,399-....  2,260-....  5,659-
                               2010.......  458........  353........  811.......  1,568.....  1,095.....  2,663.....  2,894.....  1,979.....  4,873
Discounted social benefits,    2008.......  212-.......  144-.......  355-......  648-......  426-......  1,072-....  1,176-....  765-......  1,939-
 3% ($B).                      2010.......  149........  114........  263.......  527.......  362.......  889.......  996.......  668.......  1,662
Technology costs ($B)........  2008.......  33-........  20-........  53-.......  106-......  57-.......  163-......  204-......  99-.......  303-
                               2010.......  27.........  18.........  44........  92........  56........  147.......  172.......  98........  270
Discounted social costs, 3%    2008.......  44-........  26-........  70-.......  233-......  140-......  372-......  393-......  236-......  627-
 ($B).                         2010.......  34.........  23.........  57........  187.......  123.......  309.......  318.......  207.......  522
Discounted net benefits, 3%..  2008.......  168-.......  118-.......  285-......  415-......  286-......  700-......  783-......  529-......  1,312-
                               2010.......  115........  91.........  206.......  340.......  239.......  580.......  678.......  461.......  1,140
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The agency performed a number of sensitivity analyses to examine 
important assumptions. All sensitivity analyses were based on the 
``standard setting'' output of the CAFE model, and are based solely 
upon the 2010 baseline fleet. We examine sensitivity with respect to 
the following economic parameters:

 The price of gasoline: The main analysis uses the Reference 
Case AEO 2012 Early Release estimate for the price of gasoline. As the 
AEO 2012 Early Release does not contain Low and High Price Cases, 
ranges derived from the Low and High Price Cases from the AEO 2011 were 
utilized in conjunction with the Reference Case AEO 2012 Early Release 
to study the effect of the Low and High Price Cases on the model 
results.
 The rebound effect: The main analysis uses a rebound effect of 
10 percent to project increased miles traveled as the cost per mile 
driven decreases. In the sensitivity analysis, we examine the effect of 
using a 5, 15, or 20 percent rebound effect instead.
 The value of CO2 benefits: The main analysis uses 
$22 per ton discounted at a 3 percent discount rate to quantify the 
benefits of reducing CO2 emissions and $0.199 per gallon to 
quantify the benefits of reducing fuel consumption. In the sensitivity 
analysis, we examine the following values and discount rates applied 
only to the social cost of carbon to value carbon benefits, considering 
valuations of approximately $5, $36, and $68 per ton, at discount rates 
of 5 percent (model average), 2.5 percent (model average) and 3 percent 
(95th percentile), respectively, with regard to the benefits of 
reducing CO2 emissions.\1291\ These are the 2010 values, 
which increase over time. These values can be translated into cents per 
gallon by multiplying by 0.0089,\1292\ giving the following values:
---------------------------------------------------------------------------

    \1291\ The low, high, and very high valuations of $5, $36, and 
$67 are rounded for brevity. While the model uses the unrounded 
values, the use of unrounded values is not intended to imply that 
the chosen values are precisely accurate to the nearest cent; 
rather, they are average levels resulting from the many published 
studies on the topic.
    \1292\ The molecular weight of Carbon (C) is 12, the molecular 
weight of Oxygen (O) is 16, thus the molecular weight of 
CO2 is 44. 1 gallon of gas weighs 2,819 grams, of that 
2,433 grams are carbon. One ton of CO2/One ton of C (44/
12)* 2433grams C/gallon *1 ton/1000kg * 1 kg/1000g = (44 * 
2433*1*1)/(12*1*1000 * 1000) = 0.0089. Thus, one ton of 
CO2*0.0089 = 1 gallon of gasoline.
---------------------------------------------------------------------------

    [cir] ($4.91 per ton CO2) x 0.0089 = $0.044 per gallon 
discounted at 5%
    [cir] ($22.22 per ton CO2) x 0.0089 = $0.198 per gallon 
discounted at 3%

[[Page 63088]]

(used in the main analysis)
    [cir] ($36.49 per ton CO2) x 0.0089 = $0.325 per gallon 
discounted at 2.5%
    [cir] And a 95th percentile estimate of
    [cir] ($67.55 per ton CO2) x 0.0089 = $0.601 per gallon 
discounted at 3%
 Global Warming Potential (non-CO2 GHG benefits): 
The main analysis does not monetize benefits associated with the 
reduction of non-CO2 GHGs (methane, nitrous oxide, HFC-
134a). This sensitivity analysis uses a GWP approach to convert non-
CO2 gases to CO2-equivalence to monetize these 
benefits using the same methods with which the benefits of 
CO2 reductions are valued.
 Military security: The main analysis does not assign a value 
to the military security benefits of reducing fuel consumption. In the 
sensitivity analysis, we examine the impact of using a value of 12 
cents per gallon instead.
 Consumer Benefit: The main analysis assumes there is no loss 
in value to consumers resulting from vehicles that have an increase in 
price and higher fuel economy. This sensitivity analysis assumes that 
there is a 25, or 50 percent loss in value to consumers--equivalent to 
the assumption that consumers will only value the calculated benefits 
they will achieve at 75, or 50 percent, respectively, of the main 
analysis estimates.
 Post-warranty repair costs: The main analysis includes repair 
costs during the warranty period; post-warranty repair costs are 
addressed in a sensitivity analysis. The warranty period is assumed to 
be 5 years for the powertrain and 3 years for the rest of the vehicle. 
This sensitivity analysis scales the frequency of repair by vehicle 
survival rates, assumes that per-vehicle repair costs during the post-
warranty period are the same as in the in-warranty period, and that 
repair costs are proportional to incremental direct costs (therefore 
vehicles with additional components will have increased repair costs).
 Battery cost: The agency conducted a sensitivity analysis of 
battery costs for HEV, PHEV and EV technologies. The ranges for battery 
costs are based on the recommendations from the technical experts in 
the field of battery energy storage technologies at Department of 
Energy (DOE) and Argonne National Laboratory (ANL). These ranges of 
battery costs are developed using the Battery Performance and Cost 
(BatPaC) model developed by ANL and funded by DOE.\1293\ The values for 
these ranges are shown in Table IV-115 and are calculated with 95% 
confidence interval after analyzing the confidence bound using the 
BatPaC model.
---------------------------------------------------------------------------

    \1293\ Section 3.4.3.9 in TSD Chapter 3 has detailed 
descriptions of the history of the BatPac model and how the agencies 
used the BatPac model in this analysis.
---------------------------------------------------------------------------

    In the NPRM central analysis, EPA developed direct manufacturing 
costs (DMC) for battery systems using ANL's BatPaC model. For this 
sensitivity analysis, NHTSA scaled these central battery system costs 
by the percentages shown in Table IV-115, per guidance from DOE and ANL 
experts on reasonable ranges for these costs.

Table IV-115--NHTSA Suggested Confidence Bounds as a Percentage of the Calculated Point Estimate for a Graphite-
                             Based Li-ion Battery Using the Default Inputs in BatPac
----------------------------------------------------------------------------------------------------------------
                                                                                          Confidence interval
                  Battery type                                 Cathodes              ---------------------------
                                                                                        Lower (%)     Upper (%)
----------------------------------------------------------------------------------------------------------------
HEV.............................................  LMO, LFP, NCA, NMC................          -10            10
PHEV, EV........................................  NMC, NCA..........................          -10            20
PHEV, EV........................................  LMO, LFP..........................          -20            35
----------------------------------------------------------------------------------------------------------------

    Figures IV-4 to IV-8 show these battery system DMCs in terms of $/
kW for HEV and $/kWh for 20-mile range PHEV (PHEV20), 40-mile range 
PHEV (PHEV40), 75-mile range EV (EV75), 100-mile range EV (EV100) and 
150-mile range EV (EV150). We note that battery system cost varies with 
vehicle subclasses and driving range. Smaller batteries tend to be 
relatively more expensive per kWh because the cost for the battery 
management system, disconnect units and baseline thermal management 
system is the same from vehicle to vehicle for each type of 
electrification system, such as HEV, PHEV and EV (but varies between 
different electrification systems) and this cost is spread over fewer 
kWh for smaller vehicle. For example, the battery system cost for EVs 
ranges from $221/kWh for subcompact cars for EV75, to $160/kWh for 
large trucks for EV150 in MY 2021. Note: the agencies do not apply PHEV 
or EV technology to large MPVs/minivans or large trucks; however, the 
estimated costs of such a system are shown here for completeness.

[[Page 63089]]

[GRAPHIC] [TIFF OMITTED] TR15OC12.033

[[Page 63090]]

[GRAPHIC] [TIFF OMITTED] TR15OC12.034

[[Page 63091]]

[GRAPHIC] [TIFF OMITTED] TR15OC12.035

    For the reader's reference, this sensitivity was conducted using 
what the agency refers to as ``standard setting'' analytical runs, in 
which the agency restricts the operation of the model consistent with 
statutory requirements related to how the agency may determine maximum 
feasible CAFE standards (for example, the standard setting runs do not 
include EVs, because NHTSA may not consider the fuel economy of EVs 
when setting maximum feasible CAFE standards, nor do they consider 
PHEVs prior to MY 2020, for the same reason), as compared to the 
``real-world'' analysis, in which the agency attempts to model how 
manufacturers might respond to the standards (and regulatory 
alternatives) taking account of all available technologies and 
compliance flexibilities. NHTSA used the ``standard setting'' runs for 
this sensitivity analysis to show the regulatory impact of the battery 
cost. In the ``standard setting'' runs, NHTSA included 30-mile range 
PHEV (PHEV30) only after MY 2019 to represent all PHEVs, the cost of 
which is the average cost of PHEV20 and PHEV40. NHTSA did not apply any 
EVs in this analysis.
     Mass reduction cost: Due to the wide range of mass 
reduction cost as stated in TSD Chapter 3, a sensitivity analysis was 
performed examining the impact of the cost of vehicle mass reduction to 
the total technology cost. The direct manufacturing cost (DMC) for mass 
reduction is represented as a linear function between the unit DMC 
versus percent of mass reduction as shown in Figure IV-10. The slope of 
this line used for NPRM central analysis is $4.36 (2010$) per pound per 
percent of mass reduction. The slope of the line is varied  
40% as the upper and lower bound for this sensitivity study. The values 
for the range of mass reduction cost are shown in Table IV-116.

                     Table IV-116--NHTSA Bounds for Mass Reduction Direct Manufacturing Cost
                                                     [2010$]
----------------------------------------------------------------------------------------------------------------
                                                                                Example unit      Example total
                                                              Slope of mass        direct            direct
                     Sensitivity bound                       reduction line   manufacture cost  manufacture cost
                                                              [$/(lb-%MR)]       \1\ [$/lb]        \2\ [$/lb]
----------------------------------------------------------------------------------------------------------------
Lower Bound...............................................             $2.61             $0.39              $235
NPRM Central Analysis.....................................              4.36              0.65               392
Upper Bound...............................................              6.10              0.92               549
----------------------------------------------------------------------------------------------------------------
Notes
\1\ Example is based on 15% mass reduction.
Unit direct manufacturing cost [$/lb] = Slope x Percent of Mass Reduction.
\2\ Example is based on 15% mass reduction for a 4000-lb vehicle.
Total direct manufacturing cost $[] = Unit Direct Manufacturing Cost x Amount of Mass Reduction.

[[Page 63092]]

[GRAPHIC] [TIFF OMITTED] TR15OC12.036

     Market-driven response: The baseline for the central 
analysis is based on the MY 2016 CAFE standards and assumes that 
manufacturers will make no changes in the fuel economy from that level 
through MY 2025. A sensitivity analysis was performed to simulate 
potential increases in fuel economy over the compliance level required 
if MY 2016 standards were to remain in place. The assumption is that 
the market would drive manufacturers to put technologies into their 
vehicles that they believe consumers would value and be willing to pay 
for. Using parameter values consistent with the central analysis, the 
agency simulated a market-driven response baseline by applying a 
payback period of one year for purposes of calculating the value of 
future fuel savings when simulating whether manufacturers would apply 
additional technology to an already CAFE-compliant fleet. In other 
words we assumed that manufacturers that were above their MY 2016 CAFE 
level would compare the cost to consumers to the fuel savings in the 
first year of operation and decide to voluntarily apply those 
technologies to their vehicles when benefits for the first year 
exceeded costs for the consumer. For a manufacturer's fleet that that 
has not yet achieved compliance with CAFE standards, the agency 
continued to apply a five-year payback period. In other words, for this 
sensitivity analysis the agency assumed that manufacturers that have 
not yet met CAFE standards for future model years will apply technology 
as if buyers were willing to pay for the technologies as long as the 
fuel savings throughout the first five years of vehicle ownership 
exceeded their costs. Once having complied with those standards, 
however, manufacturers are assumed to consider making further 
improvements in fuel economy as if buyers were only willing to pay for 
fuel savings to be realized during the first year of vehicle ownership. 
The `market-drive response' analysis assumes manufacturers will 
overcomply if additional technology is sufficiently cost effective. 
Because this assumption has a greater impact under the baseline 
standards, its application reduces the incremental costs, effects, and 
benefits attributable to the new standards. This does not mean costs, 
effects, and benefits would actually be smaller with a market-driven 
response; rather it means costs, effects, and benefits would be at 
least as great, but would be partially attributable not to the new 
standards, but instead to the market.
     Transmission shift optimization technology disabled: As 
part of the simulation work for the final rule, ANL attempted to 
replicate the shift optimizer technology but was not able to identify 
any significant fuel consumption reductions. For this reason a 
sensitivity case analysis was conducted with the transmission shift 
optimizer technology disabled.
    Varying each of the above 10 parameters in isolation results in a 
variety of economic scenarios. These are listed in Table IV-117 below 
along with the preferred alternative.

[[Page 63093]]

                                                Table IV-117--List of NHTSA Economic Sensitivity Analyses
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                             Military
                    Name                                      Fuel price                  Discount  rate      Rebound         SCC ($)        security
                                                                                                (%)         effect (%)                     ([cent]/gal)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Reference...................................  Reference.................................               3              10              22               0
High Fuel Price.............................  High......................................               3              10              22               0
Low Fuel Price..............................  Low.......................................               3              10              22               0
5% Rebound Effect...........................  Reference.................................               3               5              22               0
15% Rebound Effect..........................  Reference.................................               3              15              22               0
20% Rebound Effect..........................  Reference.................................               3              20              22               0
12[cent]/gal Military Security Value........  Reference.................................               3              10              22              12
$5/ton CO2 Value............................  Reference.................................               3              10               5               0
$36/ton CO2 Value...........................  Reference.................................               3              10              36               0
$68/ton CO2 Value...........................  Reference.................................               3              10              68               0
Global Warming Potential....................  Reference.................................               3              10              22               0
50% Consumer Benefit........................  Reference.................................               3              10              22               0
75% Consumer Benefit........................  Reference.................................               3              10              22               0
Post-Warranty Repair Costs..................  Reference.................................               3              10              22               0
Low Battery Cost............................  Reference.................................               3              10              22               0
High Battery Cost...........................  Reference.................................               3              10              22               0
Low Cost Mass Reduction.....................  Reference.................................               3              10              22               0
High Cost Mass Reduction....................  Reference.................................               3              10              22               0
Market-Driven Response......................  Reference.................................               3              10              22               0
No Shift Optimization.......................  Reference.................................               3              10              22               0
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The basic results of these sensitivity analyses are contained in 
Chapter X of the FRIA, but several selected findings are as follows:
     Varying the economic assumptions has almost no impact on 
achieved mpg. The mass reduction cost sensitivities, battery cost 
reduction sensitivities, market-based baseline sensitivity, and no 
shift optimization sensitivity cases are the only instances in which 
achieved mpg differs from the reference case of the Preferred 
Alternative. None of these alter the outcome by more than 0.3 mpg for 
either fleet.
     Varying the economic assumptions has, at most, a small 
impact on per-vehicle costs, with only the no shift optimization 
variation affecting the per-vehicle cost by more than 10 percent from 
the central analysis level. Similarly, fuel saved and CO2 
emissions reductions vary only slightly across the sensitivity cases, 
where the only substantial impact results from the market-driven 
baseline sensitivity in which voluntary overcompliance reduces the 
number of gallons of fuel saved as well as the quantity of 
CO2 emissions by just under 28 percent.
     The category most affected by variations in the economic 
parameters considered in these sensitivity analyses is net benefits. 
The sensitivity analyses examining the AEO low and high fuel price 
scenarios demonstrate the potential to negatively impact net benefits 
by up to 38 percent or to increase them by about 32 percent relative to 
those of the Preferred Alternative. Other large impacts on net benefits 
occurred with the $68/ton CO2 valuation, in which net 
benefits increased by nearly 22 percent, the market-driven baseline, 
which reduces net benefits by close to 32 percent, and (as expected) 
the 50 and 75 percent consumer fuel savings valuation cases, which 
decrease net benefits by approximately 52 and 26 percent, respectively.
     Even if consumers value the benefits achieved at 50% of 
the main analysis assumptions, total benefits still exceed costs, with 
net benefits greater than $135 billion.
    Regarding the lower fuel savings and CO2 emissions 
reductions predicted by the sensitivity analysis as fuel price 
increases, which initially may seem counterintuitive, we note that 
there are some counterbalancing factors occurring. As fuel price 
increases, people will drive less and so fuel savings and 
CO2 emissions reductions may decrease.
    The agency performed two additional sensitivity analyses presented 
in Tables IV-118 through IV-120. First, the agency analyzed the impact 
that having a retail price equivalent (RPE) factor of 1.5 for all 
technologies would have on the various alternatives instead of using 
the indirect cost methodology (ICM). The ICM methodology results in an 
overall markup factor of 1.2 to 1.25 compared to the RPE markup factor 
from variable cost of 1.5. Next, the agency conducted a separate 
sensitivity analysis using values that were derived from the 2011 NAS 
report.\2\ This analysis used an RPE markup factor of 1.5 for non-
electrification technologies, which is consistent with the NAS 
estimation for technologies manufactured by suppliers, and a RPE markup 
factor of 1.33 for electrification technologies (HEV, PHEV and EV); 
three types of learning which include no learning for mature 
technologies, 1.25 percent annual learning for evolutionary 
technologies, and 2.5 percent annual learning for revolutionary 
technologies; technology cost estimates for 52 percent (33 out of 63) 
technologies; and technology effectiveness estimates for 56 percent (35 
out of 63) of technologies. Cost learning was applied to technology 
costs in a manner similar to how cost learning is applied in the 
central analysis for many technologies which have base costs which are 
applicable to recent or near-term future model years. As noted above, 
the cost learning factors used for the sensitivity case are different 
than the values used in the central analysis. For the other inputs in 
the sensitivity case, where the NAS study has inconsistent information 
or lacks projections, NHTSA used the same input values that were used 
in the central analysis.

[[Page 63094]]

    Table IV-118--NHTSA Estimated Achieved MPG Level, MY 2025, Comparing Different Cost Mark-Up Methodologies
                                               [3% Discount rate]
----------------------------------------------------------------------------------------------------------------
                                                               ICM Method        RPE Method
                                                             (main analysis    (main analysis      Difference
                                                                 costs)            costs)             (mpg)
----------------------------------------------------------------------------------------------------------------
                                                 Passenger cars
----------------------------------------------------------------------------------------------------------------
Preferred Alternative.....................................             54.07             53.92              0.16
Max Net Benefits..........................................             56.52             56.42              0.10
----------------------------------------------------------------------------------------------------------------
                                                  Light trucks
----------------------------------------------------------------------------------------------------------------
Preferred Alternative.....................................             39.29             39.14              0.15
Max Net Benefits..........................................             43.66             43.56              0.10
----------------------------------------------------------------------------------------------------------------

Table IV-119--NHTSA Estimated Achieved MPG Level, MY 2025, Comparing ICM Method With Main Analysis Costs vs. NAS
                                                      Costs
                                               [3% Discount rate]
----------------------------------------------------------------------------------------------------------------
                                                               ICM Method
                                                             (main analysis   ICM Method  (NAS     Difference
                                                                 costs)        Cost estimates)        (mpg)
----------------------------------------------------------------------------------------------------------------
                                                 Passenger Cars
----------------------------------------------------------------------------------------------------------------
Preferred Alternative.....................................             54.07             52.78              1.29
Max Net Benefits..........................................             56.52             55.32              1.20
----------------------------------------------------------------------------------------------------------------
                                                  Light trucks
----------------------------------------------------------------------------------------------------------------
Preferred Alternative.....................................             39.29             37.71              1.58
Max Net Benefits..........................................             43.66             43.27              0.39
----------------------------------------------------------------------------------------------------------------

                                    Table IV-120--NHTSA Sensitivity Analyses
         [Estimated Achieved mpg, per-vehicle cost, net benefits, fuel saved, and CO2 emissions reduced]
----------------------------------------------------------------------------------------------------------------
                                                    Average MY     MY 2017-2025
                                                     2025 per-     net benefits,   MY 2017-2025    MY 2017-2025
   Cost method and set of cost        MY 2025         vehicle     discounted 3%,  fuel saved, in   CO2 Emissions
            estimates              Achieved mpg     technology    in millions of    millions of     reduced, in
                                                       cost              $            gallons           mmT
----------------------------------------------------------------------------------------------------------------
                                 Passenger Cars
----------------------------------------------------------------------------------------------------------------
ICM w/Main Analysis Costs.......           54.07          $1,578        $293,062         109,852           2,384
RPE w/Main Analysis Costs.......           53.92           1,943         273,307         107,200           2,325
ICM w/NAS Costs.................           52.78           2,103         242,912         100,496           2,155
----------------------------------------------------------------------------------------------------------------
                                  Light trucks
----------------------------------------------------------------------------------------------------------------
ICM w/Main Analysis Costs.......           39.29           1,226         175,793          61,984           1,333
RPE w/Main Analysis Costs.......           39.14           1,491         181,243          65,083           1,397
ICM w/NAS Costs.................           37.71           1,375         154,597          56,337           1,217
----------------------------------------------------------------------------------------------------------------

    For today's rulemaking analysis, as for the NPRM, the agency has 
also performed a sensitivity analysis where manufacturers are allowed 
to voluntarily apply more technology than would be required to comply 
with CAFE standards for each model year. Manufacturers are assumed to 
do so as long as applying each additional technology would increase 
vehicle production costs (including markup) by less than it would 
reduce buyers' fuel costs during the first year they own the vehicle. 
This analysis makes use of the ``voluntary overcompliance'' simulation 
capability DOT has recently added to its CAFE model. This capability, 
which is discussed further above in section IV.C.4.c and in the CAFE 
model documentation, is a logical extension of the model's simulation 
of some manufacturers' decisions to respond to EPCA by paying civil 
penalties once additional technology becomes economically unattractive. 
It attempts to simulate manufacturers' responses to buyers' demands for 
higher fuel economy levels than prevailing CAFE standards would require 
when fuel costs are sufficiently high, and technologies that 
manufacturers have not yet fully utilized are available to improve fuel 
economy at relatively low costs.
    NHTSA introduced this analysis for the NPRM because some 
stakeholders commenting on the recently-promulgated standards for 
medium- and heavy-duty vehicles had indicated that it would be 
unrealistic for the agency to

[[Page 63095]]

assume that in the absence of new regulations, technology and fuel 
economy would not improve at all in the future. In other words, these 
stakeholders argued that market forces are likely to result in some 
fuel economy improvements over time, as potential vehicle buyers and 
manufacturers respond to changes in fuel prices and in the availability 
and costs of technologies to increase fuel economy. NHTSA agreed that, 
in principle, its analysis should estimate a potential that 
manufacturers will apply technology as if buyers place some value on 
fuel economy improvements. Considering uncertainties discussed below 
regarding the degree to which manufacturers will do so, the agency 
judged it appropriate to conduct its central rulemaking analysis 
without attempting to simulate these effects. Nonetheless, the agency 
considered voluntary overcompliance sufficiently plausible to warrant 
corresponding sensitivity analysis.
    In the NPRM, NHTSA invited comment on this sensitivity analysis, in 
particular regarding the reasonableness of the assumption that 
manufacturers might consider further fuel economy improvements, 
depending on technology costs and fuel prices; the reasonableness of 
the agency's approach (comparing technology costs to the present value 
of fuel savings over some payback period) to simulating such decisions; 
and what payback period (or periods) would most likely to reflect 
manufacturers' decisions regarding technology application through 
MY2025.
    Several environmental organizations submitted comments on NHTSA's 
analysis. The Center for Biological Diversity (CBD) commented that the 
agency's baseline ``suggests a much lower fuel efficiency increase 
driven solely by market forces than actual experience demonstrates 
occurs.'' \1294\ The Natural Resources Defense Council (NRDC) commented 
that manufacturers might add more technology than required by 
standards, but that such decisions are too uncertain to be included in 
NHTSA's baseline projection. The Environmental Defense Fund (EDF) 
commented that, given relatively stable future fuel prices, and given 
provisions allowing credit transfers between manufacturers, 
manufacturers will not likely overcomply with MY2016 standards, on 
average, after MY2016. The American Council for an Energy-Efficient 
Economy (ACEEE) commented that the historical record contains little 
evidence of sustained fuel economy increases absent sustained increases 
in fuel economy standards. ACEEE also commented that an alternative 
``non-flat'' baseline would reduce NHTSA's estimates of the benefits 
(and costs) of the new standards, the net effect being a reduction in 
the cost-effectiveness of the standards, because the most cost-
effective technologies are the ones that will appear in the alternative 
baseline scenario, leaving the more expensive technologies for the rule 
to bring into the market.
---------------------------------------------------------------------------

    \1294\ CBD, p. 6.
---------------------------------------------------------------------------

    In addition, several stakeholders on the ``payback period'' NHTSA 
should apply in its analysis. EDF indicated that any payback period 
shorter than five years would not accurately reflect the current and 
forecasted buying trends of consumers. The Sierra Club also submitted 
comments suggesting a five-year payback period. Volkswagen commented 
that buyers' preferences will suggest payback periods of less than four 
years. The International Council on Clean Transportation (ICCT) 
commented that analysis in 2010 by David Greene supported an average 
payback period of three years.\1295\ NADA commented that analysis based 
on a payback period oversimplifies the calculation of consumer 
benefits, but did not comment on the payback period as basis to 
estimate the potential that manufacturers might add technology beyond 
that required by regulation.
---------------------------------------------------------------------------

    \1295\ Greene, David 2010. ``Uncertainty, loss aversion, and 
markets for energy efficiency'', Energy Economics.
---------------------------------------------------------------------------

    NHTSA recognizes the uncertainty inherent in forecasting whether 
and to what extent the average fuel economy level of light-duty 
vehicles will continue to increase beyond the level necessary to meet 
regulatory standards. However, because market forces could 
independently result in changes to the future light-duty vehicle fleet 
even in the absence of agency action, to the extent they can be 
estimated, those changes should be incorporated into the baseline. As a 
result, today's final rule continues to present impacts in terms of two 
sets of analyses: one assuming that the average fleetwide fuel economy 
for light-duty vehicles will not exceed the minimum level necessary to 
comply with CAFE standards, and one assuming continued improvement in 
average fleetwide fuel economy for light-duty vehicles due to higher 
market demand for fuel-efficient vehicles.
    From a market-driven perspective, there is considerable historical 
evidence that manufacturers have an economic incentive to improve the 
fuel economy of their fleets beyond the level of the CAFE standards 
when they are able to do so. Although there was an historical period of 
stagnation in average fuel economy starting in the 1990s, when 
manufacturers allocated efficiency improvements to weight and power, it 
was accompanied by a prolonged period of historically low gasoline 
prices, where real prices remained below $1.50 per gallon for nearly 15 
years. Even during that period, passenger car fuel economy exceeded 
CAFE standards every year and light-truck fuel economy exceeded 
standards in most years. This trend supports the proposition that 
consumers have historically recognized the benefits that accrue from 
operating vehicles with greater fuel efficiency even in an environment 
of low fuel prices.
    In recent years, overcompliance with standards has increased, 
likely in response to higher fuel prices, with the market shifting 
toward more fuel-efficient models and toward passenger cars rather than 
trucks, even in the absence of regulatory pressure. This suggests that, 
at the fuel prices that have been prevalent in recent years, consumers 
are placing a greater value on fuel economy than the longer term 
historical average. Consumers appear to be recognizing the value of 
purchases based not only on initial costs but also on the total cost of 
owning and operating a vehicle over its lifetime. The fuel economy of 
the combined car and light-truck fleet has increased since 2005, with 
the largest increase in 2009. NHTSA also expects the new fuel economy 
labels will increase awareness of the consumer savings that result from 
purchasing a vehicle with higher fuel economy and will impact consumer 
demand for more fuel-efficient vehicles. NHTSA discusses how consumers 
value fuel savings in Chapter VIII of the FRIA accompanying today's 
notice.
    Consumer demand for fuel-efficient vehicles is expected to continue 
in the future. Increasing uncertainty about future fuel prices and 
growing concern for the energy security and environmental impacts of 
petroleum use are likely to have an increasing impact on the vehicle 
market. In response, a number of manufacturers have announced plans to 
introduce technology beyond what is necessary to meet the MY 2016 
standards. This evidence aligns with the AEO 2012 Early Release, which 
shows continued fuel economy improvements in the Reference Case through 
2035 in the absence of the MY 2017-2025 standards.
    NHTSA performed today's analysis by simulating potential 
overcompliance under the no-action alternative, the

[[Page 63096]]

preferred alternative, and other regulatory alternatives. In doing so, 
the agency used all the same parameter values as in the agency's 
central analysis, but applied a payback period of one year for purposes 
of calculating the value of future fuel savings when simulating whether 
a manufacturer would apply additional technology to an already CAFE-
compliant fleet. For technologies applied to a manufacturer's fleet 
that has not yet achieved compliance with CAFE standards, the agency 
continued to apply a five-year payback period.
    In other words, for this sensitivity analysis the agency assumed 
that manufacturers that have not yet met CAFE standards for future 
model years will apply technology as if buyers were willing to pay for 
fuel savings throughout the first five years of vehicle ownership. Once 
having complied with those standards, however, manufacturers are 
assumed to consider making further improvements in fuel economy as if 
buyers were only willing to pay for fuel savings to be realized during 
the first year of vehicle ownership. This reflects the agency's 
assumptions for this sensitivity analysis, that (1) civil penalties, 
though legally available, carry a stigma that manufacturers will strive 
to avoid, and that (2) having achieved compliance with CAFE standards, 
manufacturers will avoid competitive risks entailed in charging higher 
prices for vehicles that offer additional fuel economy, rather than 
offering additional performance or utility.
    Since CAFE standards were first introduced, some manufacturers have 
consistently exceeded those standards, and the industry as a whole has 
consistently overcomplied with both the passenger car and light truck 
standards. Although the combined average fuel economy of cars and light 
trucks declined in some years, this resulted from buyers shifting their 
purchases from passenger cars to light trucks, not from undercompliance 
with either standard. Even with those declines, the industry still 
overcomplied with both passenger car and light truck standards. In 
recent years, between MYs 1999 and 2009, fuel economy overcompliance 
has been increasing on average for both the passenger car and the light 
truck fleets. NHTSA considers it impossible to say with certainty why 
past fuel economy levels have followed their observed path. If the 
agency could say with certainty how fuel economy would have changed in 
the absence of CAFE standards, it might be able to answer this 
question; however, NHTSA regards this ``counterfactual'' case as simply 
unknowable.
    NHTSA has, however, considered other relevant indications regarding 
manufacturers' potential future decisions. Published research regarding 
how vehicle buyers have previously viewed fuel economy suggests that 
they have only a weak quantitative understanding of the relationship 
between fuel economy and future fuel outlays, and that potential buyers 
value fuel economy improvements by less than theoretical present-value 
calculations of lifetime fuel savings would suggest. These findings are 
generally consistent with manufacturers' confidential and, in some 
cases, public statements. Manufacturers have tended to communicate not 
that buyers absolutely ``don't care'' about fuel economy, but that 
buyers have, in the past, not been willing to pay the full cost of most 
fuel economy improvements. Manufacturers have also tended to indicate 
that sustained high fuel prices would provide a powerful incentive for 
increased fuel economy; this implies that manufacturers believe buyers 
are willing to pay for some fuel economy increases, but that buyers' 
willingness to do so depends on their expectations for future fuel 
prices. In their confidential statements to the agency, manufacturers 
have also tended to indicate that in their past product planning 
processes, they have assumed buyers would only be willing to pay for 
technologies that ``break even'' within a relatively short time--
generally the first two to four years of vehicle ownership.
    NHTSA considers it not only feasible but appropriate to simulate 
such effects by calculating the present value of fuel savings over some 
``payback period.'' The agency also believes it is appropriate to 
assume that specific improvements in fuel economy will be implemented 
voluntarily if manufacturers' costs for adding the technology necessary 
to implement them to specific models would be lower than potential 
buyers' willingness to pay for the resulting fuel savings. This 
approach takes fuel costs directly into account, and is therefore 
responsive to manufacturers' statements regarding the role that fuel 
prices play in influencing buyers' demands and manufacturers' planning 
processes. Under this approach, a short payback period can be employed 
if manufacturers are expected to act as if buyers place little value on 
fuel economy. Conversely, a longer payback period can be used if 
manufacturers are expected to act as if buyers will place comparatively 
greater value on fuel economy.
    NHTSA cannot be certain to what extent vehicle buyers will, in the 
future, be willing to pay for fuel economy improvements, or to what 
extent manufacturers would, in the future, voluntarily apply more 
technology than needed to comply with fuel economy standards. The 
agency is similarly hopeful that future vehicle buyers will be more 
willing to pay for fuel economy improvements than has historically been 
the case. In meetings preceding today's standards, two manufacturers 
stated they expected fuel economy to increase two percent to three 
percent per year after MY 2016, absent more stringent regulations. And 
in August 2010, one manufacturer stated its combined fleet would 
achieve 50 mpg by MY 2025, supporting that at a minimum some 
manufacturers believe that exceeding fuel economy standards will 
provide them a competitive advantage. The agency is hopeful that future 
vehicle buyers will be better-informed than has historically been the 
case, in part because recently-promulgated requirements regarding 
vehicle labels will provide clearer information regarding fuel economy 
and the dollar value of resulting fuel savings. The agency is similarly 
hopeful that future vehicle buyers will be more willing to pay for fuel 
economy improvements than past buyers. In meetings preceding today's 
standards, many manufacturers indicated significant shifts in their 
product plans--shifts consistent with expectations that compared to 
past buyers, future buyers will ``care more'' about fuel economy.
    Nevertheless, considering the uncertainties mentioned above, NHTSA 
continues to consider it appropriate to conduct its central rulemaking 
analysis in a manner that ignores the possibility that in the future, 
manufacturers will voluntarily apply more technology than the minimum 
necessary to comply with CAFE standards. Also, in conducting its 
sensitivity analysis to simulate voluntary overcompliance with the 
standards, the agency has applied the conservative assumption that when 
considering whether to employ ``extra'' technology, manufacturers will 
act as if buyers' value the resulting savings in fuel costs only during 
their first year of ownership (i.e., as if a 1-year payback period 
applies).
    Results of the agency's analysis simulating this potential for 
voluntary overcompliance are summarized below. Compared to results from 
the agencies' central analysis presented above, differences are 
greatest for the baseline scenario (i.e., the No-Action Alternative), 
under which CAFE

[[Page 63097]]

standards remain unchanged after MY 2016. These results also suggest, 
as the agency would expect, that because increasingly stringent 
standards require progressively more technology than the market will 
demand, the likelihood of voluntary overcompliance will decline with 
increasing stringency. Achieved fuel economy levels under baseline 
standards are as follows:

                        Table IV-121--NHTSA Estimated Average Achieved Fuel Economy (mpg) Under Baseline Standards--MYs 2017-2021
                                                          [Including voluntary overcompliance]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2017                2018                2019                2020                2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  39.0-.............  39.5-.............  40.0-.............  40.2-.............  40.5-
                                 2010...............  38.6-.............  39.1-.............  39.4-.............  39.8-.............  40.3-
Light trucks...................  2008...............  30.4-.............  31.0-.............  31.7-.............  32.0-.............  32.3-
                                 2010...............  29.4-.............  29.6-.............  30.4-.............  31.0-.............  31.5-
Combined.......................  2008...............  35.3-.............  35.9-.............  36.6-.............  36.9-.............  37.2-
                                 2010...............  34.7-.............  35.1-.............  35.7-.............  36.2-.............  36.8-
--------------------------------------------------------------------------------------------------------------------------------------------------------

                        Table IV-122--NHTSA Estimated Average Achieved Fuel Economy (mpg) Under Baseline Standards--MYs 2022-2025
                                                          [Including voluntary overcompliance]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                          MY Baseline                2022                    2023                    2024                   2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars....................  2008..................  40.8-.................  40.9-.................  41.0-................  41.1-
                                    2010..................  40.5..................  40.6..................  40.7.................  40.9
Light trucks......................  2008..................  32.5-.................  32.7-.................  32.9-................  33.1-
                                    2010..................  31.8..................  32.0..................  32.2.................  32.4
Combined..........................  2008..................  37.5-.................  37.7-.................  37.9-................  38.1-
                                    2010..................  37.0..................  37.2..................  37.4.................  37.6
--------------------------------------------------------------------------------------------------------------------------------------------------------

    With no change in standards after MY 2016, while combined average 
fuel economy is the same in MY 2017 both with and without simulated 
voluntary overcompliance, differences grow over time, reaching nearly 3 
mpg by MY 2025. In other words, without simulating voluntary 
overcompliance, the agency estimated that combined average achieved 
fuel economy would reach 34.7-35.4 mpg in MY 2025, whereas the agency 
estimates that it would reach 37.6-38.1 mpg in that year if voluntary 
overcompliance occurred.
    In contrast, the effect on achieved fuel economy levels of allowing 
voluntary overcompliance with the standards was minimal. Allowing 
manufacturers to overcomply with the standards for MY 2025 led to 
combined average achieved fuel economy levels approximately equal to 
levels of values obtained without simulating voluntary overcompliance:

                         Table IV-123--NHTSA Estimated Average Achieved Fuel Economy (mpg) Under Final Standards--MYs 2017-2021
                                                          [Including voluntary overcompliance]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2017                2018                2019                2020                2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  40.8-.............  43.0-.............  45.1-.............  47.2-.............  48.9-
                                 2010...............  40.5-.............  42.2-.............  44.3-.............  46.4-.............  48.6-
Light trucks...................  2008...............  30.9-.............  32.0-.............  33.9-.............  35.3-.............  36.7-
                                 2010...............  29.9-.............  30.5-.............  32.2-.............  33.6-.............  35.6-
Combined.......................  2008...............  36.5-.............  38.3-.............  40.4-.............  42.2-.............  43.9-
                                 2010...............  36.0-.............  37.1-.............  39.1-.............  41.0-.............  43.2-
--------------------------------------------------------------------------------------------------------------------------------------------------------

                        Table IV-124--NHTSA Estimated Average Achieved Fuel Economy (mpg) Under Augural Standards--MYs 2022-2025
                                                          [Including voluntary overcompliance]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                          MY Baseline                2022                    2023                    2024                   2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars....................  2008..................  50.2-.................  51.2-.................  53.1-................  54.3-
                                    2010..................  49.6..................  51.1..................  53.0.................  54.4
Light trucks......................  2008..................  37.6-.................  38.3-.................  39.4-................  40.2-
                                    2010..................  36.3..................  37.5..................  38.4.................  39.3
Combined..........................  2008..................  45.0-.................  46.0-.................  47.6-................  48.7-
                                    2010..................  44.1..................  45.5..................  47.0.................  48.2
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 63098]]

    As a result, NHTSA estimates that, when the potential for voluntary 
overcompliance is taken into account, fuel savings attributable to more 
stringent standards will total 131-133 billion gallons, as compared to 
the 180-184 billion gallons estimated when potential voluntary 
overcompliance is not taken into account:

                                                 Table IV-125--NHTSA Estimated Fuel Saved (Billion Gallons) Under Final Standards--MYs 2017-2021
                                                                              [Including voluntary overcompliance]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  4-...................  3-...................  5-...................  7-...................  9-..................  10-
                                   2010.................  5....................  3....................  4....................  7....................  8...................  10
Light trucks.....................  2008.................  0-...................  1-...................  1-...................  3-...................  4-..................  5-
                                   2010.................  1....................  1....................  1....................  2....................  3...................  5
Combined.........................  2008.................  5-...................  3-...................  6-...................  9-...................  13-.................  16-
                                   2010.................  6....................  4....................  5....................  9....................  12..................  15
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                            Table IV-126--NHTSA Estimated Fuel Saved (Billion Gallons) Under Augural Standards--MYs 2022-2025
                                                          [Including voluntary overcompliance]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  11-...............  13-...............  15-...............  16-...............  92-
                                 2010...............  11................  13................  15................  16................  92
Light trucks...................  2008...............  6-................  6-................  7-................  8-................  41-
                                 2010...............  5.................  6.................  7.................  7.................  39
Combined.......................  2008...............  17-...............  19-...............  22-...............  24-...............  133-
                                 2010...............  16................  19................  21................  23................  131
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The agency is not projecting, however, that fuel consumption will 
be greater when voluntary overcompliance is taken into account. Rather, 
under today's final and augural standards, the agency's analysis shows 
lower fuel consumption (by 0.7-1.1 percent less over the useful lives 
of MY 2017-2025 vehicles) when potential voluntary overcompliance is 
taken into account. Simulation of voluntary overcompliance, therefore, 
does not reduce the agency's estimate of future fuel savings over the 
baseline scenario. Rather it changes the attribution of those fuel 
savings to the standards, because voluntary overcompliance attributes 
some of the fuel savings to the market. The same holds for the 
attribution of costs, other effects, and monetized benefits--inclusion 
of voluntary overcompliance does not necessarily change their amounts, 
but it does attribute some of each cost, effect, or benefit to the 
workings of the market, rather than to the final and augural standards.
    The agency further estimates CO2 emissions reductions 
attributable to today's final and augural standards will total 1,432-
1,414 million metric tons (mmt), versus the 1,953-1,987 mmt estimated 
when potential voluntary overcompliance is not taken into account: 
\1296\
---------------------------------------------------------------------------

    \1296\ Differences in the application of diesel engines and 
plug-in hybrid electric vehicles lead to differences in the 
incremental percentage changes in fuel consumption and carbon 
dioxide emissions.

                                            Table IV-127--NHTSA Estimated Avoided Carbon Dioxide Emissions (mmt) Under Final Standards--MYs 2017-2021
                                                                              [Including voluntary overcompliance]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  46-..................  29-..................  51-..................  71-..................  95-.................  110-
                                   2010.................  54...................  31...................  46...................  71...................  92..................  111
Light trucks.....................  2008.................  5-...................  8-...................  15-..................  28-..................  42-.................  56-
                                   2010.................  12...................  8....................  13...................  26...................  36..................  52
Combined.........................  2008.................  52-..................  36-..................  65-..................  99-..................  136-................  166-
                                   2010.................  66...................  39...................  58...................  98...................  127.................  162
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                       Table IV-128--NHTSA Estimated Avoided Carbon Dioxide Emissions (mmt) Under Augural Standards--MYs 2022-2025
                                                          [Including voluntary overcompliance]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  123-..............  135-..............  155-..............  171-..............  985-
                                 2010...............  121...............  137...............  158...............  172...............  993
Light trucks...................  2008...............  64-...............  68-...............  77-...............  84-...............  447-
                                 2010...............  56................  66................  73................  80................  421
Combined.......................  2008...............  187-..............  203-..............  232-..............  255-..............  1,432-

[[Page 63099]]

 
                                 2010...............  177...............  203...............  231...............  252...............  1,414
--------------------------------------------------------------------------------------------------------------------------------------------------------

    This analysis further indicates smaller or similar incremental 
outlays for additional technology under the standards when potential 
voluntary overcompliance is taken into account. Table IV-129 and Table 
IV-130 below show that total incremental technology costs attributable 
to today's standards are estimated at $127-140 billion, as compared to 
the $134-140 billion estimated when potential voluntary overcompliance 
was not taken into account:

                                          Table IV-129--NHTSA Estimated Incremental Technology Outlays ($ billion) Under Final Standards--MYs 2017-2021
                                                                              [Including voluntary overcompliance]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  5-...................  3-...................  5-...................  7-...................  9-..................  12-
                                   2010.................  5....................  3....................  4....................  6....................  9...................  11
Light trucks.....................  2008.................  0-...................  0-...................  1-...................  2-...................  3-..................  4-
                                   2010.................  1....................  1....................  1....................  2....................  3...................  4
Combined.........................  2008.................  5-...................  3-...................  5-...................  8-...................  12-.................  16-
                                   2010.................  7....................  4....................  5....................  8....................  11..................  14
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                     Table IV-130--NHTSA Estimated Incremental Technology Outlays ($ billion) Under Augural Standards--MYs 2022-2025
                                                          [Including voluntary overcompliance]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  14-...............  15-...............  19-...............  20-...............  109-
                                 2010...............  12................  13................  16................  17................  97
Light trucks...................  2008...............  5-................  5-................  6-................  6-................  31-
                                 2010...............  4.................  5.................  5.................  5.................  30
Combined.......................  2008...............  18-...............  20-...............  25-...............  26-...............  140-
                                 2010...............  16................  18................  21................  22................  127
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Because NHTSA's analysis indicated that voluntary overcompliance 
with baseline standards will reduce the share of fuel savings 
attributable to today's standards, the agency's estimate of the present 
value of total benefits will be $484-495 billion when discounted at a 3 
percent annual rate, as Tables IV-131 and IV-132 following report. This 
estimate of total benefits is lower than the $671-687 billion reported 
previously for the analysis in which potential voluntary overcompliance 
was not taken into account:

                            Table IV-131--NHTSA Estimated Present Value of Benefits ($ billion) Under Final Standards Using a 3 Percent Discount Rate--MYs 2017-2021
                                                                              [Including voluntary overcompliance]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  15.2-................  9.5-.................  17.1-................  24.1-................  32.4-...............  38.0-
                                   2010.................  17.7.................  10.3.................  15.3.................  24.1.................  31.2................  38
Light trucks.....................  2008.................  1.7-.................  2.5-.................  4.8-.................  9.2-.................  13.8-...............  18.8-
                                   2010.................  3.9..................  2.5..................  4.2..................  8.5..................  11.7................  17.2
Combined.........................  2008.................  17.0-................  12.1-................  21.9-................  33.3-................  46.3-...............  56.9-
                                   2010.................  21.5.................  12.8.................  19.4.................  32.6.................  42.9................  55.1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

       Table IV-132--NHTSA Estimated Present Value of Benefits ($ billion) Under Augural Standards Using a 3 Percent Discount Rate--MYs 2022-2025
                                                          [including voluntary overcompliance]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  42.7-.............  47.3-.............  55.3-.............  61.4-.............  343.1-

[[Page 63100]]

 
                                 2010...............  41.9..............  47.9..............  55.5..............  61.1..............  343.1
Light trucks...................  2008...............  21.6-.............  23.2-.............  26.6-.............  29.2-.............  151.6-
                                 2010...............  18.9..............  22.3..............  25................  27.5..............  141.6
Combined.......................  2008...............  64.3-.............  70.5-.............  81.9-.............  90.6-.............  494.6-
                                 2010...............  60.7..............  70.1..............  80.6..............  88.7..............  484.4
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Similarly, when accounting for potential voluntary overcompliance, 
NHTSA estimates that the present value of total benefits will decline 
from its previous estimate when future fuel savings and other benefits 
are discounted at the higher 7 percent rate. Tables IV-133 and IV-134 
report that the present value of benefits from requiring higher fuel 
economy for MY 2017-25 cars and light trucks will total $387-395 
billion when discounted using a 7 percent rate, as compared to the 
previous $525-536 billion estimate of total benefits when potential 
voluntary overcompliance is not taken into account:

                            Table IV-133--NHTSA Estimated Present Value of Benefits ($ Billion) Under Final Standards Using a 7 Percent Discount Rate--MYs 2017-2021
                                                                              [Including voluntary overcompliance]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  12.2-................  7.6-.................  13.7-................  19.4-................  26.0-...............  30.5-
                                   2010.................  14.1.................  8.3..................  12.3.................  19.3.................  25..................  30.4
Light trucks.....................  2008.................  1.4-.................  2.0-.................  3.8-.................  7.3-.................  11.0-...............  14.9-
                                   2010.................  3.1..................  2....................  3.3..................  6.7..................  9.3.................  13.6
Combined.........................  2008.................  13.5-................  9.7-.................  17.5-................  26.6-................  37.0-...............  45.4-
                                   2010.................  17.2.................  10.3.................  15.5.................  26...................  34.3................  44
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

       Table IV-134--NHTSA Estimated Present Value of Benefits ($ Billion) Under Augural Standards Using a 7 Percent Discount Rate--MYs 2022-2025
                                                          [Including voluntary overcompliance]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  34.2-.............  37.9-.............  44.3-.............  49.2-.............  275.0-
                                 2010...............  33.6..............  38.4..............  44.5..............  49................  275
Light trucks...................  2008...............  17.2-.............  18.4-.............  21.1-.............  23.2-.............  120.2-
                                 2010...............  15................  17.6..............  19.8..............  21.8..............  112.3
Combined.......................  2008...............  51.3-.............  56.3-.............  65.4-.............  72.4-.............  395.1-
                                 2010...............  48.5..............  56................  64.4..............  70.8..............  387
--------------------------------------------------------------------------------------------------------------------------------------------------------

The agency estimates, as shown in Tables IV-135 and IV-136, that net 
benefits from the CAFE standards will be $329-335 billion. This is 
compared to the previously-reported estimate of $498-507 billion which 
did not incorporate the potential for voluntary overcompliance and is 
based primarily on the reduction of benefits attributable to the 
standards when voluntary overcompliance is taken into account.

                          Table IV-135--NHTSA Estimated Present Value of Net Benefits ($ Billion) Under Final Standards Using a 3 Percent Discount Rate--MYs 2017-2021
                                                                              [Including voluntary overcompliance]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  10-..................  6-...................  11-..................  16-..................  21-.................  24-
                                   2010.................  11...................  7....................  10...................  16...................  21..................  25
Light trucks.....................  2008.................  1-...................  2-...................  4-...................  7-...................  11-.................  14-
                                   2010.................  2....................  2....................  3....................  6....................  9...................  13
Combined.........................  2008.................  11-..................  8-...................  15-..................  23-..................  31-.................  38-
                                   2010.................  14...................  8....................  13...................  23...................  29..................  38
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 63101]]

     Table IV-136--NHTSA Estimated Present Value of Net Benefits ($ Billion) Under Augural Standards Using a 3 Percent Discount Rate--MYs 2022-2025
                                                          [Including voluntary overcompliance]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  26-...............  29-...............  33-...............  38-...............  214-
                                 2010...............  28................  32................  37................  41................  228
Light trucks...................  2008...............  16-...............  17-...............  20-...............  22-...............  115-
                                 2010...............  14................  17................  19................  21................  106
Combined.......................  2008...............  43-...............  47-...............  53-...............  60-...............  329-
                                 2010...............  42................  49................  56................  62................  335
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Similarly, Tables IV-137 and IV-138 below show that NHTSA estimates 
voluntary overcompliance could reduce net benefits attributable to 
today's standards to $235-242 billion if a 7 percent discount rate is 
applied to future benefits. This estimate is lower than the previously-
reported $372-377 billion estimate of net benefits when potential 
voluntary overcompliance is not taken into account, using that same 
discount rate.

                          Table IV-137--NHTSA Estimated Present Value of Net Benefits ($ Billion) Under Final Standards Using a 7 Percent Discount Rate--MYs 2017-2021
                                                                              [Including voluntary overcompliance]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        MY Baseline              Earlier                  2017                   2018                   2019                  2020                  2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars...................  2008.................  7-...................  4-...................  8-...................  12-..................  15-.................  17-
                                   2010.................  8....................  5....................  7....................  12...................  15..................  18
Light trucks.....................  2008.................  1-...................  2-...................  3-...................  5-...................  8-..................  10-
                                   2010.................  2....................  1....................  2....................  5....................  6...................  9
Combined.........................  2008.................  8-...................  6-...................  11-..................  17-..................  23-.................  27-
                                   2010.................  10...................  6....................  9....................  16...................  21..................  28
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

     Table IV-138--NHTSA Estimated Present Value of Net Benefits ($ Billion) Under Augural Standards Using a 7 Percent Discount Rate--MYs 2022-2025
                                                          [Including voluntary overcompliance]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     MY Baseline             2022                2023                2024                2025                Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger cars.................  2008...............  18-...............  21-...............  23-...............  26-...............  150-
                                 2010...............  20................  23................  26................  30................  164
Light trucks...................  2008...............  12-...............  13-...............  15-...............  16-...............  85-
                                 2010...............  11................  12................  14................  16................  78
Combined.......................  2008...............  31-...............  33-...............  37-...............  43-...............  235-
                                 2010...............  31................  36................  40................  45................  242
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As discussed above, these reductions in fuel savings and avoided 
CO2 emissions (and correspondingly, in total and net 
benefits) attributable to today's standards, do not indicate that fuel 
consumption and CO2 emissions will be higher when potential 
voluntary overcompliance with standards is taken into account than when 
it is set aside. Rather, these reductions reflect differences in 
attribution; when potential voluntary overcompliance is taken into 
account, portions of the avoided fuel consumption and CO2 
emissions (and, correspondingly, in total and net benefits) are 
effectively attributed to the actions of the market, rather than to the 
CAFE standards.
    For more detailed information regarding NHTSA's sensitivity 
analyses for this final rule, please see Chapter X of NHTSA's FRIA.
    Additionally, due to the uncertainty and difficulty in projecting 
technology cost and efficacy through 2025, and consistent with Circular 
A-4, NHTSA conducted a full probabilistic uncertainty analysis, which 
is included in Chapter XII of the FRIA. Results of the uncertainty 
analysis are summarized below for the model year 2017-2025 standards, 
combining the passenger car and light truck fleets:
     Total Benefits at 7% discount rate: Societal benefits will 
total $7.5 billion to $721 billion, with a mean estimate of $373 
billion.
     Total Benefits at 3% discount rate: Societal benefits will 
total $9 billion to $912 billion, with a mean estimate of $467 billion.
     Total Costs at 7% discount rate: Costs will total between 
$429 million and $247 billion, with a mean estimate of $125 billion.
     Total Costs at 3% discount rate: Costs will total between 
$421 million and $250 billion, with a mean estimate of $126 billion
5. How would these final standards impact vehicle sales and employment?
    The effect of this rule on sales of new vehicles depends largely on 
how potential buyers evaluate and respond to its effects on vehicle 
prices and fuel economy. The rule will make new cars and light trucks 
more expensive, as manufacturers attempt to recover their costs for 
complying with the rule by raising vehicle prices. At the same time, 
the rule will require manufacturers to improve the fuel economy of many 
of their models, which will lower the operating costs of those models. 
While the initial purchase price of those vehicles will increase, the 
overall cost of owning them--including their operating

[[Page 63102]]

costs--will decrease, because their fuel consumption will decline 
significantly. The net effect on sales will depend on the extent to 
which consumers are willing to pay for higher fuel economy and the 
resulting savings in operating costs, versus their sensitivity to 
changes in vehicles' initial purchase prices, and is thus challenging 
to evaluate.
    The agency anticipates that consumers will place some value on 
improved fuel economy, both because it reduces the operating cost of 
the vehicles, and because recently promulgated EPA and DOT regulations 
require vehicles sold during 2017 through 2025 to display labels that 
more clearly communicate to potential buyers the fuel savings, 
economic, and environmental benefits of owning more fuel-efficient 
vehicles. We recognize that the magnitude of this effect cannot be 
predicted at this time, and that how consumers value fuel economy is a 
subject of ongoing debate. We also expect that consumers may consider 
other factors besides direct purchase price increases that affect the 
costs they pay for new vehicles, and have included these factors in the 
analysis.
    There is a broad consensus in the economic literature that the 
price elasticity of demand for automobiles is approximately -
1.0,1297,1298,1299,1300 meaning that every one percent 
increase in the price of the vehicle would reduce sales by one percent 
(assuming no change in fuel economy, quality, or other attributes of 
vehicles). NHTSA typically assumes that manufacturers will be able to 
pass all of their costs to improve fuel economy on to consumers in the 
form of higher sales prices for models offering higher fuel economy. 
The subsequent discussion of consumer welfare, however, suggests that 
by itself, a net decrease in overall operating costs may not 
necessarily produce a net increase in sales. Many consumers are more 
sensitive to vehicles' initial purchase prices than to their subsequent 
operating costs, and thus may not be willing to purchase vehicles with 
higher fuel economy even when it appears that doing so would reduce 
their overall costs to own a vehicle.
---------------------------------------------------------------------------

    \1297\ Kleit, A.N. (1990). ``The Effect of Annual Changes in 
Automobile Fuel Economy Standards,'' Journal of Regulatory 
Economics, vol. 2, pp 151-172. Available at http://www.springerlink.com/content/m04787480k056018/ (last accessed August 
1, 2012) or Docket No. NHTSA-2010-0131.
    \1298\ Bordley, R. (1994). ``An Overlapping Choice Set Model of 
Automotive Price Elasticities,'' Transportation Research B, vol 28B, 
no 6, pp 401-408. Available at http://www.sciencedirect.com/science/article/B6V99-466M3VD-1/2/3ecfe61bac45f1afb8d9b370330e3f0c (last 
accessed August 1, 2012).
    \1299\ McCarthy, P.S. (1996). ``Market Price and Income 
Elasticities of New Vehicle Demands,'' The Review of Economics and 
Statistics, vol. LXXVII, no. 3, pp. 543-547. Available at http://econpapers.repec.org/article/tprrestat/v_3a78_3ay_3a1996_3ai_3a3_3ap_3a543-47.htm (last accessed August 1, 2012) or Docket No. 
NHTSA-2010-0131.
    \1300\ This elasticity is generally considered to be a short-run 
elasticity, reflecting the immediate impacts of a price change on 
vehicle sales. For a durable good such as an auto, the elasticity 
may be smaller in the long run: though people may be able to change 
the timing of their purchase when price changes in the short run, 
they must eventually make the investment. Using a smaller elasticity 
would reduce the magnitude of the estimates presented here for 
vehicle sales, but it would not change the direction. A short-run 
elasticity is more valid for initial responses to changes in price, 
but, over time, a long-run elasticity may better reflect behavior; 
thus, the results presented for the initial years of the program may 
be more appropriate for modeling with the short-run elasticity than 
the later years of the program. A search of the literature has not 
found studies more recent than the 1970s that specifically 
investigate long-run elasticities. See., e.g., Hymans, Saul H., 
``Consumer Durable Spending: Explanation and Prediction,'' Brookings 
Papers on Economic Activity 1 (1970), which finds a short-run 
elasticity of auto expenditures (not sales) with respect to price of 
0.78 to 1.17, and a long-run elasticity of 0.3 to 0.46 (pp. 173-
206). Available at: http://www.brookings.edu/about/projects/bpea/
editions/~/media/Projects/BPEA/1970%202/1970b--bpea--hymans--
ackley--juster.PDF or Docket No. NHTSA-2010-0131 (last accessed 
August 1, 2012).
---------------------------------------------------------------------------

    There is considerable uncertainty in the economics literature about 
the extent to which consumers value fuel savings from increased fuel 
economy, and there is still more uncertainty about possible changes in 
consumer behavior over time (especially with the likelihood of consumer 
learning) and the extent to which this final rule could affect consumer 
behavior. In addition, consumers' valuation of fuel economy 
improvements depends upon the price of gasoline, which has recently 
been very volatile. On balance, the effect of this final rule on 
vehicle sales will depend upon whether the value that potential buyers 
place on the increased fuel economy that this rule requires is greater 
or less than the increase in vehicle prices that results from the rule, 
as well as on how automakers interpret buyers' likely responses to 
higher prices and increased fuel economy. Additional data would enhance 
the accuracy of predictions on these issues. In addition, it would be 
helpful to assess important emerging trends, such as the degree that 
longer financing terms affect consumers' decisionmaking as they weigh 
operating costs versus upfront costs, and the degree to which extreme 
and continued volatility itself in gas prices affects assumptions about 
likely returns on upfront technology investments.
a. How do consumers value fuel economy?
    The first question to evaluate is how consumers value fuel economy, 
or more accurately, how they value fuel savings attributable to 
increased fuel economy. Two interrelated economic concepts are commonly 
used to summarize how consumers appear to value future fuel savings 
that result from higher fuel economy. The first relates to the length 
of time that consumers consider when valuing fuel savings, or ``payback 
period,'' while the second relates to the discount rate that consumers 
apply to future savings. Although either of these two concepts can be 
used by itself to indicate how buyers value future fuel savings, our 
analysis uses a combination of the two to characterize consumers' 
valuation of future fuel savings.
    The length of time that consumers consider when valuing future fuel 
savings can significantly affect their comparisons of fuel savings to 
the increased cost of purchasing a vehicle that offers higher fuel 
economy. For example, there will be a significant difference in 
aggregate fuel savings if consumers consider 1 year, 3 years, 5 years, 
10 years, or the lifetime of the vehicle as the relevant payback 
period. The discount rate that consumers use to discount future fuel 
savings to their present value can also have a significant impact; 
higher discount rates will reduce the importance of future fuel savings 
relative to a vehicle's initial purchase price. If consumers value fuel 
savings over a short payback period, such as 1 to 2 years, then the 
discount rate will be less important, but if consumers consider fuel 
savings over a longer period, then the discount rate will become 
important.
    The payback period and discount rate are conceptual proxy measures 
for consumer decisions that may often be made without any explicit 
quantitative analysis. For example, some buyers choosing among a set of 
vehicles may know what they have been paying recently for fuel, what 
they are likely to pay to buy each of the vehicles considered, and some 
attributes--including labeled fuel economies--of those vehicles. 
However, these buyers may then make a choice without actually trying to 
estimate how much they would pay to fuel each of the vehicles they are 
considering buying; for such buyers, the idea of a payback period and 
discount rate may have no explicit meaning. This does not, however, 
limit the utility of these concepts for the agency's analysis. If, as a 
group, buyers behave as if they value fuel consumption by considering 
an

[[Page 63103]]

explicit payback period and discount rate, these concepts remain useful 
as a basis for estimating the market response to increases in fuel 
economy accompanied by increases in price.
    Information regarding the number of years that consumers value fuel 
savings comes from several sources. In past analyses, NHTSA has used 
five years as representing the average payback period, because this is 
the average length of time of a financing agreement.\1301\ We conducted 
a search of the literature for additional estimates of consumer 
valuation of fuel savings, in order to determine whether the 5 year 
assumption was accurate or should be revised. A recent paper by David 
Greene \6\ examined studies from the past 20 years of consumers' 
willingness to pay for fuel economy and found that ``the available 
literature does not provide a reasonable consensus,'' although the 
author states that ``manufacturers have repeatedly stated that 
consumers will pay, in increased vehicle price, for only 2-4 years in 
fuel savings'' based on manufacturers' own market research. The 
National Research Council \1302\ also used a 3 year payback period as 
one way to compare consumer valuation of benefits to a full lifetime 
value. A survey conducted for the Department of Energy in 2004, which 
asked 1,000 households how much they would pay for a vehicle that saved 
them $400 or $1,200 per year in fuel costs, found implied payback 
periods of 1.5 to 2.5 years. In reviewing this survey, Greene 
concluded: ``The striking similarity of the implied payback periods 
from the two subsamples would seem to suggest that consumers understand 
the questions and are giving consistent and reliable responses: They 
require payback in 1.5 to 2.5 years.'' However, Turrentine and Kurani's 
\1303\ in-depth interviews of 57 households found almost no evidence 
that consumers think about fuel economy in terms of payback periods. 
When asked such questions, some consumers became confused while others 
offered time periods that were meaningful to them for other reasons, 
such as the length of their car loan or lease.
---------------------------------------------------------------------------

    \1301\ National average financing terms for automobile loans are 
available from the Board of Governors of the Federal Reserve System 
G.19 ``Consumer Finance'' release. See http://www.federalreserve.gov/releases/g19/ (last accessed August 25, 
2011). The average new car loan at an auto finance company in the 
first quarter of 2011 is for 62 months at 4.73%.
    \1302\ National Research Council (2002), ``Effectiveness and 
Impact of Corporate Average Fuel Economy (CAFE) Standards'', 
National Academies Press, Washington DC.
    \1303\ Turrentine, T.S. and K.S. Kurani, 2007. ``Car Buyers and 
Fuel Economy,'' Energy Policy, vol. 35, pp. 1213-1223.
---------------------------------------------------------------------------

    The effective discount rate that consumers have used in the past to 
value future fuel economy savings has been studied in many different 
ways and by many different economists. Greene examined and compiled 
many of these analyses and found: ``Implicit consumer discount rates 
were estimated by Greene (1983) based on eight early multinomial logit 
choice models. * * *The estimates range from 0 to 73% * * * Most fall 
between 4 and 40%.'' Greene added: ``The more recent studies exhibit as 
least a wide a range as the earlier studies.''
    This is an extremely broad range. With such uncertainty about how 
consumers value future fuel savings and the discount rates they might 
use to determine the present value of future fuel savings, NHTSA chose 
for purposes of this analysis to utilize the standard 3 and 7 percent 
social discount rates recommended by OMB guidance to evaluate the costs 
and benefits of regulation. To the extent that some consumers appear to 
apply higher discount rates, the analysis of likely sales consequences 
would be different. This review leads us to conclude that consumer 
valuation of future fuel savings is highly uncertain, leading to 
different potential scenarios for vehicle sales. A negative impact on 
sales is possible if consumers don't value the fuel savings or desire 
very short payback periods, because the final rule will lead to an 
increase in the perceived ownership cost of vehicles. In addition, 
sales decreases are possible if gasoline prices are lower than 
projected by manufacturers and the agencies or technology costs are 
higher than projected. A positive impact on sales is also possible, 
because the final rule will lead to a significant decrease in the 
lifetime cost of vehicles, and with consumer learning over time, this 
effect may produce an increase in sales. Whether a change in sales will 
result from this final rule, or will result from other factors that 
affect the way drivers consider fuel economy in their purchasing 
decisions, is subject to uncertainty.
b. How do manufacturers believe consumers value fuel savings 
attributable to higher fuel economy?
    Although some manufacturers have indicated in public remarks or 
confidential statements to NHTSA that their plans to apply fuel-saving 
technology depend on fuel prices and consumers' willingness to pay for 
fuel economy improvements, the agency does not have specific and robust 
information regarding how manufacturers interpret consumers' valuation 
of fuel savings. Based on our review of the literature and available 
evidence, it is not clear how accurately manufacturers are accounting 
for consumer valuation of fuel economy in making their pricing 
decisions, nor how that accuracy will be affected in the future as 
manufacturers' costs to produce vehicles rise in response to the final 
standards. In standard economic theory, if manufacturers believe that 
consumers value the fuel savings at a higher dollar level than the 
technology costs, then manufacturers' profit motives would lead them to 
voluntarily add the cost-effective technologies to their vehicles in 
the absence of government mandates, in the belief that their sales and 
profits would increase.
    This concept ties into the basic question of whether manufacturers 
are providing the amount of fuel economy that consumers wish to 
purchase--whether there is matching between consumers' demand for fuel 
economy and the firms' supply of fuel economy. It is possible that the 
light-duty vehicle market is currently operating according to standard 
economic assumptions, and manufacturers are providing approximately the 
amount of fuel economy that consumers wish to purchase, because they 
correctly interpret consumers' valuation of fuel economy. On the other 
hand, it is possible that manufacturers are providing more or less fuel 
economy than consumers wish to purchase, because they do not correctly 
understand consumers' valuation of fuel economy. Because NHTSA does not 
know which scenario is correct today, and cannot predict which will 
apply in the future, we evaluate the response of sales under both 
scenarios in the following sections in order to assess the range of 
potential impacts that could be attributable to this final rule.
    As discussed above, it is very difficult to determine how consumers 
will react to fuel economy improvements, and manufacturers presumably 
face this same challenge. Consumer consideration of fuel economy 
appears to evolve based on a variety of factors (fuel price, 
recessions, marketing), and consumers can react quickly to changes in 
these factors, sometimes more rapidly than the industry is able to 
change its product offerings. There have been examples of periods when 
demand for fuel efficient vehicles exceeded the available supply of 
highly efficient vehicles, and other periods where very efficient 
vehicle models were introduced into the market but sales stalled. If 
manufacturers did not

[[Page 63104]]

accurately forecast consumers' demand for fuel efficient vehicles, 
manufacturers' investment in vehicle technologies would not result in 
desired payoff. Manufacturers may be likely to be particularly risk 
averse with regard to future changes in fuel prices, in large part due 
to the substantial capital investments that are necessary to develop 
and market fuel-efficient models. If a manufacturer invests 
substantially in fuel efficient technologies expecting higher consumer 
demand than realized, then the manufacturer has incurred the costs of 
investment but not reaped the benefits of those investments. On the 
other hand, if a manufacturer does not invest in fuel efficient 
technologies, then the manufacturer may lose some market share in the 
short run if demand for fuel economy is higher than expected, but they 
still retain the option of investing in fuel efficient technologies. 
The predicted level of investment under uncertainty related to consumer 
demand for fuel efficient vehicles and irreversibility of investment 
for fuel efficient technologies would be less than the predicted level 
of investment under no uncertainty and complete reversibility.
    In addition, there is reason to believe there may be risk aversion 
on the consumer side. The simultaneous investment by all companies may 
also encourage consumer confidence in the new technologies. If only one 
company adopted new technologies, early adopters might gravitate toward 
that company, but early adopters tend to be a relatively small portion 
of the public. More cautious buyers, who are likely to be more 
numerous, might wait for greater information before moving away from 
well-known technologies. If all companies adopt advanced technologies 
at the same time, though, potential buyers may perceive the new 
technologies as the new norm rather than as a risky innovation. They 
will then be more willing to move to the new technologies. As some 
commenters have pointed out, simultaneous action required by the rule 
may change buyers' expectations (their reference points) for fuel 
economy, and investing in more fuel economy may seem less risky than in 
the absence of the rule.\1304\
---------------------------------------------------------------------------

    \1304\ We note that this risk aversion by itself does not 
indicate a market failure; but that the risk aversion leads to 
under-provision of social benefits (e.g., reduction in greenhouse 
gas emissions).
---------------------------------------------------------------------------

    Further, the certainty of the regulations reduces the costs of 
meeting them, because there will be a) more economies of scale and more 
learning curve benefits due to greater cumulative production of fuel-
efficient technologies and b) more incentive for automakers and 
suppliers to invest in R&D to create future fuel-efficient 
technologies.\1305\ We note that this risk aversion by itself does not 
indicate a market failure; it is the fact that the risk aversion leads 
to under provision of social benefits (e.g., reduction in greenhouse 
gas emissions).
---------------------------------------------------------------------------

    \1305\ The literature reviewed by Popp, Newell, and Jaffe (2010) 
shows that environmental regulation has played an important role in 
inducing innovation that reduces the cost of achieving environmental 
goals; Popp (2011) provides evidence that consumer pressure alone is 
rarely sufficient to achieve broad diffusion of environmentally 
friendly technologies.
---------------------------------------------------------------------------

c. How did NHTSA attempt to calculate potential impacts of the final 
rule on vehicle sales under the different scenarios discussed above?
    Given the considerable uncertainty associated with consumer 
valuation of fuel savings and manufacturers' understanding of that 
valuation, NHTSA sought to assess potential sales impacts under two 
possible basic scenarios: first, one in which the light-duty vehicle 
market is currently operating according to standard theoretical 
economic principles, and manufacturers are providing exactly the amount 
of fuel economy that consumers wish to purchase, because they perfectly 
understand consumers' valuation of fuel economy; and second, one in 
which manufacturers are not providing the exact amount of fuel economy 
that consumers wish to purchase (either too much or too little), 
because they do not have perfect information regarding consumers' 
valuation of fuel economy. In the first scenario, manufacturers and 
consumers would behave as though they are assuming the same payback 
period (and/or discount rate) for fuel savings attributable to higher 
fuel economy; in the second, manufacturers and consumers would behave 
as though they are assuming different payback periods (and/or discount 
rates).
    For years, consumers have been learning about the benefits that 
accrue to them from owning and operating vehicles with greater fuel 
efficiency. This type of learning is expected to continue before and 
during the model years affected by this rule, particularly given the 
new fuel economy labels that clarify potential economic effects and 
should therefore reinforce that learning. Therefore, some increase in 
the demand for, and production of, more fuel efficient vehicles is 
incorporated in the market driven baseline.
    The fuel savings associated with operating more fuel efficient 
vehicles will be more salient to individuals who own them, causing 
their subsequent purchase decisions to shift closer to minimizing the 
total cost of ownership over the lifetime of the vehicle. Second, this 
appreciation may spread across households through word of mouth and 
other forms of communications. Third, as more motorists experience the 
time and fuel savings associated with greater fuel efficiency, the 
price of used cars will better reflect such efficiency, further 
reducing the cost of owning more efficient vehicles for the buyers of 
new vehicles (since the resale price will increase). If these induced 
learning effects are strong, the rule could potentially increase total 
vehicle sales over time. These increased sales would not occur in the 
model years first affected by the rule, but they could occur once the 
induced learning takes place. It is not possible to quantify these 
learning effects years in advance and that effect may be speeded or 
slowed by other factors that enter into a consumer's valuation of fuel 
efficiency in selecting vehicles.
    The possibility that the rule will (after a lag for consumer 
learning) increase sales need not rest on the assumption that 
automobile manufacturers are failing to pursue profitable opportunities 
to supply the vehicles that consumers demand. In the absence of the 
rule, no individual automobile manufacturer would find it profitable to 
move toward the more efficient vehicles mandated under the rule. In 
particular, no individual company can fully internalize the future 
boost to demand resulting from the rule. If one company were to make 
more efficient vehicles, counting on consumer learning to enhance 
demand in the future, that company would capture only a fraction of the 
extra sales so generated, because the learning at issue is not specific 
to any one company's fleet. Many of the extra sales would accrue to 
that company's competitors.
    In the language of economics, consumer learning about the benefits 
of fuel efficient vehicles involves positive externalities (spillovers) 
from one company to the others.\1306\ These positive externalities may 
lead to benefits for manufacturers as a whole. We emphasize that this 
discussion has been tentative and qualified. Social learning of related 
kinds has been

[[Page 63105]]

identified in a number of contexts,\1307\ and the agency expects that 
it will influence consumers' future valuation of fuel economy. Thus, 
while it is difficult to determine how consumers will react to fuel 
economy improvements attributable to the final rule, we believe that it 
is likely that consumers will learn more about and increasingly value 
fuel economy improvements in the future. If manufacturers assume that 
consumers value fuel economy less than consumers actually value fuel 
economy, there will be a demand pull for better fuel economy vehicles 
into the market, and by virtue of the final standards forcing 
manufacturers to increase better fuel economy product offerings; it is 
possible that sales could increase as a result.
---------------------------------------------------------------------------

    \1306\ Industry-wide positive spillovers of this type are hardly 
unique to this situation. In many industries, companies form trade 
associations to promote industry-wide public goods. For example, 
merchants in a given locale may band together to promote tourism in 
that locale. Antitrust law recognizes that this type of coordination 
can increase output.
    \1307\ See Hunt Alcott, Social Norms and Energy Conservation, 
Journal of Public Economics (March 2011), available at http://opower.com/uploads/library/file/1/allcott_2011_jpubec_-_social_norms_and_energy_conservation.pdf (last accessed August 1, 2012); 
Christophe Chamley, Rational Herds: Economic Models of Social 
Learning (Cambridge, 2004), available at http://bilder.buecher.de/zusatz/21/21995/21995098_lese_1.pdf (last accessed August 1, 
2012).
---------------------------------------------------------------------------

d. How did NHTSA illustrate these scenarios analytically?
    The agency examined a number of cases to illustrate these 
scenarios. Sales impacts were determined for 6 cases that are 
combinations of manufacturers' beliefs of how consumers value fuel 
savings and consumers' valuation of fuel savings. The first two cases 
assume a flat baseline (no voluntary improvement in fuel economy above 
the MY 2016 standards by manufacturers absent new regulations), 
consistent with the agency's main analysis in this rulemaking. In these 
first two cases we assume consumers value fuel savings for a 3 year 
period or a 5 year period (the average length of a loan), and we also 
determine the breakeven point of consumer valuation of fuel savings, 
where there would be no impact on sales, assuming all other factors 
remain constant. As can be seen in Table IV-140 below, with a flat 
baseline and assuming that consumers consider fuel economy benefits 
over a 3 or 5 year period, benefits exceed costs to the point that 
consumers will purchase more vehicles and sales will increase. NHTSA 
estimates a break-even point of 2.35 years for scenarios with a flat 
baseline; that is, if consumers value fuel savings over an average 2.35 
years, neither an increase nor a decrease in sales is expected.
    The next 4 cases assume that manufacturers will, absent new 
regulations, implement technologies in response to their belief that 
consumers have either a 1 year, 3 year, or 5 year payback period, and 
for 3 of these scenarios where the consumer also values fuel economy 
over the same payback periods assumed by manufacturers. For example, 
the agency also examined the impact on sales and employment under the 
sensitivity analysis assumption that the baseline fleet included the 
manufacturers voluntarily implementing any technology that had a 1 year 
or less payback period for consumers. In this analysis, the least 
expensive technologies relative to their effects on fuel economy 
improvement (those that had a consumer payback where fuel savings over 
the first year of use were higher than new vehicle price increases) 
were assumed to be voluntarily implemented by manufacturers, resulting 
in improved fuel economy in the baseline case which would have occurred 
without adoption of this rule. The same methodology was used in the 
cases where both manufacturers and consumers value fuel savings over 
either a 3 year period or a 5 year period. All three of these cases 
result in reductions in sales, with the impact decreasing as the 
manufacturer's baseline increases from 1 year to 3 year to 5 years. In 
a final case we assume that manufacturers voluntarily implement any 
technology that had a 1 year or less payback period for consumers, but 
that consumers value fuel savings over a 3 year period.
    Under that case, the breakeven point for consumers is about 3.1 
years--meaning that if consumers valued their fuel savings over 3.1 
years in this scenario, there would be no impact on sales; in other 
words if the payback period of the fuel saving technologies was less 
than 3.1 years, then the vehicle sales would increase and vice versa.
    For the reader's reference, Table IV-139 below shows the included 
combinations of payback periods assumed--for these different cases--to 
represent consumers' and manufacturers' decisions. The agency 
considered these different cases to represent an illustrative range of 
possible outcomes under the scenarios described above.

                          Table IV-139--Scenarios Considered for Sales Impact Analysis
----------------------------------------------------------------------------------------------------------------
                                                     Payback period representing buyers' decisions
     Payback period representing      --------------------------------------------------------------------------
       manufacturers' decisions                 1 Year                  3 Years                  5 Years
----------------------------------------------------------------------------------------------------------------
0 Years (Flat).......................  .......................   Included..............  Included.
1 Year...............................   Included..............   Included.               .......................
3 Years..............................  .......................   Included..............  .......................
5 Years..............................  .......................  .......................  Included.
----------------------------------------------------------------------------------------------------------------

    For the analysis for each of these cases, NHTSA makes several 
assumptions. For the fuel savings part of the equation, as shown in the 
table, we assumed that the average purchaser considers the fuel savings 
they would receive over a 1, 3, or 5 year timeframe. The present values 
of these savings were calculated using a 3 and 7 percent discount rate. 
We used a fuel price forecast that included taxes, because this is what 
consumers must pay. Fuel savings were calculated over the first 1, 3, 
or 5 years and discounted back to a present value.
    The agency believes that consumers may consider several other 
factors over the 5 year horizon when contemplating the purchase of a 
new vehicle. The agency added some of these factors into the 
calculation to represent how an increase in technology costs might 
affect consumers' buying considerations.
    First, consumers might consider the sales taxes they have to pay at 
the time of purchasing the vehicle. As these costs are transfer 
payments, they are not included in the societal cost of the program, 
but they are included as one of the increased costs to the consumer for 
these standards. We took the most recent auto sales tax by state \1308\ 
and

[[Page 63106]]

weighted them by population by state to determine a national weighted-
average sales tax of 5.46 percent (hereafter rounded to 5.5 percent in 
the discussion). NHTSA sought to weight sales taxes by new vehicle 
sales by state; however, such data were unavailable. NHTSA recognizes 
that for this purpose, new vehicle sales by state is a superior 
weighting mechanism to Census population; in an effort to approximate 
new vehicle sales by state NHTSA studied the change in new vehicle 
registrations (using R.L. Polk data) by state across recent years and 
developed a corresponding set of weights. The resulting national 
weighted-average sales tax rate was almost identical to that resulting 
from the use of Census population estimates as weights, just slightly 
above 5.5 percent. NHTSA opted to utilize Census population rather than 
the registration-based proxy of new vehicle sales as the basis for 
computing this weighted average, as the end results were negligibly 
different and the analytical approach involving new vehicle 
registrations had not been as thoroughly reviewed.
---------------------------------------------------------------------------

    \1308\ See http://www.factorywarrantylist.com/car-tax-by-state.html (last accessed August 1, 2012). Note that county, city, 
and other municipality-specific taxes were excluded from NHTSA's 
weighted average, as the variation in locality taxes within states, 
lack of accessible documentation of locality rates, and difficulty 
in obtaining reliable sets of weights to apply to locality taxes 
complicates the ability to perform this analysis. Localities with 
relatively high automobile sales taxes may have relatively fewer 
auto dealerships, as consumers would likely endeavor to purchase 
vehicles in areas with lower locality taxes.
---------------------------------------------------------------------------

    Second, we considered insurance costs over the 5 year period. More 
expensive vehicles will require more expensive collision and 
comprehensive (e.g., theft) car insurance. The increase in insurance 
costs is estimated from the average value of collision plus 
comprehensive insurance as a proportion of average new vehicle price. 
Collision plus comprehensive insurance is the portion of insurance 
costs that depend on vehicle value. A recent study by Quality Planning 
\1309\ provides the average value of collision plus comprehensive 
insurance for new vehicles, in 2010$, is $521 ($396 of which is 
collision and $125 of which is comprehensive). The average consumer 
expenditure for a new passenger car in 2011, according to the Bureau of 
Economic Analysis was $24,572 and the average price of a new light 
truck was $31,721 in $2010.\1310\ Using sales volumes from the Bureau, 
we determined an average passenger car and an average light truck price 
was $27,953 in $2010 dollars.\1311\ Average prices and estimated sales 
volumes are needed because price elasticity is an estimate of how a 
percent increase in price \1312\ affects the percent decrease in sales. 
Dividing the cost to insure a new vehicle by the average price of a new 
vehicle gives the proportion of comprehensive plus collision insurance 
as 1.86 percent of the price of a vehicle. As vehicles' values decline 
with vehicle age, comprehensive and collision insurance premiums 
likewise decline. Data on the change in insurance premiums as a 
function of vehicle age are scarce; however, NHTSA utilized data from 
the aforementioned Quality Planning study that cite the cost to insure 
the average vehicle on the road today (average age 10.8 years)\1313\ to 
enable a linear interpolation of the change in insurance premiums 
during the first 11 years of a typical vehicle's life. Using this 
interpolation, as a percentage of the base vehicle price of $27,953, 
the cost of collision and comprehensive insurance in each of the first 
five years of a vehicle's life is 1.86 percent, 1.82 percent, 1.75 
percent, 1.64 percent, and 1.50 percent, respectively, or 8.57 percent 
in aggregate. Discounting that stream of insurance costs back to 
present value indicates that the present value of the component of 
insurance costs that vary with vehicle price is equal to 8.0 percent of 
the vehicle's price at a 3 percent discount rate.
---------------------------------------------------------------------------

    \1309\ ``During Recession, American Drivers Assumed More Risk to 
Reduce Auto Insurance Costs,'' Quality Planning, March 2011. See 
https://www.qualityplanning.com/media/4312/110329%20tough%20times_f2.pdf (last accessed August 1, 2012).
    \1310\ U.S. Department of Commerce, Bureau of Economic 
Analysis,--Table 7.2.5S. Auto and Truck Unit Sales, Production, 
Inventories, Expenditures, and Price, Available at http://www.bea.gov/itable/ (last accessed August 1, 2012)
    \1311\ http://www.bls.gov/cpi/cpid11av.pdf, Table 1A. Consumer 
Price Index for All Urban Consumers (CPI-U): U.S. city average, by 
expenditure category and commodity and service group, for new 
vehicles. (Last accessed August 1, 2012)
    \1312\ When estimating the sales impact, the price of the 
vehicle was increased from these MY 2011 prices based on the costs 
of estimated safety and MY 2011-2016 fuel economy rules. See the 
cumulative impact section for an estimate of those costs. For 
passenger cars $871 was added to the average price of a MY 2011 
passenger car to make the total baseline price for MY 2017 $25,443 
($24,572 + $871), for light trucks $1,090 was added to the average 
price of a MY 2011 light truck to make the total baseline price for 
MY 2017 $32,811 ($31,721 + $1,090). All of these values are in 2010 
dollars.
    \1313\ See https://www.polk.com/company/news/average_age_of_vehicles_reaches_record_high_according_to_polk (last accessed 
August 1, 2012).
---------------------------------------------------------------------------

    Third, we considered that 70 percent of new vehicle purchasers take 
out loans to finance their purchase.\1314\ Using proprietary forecasts 
available from Global Insight, NHTSA developed an average of 48-month 
\1315\ bank and auto finance company loan rates for years 2017 through 
2025, which--when deflated by Global Insight's corresponding forecasts 
of the CPI--is 5.16 percent. In the construction of this estimate, 
NHTSA assumed an equal distribution of bank and auto finance company 
loans--an assumption necessitated by the lack of data on the 
distribution of the volume of loans between the differing types of 
creditors. NHTSA opted to adjust future loan rates using the CPI rather 
than the GDP deflator as this analysis is intended to facilitate 
further analysis from the perspective of the consumer, for which the 
CPI is the preferred deflation factor. At these terms the average 
person taking a loan will pay 13.7 percent more (undiscounted) for 
their vehicle over the 5 years than a consumer paying cash for the 
vehicle at the time of purchase. Discounting future loan payments at a 
3 percent discount rate, a consumer financing a vehicle purchase pays 
5.43 percent more as opposed to an all cash purchase. Taking into 
account to make the total baseline price for MY 2017 $25,443 ($24,572 + 
$871), for light trucks $1,090 was added to the average price of a MY 
2011 light truck to make the total baseline price for MY 2017 $32,811 
($31,721 + $1,090). All of these values are in 2010 dollars. Assuming 
that only 70 percent of vehicle purchases are financed, the average 
consumer would pay 3.80 (=0.70 * 5.43 percent) percent more than the 
retail price of a vehicle.
---------------------------------------------------------------------------

    \1314\ Bird, Colin. ``Should I Pay Cash, Lease or Finance My New 
Car?'' http://www.cars.com/go/advice/Story.jsp?section=fin&story=should-i-pay-cash&subject=loan-quick-start&referer=advice&aff=sacbee, July 12, 2011, citing CNW Marketing 
Research. (Last accessed August 1, 2012)
    \1315\ No projections were available for rates of loan terms of 
60 months. NHTSA compared the historical difference of 48-month and 
60-month loan rates and determined the 48-month rate to be a 
suitable proxy for the 60-month rate.
---------------------------------------------------------------------------

    Fourth, we considered the residual value (or resale value) of the 
vehicle after 5 years and expressed this as a percentage of the new 
vehicle price. If the price of the vehicle increases due to fuel 
economy technologies, the resale value of the vehicle will go up 
proportionately. The average resale price of a vehicle after 5 years is 
about 35 percent \1316\ of the original purchase price. Discounting the 
residual value back 5 years using a 3 percent discount rate (=35 
percent * .8755) gives an effective residual value of 30.64 percent. 
Note that added CAFE technology could also result in more expensive or 
more frequent repairs. However, we do not have data to verify the 
extent to which this would be a factor during the first 5 years of 
vehicle life. We add these four factors together. At a 3 percent 
discount

[[Page 63107]]

rate, the consumer considers that he could get 30.64 percent back upon 
resale in 5 years, but will pay 5.5 percent more for taxes, 8.0 percent 
more in insurance, and 5.1 percent more for loans, resulting in an 12.0 
percent return on the increase in price for fuel economy technology 
(=30.6 percent - 5.5 percent-8.0 percent - 5.1 percent). Thus, the 
increase in price per vehicle would be multiplied by 0.88 (=1 - 0.12) 
before subtracting the fuel savings to determine the overall net 
consumer valuation of the increase of costs on this purchase decision. 
This process results in estimates of the payback period for MY 2025 
vehicles of 2 years for light trucks and 4 years for passenger cars at 
a 3 percent discount rate. For ease of presentation, we combine the 
impact on passenger car and light truck sales for the Preferred 
Alternative only for the combined 9 year period of 2017-2025, and we 
compare the sales impact for both the MY 2010 baseline and for the MY 
2008 baseline at the 3 percent and 7 percent discount rates. There is 
not a significant difference in sales impacts depending upon the 
baseline considered (2010 versus 2008) and the discount rate impact is 
predictable, with sales increasing to a lesser extent under a 7 percent 
discount rate than in the case of a 3 percent discount rate, since 
benefits are valued lower with a higher discount rate.
---------------------------------------------------------------------------

    \1316\ Consumer Reports, August 2008, ``What That Car Really 
Costs to Own,'' Available at http://www.consumerreports.org/cro/cars/pricing/what-that-car-really-costs-to-own-4-08/overview/what-that-car-really-costs-to-own-ov.htm (last accessed August 1, 2012).

                    Table IV-140--Potential Sales Impact for Passenger Cars and Light Trucks
                                             [Vehicles in thousands]
----------------------------------------------------------------------------------------------------------------
                                                   MYs 2017-2025 Sales impact in   MYs 2017-2025 Sales impact in
                                                    thousands and in percent of     thousands and in percent of
      Years fuel valued by          Years fuel       total sales  (3% discount       total sales  (7% discount
          manufacturers              valued by                 rate)                           rate)
                                     consumers   ---------------------------------------------------------------
                                                      (000's)           (%)           (000's)           (%)
----------------------------------------------------------------------------------------------------------------
                                                  2008 Baseline
----------------------------------------------------------------------------------------------------------------
0 Flat..........................           3 yr.             911             0.6             757             0.5
0 Flat..........................           5 yr.           3,784             2.7           3,232             2.3
1 yr. *.........................         1 yr. *          -2,696            -1.9          -2,322            -1.6
1 yr............................           3 yr.            -360            -0.3            -445            -0.3
3 yr. *.........................         3 yr. *            -530            -0.4            -542            -0.4
5 yr. *.........................         5 yr. *              -3            -0.0             -36            -0.0
----------------------------------------------------------------------------------------------------------------
                                                  2010 Baseline
----------------------------------------------------------------------------------------------------------------
0 Flat..........................           3 yr.             988             0.7             867             0.6
0 Flat..........................           5 yr.           3,804             2.7           3,261             2.3
1 yr. *.........................         1 yr. *          -2,405            -1.7          -2,611            -1.8
1 yr............................           3 yr.             -50            -0.0            -130            -0.1
3 yr. *.........................         3 yr. *            -309            -0.2            -314            -0.2
5 yr. *.........................         5 yr. *             124             0.1              94             0.1
----------------------------------------------------------------------------------------------------------------
* These scenarios are presented as theoretical cases. NHTSA believes it is unlikely that manufacturers and
  consumers would value improvements in fuel economy identically, and believes that on average, manufacturers
  will behave more conservatively in their assumptions of how consumers value fuel economy than how on average
  consumers will actually behave. NHTSA expects that in practice the number of years fuel is valued by
  manufacturers will be shorter than the number of years fuel is valued by consumers.

e. What have commenters and other sources said in terms of potential 
sales impacts attributable to the final rule?
    A recent study on the effects on sales, attributable to NHTSA 
regulatory programs, including the fuel economy program was undertaken 
by the Center for Automotive Research (CAR).\1317\ CAR examined the 
impacts of alternative fuel economy increases of 3%, 4%, 5%, and 6% per 
year on the outlook for the U.S. motor vehicle market, including the 
impacts of likely increases in costs for increased fuel economy (based 
on the NAS report, which estimates higher costs than NHTSA's current 
estimates) and required safety features. The CAR analysis also examined 
the technologies that would be used to achieve higher fuel economy, and 
how their production and use would affect the new vehicle market, 
production volumes, and automotive manufacturing employment in the year 
2025. The required safety mandates were assumed to cost $1,500 per 
vehicle in 2025, but CAR did not evaluate the value of those safety 
mandates to consumers. Thus the CAR study cannot be compared to other 
studies, as it combines the cost of additional safety mandates along 
with costs for fuel economy improvements. The CAR study likely 
underestimates sales (that is, it overestimates the reduction in sales 
resulting from increased CAFE standards alone), as it assigns no value 
to consumers' perceived values of additional safety features. In any 
case, unlike other analyses discussed in this final rule, sales changes 
shown cannot be solely attributed to the rulemaking.
---------------------------------------------------------------------------

    \1317\ ``The U.S. Automotive Market and Industry in 2025,'' 
Center for Automotive Research, June 2011, available at http://www.cargroup.org/assets/files/ami.pdf (last accessed August 1, 
2012).
---------------------------------------------------------------------------

    There are many factors that go into the CAR analysis of sales. CAR 
assumes a 22.0 mpg baseline, two gasoline price scenarios of $3.50 and 
$6.00 per gallon, VMT schedules by age, and a rebound rate of 10 
percent (although it appears that the CAR report assumes a rebound 
effect even for the baseline and thus negates the impact of the rebound 
effect). Fuel savings are assumed to be valued by consumers over a 5 
year period at a 10 percent discount rate. The impact on sales varies 
by scenario, the estimates of the cost of technology, the price of 
gasoline, etc. At $3.50 per gallon, the net change in consumer savings 
(costs minus the fuel savings valued by consumers) is a net cost to 
consumers of $359 for the 3% scenario, a net cost of $1,644 for the 4% 
scenario, a net cost of $2,858 for the 5% scenario, and a net consumer 
cost of $6,525 for the 6% scenario. At $6.00 per gallon, the net change 
in consumer savings (costs minus the fuel savings valued by consumers) 
is a net savings to consumers of $2,107 for the 3% scenario, a net 
savings of $1,131 for the 4% scenario, a net savings of $258 for

[[Page 63108]]

the 5% scenario, and a net consumer cost of $3,051 for the 6% scenario. 
Thus, the price of gasoline can be a significant factor in affecting 
how consumers view whether they are getting value for their 
expenditures on technology. Table 14 on page 42 of the CAR report 
presents the results of their estimates of the 4 alternative mpg 
scenarios and the 2 prices of gasoline on light vehicle sales and 
automotive employment. The table below shows these estimates. The 
baseline for the CAR report is 17.9 million sales and 877,075 
employees. The price of gasoline at $6.00 per gallon, rather than $3.50 
per gallon results in about 2.1 million additional sales per year and 
100,000 more employees in year 2025.

   Table IV-141--Center for Automotive Research (CAR) Report Estimates of Sales and Employment Impacts in 2025
----------------------------------------------------------------------------------------------------------------
                                       CAFE Requirement   CAFE Requirement   CAFE Requirement   CAFE Requirement
                                       of a 3% increase   of a 4% increase   of a 5% increase   of a 6% increase
                                       in mpg per year    in mpg per year    in mpg per year    in mpg per year
----------------------------------------------------------------------------------------------------------------
                                                Gasoline at $3.50
----------------------------------------------------------------------------------------------------------------
Sales (millions)....................               16.4               15.5               14.7               12.5
Employment..........................          803,548            757,700            717,626            612,567
----------------------------------------------------------------------------------------------------------------
                                                Gasoline at $6.00
----------------------------------------------------------------------------------------------------------------
Sales...............................               18.5               17.6               16.9               14.5
Employment..........................          903,135            861,739            826,950            711,538
----------------------------------------------------------------------------------------------------------------

    Figure 13 on page 44 of the CAR report shows a graph of historical 
automotive labor productivity, indicating that there has been a long 
term 0.4 percent productivity growth rate from 1960-2008, to indicate 
that there will be 12.26 vehicles produced in the U.S. per worker in 
2025 (which is higher than NHTSA's estimate--see below). In addition, 
the CAR report discusses the jobs multiplier. For every one automotive 
manufacturing job, they estimate the economic contribution to the U.S. 
economy of 7.96 jobs \1318\ stating ``In 2010, about 1 million direct 
U.S. jobs were located at an auto and auto parts manufacturers; these 
jobs generated an additional 1.966 million supplier jobs, largely in 
non-manufacturing sectors of the economy. The combined total of 2.966 
jobs generated a further spin-off of 3.466 million jobs that depend on 
the consumer spending of direct and supplier employees, for a total 
jobs contribution from U.S. auto manufacturing of 6.432 million jobs in 
2010. The figure actually rises to 7.96 million when direct jobs 
located at new vehicle dealerships (connected to the sale and service 
of new vehicles) are considered.''
---------------------------------------------------------------------------

    \1318\ Kim Hill, Debbie Menk, and Adam Cooper, ``Contribution of 
the Automotive Industry to the Economies of All Fifty States and the 
United States,'' The Center for Automotive Research, Ann Arbor, MI, 
April 2010. Available at http://www.cargroup.org/?module=Publications&event=View&pubID=16. Docket No. NHTSA-2010-
0131.
---------------------------------------------------------------------------

    CAR uses econometric estimates of the sensitivity of new vehicle 
purchases to prices and consumer incomes and forecasts of income growth 
through 2025 to translate these estimated changes in net vehicle prices 
to estimates of changes in sales of MY 2025 vehicles; higher net 
prices--which occur when increases in vehicle prices exceeds the value 
of fuel savings--reduce vehicle sales, while lower net prices increase 
new vehicle sales in 2025. We do not have access to the statistical 
models that CAR develops to estimate the effects of price and income 
changes on vehicle sales. CAR's analysis assumes continued increases in 
labor productivity over time and then translates the estimated impacts 
of higher CAFE standards on net vehicle prices into estimated impacts 
on sales and employment in the automobile production and related 
industries.
    The agency disagrees with the cost estimates in the CAR report for 
new technologies, the addition of safety mandates into the costs, and 
various other assumptions. Many commenters stated that they expected 
vehicle sales to increase as a result of the final rule, and cited an 
analysis conducted by Ceres and Citigroup Global Markets Inc.\1319\ 
that examined the impact on automotive sales in 2020, with a baseline 
assumption of an industry fuel economy standard of 42 mpg, a $4.00 
price of gasoline, a 12.2 percent discount rate and an assumption that 
buyers value 48% of fuel savings over seven years in purchasing 
vehicles. The main finding on sales was that light vehicle sales were 
predicted to increase by 6% from 16.3 million to 17.3 million in 2020. 
That analysis has subsequently been revised to predict a 4% increase 
from 15.8 million to 16.4 million.\1320\ Elasticity is not provided in 
the report but it states that they use a complex model of price 
elasticity and cross elasticities developed by GM. A fuel price risk 
factor \1321\ was utilized. Little rationale was provided for the 
baseline assumptions, but sensitivity analyses were examined around the 
price of fuel ($2, $4, and $7 per gallon), the discount rate (5.2%, 
12.2%, 17.2%), purchasers consider fuel savings over (3, 7, or 15 
years), fuel price risk factor of (30%, 70%, or 140%), and VMT of 
(10,000, 15,000, and 20,000 in the first year and declining 
thereafter).
---------------------------------------------------------------------------

    \1319\ ``U.S. Autos, CAFE and GHG Emissions'', March 2011, Citi 
Ceres, UMTRI, Baum and Associates, Meszler Engineering Services, and 
the Natural Resources Defense Council, available at http://www.ceres.org/resources/reports/fuel-economy-focus (last accessed 
August 1, 2012).
    \1320\ ``U.S. Autos, CAFE and GHG Emissions'', March 2011, Citi 
Ceres, UMTRI, Baum and Associates, Meszler Engineering Services, and 
the Natural Resources Defense Council, available at http://www.ceres.org/resources/reports/fuel-economy-focus (last accessed 
August 1, 2012).
    \1321\ Fuel price risk factor measures the rate at which 
consumers are willing to trade reductions in fuel costs for 
increases in purchase price. For example, a fuel price risk factor 
of 1.0 would indicate the consumers would be willing to pay $1 for 
an improvement in fuel economy that resulted in reducing by $1 the 
present value of the savings in fuel costs.
---------------------------------------------------------------------------

    The UAW, along with NRDC and the National Wildlife Foundation, also 
submitted reports indicating their assessment that the additional 
technology content needed to meet higher fuel economy standards would 
lead to considerable sales and employment growth. For example, the 2010 
UAW/NRDC/Center for American Progress study, ``Driving Growth,'' 
concluded that if 75 percent of the

[[Page 63109]]

additional content needed for the vehicle fleet to reach an average 40 
mpg by 2020 was produced in the U.S., as many as 150,000 jobs would be 
created.\1322\ Similarly, the 2011 UAW/NRDC/NWF study, ``Supplying 
Ingenuity,'' found that 504 facilities across 43 states employing over 
500,000 people are devoted to researching, developing, or producing 
clean-car technologies, and that 67 percent of these jobs are related 
to advanced conventional technologies such as better engines and 
transmissions and components like electric power steering and high 
strength steel.
---------------------------------------------------------------------------

    \1322\ UAW/NRDC/Center for American Progress, ``Driving Growth: 
How Clean Cars and Climate Policy Can Create Jobs,'' March 2010. 
NHTSA-2010-0131.
---------------------------------------------------------------------------

f. Based on all of the above, what does NHTSA believe the likely impact 
on vehicle sales attributable to this final rule will be?
    While NHTSA conducted and considered a variety of vehicle sales 
``cases'' as presented above, we do not believe that we can state with 
certainty that any given case is ``correct'' for the rulemaking 
timeframe. Given that this final rule affects multiple years, many 
years in the future, and that during that time there will be a dynamic 
situation occurring with dramatically changing fuel economy levels and 
technology being added to vehicles, we anticipate that consumers' 
consideration of fuel economy will evolve over time. NHTSA believes 
that there is much uncertainty in how much consumers' consideration of 
fuel economy will change as a result of this final rule alone, as 
compared to other rules such as the MYs 2012-2016 CAFE and GHG 
emissions rules and the Fuel Economy Labeling rule, or manufacturers' 
marketing efforts. We anticipate that manufacturers will be tracking 
consumers' behavior and marketing their products to affect consumer 
behavior, as they always have. We have made several simplifying 
assumptions in order to estimate the potential impact on sales, but as 
discussed above, there are uncertainties in how this final rule will 
affect sales and employment. We note, as is likely evident in the table 
above, that the impact on sales in this analysis is heavily impacted by 
the difference between manufacturers' beliefs of how consumers value 
fuel savings and consumers' valuation of fuel savings.
    This uncertainty, however, supports our conclusion in Section IV.F 
of the preamble that higher standards than the ones finalized in this 
rulemaking may not be economically practicable. The agency has tried to 
grapple with potential sales impacts as an important aspect of economic 
practicability, but reaching no definitive conclusion, believes that a 
conservative approach will be most likely to help us avoid setting 
standards that are beyond what would be economically practicable, and 
thus beyond the maximum feasible levels. NHTSA will monitor sales 
trends going forward, and anticipates that the intervening years 
between this final rule and the future rulemaking to develop and 
establish final standards for MYs 2022-2025 will provide significant 
additional insight into the questions of how consumers value fuel 
savings associated with increased fuel economy, how manufacturers 
believe consumers value that fuel savings, and corresponding effects on 
vehicle sales attributable to CAFE standards.
    As discussed elsewhere in the preamble and FRIA, the literature 
provides mixed evidence that consumers consistently value future fuel 
savings consistent with shorter payback periods and/or higher discount 
rate than the full lifetime value of fuel savings over the useful life 
of vehicles discounted as the social discount rates. That also provides 
an explanation for one of the potential reasons that manufacturers do 
not voluntarily provide all of the fuel saving technologies that are 
cost-effective and available, on a societal basis considered over the 
lifetime of the vehicle. In the past, consumers have not been willing 
to pay the additional price for such fuel economy improvements. One 
question is whether consumers will place a greater value on fuel 
savings as a result of this rule, and only as a result of this rule. In 
the past, large spikes in gasoline prices and consistently high 
gasoline prices have spurred consumers to consider fuel economy more 
prevalent in their purchasing decisions. The agency believes that the 
new and improved fuel economy labels and the large increase in fuel 
economy required as a result of the MY 2012-2016 fuel economy 
standards, may all have an impact on consumer valuation of fuel 
savings. However, these effects are not due to this rule. This final 
rule with its very large increase in average fuel economy, as well as 
manufacturers marketing these increased fuel economy levels, should 
also have a significant effect on consumers' realization that fuel 
economy is changing rapidly and significantly. As a result, we believe 
consumers will pay more attention to fuel savings as a result of this 
final rule assuming that fuel prices do not decrease significantly, but 
there is uncertainty whether all sales impacts will be the result of 
this final rule alone. It is possible that consumers will not demand 
increased fuel economy even when such increases would reduce overall 
costs for them. Some vehicle owners may also react to persistently 
higher vehicle costs by owning fewer vehicles, and keeping existing 
vehicles in service for somewhat longer. For these consumers, the 
possibility exists that there may be permanent sales losses, compared 
with a situation in which vehicle prices are lower. There is a wide 
variety in the number of miles that owners drive per year. Some drivers 
only drive 5,000 miles per year and others drive 25,000 miles or more. 
Rationally those that drive many miles have more incentive to buy 
vehicles with high fuel economy levels. In summary, there are a variety 
of types of consumers that are in different financial situations and 
drive different mileages per year. Since consumers are different and 
use different reasoning in purchasing vehicles, and we do not yet have 
an account of the distribution of their preferences or how that may 
change over time as a result of this rulemaking, the answer is quite 
ambiguous. Some may be induced by better fuel economy to purchase 
vehicles more often to keep up with technology, some may purchase no 
new vehicles because of the increase in vehicle price, and some may 
purchase fewer vehicles and hold onto their vehicles longer. There is 
great uncertainty about how consumers value fuel economy, and for this 
reason, the impact of this fuel economy proposal on sales is uncertain.
    While it is difficult to determine how consumers will react to fuel 
economy improvements attributable to the final rule, we believe that it 
is likely that consumers will learn more about and increasingly value 
fuel economy improvements in the future, but we also believe that 
manufacturers and consumers are unlikely to place identical valuation 
on fuel economy benefits. We believe for the reasons discussed above 
that manufacturers will behave more conservatively in their assumptions 
of how consumers value fuel economy than how on average consumers will 
actually behave.
    Some commenters stated that sales will increase as a result of the 
rule, as evidenced above in the above discussion of comments from Ceres 
and the UAW. Others, including NADA, expressed concern that sales may 
fall.

[[Page 63110]]

g. How does NHTSA plan to address this issue in the future?
    NHTSA is currently sponsoring work to develop a vehicle choice 
model for potential use in the agency's future rulemaking analyses--
this work may help to better estimate the market's effective valuation 
of future fuel economy improvements. This rule did not rely on a 
vehicle choice model. With an integrated market share model, the CAFE 
model would estimate how the sales volumes of individual vehicle models 
would change in response to changes in fuel economy levels and prices 
throughout the light vehicle market, possibly taking into account 
interactions with the used vehicle market. Having done so, the model 
would replace the sales estimates in the original market forecast with 
those reflecting these model-estimated shifts, repeating the entire 
modeling cycle until converging on a stable solution. We sought comment 
on the potential for this approach to help the agency estimate sales 
effects. Several commenters wanted the agency to either have the 
vehicle choice model go through a full peer review (the Alliance) or to 
be provided for public comment and review (NRDC) before being used. 
There was wide disparity in the comments on the concept of using a 
vehicle choice model to estimate the impacts on sales. The Alliance 
supported the use of a vehicle choice model. The American Fuel and 
Petrochemical Manufacturers \1323\ stated that it was concerned that 
the analysis is not based on a model that considered consumer choices 
and the impacts on different industries and individuals that would be 
affected. The Natural Resources Defense Council (NRDC) \1324\ and Union 
of Concerned Scientists (UCS) \1325\ did not support the use of a 
consumer choice model and stated that the agencies should not rely on a 
highly uncertain and idealized consumer choice model.
---------------------------------------------------------------------------

    \1323\ See EPA Docket EPA-HQ-OAR-2010-0799-9485.
    \1324\ See EPA Docket EPA-HQ-OAR-2010-0799-0284.
    \1325\ Id.
---------------------------------------------------------------------------

    NRDC stated that a consumer choice model could only rely on stated 
or revealed preferences based on existing vehicles in the market place 
and such a model is inappropriate for standards that drive the use of 
new technology. In response, NHTSA agrees that further work on the 
vehicle choice model is necessary, and is continuing to develop it. 
Section IV.C.4 of the preamble discusses the current progress with the 
choice model and next steps, and we refer the reader there for more 
information.
h. Potential Impact on Employment in the Automotive Industry in the 
Short Run
    There are three potential areas of employment in the automotive 
industry that fuel economy standards could affect.\1326\ We briefly 
outline those areas here.
---------------------------------------------------------------------------

    \1326\ For a general analysis of the potentially complex 
employment effects of regulation, see Morgenstern, Richard D., 
William A. Pizer, and Jhih-Shyang Shih. ``Jobs Versus the 
Environment: An Industry-Level Perspective.'' Journal of 
Environmental Economics and Management 43 (2002): 412-436 (Docket 
EPA-HQ-OAR-2010-0799).
---------------------------------------------------------------------------

     The first is the hiring of additional engineers by 
automobile companies and their suppliers to do research and development 
and testing on new technologies to determine their capabilities, 
durability, platform introduction, etc. The agency anticipates that 
there may be some level of additional job creation due to the added 
research and development, overall program management, and subsequent 
sales efforts required to market vehicles that have been redesigned for 
significant improvements in fuel economy, especially for revolutionary 
technologies such as hybrid and electric vehicles. In this respect, the 
final rule will likely have a positive effect on employment. At the 
same time, the levels of added employment are uncertain. In addition, 
it is not clear how much of this effort will be accomplished by added 
employment and how much by diverting existing employees to focus on 
CAFE instead of other company priorities such as improved acceleration 
performance, styling, marketing, new vehicle concepts, etc.
     The second area is the impact that new technologies would 
have on production employment, both at suppliers and at auto 
assemblers. Added parts, like turbochargers, or complexity of assembly 
could have a positive impact on employment. The use of more exotic 
steels, aluminum, or other materials to save weight could affect the 
number of welds or attachment methods. It is uncertain to what extent 
new CAFE technologies would require added steps in the assembly process 
that would necessitate new hiring, but generally when content is added, 
the number of employees in the supplier industry and on the assembly 
line goes up.
     The third area is the potential impact that sales gains or 
losses could have on production employment. This area is potentially 
much more sensitive to change than the first two areas discussed above, 
although for reasons discussed above its estimation is highly 
uncertain. An increase in sales, produced for example by consumer 
attention to overall costs and learning over time, would have a 
positive effect on employment. A decrease in sales, produced by 
increases in initial costs, would have a negative effect.
    We received a number of comments (from the Defour Group and some 
private individuals) asserting that there will be decreases in 
employment as a result of the costs of the rule, and a number of 
comments (from the United Auto Workers, environmental organizations, 
sustainable business groups, some private individuals, and others) 
asserting increases in employment, based on the development of advanced 
technologies and the reduction in net costs due to fuel savings. An 
assessment by the Defour Group predicts a loss of 155,000 jobs in 
manufacturing and supply, plus another 50,000 in distribution.\1327\ A 
study by Ceres predicts job gains of 43,000 in the auto industry and 
484,000 economy-wide.\1328\ Some comments cite a study by the Natural 
Resources Defense Council, National Wildlife Federation, and United 
Auto Workers that 150,000 auto workers already are working to supply 
clean, fuel-efficient technologies.\1329\ The differences in results 
for quantitative employment impacts are mainly due to difference in the 
price impacts.
---------------------------------------------------------------------------

    \1327\ Walton, Thomas F., and Dean Drake, Defour Group LLC 
(February 13, 2012). ``Comments on the Notice of Proposed Rulemaking 
and Preliminary Regulatory Impact Analysis for MY 2017 to 2025 Fuel 
Economy Standards.'' Docket EPA-HQ-OAR-2010-0799-9319.
    \1328\ Management Information Services, Inc. (July 2011). ``More 
Jobs per Gallon: How Strong Fuel Economy/GHG Standards Will Fuel 
American Jobs.'' Boston, MA: Ceres. Docket EPA-HQ-OAR-2010-0799-
0709.
    \1329\ Natural Resources Defense Council, National Wildlife 
Federation, and United Auto Workers (August 2011). ``Supplying 
Ingenuity: U.S. Suppliers of Clean, Fuel-Efficient Vehicle 
Technologies,'' available at http://www.nrdc.org/transportation/autosuppliers/files/SupplierMappingReport.pdf (last accessed August 
1, 2012). (Docket EPA-HQ-OAR-2010-0799)
---------------------------------------------------------------------------

    Estimates of decreases in employment commonly come from studies 
that use cost estimates higher than those estimated by the agencies, 
and sometimes lower benefits estimates, resulting in reductions in 
vehicle sales. For instance, some comments from individuals cite the 
National Automobile Dealers Association and Center for Automotive 
Research for cost estimates of $5,000 to $6,000 per vehicle, much 
higher than those

[[Page 63111]]

estimated by the agencies. Those studies commonly look at the 
employment associated with vehicle sales, but not the employment 
associated with producing the technologies needed to comply with the 
standards, or changes in labor intensity of production. Analyses that 
find increases in employment commonly start with increased vehicle 
sales as a result of the rule. Many of these analyses also note that 
even without increased unit sales, employment is likely to rise due to 
the additional technology content of the vehicles sold.\1330\ In both 
cases, ``multiplier'' effects, which extend employment impacts beyond 
the auto sector to impacts on suppliers, other sectors, and expenditure 
changes by workers, lead to large estimates, either positive or 
negative, of the employment effects of the rule. We received the 
suggestion to include in our analysis an alternative scenario where 
there is less than full employment; the implication of less than full 
employment is that multiplier effects are more likely. While we 
examined all of these different employment estimates, we decided to 
continue using our methodology from previous analyses, with some 
updates to our method of calculating the impacts.
---------------------------------------------------------------------------

    \1330\ UAW/NRDC/Center for American Progress, ``Driving Growth: 
How Clean Cars and Climate Policy Can Create Jobs,'' March 2010, p. 
11.
---------------------------------------------------------------------------

    In order to obtain an estimate of potential job increases per unit 
sales increase, we examined recent U.S. employment (original equipment 
manufacturers and suppliers) and U.S. production. Total employment in 
2000 reached a peak in the Motor Vehicle and Parts Manufacturing sector 
of the economy averaging 1,313,500 workers (NAICS codes of 3361, 2, 3). 
Then there was a steady decline to 1,096,900 in 2006 and more rapid 
decreases in 2008, and 2009. Employment in 2009 averaged 664,000, 
employment in 2010 averaged 675,000 and employment in the first six 
months of 2011 has averaged 699,000. Table VII-19 shows how many 
vehicles are produced by the average worker in the industry. Averaging 
the information shown for the even years of 2000-2010, the average U.S. 
domestic employee produces 11.3 vehicles (the same number as in 2008 
and 2010). Thus, assuming that a projected sales gain or loss divided 
by 11.3 would be one method of estimating the potential employment gain 
or loss in any one year. This provides a measurement in job years. This 
method underestimates the number of jobs per vehicle sold under the 
rule, because it does not take into account the additional employment 
associated with the additional fuel-saving technologies.
    We also examined the employment impact for production and non-
supervisory workers from the Bureau of Labor Statistics to see if there 
was a more direct link between their employment level and production 
than the white collar workers. There is a closer link between light 
vehicle production in the U.S. and the number of production and non-
supervisory workers (for example, from 2002 to 2010, production fell by 
44 percent; the number of production and non-supervisory workers in the 
industry fell by 44 percent and the number of white collar workers fell 
by 31 percent). However, in some years (2004 and 2006) the white-collar 
jobs had a higher percentage loss than the blue-collar jobs. In this 
analysis, the agency examines all jobs in the industry.

                         Table IV-142--U.S. Light Duty Vehicle Production and Employment
----------------------------------------------------------------------------------------------------------------
                                                                                Motor vehicle
                                                               U.S. Light      and parts U.S.    Production per
                           Year                                  vehicle         employment         employee
                                                               production          \1331\
----------------------------------------------------------------------------------------------------------------
2000......................................................        12,773,714         1,313,500               9.7
2002......................................................        13,568,385         1,151,300              11.8
2004......................................................        13,527,309         1,112,700              12.2
2006......................................................        12,855,845         1,069,800              11.7
2008......................................................         9,870,473           875,400              11.3
2010......................................................         7,597,147           674,600              11.3
                                                           -----------------------------------------------------
    Total/Average.........................................        70,192,873         6,197,300              11.3
----------------------------------------------------------------------------------------------------------------

    The Administration projects that full employment will return in 
2018.\1332\ When the economy is at full employment, a fuel economy 
regulation is unlikely to have much impact on net overall U.S. 
employment; instead, labor would primarily be shifted from one sector 
to another. These shifts in employment impose an opportunity cost on 
society, approximated by the wages of the employees, as regulation 
diverts workers from other activities in the economy. In this 
situation, any effects on net employment are likely to be transitory as 
workers change jobs (e.g., some workers may need to be retrained or 
require time to search for new jobs, while shortages in some sectors or 
regions could bid up wages to attract workers). On the other hand, if a 
regulation comes into effect during a period of high unemployment, a 
change in labor demand due to regulation may affect net overall U.S. 
employment because the labor market is not in equilibrium. Schmalansee 
and Stavins point out that net positive employment effects are possible 
in the near term when the economy is at less than full employment due 
to the potential hiring of idle labor resources by the regulated sector 
to meet new requirements (e.g., to install new equipment) and new 
economic activity in sectors related to the regulated sector longer 
run, the net effect on employment is more difficult to predict and will 
depend on the way in which the related industries respond to the 
regulatory requirements. This program is expected to affect employment 
in the regulated sector (auto manufacturing) and other sectors directly 
affected by the final rule: auto parts suppliers, auto dealers, the 
fuel supply market (which will face reduced petroleum production due to 
reduced fuel demand but which may see additional demand for electricity 
or other fuels). As discussed in the CAR and Ceres reports above, each 
of these sectors could potentially have ripple

[[Page 63112]]

effects throughout the rest of the economy. These ripple effects depend 
much more heavily on the state of the economy than do the direct 
effects. As noted above, though, in a full-employment economy, any 
changes in employment will result from people changing jobs or 
voluntarily entering or exiting the workforce. In a full-employment 
economy, employment impacts of this proposal will change employment in 
specific sectors, but it will have small, if any, effect on aggregate 
employment.
---------------------------------------------------------------------------

    \1331\ U.S. employment data is from the Bureau of Labor 
Statistics, available at http://data.bls.gov/timeseries/CES3133600101?data_tool=XGtable (last accessed Aug. 10, 2012).
    \1332\ Based on the Congressional Budget Office January 2012 
Report, ``The Budget and Economic Outlook, Fiscal Years 2012-2022,'' 
which predicted unemployment levels of 5.5% in 2018. See http://www.cbo.gov/publication/42905 (last accessed Aug. 10, 2012).
---------------------------------------------------------------------------

    This rule would take effect in 2017 through 2025; by then, the 
current high unemployment may be moderated or ended. The Congressional 
Budget Office has predicted full employment by 2018.\1333\ To the 
extent that full employment is achieved, increases in employment are 
not possible. For that reason, this analysis does not include 
multiplier effects, but instead focuses on employment impacts in the 
most directly affected industries. Those sectors are likely to face the 
most concentrated employment impacts.
---------------------------------------------------------------------------

    \1333\ Based on the Congressional Budget Office January 2012 
Report, ``The Budget and Economic Outlook, Fiscal Years 2012-2022,'' 
which predicted unemployment levels of 5.5% in 2018. See http://www.cbo.gov/publication/42905 (last accessed Aug. 10, 2012).
---------------------------------------------------------------------------

    Table IV-143 shows the potential cumulative impact on auto sector 
employment over the MY 2017-2025 period in job years, without 
considering or quantifying the ripple effect. This table takes the 
results from sales and divides by 11.3 to obtain the impact on auto 
sector employment. To estimate the proportion of domestic employment 
affected by the change in sales, we use data from Ward's Automotive 
Group for total car and truck production in the U.S. compared to total 
car and truck sales in the U.S. For the period 2001-2010, the 
proportion is 66.7 percent. We thus weight sales by this factor to get 
an estimate of the effect on U.S. employment in the motor vehicle 
manufacturing sector due to this rule. As in the sales analysis, the 
table shows the potential impact for the preferred alternative for both 
the MY 2010 baseline and for the MY 2008 baseline at the 3 percent and 
7 percent discount rates for 6 different cases.
    Since the impact of this final rule on sales is very difficult to 
predict, and sales have the largest potential effect on employment, the 
impact of this final rule on employment is also very difficult to 
predict. As with sales, the impact on employment is heavily affected by 
the difference between manufacturers' investments in fuel-saving 
technologies \1334\ and consumers' valuation of fuel savings. However, 
since any negative impact of the rule on unit sales is partially offset 
by increased employment per vehicle sold, it is highly unlikely that 
the rule would lead to significant job losses in the short term in the 
automotive industry.
---------------------------------------------------------------------------

    \1334\ As discussed above, these investments are affected both 
by manufacturers' beliefs about consumers' valuation of fuel 
economy, and by competitive dynamics, since the industry is composed 
of multiple firms, each of which considers the case where a 
competitor that doesn't invest ends up in a better position due to 
gas prices at the low end of the expected distribution.

   Table IV--143 Analysis of Alternative Scenarios in Automotive \1335\ Sector Employment--in Thousands of Job
                                                      Years
                        [Passenger cars and light trucks combined preferred alternative]
----------------------------------------------------------------------------------------------------------------
                                                                                   MYs 2017-2025   MYs 2017-2025
                                                                    Years fuel      employment      employment
               Years fuel valued by manufacturers                    valued by      impact (3%      impact (7%
                                                                     consumers    discount rate)  discount rate)
                                                                                      (000's)         (000's)
----------------------------------------------------------------------------------------------------------------
                                                  2008 Baseline
----------------------------------------------------------------------------------------------------------------
0 Flat..........................................................            3 yr              54              45
0 Flat..........................................................            5 yr             223             191
* 1 yr..........................................................          * 1 yr            -160            -138
1 yr............................................................            3 yr             -21             -26
* 3 yr..........................................................          * 3 yr             -31             -32
* 5 yr..........................................................          * 5 yr               0              -2
----------------------------------------------------------------------------------------------------------------
                                                  2010 Baseline
----------------------------------------------------------------------------------------------------------------
0 Flat..........................................................            3 yr              59              51
0 Flat..........................................................            5 yr             225             193
* 1 yr..........................................................          * 1 yr            -143            -155
1 yr............................................................            3 yr              -3              -8
* 3 yr..........................................................          * 3 yr             -18             -19
* 5 yr..........................................................          * 5 yr               7               6
----------------------------------------------------------------------------------------------------------------
\1335\ The analysis does not reflect the likely positive impact in industry employment due to a change in
  vehicle content resulting from this rule.
* These scenarios are presented as theoretical cases. NHTSA believes it is unlikely that manufacturers and
  consumers would value improvements in fuel economy identically, and believes that on average, manufacturers
  will behave more conservatively in their assumptions of how consumers value fuel economy than how on average
  consumers will actually behave. NHTSA expects that in practice the number of years fuel is valued by
  manufacturers will be shorter than the number of years fuel is valued by consumers.

i. Scrappage Rates
    The effect of this rule on the use and scrappage of older vehicles 
will be related to its effects on new vehicle prices, the fuel 
efficiency of new vehicle models, and the total sales of new vehicles. 
If the value of fuel savings resulting from improved fuel efficiency to 
the typical potential buyer of a new vehicle outweighs the average 
increase in new models' prices, sales of new vehicles will rise, while 
scrappage rates of used vehicles will increase slightly. This will 
cause the ``turnover'' of the vehicle fleet--that is, the retirement of 
used vehicles and their replacement by new models--to accelerate 
slightly, thus accentuating the anticipated effect of the

[[Page 63113]]

rule on fleet-wide fuel consumption and CO2 emissions. 
However, if potential buyers value future fuel savings resulting from 
the increased fuel efficiency of new models at less than the increase 
in their average selling price, sales of new vehicles will decline, as 
will the rate at which used vehicles are retired from service. This 
effect will slow the replacement of used vehicles by new models, and 
thus partly offset the anticipated effects of the final rules on fuel 
use and emissions.
    Because the agencies are uncertain about how the value of projected 
fuel savings from the final rules to potential buyers will compare to 
their estimates of increases in new vehicle prices, we have not 
attempted to estimate explicitly the effects of the rule on scrappage 
of older vehicles and the turnover of the vehicle fleet.
6. Social Benefits, Private Benefits, and Potential Unquantified 
Consumer Welfare Impacts of the Standards
    There are two viewpoints for evaluating the costs and benefits of 
the increase in CAFE standards: the private perspective of vehicle 
buyers themselves on the higher fuel economy levels that the rule would 
require, and the economy-wide or ``social'' perspective. In order to 
appreciate how these viewpoints can diverge, it is important to 
distinguish between costs and benefits that are borne privately by 
those who would have purchased new vehicles in the absence of the rule, 
and costs and benefits that are distributed broadly throughout the 
economy. The agency's analysis of benefits and costs from requiring 
higher fuel efficiency, presented in detail above, includes several 
categories of benefits (identified as ``social benefits'') that are not 
limited to automobile buyers, and instead extend throughout the U.S. 
(and global) economy. Examples of these benefits include reductions in 
the energy security costs associated with U.S. petroleum imports, and 
in the economic damages expected to result from climate change and 
local air pollution. In contrast, other categories of benefits--
principally future fuel savings projected to result from higher fuel 
economy, but also, for example, the value of less frequent refueling--
will be experienced exclusively by the initial purchasers and 
subsequent owners of vehicle models whose fuel economy manufacturers 
elect to improve (and are thus referred to as ``private benefits'').
    While the economy-wide or social benefits from increased fuel 
economy represent a small but important share of the total economic 
benefits from raising CAFE standards, NHTSA estimates that benefits to 
vehicle buyers themselves will significantly exceed vehicle 
manufacturers' costs for complying with the stricter fuel economy 
standards this final rule establishes. The agency also assumes that the 
costs of new technologies manufacturers employ to improve fuel economy 
will ultimately be borne by vehicle buyers in the form of higher 
purchase prices. Thus NHTSA concludes that the benefits to vehicle 
buyers from requiring higher fuel efficiency will far outweigh the 
costs they will be required to pay to obtain it. As an illustration, 
Tables IV-144 and IV-145 report the agency's estimates of the average 
lifetime values of fuel savings for MY 2017-2025 passenger cars and 
light trucks, calculated using projected future retail fuel prices 
consistent with the pre-tax prices used in its analysis of social costs 
and benefits. The table compares NHTSA's estimates of the average 
lifetime value of fuel savings for cars and light trucks to the price 
increases it expects to occur as manufacturers attempt to recover their 
costs for complying with increased CAFE standards. As the table shows, 
the agency's estimates of the present value of lifetime fuel savings 
(discounted using the OMB-recommended 3% rate) substantially outweigh 
projected vehicle price increases for both cars and light trucks in 
every model year, even under the assumption that all of manufacturers' 
technology outlays are passed on to buyers in the form of higher 
selling prices for new cars and light trucks. By model year 2025, NHTSA 
projects that average lifetime fuel savings will exceed the average 
price increase by between $3,800 and $4,300 for cars, and by more than 
$5,800 for light trucks.

     Table IV-144--NHTSA Estimated Value of Lifetime Fuel Savings vs. Vehicle Price Increases--MYs 2017-2021
----------------------------------------------------------------------------------------------------------------
                                                                                 Model year
            Fleet                  Measure          MY    ------------------------------------------------------
                                                 baseline     2017       2018       2019       2020       2021
----------------------------------------------------------------------------------------------------------------
Passenger Cars...............  Value of fuel         2008      $872-    $1,657-    $2,390-    $3,269-    $3,852-
                                savings.
                                                     2010     $1,090     $1,609     $2,540     $3,311     $3,954
                               Average price         2008      $233-      $434-      $602-      $904-    $1,105-
                                increase.
                                                     2010       $364       $484       $659       $858       $994
                               Difference.....       2008      $639-    $1,222-    $1,789-    $2,366-    $2,747-
                                                     2010       $726     $1,125     $1,881     $2,453     $2,960
Light Trucks.................  Value of fuel         2008      $537-    $1,340-    $2,665-    $3,793-    $5,183-
                                savings.
                                                     2010       $427       $817     $2,031     $3,142     $4,621
                               Average price         2008       $78-      $191-      $422-      $620-      $853-
                                increase.
                                                     2010       $147       $196       $396       $628       $907
                               Difference.....       2008      $459-    $1,149-    $2,243-    $3,173-    $4,330-
                                                     2010       $280       $621     $1,635     $2,514     $3,714
----------------------------------------------------------------------------------------------------------------

     Table IV-145--NHTSA Estimated Value of Lifetime Fuel Savings vs. Vehicle Price Increases--MYs 2022-2025
----------------------------------------------------------------------------------------------------------------
                                                                                      Model year
               Fleet                       Measure             MY    -------------------------------------------
                                                            baseline     2022       2023       2024       2025
----------------------------------------------------------------------------------------------------------------
Passenger Cars....................  Value of fuel savings       2008    $4,216-    $4,571-    $5,101-    $5,496-
                                                                2010     $4,339     $4,880     $5,440     $5,881
                                    Average price               2008    $1,219-    $1,326-    $1,666-    $1,738-
                                     increase.
                                                                2010     $1,091     $1,221     $1,482     $1,578

[[Page 63114]]

 
                                    Difference...........       2008    $2,997-    $3,245-    $3,435-    $3,758-
                                                                2010     $3,248     $3,659     $3,958     $4,303
Light Trucks......................  Value of fuel savings       2008    $5,707-    $6,094-    $6,673-    $7,180-
                                                                2010     $5,068     $5,747     $6,431     $7,017
                                    Average price               2008      $949-      $994-    $1,076-    $1,171-
                                     increase.
                                                                2010       $948     $1,056     $1,148     $1,226
                                    Difference...........       2008    $4,758-    $5,100-    $5,597-    $6,008-
                                                                2010     $4,126     $4,694     $5,289     $5,804
----------------------------------------------------------------------------------------------------------------

    The comparisons above immediately raise the question of why buyers 
would not purchase vehicles with the higher fuel economy levels the 
rule requires manufacturers to achieve in future model years even if 
NHTSA did not adopt it. They also raise the question of whether it is 
appropriate to assume that manufacturers would not elect to provide 
higher fuel economy even in the absence of increases in CAFE standards, 
since the comparisons in Tables IV-144 and IV-145 suggest that doing so 
would increase the prices that potential buyers would be willing to pay 
for many new vehicle models by far more than it would raise their 
manufacturers' costs of produce them. In other words, these comparisons 
suggest that increasing fuel economy would be an effective strategy for 
many manufacturers to expand their sales of new vehicles and increase 
profits. More specifically, why would potential buyers of new vehicles 
hesitate to purchase models offering higher fuel economy, when doing so 
would produce the substantial economic savings implied by the 
comparisons presented in Tables IV-144 and IV-145? And why would 
manufacturers voluntarily forego opportunities to increase the 
attractiveness, value, and competitive positioning of their car and 
light truck models--and thus their own profits--by improving their fuel 
economy?
    One explanation for why this might arise is that the market for 
vehicle fuel economy does not appear to work perfectly, and that higher 
CAFE standards are necessary to require manufacturers to produce--and 
potential buyers to purchase--models with higher fuel economy. One 
source of such market imperfections might be limited availability of 
information to consumers about the savings from purchasing models that 
offer higher fuel economy. However, such information is increasingly 
available and has become easier to obtain, and new fuel economy labels 
will provide a wide range of information about the economic and 
environmental benefits of increased fuel economy.
    While Tables IV-144 and IV-145 illustrate large net (discounted) 
savings from reduced fuel expenditures over the useful life of the 
vehicle, fuel expenditures are not the only relevant operating cost 
associated with vehicle ownership. By forcing manufacturers to add new 
fuel economy technologies to their vehicle offerings, this rule creates 
additional costs that will be borne by the purchasers of those 
vehicles. By model year 2025, buyers of new passenger cars and light 
trucks will face an average increase of $80 per vehicle in additional 
taxes and fees at the time of purchase and registration. Over the 
vehicle's useful life, buyers of MY 2025 new vehicles will spend an 
additional $225 in financing charges, $280 in the cost of insurance, 
and another $130 in vehicle maintenance costs. These costs combine to 
add over $700 (discounted) to the cost of ownership, and further erode 
the savings in fuel expenditures. However, Tables IV-144 and IV-145 
suggest much larger net savings, even accounting for ancillary 
ownership costs.
    Many commenters noted that recent poll results and changes in 
attitudes suggest that consumers are becoming more aware of the 
importance and value of fuel economy, and that this will increasingly 
be reflected in their future vehicle purchasing decisions. NRDC, the 
Sierra Club, Consumer Federation of America, and Consumers' Union each 
cited recent polls indicating that consumers are increasingly concerned 
about fuel prices and U.S. energy security, and are increasingly aware 
that purchasing vehicles with higher fuel economy can reduce both their 
gasoline costs and U.S. dependence on imported petroleum. Some of these 
commenters also noted that recent polls have shown growing support for 
higher CAFE standards as a strategy for increasing the range of vehicle 
models offering high fuel economy, and increased willingness of vehicle 
buyers to pay for improved fuel economy and advanced technologies such 
as electric vehicles.
    The agency agrees that there appears to be growing awareness of 
fuel economy generally and increased interest in higher fuel economy 
among vehicle buyers, but notes that some of this may reflect the 
persistence of high fuel prices in recent years. Thus if fuel prices 
decline from recent high levels, some of this increased awareness and 
willingness to pay for higher fuel economy could erode. In addition, if 
significant failures in the market for fuel economy--such as those 
identified in the preceding discussion--exist, then increased consumer 
awareness of and interest in fuel economy may be inadequate by 
themselves to result in the levels of fuel economy that would be 
economically desirable. In this case, increased CAFE standards are 
still likely to be necessary to require manufacturers to supply--and 
buyers to demand--the higher fuel economy levels that can be 
economically justified on the basis of their benefits and costs.
    Other potential sources of market failure include phenomena 
highlighted by the field of behavioral economics, including loss 
aversion, inadequate consumer attention to long-term effects of their 
decisions, or a lack of salience of benefits such as fuel savings to 
consumers at the time they make purchasing decisions. For example, some 
research suggest that many consumers are unwilling to make energy-
efficiency investments that appear likely to pay off in the relatively 
short-term, in part because they are deterred by the prospect that 
those investments require immediate, known outlays but produce deferred 
and uncertain returns.\1336\ As an illustration,

[[Page 63115]]

Greene et al. (2009) calculate that the expected net present value of 
increasing the fuel economy of a passenger car from 28 to 35 miles per 
gallon falls from $405 when calculated using standard net present value 
calculations, to nearly zero when uncertainty regarding future cost 
savings and buyers' reluctance to accept the risk of losses are taken 
into account.\1337\Other research finds that consumers may undervalue 
benefits or costs that are less salient, difficult to isolate, or that 
they will realize only in the future.\1338\
---------------------------------------------------------------------------

    \1336\ Jaffe, A. B., and Stavins, R. N. (1994). The Energy 
Paradox and the Diffusion of Conservation Technology. Resource and 
Energy Economics, 16(2); see Hunt Alcott and Nathan Wozny, Gasoline 
Prices, Fuel Economy, and the Energy Paradox (2009), available at 
http://apps.olin.wustl.edu/cres/research/calendar/files/AllcottH.pdf 
(last accessed Jul. 13, 2012). For relevant background, with an 
emphasis on the importance of salience and attention, see Kahneman, 
D. Thinking, Fast and Slow (2011).
    \1337\ Greene, D., J. German, and M. Delucchi (2009). ``Fuel 
Economy: The Case for Market Failure'' in Reducing Climate Impacts 
in the Transportation Sector, Sperling, D., and J. Cannon, eds. 
Springer Science. Surprisingly, the authors find that uncertainty 
regarding the future price of gasoline appears to be less important 
than uncertainty surrounding the expected lifetimes of new vehicles. 
(Docket NHTSA-2009-0059-0154). On loss aversion in general, and its 
relationship to prospect theory (which predicts that certain losses 
will loom larger than probabilistic gains of higher expected value), 
see Kahneman.
    \1338\ Mutulinggan, S., C.Corbett, S.Benzarti, and B. Oppenheim. 
``Investment in Energy Efficiency by Small and Medium-Size Firms: An 
Empirical Analysis of the Adoption of Process Improvement 
Recommendations'' (2011), available at http://papers.ssrn.com/sol3/papers/cfm?abstract_id=1947330. Hossain, Janjim, and John Morgan 
(2009). ``* * * Plus Shipping and Handling: Revenue (Non) 
Equivalence in Field Experiments on eBay,'' Advances in Economic 
Analysis and Policy vol. 6; Barber, Brad, Terrence Odean, and Lu 
Zheng (2005). ``Out of Sight, Out of Mind: The Effects of Expenses 
on Mutual Fund Flows,'' Journal of Business vol. 78, no. 6, pp. 
2095-2020.
---------------------------------------------------------------------------

    Another possible explanation for manufacturers' unwillingness to 
offer models with improved fuel economy is that many consumers appear 
to undervalue potential savings in gasoline costs when purchasing 
vehicles. Fuel costs may be a ``shrouded'' attribute in consumers' 
decisions, because it may simply not be in many shoppers' interest to 
spend the time and effort necessary to determine the economic value of 
higher fuel economy, to isolate the component of a new vehicle's 
selling price that is related to its fuel economy, and compare these 
two. It may also be difficult for potential buyers to disentangle the 
cost of purchasing a more fuel-efficient vehicle from its overall 
purchase price, or to isolate the value of higher fuel economy from 
accompanying differences in more prominent features of new vehicles, 
such as passenger and cargo-carrying capacity, performance, or safety. 
Some recent research finds that because of these or other reasons, many 
buyers are unwilling to pay $1 more to purchase a vehicle that offers a 
$1 reduction in the discounted present value of its future gasoline 
costs.\1339\
---------------------------------------------------------------------------

    \1339\ See, e.g., Alcott and Wozny. On shrouded attributes and 
their importance, see Gabaix, Xavier, and David Laibson, 2006. 
``Shrouded Attributes, Consumer Myopia, and Information Suppression 
in Competitive Markets.'' Quarterly Journal of Economics 121(2): 
505-540.
---------------------------------------------------------------------------

    Other research suggests that the manufacturers' hesitance to offer 
e more fuel efficient vehicles stems from consumers' inability to value 
future fuel savings correctly. For example, Larrick and Soll (2008) 
find evidence that consumers do not understand how to translate changes 
in fuel economy, which is denominated in miles per gallon (MPG), into 
resulting changes in fuel consumption and fuel costs per mile driven or 
in a time period.\1340\ The recently redesigned fuel economy label 
should help overcome this difficulty, because it draws attention to 
purely economic effects of fuel economy, although the vehicle's MPG 
itself remains a prominent measure. Sanstad and Howarth (1994) argue 
that consumers often resort to imprecise but convenient rules of thumb 
to compare vehicles that offer different fuel economy ratings, and that 
this can cause many buyers to underestimate the value of fuel savings, 
particularly from large increases in fuel economy.\1341\ If the 
behavior identified in these studies is widespread, then the agency's 
estimates that the benefits to vehicle owners from requiring higher 
fuel economy significantly exceed the costs of providing it may indeed 
be consistent with the unwillingness of vehicle manufacturers to 
offer--and buyers to purchase--the levels of fuel economy this rule 
would require.
---------------------------------------------------------------------------

    \1340\ Larrick, R. P., and J.B. Soll (2008). ``The MPG 
illusion'' Science 320: 1593-1594.
    \1341\ Sanstad, A., and R. Howarth (1994). '' `Normal' Markets, 
Market Imperfections, and Energy Efficiency.'' Energy Policy 22(10): 
811-818.
---------------------------------------------------------------------------

    Another possible reconciliation of the large net benefits the 
agency projects for individual buyers and its assumption that producers 
would not offer the level of fuel economy this final rule requires is 
that many of the technologies projected by the agency to be available 
beginning in MY 2017 offer significantly improved efficiency per unit 
of cost, but are not available for application to new vehicles sold 
currently. Still another is that the actual value of future fuel 
savings resulting from the standards will vary widely among potential 
vehicle buyers. These differences primarily reflect variation in the 
amount they drive, but differences in their driving styles may also 
affect the fuel economy they expect to achieve, and buyers undoubtedly 
have varying expectations about future fuel prices. Thus while the 
agency's assertion that fuel savings for the average buyer will 
significantly exceed the increase in vehicle prices may be correct, the 
reverse may nevertheless be true for some potential buyers. Defects in 
the market for cars and light trucks could also lead manufacturers to 
undersupply fuel economy, even in cases where many buyers were willing 
to pay the increased prices necessary to compensate manufacturers for 
providing it. To be sure, the market for new automobiles as a whole 
exhibits a great deal of competition, but this apparently vigorous 
competition among manufacturers may not extend to the provision of some 
individual vehicle attributes. Incomplete or ``asymmetric'' access to 
information about vehicle attributes such as fuel economy--whereby 
manufacturers of new cars and light trucks or sellers of used models 
have more complete knowledge about vehicles' actual fuel economy 
performance than is available to their potential buyers--may also 
prevent sellers of new or used vehicles from being able to capture its 
full value. In this situation, the level of fuel efficiency provided in 
the markets for new or used vehicles might remain persistently lower 
than that demanded by well-informed potential buyers.
    Constraints on the combinations of fuel economy, carrying capacity, 
and performance that current technologies allow manufacturers to offer 
in individual vehicle models undoubtedly limit the range of fuel 
economy available within certain vehicle classes, particularly those 
including larger vehicles. However, it is also possible that deliberate 
decisions by manufacturers further limit the range of fuel economy 
available within individual vehicle market segments, if they 
underestimate the premiums that prospective buyers of those models are 
willing to pay for improved fuel economy. As an illustration, the range 
of highway fuel economy ratings among current minivan models extends 
only from 23 to 28 mpg, while their combined city and highway ratings 
ranges only from 19 to 24 mpg.\1342\ If this phenomenon is widespread, 
the average fuel efficiency of their entire new vehicle fleet could 
remain below the levels that potential buyers demand and are willing to 
pay for.
---------------------------------------------------------------------------

    \1342\ This is the range of combined city and highway fuel 
economy levels from lowest (Toyota Sienna AWD) to highest (Mazda 5) 
available for model year 2012; http://www.fueleconomy.gov/feg/bestworstEPAtrucks.htm (last accessed Jul. 13, 2012).

---------------------------------------------------------------------------

[[Page 63116]]

    Some commenters endorsed the agency's analysis of the potential for 
various sources of market failure to inhibit manufacturers from 
supplying adequate fuel economy levels, and to cause potential buyers 
to underestimate the value of purchasing models that offer higher fuel 
economy. Consumer Federation of America endorsed the agency's focus on 
sources of manufacturers' hesitance to offer models with higher fuel 
economy, as well as on the more commonly cited market failures that can 
make buyers unwilling to invest in higher fuel economy. CFA also 
submitted more detailed discussions of some of these sources of 
potential market failure in support of its general comments. ICCT noted 
that the combination of uncertainty about the cost and effectiveness of 
new technologies to improve fuel economy with buyers' aversion to 
potential losses from purchasing higher-priced vehicles offering 
uncertain fuel savings was sufficient to explain the underinvestment in 
fuel economy, and to justify higher fuel economy standards. ICCT also 
argued that by removing consumers' option to buy low fuel economy 
vehicles, higher fuel economy standards minimize the effect of aversion 
on buyers' willingness to invest in higher fuel economy.
    A fundamentally different explanation for buyers' apparent 
unwillingness to invest in higher fuel economy when it appears to offer 
such large financial returns is that NHTSA's estimates of private 
benefits and costs from requiring manufacturers to improve fuel 
efficiency do not match potential buyers' assessment of the likely 
benefits and costs from purchasing models with higher fuel economy 
ratings. This could occur because the agency's underlying assumptions 
about some of the factors that affect the value of fuel savings differ 
from those made by potential buyers, because NHTSA has used different 
estimates for some benefits from saving fuel than do buyers, or simply 
because the agency has failed to account for some potential costs of 
achieving higher fuel economy. For example, buyers may not value 
increased fuel economy as highly as the agency's calculations suggest, 
because they have shorter time horizons than the full vehicle lifetimes 
NHTSA uses in these calculations, or because they discount future fuel 
savings using higher rates than those prescribed by OMB for evaluating 
Federal regulations. Potential buyers may also anticipate lower fuel 
prices in the future than those forecast by the Energy Information 
Administration, or may expect larger differences between vehicles' MPG 
ratings and their own actual on-road fuel economy than the 20 percent 
gap (30 percent for HEVs) the agency estimates.
    To illustrate the first of these possibilities, Table IV-146 shows 
the effect of differing assumptions about vehicle buyers' time horizons 
on their assessment of the value of future fuel savings. Specifically, 
the table reports the value of fuel savings consumers might consider 
when purchasing a MY 2025 car or light truck that features the higher 
fuel economy levels required by the final rule, when those fuel savings 
are evaluated over different time horizons. The table then compares 
these values to the agency's estimates of the increases in these 
vehicles' prices that are likely to result for MY 2025. This table 
shows that when fuel savings are evaluated over the average lifetime of 
a MY 2025 car (approximately 14 years) or light truck (about 16 years), 
their present value (discounted at 3 percent) exceeds the estimated 
average price increase by $2,900-3,300 for cars and by $4,400-4,900 for 
light trucks.
    If buyers are instead assumed to consider fuel savings over only a 
10-year time horizon, Table IV-146 shows that this reduces the 
difference between the present value of fuel savings and the projected 
price increase for a MY 2025 car to $2,100-2,500, and to about $3,300-
3,600 for a MY 2025 light truck. Finally, Table IV-146 shows that if 
buyers consider fuel savings only over the length of time for which 
they typically finance new car purchases (slightly more than 5 years 
during 2011), the value of fuel savings exceeds the estimated increase 
in the price of a MY 2025 car by only about $550-830, while the 
corresponding difference is reduced to $1,500-1,700 for a MY 2025 light 
truck.

    Table IV-146--NHTSA Estimated Value of Fuel Savings Considered by Buyers vs. Vehicle Price Increases With
                            Alternative Assumptions About Vehicle Buyer Time Horizons
----------------------------------------------------------------------------------------------------------------
                                                                                   Value over alternative time
                                                                                             horizons
                                                                                --------------------------------
                 Vehicle                            Measure            Baseline         (3% Discount rate)
                                                                        fleet   --------------------------------
                                                                                  Average               Average
                                                                                  lifetime   10 Years  loan term
----------------------------------------------------------------------------------------------------------------
MY 2025 Passenger Car...................  Fuel Savings..............       2008    $4,506-    $3,694-    $2,121-
                                                                           2010     $4,659     $3,820     $2,193
                                          Price Increase............       2008  ($1,577)-  ($1,577)-  ($1,577)-
                                                                           2010   ($1,361)   ($1,361)   ($1,361)
                                          Difference................       2008    $2,929-    $2,118-      $545-
                                                                           2010     $3,298     $2,459       $833
MY 2025 Light Truck.....................  Fuel Savings..............       2008    $5,900-    $4,683-    $2,722-
                                                                           2010     $5,472     $4,343     $2,525
                                          Price Increase............       2008   ($1,040)   ($1,040)   ($1,040)
                                                                           2010   ($1,047)   ($1,047)   ($1,047)
                                          Difference................       2008    $4,860-    $3,643-    $1,682-
                                                                           2010     $4,425     $3,296     $1,477
----------------------------------------------------------------------------------------------------------------

    Potential vehicle buyers may also discount future fuel savings 
using higher rates than those typically used to evaluate Federal 
regulations. OMB guidance prescribes that future benefits and costs of 
regulations that mainly affect private consumption decisions, as will 
be the case if manufacturers' costs for complying with higher fuel 
economy standards are passed on to vehicle buyers, should be discounted 
using a consumption rate of time preference.\1343\

[[Page 63117]]

OMB estimates that savers currently discount future consumption at an 
average real or inflation-adjusted rate of about 3 percent when they 
face little risk about its likely level, making this figure a 
reasonable estimate of the consumption rate of time preference. 
However, vehicle buyers may view the value of future fuel savings that 
results from purchasing a vehicle with higher fuel economy as risky or 
uncertain, or they may instead discount future consumption at rates 
reflecting their costs for financing the higher capital outlays 
required to purchase more fuel-efficient models. In either case, buyers 
comparing models with different fuel economy ratings are likely to 
discount the future fuel savings from purchasing one that offers higher 
fuel economy at rates well above the 3% assumed in NHTSA's evaluation.
---------------------------------------------------------------------------

    \1343\ Office of Management and Budget, Circular A-4, 
``Regulatory Analysis,'' September 17, 2003, 33. Available at http://www.whitehouse.gov/sites/default/files/omb/assets/regulatory_matters_pdf/a-4.pdf (last accessed Jul. 13, 2012).
---------------------------------------------------------------------------

    Table IV-147 shows the effects of higher discount rates on vehicle 
buyers' evaluation of the fuel savings projected to result from the 
CAFE standards presented in this final rule, again using MY 2025 
passenger cars and light trucks as an example. As Table IV-146 showed 
previously, average future fuel savings discounted at the OMB 3 percent 
consumer rate exceed the agency's estimated price increases by $2,900-
3,300 for MY 2025 passenger cars and by $4,400-4,900 for MY 2025 light 
trucks. If vehicle buyers instead discount future fuel savings at the 
typical new-car loan rate prevailing during 2011 (approximately 5.2 
percent), however, these differences decline to $2,500-2,800 for cars 
and $3,800-4,200 for light trucks, as Table IV-147 illustrates. This is 
a plausible alternative assumption, because buyers are likely to 
finance the increases in purchase prices resulting from compliance with 
higher CAFE standards as part of the process of financing the vehicle 
purchase itself.
    Finally, as the table also shows, discounting future fuel savings 
using a consumer credit card rate (which averaged about 13 percent 
during 2011) reduces these differences to $1,100-1,500 for a MY 2025 
passenger car and $2,200-2,500 for the typical MY 2025 light truck. 
Even at these significantly higher discount rates, however, the table 
shows that the private net benefits from purchasing new vehicles with 
the levels of fuel economy this rule would require--rather than those 
that would result from simply extending the MY 2016 CAFE standards to 
apply to future model years--remain large.

    Table IV-147--NHTSA Estimated Value of Fuel Savings Considered by Buyers vs. Vehicle Price Increases With
                              Alternative Assumptions About Consumer Discount Rates
----------------------------------------------------------------------------------------------------------------
                                                                        Value at Alternative Discount Rates
                                                                 -----------------------------------------------
                                                        Baseline                                     Consumer
             Vehicle                    Measure          fleet     OMB consumer    New car loan     credit card
                                                                    rate  (3%)     rate  (5.2%)    rate  (12.7%)
                                                                                      \1344\          \1345\
----------------------------------------------------------------------------------------------------------------
MY 2025 passenger car...........  Fuel savings.......       2008         $4,506-         $4,041-         $2,725-
                                                            2010          $4,659          $4,178          $2,818
                                  Price increase.....       2008       ($1,577)-       ($1,577)-       ($1,577)-
                                                            2010        ($1,361)        ($1,361)        ($1,361)
                                  Difference.........       2008         $2,929-         $2,464-         $1,148-
                                                            2010          $3,298          $2,817          $1,457
MY 2025 light truck.............  Fuel savings.......       2008         $5,900-         $5,266-         $3,507-
                                                            2010          $5,472          $4,883          $3,252
                                  Price increase.....       2008       ($1,040)-       ($1,040)-       ($1,040)-
                                                            2010        ($1,047)        ($1,047)        ($1,047)
                                  Difference.........       2008          $4,860          $4,226          $2,467
                                  ...................       2010          $4,425          $3,836          $2,205
----------------------------------------------------------------------------------------------------------------
\1344\ Interest rates on 48-month new vehicle loans made by commercial banks during 2011 averaged 5.73%, while
  new car loan rates at auto finance companies averaged 4.73%; See Board of Governors of the Federal Reserve
  System, Federal Reserve Statistical Release G.19, Consumer Credit. Available at http://www.federalreserve.gov/releases/g19/Current releases/g19/Current (last accessed July 13, 2012).
\1345\ The average rate on consumer credit card accounts at commercial banks during 2011 was 12.74%; See Board
  of Governors of the Federal Reserve System, Federal Reserve Statistical Release G.19, Consumer Credit.
  Available at http://www.federalreserve.gov/releases/g19/Current (last accessed July 13, 2012).

    Some evidence also suggests that vehicle buyers may employ 
combinations of high discount rates and short time horizons in their 
purchase decisions. For example, consumers surveyed by Kubik (2006) 
reported that fuel savings would have to be adequate to pay back the 
additional purchase price of a more fuel-efficient vehicle in less than 
3 years to persuade them to purchase it, and that even over this short 
time horizon they were likely to discount fuel savings using credit 
card-like rates.\1346\ Combinations of a shorter time horizon and a 
higher discount rate could further reduce--or potentially even 
eliminate--the difference between the value of fuel savings and the 
agency's estimates of increases in vehicle prices. One plausible 
combination would be for buyers to discount fuel savings over the term 
of a new car loan, using the interest rate on that loan as a discount 
rate. Doing so would reduce the amount by which future fuel savings 
exceed the estimated increase in the prices of MY 2025 vehicles 
considerably further, to about $200-300 for passenger cars and $1,300-
1,600 for light trucks.
---------------------------------------------------------------------------

    \1346\ Kubik, M. (2006). Consumer Views on Transportation and 
Energy. Second Edition. Technical Report: National Renewable Energy 
Laboratory. Available at Docket No. NHTSA-2009-0059-0038.
---------------------------------------------------------------------------

    As these comparisons illustrate, reasonable alternative assumptions 
about how consumers might evaluate future fuel savings, the major 
private benefit from requiring higher fuel economy, can significantly 
affect the benefits they consider when deciding whether to purchase 
more fuel-efficient vehicles. Readily imaginable combinations of 
shorter time horizons, higher discount rates, and lower expectations 
about future fuel prices or annual vehicle use and fuel savings could 
make some potential buyers hesitant--or perhaps even unwilling--to

[[Page 63118]]

purchase vehicles offering the increased fuel economy levels this final 
rule would require manufacturers to provide in future model years. 
Thus, vehicle buyers' assessment of the benefits and costs of this 
final rule in their purchase decisions may differ markedly from NHTSA's 
estimates.
    If consumers' views about critical variables such as future fuel 
prices or the appropriate discount rate differ sufficiently from the 
assumptions used by the agency, some potential vehicle buyers might 
conclude that the value of fuel savings and other benefits from higher 
fuel economy they are considering are not sufficient to justify the 
increase in purchase prices they expect to pay. In conjunction with the 
possibility that manufacturers misinterpret potential buyers' 
willingness to pay for improved fuel economy, this might explain why 
the current choices among available models do not result in average 
fuel economy levels approaching those this rule would require.
    Another possibility is that achieving the fuel economy improvements 
required by stricter fuel economy standards might lead manufacturers to 
forego planned future improvements in performance, carrying capacity, 
safety, or other features of their vehicle models that provide 
important sources of utility to their owners, even if manufacturers 
could--at some cost--retain those other features while improving fuel 
economy. Although the specific economic values that buyers attach to 
individual vehicle attributes such as fuel economy, performance, or 
passenger- and cargo-carrying capacity are difficult to infer from 
vehicle prices or buyers' choices among competing models, changes in 
vehicle attributes can significantly affect the overall utility that 
vehicles offer. Thus if requiring manufacturers to provide higher fuel 
economy leads them to sacrifice improvements in these or other highly-
valued attributes, potential buyers are likely to view these sacrifices 
as an additional cost of improving fuel economy. If the range of models 
offered ensures that vehicles with those attributes continue to be 
available, then vehicle buyers will still have the opportunity to 
purchase them, although only at higher costs than they were previously 
available.
    As indicated in its previous discussion of technology costs, NHTSA 
has approached this problem by attempting to develop cost estimates for 
fuel economy-improving technologies that include allowances for any 
additional costs necessary to maintain the reference fleet (or 
baseline) levels of performance, comfort, capacity, and safety of 
light-duty vehicle models. Although NHTSA has revised its estimates of 
manufacturers' costs for some technologies significantly for use in 
this rulemaking, these revised estimates are still intended to allow 
manufacturers to maintain the performance, safety, carrying capacity, 
and utility of vehicle models while improving their fuel economy, in 
the majority of cases. The agency's continued specification of 
footprint-based CAFE standards also addresses this concern, by 
establishing less demanding fuel economy targets for larger cars and 
light trucks.
    Finally, vehicle buyers may simply prefer the choices of vehicle 
models they now have available to the combinations of price, fuel 
economy, and other attributes that manufacturers are likely to offer 
when required to achieve the higher overall fuel economy levels 
presented in this final rule. If this is the case, their choices among 
models--and even some buyers' decisions about whether to purchase a new 
vehicle--will respond accordingly, and their responses to these new 
choices will reduce their overall welfare. Some may buy models with 
combinations of price, fuel efficiency, and other attributes that they 
consider less desirable than those they would otherwise have purchased, 
while others may simply postpone buying a new vehicle.
    As the foregoing discussion makes clear, the agency cannot offer a 
complete answer to the question of why the apparently large differences 
between its estimates of private benefits from requiring higher fuel 
economy and manufacturers' costs for providing it would not result in 
fuel economy levels comparable to those required by the rule even in 
its absence. One explanation is that these estimates are reasonable, 
but that for some combination of the reasons outlined above, the market 
for fuel economy is not responding efficiently to these potential 
economic returns. NHTSA believes the existing literature offers some 
support for the view that various failures in the market for fuel 
economy prevent an economically desirable outcome, which implies that 
there are likely to be substantial private gains from the final rule.
    NHTSA acknowledges the possibility that it has incorrectly 
characterized the impact on the market of the CAFE standards this rule 
proposes, and that this could cause its estimates of benefits and costs 
to misrepresent the effects of the final rule. To recognize this 
possibility, this section presents an alternative accounting of the 
benefits and costs of CAFE standards for MYs 2017-2025 passenger cars 
and light trucks and discusses its implications. Table IV-148 and Table 
IV-149 display the aggregate economic impacts of the rule as viewed 
from the perspective of potential buyers.
    As the table shows, the final rule's total benefits to vehicle 
buyers (line 4) consist of the value of fuel savings over vehicles' 
full lifetimes measured using retail fuel prices (line 1), the economic 
value of vehicle occupants' savings in refueling time (line 2), and the 
economic benefits from added rebound-effect driving (line 3). As the 
zero entries in line 5 of the table suggest, no losses in consumer 
welfare from changes in vehicle attributes (other than those from 
increases in vehicle prices) are assumed to occur. The only reduction 
in the total private benefits to vehicle owners occurs as a result of 
the increased cost of maintaining the more technologically 
sophisticated vehicles that this rule forces manufacturers to produce 
and consumers to buy. Thus, the net private benefits to vehicle buyers 
(line 7) are equal to total private benefits (reported previously in 
line 4) minus the estimated incremental maintenance costs (line 6). The 
decline in fuel tax revenues (line 8) that results from reduced fuel 
purchases offsets the savings in fuel tax payments by vehicle buyers, 
which was previously included in the retail value of fuel savings (line 
1). The offsetting savings in tax payments to vehicle buyers and tax 
revenue loss to government agencies is simply a transfer of funds 
between consumers and government, and thus does not represent a net 
social cost.\1347\ (Thus the sum of lines 1 and 8 equals the savings in 
fuel production costs that were reported previously as the value of 
fuel savings at pre-tax prices in the agency's accounting of economy-
wide benefits and costs.) Lines 9 and 10 of Table IV-148 and Table IV-
149 report the value of reductions in air pollution and climate-related 
externalities resulting from lower emissions of criteria air pollutants 
and CO2 during fuel production and consumption, while line 
11 reports the savings in energy security externalities to the U.S. 
economy from reduced consumption

[[Page 63119]]

and imports of petroleum and refined fuel. Line 13 reports the costs of 
increased congestion delays, accidents, and noise that result from 
additional driving due to the fuel economy rebound effect. Net external 
benefits--those that extend beyond the realm of vehicle buyers--from 
the final and augural CAFE standards (line 14) are thus the sum of the 
change in fuel tax revenues, the reduction in environmental and energy 
security externalities, and increased external costs from added 
driving.
---------------------------------------------------------------------------

    \1347\ Strictly speaking, fuel taxes represent a transfer of 
resources from consumers of fuel to government agencies and not a 
use of economic resources. Reducing the volume of fuel purchases 
simply reduces the value of this transfer, and thus cannot produce a 
real economic cost or benefit. Representing the change in fuel tax 
revenues in effect as an economy-wide cost is necessary to offset 
the portion of fuel savings included in line 1 that represents 
savings in fuel tax payments by consumers. This prevents the savings 
in tax revenues from being counted as a benefit from the economy-
wide perspective.
---------------------------------------------------------------------------

    Line 15 of Table IV-148 and Table IV-149 shows manufacturers' 
technology outlays for meeting higher CAFE standards for passenger cars 
and light trucks, which represent the principal private and social cost 
of requiring higher fuel economy. The net social benefits (line 16 of 
the table) resulting from the final rule consist of the sum of private 
(line 7) and external (line 14) benefits, minus technology costs (line 
15). As expected, the figures reported in line 16 of the table are 
identical to those reported previously. Table IV-148 and Table IV-149 
highlight several important features of this rule's economic impacts. 
First, comparing the rule's net private benefits (line 7) to its 
external effects (lines 8 through 14) makes it clear that a very large 
proportion of the final rule's benefits would be experienced by vehicle 
buyers, while only the small remaining fraction would be extend beyond 
vehicle buyers themselves. In turn, the vast majority of private 
benefits resulting from the higher fuel economy levels the final rule 
would require stem from fuel savings to vehicle buyers. Net external 
benefits from the final rule (line 14) are actually projected to be 
small, because losses in tax revenue and external costs from added 
driving combine to exceed the value of reductions in environmental and 
energy security externalities. As a consequence, the net social 
benefits of the rule mirror almost exactly its net private benefits to 
vehicle buyers, under the assumption that manufacturers will recover 
their technology outlays for achieving higher fuel economy by raising 
new car and light truck prices. Once again, this result highlights the 
extreme importance of accounting for any other effects of the rule on 
the economic welfare of vehicle buyers.

  Table IV-148--NHTSA Estimated Private, Social, and Total Benefits and Costs of MYs 2017-2021 CAFE Standards--
                                        Passenger Cars Plus Light Trucks
                                               [3% discount rate]
----------------------------------------------------------------------------------------------------------------
                                                                                   Model year
                             Entry                             -------------------------------------------------
                                                                  2017      2018      2019      2020      2021
----------------------------------------------------------------------------------------------------------------
1. Value of fuel savings (at retail prices)...................     $13.5     $20.7     $37.0     $50.8     $65.8
2. Savings in refueling time..................................       0.5       0.6       1.1       1.4       1.7
3. Consumer surplus from added driving........................       1.2       1.8       3.1       4.2       5.5
4. Total private benefits (= 1 + 2 + 3).......................      15.2      23.1      41.2      56.4      73.0
5. Reduction in private benefits from changes in other vehicle       0.0       0.0       0.0       0.0       0.0
 attributes...................................................
6. Maintenance costs..........................................       (0)       (0)       (0)       (1)       (1)
7. Net private benefits (= 4 + 5 + 6).........................      15.2      23.1      41.2      56.4      73.0
8. Change in fuel tax revenues................................     (1.3)     (2.0)     (3.6)     (4.9)     (6.3)
9. Reduced health damages from criteria emissions.............       0.4       0.6       1.1       1.5       1.9
10. Reduced climate damages from CO2 emissions................       1.2       1.8       3.3       4.6       6.0
11. Reduced energy security externalities.....................       0.7       1.0       1.8       2.4       3.1
12. Reduction in externalities (= 9 + 10 + 11)................       2.3       3.4       6.2       8.5      11.0
13. Increased costs of congestion, etc........................     (0.8)     (1.2)     (2.0)     (2.7)     (3.4)
14. Net external benefits (= 8 + 12 + 13).....................       0.2       0.2       0.6       0.9       1.3
15. Technology costs..........................................     (4.4)     (5.8)     (8.7)    (11.9)    (14.8)
16. Net social benefits (= 7 + 14 + 15).......................      5.50     13.90     24.60     32.00     42.20
----------------------------------------------------------------------------------------------------------------

Table IV-149--NHTSA Estimated Private, Social, and Total Benefits and Costs of MYs 2022-2025 and Total MYs 2017-
                              2025 CAFE Standards--Passenger Cars Plus Light Trucks
----------------------------------------------------------------------------------------------------------------
                                                                                 Model year
                                                          ------------------------------------------------------
                          Entry                                                                          Total,
                                                              2022       2023       2024       2025    2017-2025
----------------------------------------------------------------------------------------------------------------
1. Value of fuel savings (at retail fuel prices).........      $72.9      $82.8      $93.8     $103.0     $540.3
2. Savings in refueling time.............................        1.9        2.2        2.5        2.8       14.6
3. Consumer surplus from added driving...................        6.1        7.0        7.8        8.6       45.2
4. Total private benefits (= 1 + 2 + 3)..................       80.9       92.0      104.1      114.4      600.1
5. Reduction in private benefits from changes in other           0.0        0.0        0.0        0.0        0.0
 vehicle attributes......................................
6. Maintenance costs.....................................        (1)        (2)        (2)        (2)        (9)
7. Net private benefits (= 4 + 5 + 6)....................       80.9       92.0      104.1      114.4      600.1
8. Change in fuel tax revenues...........................      (6.9)      (7.7)      (8.7)      (9.4)     (50.8)
9. Reduced health damages from criteria emissions........        2.1        2.3        2.6        2.8       15.2
10. Reduced climate damages from CO2 emissions...........        6.7        7.8        8.9        9.9       50.0
11. Reduced energy security externalities................        3.4        3.9        4.4        4.7       25.4
12. Reduction in externalities (= 9 + 10 + 11)...........       12.2       14.0       15.9       17.4       90.6
13. Increased costs of congestion, etc...................      (3.7)      (4.3)      (4.9)      (5.2)     (29.6)
14. Net external benefits (= 8 + 12 + 13)................        1.6        2.0        2.0        2.8       10.2
15. Technology costs.....................................     (16.1)     (18.1)     (21.7)     (23.3)    (133.7)
16. Net social benefits (= 7 + 14 + 15)..................      49.10      53.80      59.40      66.50     346.60
----------------------------------------------------------------------------------------------------------------

[[Page 63120]]

    As discussed in detail previously, NHTSA believes that the 
aggregate benefits from this final rule amply justify its total costs, 
but it remains possible that the agency has overestimated the value of 
fuel savings to buyers and subsequent owners of the cars and light 
trucks to which the higher CAFE standards it establishes would apply. 
It is also possible that the agency has failed to include adequate cost 
allowances to allow manufacturers to maintain other vehicle attributes 
as part of their efforts to achieve higher fuel economy. To acknowledge 
these possibilities, NHTSA has examined their potential impact on its 
estimates of the final rule's benefits and costs. This analysis, which 
appears in Chapter VIII of the Final RIA accompanying this rule, shows 
the rule's economic impacts under alternative assumptions about the 
private benefits from higher fuel economy, and the value of potential 
changes in other vehicle attributes. An important conclusion of this 
analysis is that even if the private savings are significantly 
overstated, the benefits of the final and augural standards continue to 
exceed the costs.
7. What other impacts (quantitative and unquantifiable) will these 
standards have?
    In addition to the quantified benefits and costs of fuel economy 
standards, the final standards established by this rule will have other 
impacts that we have not quantified in monetary terms. The decision on 
whether or not to quantify a particular impact depends on several 
considerations:
     How likely is it to occur, and can the magnitude of the 
impact reasonably be attributed to the outcome of this rulemaking?
     Would quantification of its physical magnitude or economic 
value help NHTSA and the public evaluate the CAFE standards that may be 
set in rulemaking?
     Is the impact readily quantifiable in physical terms?
     If so, can it readily be translated into an economic 
value?
     Is this economic value likely to be material?
     Can the impact be quantified with a sufficiently narrow 
range of uncertainty so that the estimate is useful?
    NHTSA expects that this rulemaking will have a number of genuine, 
material impacts that have not been quantified due to one or more of 
these considerations. In some cases, further research may yield 
estimates that are useful for future rulemakings.
a. Technology Forcing
    The final rule will improve the fuel economy of the U.S. new 
vehicle fleet, but it will also increase the cost (and presumably, the 
price) of new passenger cars and light trucks built during MYs 2017-
2025. We anticipate that the cost, scope, and duration of this rule, as 
well as the steadily rising standards it requires, will cause 
automakers and suppliers to devote increased attention to methods of 
improving vehicle fuel economy.
    This increased attention will stimulate additional research and 
engineering, and we anticipate that, over time, innovative approaches 
to reducing the fuel consumption of light duty vehicles will emerge. 
These innovative approaches may reduce the cost of the final rule in 
its later years, and also increase the set of feasible technologies in 
future years. We have attempted to estimate the effect of learning 
effects on the costs of producing known technologies within the period 
of the rulemaking, which is one way that technologies become cheaper 
over time, and may reflect innovations in application and use of 
existing technologies to meet the future standards.
    However, we have not attempted to estimate the extent to which not-
yet-invented technologies will appear, either within the time period of 
the current rulemaking or that might be available after MY 2016. Nor 
have we projected whether technologies that were considered but not 
applied in the current rulemaking because of concerns about the 
likelihood of their commercialization during its timeframe, will in 
fact be helped towards commercialization as a result of the final 
standards.
b. Effects on Vehicle Costs
    Actions that increase the cost of new vehicles could subsequently 
make such vehicles more costly to maintain, repair, and insure. In 
general, NHTSA expects that this effect to be a positive linear 
function of vehicle costs. In its central analysis, NHTSA estimates 
that the final rule could raise average vehicle technology costs by 
over $1,500 by 2025, and for some manufacturers, average costs will 
increase by more than $2,500 (for some specific vehicle models, we 
estimate that the final rule could increase technology costs by more 
than $10,000). Depending on the retail price of the vehicle, this could 
represent a significant increase in the overall vehicle cost and 
subsequently increase insurance rates, operation costs, and maintenance 
costs. Comprehensive and collision insurance costs are likely to be 
directly related to price increases, but liability premiums will go up 
by a smaller proportion because the bulk of liability coverage reflects 
the cost of personal injury. Also, although they represent economic 
transfers, sales and excise taxes would also increase with increases in 
vehicle prices (unless rates are reduced). NHTSA has attempted to 
quantify these increased costs in detail, as reported in the previous 
discussion of the rule's likely impacts on vehicle sales.
    The impact on operation and maintenance costs is less clear, 
because the maintenance burden and useful life of each technology are 
not known. However, one of the common consequences of using more 
complex or innovative technologies is a decline in vehicle reliability 
and an increase in maintenance costs. These costs are borne in part by 
vehicle manufacturers (through warranty costs, which are included in 
the indirect costs of production), and in part by vehicle owners. NHTSA 
believes that this effect may be significant, but has been unable to 
quantify these costs for purposes of this final rule.
    To the extent that the final standards require manufacturers to 
build and sell more PHEVs and EVs, vehicle manufacturers and owners may 
face additional costs for charging infrastructure and battery disposal. 
While Chapter 3 of the final Joint TSD discusses the costs of charging 
infrastructure, neither of these costs have been incorporated into the 
rulemaking analysis.
c. Effects on Vehicle Miles Traveled (VMT)
    While NHTSA has estimated the impact of the rebound effect on the 
use of MY 2017-25 vehicles, we have not estimated how a change in new 
vehicle sales would impact aggregate vehicle use. Changes in new 
vehicle sales may be accompanied by complex but difficult-to-quantify 
effects on overall vehicle use and its composition by vehicle type and 
age, because the same factors affecting sales of new vehicles are also 
likely to influence their use, as well as how intensively older 
vehicles are used and when they are retired from service. These changes 
may have important consequences for total fleet-wide fuel consumption. 
NHTSA has been unable to quantify these effects for purposes of this 
final rule.
d. Effect on Composition of Passenger Car and Light Truck Sales
    To the extent that manufacturers pass on costs to buyers by raising 
prices for

[[Page 63121]]

new vehicle models, they may distribute these price increases across 
their model lineups in ways that affect the composition of their total 
sales. If changes in the composition of sales occur, this could affect 
fuel savings to some degree. However, NHTSA's view is that the scope 
for such effects is relatively small, since most vehicles will to some 
extent be impacted by the standards. Compositional effects might be 
important with respect to compliance costs for individual 
manufacturers, but are unlikely to be material for the rule as a whole.
e. Effects on the Used Vehicle Market
    The effect of this rule on the lifetimes, use, and retirement dates 
of older vehicles will be related to its effects on new vehicle prices, 
the fuel efficiency of new vehicle models, and total sales of new 
vehicles. If the value of fuel savings resulting from improved fuel 
efficiency to the typical potential buyer of a new vehicle outweighs 
the average increase in new models' prices, sales of new vehicles will 
rise while retirement rates of used vehicles will increase slightly. 
This will cause the ``turnover'' of the vehicle fleet--that is, the 
retirement of used vehicles and their replacement by new models--to 
accelerate slightly, thus accentuating the anticipated effect of the 
rule on fleet-wide fuel consumption and CO2 emissions. 
However, if potential buyers value future fuel savings resulting from 
the increased fuel efficiency of new models at less than the increase 
in their average selling price, sales of new vehicles will decline, as 
will the rate at which used vehicles are retired from service. This 
effect will slow the replacement of used vehicles by new models, and 
thus partly offset the anticipated effects of the final rules on fuel 
use and emissions.
    Because the agencies are uncertain about how the value of projected 
fuel savings from the final rules to potential buyers will compare to 
their estimates of increases in new vehicle prices, we have not 
attempted to estimate explicitly the effects of the rule on retirement 
of older vehicles and the turnover of the vehicle fleet.
f. Impacts of Changing Fuel Composition on Costs, Benefits, and 
Emissions
    EPAct, as amended by EISA, creates a Renewable Fuels Standard that 
sets targets for greatly increased usage of renewable fuels over the 
next decade. The law requires fixed volumes of renewable fuels to be 
used--volumes that are not linked to actual usage of transportation 
fuels.
    Ethanol and biodiesel (in the required volumes) may increase or 
decrease the cost of blended gasoline and diesel, depending on crude 
oil prices and tax subsidies offered for renewable fuels. The potential 
extra cost of renewable fuels would be borne through a cross-subsidy: 
the price of every gallon of blended gasoline could rise sufficiently 
to pay for any extra cost of using renewable fuels in these blends. 
However, if the price of gasoline or diesel increases enough, the 
consumer could actually realize a savings through the increased usage 
of renewable fuels. By reducing total fuel consumption, the CAFE 
standards in this rule could tend to increase any necessary cross-
subsidy per gallon of fuel, and hence raise the market price of 
transportation fuels, while there would be no change in the volume or 
cost of renewable fuels used.
    These effects are indirectly incorporated in NHTSA's analysis of 
the final CAFE standards, because they are reflected in EIA's 
projections of future gasoline and diesel prices in the Annual Energy 
Outlook, which incorporates in its baseline both a Renewable Fuel 
Standard and higher CAFE standards.
    The net effect of incorporating an RFS then might be to slightly 
reduce the benefits of the rule, because affected vehicles might be 
driven slightly less if the RFS makes blended gasoline relatively more 
expensive, and because fuels blended with more ethanol emit slightly 
fewer greenhouse gas emissions per gallon. In addition, there might be 
corresponding benefit losses from the induced reduction in VMT. All of 
these effects are difficult to estimate, because of uncertainty in 
future crude oil prices, uncertainty in future tax policy, and 
uncertainty about how petroleum marketers will actually comply with the 
RFS, but they are likely to be small, because the cumulative deviation 
from baseline fuel consumption induced by the final rule will itself be 
small.
g. Distributional Effects
    The agency's analysis of the final rule reports impacts only as 
nationwide aggregate or per-vehicle average values. NHTSA also shows 
the effects of the EIA high and low fuel price forecasts on the 
aggregate benefits in its sensitivity analysis. Generally, this final 
rule would have its largest effects on individuals who purchase new 
vehicles produced during the model years it would affect (2017-25). New 
vehicle buyers who drive more than the agency's estimates of average 
vehicle use will experience larger fuel savings and economic benefits 
than the average values reported in this final rule, while those who 
drive less than our average estimates will experience smaller fuel 
savings and benefits.

H. Vehicle Classification

    Vehicle classification, for purposes of the CAFE program, refers to 
manufacturers' decisions regarding whether a vehicle is a passenger car 
or a light truck and whether NHTSA agrees; the vehicle would then be 
subject to the applicable passenger car or the light truck 
standards.\1348\ As NHTSA explained in the MY 2011 rulemaking and in 
the MYs 2012-2016 rulemaking, vehicle classification is based in part 
on EPCA/EISA, and in part on NHTSA's regulations. EPCA categorizes some 
light 4-wheeled vehicles as ``passenger automobiles'' (cars) and the 
balance as ``non-passenger automobiles'' (light trucks). EPCA defines 
passenger automobiles as any automobile (other than an automobile 
capable of off-highway operation) which NHTSA decides by rule is 
manufactured primarily for use in the transportation of not more than 
10 individuals.\1349\ NHTSA created regulatory definitions for 
passenger automobiles and light trucks, found at 49 CFR Part 523, to 
guide the manufacturers in classifying vehicles and NHTSA in reviewing 
those classifications.
---------------------------------------------------------------------------

    \1348\ For the purpose of the MYs 2012-2016 standards and this 
final rule establishing standards for MYs 2017 and beyond, EPA has 
agreed to use NHTSA's regulatory definitions for determining which 
vehicles would be subject to which CO2 standards.
    \1349\ EPCA 501(2), 89 Stat. 901, codified at 49 U.S.C. 
32901(a).
---------------------------------------------------------------------------

    Under EPCA, there are two general groups of automobiles that 
qualify as non-passenger automobiles or light trucks: (1) Those defined 
by NHTSA in its regulations as other than passenger automobiles due to 
their having design features that indicate they were not manufactured 
``primarily'' for transporting up to ten individuals; and (2) those 
expressly excluded from the passenger category by statute due to their 
capability for off-highway operation, regardless of whether they might 
have been manufactured primarily for passenger transportation.\1350\ 49 
CFR 523.5

[[Page 63122]]

directly tracks those two broad groups of non-passenger automobiles in 
subsections (a) and (b), respectively. We note that NHTSA tightened the 
definition of light truck in the rulemaking establishing the MY 2011 
standards to ensure that only vehicles that actually have 4WD will be 
classified as off-highway vehicles by reason of having 4WD (to prevent 
2WD SUVs that also come in a 4WD ``version'' from qualifying 
automatically as ``off-road capable'' simply due to the existence of 
the 4WD version), which resulted in the reclassification of over 1 
million vehicles from the truck fleet to the car fleet.
---------------------------------------------------------------------------

    \1350\ 49 U.S.C. 32901(a)(18). The statute refers both to 
vehicles that are 4WD and to vehicles over 6,000 lbs GVWR as 
potential candidates for off-road capability, if they also meet the 
``significant feature * * * designed for off-highway operation'' as 
defined by the Secretary. We note that we consider ``AWD'' vehicles 
as 4WD for purposes of this determination--both systems have the 
capability of providing power to all four wheels, which appears to 
make them equal candidates for off-road capability given other 
necessary characteristics. We also underscore, as we have in the 
past, that despite comments in prior rulemakings suggesting that any 
vehicle that appears to be manufactured ``primarily'' for 
transporting passengers must be classified as a passenger car, the 
statute as currently written clearly provides that vehicles that are 
off-highway capable are not passenger cars.
---------------------------------------------------------------------------

    Since the original passage of EPCA, and consistently through the 
passage of EISA, Congress has expressed its intent that different 
vehicles with different characteristics and capabilities should be 
subject to different CAFE standards in two ways: first, through whether 
a vehicle is classified as a passenger car or as a light truck, and 
second, by requiring NHTSA to set separate standards for passenger cars 
and for light trucks.\1351\ Creating two categories of vehicles and 
requiring separate standards for each, however, can lead to two issues 
which may either detract from the fuel savings that the program is able 
to achieve, or increase regulatory burden for manufacturers simply 
because they are trying to meet market demand. Specifically,
---------------------------------------------------------------------------

    \1351\ See, e.g., discussion of legislative history in 42 FR 
38362, 38365-66 (Jul. 28, 1977).
---------------------------------------------------------------------------

     If the stringency of the standards that NHTSA establishes 
seems to favor either cars or trucks, manufacturers may have incentive 
to change their vehicles' characteristics in order to reclassify them 
and average them into the ``easier'' fleet; and
     ``Like'' vehicles, such as the 2WD and 4WD versions of the 
same CUV, may have generally similar fuel economy-achieving 
capabilities, but different target standards due to differences in the 
car and truck curves.
    NHTSA recognizes that manufacturers may have an incentive to 
classify vehicles as light trucks if the fuel economy target for light 
trucks with a given footprint is less stringent than the target for 
passenger cars with the same footprint. This is often the case given 
the current fleet. Because of characteristics like 4WD and towing and 
hauling capacity (and correspondingly, although not necessarily, 
heavier weight), the vehicles in the current light truck fleet are 
generally less capable of achieving higher fuel economy levels as 
compared to the vehicles in the passenger car fleet. 2WD SUVs and CUVs 
are the vehicles that could be most readily redesigned so that they can 
be ``moved'' from the passenger car to the light truck fleet. A 
manufacturer could do this by adding a third row of seats, for example, 
or boosting GVWR over 6,000 lbs for a 2WD SUV or CUV that already meets 
the ground clearance requirements for ``off-road capability.'' A change 
like this may only be possible during a vehicle redesign, but since 
vehicles are redesigned, on average, every 5 years, at least some 
manufacturers could possibly choose to make such changes before or 
during the model years covered by this rulemaking, either because of 
market demands or because of interest in changing the vehicle's 
classification.
    In the NPRM, the agency stated that it continues to believe that 
the definitions as they currently exist are consistent with the text of 
EISA and with Congress' original intent. However, the time frame of 
this rulemaking is longer than any CAFE rulemaking that NHTSA has 
previously undertaken, and no one can predict with certainty how the 
market will change between now and 2025. The agency therefore has less 
assurance than in prior rulemakings that manufacturers will not have 
greater incentives and opportunities during that time frame to make 
more deliberate redesign efforts to move vehicles out of the car fleet 
and into the truck fleet in order to obtain the lower target, and 
potentially reducing overall fuel savings. Recognizing this 
possibility, NHTSA sought comment on how best to avoid it while still 
classifying vehicles appropriately based on their characteristics and 
capabilities.
    One of the potential options that we explored in the MYs 2012-2016 
rulemaking for MYs 2017 and beyond was changing the definition of light 
truck to remove paragraph (5) of 49 CFR 523.5(a), which allows vehicles 
to be classified as light trucks if they have three or more rows of 
seats that can either be removed or folded flat to allow greater cargo-
carrying capacity. NHTSA has received comments in the past arguing that 
vehicles with three or more rows of seats, unless they are capable of 
transporting more than 10 individuals, should be classified as 
passenger cars rather than as light trucks because they would not need 
to have so many seats if they were not intended primarily to carry 
passengers.
    In the NPRM for MYs 2017 and beyond, NHTSA explained that we 
recognize that there are arguments both for and against maintaining the 
definition as currently written. The agency continues to believe that 
three or more rows of seats that can be removed or folded flat is a 
reasonable proxy for a vehicle's ability to provide expanded cargo 
space, consistent with the agency's original intent in developing the 
light truck definitions that expanded cargo space is a fundamentally 
``truck-like'' characteristic. Much of the public reaction to this 
definition, which is mixed, tends to be visceral and anecdotal--for 
example, for parents with minivans and multiple children, the ability 
of seats to fold flat to provide more room for child-related cargo may 
have been a paramount consideration in purchasing the vehicle, while 
for CUV owners with cramped and largely unused third rows, those extra 
seats may seem to have sprung up entirely in response to the 
regulation, rather than in response to the consumer's need for utility. 
If we believe, for the sake of argument, that the agency's decision 
might be reasonable from both a policy and a legal perspective whether 
we decided to change the definition or to leave it alone, the most 
important questions in making the decision become (1) whether removing 
523.5(a)(5), and thus causing vehicles with three or more rows to be 
classified as passenger cars in the future, will save more fuel, and 
(2) if more fuel will be saved, at what cost.
    In considering these questions in the MYs 2012-2016 rulemaking, 
NHTSA conducted an analysis in that final rule to attempt to consider 
the impact of moving these vehicles. We identified all of the 3-row 
vehicles in the baseline (MY 2008) fleet,\1352\ and then considered 
whether any could be properly classified as a light truck under a 
different provision of 49 CFR 523.5--about 40 vehicles were 
classifiable under Sec.  523.5(b) as off-highway capable. We then 
transferred those remaining 3-row vehicles from the light truck to the 
passenger car input sheets for the CAFE model, re-estimated the 
relative stringency of the passenger car and light truck standards, 
shifted the curves to obtain the same overall average required fuel 
economy as under the final standards, and ran the model to evaluate 
potential impacts (in terms of costs, fuel savings, etc.) of moving 
these vehicles. The agency's hypothesis had been that moving 3-row 
vehicles from the truck to the car fleet would tend to bring the 
achieved fuel economy levels down in both fleets--the car fleet 
achieved levels could theoretically fall due to the introduction of 
many more vehicles that

[[Page 63123]]

are relatively heavy for their footprint and thus comparatively less 
fuel economy-capable, while the truck fleet achieved levels could 
theoretically fall due to the characteristics of the vehicles remaining 
in the fleet (4WDs and pickups, mainly) that are often comparatively 
less fuel economy-capable than 3-row vehicles, although more vehicles 
would be subject to the relatively more stringent passenger car 
standards, assuming the curves were not refit to the data.
---------------------------------------------------------------------------

    \1352\ Of the 430 light trucks models in the fleet, 175 of these 
had 3 rows.
---------------------------------------------------------------------------

    As the agency found, however, moving the vehicles reduced the 
stringency of the passenger car standards by approximately 0.8 mpg on 
average for the five years of the rule, and reduced the stringency of 
the light truck standards by approximately 0.2 mpg on average for the 
five years of the rule, but it also resulted in approximately 676 
million fewer gallons of fuel consumed (equivalent to about 1 percent 
of the reduction in fuel consumption under the final standards) and 7.1 
mmt fewer CO2 emissions (equivalent to about 1 percent of 
the reduction in CO2 emissions under the final standards) 
over the lifetime of the MYs 2012-2016 vehicles. This result was 
attributable to slight differences (due to rounding precision) in the 
overall average required fuel economy levels in MYs 2012-2014, and to 
the retention of the relatively high lifetime mileage accumulation 
(compared to ``traditional'' passenger cars) of the vehicles moved from 
the light truck fleet to the passenger car fleet. The net effect on 
technology costs was approximately $200 million additional spending on 
technology each year (equivalent to about 2 percent of the average 
increase in annual technology outlays under the final standards). 
Assuming manufacturers would pass that cost forward to consumers by 
increasing vehicle costs, NHTSA estimated that vehicle prices would 
increase by an average of approximately $13 during MYs 2012-2016. With 
less fuel savings and higher costs, and a substantial disruption to the 
industry, removing 523.5(a)(5) did not seem advisable in the context of 
the MYs 2012-2016 rulemaking.
    Looking forward, however, and given the considerable uncertainty 
regarding the incentive to reclassify vehicles in the MYs 2017 and 
beyond timeframe, the agency considered whether a fresh attempt at this 
analysis would be warranted, but did not believe that it would be 
informative given the uncertainty. One important point to note in the 
comparative analysis in the MYs 2012-2016 rulemaking is that, due to 
time constraints, the agency did not attempt to refit the respective 
fleet target curves or to change the intended required stringency in MY 
2016 of 34.1 mpg for the combined fleets. If we had refitted curves, 
considering the vehicles in question, we might have obtained a somewhat 
steeper passenger car curve, and a somewhat flatter light truck curve, 
which could have affected the agency's findings. NHTSA explained in the 
NPRM that the same is true for MYs 2017 and beyond. Without refitting 
the curves and changing the required levels of stringency for cars and 
trucks, simply moving vehicles from one fleet to another would not 
inform the agency in any substantive way as to the impacts of a change 
in classification. Moreover, even if we did attempt to make those 
changes, the results would be somewhat speculative; for example, a MY 
2008 baseline (or for that matter, a MY 2010 baseline) may have limited 
utility for predicting relatively small changes (moving only 40 
vehicles, as noted above) in the fleet makeup during the rulemaking 
timeframe. As a result, NHTSA did not attempt in the NPRM to quantify 
the impact of such a reclassification of 3-row vehicles, but sought 
comment on whether and how we should do so for the final rule. If 
commenters believed that we should attempt to quantify the impact, we 
specifically sought comment on how to refit the footprint curves and 
how the agency should consider stringency levels under such a scenario.
    Another potential option that we explored in the MYs 2012-2016 
rulemaking for MYs 2017 and beyond was classifying ``like'' vehicles 
together. Many commenters objected in the rulemaking for the MY 2011 
standards to NHTSA's regulatory separation of ``like'' vehicles. 
Industry commenters argued that it was technologically inappropriate 
for NHTSA to place 4WD and 2WD versions of the same SUV in separate 
classes. They argued that the vehicles are the same except for their 
drivetrain features, thus giving them similar fuel economy improvement 
potential. They further argued that all SUVs should be classified as 
light trucks. Environmental and consumer group commenters, on the other 
hand, argued that 4WD SUVs and 2WD SUVs that are ``off-highway 
capable'' by virtue of a GVWR above 6,000 pounds should be classified 
as passenger cars, since they are primarily used to transport 
passengers. In the MY 2011 rulemaking, NHTSA rejected both of these 
sets of arguments. NHTSA concluded that 2WD SUVs that were neither 
``off-highway capable'' nor possessed ``truck-like'' functional 
characteristics were appropriately classified as passenger cars. At the 
same time, NHTSA also concluded that because Congress explicitly 
designated vehicles with GVWRs over 6,000 pounds as ``off-highway 
capable'' (if they meet the ground clearance requirements established 
by the agency), NHTSA did not have authority to move these vehicles to 
the passenger car fleet.
    NHTSA explained in the NPRM that the agency continues to believe 
that this would not be an appropriate solution for addressing either 
the risk of gaming or perceived regulatory inequity going forward. As 
explained in the MYs 2012-2016 final rule, with regard to the first 
argument, that ``like'' vehicles should be classified similarly (i.e., 
that 2WD SUVs should be classified as light trucks because, besides 
their drivetrain, they are ``like'' the 4WD version that qualifies as a 
light truck), NHTSA continues to believe that 2WD SUVs that do not meet 
any part of the existing regulatory definition for light trucks should 
be classified as passenger cars. However, NHTSA recognizes the 
additional point raised by industry commenters in the MY 2011 
rulemaking that manufacturers may respond to this tighter 
classification by ceasing to build 2WD versions of SUVs, which could 
reduce fuel savings. In response to that point, NHTSA stated in the MY 
2011 final rule that it expects that manufacturer decisions about 
whether to continue building 2WD SUVs will be driven in much greater 
measure by consumer demand than by NHTSA's regulatory definitions. As 
stated in the NPRM, if it appears, in the course of the next several 
model years, that manufacturers are indeed responding to the CAFE 
regulatory definitions in a way that reduces overall fuel savings from 
expected levels, it may be appropriate for NHTSA to review this 
question again. At the time of the NPRM, however, since so little time 
has passed since our last rulemaking action, NHTSA explained that the 
agency does not believe that we have enough information about changes 
in the fleet to ascertain whether this is yet ripe for consideration. 
We sought comment on how the agency might go about reviewing this 
question as more information about manufacturer behavior is accumulated 
over time.
    Few commenters provided much substantive analysis in response to 
the agency's request. Industry commenters generally opposed any changes 
to the car and truck definitions. The Alliance commented that the 
existing definitions for classifying vehicles are consistent with the 
statutes and Congress' intent, and that while NHTSA's adjustments to

[[Page 63124]]

the definitions in prior rules were helpful clarifications, no further 
changes should be made.\1353\ The Alliance stated that gaming of the 
definitions was unlikely because consumer demand for vehicle features 
is significantly more important to manufacturer decisions than 
regulatory classifications, and argued that the attribute-based 
standards decrease the incentive to reclassify vehicles since ``even 
larger vehicles can be `CAFE positive' based on their status relative 
to their footprint target.'' \1354\ The Alliance further argued that 
stability in the definitions was crucial, to avoid opening up the 
possibility of gaming and/or reduction in consumer choice, and because 
the current definitions were the basis for the analysis supporting the 
proposed rules.\1355\ The Alliance stated that ``as a practical matter, 
a change to the classification definitions can be equivalent to a major 
change to the standards themselves, so ``[a]n amendment to the car/
truck definitions could easily mean the difference between compliance 
and non-compliance for many manufacturers.'' \1356\ Therefore, the 
Alliance argued, ``amendments to the classification rules would 
necessitate a brand new, top-to-bottom reanalysis of the standards by 
all manufacturers as well as NHTSA and EPA,'' and ``large portions of 
the rulemaking package [c]ould need significant readjustment as a 
result of that exercise.'' \1357\
---------------------------------------------------------------------------

    \1353\ Alliance, at 8.
    \1354\ Id. at 9.
    \1355\ Id.
    \1356\ Id.
    \1357\ Id.
---------------------------------------------------------------------------

    Global Automakers similarly argued that if NHTSA adjusted 
definitions to make 3-row vehicles passenger cars rather than light 
trucks, it would ``likely necessitate changes to the * * * standards to 
make [them] less stringent to accommodate these vehicles, potentially 
reducing fuel savings.'' \1358\ Global further argued that any changes 
to definitions would impose ``significant compliance costs on 
manufacturers,'' as the effective stringency of the standards would 
change, and disagreed that manufacturers would add a third row to CUVs 
in order to obtain the light truck target, because ``There are 
substantial cost and weight penalties associated with the addition of 
third row seats, so installing these seats cannot be justified in the 
absence of consumer demand for them.'' \1359\ Ford \1360\ and GM \1361\ 
supported the Alliance comments; Toyota provided similar comments, 
stating that it knew of no new information that should cause the agency 
to revisit its conclusion on this issue from the 2012-2016 final 
rule.\1362\ Toyota suggested that ``to the extent NHTSA is concerned 
about whether the classification definitions can keep pace with the 
evolving market through the 2017-2025 model year period, * * * the 
issue [should] be revisited during the mid-term review.'' \1363\
---------------------------------------------------------------------------

    \1358\ Global, at 11.
    \1359\ Id.
    \1360\ Ford, at 28.
    \1361\ GM, at 2.
    \1362\ Toyota, at 21.
    \1363\ Id. at 21.
---------------------------------------------------------------------------

    Environmental group commenters generally supported changes to the 
definitions. CBD expressed concern that manufacturers will be 
encouraged to redesign 2WD versions of SUVs and CUVs by giving them 4WD 
and other ``off-highway features'' to obtain the lower light truck 
curve target, particularly given the ``even greater disparity in 
mileage standards between trucks and passenger cars created by the 
NPRM.'' \1364\ CBD argued, as it did in CBD v. NHTSA, that because 
light trucks may be used for carrying passengers, ``EPCA's drafters 
surely never intended manufacturers to be able to manipulate their 
products for the sole purpose of escaping higher efficiency 
standards.'' \1365\ CBD stated that NHTSA must ``close the SUV 
loophole,'' \1366\ but provided no legal analysis of how the agency 
should revise the definitions to address its concerns.
---------------------------------------------------------------------------

    \1364\ CBD, at 16.
    \1365\ Id. at 16-17.
    \1366\ Id. at 17.
---------------------------------------------------------------------------

    NRDC also stated that manufacturers could easily add 4WD technology 
to vehicles to reclassify them as light trucks rather than as cars, and 
the decision would be ``influenced by whether or not the cost to add 
the 4WD technology is less than adding the fuel efficiency and 
emissions technology necessary to stay compliant on the car curve.'' 
\1367\ NRDC thus argued that the truck definitions should be revised to 
ensure that trucks have technologies ``that are necessary for true off-
road capability vs. typical all-wheel on-road driving.'' \1368\ UCS 
offered similar examples, and suggested that NHTSA add new criteria to 
ensure that light trucks have ``true off-road capability,'' such as ``a 
majority subset of the following 5 items: Limited slip center 
differential, limited slip rear differential, locking axles, skid 
plates, and 2-speed transfer cases.'' \1369\ The Sierra Club also 
commented that NHTSA should revisit the light truck definition, but 
provided no suggestions as to what, specifically, it believed should be 
revised.\1370\
---------------------------------------------------------------------------

    \1367\ NRDC, at 10.
    \1368\ Id.
    \1369\ UCS, at 9.
    \1370\ Sierra Club et al., at 7.
---------------------------------------------------------------------------

    In response, NHTSA agrees with the point raised by industry 
commenters that the underlying analysis for this final rule was 
premised on the passenger car and light truck fleets being defined per 
the current definitions in 49 CFR Part 523, and we recognize that any 
change to those definitions in this final rule could conceivably 
require a fresh analysis and determination of what standards are 
maximum feasible for the separate car and truck fleets in each model 
year. If the determination of maximum feasible standards is based on a 
balancing of factors that accounts, in part, for the unique 
capabilities of a given fleet, then any changes to that fleet that 
affect its overall capabilities could presumably change the balancing, 
and thus the level of stringency that is maximum feasible. Thus, the 
following discussion is directed toward the future, i.e., the future 
rulemaking to develop final standards for MYs 2022-2025.
    A number of commenters expressed concern that manufacturers would 
convert passenger car 2WD SUVs and CUVs to 4WD versions, or add a third 
row, in order to obtain the lower target under the light truck curves. 
Industry commenters maintain that the decision to make such a change to 
a vehicle model is driven by consumer demand and not by regulations; in 
fact, Global argued, a vehicle may be better off as a car than as a 
truck in terms of how its fuel economy compares to its target, insofar 
as a third row adds cost and weight that may obviate the benefit of the 
lower target by making it harder to meet it. This contrasts with NRDC's 
argument that a manufacturer is likely to add 4WD to obtain the light 
truck target if doing so is cheaper than adding the technology 
necessary to meet the passenger car target. As discussed above, the 
agency does not have sufficient information at this time to evaluate 
the seriousness of this risk. We expect that the calculus of vehicle 
classification will vary significantly between manufacturers and 
between model years, and we agree with the suggestion by industry that 
consumer demand is likely the primary driver of decisions such as 4WD 
or a third row. Industry cannot remain profitable if it provides too 
many vehicles that the public does not want; public demand for features 
such as 2WD and cargo space currently appears to be just as robust as 
demand for 4WD and third rows, and we have no reason to think

[[Page 63125]]

that those trends will change significantly in the near future.
    That said, while EPCA continues to be clear that some vehicles are 
to be passenger cars and some to be light trucks, the agency agrees 
with environmental and consumer group commenters that the question of 
what makes a vehicle ``off-road capable'' and what functional 
characteristics make a vehicle ``truck like'' are within the agency's 
discretion to resolve. We appreciate and will consider further the 
suggestions by UCS with regard to greater specification of what factors 
may be appropriate for the regulatory definition of ``off-road 
capable,'' even though we are not implementing them as part of this 
final rule for the reasons discussed above. We will continue to monitor 
this issue and will revisit it in the future rulemaking to develop 
final standards for MYs 2022-2025. During the interim, if interested 
parties compile information on these issues that they believe may be 
helpful to the agency's future consideration, we welcome them to 
contact us.
    The final issue under the category of vehicle classification was 
raised by Ford: A discussion of whether aerodynamic components (often 
referred to as ``strakes'') made of flexible plastic and affixed in 
front of wheels, prevent a vehicle from meeting the running clearance 
requirements for being ``off-road capable.'' That question was answered 
by NHTSA in a letter of interpretation dated July 30, 2012, and thus 
does not need further discussion as part of this preamble.

I. Compliance and Enforcement

1. Overview
    NHTSA's CAFE enforcement program is largely established by 
statute--unlike the CAA, EPCA, as amended by EISA, is very prescriptive 
with regard to enforcement. EPCA and EISA also clearly specify a number 
of flexibilities that are available to manufacturers to help them 
comply with the CAFE standards. Some of those flexibilities are 
constrained by statute--for example, while Congress required that NHTSA 
allow manufacturers to transfer credits earned for over-compliance from 
their car fleet to their truck fleet and vice versa, Congress also 
limited the amount by which manufacturers could increase their CAFE 
levels using those transfers.\1371\ NHTSA believes Congress balanced 
the energy-saving purposes of the statute against the benefits of 
certain flexibilities and incentives and intentionally placed some 
limits on certain statutory flexibilities and incentives. With that 
goal in mind, of maximizing compliance flexibility while also 
implementing EPCA/EISA's overarching purpose of energy conservation as 
fully as possible, NHTSA has done its best in crafting the credit 
transfer and trading regulations authorized by EISA to ensure that 
total fuel savings are preserved when manufacturers exercise their 
statutorily-provided compliance flexibilities.
---------------------------------------------------------------------------

    \1371\ See 49 U.S.C. 32903(g).
---------------------------------------------------------------------------

    Furthermore, to achieve the level of standards described in this 
final rule for the 2017-2025 program, NHTSA expects automakers to 
continue increasing the use of innovative and advanced technologies as 
they evolve. The additional incentive programs finalized will encourage 
early adoption of these innovative and advanced technologies and help 
to maximize both compliance flexibility and energy conservation. These 
incentive programs for CAFE compliance are not under NHTSA's EPCA/EISA 
authority, but under EPA's EPCA authority--as discussed in more detail 
below and in Section III of this preamble, EPA measures and calculates 
a manufacturer's compliance with the CAFE standards, and it will be in 
the calculation of fuel economy levels that the additional incentives 
are applied. Specifically, what is being finalized in the CAFE program, 
as proposed by EPA: 1) Fuel economy performance adjustments due to 
improvements in air conditioning system efficiency; 2) utilization of 
``game changing'' technologies installed on full size pick-up trucks 
including hybridization; and 3) installation of ``off-cycle'' 
technologies. In addition, for model years 2020 and later, EPA will 
utilize calculation methods for dual-fueled vehicles, to fill the gap 
left in EPCA/EISA by the expiration of the dual-fuel incentive. A more 
thorough description of the basis for the new incentive programs can be 
found in Sections II.F, III.C, and Chapter 5 of the joint TSD.
    The following sections explain how NHTSA determines whether 
manufacturers are in compliance with the CAFE standards for each model 
year, and how manufacturers may address potential non-compliance 
situations through the use of compliance flexibilities or fine payment. 
The following sections also explain, for the reader's reference, the 
new incentives and calculations finalized, but we also refer readers to 
Section III.C for EPA's explanation of its authority and more specific 
detail regarding these changes to the CAFE program.
2. How does NHTSA determine compliance?
a. Manufacturer Submission of Data and CAFE Testing by EPA
    NHTSA begins to determine CAFE compliance by reviewing projected 
estimates in pre- and mid-model year reports submitted by manufacturers 
pursuant to 49 CFR part 537, Automotive Fuel Economy Reports.\1372\ 
Those reports for each compliance model year are submitted to NHTSA by 
December of the calendar year prior to the corresponding subsequent 
model year (for the pre-model year report) and in July of the given 
model year (for the mid-model year report). NHTSA has already received 
pre- and mid-model year reports from manufacturers for MY 2012. NHTSA 
uses these reports for reference to help the agency, and the 
manufacturers who prepare them, anticipate potential compliance issues 
as early as possible, and help manufacturers plan compliance 
strategies. NHTSA also uses the reports for auditing and testing 
purposes, which helps manufacturers correct errors prior to the end of 
the model year and facilitates acceptance of their final CAFE report by 
EPA. In addition, NHTSA issues reports to the public twice a year that 
provide a summary of manufacturers' fleet fuel economy projected 
performances using pre- and mid-model year data. Currently, NHTSA 
receives manufacturers' CAFE reports in paper form. In order to 
facilitate submission by manufacturers, NHTSA amended part 537 to allow 
for electronic submission of the pre- and mid-model year CAFE reports 
in 2010 (see 75 FR 25324). Electronic reports are optional and must be 
submitted in a pdf format. NHTSA proposes to modify these provisions in 
this NPRM, as described below, in order to eliminate hardcopy 
submissions and help the agency more readily process and utilize the 
electronically-submitted data.
---------------------------------------------------------------------------

    \1372\ 49 CFR part 537 is authorized by 49 U.S.C. 32907.
---------------------------------------------------------------------------

    Throughout the model year, NHTSA audits manufacturers' reports and 
conducts vehicle testing to confirm the accuracy of track width and 
wheelbase measurements as a part of its footprint validation 
program,\1373\ which helps the agency understand better how 
manufacturers may adjust vehicle characteristics to change a vehicle's 
footprint measurement, and thus its fuel economy target. NHTSA resolves 
discrepancies with the manufacturer prior to the end of the calendar 
year

[[Page 63126]]

corresponding to the respective model year with the primary goal of 
manufacturers submitting accurate final reports to EPA. NHTSA makes its 
ultimate determination of a manufacturer's CAFE compliance obligation 
based on official reported and verified CAFE data received from EPA. 
Pursuant to 49 U.S.C. 32904(e), EPA is responsible for calculating 
manufacturers' CAFE values so that NHTSA can determine compliance with 
its CAFE standards. The EPA-verified data is based on any 
considerations from NHTSA testing, its own vehicle testing, and final 
model year data submitted by manufacturers to EPA pursuant to 40 CFR 
600.512. A manufacturer's final model year report must be submitted to 
EPA no later than 90 days after December 31st of the model year. EPA 
test procedures including those used to establish the new incentive 
fuel economy performance values for model year 2017 to 2025 vehicles 
are contained in sections 40 CFR Part 600 and 40 CFR Part 86.
---------------------------------------------------------------------------

    \1373\ See http://www.nhtsa.gov/DOT/NHTSA/Vehicle%20Safety/Test%20Procedures/Associated%20Files/TP-537-01.pdf.
---------------------------------------------------------------------------

b. NHTSA Then Analyzes EPA-Certified CAFE Values for Compliance
    NHTSA's determination of CAFE compliance is fairly straightforward: 
After testing, EPA verifies the data submitted by manufacturers and 
issues final CAFE reports sent to manufacturers and to NHTSA in a pdf 
format between April and October of each year (for the previous model 
year), and NHTSA then identifies the manufacturers' compliance 
categories (fleets) that do not meet the applicable CAFE fleet 
standards. NHTSA plans to construct a new, more automated database 
system in the near future to store manufacturer data and the EPA data. 
The new database is expected to simplify data submissions to NHTSA, 
improve the quality of the agency's data, expedite public reporting, 
improve audit verifications and testing, and enable more efficient 
tracking of manufacturers' CAFE credits with greater transparency.
    NHTSA uses the verified data from EPA to compare fleet average 
standards with performance. A manufacturer complies with NHTSA's fuel 
economy standard if its fleet average performance is greater than or 
equal to its required standard, or if it is able to use available 
compliance flexibilities to resolve its non-compliance difference. 
NHTSA calculates a cumulative credit status for each of a 
manufacturer's vehicle compliance categories according to 49 U.S.C. 
32903. If a manufacturer's compliance category exceeds the applicable 
fuel economy standard, NHTSA adds credits to the account for that 
compliance category. The amount of credits earned in a given year are 
determined by multiplying the number of tenths of an mpg by which a 
manufacturer exceeds a standard for a particular category of 
automobiles by the total volume of automobiles of that category 
manufactured by the manufacturer for that model year. Credits may be 
used to offset shortfalls in other model years, subject to the three 
year ``carry-back'' and five-year ``carry-forward'' limitations 
specified in 49 U.S.C. 32903(a); NHTSA does not have authority to allow 
credits to be carried forward or back for periods longer than that 
specified in the statute. A manufacturer may also transfer credits to 
another compliance category, subject to the limitations specified in 49 
U.S.C. 32903(g)(3), or trade them to another manufacturer. The value of 
each credit received via trade or transfer, when used for compliance, 
is adjusted using the adjustment factor described in 49 CFR 536.4, 
pursuant to 49 U.S.C. 32903(f)(1). As part of this rulemaking, NHTSA 
proposed and is finalizing the VMT values that are part of the 
adjustment factor for credits earned in MYs 2017-2025 at a single level 
that does not change from model year to model year, as discussed 
further below.
    If a manufacturer's vehicles in a particular compliance category 
fall below the standard fuel economy value, NHTSA will provide written 
notification to the manufacturer that it has not met a particular fleet 
standard. The manufacturer will be required to confirm the shortfall 
and must either submit a plan indicating it will allocate existing 
credits, or if it does not have sufficient credits available in that 
fleet, how it will earn, transfer and/or acquire credits, or pay the 
appropriate civil penalty. The manufacturer must submit a plan or 
payment within 60 days of receiving agency notification. Credit 
allocation plans received from the manufacturer will be reviewed and 
approved by NHTSA. NHTSA will approve a credit allocation plan unless 
it finds the proposed credits are unavailable or that it is unlikely 
that the plan will result in the manufacturer earning sufficient 
credits to offset the subject credit shortfall. If a plan is approved, 
NHTSA will revise the manufacturer's credit account accordingly. If a 
plan is rejected, NHTSA will notify the manufacturer and request a 
revised plan or payment of the appropriate fine.
    In the event that a manufacturer does not comply with a CAFE 
standard even after the consideration of credits, EPCA provides for the 
assessment of civil penalties. The Act specifies a precise formula for 
determining the amount of civil penalties for noncompliance.\1374\ 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 short 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. The amount of the 
penalty may not be reduced except under the unusual or extreme 
circumstances specified in the statute. All penalties are paid to the 
U.S. Treasury and not to NHTSA itself.
---------------------------------------------------------------------------

    \1374\ See 49 U.S.C. 32912.
---------------------------------------------------------------------------

    Unlike the National Traffic and Motor Vehicle Safety Act, EPCA does 
not provide for recall and remedy in the event of a noncompliance. The 
presence of recall and remedy provisions \1375\ in the Safety Act and 
their absence in EPCA is believed to arise from the difference in the 
application of the safety standards and CAFE standards. A safety 
standard applies to individual 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. Typically, a vehicle does not entirely lack an item or 
equipment or feature. Instead, the equipment or features fails to 
perform adequately. Recalling the vehicle to repair or replace the 
noncompliant equipment or feature can usually be readily accomplished.
---------------------------------------------------------------------------

    \1375\ 49 U.S.C. 30120, Remedies for defects and noncompliance.
---------------------------------------------------------------------------

    In contrast, a CAFE standard applies to a manufacturer's entire 
fleet for a model year. It does not require that a particular 
individual 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. Further, although under the 
attribute-based approach to setting CAFE standards fuel economy targets 
are established for individual vehicles based on their footprints, the 
vehicles are not required to comply with those targets on a model-by-
model or vehicle-by-vehicle basis. However, as a practical matter, if a 
manufacturer chooses to design some vehicles so they fall below their 
target levels of fuel economy, it will need to design other vehicles so 
they exceed their targets if the manufacturer's overall fleet average 
is to meet the applicable standard.
    Thus, under EPCA, there is no such thing as a noncompliant vehicle, 
only a noncompliant fleet. No particular

[[Page 63127]]

vehicle in a noncompliant fleet is any more, or less, noncompliant than 
any other vehicle in the fleet.
    After enforcement letters are sent, NHTSA continues to monitor 
receipt of credit allocation plans or civil penalty payments that are 
due within 60 days from the date of receipt of the letter by the 
vehicle manufacturer, and takes further action if the manufacturer is 
delinquent in responding. If NHTSA receives and approves a 
manufacturer's carryback plan to earn future credits within the 
following three years in order to comply with current regulatory 
obligations, NHTSA will defer levying fines for non-compliance until 
the date(s) when the manufacturer's approved plan indicates that 
credits will be earned or acquired to achieve compliance, and upon 
receiving confirmed CAFE data from EPA. If the manufacturer fails to 
acquire or earn sufficient credits by the plan dates, NHTSA will 
initiate compliance proceedings. 49 CFR part 536 contains the detailed 
regulations governing the use and application of CAFE credits 
authorized by 49 U.S.C. 32903.
c. What exemptions are allowed by NHTSA?
    NHTSA allows vehicles defined as emergency vehicles to be exempted 
from complying with CAFE standards. The NHTSA definition for emergency 
vehicle was established in 1972 by EPCA and is defined for NHTSA in 49 
U.S.C. 32902(e) \1376\ and includes ambulances and law enforcement 
vehicles. The EPA definition was proposed as a part of the NPRM \1377\ 
for this rulemaking and establishes for the EPA GHG program a 
harmonized definition for emergency vehicles similar to that prescribed 
by EPCA.\1378\ The agencies received a comment from the Alliance in 
response to the NPRM, on July 27, 2012, asking for the agencies to 
consider broadening their definitions for emergency vehicles to include 
other types of vehicles used for emergency purposes. The Alliance 
comment requested that the EPCA definition be expanded to include 
``fire suppression, search and rescue and other emergency vehicle 
types.''The Alliance also recommended adding these vehicles in the 
definition for emergency vehicle adopted by EPA in the June 8, 2012, 
DFR (see 77 FR 34130) for the EPA emissions criteria program. The 
Alliance argued that it is important to ensure harmonized treatment of 
emergency vehicles under EPA's criteria pollutant and greenhouse gas 
emission regulations and NHTSA's CAFE regulations.
---------------------------------------------------------------------------

    \1376\ In 32902(e), the definition is as follows: Emergency 
vehicles.--(1) In this subsection, ``emergency vehicle'' means an 
automobile manufactured primarily for use--
     (A) as an ambulance or combination ambulance-hearse;
     (B) by the United States Government or a State or local 
government for law enforcement; or
     (C) for other emergency uses prescribed by regulation by the 
Secretary of Transportation.
    \1377\ See 76 FR 75362 (Dec. 1, 2011).
    \1378\ In the NPRM, EPA proposed the following definition in 40 
CFR 86.1818-12: (b)(4) Emergency vehicle means a motor vehicle 
manufactured primarily for use as an ambulance or combination 
ambulance-hearse or for use by the United States Government or a 
State or local government for law enforcement.
---------------------------------------------------------------------------

    At this time, NHTSA does not believe that it has sufficient 
information to create a regulatory definition for ``emergency 
vehicles'' that is different from the text in EPCA. The Alliance 
provided no definitions, examples, or testing data on the model types 
of fire suppression, search and rescue and other emergency type 
vehicles which could be analyzed to determine whether sufficient need 
exists to add them to the definition and allow for their exclusion. 
Without this information, amending the definition as requested by the 
Alliance could inadvertently allow for the exclusion of vehicles that 
are capable of complying with the CAFE standards, which would be 
contrary to the overarching purpose of EPCA, energy conservation. 
Therefore, NHTSA will retain the use of the EPCA definition for the 
CAFE program, which is already harmonized with EPA's proposed 
definition of ``emergency vehicle'' for the GHG program. While we 
expect to examine this issue further, our initial understanding is that 
harmonizing exempted vehicles between EPA's criteria emissions program 
and the CAFE/GHG programs may not be necessary. The most fundamental 
issue underlying the Alliance comment is concern over a loss in vehicle 
performance caused by the operation of the criteria emission control 
system on diesel vehicles. However, to comply with the final CAFE and 
GHG emission standards, the agencies do not believe that manufacturers 
would need to implement technologies that would reduce vehicle 
performance. In the agencies' analyses of the how the industry could 
comply with the standards, the CAFE and OMEGA models applied 
technologies that were projected to maintain vehicle performance. 
Therefore, it is not expected that broadening the definition of 
emergency vehicles for the CAFE program would affect vehicle 
performance. NHTSA notes, however, that should a manufacturer wish to 
exempt a vehicle that falls outside the coverage provided by EPCA, such 
as the ``other types of emergency vehicles'' identified by the 
Alliance, 49 U.S.C. 32902(e)(1)(C) allows DOT to undertake rulemaking 
to consider adding other vehicles to this category.
3. What compliance flexibilities are available under the CAFE program 
and how do manufacturers use them?
    There are three basic flexibilities outlined by EPCA/EISA that 
manufacturers can currently use to achieve compliance with CAFE 
standards beyond applying fuel economy-improving technologies: (1) 
Building dual- and alternative-fueled vehicles; (2) banking (carry-
forward and carry-back), trading, and transferring credits earned for 
exceeding fuel economy standards; and (3) paying civil penalties. We 
note that while these flexibility mechanisms will reduce compliance 
costs to some degree for most manufacturers, 49 U.S.C. 32902(h) 
expressly prohibits NHTSA from considering the availability of 
statutorily-established credits (either for building dual- or 
alternative-fueled vehicles or from accumulated transfers or trades) in 
determining the level of the standards. Thus, NHTSA may not raise CAFE 
standards because manufacturers have enough of those credits to meet 
higher standards. This is an important difference from EPA's authority 
under the CAA, which does not contain such a restriction, and which 
allows EPA to set higher standards as a result.
a. Dual- and Alternative-Fueled Vehicles
    EPCA/EISA sets forth statutory provisions for manufacturers 
building alternative-fueled and dual- (or flexible-) fueled vehicles by 
providing special fuel economy calculations for ``dedicated'' (that is, 
100 percent) alternative fueled vehicles and ``dual-fueled'' (that is, 
capable of running on both the alternative fuel and gasoline/diesel) 
vehicles. Consistent with the overarching purpose of EPCA/EISA, these 
statutory provisions establish incentives to help reduce petroleum 
usage and thus improve our nation's energy security.
    By statute, the fuel economy of a dedicated alternative fuel 
vehicle is determined by dividing its fuel economy in equivalent miles 
per gallon of gasoline or diesel fuel by 0.15.\1379\ Thus, a 15 mpg 
dedicated alternative fuel vehicle would be rated as 100 mpg. Likewise, 
for dual-fueled vehicles, the vehicle's fuel economy rating is 
determined as the harmonic average of

[[Page 63128]]

the fuel economy on gasoline or diesel and the fuel economy on the 
alternative fuel vehicle divided by 0.15.\1380\ For example, a dual-
fueled vehicle that averages 25 mpg on gasoline or diesel could be 
considered a 40 mpg vehicle for CAFE purposes when considering its 
performance on the alternative fuel. This assumes that (1) the vehicle 
operates on gasoline or diesel 50 percent of the time and on 
alternative fuel 50 percent of the time; (2) fuel economy while 
operating on alternative fuel is 15 mpg (15/.15 = 100 mpg); and (3) 
fuel economy while operating on gas or diesel is 25 mpg. Thus:
---------------------------------------------------------------------------

    \1379\ 49 U.S.C. 32905(a).
    \1380\ 49 U.S.C. 32905(b).

CAFE FE = 1/{0.5/(mpg gas) + 0.5/(mpg alt fuel){time}  = 1/{0.5/25 + 
0.5/100{time}  = 40 mpg

Equation IV-4 NHTSA Example Dual Fueled Vehicle MPG Calculation

    Considering a similar example for an alternative fueled vehicle 
powered by natural gas, a vehicle averaging 25 miles per 100 ft\3\ of 
natural gas could have a 203 mpg fuel economy rating. The CAFE fuel 
economy while operating on the natural gas is determined by dividing 
its fuel economy in equivalent miles per gallon of gasoline by 
0.15.\1381\ The equivalent fuel economy for 100 cubic feet (ft\3\) of 
natural gas is equivalent to 0.823 gallons of gasoline as provided by 
EISA. Thus, if a vehicle averages 25 miles per 100 ft\3\ of natural 
gas, then:
---------------------------------------------------------------------------

    \1381\ 49 U.S.C. 32905(c).

CAFE FE = (25/100) * (100/.823)*(1/0.15) = 203 mpg

Equation IV-5 NHTSA Example Natural Gas Vehicle MPG Calculation

    EISA prescribes the incentive for dual-fueled automobiles not only 
as an adjustment to the vehicle but also limits the overall impact of 
these vehicles on a manufacturer's fleet performance. A cap for the 
overall impact of dual-fueled vehicles is specified through MY 2019, 
but progressively phases-out between MYs 2015 and 2019.\1382\ The 
maximum fleet fuel economy increase attributable to this statutory 
incentive is as follows:
---------------------------------------------------------------------------

    \1382\ 49 U.S.C. 32906(a). NHTSA notes that the incentive for 
dedicated alternative-fuel automobiles, automobiles that run 
exclusively on an alternative fuel, at 49 U.S.C. 32905(a), was not 
phased-out by EISA.
    We note additionally and for the reader's reference that EPA 
will be treating dual- and alternative-fueled vehicles under its GHG 
program similarly to the way EPCA/EISA provides for CAFE through MY 
2015, but for MY 2016, EPA established CO2 emission 
levels for alternative fuel vehicles based on measurement of actual 
CO2 emissions during testing, plus a manufacturer 
demonstration that the vehicles are actually being run on the 
alternative fuel. The manufacturer would then be allowed to weight 
the gasoline and alternative fuel test results based on the 
proportion of actual usage of both fuels. Because EPCA/EISA provides 
the explicit CAFE measurement methodology for EPA to use for 
dedicated vehicles and dual-fueled vehicles through MY 2019, we 
explained in the MYs 2012-2016 final rule that the CAFE program 
would not require that vehicles manufactured for the purpose of 
obtaining the credit actually be run on the alternative fuel.

      Table IV-150--Statutory Fleet mpg Increase Caps by Model Year
------------------------------------------------------------------------
                                                               Fleet mpg
                         Model year                            increase
------------------------------------------------------------------------
MYs 1993-2014...............................................         1.2
MY 2015.....................................................         1.0
MY 2016.....................................................         0.8
MY 2017.....................................................         0.6
MY 2018.....................................................         0.4
MY 2019                                                              0.2
After MY 2019...............................................           0
------------------------------------------------------------------------

    49 CFR part 538 codifies in regulation the statutory alternative-
fueled and dual-fueled automobile manufacturing incentives.
    Given that the statutory incentive for dual-fueled vehicles in 49 
U.S.C. 32906 and the measurement methodology specified in 49 U.S.C. 
32905(b) and (d) expire in MY 2019, NHTSA questioned how the fuel 
economy of dual-fueled vehicles should be determined for CAFE 
compliance in MYs 2020 and beyond. NHTSA and EPA believe that the 
expiration of the dual-fueled vehicle measurement methodology in the 
statute leaves a gap to be filled that must be addressed to avoid the 
inappropriate result of dual-fueled vehicles' fuel economy being 
measured like that of conventional gasoline vehicles, with no 
recognition of their alternative fuel capability, which would be 
contrary to the intent of EPCA/EISA. The need for such a method is of 
greater importance for future model years when the number of plug-in 
hybrid electric vehicles is expected to increase in MYs 2020 and 
beyond. If the overarching purpose of the statute is energy 
conservation and reducing petroleum usage, the agencies believe that 
that goal is best met by continuing to reflect through CAFE 
calculations the reduced petroleum usage that dual-fueled vehicles 
achieve through their alternative fuel usage.
    Therefore, after the expiration of the special calculation 
procedures in 49 U.S.C. 32905 for dual fuel vehicles, the agencies 
proposed for model years 2020 and later vehicles that the general 
provisions authorizing EPA to establish testing and calculation 
procedures would provide discretion to set the CAFE calculation 
procedures.\1383\ EPA proposed to harmonize with the approach it uses 
under the GHG program to measure the emissions of dual-fuel vehicles, 
to reflect the real-world percentage of usage of alternative fuels by 
dual-fuel vehicles, but also to continue to incentivize the use of 
certain alternative fuels in dual-fuel vehicles as appropriate under 
EPCA/EISA to reduce petroleum usage. EPA is finalizing this approach as 
proposed for plug-in hybrid electric vehicles (PHEV) that runs on both 
gasoline (or diesel) and electricity. Specifically, for MYs 2020 and 
beyond, EPA will calculate the fuel economy test values for a plug-in 
hybrid electric vehicle PHEV, but rather than assuming that the dual-
fueled vehicle runs on the alternative fuel 50 percent of the time as 
the current statutory measurement methodology requires, EPA will 
instead use the Society of Automotive Engineers (SAE) ``utility 
factor'' methodology \1384\ (based on vehicle range on the alternative 
fuel and typical daily travel mileage) to determine the assumed 
percentage of operation on gasoline/diesel and percentage of operation 
on the alternative fuel for those vehicles. Using the utility factor, 
rather than making an a priori assumption about the amount of 
alternative fuel used by dual-fueled vehicles, recognizes that once a 
consumer has paid several thousand dollars to be able to use a fuel 
that is considerably cheaper than gasoline or diesel, it is very likely 
that the consumer will seek to use the cheaper fuel as much as 
possible. For MYs 2020 and beyond, EPA will calculate the fuel economy 
test values for a dual fuel CNG vehicle (that runs on both the 
alternative fuel and on gasoline or diesel), EPA will use one of two 
calculation methods. EPA will use the SAE ``utility factor'' 
methodology if the dual fuel CNG vehicle meets two requirements. First, 
the vehicle must have a minimum natural gas range-to-gasoline range of 
2.0. Second, the vehicle must be designed such that gasoline can only 
be used when the CNG tank is empty, though EPA is permitting a de 
minimis exemption for those dual fuel vehicle designs where a very 
small amount of gasoline is used to initiate combustion before changing 
over to a much greater volume of natural gas to sustain combustion. A 
dual fuel CNG vehicle that does not meet the above eligibility 
requirements would use a utility factor of 0.50, the value that has 
been used in the past for dual fuel vehicles under the CAFE program.
---------------------------------------------------------------------------

    \1383\ 49 U.S.C. 32904(a), (c).
    \1384\ SAE Standard J2841 ``Utility Factor Definitions for Plug-
In Hybrid Electric Vehicles Using Travel Survey Data.'' Available at 
http://standards.sae.org/j2841_201009/ (last accessed Jul. 13, 
2012).

---------------------------------------------------------------------------

[[Page 63129]]

    Consistent with this approach, however, EPA's proposal did not 
extend the utility factor method to flexible fueled vehicles (FFVs) 
that use E-85 and gasoline, since there is not a significant cost 
differential between an FFV and conventional gasoline vehicle and 
historically consumers have only fueled these vehicles with E85 a very 
small percentage of the time. Therefore, for CAFE compliance in MYs 
2020 and beyond, EPA will continue treatment of E85 and other FFVs 
(other than PHEVs and CNG) as finalized in the MY 2016 GHG program, 
based on the relative weighting of gasoline and E85 (or other fuels) 
emissions performance on the actual national average use of E85 (or 
other fuels) in ethanol FFVs or optionally the manufacturer-specific 
data showing the percentage of miles that are driven on E85 vis-
[agrave]-vis gasoline for that manufacturer's FFVs. For clarification 
in our regulations, NHTSA proposed, and is adding, Part 536.10(d) which 
states that for model years 2020 and beyond a manufacturer must 
calculate the fuel economy of dual-fuel vehicles in accordance with 40 
CFR 600.510-12(c), (2)(v) and (vii), the sections of EPA's calculation 
regulations where EPA is proposing to incorporate these changes.
    Additionally, to avoid manufacturers being encouraged to build only 
dedicated alternative fuel vehicles (which may be harder to refuel in 
some instances) because of the incentive of the continued statutory 
0.15 CAFE divisor under 49 U.S.C. 32905(a) and the calculation for EV 
fuel economy under 49 U.S.C. 32904, and being discouraged from building 
dual-fuel vehicles which might not get a similar bonus, EPA proposed 
and is finalizing the use of the Petroleum Equivalency Factor (PEF) and 
a 0.15 divisor for calculating the fuel economy of PHEVs' electrical 
operation and for natural gas operation of CNG-gasoline vehicles. This 
is consistent with the statutory approach for dedicated alternative 
fuel vehicles, and continues to incentivize the usage of alternative 
fuels and reduction of petroleum usage, but when combined with the 
utility factor approach described above, does not needlessly over-
incentivize their usage--it gives credit for what is used, and does not 
give credit for what is not used. Because it does not give credit for 
what is not used, EPA proposed that manufacturers may increase their 
calculated fleet fuel economy for dual-fuel vehicles by an unlimited 
amount using these flexibilities.
    As an example, for MYs 2020 and beyond, the calculation procedure 
for a dual-fuel vehicle that uses both gasoline and CNG (and meets the 
two criteria for using the ``utility factor'' method) could result in a 
combined fuel economy value of 150 mpg for CAFE purposes. This assumes 
that (1) the ``utility factor'' for the alternative fuel is found to be 
95 percent, and so the vehicle operates on gasoline for the remaining 5 
percent of the time; (2) fuel economy while operating on natural gas is 
203 mpg [(25/100) * (100/.823)*(1/0.15)] as shown above utilizing the 
PEF and the .15 incentive factor; and (3) fuel economy while operating 
on gasoline is 25 mpg. Thus:

CAFE FE = 1/{0.05/(mpg gas) + 0.95/(mpg CNG){time}  = 1/{0.05/25 + 
0.95/203{time}  = 150 mpg

    As discussed in Section III.C, the agencies received favorable 
comments on the proposals for dual fuel and alternative fuel vehicles 
(with most focusing on PHEVs and dual fuel CNG vehicles). The Alliance 
of Automobile Manufacturers, Fisker Automotive, the Electric Drive 
Transportation Association, and the American Council for an Energy-
Efficient Economy (ACEEE) supported the use of the SAE utility factor 
methodology for PHEVs. The natural gas advocacy groups (including 
America's Natural Gas Alliance/American Gas Association, American 
Public Gas Association, Clean Energy, Encana Natural Gas Inc., NGV 
America, and VNG.Co) and the Natural Resources Defense Council (NRDC) 
supported the use of cycle-specific fleet-based utility factors for 
dual fuel CNG vehicles, and supported the extension of this approach 
for MYs 2012-2015, but generally argued against any eligibility 
requirements for the application of utility factors for dual fuel CNG 
vehicles. NRDC suggested that EPA adopt the additional constraints on 
the design of dual-fuel CNG vehicles that were suggested in the NPRM to 
ensure that these vehicles operate preferentially on CNG. The groups 
opposing the use of the SAE utility factor did not necessarily reject 
its use, but rather argued that the values were too conservative. The 
American Petroleum Institute (API) and Securing America's Future Energy 
(SAFE) argued that agencies were underestimating the behavior of owners 
in maximizing tank refills and the likelihood of PHEV buyers to 
maximize their electricity vs. gasoline use. Other comments included 
ACEEE's and API's recommendation that EPA use lower 5-cycle range 
values for all-electric (or equivalent all-electric) operation in the 
calculation of the utility factor, and ACEEE's recommendation that 
fleet based utility factors be used for compliance, rather than the 
multiple-day individual utility factors (MDIUFs) that are used for fuel 
economy and environment labels.
    Commenters generally supported the proposal for FFVs. The Alliance 
of Automobile Manufacturers, Ford, and General Motors supported the 
NPRM proposal as presented. The Renewable Fuels Association commented 
that the agencies should instead consider utility factors for ethanol 
FFVs, supporting its position by possibility of higher fuel prices than 
gasoline on a per mile basis (i.e., due to prices increasing with 
demand or limited refueling access) for CNG and PHEVs. The National 
Corn Growers Association argued that ``[t]he concern for high relative 
cost of mid or high level ethanol blends does not seem to be justified 
in the term of the CAFE/GHG and RFS2 rules since at some point in the 
renewable fuel volume ramp-up of RFS2, market forces would result in 
competitive prices for ethanol and gasoline in order for the required 
volumes to be sold.''
    In consideration of the comments received, EPA and NHTSA are 
finalizing the proposed requirements for dual fuel PHEV and for 
alternative fueled vehicles, with the exception of adopting the use of 
a fleet based utility factor for PHEVs, as suggested by ACEEE (see 40 
CFR 600.116(b)(1)). The bases for arguments opposing adoption were not 
substantial enough to deviate for the proposal compliance treatment of 
these vehicles (see Section III.C for further explanations).
    As mentioned above, EPA and NHTSA are finalizing, as proposed, the 
use of SAE fleet-based utility factors for dual fuel CNG vehicles, and 
are also finalizing some additional requirements in order for a dual 
fuel CNG vehicle to be able to use the utility factors. Dual fuel CNG 
vehicles must meet two requirements in order to use the utility factor 
approach. One, the vehicle must have a minimum natural gas range-to-
gasoline range of 2.0. This is to ensure that there is a vehicle range 
incentive to encourage vehicle owners to seek to use CNG fuel as much 
as possible (for example, if a vehicle had equal or greater range on 
gasoline than on natural gas, the agency is concerned that some owners 
would fuel more often on gasoline). While NRDC suggested a minimum 
natural gas range-to-gasoline range of 4.0, the agency believes that a 
ratio of 2.0, in concert with a (currently) much less expensive fuel, 
is very strong incentive to use natural gas fuel. Two, the vehicle must 
be designed such that gasoline can only be used when the CNG tank is 
empty, though the agencies are permitting a de minimis exemption for 
those dual fuel vehicle designs

[[Page 63130]]

where a very small amount of gasoline is used to initiate combustion 
before changing over to a much greater volume of natural gas to sustain 
combustion. With these eligibility requirements, EPA and NHTSA believe 
that there will be strong economic motivation for consumers to 
preferentially seek out and use CNG fuel in dual fuel CNG vehicles. 
Consumers will have paid a premium for this feature, and will have 
greater range on CNG. We also believe that the utility factor approach 
is the most reasonable approach for projecting the real world use of 
CNG and gasoline fuels in such dual fuel CNG vehicles. The agencies 
believe that dual fuel CNG vehicles that would not meet the two 
criteria because they have higher driving ranges on gasoline/diesel 
would be more likely to operate more often on gasoline/diesel and the 
``utility factor'' method would overestimate the operation on CNG. 
Therefore the agencies believe it is appropriate to use a fixed utility 
factor of 0.50, the value that has been used in the past for dual fuel 
vehicles under the CAFE program for these vehicles.
    As noted above, there was widespread public support from the 
commenters for the utility factor approach for dual fuel CNG vehicles. 
The agencies are rejecting the one alternative approach that was 
suggested, the use of a fixed 95% utility factor, because it would 
allow a dual fuel CNG vehicle with a small CNG tank to benefit from a 
very large utility factor.
    NHTSA and EPA are finalizing the proposed approach without changes 
for ethanol-capable dual-fueled vehicles. The agencies disagree with 
using utility factors for these vehicles. NHTSA supports EPA's 
positions that ethanol FFVs will primarily use gasoline fuel, as there 
was no extra vehicle cost, E85 fuel is no cheaper and in fact usually 
more expensive per mile, and use of E85 reduces overall vehicle range 
since there is only one fuel tank (as opposed to PHEVs and dual fuel 
CNG vehicles which have two fuel storage devices and therefore the use 
of the alternative fuel raises overall vehicle range). Data compiled by 
EPA shows that approximately 10 million ethanol FFVs in the US car and 
light truck fleet, fuel use data demonstrate that ethanol FFVs only use 
E85 less than one percent of the time. Therefore, NHTSA agrees with EPA 
to finalize FFVs compliance relative to the weighting of gasoline and 
E85 emissions performance on the actual national average use of E85 in 
ethanol FFVs, consistent with the provisions in the MYs 2012-2016 
standards for GHG compliance.
b. Credit Trading and Transfer
    As part of the MY 2011 final rule, NHTSA created 49 CFR part 536 
for credit trading and transfer. Part 536 implements the provisions in 
EISA authorizing NHTSA to establish by regulation a credit trading 
program and directing it to establish by regulation a credit transfer 
program.\1385\ Since its enactment, EPCA has permitted manufacturers to 
earn credits for exceeding the standards and to carry those credits 
backward or forward. EISA extended the ``carry-forward'' period from 
three to five model years, and left the ``carry-back'' period at three 
model years. Under part 536, credit holders (including, but not limited 
to, manufacturers) will have credit accounts with NHTSA, and will be 
able to hold credits, use them to achieve compliance with CAFE 
standards, transfer them between compliance categories, or trade them. 
A credit may also be cancelled before its expiration date, if the 
credit holder so chooses. Traded and transferred credits are subject to 
an ``adjustment factor'' to ensure total oil savings are preserved, as 
required by EISA. EISA also prohibits credits earned before MY 2011 
from being transferred, so NHTSA has developed several regulatory 
restrictions on trading and transferring to facilitate Congress' intent 
in this regard. As discussed above, EISA establishes a ``cap'' for the 
maximum increase in any compliance category attributable to transferred 
credits: for MYs 2011-2013, transferred credits can only be used to 
increase a manufacturer's CAFE level in a given compliance category by 
1.0 mpg; for MYs 2014-2017, by 1.5 mpg; and for MYs 2018 and beyond, by 
2.0 mpg.
---------------------------------------------------------------------------

    \1385\ Congress required that DOT establish a credit 
``transferring'' regulation, to allow individual manufacturers to 
move credits from one of their fleets to another (e.g., using a 
credit earned for exceeding the light truck standard for compliance 
with the domestic passenger car standard). Congress allowed DOT to 
establish a credit ``trading'' regulation, so that credits may be 
bought and sold between manufacturers and other parties.
---------------------------------------------------------------------------

    In the NPRM, NHTSA proposed that the VMT estimates used in the 
credit adjustment factor should be 195,264 miles for passenger car 
credits and 225,865 miles for light truck credits for all over-
compliance credits earned in MYs 2017-2025. NHTSA did not propose to 
change the VMT estimates used for these purposes for MYs 2012-2016. 
NHTSA proposed these values in the interest of harmonizing with EPA's 
GHG program, and sought comment on this approach as compared to the 
prior approach of adjustment factors with VMT estimates that vary by 
year. Additionally, NHTSA proposed to include VMT estimates for MY 
2011, which the agency had not included in Part 536 as part of the MYs 
2012-2016 rulemaking. The proposed MY 2011 VMT value for passenger cars 
was 152,922 miles, and for light trucks was 172,552 miles. The Alliance 
supported the fixed value VMT approach for MYs 2017-2025, and requested 
that NHTSA also revise the VMT values for MYs 2012-2016 to harmonize 
with EPA. NHTSA is finalizing the VMT value approach as proposed. With 
respect to the Alliance's comment regarding the VMT values for credits 
earned in MYs 2012-2016, the agency expressly did not propose to make 
this change, and we do not believe that the benefits of harmonization 
in this particular aspect for these model years outweigh the potential 
fuel savings losses that may occur if a change is made at this time.
c. Payment of Civil Penalties
    If a manufacturer's average miles per gallon for a given compliance 
category (domestic passenger car, imported passenger car, light truck) 
falls below the applicable standard, and the manufacturer cannot make 
up the difference by using credits earned or acquired, the manufacturer 
is subject to penalties. The penalty, as mentioned, is $5.50 for each 
tenth of a mpg that a manufacturer's average fuel economy falls short 
of the standard for a given model year, multiplied by the total volume 
of those vehicles in the affected fleet, manufactured for that model 
year. NHTSA has collected $818,724,551.00 to date in CAFE penalties, 
the largest ever being paid by DaimlerChrysler for its MY 2006 import 
passenger car fleet, $30,257,920.00. For their MY 2010 fleets, five 
manufacturers paid CAFE fines for not meeting an applicable standard--
Fiat, which included Ferrari and Maserati; Daimler (Mercedes-Benz); 
Porsche; Tata (Jaguar Land Rover) and Volvo--for a total of 
$23,803,411.50. As mentioned above, civil penalties paid for CAFE non-
compliance go to the U.S. Treasury, and not to DOT or NHTSA.
    NHTSA recognizes that some manufacturers may use the option to pay 
civil penalties as a CAFE compliance flexibility--presumably, when 
paying civil penalties is deemed more cost-effective than applying 
additional fuel economy-improving technology, or when adding fuel 
economy-improving technology would fundamentally change the 
characteristics of the vehicle in ways that the manufacturer believes 
its target consumers would not accept. NHTSA has no authority under 
EPCA/EISA to prevent manufacturers from turning to payment of civil 
penalties if they choose

[[Page 63131]]

to do so. This is another important difference from EPA's authority 
under the CAA, which allows EPA to revoke a manufacturer's certificate 
of conformity that permits it to sell vehicles if EPA determines that 
the manufacturer is in non-compliance, and does not permit 
manufacturers to pay fines in lieu of compliance with applicable 
standards.
    NHTSA has grappled repeatedly with the issue of whether civil 
penalties are motivational for manufacturers, and whether raising them 
would increase manufacturers' compliance with the standards. EPCA 
authorizes increasing the civil penalty very slightly up to $10.00, 
exclusive of inflationary adjustments, if NHTSA decides that the 
increase in the penalty ``will result in, or substantially further, 
substantial energy conservation for automobiles in the model years in 
which the increased penalty may be imposed; and will not have a 
substantial deleterious impact on the economy of the United States, a 
State, or a region of a State.'' 49 U.S.C. 32912(c).
    To support a decision that increasing the penalty would result in 
``substantial energy conservation'' without having ``a substantial 
deleterious impact on the economy,'' NHTSA would likely need to provide 
some reasonably certain quantitative estimates of the fuel that would 
be saved, and the impact on the economy, if the penalty were raised. 
Comments received on this issue in the past have not explained in clear 
quantitative terms what the benefits and drawbacks to raising the 
penalty might be. Additionally, it may be that the range of possible 
increase that the statute provides, i.e., up to $10 per tenth of a mpg, 
is insufficient to result in substantial energy conservation, although 
changing this would require an amendment to the statute by Congress. 
NHTSA continues to seek to gain information on this issue and requested 
that commenters wishing to address this issue please provide, as 
specifically as possible, estimates of how raising or not raising the 
penalty amount will or will not substantially raise energy conservation 
and impact the economy. No comments specific to this issue were 
received, so the agency will continue to attempt to evaluate this issue 
on its own.
4. What new incentives are being added to the CAFE program for MYs 
2017-2025?
    All of the CAFE compliance incentives discussed below are being 
finalized by EPA under its EPCA authority to calculate fuel economy 
levels for individual vehicles and for fleets. We refer the reader to 
Section III for more details, as well as Chapter 5 of the Joint TSD for 
more information on the precise mechanics of the incentives, but we 
present them here in summary form so that the reader may understand 
more comprehensively what compliance options will be available for 
manufacturers meeting MYs 2017-2025 CAFE standards.
    As mentioned above with regard to EPA's finalized changes for the 
calculation of dual-fueled automobile fuel economy for MYs 2020 and 
beyond, NHTSA is modifying its own regulations to reflect the fact that 
these incentives may be used as part of the determination of a 
manufacturer's CAFE level. The requirements for determining the vehicle 
and fleet average performance for passenger cars and light trucks 
inclusive of the proposed incentives are defined in 49 CFR 531 and 49 
CFR 533, respectively. Part 531.6(a) specifies that the average fuel 
economy of all passenger automobiles that are manufactured by a 
manufacturer in a model year shall be determined in accordance with 
procedures established by the Administrator of the Environmental 
Protection Agency under 49 U.S.C. 32904 of the Act and set forth in 40 
CFR part 600. Part 533.6(b) specifies that the average fuel economy of 
all non-passenger automobiles is required to be determined in 
accordance with the procedures established by the Administrator of the 
Environmental Protection Agency under 49 U.S.C. 32904 and set forth in 
40 CFR Part 600. The final changes to these sections simply clarify 
that in model years 2017 to 2025, manufacturers may adjust their 
vehicle fuel economy performance values in accordance with 40 CFR Part 
600 for improvements due to the new incentives.
a. ``Game Changing'' Technologies for Full Size Pick-Up Trucks
    EPA is adopting two new types of incentives for improving the fuel 
economy performance of full size pickup trucks. The first incentive 
provides a credit to manufacturers that employ significant quantities 
of hybridized full size pickup trucks. The second incentive is a 
performance-based incentive for full size pickup trucks that achieve a 
significant reduction in fuel consumption as compared to the applicable 
fuel economy target for the vehicle in question. These incentives are 
designed to promote technologies improving fuel economy and GHG 
performance for addressing the significant difficulty full size pickup 
trucks have in meeting CAFE standards while still maintaining the 
levels of utility to which consumers have become accustomed, which 
require higher payload and towing capabilities and greater cargo 
volumes than other light-duty vehicles. Technologies that provide 
substantial fuel economy benefits are often not attractive to 
manufacturers of full size pickups and other large trucks due to these 
tradeoffs in utility purposes, and therefore have not been utilized to 
the same extent as they have in other vehicle classes. The goal of 
these incentives is to facilitate the application of these ``game 
changing'' technologies for large pickups, both to save more fuel and 
to help provide a bridge for industry to future more stringent light 
truck standards. As manufacturers gain experience with applying more 
fuel-saving technology for these vehicles and consumers become more 
accustomed to certain advanced technologies in pickup trucks, the 
agencies anticipate that higher CAFE levels will be more feasible for 
the fleet as a whole.\1386\ In the context of the CAFE program, these 
incentives would be used as an adjustment to a full size pickup truck's 
fuel economy performance. The same vehicle would not be allowed to 
receive an adjustment to its calculated fuel economy for both the 
hybridization incentive and the performance-based incentive, to avoid 
double-counting.
---------------------------------------------------------------------------

    \1386\ NHTSA is not prohibited from considering this 
availability of this incentive in determining the maximum feasible 
levels of stringency for the light truck standards, because it is 
not one of the statutory flexibilities enumerated in 49 U.S.C. 
32902(h).
---------------------------------------------------------------------------

    EPA and NHTSA proposed adopting the eligibility criteria for the 
incentives by adding definitions with the characteristics for: (1) Full 
size pickup trucks; (2) mild hybrid electric pickup trucks, and; (3) 
strong hybrid electric pickup trucks. NHTSA is finalizing these 
definitions by reference to 40 CFR 86.1803-01 in its regulation 49 CFR 
523, ``Vehicle Classification.'' The agencies proposed that trucks 
meeting an overall bed width and length as well as a minimum towing or 
payload capacity could be qualified as full size pickup trucks. Part 
523 was established by NHTSA to include its regulatory definitions for 
passenger automobiles and trucks and to guide the agency and 
manufacturers in classifying vehicles. NHTSA believes these references 
are necessary to help explain to readers that the characteristics of 
full size pickup trucks make them eligible to gain fuel economy 
improvement values after a manufacturer meets either a minimum 
penetration of hybridized technologies or has other technologies that

[[Page 63132]]

significantly reduce fuel consumption. The improvement will be 
available on a per-vehicle basis for mild and strong HEVs, as well as 
for other technologies that significantly improve the efficiency of 
full sized pickup trucks.
i. Pickup Truck Hybridization
    EPA proposed criteria that would provide an adjustment to the fuel 
economy of a manufacturer's full size pickup trucks if the manufacturer 
employs certain defined hybrid technologies for a significant quantity 
of its full size pickup trucks. After meeting minimum production 
percentages, manufacturers would gain an adjustment to the fuel economy 
performance for each ``mild'' or ``strong'' hybrid full size pickup 
truck it produces. EPA is finalizing that manufacturers producing mild 
hybrid pickup trucks would gain a 0.0011 gal/mi (10 g/mi CO2 
equivalent) incentive by applying mild hybrid technology to at least 20 
percent of the company's full sized pickups produced in MY 2017, which 
increases each year up to at least 80 percent of the company's full 
size pickups produced in MY 2021 (20-30-55-70-80% in model years 2017-
2018-2019-2020-2021, respectively), after which point the adjustment 
would no longer be applicable. The mild hybrid penetration rates 
represent a change from the proposed rates, in response to comments 
received from industry that penetration levels proposed for mild hybrid 
credits are too ambitious in the initial model years and may be 
counter-productive, as launching a complex new technology on almost a 
third of first-year sales could be a risky business strategy in this 
highly competitive large truck market segment. As a result, EPA has 
changed this requirement to 20 and 30% in model years 2017 and 2018, 
respectively (compared to the proposed levels of 30% and 40% in MY 2017 
and 2018, respectively), to help facilitate the smooth introduction of 
mild hybrid technology. NHTSA is incorporating reference to EPA's 
requirements in 40 CFR 600.512, which contains the final provisions. 
For strong hybrids, EPA is adopting provisions for strong hybrid 
technology to be applied to at least 10 percent of a company's full 
sized pickup production in each year for model years 2017-2025 to gain 
a 0.0023 gal/mi (20 g/mi CO2 equivalent) incentive.
    The fuel economy adjustment for each mild and strong hybrid full 
size pickup would be a decrease in measured fuel consumption. These 
adjustments are consistent with the GHG credits under EPA's program for 
mild and strong hybrid pickups. A manufacturer would then be allowed to 
adjust the fuel economy performance of its light truck fleet by 
converting the benefit gained from those improvements in accordance 
with the procedures specified in 40 CFR Part 600.
    A number of comments were received in response to the proposed 
definitions for mild and strong hybrids. EPA had proposed that a 75 
percent brake energy recovery criteria would be needed to qualify as a 
strong hybrid and a 15 percent recovery for a mild hybrid; the 
Alliance, Ford, Chrysler, Toyota, and MEMA recommended changing the 
criteria for determining whether a hybrid pickup truck is categorized 
as strong or mild by the percentage of energy recovery achieved during 
braking. GM also provided late oral comments to the agencies suggesting 
revisions to those percentage definitions, meeting with the agencies 
and providing a hybrid pickup truck for EPA's use in testing. Other 
industry commenters objected to EPA's characterization of the credit 
provisions as applying to only hybrid ``gasoline-electric'' vehicles, 
and requested that hybrids be defined more broadly. EPA and NHTSA agree 
that the provisions should not be applicable only to ``gasoline-
electric'' vehicles and are clarifying in this final rule that the 
provisions also apply to non-gasoline (including diesel-, ethanol-, and 
CNG-fueled) hybrids. EPA also agreed with manufacturers that defining 
strong hybrids based upon the proposed percent efficiency in recovering 
braking energy is inappropriate. As identified through recent testing 
by EPA, the only large hybrid truck currently marketed would not 
satisfy the proposed 75 percent metric. Therefore, EPA is finalizing 
changes to the criteria, as discussed in Sections II and III above, 
such that now a 65 percent threshold instead of 75 percent is required 
for a pickup truck to qualify as a strong hybrid. NHTSA is finalizing 
the same definitions as EPA by referencing EPA's definitions in Part 
523.
ii. Performance-Based Incentive for Full-Size Pickups
    Another proposed incentive that is being finalized for full size 
pickup trucks will provide an adjustment to the fuel economy of a 
manufacturer's full sized pickup truck if it achieves a fuel economy 
performance level significantly above the CAFE target for its 
footprint. This incentive recognizes that not all manufacturers may 
wish to pursue hybridization for their pickup trucks, but still rewards 
them for applying fuel-saving technologies above and beyond what they 
might otherwise do. The incentive will allow a performance-based credit 
without the need for a specific technology or design requirements. A 
manufacturer can use any technology or set of technologies as long as 
the vehicle's CO2 performance is at least 15 or 20% below 
the vehicle's footprint-based target. The fuel economy adjustment for 
each full size pickup that exceeds its applicable footprint curve 
target by 15 percent will decrease the vehicle's measured fuel 
consumption by a value of 0.0011gal/mi. Likewise, for each full size 
pickup that exceeds its applicable footprint curve target by 20 
percent, the decrease in measured fuel consumption will be 0.0023 gal/
mi. These adjustments are consistent with the GHG credits under EPA's 
program of 10 g/mi CO2 and 20 g/mi CO2, 
respectively, for beating the applicable CO2 targets by 15 
and 20 percent, respectively.
    The 0.0011 gal/mi performance-based adjustment would be available 
for MYs 2017 to 2021, and a vehicle model meeting the requirement in a 
given model year would continue to receive the credit until MY 2021--
that is, the credit remains applicable to that vehicle model if the 
target is exceeded in only one model year--unless its fuel consumption 
increases from one year to the next or its sales drop below the 
penetration threshold. The 0.0023 gal/mi adjustment would be available 
for a maximum of 5 consecutive years within model years 2017-2025, 
provided the vehicle model's fuel consumption does not increase. As 
explained above for the hybrid incentive, a manufacturer would then be 
allowed to adjust the fuel economy performance of its light truck fleet 
by converting the benefit gained from those improvements in accordance 
with the procedures specified in 40 CFR Part 600.
    Comments received to the NPRM primarily concerned the minimum 
penetration thresholds for full size pickup truck incentives requesting 
to reduce or eliminate the thresholds. Manufacturers cited multiple 
reasons for lower thresholds based upon prevailing production needs, 
unfamiliarity with new technology, and customer acceptance rates. EPA 
discusses in section III.C.3 that the goal of the ``game changing'' 
credits is to incentivize the widespread adoption of advanced 
technologies. Therefore, EPA has decided to finalize the penetration 
requirements as proposed, citing that eliminating or greatly reducing 
the minimum penetration requirements might retain the incentive for 
niche applications but would lose any assurance of widespread ``game-
changing'' technology introduction and substantial penetration.

[[Page 63133]]

b. A/C Efficiency-Improving Technologies
    Air conditioning (A/C) use places excess load on an engine, which 
results in additional fuel consumption. A number of methods related to 
the A/C system components and their controls can be used to improve A/C 
system efficiencies. EPA proposed to allow manufacturers, starting in 
MY 2017, to include fuel consumption reductions resulting from the use 
of improved A/C systems in their CAFE calculations. This will more 
accurately account for achieved real-world fuel economy improvements 
due to improved A/C technologies, and better fulfill EPCA's overarching 
purpose of energy conservation. Manufacturers would not be allowed to 
claim CAFE-related benefits for reducing A/C leakage or switching to an 
A/C refrigerant with a lower global warming potential, because while 
these improvements reduce GHGs consistent with the purpose of the CAA, 
they generally do not relate to fuel economy and thus are not relevant 
to the CAFE program. This proposal to allow manufacturers to consider 
A/C efficiency improvement technologies for determining CAFE 
performance values is being finalized in this final rule.
    Based upon comments received to the proposal, EPA is making several 
technical and programmatic changes to the proposed ``AC17'' test. The 
A/C 17 test is a more extensive test than the ``idle test'' used for 
MYs 2012-2016 and has four elements, including two drive cycles, US03 
and the highway fuel economy cycle, which capture steady state and 
transient operating conditions. It also includes a solar soak period to 
measure the energy required to cool down a car that has been sitting in 
the sun, as well as a pre-conditioning cycle. The A/C 17 test cycle 
will be able to capture improvements in all areas related to efficient 
operation of a vehicle's A/C system. The A/C 17 test cycle measures 
CO2 emissions in grams per mile (g/mi), and--beginning in 
2020--the agencies will require that baseline emissions be measured in 
addition to emissions from vehicles with improved A/C systems.
    Industry and industry representatives--including the Alliance, BMW, 
Ford, Toyota, Honda, Hyundai, Honeywell, and others--asked that an AC17 
baseline configuration test in addition to an AC17 test of a vehicle 
with an improved A/C system not be required in 2017 since few or no 
baseline vehicles will be available in that time period. In response, 
EPA is finalizing that from 2017 to 2019 manufacturers will be eligible 
to receive GHG credits and fuel consumption improvement values from the 
menu simply by reporting the results of the AC17 test. In addition, a 
number of commenters, including the Alliance, Volvo, BMW, Ford, and 
others, asked the agencies to change the required AC17 test 
conditions--such as temperature, humidity, and solar soak period--to 
improve repeatability and reduce test burden. In response, EPA has 
altered some of the test condition requirements. A number of 
manufacturers commented that the definition of vehicle platform would 
require many vehicles to be tested, and asked for clarification on 
which vehicles are required to be tested, and on aspects of the test 
procedure, such as which instrumentation can be used during the test. 
In response, EPA has defined vehicle platform more clearly to minimize 
the testing burden. More detail on the technical and programmatic 
changes along with the comments received are provided in section II.F.
    The details of the A/C efficiency performance provision are 
discussed as follows and in greater detail in Sections II.F, III.C, and 
Chapter 5 of the joint TSD.
    For MYs 2017-2019, eligibility for A/C efficiency fuel consumption 
improvement values will be determined solely by completion of the AC17 
testing on vehicles with more efficient A/C systems. Manufacturers can 
earn the A/C efficiency GHG credit and fuel consumption improvement 
values between 2017 and 2019 by running the A/C 17 test procedure on 
the highest sales volume vehicle in a platform that incorporates the 
new technologies, with the A/C system off and then on, and then report 
these test results to the EPA. In addition to reporting the test 
results, EPA will require that manufacturers provide detailed vehicle 
and A/C system information for each vehicle tested (e.g. vehicle class, 
model type, curb weight, engine size, transmission type, interior 
volume, climate control type, refrigerant type, compressor type, and 
evaporator/condenser characteristics). The amount of the fuel 
consumption improvement value that can be included in the 
manufacturer's CAFE calculations is equal to the value(s) on the menu 
for the particular technolog(ies) installed on the vehicle--up to a 
maximum amount, which is described in more detail below.
    Starting in MY 2020, however, AC17 test results will be used not 
only to determine eligibility for AC efficiency fuel consumption 
improvement values, but will also play a part in calculating the amount 
of the value that can be claimed. From 2020 to 2025, the AC17 test 
would be run on the highest sales volume vehicle in a platform to 
validate that the performance and efficiency of a vehicle's A/C 
technology is commensurate with the level of improvement value that is 
being earned. To determine whether the efficiency improvements of these 
technologies are being realized, the results of an AC17 test performed 
on a new vehicle model will be compared to a ``baseline'' vehicle which 
does not incorporate the efficiency-improving technologies. The 
baseline vehicle is defined as one with characteristics which are 
similar to the new vehicle, only it is not equipped with efficiency-
improving technologies (or they are de-activated). The difference 
between the test of the baseline vehicle and the vehicle with new A/C 
technologies will determine the fuel consumption improvement value that 
can be included in the CAFE calculations. The manufacturer will be 
eligible for GHG credits and fuel consumption improvement values if the 
test results show an improvement over the baseline vehicle. If the test 
result comparisons indicate an emission and fuel consumption reduction 
greater than or equal to the maximum menu-based credit/fuel consumption 
improvement value, then the manufacturer will generate the appropriate 
maximum value based on the menu. However, if the test result does not 
demonstrate the full menu-based potential of the technology, then only 
partial GHG credit and fuel consumption improvement value can be 
earned.
    Manufacturers take the results of the AC17 test(s) and access a 
credit menu (shown in the table below) to determine A/C related fuel 
consumption improvement values. The maximum value possible is limited 
to 0.000563 gal/mi for cars and 0.000810 gal/mi for trucks. As an 
example, a manufacturer uses two technologies listed in the table, for 
which the combined improvement value equals 0.000282 gal/mi. For model 
years 2020 and later, if the results of the AC17 tests for the baseline 
and vehicle with improved A/C system demonstrates a 0.000282 gal/mi or 
greater improvement, then the full fuel consumption improvement value 
provided in the table for those two technologies can be taken. If the 
AC17 test result falls short of the improvement value for the two 
technologies, then a fraction of the improvement value may be counted 
in CAFE calculations. The improvement value fraction is calculated in 
the following way: the AC17 test result for both the baseline vehicle 
and the vehicle with an

[[Page 63134]]

improved A/C system are measured. The difference in the test result of 
the baseline and the improved vehicle is divided by the test result of 
the baseline vehicle. This fraction is multiplied by the fuel 
consumption improvement value for the specific technologies. Thus, if 
the AC17 test yielded an improvement equal to \2/3\ of the summed 
values listed in the table, then \2/3\ of the summed fuel consumption 
improvement values can be counted. Table IV-151 below shows the fuel 
consumption improvement values associated with different A/C efficiency 
improving technologies.

                Table IV-151--NHTSA Efficiency Improving A/C Technologies and Improvement Values
----------------------------------------------------------------------------------------------------------------
                                                                     Estimated
                                                                   reduction in       Car A/C        Truck A/C
                                                                      A/C CO2       efficiency      efficiency
                     Technology description                       emissions  and       fuel            fuel
                                                                       fuel         consumption     consumption
                                                                    consumption     improvement     improvement
                                                                     (percent)      (gallon/mi)     (gallon/mi)
----------------------------------------------------------------------------------------------------------------
Reduced reheat, with externally-controlled, variable-                         30        0.000169        0.000248
 displacement compressor........................................
Reduced reheat, with externally-controlled, fixed-displacement                20        0.000113        0.000158
 or pneumatic variable displacement compressor..................
Default to recirculated air with closed-loop control of the air               30        0.000169        0.000248
 supply (sensor feedback to control interior air quality)
 whenever the outside ambient temperature is 75 [deg]F or higher
 (although deviations from this temperature are allowed based on
 additional analysis)...........................................
Default to recirculated air with open-loop control of the air                 20        0.000113        0.000158
 supply (no sensor feedback) whenever the outside ambient
 temperature is 75 [deg]F or higher (although deviations from
 this temperature are allowed if accompanied by an engineering
 analysis)......................................................
Blower motor controls that limit wasted electrical energy (e.g.               15        0.000090        0.000124
 pulsewidth modulated power controller).........................
Internal heat exchanger (or suction line heat exchanger)........              20        0.000113        0.000158
Improved evaporators and condensers (with engineering analysis                20        0.000113        0.000158
 on each component indicating a COP improvement greater than
 10%, when compared to previous design).........................
Oil Separator (internal or external to compressor)..............              10        0.000090        0.000079
----------------------------------------------------------------------------------------------------------------

    As stated above, if more than one technology is utilized by a 
manufacturer for a given vehicle model, the A/C fuel consumption 
improvement values can be added, but the maximum value possible is 
limited to 0.000563 gal/mi for cars and 0.000810 gal/mi for trucks. 
More A/C related fuel consumption improvement values are discussed in 
the off-cycle credits section of this chapter. The approach for 
determining the manufacturers adjusted fleet fuel economy performance 
due to improvements in A/C efficiency is described in 40 CFR Part 600.
    For model years 2020 and later if a vehicle with new A/C 
technologies is tested and the result is not commensurate with the 
expected level of fuel consumption reduction for technologies included 
on the vehicle, an engineering analysis can be submitted by the 
manufacturer to justify a claim for the fuel consumption improvement 
values.
c. Off-Cycle Technologies and Adjustments
    For MYs 2012-2016, EPA provided an optional credit for new and 
innovative ``off-cycle'' technologies that reduce vehicle 
CO2 emissions, but for which the CO2 reduction 
benefits are not recognized under the 2-cycle test procedure used to 
determine compliance with the fleet average standards. The off-cycle 
credit option was intended to encourage the introduction of off-cycle 
technologies that achieve real-world benefits. The off-cycle credits 
were to be determined using the 5-cycle methodology currently used to 
determine fuel economy label values, which EPA established to better 
represent real-world factors impacting fuel economy, including higher 
speeds and more aggressive driving, colder temperature operation, and 
the use of air conditioning. A manufacturer must determine whether the 
benefit of the technology could be captured using the 5-cycle test; if 
this determination is affirmative, the manufacture must follow the 5-
cycle procedures to determine the CO2 reductions. If the 
manufacturer finds that the technology is such that the benefit is not 
adequately captured using the 5-cycle approach, then the manufacturer 
would have to develop a robust methodology, subject to EPA approval, to 
demonstrate the benefit and determine the appropriate CO2 
gram per mile credit. The demonstration program must be robust, 
verifiable, and capable of demonstrating the real-world emissions 
benefit of the technology with strong statistical significance. The 
non-5-cycle approach includes an opportunity for public comment as part 
of the approval process.
    EPA has been encouraged by automakers' interest in off-cycle 
credits since the program was finalized for the MYs 2012-2016 GHG 
program and concluded that extending the program to MY 2017 and beyond 
may continue to encourage automakers to invest in off-cycle 
technologies that could have the benefit of realizing additional 
reductions in the light-duty fleet over the longer-term. Therefore, EPA 
proposed to extend the off-cycle credits program to 2017 and later 
model years. EPA also proposed, under its EPCA authority, to make 
available a comparable off-cycle technology incentive under the CAFE 
program beginning in MY 2017. However, instead of manufacturers gaining 
credits as done under the GHG program, a direct adjustment would be 
made to the manufacturer's fuel economy fleet performance value. The 
proposed off-cycle incentive for the CAFE program is being finalized 
for MYs 2017 and later as discussed below.
    Starting with MY 2017, manufacturers will be able to generate fuel 
economy improvements by applying technologies listed on a pre-defined 
and pre-approved technology list. These credits would be verified and 
approved as part of certification, with no prior approval process 
needed. The ``pick list'' option will significantly simplify the 
program for manufacturers and provide certainty that improvement values 
may be generated through the use of pre-approved technologies. For 
improvements from technologies not on

[[Page 63135]]

the pre-defined list, the agencies have clarified the step-by-step 
application and approval process for demonstration of fuel consumption 
reductions and approval.
    EPA and NHTSA are finalizing the off-cycle program as proposed with 
the exception of two differences made in response to comments received. 
The first change applies to EPA only and allows the pre-defined list to 
be used starting in MY 2014, rather than the proposed starting point of 
MY 2017. This change does not apply to CAFE, where the off-cycle 
credits program does not begin until MY 2017. Second, the agencies are 
deleting the minimum sales thresholds for technologies on the pre-
defined list. For further explanation of the changes for the GHG 
program, see Section III.C.5.a and Section III.C.5.b, and for the CAFE 
program, see Section III.C.5.c. The agencies are also finalizing the 
step-by-step process and timeline for reviewing credit applications and 
providing a decision to manufacturers. The agencies plan to coordinate 
approvals whereas EPA will consult with NHTSA on the application and 
the data received in cases where the manufacturer intends to generate 
fuel consumption improvement values for CAFE in MY 2017 and later. The 
details of the testing protocols used for determining off-cycle 
technology benefits and the step-by-step EPA review and approval 
process are detailed more thoroughly in Section III.C.5.b.iii and 
Section III.C.5.b.v. The agencies are also clarifying, for purposes of 
the off-cycle program for CAFE, how consultation and coordination as 
required by 49 U.S.C. 32904(e) will occur. NHTSA has added regulatory 
text in 49 CFR 531.6 and 533.6 explaining that NHTSA will consult with 
EPA on manufacturer applications under 40 CFR 86.1869-12 and provide 
its views on the specific off-cycle technology under consideration to 
ensure its impact on fuel economy and the suitability of using the off-
cycle technology to adjust the fuel economy performance. NHTSA's 
evaluation and review will consider whether the technology has a direct 
impact upon improving fuel economy performance; whether the technology 
is related to crash-avoidance technologies, safety critical systems or 
systems affecting safety-critical functions, or technologies designed 
for the purpose of reducing the frequency of vehicle crashes; 
information from any assessments conducted by EPA related to the 
application, the technology and/or related technologies; and other 
relevant factors. NHTSA also notes that since the off-cycle program for 
CAFE does not begin until MY 2017, but manufacturers may obtain 
approval for off-cycle credits in the GHG program prior to that model 
year which they wish to carry into the CAFE program, clarification is 
needed to explain what manufacturers should do in those circumstances. 
In those cases, manufacturers must concurrently submit a copy to NHTSA 
of the application that is being submitted to EPA if manufacturers 
anticipate seeking fuel consumption improvements for CAFE beginning in 
MY 2017 to ensure the smooth functioning of the program.
    The changes finalized today by the agencies respond to issues 
raised by commenters. The agencies received several comments supporting 
the proposal to establish a pre-defined and pre-approved technology 
list for the CAFE program. Manufacturers who supported the list stated 
that it is a necessary element to streamline and simplify the off-cycle 
program for EPA and NHTSA. There were no comments received objecting to 
the pre-defined list, but comments were received on various aspects of 
the list, as discussed in detail in Section II.F. EPA has made changes 
to some of the technologies and credit values on the list as a result 
of these comments. Based on received information and meetings with 
manufacturers, the agencies are also clarifying the proposed credit 
values and calculation procedures for active transmission warmup, solar 
panels and solar control glazing in the final rule. These clarified 
values are presented in Table III-19 and the calculation methods 
described in detail in the Joint TSD Chapter 5.
    Section II.F of the preamble provides an overview of the 
technologies, credit values, and comments the agencies received on the 
proposed technology list. Table IV-152 provides the list of the 
technologies and per vehicle credit levels for the CAFE program that 
are being adopted for the final rule.

   Table IV-152--NHTSA Off-cycle Technologies and Final Improvement Values for Passenger Cars and Light Trucks
----------------------------------------------------------------------------------------------------------------
                                                       Adjustments for cars           Adjustments for trucks
                   Technology                    ---------------------------------------------------------------
                                                       g/mi         gallons/mi         g/mi         gallons/mi
----------------------------------------------------------------------------------------------------------------
\+\High Efficiency Exterior Lights* (at 100 watt             1.0        0.000113             1.0        0.000113
 savings).......................................
\+\Waste Heat Recovery (at 100W)................             0.7        0.000079             0.7        0.000079
----------------------------------------------------------------------------------------------------------------

\+\Solar Panels (based on a 75 watt solar        Battery Charging Only..................             3.3        0.000371             3.3        0.000371
 panel)**.
                                                 Active Cabin Ventilation and Battery                2.5        0.000281             2.5        0.000281
                                                  Charging.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\+\Active Aerodynamic Improvements (for a 3% aerodynamic drag or Cd reduction)..........             0.6        0.000068             1.0        0.000113
--------------------------------------------------------------------------------------------------------------------------------------------------------

Engine Idle Start-Stop.........................  w/heater circulation system #..........             2.5        0.000281             4.4        0.000495
                                                 w/o heater circulation system..........             1.5        0.000169             2.9        0.000326
--------------------------------------------------------------------------------------------------------------------------------------------------------
Active Transmission Warm-Up.............................................................             1.5        0.000169             3.2        0.000360
--------------------------------------------------------------------------------------------------------------------------------------------------------
Active Engine Warm-up...................................................................             1.5        0.000169             3.2        0.000360
--------------------------------------------------------------------------------------------------------------------------------------------------------
Solar/Thermal Control...................................................................       Up to 3.0        0.000338       Up to 4.3        0.000484
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 63136]]

    Since one purpose of the off-cycle improvement incentive is to 
encourage market penetration of the technologies (see 75 FR 25438), EPA 
proposed to require minimum penetration rates for non-hybrid based 
listed technologies as a condition for generating improvements from the 
list as a way to further encourage their widespread adoption by MY 2017 
and later. At the end of the model year for which the off-cycle 
improvement is claimed, manufacturers would need to demonstrate that 
production of vehicles equipped with the technologies for that model 
year exceeded the percentage thresholds in order to receive the listed 
improvement. EPA proposed to set the threshold at 10 percent of a 
manufacturer's overall combined car and light truck production for all 
technologies not specific to HEVs. Ten percent seemed to be an 
appropriate threshold as it would encourage manufacturers to develop 
technologies for use on larger volume models and bring the technologies 
into the mainstream. For solar roof panels and electric heat 
circulation pumps, which are specific to HEVs, PHEVs, and EVs, EPA is 
not proposing a minimum penetration rate threshold for credit 
generation. Hybrids may be a small subset of a manufacturer's fleet, 
less than 10 percent in some cases, and EPA does not believe that 
establishing a threshold for hybrid-based technologies would be useful 
and could unnecessarily complicate the introduction of these 
technologies. The agencies requested comments on applying this type of 
threshold, the appropriateness of 10 percent as the threshold for 
listed technologies that are not P/H/EV-specific, and the proposed 
treatment of hybrid-based technologies.
    The agencies received comments from several manufacturers and 
suppliers recommending not to adopt the proposed sales thresholds. 
Commenters argued, for example, that a sales threshold would impede the 
development of these early stage technologies because manufacturers 
typically introduce new, expensive technologies on high-end, low-volume 
models, and requiring a technology across a certain percentage of the 
fleet in order to allow access to credits would create incentives for 
the manufacturer simply to forego the technology, if no credit is 
available, and focus instead on other ways to improve fuel economy. The 
agencies believe these issues have merit and consequently for the final 
rule have decided not to adopt sales thresholds as a condition. The 
agencies believe that several points raised by the commenters are 
persuasive in demonstrating that a sales threshold could have the 
opposite effect, dissuading manufacturers from introducing 
technologies.
    The agencies also proposed in the NPRM to impose a cap on the 
amount of improvement a manufacturer could generate to 0.001125 gal/
mile per year on a combined car and truck fleet-wide average basis for 
the CAFE program. As proposed, the cap would not have applied on a 
vehicle model basis, allowing manufacturers the flexibility to focus 
off-cycle technologies on certain vehicle models and generate 
improvements for that vehicle model in excess of 0.001125 gal/mile. 
Additionally, if manufacturers wished to generate improvements in 
excess of the 0.001125 gal/mile limit using listed technologies, they 
could do so by generating necessary data and going through the approval 
process.
    The agencies are finalizing the proposed technology cap as 
specified in the NPRM. Some commenters had argued that the cap is too 
conservative or, conversely, that it may discourage the maximum 
adoption of the pre-defined off-cycle technologies, but the agencies 
believe that the cap is sufficient enough and appropriately structured. 
The cap is appropriate because the default credit values are based on 
limited data, and also because the agencies recognize that some 
uncertainty is introduced when credits are provided based on a general 
assessment of off-cycle performance as opposed to testing on the 
individual vehicle models. Furthermore, the agencies are finalizing the 
approach discussed above by which manufacturers may generate credits 
beyond the cap limitation through the agency approval process. Comments 
were also received requesting to change the approach for adding 
technologies in meeting the cap limitation. The agencies view these 
issues as beyond the scope of this rulemaking, and expect to review 
these issues further and address them as a part of the future NHTSA 
rulemaking to develop final standards for MYs 2022-2025 and concurrent 
mid-term evaluation.
    As proposed, EPA is finalizing that a CAFE improvement value for 
off-cycle improvements be determined at the fleet level by converting 
the CO2 credits determined under the EPA program (in metric 
tons of CO2) for each fleet (car and truck) to a fleet fuel 
consumption improvement value. This improvement value would then be 
used to adjust the fleet's CAFE level upward. See the regulations at 40 
CFR 600.510-12. Note that although the table above presents fuel 
consumption values equivalent to a given CO2 credit value, 
these consumption values are presented for informational purposes and 
are not meant to imply that these values will be used to determine the 
fuel economy for individual vehicles.
5. Other CAFE Enforcement Issues
a. Electronic Reporting
    NHTSA proposed in the NPRM to modify 49 CFR Part 537 to eliminate 
the current option for manufacturers to mail hardcopy submissions of 
CAFE reports to NHTSA and proposed to receive all reports 
electronically. 49 CFR Part 537 requires light vehicle manufacturers to 
submit pre-model year (PMY), mid-model year (MMY), and supplemental 
reports to NHTSA containing projected estimates of how manufacturers 
plan to comply with NHTSA standards. Manufacturers are required to 
submit pre-model year reports by December prior to each year, mid-model 
reports by July of the model year and a supplemental report whenever 
changes are needed to a previously submitted CAFE report. After the end 
of the model year, EPA verifies manufacturers' end-of-the-year data and 
sends the final verified values to NHTSA. In general, manufacturers' 
pre and mid model reports contain projected estimates of the 
manufacturers' CAFE standards, the average fuel economy for each fleet, 
and, primarily in the PMY report, more specific information about the 
vehicles in each manufacture's fleet, such as loaded vehicle weight, 
engine displacement, horsepower and other defining characteristics of 
the vehicle. Manufacturers currently may provide reports either by 
hardcopy or CD-ROM including 5 copies of reports mailed to the NHTSA 
Administrator or electronically sending reports to a secure email 
address, cafe@dot.gov, an option that was added in the MYs 2012-2016 
final rule. NHTSA proposed in the NPRM to modify Sec.  537.5(c)(4) to 
require manufacturers to submit all reports electronically by CD-ROM or 
by email. The agency proposed that electronic data be submitted in a 
Microsoft Excel spreadsheet format for all of the manufacturer's data, 
with the exception of any supporting documentation such as cover 
letters or any requests for confidentiality which had to be provided in 
a pdf format. The agency explained that its long range goal was to use 
the data as part of a step approach it discussed in the NPRM to 
eventually develop a new CAFE database allowing manufacturers to submit 
electronic CAFE reports through the NHTSA Web site using an XML schema.

[[Page 63137]]

    Having examined the issue more closely, NHTSA has discovered that 
there are complications with the amendment to Part 537 in the MYs 2012-
2016 final rule allowing confidential pre- and mid-model year reports 
to be submitted via email. The regulation governing NHTSA's 
determinations of confidentiality, 49 CFR Part 512, currently states 
that if a manufacturer wishes to submit information that it claims to 
be confidential to the agency electronically, the only acceptable 
electronic format is a ``physical medium such as a CD-ROM.'' \1387\ 
Email submissions of confidential material would not conform with this 
requirement. The only exception to this requirement under the current 
Part 512 is early warning reporting data submitted to NHTSA under 49 
CFR part 579.
---------------------------------------------------------------------------

    \1387\ See 49 CFR 512.6(c).
---------------------------------------------------------------------------

    Thus, unless and until the agency undertakes rulemaking to include 
submission of confidential CAFE data by email within Part 512, NHTSA 
will have to continue to accept such data in electronic format by CD-
ROM only. Because manufacturers are required under Part 537 to submit 
both confidential and non-confidential (i.e., redacted) versions of the 
pre- and mid-model year reports to NHTSA, we will continue to accept 
the non-confidential versions by email to cafe@dot.gov, but the 
confidential versions will need to come in by CD-ROM. As discussed in 
the NPRM, we will also be eliminating the option of providing pre- and 
mid-model year reports in hard copy, in the interest of maximizing 
efficiency and reducing paperwork burden. No comments were received 
disagreeing with this proposal.
    The only comments that were received on the question of electronic 
CAFE reporting were from Ford, who supported the concept of electronic 
reporting and NHTSA's move to all electronic reporting in an Excel 
format. However, Ford argued that when the agency eventually made that 
transition, it should continue to allow manufacturers to submit data in 
formats to which they are already accustomed, such as the current 
(totally unrestricted) formats allowed for hardcopy submissions under 
Part 537, or the same format as required by EPA's ``VERIFY'' database. 
Ford argued that manufacturers have spent significant time and 
resources updating their databases to conform to EPA's new VERIFY 
requirements commencing in model year 2009,\1388\ and that Canada also 
uses the VERIFY database system to access CAFE information, so it would 
be easiest for manufacturers if NHTSA employed an identical format for 
CAFE reporting under Part 537.
---------------------------------------------------------------------------

    \1388\ See 76 FR 75340
---------------------------------------------------------------------------

    In response, we reiterate that NHTSA's intent in the NPRM proposal 
was not to impact the format of the existing reports but simply to 
require manufacturers to submit CD-ROMs rather than paper. No changes 
are being made at this time to the format of the Part 537 submissions. 
However, as discussed in the NPRM and as supported by comments, the 
agency does intend to continue investigating the possibility of 
reducing industry's reporting burdens even further through a long term 
goal of developing a means to receive electronic submissions through 
the NHTSA Web site using an XML schema. NHTSA will consider the 
existing formats of the EPA VERIFY system as it moves forward towards 
this goal. We note, however, that while NHTSA is currently aware of a 
number of data requirements that NHTSA and EPA already share in common 
where the EPA VERIFY system format could be used for receiving data, at 
the same time, NHTSA has unique data requirements not collected by EPA 
that may require additional information to be independently reported to 
NHTSA. For example, only NHTSA requires manufacturers to report 
information on the criteria used to classify an automobile as a non-
passenger vehicle or a light truck. Any future changes to the Part 537 
reporting requirements would, of course, occur through rulemaking, and 
we continue to invite manufacturer feedback as the agency develops its 
ideas for modernizing this data collection system.
b. Reporting of How a Vehicle Is Classified as a Light Truck
    In the NPRM, NHTSA proposed to restructure and clarify how 
manufacturers report information used to make the determination that an 
automobile can be classified as a light truck for CAFE purposes, and 
sought comments on the proposed change. The agency felt that this 
proposed change was necessary because the previous requirements in 49 
CFR Part 537 specified that manufacturers must provide information on 
some, but not all, of the functions and features used to classify an 
automobile as a light truck, and it is important for compliance reasons 
to understand and be able to readily verify the methods used to ensure 
manufacturers are classifying vehicles correctly. In addition, the 
regulation required that the information be distributed in different 
locations throughout a manufacturer's report, making it difficult for 
the agency to clearly determine exactly what functions or features a 
manufacturer is using to classify a vehicle as a light truck. For the 
NPRM, NHTSA proposed to relocate the language requesting manufacturers 
to provide their vehicle classification determination information in 
Sections 537.7(c)(4)(xvi)(B)(1) and(2), (xvii) and (xviii) into a 
revised Section 537.7(c)(5) consolidating all the required information. 
NHTSA believed that by incorporating all the requirements into one 
section, the classification determination process would be 
significantly more accurate and easily identifiable.
    In response, Ford commented in support of the proposed 
consolidation of all truck classification determination data into one 
location, but argued that the proposed regulatory text had duplicative 
requirements for reporting light truck cargo-carrying volumes in 
sections 537.7(c)(4)(xix)(B)(2) and (5)(i)(D). Ford requested that 
NHTSA allow manufacturers to streamline their reporting, as long as all 
the data required for NHTSA to confirm CAFE calculations, fleet 
classification, and NHTSA's fleet analyses are present and easily 
identified.
    Upon further review of the proposed regulatory text, we believe 
that our intentions were not clearly articulated. In the proposal, 
NHTSA intended for sections 537.7(c)(4)(xix)(B)(1) and (2) to require 
manufacturers to provide the passenger-carrying volume and cargo-
carrying volume values, respectively, and for section 537.7(c)(5)(i)(D) 
to require the difference between the two volumes and an indication 
whether a vehicle's cargo volume is larger than its passenger volume. 
However, after reviewing Ford's comment, we now understand how these 
requirements could be interpreted as duplicative. Therefore, for the 
final rule, NHTSA is revising section 537.7(c)(5)(i)(D) to clarify that 
the manufacturer must indicate whether the cargo-carrying volume is 
greater than the passenger-carrying volume; if so it must also provide 
the difference between the two values. Finally, Ford requested that 
NHTSA allow manufacturers to streamline their reporting, as long as all 
the data required to confirm CAFE calculations, fleet classification, 
and NHTSA's fleet analyses are present and easily identified. NHTSA 
agrees that streamlining its reporting requirements is important, and 
believes that the changes finalized in this rule to Part 537 will help 
to accomplish that. With these changes, manufacturers can provide the 
agency with all the necessary data in a

[[Page 63138]]

simpler format that allows the agency, and perhaps also the 
manufacturer, to understand quickly and easily how light truck vehicle 
classification determination decisions are made.
c. Base Tire Definition Revision
    The CAFE standards are attribute-based, and thus each manufacturer 
has its own ``standard,'' or compliance obligation, defined by the 
vehicles it produces for sale in each fleet in a given model year. A 
manufacturer calculates its fleet standard from the attribute-based 
target curve standards derived from the unique footprint values, which 
are the products of the average front and rear vehicle track width and 
wheelbase dimensions, of the vehicles in each model type. Vehicle track 
width dimensions are determined with a vehicle equipped with ``base 
tires,'' which NHTSA currently defines in 49 CFR Part 523 as the tire 
specified as standard equipment by a manufacturer on each vehicle 
configuration of a model type.\1389\
---------------------------------------------------------------------------

    \1389\ See 49 CFR 523.2.
---------------------------------------------------------------------------

    The calculation of footprint, and thus the definition of base tire, 
is important in the CAFE program because they ultimately affect a 
manufacturer's compliance obligation, and consistency in how 
manufacturers' compliance obligations are determined is vital for 
predictability and fairness of the program. In the NPRM (See 76 FR 
75351), NHTSA proposed to modify the definition of base tire by 
deleting the reference to ``standard equipment'' and adding a reference 
to ``the tire installed by the vehicle manufacturer that has the 
highest production sales volume on each vehicle configuration of a 
model type.'' NHTSA believed that this modification would ensure that 
the tires most frequently installed on each vehicle configuration would 
become the basis for setting a manufacturer's fuel economy standard, 
which the agency expected would help to reduce inconsistencies and 
confusion that existed in identifying base tires for both the agency 
and the manufacturers. NHTSA sought comment on this approach, and on 
other approaches that could be used for selecting base tires.\1390\
---------------------------------------------------------------------------

    \1390\ For reference, EPA currently defines ``base tire'' as the 
``tire specified as standard equipment by the manufacturer.'' 40 CFR 
600.002. It further defines ``standard equipment'' as ``those 
features or equipment which are marketed on a vehicle over which the 
purchaser can exercise no choice.'' 40 CFR 86.1803-01. In the NPRM, 
EPA noted that some manufacturers may be applying this base tire 
definition in different ways, which could lead to differences across 
manufacturers in how they are calculating footprint values, and thus 
compliance obligations. EPA further noted NHTSA's proposal to change 
its definition for base tire in 49 CFR 523.2, and sought comment on 
whether EPA should change its definition for base tire as well. See 
76 FR 75088-89.
---------------------------------------------------------------------------

    The agencies received several comments in response to the NPRM. 
Global Automakers agreed with NHTSA that clarification would help avoid 
different interpretations of ``base tire'' by different manufacturers, 
but the Alliance, Toyota and GM requested that the agency defer the 
decision on changing the base tire definition and discuss the issue 
further with industry before making changes. The Alliance argued that 
because the highest sales tire can change throughout the model year 
based on many factors beyond a manufacturer's control or foresight, 
NHTSA should therefore use a definition which allows all vehicles to be 
included in the fleet average ``using a representative footprint based 
on the physical vehicle, not a footprint based on a moving target of 
sales.'' The Alliance, and Ford individually, stated that specifying 
that base tire (and thus footprint measurement) could vary by vehicle 
configuration was ``confusing'' because footprint is a physical 
measurement and unrelated to vehicle configuration, which the 
manufacturers implied was a defined term for purposes of fuel economy. 
The Alliance and Ford requested that NHTSA adopt EPA's definition of 
``base tire,'' Global Automakers requested that NHTSA and EPA simply 
adopt the same definition of ``base tire,'' and Hyundai supported 
NHTSA's proposed definition. Additionally, the Alliance warned that a 
decision by NHTSA to adopt its proposed definition could impact 
manufacturer acceptance of the final standards, since all manufacturers 
had assessed their ability to comply with the standards in July 2011 
based on their own interpretation and understanding of what base tire 
means.
    In response, again, any changes to NHTSA's definition for base tire 
are in the interest of ensuring consistency in how manufacturers' 
compliance obligations are determined, to boost the predictability and 
fairness of the program. With respect to the comments on determining a 
base tire for each vehicle configuration, NHTSA agrees that the factors 
defining a vehicle configuration (engine, transmission, fuel system, 
axle ratio and inertial weight) may not necessarily define a unique 
footprint. For example, it is possible for a single ``vehicle 
configuration'' to contain all cab/bed/wheelbase variations of a pick-
up truck, from a standard cab with a short wheelbase to a crew cab with 
a long bed and long wheelbase. In this example, one vehicle 
configuration can have multiple unique wheelbases and associated 
footprints. Thus, using ``vehicle configuration'' in the definition of 
base tire does not clearly address the agency's interest in maximizing 
consistency, because if a vehicle configuration includes multiple 
footprints, it is not clear which footprint a manufacturer should use 
for designating the base tire associated with that configuration, nor 
is it clear how the other footprints would be incorporated into the 
manufacturer's calculation of its compliance obligation. NHTSA will 
therefore be removing the concept of vehicle configuration from its 
definition for base tire.
    NHTSA also agrees with the commenters' theme that in order to be 
most effective, a definition for base tire must be related to 
footprint. If ``vehicle configuration'' in the CAFE context is not 
particularly related to footprint, and thus to base tire, perhaps 
another term is better related. Since the NPRM, NHTSA has analyzed base 
tires and the related footprint dimensions submitted by manufacturers 
in their pre-model year (PMY) reports \1391\ for model years 2011 and 
2012. We have observed that some manufacturers provided wheelbase, 
front and rear track width, and footprint values in these reports using 
the calculation sheet provided to them by EPA in September 2010 
(hereafter referenced as the EPA calculator). EPA, with input from 
NHTSA, developed the EPA calculator for manufacturers' and agency use 
in calculating the footprint-based fuel economy standard (required mpg 
value) for manufacturers' CAFE fleets when submitting end-of-year data 
to EPA.\1392\ The majority of manufacturers that did not submit PMY 
information on the EPA calculator used a format substantially similar 
to it, some for unique model types and others by unique vehicle 
configurations. In either case, the information submitted by 
manufacturers specified, at a minimum, the carline, basic engine, and 
transmission class associated with each footprint. These parameters 
match EPA's definition of ``model type,'' which means a unique 
combination of car line, basic engine, and transmission class.\1393\ 
Thus, while ``vehicle configuration'' may not

[[Page 63139]]

necessarily define a unique footprint, it appears that manufacturers 
understand and are capable of using ``model type'' as a way to define 
groups of vehicles with unique footprints, and that ``model type'' can 
be used for determining fleet-specific compliance obligations.
---------------------------------------------------------------------------

    \1391\ See 49 CFR 537.7.
    \1392\ EPA has also prepared a similar calculator for GHG 
standards that are similarly based on all unique footprints of 
vehicles in each fleet.
    \1393\ ``Transmission class,'' in turn, includes transmission 
type, e.g., manual, automatic, or semi-automatic; number of forward 
gears used in fuel economy testing; drive system, e.g., front wheel 
drive, rear wheel drive, four wheel drive; torque converter type, if 
applicable; etc. See 40 CFR 600.002.
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    With respect to the comments objecting to NHTSA's proposal to tie 
the ``base tire'' definition to the vehicle configuration of the 
``highest production sales volume,'' the agency does not believe that 
using the highest tire sales volume to select base tires creates any 
more difficulty for manufacturers when the supply and volume of other 
vehicle components, or vehicles themselves, can unexpectedly change 
throughout the model year. As with any other model year, unexpected or 
adjusted volume level changes could have an impact on reported base 
tires and fleet average standard calculations which we would expect to 
be revised accordingly in a manufacturer's final year-end report.
    However, in considering the issue further, NHTSA recognizes that 
utilizing the highest production sales volume tire instead of ``the 
tire used as standard equipment'' may lead to standards not derived 
from each unique footprint within a manufacturer's fleet but rather 
derived only from those footprints associated with the highest 
production tire. The Alliance stated that all vehicles should be 
included in the fleet average using a representative footprint based on 
the physical vehicle, not a footprint based on a moving target of 
sales. It appears that the Alliance is suggesting that the agency 
remove the link between footprint and base tire but is not clear as to 
its intent. The agency does not disagree with the concept of using 
representative vehicles to calculate a manufacturer's fleet average 
standard, as long as each unique footprint and base tire combination is 
included when calculating each fleet average standard. Otherwise, the 
agency does not see how to ensure consistency, and thus predictability 
and fairness, in how footprint values are calculated, and thus in how 
compliance obligations are calculated.
    As mentioned, the Alliance and GM suggested that the agency defer 
the decision on changing the base tire definition until further 
analysis and discussions with industry could take place. The Alliance 
explained that various options exist and stated that each one had its 
own risks, but did not provide any details or recommendations. The 
Alliance argued that changing the definition now could create a rule 
that would not be acceptable by some manufacturers because any change 
could negatively impact fleet standard projections. GM also commented 
that additional time be taken to make any decisions in order to 
minimize the potential for any unnecessary complications and unintended 
consequences resulting from revising the definition. Global, Ford and 
Toyota stated that the agencies should harmonize any final definitions. 
The agency agrees with manufacturers that it should move in the 
direction of harmonization with EPA on the base tire definition. We 
also agree with manufacturers that the agency should evaluate all the 
potential risks on fleet standards associated with the available 
options manufacturers have for selecting base tires. The agency 
believes that a proper evaluation of the various options will require 
additional time and effort beyond the scope of this rulemaking.
    For this final rule, the agency has decided to modify the NPRM base 
tire definition by removing the terms ``highest production sales 
volume'' and ``vehicle configuration'' in response to the concerns 
raised by commenters. In addition, to align the definition more closely 
with EPA's, we have added back the term ``standard equipment.'' For 
clarification purposes, we are adding language to ensure that 
manufacturers provide a base tire size for each combination of a 
vehicle's footprint and model type.
    For the final rule, the definition for base tire will therefore be 
as follows: ``the tire size specified as standard equipment by the 
manufacturer on each unique combination of a vehicle's footprint and 
model type.'' For purposes of harmonization, EPA is adopting this same 
definition in its final rule (see preamble section III.E.10 and 40 CFR 
600.002). Standard equipment would mean those features or equipment 
which are marketed on a vehicle over which the purchaser can exercise 
no choice, in accordance with the EPA definition in 40 CFR 86.1803-01. 
NHTSA believes these changes will harmonize both agencies' definitions 
and will allow manufacturers to use the same approach for calculating 
attribute-based standards for NHTSA's Parts 531 and 533 and EPA's GHG 
programs. In addition, each unique footprint and model type combination 
must be used to calculate a manufacturer's target and fleet standards. 
Therefore, NHTSA expects manufacturers to report these projected values 
in their PMY reports. These revised reporting requirements for base 
tire are a part of the provisions that are being finalized in the 
following section. Allowing manufacturers to group and report vehicles 
within a model type by similar footprints reduces the burden that would 
otherwise exist by having to identify the multiple ``vehicle 
configurations'' that exist within each model type. As such, 
manufacturers can submit the EPA calculator, or similar formatted data 
as specified in Part 537.7, with an additional column reporting the 
base tire sizes for each table line entry.
    NHTSA does not believe that this definition represents any material 
change in the reporting requirements already present in the CAFE 
program. Manufacturers are already required to report base tires under 
Part 537 beginning in MY 2010, and have been required to calculate 
their footprint values since model year 2008 for light trucks, 
optionally,\1394\ and then mandatory for both passenger cars and light 
trucks in model year 2011.\1395\ Moreover, since EPA already uses 
``model type'' as a basis for calculating footprint for the GHG 
program, this change to the definition for base tire should enhance 
harmonization between the programs and reduce manufacturer reporting 
burden, insofar as the submissions to both agencies should better 
encompass identical information. And finally, allowing manufacturers to 
group and report vehicles within a model type by similar footprints 
would reduce the burden that would otherwise exist by having to 
identify the multiple ``vehicle configurations'' that exist within each 
model type. As such, manufacturers can submit the EPA calculator, or 
similar formatted data as specified in Part 537.7, with an additional 
column reporting the base tire sizes for each table line entry. NHTSA 
believes these changes provide a clear definition for footprint 
calculations and, thus, fleet compliance projections, calculations, 
finalizations and enforcement efforts.
---------------------------------------------------------------------------

    \1394\ The final rule was published on April 6, 2006. See 71 FR 
17566.
    \1395\ The final rule was published on March 30, 2009. See 74 FR 
14196, per 49 U.S.C. Sec.  32902(b)(3).
---------------------------------------------------------------------------

d. Confirming Target and Fleet Standards
    As discussed in the NPRM, because Part 537 as currently written 
requires only a breakdown of footprint values by vehicle configurations 
rather than by each unique model type and footprint combination, NHTSA 
is currently unable to verify manufacturers' reported target standards. 
To remedy that, the agency proposed to harmonize the NHTSA and EPA 
reporting requirements relating to the derivation of a manufacturer's 
fleet standards. The agency proposed to accomplish this by relocating 
paragraphs

[[Page 63140]]

537.7(c)(4)(xvi)(A)(3) through (6) and (B)(3) through (6), to a revised 
paragraph 537.7(b)(3). NHTSA sought comments on these proposed changes.
    Because no comments were received on this issue, and because NHTSA 
continues to believe that the change will be beneficial, NHTSA is 
finalizing the proposal as specified with one addition. To harmonize 
further with EPA and standardize the data content and format that can 
be submitted to both agencies, NHTSA is adding an optional requirement, 
shown below in the regulatory text for paragraphs Sec.  
537.7(b)(3)(i)(E) and (ii)(E), for manufacturers to provide the 
calculated target standard along with each required unique model type 
and footprint combination listing used to calculate the fleet standard. 
This information would be beneficial to NHTSA for assisting in the 
validation of the manufacturer's calculated fleet standards, and the 
agency believes that optionally requesting this information in Part 537 
does not constitute a material change to the existing reporting 
requirements and should require no additional work on the part of 
manufacturers, because this information will already be submitted to 
EPA. If manufacturers choose not to provide this optional data to NHTSA 
along with the related required data, NHTSA may consider changing this 
to a mandatory requirement in a future rulemaking.
e. Public Reporting
    Several commenters in response to the NPRM requested that NHTSA 
consider expanding the amount of CAFE information it provides to the 
public each year. NACAA commented that once the program is in place, it 
is critical that agencies closely track the progress of manufacturers 
in meeting standards. NRDC stated that EPA and NHTSA should create 
greater public transparency by annually publishing data on each 
manufacturer's credit status and technology penetration rates to ensure 
greater public confidence in the program's effectiveness. NRDC further 
commented that the agencies should publish an annual public report that 
includes at a minimum the following for each manufacturer's passenger 
car and light truck fleets: the amount of cumulative credits or 
deficits; the amount of transfers; the amount of traded credits and the 
name of the receiving party; the amount of credits generated from A/C, 
pickup credits, dedicated and dual fuel, and off-cycle.
    UCS commented that the agencies could further improve transparency 
by having a clear public accounting of credits and program compliance 
explaining that over the years it has been exceedingly difficult to 
independently verify whether manufacturers are compliant with their 
CAFE obligations. Given the numerous compliance flexibility mechanisms 
being proposed by the agencies as well as a multitude of opportunities 
for trading, transferring, banking, and borrowing of credits, USC 
believes that 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. USC urged 
the agencies to undertake an effort to provide clear public accounting 
of credits and program compliance. UCS also stated that in order for it 
and other public interest groups to effectively assess industry 
compliance and behavior, the agencies should expand the public 
availability and quality of disaggregated vehicle data. Because of the 
new attribute-based standards, USC argued that it is critical that sub-
model level data be regularly published that includes not only fuel 
economy and greenhouse gas emissions performance specifications, but at 
a minimum, finalized sales, vehicle footprint, regulatory vehicle 
classification, and other listed technical data. Additional comments 
similar to USC were also received from the Sierra Club. Sierra Club 
requested that public information for model years 2017 to 2025 be 
expanded to include enough detail to sufficiently assess manufacturers' 
credits balances and activities, compliance margins and vehicle model 
type characteristics and performance.
    In response to the commenters' requests to increase the 
transparency of CAFE compliance data, we are continuing to consider 
this issue as we develop the new CAFE database discussed above. We also 
note that as part of the MY 2011 CAFE final rule, NHTSA issued 49 CFR 
part 536 to implement a new CAFE credit trading and transfer program as 
authorized by EISA. In Paragraph 536.5(e) of the regulation, NHTSA 
adopted new provisions for periodically publishing the names and credit 
holdings of all credit holders. Credit holdings will include a 
manufacturer's credit balance accounting for all transferred and traded 
credit transactions which have occurred over a specified transaction 
period. NHTSA plans to make manufacturer's credit balances available to 
the public on the NHTSA Web site before the end of calendar year 2012.
    NHTSA also already publishes a report on its Web site titled, ``The 
Summary of Fuel Economy Report,'' which provides a bi-annual status 
report on CAFE fleet standards, performance values and production 
volumes by manufacturer, and makes manufacturers' pre-model and mid-
model year CAFE reports publicly available at the end of each current 
calendar year in dockets at http://www.regulations.gov. Starting in 
model year 2017, and as detailed in the next section, manufacturers' 
CAFE reports will also be required to contain most of the information 
requested by NRDC such as the amount of the incentive gained by a 
manufacturer in its fleet average performance as generated by A/C, full 
size pickup trucks, dedicated and dual fuel, and off-cycle technology 
improvements. Finally, manufacturers' CAFE reports also already address 
USC's concerns for providing information sufficiently granular enough 
to assess the measure by which companies will comply with regulations 
and provides the information on a vehicle configuration level which 
addresses USC's and Sierra Club's requests for model type information.
f. Additional Enforcement Issues
    The agency proposed in the NPRM to add requirements in 537.7(c)(4) 
for manufacturers to report air conditioning efficiency, full-size 
pickup truck and off-cycle technology improvements used to acquire the 
incentives in 40 CFR 86.1866, and the amount of each incentive. As 
proposed, the technology credits or incentives would need to be 
reported for each vehicle configuration making up the model types used 
to determine a manufacturer's fleet average performance.
    Ford argued that these particular types of vehicle 
characteristics--those necessary to earn fuel economy adjustment values 
for air conditioning efficiency, full-size pickup truck and off-cycle 
technology improvements--will not vary by fuel economy configuration 
and will likely only vary by vehicle line. Ford requested instead that 
manufacturers be allowed to delineate the credit applicability 
specifically, as needed, but for cases where credits apply across a 
much broader section of vehicles, manufacturers should be allowed to 
report on that level rather than being required to report at the 
vehicle configuration level.
    Upon further consideration, NHTSA agrees that these technology 
improvements likely need not be specified at the vehicle configuration 
level because the fuel economy adjustment incentive is derived based 
upon the technology and is not necessarily affected by being applied to

[[Page 63141]]

any particular vehicle based upon vehicle configuration or model type. 
The important information that NHTSA seeks to receive is what air 
conditioning, off-cycle and hybrid technologies are being used, what 
the adjustment incentive is (gallons/mile) for each technology, and the 
number of vehicles in the fleet using the respective technology. These 
adjustment incentives form the inputs to adjust the manufacturer's 
fleet CAFE values in accordance with the equations in 40 CFR 600.510-
12, and manufacturers must also submit this adjusted CAFE value to 
NHTSA. Therefore, for the final rule, we plan to move the provisions 
proposed in section (c)(4)(xvi), (xvii) and (xviii) into a new section 
numbered (c)(7) and require manufacturers to report their technologies 
by vehicle make and model types. Manufacturers will also be required to 
report their adjusted fleet average performance values and other 
required information used in the equation specified in 40 CFR 600.510-
12(c)(1).

J. Record of Decision

    This final rule constitutes the Record of Decision (ROD) for 
NHTSA's final rule for CAFE standards for model years 2017 and beyond, 
pursuant to the National Environmental Policy Act (NEPA) and the 
Council on Environmental Quality's (CEQ) implementing 
regulations.\1396\ See 40 CFR 1505.2.
---------------------------------------------------------------------------

    \1396\ NEPA is codified at 42 U.S.C. 4321-47. CEQ NEPA 
implementing regulations are codified at 40 Code of Federal 
Regulations (CFR) Parts 1500-08.
---------------------------------------------------------------------------

    As required by CEQ regulations, this ROD sets forth the following: 
(1) The agency's decision; (2) alternatives considered by NHTSA in 
reaching its decision, including the environmentally preferable 
alternative; (3) the factors balanced by NHTSA in making its decision, 
including considerations of national policy; (4) how these factors and 
considerations entered into its decision; and (5) the agency's 
preferences among alternatives based on relevant factors, including 
economic and technical considerations and agency statutory missions. 
This ROD also briefly addresses mitigation.
1. The Agency's Decision
    In the Draft Environmental Impact Statement (Draft EIS) and the 
Final Environmental Impact Statement (Final EIS), the agency identified 
a Preferred Alternative, labeled as Alternative 3. As NHTSA noted in 
the Final EIS, under the Preferred Alternative, on an mpg basis, the 
estimated annual increases in the average required fuel economy levels 
between MYs 2017 and 2021 average 3.8 to 3.9 percent for passenger cars 
and 2.5 to 2.7 percent for light trucks. The estimated annual increases 
in the average required fuel economy levels set forth for MYs 2022-
2025--also on an mpg basis--are assumed to average 4.7 percent for 
passenger cars and 4.8 to 4.9 percent for light trucks.\1397\ After 
carefully reviewing and analyzing all of the information in the public 
record, the Final EIS, and public and agency comments submitted on the 
EIS and the NPRM, NHTSA has decided to finalize the Preferred 
Alternative.
---------------------------------------------------------------------------

    \1397\ Because the standards are attribute-based, average 
required fuel economy levels, and therefore rates of increase in 
those averages, depend on the future composition of the fleet, which 
is uncertain and subject to change. The target curves identified as 
the Preferred Alternative and analyzed in the Final EIS are the same 
as those that defined the Preferred Alternative in the Draft EIS and 
outlined as the proposal in the NPRM. They are also the same as 
those being finalized by NHTSA in this final rule.
---------------------------------------------------------------------------

2. Alternatives NHTSA Considered in Reaching its Decision
    When preparing an EIS, NEPA requires an agency to compare the 
potential environmental impacts of its proposed action and a reasonable 
range of alternatives. In the Draft and Final EIS, NHTSA analyzed a No 
Action Alternative and three action alternatives. The action 
alternatives represent a range of potential actions the agency could 
take. The environmental impacts of these alternatives, in turn, 
represent a range of potential environmental impacts that could result 
from NHTSA's chosen action in setting maximum feasible fuel economy 
standards for light duty vehicles.
    The No Action Alternative in the Draft and Final EIS assumes that 
NHTSA would not issue a rule regarding CAFE standards for MY 2017-2025 
passenger cars and light trucks; rather, the No Action Alternative 
assumes that NHTSA's latest CAFE standards (the MY 2016 fuel economy 
standards, issued in conjunction with EPA's MY 2016 GHG standards) 
would continue indefinitely. This alternative provides an analytical 
baseline against which to compare the environmental impacts of the 
other alternatives presented in the EIS.\1398\ NEPA expressly requires 
agencies to consider a ``no action'' alternative in their NEPA analyses 
and to compare the effects of not taking action with the effects of 
action alternatives in order to demonstrate the environmental effects 
of the action alternatives. The No Action Alternative assumes that 
average fuel economy levels and GHG emissions performance in the 
absence of the agencies' action would equal what manufacturers would 
achieve without additional regulation.
---------------------------------------------------------------------------

    \1398\ See 40 CFR 1502.2(e), 1502.14(d). CEQ has explained that 
``[T]he regulations require the analysis of the no action 
alternative even if the agency is under a court order or legislative 
command to act. This analysis provides a benchmark, enabling 
decision makers to compare the magnitude of environmental effects of 
the action alternatives. [See 40 CFR 1502.14(c).] * * * Inclusion of 
such an analysis in the EIS is necessary to inform Congress, the 
public, and the President as intended by NEPA. [See 40 CFR 
1500.1(a).]'' Forty Most Asked Questions Concerning CEQ's National 
Environmental Policy Act Regulations, 46 FR 18026 (Mar. 23, 1981).
---------------------------------------------------------------------------

    For the EIS, in addition to the No Action Alternative, NHTSA 
analyzed a range of action alternatives with fuel economy stringencies 
that increased on average 2 percent to 7 percent annually from the MY 
2016 standards for passenger cars and for light trucks. As NHTSA noted 
in the Final EIS, the agency believes that, based on the different ways 
the agency could weigh EPCA's four statutory factors, the ``maximum 
feasible'' level of CAFE stringency falls within this range.
    Throughout the Final EIS, estimated impacts were shown for three 
action alternatives that illustrate this range of average annual 
percentage increases in fuel economy: a 2 percent per year average 
increase in stringency for both passenger cars and light trucks 
(Alternative 2); the Preferred Alternative with annual percentage 
increases in stringency for passenger cars and for light trucks that, 
on average, fall between the 2 percent and 7 percent per year increases 
(Alternative 3); and a 7 percent per year average increase in 
stringency for both passenger cars and light trucks (Alternative 4).
    Alternatives 2 and 4 were intended to provide the lower and upper 
bounds of a reasonable range of alternatives. In the EIS, the agency 
provided environmental analyses of these points to enable the 
decisionmaker and the public to determine the environmental impacts of 
points that fall between Alternatives 2 and 4. The action alternatives 
evaluated in the EIS therefore provided decisionmakers with the ability 
to select from a wide variety of other potential alternatives with 
stringencies that increase annually at average percentage rates between 
2 and 7 percent. This includes, for example, alternatives with 
stringencies that increase at different rates for passenger cars and 
for light trucks and stringencies that increase by different rates in 
different years. For a discussion of the environmental impacts 
associated with the alternatives, see Chapters 3-7 of the Final EIS.

[[Page 63142]]

    The Final EIS recognizes the unique uncertainties inherent in 
projecting the makeup of the U.S. vehicle fleet far into the future. In 
order to take account of uncertainties regarding the future vehicle 
fleet, and how manufacturers would respond to increased fuel economy 
standards in the future, the Final EIS presents the potential 
environmental impacts for each of the alternatives using two different 
assumptions regarding market-driven fuel economy improvements and two 
different sets of fleet-characteristic assumptions. See Sections 2.2.1 
and 2.2.2 of the Final EIS for a detailed discussion of NHTSA's 
assumptions.
3. NHTSA's Environmental Analysis, Including Consideration of the 
Environmentally Preferable Alternative
    NHTSA's environmental analysis indicates that Alternative 4 is the 
overall Environmentally Preferable Alternative because it would result 
in the largest reductions in fuel use and GHG emissions among the 
alternatives considered. Under each action alternative the agency 
considered, the reduction in fuel consumption resulting from higher 
fuel economy causes emissions that occur during fuel refining and 
distribution to decline. For most of these pollutants, this decline is 
more than sufficient to offset the increase in tailpipe emissions that 
results from increased driving due to the fuel efficiency rebound 
effect, leading to a net reduction in total emissions from fuel 
production, distribution, and use. Because it leads to the largest 
reductions in fuel refining, distribution, and consumption among the 
alternatives considered, Alternative 4 would also lead to the lowest 
total emissions of CO2 and other GHGs, as well as most 
criteria air pollutants and mobile source air toxics (MSATs).
    Alternative 4 would lead to the greatest reduction of 
CO2 and N2O emissions compared to the other 
action alternatives, including the Preferred Alternative. Thus, 
emissions of these GHGs would be lower under Alternative 4 than under 
each of the other action alternatives throughout the analysis period, 
regardless of the assumptions used (e.g. fleet characteristics and fuel 
economy under the No Action Alternative). While the pattern of 
CH4 emissions among the alternatives is more complicated and 
changes over time, emissions of CH4 under Alternative 4 
would rise compared to the No Action Alternative after about 2050, 
depending on the assumptions used, due to increases in tailpipe 
emissions resulting from the fuel efficiency rebound effect and from 
increased use of diesel-fueled vehicles. However, this slight increase 
in CH4 would be vastly outweighed by much larger decreases 
in CO2 emissions on a global warming potential-weighted 
basis. Alternative 4 would lead to a reduction of global atmospheric 
CO2 concentrations in 2100 of up to 0.5 percent, a reduction 
in global mean surface temperatures of up to 0.5 percent, and a 
reduction in sea-level rise of up to 0.4 percent from their respective 
levels under the No Action Alternative.
    For toxic air pollutants, results are mixed. Alternatives 3 and 4 
are the Environmentally Preferable Alternatives depending on the 
pollutant and assumptions used. The greatest reductions in emissions of 
benzene and 1,3-butadiene occur under Alternative 4 in later analysis 
years. The greatest reductions in diesel particulate matter (DPM) occur 
under Alternative 3 (the Preferred Alternative) in later analysis 
years. Under all action alternatives, emissions of acetaldehyde, 
acrolein, and formaldehyde would generally increase in later years, 
depending on the assumptions used. These emissions increases are mainly 
due to the fuel efficiency rebound effect, which more than offsets 
emission reductions from decreased fuel usage. Under different 
assumptions, the fuel efficiency rebound effect would not fully offset 
emissions reductions from decreased fuel usage, and emissions of these 
pollutants would instead decrease.
    For criteria pollutants, the greatest relative reductions in 
emissions compared to the No Action Alternative occur under Alternative 
4 for CO, PM2.5, and VOCs, for which emissions related to 
light duty vehicles decrease by as much as 26 percent by 2060. 
Emissions of NOX and SO2 related to the use of 
light duty vehicles are an exception in later analysis years. For those 
criteria pollutants in later analysis years, NHTSA's analysis indicates 
that Alternative 3 is generally the Environmentally Preferable 
Alternative because it leads to the largest reductions in 
NOX and SO2.
    At the time the analysis for the Final EIS was performed, EIA's 
final version of AEO 2012 was not yet released. The AEO 2012 Early 
Release Reference Case, used for the criteria air pollutant results 
described above, did not account for new standards for power plants, 
which are expected to result in substantial reductions of emissions of 
some air pollutants discussed in the air quality chapter.
    As we stated in the Final EIS, NHTSA believes it is reasonable to 
consider an additional analysis assuming steady improvements to the 
electrical grid during the course of the next several decades--the 
period during which any EV deployment associated with this program 
would occur. In the Final EIS, NHTSA performed an additional air 
quality analysis in order to take into account changes to the 
efficiency of power plants and the mix of fuel sources used. Emissions 
and other environmental impacts from electricity production depend on 
the efficiency of the power plant and the mix of fuel sources used, 
sometimes referred to as the ``grid mix.'' In the United States, the 
current grid mix is composed of coal, nuclear, natural gas, 
hydroelectric, oil, and renewable energy resources, with the largest 
single source of electricity being from coal. As a result of EPA's Acid 
Rain Program, the Clean Air Interstate Rule, the recent Mercury and Air 
Toxics Standards, and general advances in technology, emissions from 
the power-generation sector are expected to decline over time. Low 
natural gas prices and higher coal prices, as well as slower growth in 
electrical demand, are currently resulting in a shift away from coal-
based electricity generation. Together, these trends suggest a future 
grid mix that is likely to produce lower upstream emissions per unit of 
electricity used to charge EVs than the NEMS AEO 2012 Early Release-
based 2020 projection, especially in terms of reductions in criteria 
pollutant emissions.
    Under the cleaner grid mix analyzed in the EIS,\1399\ the greatest 
relative reductions in emissions of criteria pollutants related to the 
use of light duty vehicles occur under Alternative 4 for CO, 
PM2.5, and VOCs, for which emissions decrease by as much as 
26 percent by 2060 compared to the No Action Alternative. For 
SO2 and NOX, the greatest emissions reductions 
generally occur under Alternative 3. Under Alternative 4, emissions of 
SO2 and NOX either increase or decrease compared 
to the No Action Alternative, depending upon assumptions used. Any 
increase in emissions of these pollutants is smaller than increases 
that occur under Alternative 4 for the analysis described above.
---------------------------------------------------------------------------

    \1399\ NHTSA analyzed the ``GHG Price, Economy-wide'' case from 
AEO 2011, which assumes future carbon trading. This scenario assumes 
high levels of natural gas and renewables for electricity 
generation, with generation from coal-fired power plants reduced to 
21 percent from the EIA projected 2020 contribution of 40 percent 
used in the main analysis.
---------------------------------------------------------------------------

    EIA's final version of AEO 2012, which accounts for new EPA 
standards for power plants such as the Mercury and Air Toxics 
Standards, projects

[[Page 63143]]

nearly a 75 percent decrease in SO2 emissions and a 14 
percent reduction in NOX from the electric power sector in 
the 2010-2015 timeframe. EIA's Short-term Energy Outlook for July 2012 
shows that coal was responsible for nearly 50 percent of U.S. 
electrical generation in 2005, and is projected to fall to an average 
of less than 37 percent for 2012, which will also contribute to a 
reduction in these emissions. The full AEO 2012 projects coal 
accounting for 38 percent of total U.S. electricity generation by 2035, 
and natural gas accounting for 28 percent. As EIA notes in AEO 2012, 
the decrease in coal's generation is mostly offset by growth in natural 
gas and renewable energy. Like the cleaner grid mix analyzed in the 
Final EIS, EIA's updated projections indicate a cleaner future grid 
with lower upstream emissions per unit of electricity generated.
    For more detailed discussion of the environmental impacts 
associated with the alternatives, see Chapters 3 through 7 of the Final 
EIS. For detailed results of NHTSA's Alternate Grid Mix Case, see 
Appendix H of the Final EIS.
4. Factors Balanced by NHTSA in Making Its Decision
    For discussion of the factors balanced by NHTSA in making Its 
decision, see Sections IV.D and IV.F of this final rule.
5. How the Factors and Considerations Balanced by NHTSA Entered Into 
Its Decision
    For discussion of how the factors and considerations balanced by 
the agency entered into NHTSA's Decision, see Section IV.F of this 
final rule.
6. The Agency's Preferences among Alternatives Based on Relevant 
Factors, Including Economic and Technical Considerations and Agency 
Statutory Missions
    For discussion of the agency's preferences among alternatives based 
on relevant factors, including economic and technical considerations, 
see Section IV.F of this final rule.
7. Mitigation
    The CEQ regulations specify that a ROD must ``state whether all 
practicable means to avoid or minimize environmental harm from the 
alternative selected have been adopted, and if not, why they were 
not.'' 40 CFR 1505.2(c). The majority of the environmental effects of 
NHTSA's action are positive, i.e., beneficial environmental impacts, 
and would not raise issues of mitigation. Emissions of criteria and 
toxic air pollutants are generally projected to decrease under the 
final standards under all analysis years as compared to their levels 
under the No Action Alternative. Analysis of the environmental trends 
reported in the Final EIS for the Preferred Alternative indicates that 
the only exceptions to this decline are emissions of CO, acetaldehyde, 
acrolein, and 1,3-butadiene, and emissions of SO2 and 
formaldehyde in some analyses and years. See Chapter 4 of the Final 
EIS. The agency forecasts these emissions increases because, under all 
the alternatives analyzed in the EIS, increase in vehicle use due to 
improved fuel efficiency is projected to result in growth in total 
miles traveled by light duty vehicles. The growth in VMT outpaces 
emissions reductions for some pollutants, resulting in projected 
increases for these pollutants. In addition, as described above, 
NHTSA's NEPA analysis predicted increases in emissions of air toxic and 
criteria pollutants under certain alternatives based on assumptions 
about the type of technologies manufacturers will use to comply with 
the standards and the resulting rate and type of emissions.
    NHTSA's authority to promulgate new fuel economy standards is 
limited and does not allow regulation of criteria pollutant from 
vehicles or of factors affecting those emissions, including driving 
habits. Consequently, NHTSA must set CAFE standards but is unable to 
take steps to mitigate the impacts of these standards. Chapter 8 of the 
Final EIS outlines a number of other initiatives across the government 
that could ameliorate the environmental impacts of motor vehicle use, 
including the use of light duty vehicles.

K. Regulatory Notices and Analyses

1. Executive Order 12866, Executive Order 13563, and DOT Regulatory 
Policies and Procedures
    Executive Order 12866, ``Regulatory Planning and Review'' (58 FR 
51735, Oct. 4, 1993), as amended by Executive Order 13563, ``Improving 
Regulation and Regulatory Review'' (76 FR 3821, Jan. 21, 2011), 
provides for making determinations whether a regulatory action is 
``significant'' and therefore subject to OMB review and to the 
requirements of the Executive Order. The Order defines a ``significant 
regulatory action'' as one that is likely to result in a rule that may:
    (1) Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or Tribal governments or 
communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impact of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    The CAFE standards promulgated in this final rule will be 
economically significant if adopted. Accordingly, OMB reviewed the rule 
under Executive Order 12866. The rule is also significant within the 
meaning of the Department of Transportation's Regulatory Policies and 
Procedures.
    The benefits and costs of this proposal are described above. 
Because the rule is economically significant under both the Department 
of Transportation's procedures and OMB guidelines, the agency has 
prepared a Final Regulatory Impact Analysis (FRIA) and placed it in the 
docket and on the agency's Web site. Further, pursuant to Circular A-4, 
we have prepared a formal probabilistic uncertainty analysis for this 
final rule. The circular requires such an analysis for complex rules 
where there are large, multiple uncertainties whose analysis raises 
technical challenges or where effects cascade and where the impacts of 
the rule exceed $1 billion. This final rule meets these criteria on all 
counts.
2. National Environmental Policy Act
    Under NEPA, a Federal agency must prepare an EIS on proposals for 
major Federal actions that significantly affect the quality of the 
human environment.\1400\ The purpose of an EIS is to inform 
decisionmakers and the public of the potential environmental impacts of 
a proposed action and reasonable alternative actions the agency could 
take.\1401\ The EIS is used by the agency, in conjunction with other 
relevant material, to plan actions and make decisions. To inform its 
development of the final CAFE standards, NHTSA prepared a Draft and a 
Final EIS, which analyze, disclose, and compare the potential 
environmental impacts of a reasonable range of action alternatives, 
including a Preferred Alternative,\1402\ pursuant to Council on 
Environmental Quality (CEQ) NEPA implementing regulations,

[[Page 63144]]

DOT Order 5610.1C, and NHTSA regulations.\1403\ The Final EIS analyzes 
direct, indirect, and cumulative impacts, and discusses impacts in 
proportion to their significance. For more detailed discussion of the 
environmental impacts analyzed, see the Final EIS and Final EIS 
Summary, available at Docket No. NHTSA-2011-0056 and on the agency's 
Web site at http://www.nhtsa.gov/fuel-economy.
---------------------------------------------------------------------------

    \1400\ 40 CFR 1502.3.
    \1401\ 40 CFR 1502.1.
    \1402\ The Preferred Alternative in the Final EIS is equivalent 
to the action the agency is adopting in this final rule.
    \1403\ NEPA is codified at 42 U.S.C. 4321-4347. CEQ NEPA 
implementing regulations are codified at 40 CFR Parts 1500-1508, and 
NHTSA's NEPA implementing regulations are codified at 49 CFR Part 
520.
---------------------------------------------------------------------------

    The Final EIS quantitatively and qualitatively analyzes the 
potential environmental impacts of a range of alternative CAFE 
standards on fuel and energy use, air quality, and global climate 
change. The Final EIS also qualitatively describes potential 
environmental impacts to a variety of other resources including land 
use and development, hazardous materials and regulated wastes, historic 
and cultural resources, noise, and environmental justice.
    CEQ regulations emphasize agency cooperation early in the NEPA 
process and allow a lead agency (in this case, NHTSA) to request the 
assistance of other agencies that either have jurisdiction by law or 
have special expertise regarding issues considered in an EIS.\1404\ 
NHTSA invited EPA to be a cooperating agency in the preparation of the 
EIS because of its special expertise in the areas of climate change and 
air quality.
---------------------------------------------------------------------------

    \1404\ 40 CFR 1501.6.
---------------------------------------------------------------------------

    In preparing the Final EIS, NHTSA took a number of steps to ensure 
public involvement. On May 10, 2011, NHTSA published a notice of intent 
to prepare an environmental impact statement for new CAFE standards, 
requesting comment on the scope of the agency's analysis.\1405\ On 
November 25, 2011, EPA published a Notice of Availability of the Draft 
EIS for the new proposed CAFE standards.\1406\ NHTSA requested public 
input on the agency's Draft EIS by January 31, 2012; publication of the 
Notice of Availability triggered the Draft EIS public comment period. 
NHTSA mailed (both electronically and through regular U.S. mail) over 
1,000 copies of the Draft EIS to stakeholders and interested parties, 
including Federal, State, and local officials and agencies; elected 
officials, environmental and public interest groups; Native American 
tribes; and other interested organizations and individuals. NHTSA and 
EPA held joint public hearings on the Draft EIS and NPRM on January 17, 
2012, in Detroit, Michigan; on January 19, 2012, in Philadelphia, 
Pennsylvania; and on January 24, 2012, in San Francisco, California.
---------------------------------------------------------------------------

    \1405\ Notice of Intent to Prepare an Environmental Impact 
Statement for New Corporate Average Fuel Economy Standards, 76 FR 
26996 (May 10, 2011).
    \1406\ Notice of Availability of the Draft Environmental Impact 
Statement for New Corporate Average Fuel Economy Standards Model 
Year 2017-2025, 76 FR 72702, 72703 (Nov. 25, 2011).
---------------------------------------------------------------------------

    NHTSA received thousands of written and oral comments to the NPRM 
and the Draft EIS. The transcripts from the public hearings and written 
comments submitted to NHTSA are part of the administrative record and 
are available on the Federal Docket, available online at http://www.regulations.gov, Reference Docket Nos. NHTSA-2011-0056 and NHTSA-
2010-0131. NHTSA reviewed and analyzed all relevant comments received 
during the public comment period and revised the Final EIS in response 
to comments where appropriate.\1407\ For a more detailed discussion of 
the comments NHTSA received, see Section 1.5 of the Draft EIS and 
Chapter 9 of the Final EIS.
---------------------------------------------------------------------------

    \1407\ The agency also changed the Final EIS as a result of 
updated information that became available after issuance of the 
Draft EIS.
---------------------------------------------------------------------------

    On July 9, 2012, NHTSA submitted the Final EIS to EPA, in 
accordance with CEQ NEPA implementing regulations.\1408\ On that day, 
NHTSA also posted the Final EIS on its Web site, http://www.nhtsa.gov/fuel-economy, and notified over 1,000 stakeholders and interested 
parties about its availability (both electronically and through regular 
U.S. mail). On July 13, 2012, EPA published a Notice of Availability of 
the Final EIS in the Federal Register. See 77 FR 41403 (July 13, 2012).
---------------------------------------------------------------------------

    \1408\ 40 CFR Sec.  1506.9.
---------------------------------------------------------------------------

    In developing the CAFE standards adopted in this final rule, NHTSA 
has been informed by the analyses contained in the Final Environmental 
Impact Statement, Corporate Average Fuel Economy Standards, Passenger 
Cars and Light Trucks, Model Years 2017-2025, Docket No. NHTSA-2011-
0056 (Final EIS). For purposes of this rulemaking, the agency referred 
to an extensive compilation of technical and policy documents available 
in NHTSA's EIS and rulemaking dockets and EPA's docket. NHTSA's EIS and 
rulemaking dockets and EPA's rulemaking docket can be found online at 
http://www.regulations.gov, Reference Docket Nos.: NHTSA-2011-0056 
(EIS), NHTSA-2010-0131 (NHTSA rulemaking), and EPA-HQ-OAR-2010-0799 
(EPA rulemaking).
    Based on the foregoing, NHTSA concludes that the environmental 
analysis and public involvement process complies with NEPA implementing 
regulations issued by CEQ, DOT Order 5610.1C, and NHTSA regulations.
3. Clean Air Act (CAA) as Applied to NHTSA's Action
    The CAA (42 U.S.C. Sec.  7401) is the primary Federal legislation 
that addresses air quality. Under the authority of the CAA and 
subsequent amendments, EPA has established National Ambient Air Quality 
Standards (NAAQS) for six criteria pollutants, which are relatively 
commonplace pollutants that can accumulate in the atmosphere as a 
result of normal levels of human activity. EPA is required to review 
each NAAQS every five years and to revise those standards as may be 
appropriate considering new scientific information.
    The air quality of a geographic region is usually assessed by 
comparing the levels of criteria air pollutants found in the ambient 
air to the levels established by the NAAQS (taking into account, as 
well, the other elements of a NAAQS: averaging time, form, and 
indicator). Concentrations of criteria pollutants within the air mass 
of a region are measured in parts of a pollutant per million parts of 
air (ppm) or in micrograms of a pollutant per cubic meter ([mu]g/m\3\) 
of air present in repeated air samples taken by monitors using 
specified types of monitors. These ambient concentrations of each 
criteria pollutant are compared to the levels, averaging time, and form 
specified by the NAAQS in order to assess whether the region's air 
quality is in attainment with the NAAQS.
    When the measured concentrations of a criteria pollutant within a 
geographic region are below those permitted by the NAAQS, the region is 
designated by the EPA as an attainment area for that pollutant, while 
regions where concentrations of criteria pollutants exceed Federal 
standards are called nonattainment areas (NAAs). Former NAAs that have 
attained the NAAQS are designated as maintenance areas. Each NAA is 
required to develop and implement a State Implementation Plan (SIP), 
which documents how the region will reach attainment levels within time 
periods specified in the CAA. In maintenance areas, the SIP documents 
how the State intends to maintain attainment with the NAAQS. When EPA 
revises a NAAQS, States must revise their SIPs to address how they will 
attain the new standard.
    Section 176(c) of the CAA prohibits Federal agencies from taking 
actions in nonattainment or maintenance areas

[[Page 63145]]

that do not ``conform'' to the SIP. The purpose of this conformity 
requirement is to ensure that Federal activities do not interfere with 
meeting the emissions targets in the SIPs, do not cause or contribute 
to new violations of the NAAQS, and do not impede the ability to attain 
or maintain the NAAQS. EPA has issued two sets of regulations to 
implement CAA Section 176(c):
    (1) The Transportation Conformity Rules (40 CFR Part 93, Subpart 
A), which apply to transportation plans, programs, and projects funded 
or approved under U.S.C. Title 23 or the Federal Transit Laws (49 
U.S.C. Chapter 53). Projects funded by the Federal Highway 
Administration (FHWA) or the Federal Transit Administration (FTA) 
usually are subject to transportation conformity. See 40 CFR 93.102.
    (2) The General Conformity Rules (40 CFR Part 93, Subpart B) apply 
to all other federal actions not covered under transportation 
conformity. The General Conformity Rule established emissions 
thresholds, or de minimis levels, for use in evaluating the conformity 
of a project. If the net emissions increases attributable to the 
project are less than these thresholds, then the project is presumed to 
conform and no further conformity evaluation is required. If the 
emissions increases exceed any of these thresholds, then a conformity 
determination is required. The conformity determination can entail air 
quality modeling studies, consultation with EPA and state air quality 
agencies, and commitments to revise the SIP or to implement measures to 
mitigate air quality impacts.
    The final fuel economy standards are not funded or approved under 
Title 23 or the Federal Transit Act. Further, NHTSA's CAFE program is 
not a highway or transit project funded or approved by FHWA or FTA. 
Accordingly, this final rule is not subject to transportation 
conformity.
    Under the General Conformity Rule, a conformity determination is 
required where a Federal action would result in total direct and 
indirect emissions of a criteria pollutant or precursor equaling or 
exceeding the rates specified in 40 CFR 93.153(b)(1) and (2) for 
nonattainment and maintenance areas. As explained below, NHTSA's action 
results in neither direct nor indirect emissions as defined in 40 CFR 
93.152.
    The General Conformity Rule defines direct emissions as those of 
``a criteria pollutant or its precursors that are caused or initiated 
by the Federal action and originate in a nonattainment or maintenance 
area and occur at the same time and place as the action and are 
reasonably foreseeable.'' 40 CFR 93.152. Because NHTSA's action only 
sets fuel economy standards for light duty vehicles, it causes no 
direct emissions within the meaning of the General Conformity Rule.
    Indirect emissions under the General Conformity Rule include 
emissions or precursors: (1) That are caused or initiated by the 
Federal action and originate in the same nonattainment or maintenance 
area but occur at a different time or place than the action; (2) that 
are reasonably foreseeable; (3) that the agency can practically 
control; and (4) for which the agency has continuing program 
responsibility. 40 CFR 93.152. Each element of the definition must be 
met to qualify as an indirect emission. NHTSA has determined that, for 
the purposes of general conformity, emissions that occur as a result of 
the fuel economy standards are not caused by NHTSA's action, but rather 
occur due to subsequent activities that the agency cannot practically 
control. ``[E]ven if a Federal licensing, rulemaking, or other 
approving action is a required initial step for a subsequent activity 
that causes emissions, such initial steps do not mean that a Federal 
agency can practically control any resulting emissions'' (75 FR 17254, 
17260; 40 CFR 93.152). NHTSA cannot control vehicle manufacturers' 
production of vehicles and consumer purchasing and driving behavior. 
For the purposes of analyzing the environmental impacts of this action 
under NEPA, NHTSA has made assumptions regarding the technologies 
manufacturers will install and how companies will react to increased 
fuel economy standards. For example, NHTSA's NEPA analysis predicted 
increases in air toxic and criteria pollutants to occur in some 
nonattainment areas under certain alternatives based on assumptions 
about the rebound effect. However, NHTSA's rule does not mandate 
specific manufacturer decisions or driver behavior. NHTSA's NEPA 
analysis assumes a rebound effect, wherein the standards could create 
an incentive for additional vehicle use by reducing the cost of fuel 
consumed per mile driven. This rebound effect is an estimate of how 
NHTSA assumes some drivers will react to the rule and is useful for 
estimating the costs and benefits of the rule, but the agency does not 
have the statutory authority, or the program responsibility, to control 
the actual vehicle miles traveled by drivers. Accordingly, changes in 
air toxic and criteria pollutant emissions that result from NHTSA's 
fuel economy standards are not changes that the agency can practically 
control; therefore, this action causes no indirect emissions and a 
general conformity determination is not required.
4. National Historic Preservation Act (NHPA)
    The NHPA (16 U.S.C. 470) sets forth government policy and 
procedures regarding ``historic properties''--that is, districts, 
sites, buildings, structures, and objects included in or eligible for 
the National Register of Historic Places (NRHP). See also 36 CFR Part 
800. Section 106 of the NHPA requires federal agencies to ``take into 
account'' the effects of their actions on historic properties. The 
agency concludes that the NHPA is not applicable to NHTSA's Decision 
because it does not directly involve historic properties. The agency 
has, however, conducted a qualitative review of the related impacts of 
the alternatives on potentially affected resources, including historic 
and cultural resources. See Section 7.3 of the Final EIS. Executive 
Order 12898 (Environmental Justice)
    Under Executive Order 12898, Federal agencies are required to 
identify and address any disproportionately high and adverse human 
health or environmental effects of its programs, policies, and 
activities on minority and low-income populations. Pursuant to this 
order, the Final EIS includes a qualitative analysis of the potential 
effects of the standards on minority and low-income populations. See 
Section 7.6 of the Final EIS.
5. Fish and Wildlife Conservation Act (FWCA)
    The FWCA (16 U.S.C. 2900) provides financial and technical 
assistance to States for the development, revision, and implementation 
of conservation plans and programs for nongame fish and wildlife. In 
addition, the Act encourages all Federal agencies and departments to 
utilize their authorities to conserve and to promote conservation of 
nongame fish and wildlife and their habitats. The agency concludes that 
the FWCA is not applicable to NHTSA's Decision because it does not 
directly involve fish and wildlife.
6. Coastal Zone Management Act (CZMA)
    The Coastal Zone Management Act (16 U.S.C. 1450) provides for the 
preservation, protection, development, and (where possible) restoration 
and enhancement of the nation's coastal zone resources. Under the 
statute, States are provided with funds and technical assistance in 
developing coastal zone management programs. Each

[[Page 63146]]

participating State must submit its program to the Secretary of 
Commerce for approval. Once the program has been approved, any activity 
of a Federal agency, either within or outside of the coastal zone, that 
affects any land or water use or natural resource of the coastal zone 
must be carried out in a manner that is consistent, to the maximum 
extent practicable, with the enforceable policies of the State's 
program.
    The agency concludes that the CZMA is not applicable to NHTSA's 
Decision because it does not involve an activity within, or outside of, 
the nation's coastal zones. The agency has, however, conducted a 
qualitative review of the related direct, indirect, and cumulative 
impacts, positive or negative, of the alternatives on potentially 
affected resources, including coastal zones. See Section 5.5 of the 
Final EIS.
7. Endangered Species Act (ESA)
    Under Section 7(a)(2) of the ESA federal agencies must ensure that 
actions they authorize, fund, or carry out are ``not likely to 
jeopardize'' federally listed threatened or endangered species or 
result in the destruction or adverse modification of the designated 
critical habitat of these species. 16 U.S.C. 1536(a)(2). If a federal 
agency determines that an agency action may affect a listed species or 
designated critical habitat, it must initiate consultation with the 
appropriate Service--the U.S. Fish and Wildlife Service of the 
Department of the Interior and/or the National Oceanic and Atmospheric 
Administration's National Marine Fisheries Service of the Department of 
Commerce, depending on the species involved--in order to ensure that 
the action is not likely to jeopardize the species or destroy or 
adversely modify designated critical habitat. See 50 CFR 402.14. Under 
this standard, the federal agency taking action evaluates the possible 
effects of its action and determines whether to initiate consultation. 
See 51 FR 19926, 19949 (Jun. 3, 1986).
    NHTSA received one comment to the Draft EIS indicating that the 
agency should engage in consultation under Section 7 of the ESA when 
analyzing the overall impact of GHG emissions and other air pollutants. 
Pursuant to Section 7(a)(2) of the ESA, NHTSA has considered the 
effects of the proposed CAFE standards and has reviewed applicable ESA 
regulations, case law, and guidance to determine what, if any, impact 
there might be to listed species or designated critical habitat. NHTSA 
has considered issues related to emissions of CO2 and other 
GHGs, and issues related to non-GHG emissions. Based on this 
assessment, NHTSA has determined that the agency's action of setting 
CAFE standards, which will result in nationwide fuel savings and which, 
consequently, will generally result in emissions reductions from what 
would otherwise occur in the absence of the CAFE standards, does not 
require consultation under Section 7(a)(2) of the ESA. For discussion 
of the agency's rationale, see page 9-101 of the Final EIS. 
Accordingly, NHTSA has concluded its review of this action under 
Section 7 of the ESA.
8. Floodplain Management (Executive Order 11988 and DOT Order 5650.2)
    These Orders require Federal agencies to avoid the long- and short-
term adverse impacts associated with the occupancy and modification of 
floodplains, and to restore and preserve the natural and beneficial 
values served by floodplains. Executive Order 11988 also directs 
agencies to minimize the impact of floods on human safety, health and 
welfare, and to restore and preserve the natural and beneficial values 
served by floodplains through evaluating the potential effects of any 
actions the agency may take in a floodplain and ensuring that its 
program planning and budget requests reflect consideration of flood 
hazards and floodplain management. DOT Order 5650.2 sets forth DOT 
policies and procedures for implementing Executive Order 11988. The DOT 
Order requires that the agency determine if a proposed action is within 
the limits of a base floodplain, meaning it is encroaching on the 
floodplain, and whether this encroachment is significant. If 
significant, the agency is required to conduct further analysis of the 
proposed action and any practicable alternatives. If a practicable 
alternative avoids floodplain encroachment, then the agency is required 
to implement it.
    In this rulemaking, the agency is not occupying, modifying and/or 
encroaching on floodplains. The agency, therefore, concludes that the 
Orders are not applicable to NHTSA's Decision. The agency has, however, 
conducted a review of the alternatives on potentially affected 
resources, including floodplains. See Section 5.5 of the Final EIS.
9. Preservation of the Nation's Wetlands (Executive Order 11990 and DOT 
Order 5660.1a)
    These Orders require Federal agencies to avoid, to the extent 
possible, undertaking or providing assistance for new construction 
located in wetlands unless the agency head finds that there is no 
practicable alternative to such construction and that the proposed 
action includes all practicable measures to minimize harms to wetlands 
that may result from such use. Executive Order 11990 also directs 
agencies to take action to minimize the destruction, loss or 
degradation of wetlands in ``conducting Federal activities and programs 
affecting land use, including but not limited to water and related land 
resources planning, regulating, and licensing activities.'' DOT Order 
5660.1a sets forth DOT policy for interpreting Executive Order 11990 
and requires that transportation projects ``located in or having an 
impact on wetlands'' should be conducted to assure protection of the 
Nation's wetlands. If a project does have a significant impact on 
wetlands, an EIS must be prepared.
    The agency is not undertaking or providing assistance for new 
construction located in wetlands. The agency, therefore, concludes that 
these Orders do not apply to NHTSA's Decision. The agency has, however, 
conducted a review of the alternatives on potentially affected 
resources, including wetlands. See Section 5.5 of the Final EIS.
10. Migratory Bird Treaty Act (MBTA), Bald and Golden Eagle Protection 
Act (BGEPA), Executive Order 13186
    The MBTA provides for the protection of migratory birds that are 
native to the United States by making it illegal for anyone to pursue, 
hunt, take, attempt to take, kill, capture, collect, possess, buy, 
sell, trade, ship, import, or export any migratory bird covered under 
the statute. The statute prohibits both intentional and unintentional 
acts. Therefore, the statute is violated if an agency acts in a manner 
that harms a migratory bird, whether it was intended or not. See, e.g., 
United States v. FMC Corp., 572 F.2d 902 (2nd Cir. 1978).
    The BGEPA (16 U.S.C. 668) prohibits any form of possession or 
taking of both bald and golden eagles. Under the BGEPA, violators are 
subject to criminal and civil sanctions as well as an enhanced penalty 
provision for subsequent offenses.
    Executive Order 13186, ``Responsibilities of Federal Agencies to 
Protect Migratory Birds,'' helps to further the purposes of the MBTA by 
requiring a Federal agency to develop a Memorandum of Understanding 
(MOU) with the Fish and Wildlife Service when it is taking an action 
that has (or is likely to have) a measurable negative impact on 
migratory bird populations.
    The agency concludes that the MBTA, BGEPA, and Executive Order 
13186 do not apply to NHTSA's Decision because

[[Page 63147]]

there is no disturbance and/or take involved in NHTSA's Decision.
11. Department of Transportation Act (Section 4(f))
    Section 4(f) of the Department of Transportation Act of 1966 (49 
U.S.C. 303), as amended by Pub. Law 109-59, is designed to preserve 
publicly owned parklands, waterfowl and wildlife refuges, and 
significant historic sites. Specifically, Section 4(f) of the 
Department of Transportation Act provides that DOT agencies cannot 
approve a transportation program or project that requires the use of 
any publicly owned land from a significant public park, recreation 
area, or wildlife and waterfowl refuge, or any land from a significant 
historic site, unless a determination is made that:
    (1) There is no feasible and prudent alternative to the use of 
land, and
    (2) The program or project includes all possible planning to 
minimize harm to the property resulting from use, or
    (3) A transportation use of Section 4(f) property results in a de 
minimis impact.
    The agency concludes that Section 4(f) is not applicable to NHTSA's 
Decision because this rulemaking does not require the use of any 
publicly owned land.
12. Regulatory Flexibility Act
    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), whenever an agency is required to publish a notice 
of rulemaking for any proposed or final rule, it must prepare and make 
available for public comment a regulatory flexibility analysis that 
describes the effect of the rule on small entities (i.e., small 
businesses, small organizations, and small governmental jurisdictions). 
The Small Business Administration's regulations at 13 CFR part 121 
define a small business, in part, as a business entity ``which operates 
primarily within the United States.'' 13 CFR 121.105(a). No regulatory 
flexibility analysis is required if the head of an agency certifies the 
rule will not have a significant economic impact of a substantial 
number of small entities.
    I certify that this final rule will not have a significant economic 
impact on a substantial number of small entities. The following is 
NHTSA's statement providing the factual basis for the certification (5 
U.S.C. 605(b)).
    The final rule directly affects 19 large single stage motor vehicle 
manufacturers.\1409\ According to current information, the final rule 
would also affect a total of about 21 entities that fit the Small 
Business Administration's criteria for a small business. According to 
the Small Business Administration's small business size standards (see 
13 CFR 121.201), a single stage automobile or light truck manufacturer 
(NAICS code 336111, Automobile Manufacturing; 336112, Light Truck and 
Utility Vehicle Manufacturing) must have 1,000 or fewer employees to 
qualify as a small business. There are about 4 small manufacturers, 
including 3 electric vehicle manufacturers, 8 independent commercial 
importers, and 9 alternative fuel vehicle converters in the passenger 
car and light truck market which are small businesses. We believe that 
the rulemaking would not have a significant economic impact on these 
small vehicle manufacturers because under 49 CFR part 525, passenger 
car manufacturers making fewer than 10,000 vehicles per year can 
petition NHTSA to have alternative standards set for those 
manufacturers. Manufacturers that produce only electric vehicles, or 
that modify vehicles to make them electric or some other kind of 
dedicated alternative fuel vehicle, will have average fuel economy 
values far beyond those presented today, so we would not expect them to 
need a petition for relief. A number of other small vehicle 
manufacturers already petition the agency for relief under Part 525. If 
the standard is raised, it has no meaningful impact on those 
manufacturers, because they are expected to still go through the same 
process to petition for relief. Given that there is already a mechanism 
for handling small businesses, which is the purpose of the Regulatory 
Flexibility Act, and that no comments were received on this issue, a 
regulatory flexibility analysis was not prepared.
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    \1409\ BMW, Daimler (Mercedes), Fiat/Chrysler (which also 
includes Ferrari and Maserati for CAFE compliance purposes), Ford, 
Geely (Volvo), General Motors, Honda, Hyundai, Kia, Lotus, Mazda, 
Mitsubishi, Nissan, Porsche, Subaru, Suzuki, Tata (Jaguar Land 
Rover), Toyota, and Volkswagen/Audi.
---------------------------------------------------------------------------

13. Executive Order 13132 (Federalism)
    Executive Order 13132 requires NHTSA to develop an accountable 
process to ensure ``meaningful and timely input by State and local 
officials in the development of regulatory policies that have 
federalism implications.'' \1410\ The Order defines the term ``Policies 
that have federalism implications'' to include regulations 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 various levels of government.'' Under 
the Order, NHTSA may not issue a regulation that has federalism 
implications, that imposes substantial direct compliance costs, and 
that is not required by statute, unless the Federal government provides 
the funds necessary to pay the direct compliance costs incurred by 
State and local governments, or NHTSA consults with State and local 
officials early in the process of developing the proposed regulation. 
NHTSA and EPA consulted extensively with California and other states in 
the development of the proposal, and several state agencies provided 
comments to the proposed standards.
---------------------------------------------------------------------------

    \1410\ 64 FR 43255 (Aug. 10, 1999).
---------------------------------------------------------------------------

    Additionally, in his January 26 memorandum, the President requested 
NHTSA to ``consider whether any provisions regarding preemption are 
consistent with the EISA, the Supreme Court's decision in Massachusetts 
v. EPA and other relevant provisions of law and the policies underlying 
them.'' Comments were received on this topic, but NHTSA is deferring 
consideration of the preemption issue. The agency believes that it is 
unnecessary to address the issue further at this time because of the 
consistent and coordinated Federal standards that will apply nationally 
under the National Program.
14. Executive Order 12988 (Civil Justice Reform)
    Pursuant to Executive Order 12988, ``Civil Justice Reform,'' \1411\ 
NHTSA has considered whether this rulemaking would have any retroactive 
effect. This final rule does not have any retroactive effect.
---------------------------------------------------------------------------

    \1411\ 61 FR 4729 (Feb. 7, 1996).
---------------------------------------------------------------------------

15. Unfunded Mandates Reform Act
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires Federal agencies to prepare a written assessment of the costs, 
benefits, and other effects of a proposed or final rule that includes a 
Federal mandate likely to result in the expenditure by State, local, or 
tribal governments, in the aggregate, or by the private sector, of more 
than $100 million in any one year (adjusted for inflation with base 
year of 1995). Adjusting this amount by the implicit gross domestic 
product price deflator for 2010 results in $136 million (111.000/81.606 
= 1.36). Before promulgating a rule for which a written statement is 
needed, section 205 of UMRA generally requires NHTSA to identify and 
consider a reasonable number of regulatory alternatives and adopt the 
least costly, most cost-

[[Page 63148]]

effective, or least burdensome alternative that achieves the objectives 
of the rule. The provisions of section 205 do not apply when they are 
inconsistent with applicable law. Moreover, section 205 allows NHTSA to 
adopt an alternative other than the least costly, most cost-effective, 
or least burdensome alternative if the agency publishes with the final 
rule an explanation of why that alternative was not adopted.
    This final rule will not result in the expenditure by State, local, 
or tribal governments, in the aggregate, of more than $136 million 
annually, but it will result in the expenditure of that magnitude by 
vehicle manufacturers and/or their suppliers. In promulgating this 
final rule, NHTSA considered a variety of alternative average fuel 
economy standards lower and higher than those proposed. NHTSA is 
statutorily required to set standards at the maximum feasible level 
achievable by manufacturers based on its consideration and balancing of 
relevant factors and has concluded that the final fuel economy 
standards are the maximum feasible standards for the passenger car and 
light truck fleets for MYs 2012-2016 in light of the statutory 
considerations.
16. Regulation Identifier Number
    The Department of Transportation assigns a regulation identifier 
number (RIN) to each regulatory action listed in the Unified Agenda of 
Federal Regulations. The Regulatory Information Service Center 
publishes the Unified Agenda in April and October of each year. You may 
use the RIN contained in the heading at the beginning of this document 
to find this action in the Unified Agenda.
17. Executive Order 13045
    Executive Order 13045 \1412\ applies to any rule that: (1) Is 
determined to be economically significant as defined under E.O. 12866, 
and (2) concerns an environmental, health, or safety risk that NHTSA 
has reason to believe may have a disproportionate effect on children. 
If the regulatory action meets both criteria, we must evaluate the 
environmental, health, or safety effects of the final rule on children, 
and explain why the final regulation is preferable to other potentially 
effective and reasonably foreseeable alternatives considered by us.
---------------------------------------------------------------------------

    \1412\ 62 FR 19885 (Apr. 23, 1997).
---------------------------------------------------------------------------

    As noted in Chapter 4 of NHTSA's Final EIS, the criteria pollutants 
assessed in the agencies have been shown to cause a range of adverse 
health effects at various concentrations and exposures, including: 
Damage to lung tissue, reduced lung function, exacerbation of existing 
respiratory and cardiovascular diseases, difficulty breathing, 
irritation of the upper respiratory tract, bronchitis and pneumonia, 
educed resistance to respiratory infections, alterations to the body's 
defense systems against foreign materials, reduced delivery of oxygen 
to the body's organs and tissues, impairment of the brain's ability to 
function properly, cancer and premature death. When these gases and 
particles accumulate in the air in high enough concentrations, they can 
harm humans, especially children, the elderly, the ill, and other 
sensitive individuals.
    Diesel Particulate Matter (DPM) is a component of diesel exhaust. 
DPM particles are very fine, with most particles smaller than 1 micron, 
and their small size allows inhaled DPM to reach the lungs. Particles 
typically have a carbon core coated with condensed organic compounds 
such as POM, which include mutagens and carcinogens. EPA classifies 
many of the compounds included in the POM class as probable human 
carcinogens based on animal data. Polycyclic aromatic hydrocarbons 
(PAHs) are a subset of POM that contains only hydrogen and carbon 
atoms. Studies have found that maternal exposures to Polycyclic 
aromatic hydrocarbons (PAHs) in a population of pregnant women were 
associated with several adverse birth outcomes, including low birth 
weight and reduced length at birth, and impaired cognitive development 
in preschool children (3 years of age) (Perera et al. 2003, 2006).
    As noted in Chapter 5 of the Final EIS, potential increases in 
allergens under a changing climate could increase respiratory health 
risks, particularly for children. Recent research has projected 
increases in weed pollen and grass pollen under various climate change 
simulations; these allergens are known to exacerbate children's asthma 
and cause hospitalizations (Sheffield and Landrigan 2011 citing 
H[eacute]guy et al. 2008, Schmier and Ebi 2009, and Ziska et al. 2008). 
Consistent with earlier studies, increased temperatures from climate 
change are projected to increase ground[hyphen]level ozone 
concentrations, triggering asthma attacks among children (Bernstein and 
Myers 2011). Exposure to smoke from forest fires, which are likely to 
occur more frequently in the future, cause asthma and respiratory 
illnesses in children (Bernstein and Myers 2011 citing Liu et al. 2010, 
Bernstein and Mysers 2011 citing Kunzli et al. 2006).
    Additionally, the Final EIS notes that substantial morbidity and 
childhood mortality has been linked to water- and food-borne diseases. 
A recent study investigates how six regions in the tropics and 
subtropics--including South America, North Africa, the Middle East, 
equatorial Africa, southern Africa, and Southeast Asia, all of which 
have high incidence of dehydration and diarrhea--could experience 
increases in diarrhea incidence as average temperatures rise. This 
study estimates an average temperature increase of 4 [deg]C (7.2 
[deg]F) over land in the study area by the end of the century, compared 
to a 1961 to 1990 baseline, based on an ensemble average of 19 climate 
models using a moderate (A1B) emission scenario. A relatively simple 
linear regression relationship was developed between diarrhea incidence 
and temperature increase based on the results of five independent 
studies. Applying this relationship, the projected mean increase in the 
relative risk of contracting diarrhea across the six study regions is 
eight to 11 percent in the period 2010 to 2039, 15 to 20 percent in the 
period 2040 to 2069, and 22 to 29 percent in the period 2070 to 2099 
(Kolstad and Johansson 2011). Climate change is also projected to 
affect the rates of water[hyphen] and food[hyphen]borne diseases. 
Currently, foodborne diseases cause an estimated 5,000 deaths, 325,000 
hospitalizations, and 76 million illnesses annually in the United 
States (Ge et al. 2011 citing Mead et al. 1999). A new study tested how 
climate change can affect the spread of Salmonella. Both extended 
dryness and heavy rain were tested, and the authors found that these 
conditions facilitated the transfer of Salmonella typhimurium into the 
edible portions of lettuce and green onion when Salmonella was present 
in the soil. If climate change were to cause excessive drought or heavy 
rain, it could increase the risk of disease outbreaks (Ge et al. 2011).
    In the United States, Lyme disease is a common vector[hyphen]borne 
disease, with children between the ages of 5 and 9 having the highest 
incidence of infection (Bernstein and Myers 2011 citing Bacon et al. 
2008). In response to warming temperatures, populations of the black 
legged tick (Ixodes scapularis, often known as the deer tick) have been 
expanding and increasing in number across North America northward 
toward Canada and lower Michigan in the United States (Bernstein and 
Myers 2011 citing Ogden et al. 2010).
    Globally, there has been an increase in cases of skin cancer over 
the past several decades, due in part to increased exposure to 
UV[hyphen]B radiation caused by

[[Page 63149]]

factors such as lifestyle changes and stratospheric ozone depletion. 
Studies suggest that higher temperatures contribute to the development 
of skin carcinoma, and one new study estimates that a long[hyphen]term 
temperature increase of 2 [deg]C (3.6[emsp14][deg]F) compared to 1990 
temperatures could raise the carcinogenesis effects of UV radiation by 
10 percent (Andersen 2011 citing van der Leun and de Gruijl 2002).
    The impacts of climate change on food and water security will be 
particularly burdensome on children, who are more susceptible to 
malnutrition and disease (Sheffield and Landrigan 2011). In the Sahel 
region of Africa, expanding arid climates could hinder agricultural 
production, resulting in an increase in malnutrition, stunting, and 
anemia throughout the population. By 2025, an additional six million 
people in Mali, Africa--of which one million are children--are at 
heightened risk of malnutrition due to climate and livelihood changes 
from increasing temperatures and decreased rainfall across the region. 
As the arid region expands, it is projected that approximately 250,000 
children will suffer stunting, 200,000 children will be malnourished, 
and more than 100,000 will be anemic (Jankowska et al. 2012).
    Thus, as detailed in the Final EIS, NHTSA has evaluated the 
environmental, health, and safety effects of the rule on children and 
fetuses. The Final EIS also explains why the standards are preferable 
to other potentially effective and reasonably foreseeable alternatives 
considered by the agency.
18. National Technology Transfer and Advancement Act
    Section 12(d) of the National Technology Transfer and Advancement 
Act (NTTAA) requires NHTSA to evaluate and use existing voluntary 
consensus standards in its regulatory activities unless doing so would 
be inconsistent with applicable law (e.g., the statutory provisions 
regarding NHTSA's vehicle safety authority) or otherwise impractical.
    Voluntary consensus standards are technical standards developed or 
adopted by voluntary consensus standards bodies. Technical standards 
are defined by the NTTAA as ``performance-base or design-specific 
technical specification and related management systems practices.'' 
They pertain to ``products and processes, such as size, strength, or 
technical performance of a product, process or material.''
    Examples of organizations generally regarded as voluntary consensus 
standards bodies include the American Society for Testing and Materials 
(ASTM), the Society of Automotive Engineers (SAE), and the American 
National Standards Institute (ANSI). If NHTSA does not use available 
and potentially applicable voluntary consensus standards, we are 
required by the Act to provide Congress, through OMB, an explanation of 
the reasons for not using such standards.
    There are currently no voluntary consensus standards relevant to 
today's final CAFE standards.
19. Executive Order 13211
    Executive Order 13211 \1413\ applies to any rule that: (1) is 
determined to be economically significant as defined under E.O. 12866, 
and is likely to have a significant adverse effect on the supply, 
distribution, or use of energy; or (2) that is designated by the 
Administrator of the Office of Information and Regulatory Affairs 
(OIRA) as a significant regulatory action. If the regulatory action 
meets either criterion, we must evaluate the adverse energy effects of 
the final rule and explain why the final regulation is preferable to 
other potentially effective and reasonably foreseeable alternatives 
considered by us.
---------------------------------------------------------------------------

    \1413\ 66 FR 28355 (May 22, 2001).
---------------------------------------------------------------------------

    The final rule seeks to establish passenger car and light truck 
fuel economy standards that will reduce the consumption of petroleum 
and will not have any adverse energy effects. Accordingly, this final 
rulemaking action is not designated as a significant energy action.
20. Department of Energy Review
    In accordance with 49 U.S.C. 32902(j)(1), we submitted this final 
rule to the Department of Energy for review. That Department did not 
make any comments that we have not addressed.
21. Privacy Act
    Anyone is able to search the electronic form of all comments 
received into any of our dockets by the name of the individual 
submitting the comment (or signing the comment, if submitted on behalf 
of an organization, business, labor union, etc.). You may review DOT's 
complete Privacy Act statement in the Federal Register (65 FR 19477-78, 
April 11, 2000) or you may visit http://www.dot.gov/privacy.html.

List of Subjects

40 CFR Part 85

    Confidential business information, Imports, Labeling, Motor vehicle 
pollution, Reporting and recordkeeping requirements, Research, 
Warranties.

40 CFR Part 86

    Administrative practice and procedure, Confidential business 
information, Incorporation by reference, Labeling, Motor vehicle 
pollution, Reporting and recordkeeping requirements.

40 CFR Part 600

    Administrative practice and procedure, Electric power, Fuel 
economy, Labeling, Reporting and recordkeeping requirements.

49 CFR Part 523, 531, and 533

    Fuel Economy.

49 CFR Part 536 and 537

    Fuel economy, Reporting and Recordkeeping Requirements.

Environmental Protection Agency

    40 CFR Chapter I
    For the reasons set forth in the preamble, the Environmental 
Protection Agency amends parts 85, 86, and 600 of title 40, Chapter I 
of the Code of Federal Regulations as follows:

PART 85--CONTROL OF AIR POLLUTION FROM MOBILE SOURCES

0
1. The authority citation for part 85 continues to read as follows:

    Authority: 42 U.S.C. 7401-7671q.

Subpart F--[Amended]

0
2. Section 85.525 is amended by adding paragraph (a)(2)(i)(D) to read 
as follows:

Sec.  85.525  Applicable standards.

* * * * *
    (a) * * *
    (2) * * *
    (i) * * *
    (D) Optionally, compliance with greenhouse gas emission 
requirements may be demonstrated by comparing emissions from the 
vehicle prior to the fuel conversion to the emissions after the fuel 
conversion. This comparison must be based on FTP test results from the 
emission data vehicle (EDV) representing the pre-conversion test group. 
The sum of CO2, CH4, and N2O shall be 
calculated for pre- and post-conversion FTP test results, where 
CH4 and N2O are weighted by their global warming 
potentials of 25 and 298, respectively. The post-conversion sum of 
these emissions must be lower than the pre-conversion conversion 
greenhouse gas emission results. CO2 emissions are 
calculated as specified in 40 CFR 600.113-12. If statements of

[[Page 63150]]

compliance are applicable and accepted in lieu of measuring 
N2O, as permitted by EPA regulation, the comparison of the 
greenhouse gas results also need not measure or include N2O 
in the before and after emission comparisons.
* * * * *

PART 86--CONTROL OF EMISSIONS FROM NEW AND IN-USE HIGHWAY VEHICLES 
AND ENGINES

0
3. The authority citation for part 86 continues to read as follows:

    Authority: 42 U.S.C. 7401-7671q.

0
4. Section 86.1 is revised to read as follows:

Sec.  86.1  Reference materials.

    (a) Documents listed in this section have been incorporated by 
reference into this part. The Director of the Federal Register approved 
the incorporation by reference as prescribed in 5 U.S.C. 552(a) and 1 
CFR part 51. Anyone may inspect copies at the U.S. EPA, Air and 
Radiation Docket and Information Center, 1301 Constitution Ave. NW., 
Room B102, EPA West Building, Washington, DC 20460, (202) 566-1744, or 
at the National Archives and Records Administration (NARA). For 
information on the availability of this material at NARA, call 202-741-
6030, or go to: http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.
    (b) American Society for Testing and Materials (ASTM). Anyone may 
purchase copies of these materials from American Society for Testing 
and Materials at 100 Barr Harbor Drive, P.O. Box C700, West 
Conshohocken, PA, 19428-2959, (610) 832-9585, or http://www.astm.org/.
    (1) ASTM C1549-09, Standard Test Method for Determination of Solar 
Reflectance Near Ambient Temperature Using a Portable Solar 
Reflectometer, approved August 1, 2009, IBR approved for Sec.  86.1869-
12(b).
    (2) ASTM D975-04c, Standard Specification for Diesel Fuel Oils, 
published 2004, IBR approved for Sec. Sec.  86.213-11, 86.1910.
    (3) ASTM D1945-91, Standard Test Method for Analysis of Natural Gas 
by Gas Chromatography, published 1991, IBR approved for Sec. Sec.  
86.113-94, 86.513-94, 86.1213-94, 86.1313-94.
    (4) ASTM D2163-91, Standard Test Method for Analysis of Liquefied 
Petroleum (LP) Gases and Propane Concentrates by Gas Chromatography, 
published 1991, IBR approved for Sec. Sec.  86.113-94, 86.1213-94, 
86.1313-94.
    (5) ASTM D2986-95a (Reapproved 1999), Standard Practice for 
Evaluation of Air Assay Media by the Monodisperse DOP (Dioctyl 
Phthalate) Smoke Test, published 1999, IBR approved for Sec.  86.1310-
2007.
    (6) ASTM D5186-91, Standard Test Method for Determination of 
Aromatic Content of Diesel Fuels by Supercritical Fluid Chromatography, 
published 1991, IBR approved for Sec. Sec.  86.113-07, 86.1313-91, 
86.1313-94, 86.1313-98, 86.1313-2007.
    (7) ASTM E29-67 (Reapproved 1980), Standard Recommended Practice 
for Indicating Which Places of Figures Are To Be Considered Significant 
in Specified Limiting Values, published 1980, IBR approved for Sec.  
86.1105-87.
    (8) ASTM E29-90, Standard Practice for Using Significant Digits in 
Test Data to Determine Conformance with Specifications, published 1990, 
IBR approved for Sec. Sec.  86.609-84, 86.609-96, 86.609-97, 86.609-98, 
86.1009-84, 86.1009-96, 86.1442, 86.1708-99, 86.1709-99, 86.1710-99, 
86.1728-99.
    (9) ASTM E29-93a, Standard Practice for Using Significant Digits in 
Test Data to Determine Conformance with Specifications, published 1993, 
IBR approved for Sec. Sec.  86.004-15, 86.007-11, 86.007-15, 86.098-15, 
86.1803-01, 86.1823-01, 86.1824-01, 86.1825-01, 86.1837-01.
    (10) ASTM E903-96, Standard Test Method for Solar Absorptance, 
Reflectance, and Transmittance of Materials Using Integrating Spheres, 
approved April 10, 1996, IBR approved for Sec.  86.1869-12(b).
    (11) ASTM E1918-06, Standard Test Method for Measuring Solar 
Reflectance of Horizontal and Low-Sloped Surfaces in the Field, 
approved August 15, 2006, IBR approved for Sec.  86.1869-12(b).
    (12) ASTM F1471-93, Standard Test Method for Air Cleaning 
Performance of a High-Efficiency Particulate Air-Filter System, 
published 1993, IBR approved Sec.  86.1310-2007.
    (c) American National Standards Institute (ANSI). Anyone may 
purchase copies of these materials from American National Standards 
Institute, 25 W 43rd Street, 4th Floor, New York, NY 10036, (212) 642-
4900, http://www.ansi.org.
    (1) ANSI/AGA NGV1-1994, Standard for Compressed Natural Gas Vehicle 
(NGV) Fueling Connection Devices, 1994, IBR approved for Sec. Sec.  
86.001-9, 86.004-9, 86.098-8, 86.099-8, 86.099-9, 86.1810-01.
    (2) [Reserved]
    (d) California Air Resources Board, 1001 I Street, Sacramento, CA, 
95812, (916) 322-2884, http://www.arb.ca.gov.
    (1) California Regulatory Requirements Applicable to the ``LEV II'' 
Program, including:
    (i) California Non-Methane Organic Gas Test Procedures, August 5, 
1999, IBR approved for Sec. Sec.  86.1803-01, 86.1810-01, 86.1811-04.
    (ii) [Reserved]
    (2) California Regulatory Requirements Applicable to the National 
Low Emission Vehicle Program, October 1996, IBR approved for Sec. Sec.  
86.113-04, 86.612-97, 86.1012-97, 86.1702-99, 86.1708-99, 86.1709-99, 
86.1717-99, 86.1735-99, 86.1771-99, 86.1775-99, 86.1776-99, 86.1777-99, 
Appendix XVI, Appendix XVII.
    (3) California Regulatory Requirements known as On-board 
Diagnostics II (OBD-II), Approved on April 21, 2003, Title 13, 
California Code Regulations, Section 1968.2, Malfunction and Diagnostic 
System Requirements for 2004 and Subsequent Model-Year Passenger Cars, 
Light-Duty Trucks, and Medium-Duty Vehicles and Engines (OBD-II), IBR 
approved for Sec.  86.1806-05.
    (4) California Regulatory Requirements known as On-board 
Diagnostics II (OBD-II), Approved on November 9, 2007, Title 13, 
California Code Regulations, Section 1968.2, Malfunction and Diagnostic 
System Requirements for 2004 and Subsequent Model-Year Passenger Cars, 
Light-Duty Trucks, and Medium-Duty Vehicles and Engines (OBD-II), IBR 
approved for Sec. Sec.  86.007-17, 86.1806-05.
    (e) International Organization for Standardization (ISO). Anyone 
may purchase copies of these materials from International Organization 
for Standardization, Case Postale 56, CH-1211 Geneva 20, Switzerland, 
41-22-749-01-11, http://www.iso.org.
    (1) ISO 9141-2, Road vehicles--Diagnostic systems--Part 2: CARB 
requirements for interchange of digital information, February 1, 1994, 
IBR approved for Sec. Sec.  86.005-17, 86.007-17, 86.099-17, 86.1806-
01, 86.1806-04, 86.1806-05.
    (2) ISO 14230-4:2000(E), Road vehicles--Diagnostic systems--KWP 
2000 requirements for emission-related systems, June 1, 2000, IBR 
approved for Sec. Sec.  86.005-17, 86.007-17, 86.099-17, 86.1806-01, 
86.1806-04, 86.1806-05.
    (3) ISO 15765-4.3:2001, Road Vehicles--Diagnostics on Controller 
Area Networks (CAN)--Part 4: Requirements for emissions-related 
systems, December 14, 2001, IBR approved for Sec. Sec.  86.005-17, 
86.007-17, 86.1806-04, 86.1806-05.
    (4) ISO 15765-4:2005(E), Road Vehicles--Diagnostics on Controller 
Area Networks (CAN)--Part 4: Requirements for emissions-related 
systems, January 15, 2005, IBR approved

[[Page 63151]]

for Sec. Sec.  86.007-17, 86.010-18, 86.1806-05.
    (5) ISO 13837:2008(E), Road Vehicles--Safety glazing materials--
Method for the determination of solar transmittance, First edition, 
April 15, 2008, IBR approved for Sec.  86.1869-12(b).
    (f) National Institute of Standards and Technology (NIST). Anyone 
may purchase copies of these materials from National Institute of 
Standards and Technology, 100 Bureau Drive, Gaithersburg, MD, 20899, 
http://www.nist.gov.
    (1) NIST Special Publication 811, Guide for the Use of the 
International System of Units (SI), 1995 Edition, IBR approved for 
Sec.  86.1901.
    (2) [Reserved]
    (g) Society of Automotive Engineers (SAE). Anyone may purchase 
copies of these materials from Society of Automotive Engineers, 400 
Commonwealth Dr., Warrendale, PA 15096-0001, (877) 606-7323 (U.S. and 
Canada) or (724) 776-4970 (outside the U.S. and Canada), http://
www.sae.org.
    (1) SAE J1151, Methane Measurement Using Gas Chromatography, 
December 1991, (as found in 1994 SAE Handbook--SAE International 
Cooperative Engineering Program, Volume 1: Materials, Fuels, Emissions, 
and Noise; Section 13 and page 170 (13.170)), IBR approved for 
Sec. Sec.  86.111-94; 86.1311-94.
    (2) SAE J1634, Electric Vehicle Energy Consumption and Range Test 
Procedure, Cancelled October 2002, IBR approved for Sec.  86.1811-
04(n).
    (3) SAE J1349, Engine Power Test Code--Spark Ignition and 
Compression Ignition, June 1990, IBR approved for Sec. Sec.  86.094-8, 
86.096-8.
    (4) SAE J1711, Recommended Practice for Measuring the Exhaust 
Emissions and Fuel Economy of Hybrid-Electric Vehicles, Including Plug-
In Hybrid Vehicles, June 2010, IBR approved for Sec.  86.1811-04(n).
    (5) SAE J1850, Class B Data Communication Network Interface, July 
1995, IBR approved for Sec. Sec.  86.099-17, 86.1806-01.
    (6) SAE J1850, Class B Data Communication Network Interface, 
Revised May 2001, IBR approved for Sec. Sec.  86.005-17, 86.007-17, 
86.1806-04, 86.1806-05.
    (7) SAE J1877, Recommended Practice for Bar-Coded Vehicle 
Identification Number Label, July 1994, IBR approved for Sec. Sec.  
86.095-35, 86.1806-01.
    (8) SAE J1892, Recommended Practice for Bar-Coded Vehicle Emission 
Configuration Label, October 1993, IBR approved for Sec. Sec.  86.095-
35, 86.1806-01.
    (9) SAE J1930, Electrical/Electronic Systems Diagnostic Terms, 
Definitions, Abbreviations, and Acronyms, Revised May 1998, IBR 
approved for Sec. Sec.  86.004-38, 86.007-38, 86.010-38, 86.096-38, 
86.1808-01, 86.1808-07.
    (10) SAE J1930, Electrical/Electronic Systems Diagnostic Terms, 
Definitions, Abbreviations, and Acronyms--Equivalent to ISO/TR 15031-2: 
April 30, 2002, Revised April 2002, IBR approved for Sec. Sec.  86.005-
17, 86.007-17, 86.010-18, 86.1806-04, 86.1806-05.
    (11) SAE J1937, Engine Testing with Low Temperature Charge Air 
Cooler Systems in a Dynamometer Test Cell, November 1989, IBR approved 
for Sec. Sec.  86.1330-84, 86.1330-90.
    (12) SAE J1939, Recommended Practice for a Serial Control and 
Communications Vehicle Network, Revised October 2007, IBR approved for 
Sec. Sec.  86.010-18.
    (13) SAE J1939-11, Physical Layer--250K bits/s, Shielded Twisted 
Pair, December 1994, IBR approved for Sec. Sec.  86.005-17, 86.1806-05.
    (14) SAE J1939-11, Physical Layer--250K bits/s, Shielded Twisted 
Pair, Revised October 1999, IBR approved for Sec. Sec.  86.005-17, 
86.007-17, 86.1806-04, 86.1806-05.
    (15) SAE J1939-13, Off-Board Diagnostic Connector, July 1999, IBR 
approved for Sec. Sec.  86.005-17, 86.007-17, 86.1806-04, 86.1806-05.
    (15) SAE J1939-13, Off-Board Diagnostic Connector, Revised March 
2004, IBR approved for Sec.  86.010-18.
    (16) SAE J1939-21, Data Link Layer, July 1994, IBR approved for 
Sec. Sec.  86.005-17, 86.1806-05.
    (18) SAE J1939-21, Data Link Layer, Revised April 2001, IBR 
approved for Sec. Sec.  86.005-17, 86.007-17, 86.1806-04, 86.1806-05.
    (19) SAE J1939-31, Network Layer, Revised December 1997, IBR 
approved for Sec. Sec.  86.005-17, 86.007-17, 86.1806-04, 86.1806-05.
    (20) SAE J1939-71, Vehicle Application Layer, May 1996, IBR 
approved for Sec. Sec.  86.005-17, 86.1806-05.
    (21) SAE J1939-71, Vehicle Application Layer--J1939-71 (through 
1999), Revised August 2002, IBR approved for Sec. Sec.  86.005-17, 
86.007-17, 86.1806-04, 86.1806-05.
    (22) SAE J1939-71, Vehicle Application Layer (Through February 
2007), Revised January 2008, IBR approved for Sec.  86.010-38.
    (23) SAE J1939-73, Application Layer--Diagnostics, February 1996, 
IBR approved for Sec. Sec.  86.005-17, 86.1806-05.
    (24) SAE J1939-73, Application Layer--Diagnostics, Revised June 
2001, IBR approved for Sec. Sec.  86.005-17, 86.007-17, 86.1806-04, 
86.1806-05.
    (25) SAE J1939-73, Application Layer--Diagnostics, Revised 
September 2006, IBR approved for Sec. Sec.  86.010-18, 86.010-38.
    (26) SAE J1939-81, Recommended Practice for Serial Control and 
Communications Vehicle Network Part 81--Network Management, July 1997, 
IBR approved for Sec. Sec.  86.005-17, 86.007-17, 86.1806-04, 86.1806-
05.
    (27) SAE J1939-81, Network Management, Revised May 2003, IBR 
approved for Sec.  86.010-38.
    (28) SAE J1962, Diagnostic Connector, January 1995, IBR approved 
for Sec. Sec.  86.099-17, 86.1806-01.
    (29) SAE J1962, Diagnostic Connector Equivalent to ISO/DIS 15031-3; 
December 14, 2001, Revised April 2002, IBR approved for Sec. Sec.  
86.005-17, 86.007-17, 86.010-18, 86.1806-04, 86.1806-05.
    (30) SAE J1978, OBD II Scan Tool--Equivalent to ISO/DIS 15031-4; 
December 14, 2001, Revised April 2002, IBR approved for Sec. Sec.  
86.005-17, 86.007-17, 86.010-18, 86.1806-04, 86.1806-05.
    (31) SAE J1979, E/E Diagnostic Test Modes, July 1996, IBR approved 
for Sec. Sec.  86.099-17, 86.1806-01.
    (32) SAE J1979, E/E Diagnostic Test Modes, Revised September 1997, 
IBR approved for Sec. Sec.  86.004-38, 86.007-38, 86.010-38, 86.096-38, 
86.1808-01, 86.1808-07.
    (33) SAE J1979, E/E Diagnostic Test Modes--Equivalent to ISO/DIS 
15031-5; April 30, 2002, Revised April 2002, IBR approved for 
Sec. Sec.  86.005-17, 86.007-17, 86.099-17, 86.1806-01, 86.1806-04, 
86.1806-05.
    (34) SAE J1979, (R) E/E Diagnostic Test Modes, Revised May 2007, 
IBR approved for Sec.  86.010-18, 86.010-38.
    (35) SAE J2012, Recommended Practice for Diagnostic Trouble Code 
Definitions, July 1996, IBR approved for Sec. Sec.  86.099-17, 86.1806-
01.
    (36) SAE J2012, (R) Diagnostic Trouble Code Definitions Equivalent 
to ISO/DIS 15031-6: April 30, 2002, Revised April 2002, IBR approved 
for Sec. Sec.  86.005-17, 86.007-17, 86.010-18, 86.1806-04, 86.1806-05.
    (37) SAE J2064 FEB2011, R134a Refrigerant Automotive Air-
Conditioned Hose, Revised February 2011, IBR approved for Sec.  
86.1867-12(a) and (b).
    (38) SAE J2284-3, High Speed CAN (HSC) for Vehicle Applications at 
500 KBPS, May 2001, IBR approved for Sec. Sec.  86.096-38, 86.004-38, 
86.007-38, 86.010-38, 86.1808-01, 86.1808-07.
    (39) SAE J2403, Medium/Heavy-Duty E/E Systems Diagnosis 
Nomenclature--Truck and Bus, Revised August 2007, IBR approved for 
Sec. Sec.  86.007-17, 86.010-18, 86.010-38, 86.1806-05.
    (40) SAE J2534, Recommended Practice for Pass-Thru Vehicle 
Programming, February 2002, IBR approved for Sec. Sec.  86.004-38, 
86.007-38,

[[Page 63152]]

86.010-38, 86.096-38, 86.1808-01, 86.1808-07.
    (41) SAE J2534-1, (R) Recommended Practice for Pass-Thru Vehicle 
Programming, Revised December 2004, IBR approved for Sec.  86.010-38.
    (42) SAE J2727 FEB2012, Mobile Air Conditioning System Refrigerant 
Emission Charts for R-134a and R-1234yf, Revised February 2012, IBR 
approved for Sec.  86.1867-12(a) and (b).
    (43) SAE J2765 OCT2008, Procedure for Measuring System COP 
[Coefficient of Performance] of a Mobile Air Conditioning System on a 
Test Bench, issued October 2008, IBR approved for Sec.  86.1868-12(h).
    (h) Truck and Maintenance Council, 950 North Glebe Road, Suite 210, 
Arlington, VA 22203-4181, (703) 838-1754.
    (1) TMC RP 1210B, Revised June 2007, WINDOWSTMCOMMUNICATION API, 
IBR approved for Sec.  86.010-38.
    (2) [Reserved]

Subpart B--[Amended]

0
5. Section 86.111-94 is amended by revising paragraph (b) introductory 
text to read as follows:

Sec.  86.111-94  Exhaust gas analytical system.

* * * * *
    (b) Major component description. The exhaust gas analytical system, 
Figure B94-7, consists of a flame ionization detector (FID) (heated, 
235[deg] 15[emsp14][deg]F (113[deg]  8 [deg]C) 
for methanol-fueled vehicles) for the determination of THC, a methane 
analyzer (consisting of a gas chromatograph combined with a FID) for 
the determination of CH4, non-dispersive infrared analyzers 
(NDIR) for the determination of CO and CO2, a 
chemiluminescence analyzer (CL) for the determination of 
NOX, and an analyzer meeting the requirements specified in 
40 CFR 1065.275 for the determination of N2O. A heated flame 
ionization detector (HFID) is used for the continuous determination of 
THC from petroleum-fueled diesel-cycle vehicles (may also be used with 
methanol-fueled diesel-cycle vehicles), Figure B94-5 (or B94-6). The 
analytical system for methanol consists of a gas chromatograph (GC) 
equipped with a flame ionization detector. The analysis for 
formaldehyde is performed using high-pressure liquid chromatography 
(HPLC) of 2,4-dinitrophenylhydrazine (DNPH) derivatives using 
ultraviolet (UV) detection. The exhaust gas analytical system shall 
conform to the following requirements:
* * * * *

0
6. Section 86.135-12 is amended by revising paragraphs (a) and (d) to 
read as follows:

Sec.  86.135-12  Dynamometer procedure.

    (a) Overview. The dynamometer run consists of two tests, a ``cold'' 
start test, after a minimum 12-hour and a maximum 36-hour soak 
according to the provisions of Sec. Sec.  86.132 and 86.133, and a 
``hot'' start test following the ``cold'' start by 10 minutes. Engine 
startup (with all accessories turned off), operation over the UDDS, and 
engine shutdown make a complete cold start test. Engine startup and 
operation over the first 505 seconds of the driving schedule complete 
the hot start test. The exhaust emissions are diluted with ambient air 
in the dilution tunnel as shown in Figure B94-5 and Figure B94-6. A 
dilution tunnel is not required for testing vehicles waived from the 
requirement to measure particulates. Six particulate samples are 
collected on filters for weighing; the first sample plus backup is 
collected during the first 505 seconds of the cold start test; the 
second sample plus backup is collected during the remainder of the cold 
start test (including shutdown); the third sample plus backup is 
collected during the hot start test. Continuous proportional samples of 
gaseous emissions are collected for analysis during each test phase. 
For gasoline-fueled, natural gas-fueled and liquefied petroleum gas-
fueled Otto-cycle vehicles, the composite samples collected in bags are 
analyzed for THC, CO, CO2, CH4, NOX, 
and N2O. For petroleum-fueled diesel-cycle vehicles 
(optional for natural gas-fueled, liquefied petroleum gas-fueled and 
methanol-fueled diesel-cycle vehicles), THC is sampled and analyzed 
continuously according to the provisions of Sec.  86.110-94. Parallel 
samples of the dilution air are similarly analyzed for THC, CO, 
CO2, CH4, NOX, and N2O. For 
natural gas-fueled, liquefied petroleum gas-fueled and methanol-fueled 
vehicles, bag samples are collected and analyzed for THC (if not 
sampled continuously), CO, CO2, CH4, 
NOX, and N2O. For methanol-fueled vehicles, 
methanol and formaldehyde samples are taken for both exhaust emissions 
and dilution air (a single dilution air formaldehyde sample, covering 
the total test period may be collected). For ethanol-fueled vehicles, 
methanol, ethanol, acetaldehyde, and formaldehyde samples are taken for 
both exhaust emissions and dilution air (a single dilution air 
formaldehyde sample, covering the total test period may be collected). 
Parallel bag samples of dilution air are analyzed for THC, CO, 
CO2, CH4, NOX, and N2O.
* * * * *
    (d) Practice runs over the prescribed driving schedule may be 
performed at test point, provided an emission sample is not taken, for 
the purpose of finding the appropriate throttle action to maintain the 
proper speed-time relationship, or to permit sampling system 
adjustment. Both smoothing of speed variations and excessive 
accelerator pedal perturbations are to be avoided. When using two-roll 
dynamometers a truer speed-time trace may be obtained by minimizing the 
rocking of the vehicle in the rolls; the rocking of the vehicle changes 
the tire rolling radius on each roll. This rocking may be minimized by 
restraining the vehicle horizontally (or nearly so) by using a cable 
and winch.
* * * * *

0
7. Section 86.165-12 is amended by revising paragraphs (c)(1) and (2) 
to read as follows:

Sec.  86.165-12  Air conditioning idle test procedure.

* * * * *
    (c) * * *
    (1) Ambient humidity within the test cell during all phases of the 
test sequence shall be controlled to an average of 40-60 grains of 
water/pound of dry air.
    (2) Ambient air temperature within the test cell during all phases 
of the test sequence shall be controlled to 73-80 [deg]F on average and 
75  5 [deg]F as an instantaneous measurement. Air 
temperature shall be recorded continuously at intervals of not more 
than 30 seconds.
* * * * *

Sec.  86.166-12  [Removed and Reserved]

0
8. Section 86.166-12 is removed and reserved:

0
9. Section 86.167-17 is added to read as follows:

Sec.  86.167-17  AC17 Air Conditioning Emissions Test Procedure.

    (a) Overview. The AC17 test procedure consists of four elements: a 
pre-conditioning cycle, a 30-minute soak period under simulated solar 
heat, followed by measurement of emissions over an SC03 drive cycle and 
a Highway Fuel Economy Driving Schedule (HFET) drive cycle. The vehicle 
is preconditioned with a single UDDS to bring the vehicle to a warmed-
up stabilized condition. This preconditioning is followed by a 30 
minute vehicle soak (engine off) that proceeds directly into the SC03 
driving

[[Page 63153]]

schedule, during which continuous proportional samples of gaseous 
emissions are collected for analysis. The SC03 driving schedule is 
followed immediately by the HFET cycle, during which continuous 
proportional samples of gaseous emissions are collected for analysis. 
This entire sequence is conducted in an environmental test facility. 
Vehicles are tested for any or all of the following emissions, 
depending upon the specific test requirements and the vehicle fuel 
type: gaseous exhaust THC, NMHC, NMOG, CO, NOX, 
CO2, N2O, CH4, CH3OH, 
C2H5OH, C2H4O, and HCHO. 
For purposes of measuring the impact of air conditioning systems on 
CO2 emissions, this sequence is run twice: once with air 
conditioning on and once with air conditioning off. The following 
figure shows the basic sequence of the test procedure.
    (b) Equipment requirements. Equipment requirements are specified in 
subpart B of part 86 of this chapter.
    (c) Fuel specifications. The test fuel specifications are given in 
Sec.  86.113. Test fuels representing fuel types for which there are no 
specifications provided in Sec.  86.113 may be used if approved in 
advance by the Administrator.
    (d) Analytical gases. The analytical gases must meet the criteria 
given in Sec.  86.114.
    (e) Driving cycles. (1) The driving schedules for the EPA Urban 
Dynamometer Driving Schedule (UDDS) and the SC03 cycle are contained in 
appendix I of this part. The driving schedule for the Highway Fuel 
Economy Driving Schedule (HFET) is set forth in appendix I of part 600 
of this chapter.
    (2) The speed tolerance at any given time on the driving schedules 
is defined by upper and lower limits. The upper limit is 2 mph higher 
than the highest point on trace within 1 second of the given time. The 
lower limit is 2 mph lower than the lowest point on the trace within 1 
second of the given time. Speed variations greater than the tolerances 
(such as may occur during gear changes) are acceptable provided they 
occur for less than 2 seconds on any occasion. Speeds lower than those 
prescribed are acceptable provided the vehicle is operated at maximum 
available power during such occurrences.
    (f) Equipment calibration. The equipment used for fuel economy 
testing must be calibrated according to the provisions of Sec.  86.116.
    (g) Vehicle preparation. The vehicle shall be prepared for testing 
according to Sec.  86.132(a) through (g), concluding with a 12-36 hour 
soak.
    (h) Dynamometer procedures. (1) The AC17 test procedure consists of 
a pre-conditioning UDDS, a 30-minute soak period under simulated solar 
heat, followed by measurement of emissions over an SC03 drive cycle and 
a Highway Fuel Economy Driving Schedule (HFET) drive cycle.
    (2) Except in cases of component malfunction or failure, all 
emission control systems installed on or incorporated in a new motor 
vehicle must be functioning during all procedures in this subpart. The 
Administrator may authorize maintenance to correct component 
malfunction or failure.
    (3) Use Sec.  86.129 to determine road load power and test weight. 
The dynamometer's horsepower adjustment settings shall be set such that 
the force imposed during dynamometer operation matches actual road load 
force at all speeds.
    (4) Tests shall be run on a large single roll electric dynamometer 
or an equivalent dynamometer configuration that satisfies the 
requirements of Sec.  86.108-00.
    (5) The vehicle speed as measured from the dynamometer rolls shall 
be used. A speed vs. time recording, as evidence of dynamometer test 
validity, shall be supplied at request of the Administrator.
    (6) The drive wheel tires may be inflated up to a gauge pressure of 
45 psi (310 kPa), or the manufacturer's recommended pressure if higher 
than 45 psi, in order to prevent tire damage. The drive wheel tire 
pressure shall be reported with the test results.
    (7) The driving distance, as measured by counting the number of 
dynamometer roll or shaft revolutions, shall be determined separately 
for each driving schedule over which emissions are measured (SC03, and 
HFET).
    (8) Four-wheel drive and all-wheel drive vehicles may be tested 
either in a four-wheel drive or a two-wheel drive mode of operation. In 
order to test in the two-wheel drive mode, four-wheel drive and all-
wheel drive vehicles may have one set of drive wheels disengaged; four-
wheel and all-wheel drive vehicles which can be shifted to a two-wheel 
mode by the driver may be tested in a two-wheel drive mode of 
operation.
    (i) Testing facility requirements. (1) Ambient air temperature. (i) 
Ambient air temperature shall be controlled within the test cell during 
all emission sampling phases of the test sequence to 77  2 
[deg]F on average and 77  5 [deg]F as an instantaneous 
measurement. During phases of the test where emissions are not being 
sampled, ambient air temperature shall be controlled to these same 
tolerances, except that periods outside the specified ranges are 
allowed to occur as long as the total cumulative time outside the 
specified ranges does not exceed three minutes.
    (ii) Record air temperature continuously at intervals of not more 
than 30 seconds. Alternatively, you may use a moving average over 
intervals of not more than 30 seconds to record and report air 
temperature. You must maintain records of test cell air temperatures 
and values of average test temperatures.
    (2) Ambient humidity. (i) Ambient humidity shall be controlled, 
within the test cell, during all emission sampling phases of the test 
sequence to an average of 69  5 grains of water/pound of 
dry air and an instantaneous measurement of 69  10 grains 
of water/pound of dry air. During phases of the test where emissions 
are not being sampled, ambient humidity shall be controlled to these 
same tolerances, except that periods outside the specified ranges are 
allowed to occur as long as the total cumulative time outside the 
specified ranges does not exceed three minutes.
    (ii) Humidity shall be recorded continuously at intervals of not 
more than 30 seconds. Records of cell humidity and values of average 
test humidity shall be maintained by the manufacturer.
    (3) Solar heat loading. The requirements of Sec.  86.161-00(d) 
regarding solar heat loading specifications shall apply. The solar load 
of 850 W/m\2\ is applied only during specified portions of the test 
sequence.
    (4) Minimum test cell size. The requirements of Sec.  86.161-00(c) 
regarding test cell size requirements shall apply.
    (5) Test cell air flow requirements. The requirements of Sec.  
86.161-00(e) regarding air flow supplied to the vehicle shall apply. 
Air flow at a maximum of 4 miles/hour may be provided during periods of 
idle and key-off soak if required for maintenance of ambient 
requirements.
    (j) Interior temperature measurement. The interior temperature of 
the vehicle shall be measured during all the emission sampling phases 
of the test.
    (1) Interior temperatures shall be measured by placement of 
thermocouples at the following locations:
    (i) The outlet of the center duct on the dash.
    (ii) Behind the driver and passenger seat headrests. The location 
of the temperature measuring devices shall be 30 mm behind each 
headrest.
    (2) The temperature at each location shall be recorded a minimum of 
every 5 seconds.

[[Page 63154]]

    (k) Air conditioning system settings. For tests being conducted to 
measure emissions with the air conditioning operating, the air 
conditioner settings shall be as follows:
    (1) Automatic systems shall be set to automatic and the temperature 
control set to 72 deg F, with blower or fan speed and vent location 
controlled by the automatic mode.
    (2) Manual systems shall be set at the start of the SC03 drive 
cycle to full cool with the fan on the highest setting and the airflow 
setting to ``recirculation.'' Within the first idle period of the SC03 
drive cycle (186 to 204 seconds) the fan speed shall be reduced to the 
setting closest to 6 volts at the motor, the temperature setting shall 
be adjusted to provide 55 deg F at the center dash air outlet, and the 
airflow setting changed to ``outside air.''
    (l) Test procedure. The AC17 air conditioning test is composed of 
the following sequence of activities.
    (1) Position the test vehicle on the dynamometer (vehicle may be 
driven) and restrain.
    (2)(i) Position the variable speed cooling fan in front of the test 
vehicle with the vehicle's hood down. This air flow should provide 
representative cooling at the front of the test vehicle (air 
conditioning condenser and engine) during the driving cycles. See Sec.  
86.161-00(e) for a discussion of cooling fan specifications.
    (ii) In the case of vehicles with rear engine compartments (or if 
this front location provides inadequate engine cooling), an additional 
cooling fan shall be placed in a position to provide sufficient air to 
maintain vehicle cooling. The fan capacity shall normally not exceed 
5300 cfm (2.50 m\3\/s). If, however, it can be demonstrated that during 
road operation the vehicle receives additional cooling, and that such 
additional cooling is needed to provide a representative test, the fan 
capacity may be increased or additional fans used if approved in 
advance by the Administrator.
    (3) Open all vehicle windows.
    (4) Connect the emission test sampling system to the vehicle's 
exhaust tail pipe(s).
    (5) Set the environmental test cell ambient test conditions to the 
conditions defined in paragraph (c) of this section, except that the 
solar heat shall be off.
    (6) Set the air conditioning system controls to off.
    (7) Start the vehicle (with air conditioning system off) and 
conduct a preconditioning EPA urban dynamometer driving cycle (Sec.  
86.115).
    (i) If engine stalling should occur during any air conditioning 
test cycle operation, follow the provisions of Sec.  86.136-90 (Engine 
starting and restarting).
    (ii) For manual transmission vehicles, the vehicle shall be shifted 
according the provisions of Sec.  86.128-00.
    (8) Following the preconditioning cycle, the test vehicle and 
cooling fan(s) are turned off, all windows are rolled up, and the 
vehicle is allowed to soak in the ambient conditions of paragraph (i) 
of this section for 30 1 minutes. If emissions are being 
measured with the air conditioner operating, the solar heat system must 
be turned on and generating 850 W/m\2\ within 1 minute of turning the 
engine off. Otherwise the solar heat system shall be turned off.
    (9) Initiate data logging, sampling of exhaust gases, and 
integrating measured values. Start the engine. If emissions are being 
measured with the air conditioner operating, you must start the engine 
with the air conditioning system running as specified in paragraph (k) 
of this section. Otherwise the air conditioning system should be 
completely off. Initiate the driver's trace when the engine starts. 
Fifteen seconds after the engine starts, place vehicle in gear.
    (10) Eighteen seconds after the engine starts, begin the initial 
vehicle acceleration of the SC03 driving schedule.
    (11) Operate the vehicle according to the SC03 driving schedule, as 
described in appendix I, paragraph (h), of this part.
    (12) At the end of the deceleration which is scheduled to occur at 
594 seconds, simultaneously stop all SC03 and start all HFET sampling, 
recording, and integrating; including background sampling. Record the 
measured roll or shaft revolutions.
    (13) Allow the vehicle to idle for 14-16 seconds.
    (14) Operate the vehicle according to the HFET driving schedule, as 
described in appendix I to 40 CFR part 600.
    (15) Turn the engine off 2 seconds after the end of the last 
deceleration, i.e., engine off at 765 seconds.
    (16) Five seconds after the engine stops running, stop all HFET 
sampling, recording, and integrating (including background sampling), 
indicating the end of the test cycle. Record the measured roll or shaft 
revolutions.
    (17) Turn off the solar heat system, if applicable.
    (m) Calculations. The final reported test results for each emission 
constituent being evaluated is the average of the SC03 and HFET gram 
per mile emissions, which shall be calculated using the following 
formula:
[GRAPHIC] [TIFF OMITTED] TR15OC12.037

Where:

YWM = Weighted mass emissions of each pollutant, i.e., 
THC, CO, THCE, NMHC, NMHCE, CH4, NOX, or 
CO2, in grams per vehicle mile.
YSC03 = Mass emissions as calculated from the SC03 phase 
of the test, in grams per test phase.
DSC03 = The measured driving distance from the SC03 phase 
of the test, in miles.
YHFET = Mass emissions as calculated from the HFET phase 
of the test, in grams per test phase.
DHFET = The measured driving distance from the HFET phase 
of the test, in miles.

    (n) Measuring the net impact of air conditioner operation. This 
test may be used to determine the net impact of air conditioner 
operation as may be required under Sec.  86.1868, which requires that 
CO2 be measured using the procedures in this section with 
both air conditioning on and off. To do this, you must follow these 
steps:
    (1) Conduct the test procedure described in this section with the 
air conditioning system operating, being sure to follow the appropriate 
instructions regarding air conditioner operation and use of the solar 
heat system. Analyze the data and calculate the weighted CO2 
emissions in grams per mile according to paragraph (m) of this section.
    (2) Allow the vehicle to remain on the dynamometer, with the engine 
shut off, for 10 to 15 minutes after emissions sampling has concluded. 
The solar heat system should be turned off.
    (3) Conduct the test procedure described in paragraph (l) of this 
section with the air conditioning system turned off, being sure to 
follow the appropriate instructions regarding air conditioner operation 
(off) and use of the solar heat system (off). Analyze the data and 
calculate the weighted CO2 emissions in

[[Page 63155]]

grams per mile according to paragraph (m) of this section.
    (4) Calculate the incremental CO2 emissions due to air 
conditioning operation by subtracting the CO2 grams per mile 
determined in paragraph (n)(3) of this section from the CO2 
grams per mile determined in paragraph (n)(1) of this section.
    (o) Records required and reporting requirements. For each test the 
manufacturer shall record the information specified in Sec.  86.142-90. 
Emission results and the results of all calculations must be reported 
for each phase of the test. The manufacturer must also report the 
following information for each vehicle tested: vehicle class, model 
type, carline, curb weight engine displacement, transmission class and 
configuration, interior volume, climate control system type and 
characteristics, refrigerant used, compressor type, and evaporator/
condenser characteristics.

Subpart S--[Amended]

0
10. Section 86.1801-12 is amended by revising paragraphs (b), (j), and 
(k) introductory text to read as follows:

Sec.  86.1801-12  Applicability.

* * * * *
    (b) Clean alternative fuel conversions. The provisions of this 
subpart apply to clean alternative fuel conversions as defined in 40 
CFR 85.502, of all model year light-duty vehicles, light-duty trucks, 
medium duty passenger vehicles, and complete Otto-cycle heavy-duty 
vehicles.
* * * * *
    (j) Exemption from greenhouse gas emission standards for small 
businesses. (1) Manufacturers that qualify as a small business under 
the Small Business Administration regulations in 13 CFR part 121 are 
exempt from the greenhouse gas emission standards specified in Sec.  
86.1818-12 and in associated provisions in this part and in part 600 of 
this chapter. This exemption applies to both U.S.-based and non-U.S.-
based businesses. The following categories of businesses (with their 
associated NAICS codes) may be eligible for exemption based on the 
Small Business Administration size standards in 13 CFR 121.201.
    (i) Vehicle manufacturers (NAICS code 336111).
    (ii) Independent commercial importers (NAICS codes 811111, 811112, 
811198, 423110, 424990, and 441120).
    (iii) Alternate fuel vehicle converters (NAICS codes 335312, 
336312, 336322, 336399, 454312, 485310, and 811198).
    (2)(i) Effective for the 2013 and later model years, a manufacturer 
that would otherwise be exempt under the provisions of paragraph (j)(1) 
of this section may optionally comply with the greenhouse gas emission 
standards specified in Sec.  86.1818. A manufacturer making this choice 
is required to comply with all the applicable standards and provisions 
in Sec.  86.1818 and with all associated and applicable provisions in 
this part and in part 600 of this chapter.
    (ii) Such a manufacturer may optionally earn credits in the 2012 
model year by demonstrating fleet average CO2 emission 
levels below the fleet average CO2 standard that would have 
been applicable in model year 2012 if the manufacturer had not been 
exempt. Once the small business manufacturer opting into the greenhouse 
gas emission standards completes certification for the 2013 model year, 
that manufacturer will be eligible to generate greenhouse gas emission 
credits for their 2012 model year production, after the conclusion of 
the 2012 model year for that manufacturer. Manufacturers electing to 
earn these 2012 credits must comply with the model year reporting 
requirements in Sec.  600.512-12 for that model year. The 2012 fleet 
average must be calculated according to Sec.  600.510 and other 
applicable requirements in part 600 of this chapter, and 2012 credits 
must be calculated according to Sec.  86.1865 and other applicable 
requirements in this part.
    (k) Conditional exemption from greenhouse gas emission standards. 
Manufacturers meeting the eligibility requirements described in 
paragraphs (k)(1) and (2) of this section may request a conditional 
exemption from compliance with the emission standards described in 
Sec.  86.1818-12(c) through (e) and associated provisions in this part 
and in part 600 of this chapter. A conditional exemption under this 
paragraph (k) may be requested for the 2012 through 2016 model years. 
The terms ``sales'' and ``sold'' as used in this paragraph (k) shall 
mean vehicles produced for U.S. sale, where ``U.S.'' means the states 
and territories of the United States. For the purpose of determining 
eligibility the sales of related companies shall be aggregated 
according to the provisions of Sec.  86.1838-01(b)(3) or, if a 
manufacturer has been granted operational independence status under 
Sec.  86.1838(d), eligibility shall be based on vehicle production of 
that manufacturer.
* * * * *

0
11. Section 86.1803-01 is amended as follows:
0
a. By adding definitions for ``full size pickup truck'', ``good 
engineering judgment'', ``gross combination weight rating'', mild 
hybrid electric vehicle'', ``platform'', and ``strong hybrid electric 
vehicle'' in alphabetical order.
0
b. By revising the definitions for ``emergency vehicle'', 
``footprint'', and ``gross vehicle weight rating.''
    The revisions and additions read as follows:

Sec.  86.1803-01  Definitions.

* * * * *
    Emergency vehicle means one of the following:
    (1) For the greenhouse gas emission standards in Sec.  86.1818, 
emergency vehicle means a motor vehicle manufactured primarily for use 
as an ambulance or combination ambulance-hearse or for use by the 
United States Government or a State or local government for law 
enforcement.
    (2) For provisions related to defeat devices and other AECDs under 
this subpart, emergency vehicle means a motor vehicle that is an 
ambulance or a fire truck.
* * * * *
    Footprint is the product of average track width (rounded to the 
nearest tenth of an inch) and wheelbase (measured in inches and rounded 
to the nearest tenth of an inch), divided by 144 and then rounded to 
the nearest tenth of a square foot, where the average track width is 
the average of the front and rear track widths, where each is measured 
in inches and rounded to the nearest tenth of an inch.
* * * * *
    Full size pickup truck means a light truck which has a passenger 
compartment and an open cargo box and which meets the following 
specifications:
    (1) A minimum cargo bed width between the wheelhouses of 48 inches, 
measured as the minimum lateral distance between the limiting 
interferences (pass-through) of the wheelhouses. The measurement shall 
exclude the transitional arc, local protrusions, and depressions or 
pockets, if present. An open cargo box means a vehicle where the cargo 
box does not have a permanent roof or cover. Vehicles produced with 
detachable covers are considered ``open'' for the purposes of these 
criteria.
    (2) A minimum open cargo box length of 60 inches, where the length 
is defined by the lesser of the pickup bed length at the top of the 
body or the pickup bed length at the floor, where the length at

[[Page 63156]]

the top of the body is defined as the longitudinal distance from the 
inside front of the pickup bed to the inside of the closed endgate as 
measured at the height of the top of the open pickup bed along vehicle 
centerline, and the length at the floor is defined as the longitudinal 
distance from the inside front of the pickup bed to the inside of the 
closed endgate as measured at the cargo floor surface along vehicle 
centerline.
    (3)(i) A minimum towing capability of 5,000 pounds, where minimum 
towing capability is determined by subtracting the gross vehicle weight 
rating from the gross combined weight rating; or
    (ii) A minimum payload capability of 1,700 pounds, where minimum 
payload capability is determined by subtracting the curb weight from 
the gross vehicle weight rating.
* * * * *
    Good engineering judgment has the meaning given in 40 CFR 1068.30. 
See 40 CFR 1068.5 for the administrative process we use to evaluate 
good engineering judgment.
    Gross combination weight rating (GCWR) means the value specified by 
the vehicle manufacturer as the maximum weight of a loaded vehicle and 
trailer, consistent with good engineering judgment.
* * * * *
    Gross vehicle weight rating (GVWR) means the value specified by the 
manufacturer as the maximum design loaded weight of a single vehicle, 
consistent with good engineering judgment.
* * * * *
    Mild hybrid electric vehicle means a hybrid electric vehicle that 
has start/stop capability and regenerative braking capability, where 
the recovered energy over the Federal Test Procedure is at least 15 
percent but less than 65 percent of the total braking energy, as 
measured and calculated according to Sec.  600.116-12(c).
* * * * *
    Platform means a segment of an automobile manufacturer's vehicle 
fleet in which the vehicles have a degree of commonality in 
construction (primarily in terms of body and chassis design). Platform 
does not consider the model name, brand, marketing division, or level 
of decor or opulence, and is not generally distinguished by such 
characteristics as powertrain, roof line, number of doors, seats, or 
windows. A platform may include vehicles from various fuel economy 
classes, and may include light-duty vehicles, light-duty trucks, and 
medium-duty passenger vehicles.
* * * * *
    Strong hybrid electric vehicle means a hybrid electric vehicle that 
has start/stop capability and regenerative braking capability, where 
the recovered energy over the Federal Test Procedure is at least 65 
percent of the total braking energy, as measured and calculated 
according to Sec.  600.116-12(c).
* * * * *

0
12. Section 86.1810-09 is amended by revising paragraph (f)(2) to read 
as follows:

Sec.  86.1810-09  General standards; increase in emissions; unsafe 
condition; waivers.

* * * * *
    (f) * * *
    (2) For vehicles that comply with the cold temperature NMHC 
standards described in Sec.  86.1811-10(g) and the CO2, 
N2O, and CH4 exhaust emission standards described 
in Sec.  86.1818-12, manufacturers must submit an engineering 
evaluation indicating that common calibration approaches are utilized 
at high altitudes (except when there are specific high altitude 
calibration needs to deviate from low altitude emission control 
practices). Any deviation from low altitude emission control practices 
must be included in the auxiliary emission control device (AECD) 
descriptions submitted at certification. Any AECD specific to high 
altitude must require engineering emission data for EPA evaluation to 
quantify any emission impact and validity of the AECD.
* * * * *

0
13. Section 86.1818-12 is amended as follows:
0
a. By revising paragraphs (c)(2)(i)(A) through (C).
0
b. By revising paragraphs (c)(3)(i)(A) through (C).
0
c. By adding paragraph (c)(3)(i)(D).
0
d. By adding paragraph (c)(4).
0
e. By revising paragraph (d).
0
f. By revising paragraph (e)(1) introductory text.
0
g. By revising paragraph (e)(1)(i) introductory text.
0
h. By revising paragraph (e)(1)(i)(B).
0
i. By adding paragraph (e)(1)(i)(D).
0
j. By adding paragraph (e)(1)(iv).
0
k. By revising paragraph (e)(3).
0
l. By revising paragraph (f) introductory text.
0
m. By revising paragraphs (f)(3) and (4).
0
n. By adding paragraphs (g) and (h).
    The additions and revisions read as follows:

Sec.  86.1818-12  Greenhouse gas emission standards for light-duty 
vehicles, light-duty trucks, and medium-duty passenger vehicles.

* * * * *
    (c) * * *
    (2) * * *
    (i) * * *
    (A) For passenger automobiles with a footprint of less than or 
equal to 41 square feet, the gram/mile CO2 target value 
shall be selected for the appropriate model year from the following 
table:

------------------------------------------------------------------------
                                                            CO2 target
                       Model year                         value  (grams/
                                                               mile)
------------------------------------------------------------------------
2012....................................................           244.0
2013....................................................           237.0
2014....................................................           228.0
2015....................................................           217.0
2016....................................................           206.0
2017....................................................           195.0
2018....................................................           185.0
2019....................................................           175.0
2020....................................................           166.0
2021....................................................           157.0
2022....................................................           150.0
2023....................................................           143.0
2024....................................................           137.0
2025 and later..........................................           131.0
------------------------------------------------------------------------

    (B) For passenger automobiles with a footprint of greater than 56 
square feet, the gram/mile CO2 target value shall be 
selected for the appropriate model year from the following table:

------------------------------------------------------------------------
                                                            CO2 target
                       Model year                         value  (grams/
                                                               mile)
------------------------------------------------------------------------
2012....................................................           315.0
2013....................................................           307.0
2014....................................................           299.0
2015....................................................           288.0
2016....................................................           277.0
2017....................................................           263.0
2018....................................................           250.0
2019....................................................           238.0
2020....................................................           226.0
2021....................................................           215.0
2022....................................................           205.0
2023....................................................           196.0
2024....................................................           188.0
2025 and later..........................................           179.0
------------------------------------------------------------------------

    (C) For passenger automobiles with a footprint that is greater than 
41 square feet and less than or equal to 56 square feet, the gram/mile 
CO2 target value shall be calculated using the following 
equation and rounded to the nearest 0.1 grams/mile, except that for any 
vehicle footprint the maximum CO2 target value shall be the 
value specified for the same model year in paragraph (c)(2)(i)(B) of 
this section:

Target CO2 = [a x f] + b

Where:

[[Page 63157]]

f is the vehicle footprint, as defined in Sec.  86.1803; and a and b 
are selected from the following table for the appropriate model 
year:

------------------------------------------------------------------------
                       Model year                            a       b
------------------------------------------------------------------------
2012....................................................    4.72    50.5
2013....................................................    4.72    43.3
2014....................................................    4.72    34.8
2015....................................................    4.72    23.4
2016....................................................    4.72    12.7
2017....................................................    4.53     8.9
2018....................................................    4.35     6.5
2019....................................................    4.17     4.2
2020....................................................    4.01     1.9
2021....................................................    3.84    -0.4
2022....................................................    3.69    -1.1
2023....................................................    3.54    -1.8
2024....................................................     3.4    -2.5
2025 and later..........................................    3.26    -3.2
------------------------------------------------------------------------

* * * * *
    (3) * * *
    (i) * * *
    (A) For light trucks with a footprint of less than or equal to 41 
square feet, the gram/mile CO2 target value shall be 
selected for the appropriate model year from the following table:

------------------------------------------------------------------------
                                                            CO2 target
                       Model year                         value  (grams/
                                                               mile)
------------------------------------------------------------------------
2012....................................................           294.0
2013....................................................           284.0
2014....................................................           275.0
2015....................................................           261.0
2016....................................................           247.0
2017....................................................           238.0
2018....................................................           227.0
2019....................................................           220.0
2020....................................................           212.0
2021....................................................           195.0
2022....................................................           186.0
2023....................................................           176.0
2024....................................................           168.0
2025 and later..........................................           159.0
------------------------------------------------------------------------

    (B) For light trucks with a footprint that is greater than 41 
square feet and less than or equal to the maximum footprint value 
specified in the table below for each model year, the gram/mile 
CO2 target value shall be calculated using the following 
equation and rounded to the nearest 0.1 grams/mile, except that for any 
vehicle footprint the maximum CO2 target value shall be the 
value specified for the same model year in paragraph (c)(3)(i)(D) of 
this section:

Target CO2 = (a x f) + b

Where:

f is the footprint, as defined in Sec.  86.1803; and a and b are 
selected from the following table for the appropriate model year:

------------------------------------------------------------------------
                                               Maximum
                 Model year                   footprint      a       b
------------------------------------------------------------------------
2012.......................................         66.0    4.04   128.6
2013.......................................         66.0    4.04   118.7
2014.......................................         66.0    4.04   109.4
2015.......................................         66.0    4.04    95.1
2016.......................................         66.0    4.04    81.1
2017.......................................         50.7    4.87    38.3
2018.......................................         60.2    4.76    31.6
2019.......................................         66.4    4.68    27.7
2020.......................................         68.3    4.57    24.6
2021.......................................         73.5    4.28    19.8
2022.......................................         74.0    4.09    17.8
2023.......................................         74.0    3.91    16.0
2024.......................................         74.0    3.74    14.2
2025 and later.............................         74.0    3.58    12.5
------------------------------------------------------------------------

     (C) For light trucks with a footprint that is greater than the 
minimum footprint value specified in the table below and less than or 
equal to the maximum footprint value specified in the table below for 
each model year, the gram/mile CO2 target value shall be 
calculated using the following equation and rounded to the nearest 0.1 
grams/mile, except that for any vehicle footprint the maximum 
CO2 target value shall be the value specified for the same 
model year in paragraph (c)(3)(i)(D) of this section:

Target CO2 = (a x f) + b

Where:

f is the footprint, as defined in Sec.  86.1803; and a and b are 
selected from the following table for the appropriate model year:

----------------------------------------------------------------------------------------------------------------
                                                                Minimum      Maximum
                         Model year                            footprint    footprint        a            b
----------------------------------------------------------------------------------------------------------------
2017........................................................         50.7         66.0         4.04         80.5
2018........................................................         60.2         66.0         4.04         75.0
----------------------------------------------------------------------------------------------------------------

    (D) For light trucks with a footprint greater than the minimum 
value specified in the table below for each model year, the gram/mile 
CO2 target value shall be selected for the appropriate model 
year from the following table:

------------------------------------------------------------------------
                                                            CO2 target
               Model year                     Minimum     value  (grams/
                                             footprint         mile)
------------------------------------------------------------------------
2012....................................            66.0           395.0
2013....................................            66.0           385.0
2014....................................            66.0           376.0
2015....................................            66.0           362.0
2016....................................            66.0           348.0
2017....................................            66.0           347.0

[[Page 63158]]

 
2018....................................            66.0           342.0
2019....................................            66.4           339.0
2020....................................            68.3           337.0
2021....................................            73.5           335.0
2022....................................            74.0           321.0
2023....................................            74.0           306.0
2024....................................            74.0           291.0
2025 and later..........................            74.0           277.0
------------------------------------------------------------------------

* * * * *
    (4) Emergency vehicles. Emergency vehicles may be excluded from the 
emission standards described in this section. The manufacturer must 
notify the Administrator that they are making such an election in the 
model year reports required under Sec.  600.512 of this chapter. Such 
vehicles should be excluded from both the calculation of the fleet 
average standard for a manufacturer under this paragraph (c) and from 
the calculation of the fleet average carbon-related exhaust emissions 
in Sec.  86.510-12.
    (d) In-use CO2 exhaust emission standards. The in-use 
CO2 exhaust emission standard shall be the combined city/
highway carbon-related exhaust emission value calculated for the 
appropriate vehicle carline/subconfiguration according to the 
provisions of Sec.  600.113-12(g)(4) of this chapter multiplied by 1.1 
and rounded to the nearest whole gram per mile. For in-use vehicle 
carlines/subconfigurations for which a combined city/highway carbon-
related exhaust emission value was not determined under Sec.  600.113-
12(g)(4) of this chapter, the in-use CO2 exhaust emission 
standard shall be the combined city/highway carbon-related exhaust 
emission value calculated according to the provisions of Sec.  600.208 
of this chapter for the vehicle model type (except that total model 
year production data shall be used instead of sales projections) 
multiplied by 1.1 and rounded to the nearest whole gram per mile. For 
vehicles that are capable of operating on multiple fuels, except plug-
in hybrid electric vehicles, a separate in-use standard shall be 
determined for each fuel that the vehicle is capable of operating on. 
These standards apply to in-use testing performed by the manufacturer 
pursuant to regulations at Sec. Sec.  86.1845 and 86.1846 and to in-use 
testing performed by EPA.
    (e) * * *
    (1) The interim fleet average CO2 standards in this 
paragraph (e) are optionally applicable to each qualifying 
manufacturer, where the terms ``sales'' or ``sold'' as used in this 
paragraph (e) means vehicles produced for U.S. sale, where ``U.S.'' 
means the states and territories of the United States.
    (i) A qualifying manufacturer is a manufacturer with sales of 2009 
model year combined passenger automobiles and light trucks of greater 
than zero and less than 400,000 vehicles that elects to participate in 
the Temporary Leadtime Allowance Alternative Standards described in 
this paragraph (e).
* * * * *
    (B) In the case where two or more qualifying manufacturers combine 
as the result of merger or the purchase of 50 percent or more of one or 
more companies by another company, and if the combined 2009 model year 
sales of the merged or combined companies is less than 400,000 but more 
than zero (combined passenger automobiles and light trucks), the 
corporate entity formed by the combination of two or more qualifying 
manufacturers shall continue to be a qualifying manufacturer, except 
the provisions of paragraph (e)(1)(i)(D) shall apply in the case where 
one of the merging companies elects to voluntarily opt out of the 
Temporary Leadtime Allowance Alternative Standards as allowed under 
paragraph (e)(1)(iv) of this section. The total number of vehicles that 
the corporate entity is allowed to include under the Temporary Leadtime 
Allowance Alternative Standards shall be determined by paragraph (e)(2) 
or (e)(3) of this section, where sales is the total combined 2009 model 
year sales of all of the merged or combined companies. Vehicles sold by 
the companies that combined by merger/acquisition to form the corporate 
entity that were subject to the Temporary Leadtime Allowance 
Alternative Standards in paragraph (e)(4) of this section prior to the 
merger/acquisition shall be combined to determine the remaining number 
of vehicles that the corporate entity may include under the Temporary 
Leadtime Allowance Alternative Standards in this paragraph (e).
* * * * *
    (D) In the case where two or more manufacturers combine as the 
result of merger or the purchase of 50 percent or more of one or more 
companies by another company, where one of the manufacturers chooses to 
voluntarily opt out of the Temporary Leadtime Allowance Alternative 
Standards under the provisions of paragraph (e)(1)(iv) of this section, 
the new corporate entity formed by the combination of two or more 
manufacturers is not a qualifying manufacturer. Such a manufacturer 
shall meet the emission standards in paragraph (c) of this section 
beginning with the model year that is numerically two years greater 
than the calendar year in which the merger/acquisition(s) took place. 
If one or more of the merged or combined manufacturers was complying 
with the Temporary Leadtime Allowance Alternative Standards prior to 
the merger/combination, that manufacturer is no longer eligible for the 
Temporary Leadtime Allowance Alternative Standards beginning with the 
model year that is numerically two years greater than the calendar year 
in which the merger/acquisition(s) took place. The cumulative number of 
vehicles that such a manufacturer may include in the Temporary Leadtime 
Allowance Alternative Standards, including those that were included by 
all merged manufacturers prior to the merger/acquisition, is limited to 
100,000.
* * * * *
    (iv) In the event of a merger, acquisition, or combination with 
another manufacturer, a qualifying manufacturer that has not certified 
any vehicles to the Temporary Leadtime Allowance Alternative Standards 
in any model year may voluntarily opt out of the Temporary Leadtime 
Allowance Alternative Standards. A manufacturer making this election 
must notify EPA in writing of their intent prior to the end of the 
model year in which a merger or combination with another manufacturer 
becomes effective. The notification must indicate that the manufacturer 
is electing to not use the Temporary Leadtime Allowance Alternative

[[Page 63159]]

Standards in any model year, and that any manufacturers that are either 
purchased by or merged with the manufacturer making this election must 
also meet the emission standards in paragraph (c) of this section 
beginning with the model year that is numerically two years greater 
than the calendar year in which the merger/acquisition(s) took place.
* * * * *
    (3)(i) Qualifying manufacturers with sales of 2009 model year 
combined passenger automobiles and light trucks in the United States of 
greater than zero and less than 50,000 vehicles may select any 
combination of 2012 through 2015 model year passenger automobiles and/
or light trucks to include under the Temporary Leadtime Allowance 
Alternative Standards determined in this paragraph (e) up to a 
cumulative total of 200,000 vehicles, and additionally may select up to 
50,000 2016 model year vehicles to include under the Temporary Leadtime 
Allowance Alternative Standards determined in this paragraph (e). To be 
eligible for the provisions of this paragraph (e)(3) qualifying 
manufacturers must provide annual documentation of good-faith efforts 
made by the manufacturer to purchase credits from other manufacturers. 
Without such documentation, the manufacturer may use the Temporary 
Leadtime Allowance Alternative Standards according to the provisions of 
paragraph (e)(2) of this section, and the provisions of this paragraph 
(e)(3) shall not apply. Vehicles selected to comply with these 
standards shall not be included in the calculations of the 
manufacturer's fleet average standards under paragraph (c) of this 
section.
    (ii) Manufacturers that qualify in the 2016 model year for the 
expanded Temporary Leadtime Allowance Alternative Standards described 
in paragraph (e)(3)(i) of this section, may, subject to certain 
restrictions, use an alternative compliance schedule that provides 
additional lead time to meet the standards in paragraph (c) of this 
section for the 2017 through 2020 model years.
    (A) The alternative compliance schedule is as follows. In lieu of 
the standards in paragraph (c) of this section that would otherwise be 
applicable to the model year shown in the first column of the table 
below, a qualifying manufacturer may comply with the standards in 
paragraph (c) of this section determined for the model year shown in 
the second column of the table. In the 2021 and later model years the 
manufacturer must meet the standards designated for each model year in 
paragraph (c) of this section.

------------------------------------------------------------------------
             Model year                      Applicable standards
------------------------------------------------------------------------
                   2017                                 2016
                   2018                                 2016
                   2019                                 2018
                   2020                                 2019
------------------------------------------------------------------------

     (B) A manufacturer using the alternative compliance schedule in 
paragraph (e)(3)(ii) of this section may not sell or otherwise transfer 
credits generated in years when the alternative phase-in is used to 
other manufacturers. Other provisions in Sec.  86.1865 regarding credit 
banking, deficit carry-forward, and within-manufacturer transfers 
across fleets apply.
* * * * *
    (f) Nitrous oxide (N2O) and methane (CH4) 
exhaust emission standards for passenger automobiles and light trucks. 
Each manufacturer's fleet of combined passenger automobiles and light 
trucks must comply with N2O and CH4 standards 
using either the provisions of paragraph (f)(1), (2), or (3) of this 
section. Except with prior EPA approval, a manufacturer may not use the 
provisions of both paragraphs (f)(1) and (2) of this section in a model 
year. For example, a manufacturer may not use the provisions of 
paragraph (f)(1) of this section for their passenger automobile fleet 
and the provisions of paragraph (f)(2) for their light truck fleet in 
the same model year. The manufacturer may use the provisions of both 
paragraphs (f)(1) and (3) of this section in a model year. For example, 
a manufacturer may meet the N2O standard in paragraph 
(f)(1)(i) of this section and an alternative CH4 standard 
determined under paragraph (f)(3) of this section. Vehicles certified 
using the N2O data submittal waiver provisions of Sec.  
86.1829(b)(1)(iii)(G) are not required to be tested for N2O 
under the in-use testing programs required by Sec.  86.1845 and Sec.  
86.1846.
* * * * *
    (3) Optional use of alternative N2O and/or 
CH4 standards. Manufacturers may select an alternative 
standard applicable to a test group, for either N2O or 
CH4, or both. For example, a manufacturer may choose to meet 
the N2O standard in paragraph (f)(1)(i) of this section and 
an alternative CH4 standard in lieu of the standard in 
paragraph (f)(1)(ii) of this section. The alternative standard for each 
pollutant must be greater than the applicable exhaust emission standard 
specified in paragraph (f)(1) of this section. Alternative 
N2O and CH4 standards apply to emissions measured 
according to the Federal Test Procedure (FTP) described in Subpart B of 
this part for the full useful life, and become the applicable 
certification and in-use emission standard(s) for the test group. 
Manufacturers using an alternative standard for N2O and/or 
CH4 must calculate emission debits according to the 
provisions of paragraph (f)(4) of this section for each test group/
alternative standard combination. Debits must be included in the 
calculation of total credits or debits generated in a model year as 
required under Sec.  86.1865-12(k)(5). For flexible fuel vehicles (or 
other vehicles certified for multiple fuels) you must meet these 
alternative standards when tested on any applicable test fuel type.
    (4) CO2- equivalent debits. CO2-equivalent 
debits for test groups using an alternative N2O and/or 
CH4 standard as determined under paragraph (f)(3) of this 
section shall be calculated according to the following equation and 
rounded to the nearest whole megagram:

Debits = [GWP x (Production) x (AltStd--Std) x VLM]/1,000,000

Where:

Debits = N2O or CH4 CO2-equivalent 
debits for a test group using an alternative N2O or 
CH4 standard;
GWP = 25 if calculating CH4 debits and 298 if calculating 
N2O debits;
Production = The number of vehicles of that test group domestically 
produced plus those imported as defined in Sec.  600.511 of this 
chapter;
AltStd = The alternative standard (N2O or CH4) 
selected by the manufacturer under paragraph (f)(3) of this section;
Std = The exhaust emission standard for N2O or 
CH4 specified in paragraph (f)(1) of this section; and
VLM = 195,264 for passenger automobiles and 225,865 for light 
trucks.

    (g) Alternative fleet average standards for manufacturers with 
limited U.S. sales. Manufacturers meeting the criteria in this 
paragraph (g) may request that the Administrator establish alternative 
fleet average CO2 standards that would apply instead of the 
standards in paragraph (c) of this section. The provisions of this 
paragraph (g) are applicable only to the 2017 and later model years. A 
manufacturer that has sought and received EPA approval for alternative 
standards for the 2017 model year may, at their option, choose to 
comply with those standards in the 2015 and 2016 model years in lieu of 
requesting a conditional exemption under Sec.  86.1801(k).
    (1) Eligibility for alternative standards. Eligibility as 
determined in this paragraph (g) shall be based on the total sales of 
combined passenger

[[Page 63160]]

automobiles and light trucks. The terms ``sales'' and ``sold'' as used 
in this paragraph (g) shall mean vehicles produced for U.S. sale, where 
``U.S.'' means the states and territories of the United States. For the 
purpose of determining eligibility the sales of related companies shall 
be aggregated according to the provisions of Sec.  86.1838-01(b)(3), 
or, if a manufacturer has been granted operational independence status 
under Sec.  86.1838(d), eligibility shall be based on vehicle 
production of that manufacturer. To be eligible for alternative 
standards established under this paragraph (g), the manufacturer's 
average sales for the three most recent consecutive model years must 
remain below 5,000. If a manufacturer's average sales for the three 
most recent consecutive model years exceeds 4999, the manufacturer will 
no longer be eligible for exemption and must meet applicable emission 
standards starting with the model year according to the provisions in 
this paragraph (g)(1).
    (i) If a manufacturer's average sales for three consecutive model 
years exceeds 4999, and if the increase in sales is the result of 
corporate acquisitions, mergers, or purchase by another manufacturer, 
the manufacturer shall comply with the emission standards described in 
paragraph (c) of this section, as applicable, beginning with the first 
model year after the last year of the three consecutive model years.
    (ii) If a manufacturer's average sales for three consecutive model 
years exceeds 4999 and is less than 50,000, and if the increase in 
sales is solely the result of the manufacturer's expansion in vehicle 
production (not the result of corporate acquisitions, mergers, or 
purchase by another manufacturer), the manufacturer shall comply with 
the emission standards described in paragraph (c), of this section, as 
applicable, beginning with the second model year after the last year of 
the three consecutive model years.
    (2) Requirements for new entrants into the U.S. market. New 
entrants are those manufacturers without a prior record of automobile 
sales in the United States and without prior certification to (or 
exemption from, under Sec.  86.1801-12(k)) greenhouse gas emission 
standards in Sec.  86.1818-12. In addition to the eligibility 
requirements stated in paragraph (g)(1) of this section, new entrants 
must meet the following requirements:
    (i) In addition to the information required under paragraph (g)(4) 
of this section, new entrants must provide documentation that shows a 
clear intent by the company to actually enter the U.S. market in the 
years for which alternative standards are requested. Demonstrating such 
intent could include providing documentation that shows the 
establishment of a U.S. dealer network, documentation of work underway 
to meet other U.S. requirements (e.g., safety standards), or other 
information that reasonably establishes intent to the satisfaction of 
the Administrator.
    (ii) Sales of vehicles in the U.S. by new entrants must remain 
below 5,000 vehicles for the first three model years in the U.S. 
market, and in subsequent years the average sales for any three 
consecutive years must remain below 5,000 vehicles. Vehicles sold in 
violation of these limits within the first five model years will be 
considered not covered by the certificate of conformity and the 
manufacturer will be subject to penalties on an individual-vehicle 
basis for sale of vehicles not covered by a certificate. In addition, 
violation of these limits will result in loss of eligibility for 
alternative standards until such point as the manufacturer demonstrates 
two consecutive model years of sales below 5,000 automobiles. After the 
first five model years, the eligibility provisions in paragraph (g)(1) 
of this section apply, where violating the sales thresholds is no 
longer a violation of the condition on the certificate, but is instead 
grounds for losing eligibility for alternative standards.
    (iii) A manufacturer with sales in the most recent model year of 
less than 5,000 automobiles, but where prior model year sales were not 
less than 5,000 automobiles, is eligible to request alternative 
standards under this paragraph (g). However, such a manufacturer will 
be considered a new entrant and subject to the provisions regarding new 
entrants in this paragraph (g), except that the requirement to 
demonstrate an intent to enter the U.S. market in paragraph (g)(2)(i) 
of this section shall not apply.
    (3) How to request alternative fleet average standards. Eligible 
manufacturers may petition for alternative standards for up to five 
consecutive model years if sufficient information is available on which 
to base such standards.
    (i) To request alternative standards starting with the 2017 model 
year, eligible manufacturers must submit a completed application no 
later than July 30, 2013.
    (ii) To request alternative standards starting with a model year 
after 2017, eligible manufacturers must submit a completed request no 
later than 36 months prior to the start of the first model year to 
which the alternative standards would apply.
    (iii) The request must contain all the information required in 
paragraph (g)(4) of this section, and must be signed by a chief officer 
of the company. If the Administrator determines that the content of the 
request is incomplete or insufficient, the manufacturer will be 
notified and given an additional 30 days to amend the request.
    (4) Data and information submittal requirements. Eligible 
manufacturers requesting alternative standards under this paragraph (g) 
must submit the following information to the Environmental Protection 
Agency. The Administrator may request additional information as she 
deems appropriate. The completed request must be sent to the 
Environmental Protection Agency at the following address: Director, 
Compliance and Innovative Strategies Division, U.S. Environmental 
Protection Agency, 2000 Traverwood Drive, Ann Arbor, Michigan 48105.
    (i) Vehicle model and fleet information. (A) The model years to 
which the requested alternative standards would apply, limited to five 
consecutive model years.
    (B) Vehicle models and projections of production volumes for each 
model year.
    (C) Detailed description of each model, including the vehicle type, 
vehicle mass, power, footprint, powertrain, and expected pricing.
    (D) The expected production cycle for each model, including new 
model introductions and redesign or refresh cycles.
    (ii) Technology evaluation information. (A) The CO2 
reduction technologies employed by the manufacturer on each vehicle 
model, or projected to be employed, including information regarding the 
cost and CO2 -reducing effectiveness. Include technologies 
that improve air conditioning efficiency and reduce air conditioning 
system leakage, and any ``off-cycle'' technologies that potentially 
provide benefits outside the operation represented by the Federal Test 
Procedure and the Highway Fuel Economy Test.
    (B) An evaluation of comparable models from other manufacturers, 
including CO2 results and air conditioning credits generated 
by the models. Comparable vehicles should be similar, but not 
necessarily identical, in the following respects: vehicle type, 
horsepower, mass, power-to-weight ratio, footprint, retail price, and 
any other relevant factors. For manufacturers requesting alternative 
standards starting with the 2017 model

[[Page 63161]]

year, the analysis of comparable vehicles should include vehicles from 
the 2012 and 2013 model years, otherwise the analysis should at a 
minimum include vehicles from the most recent two model years.
    (C) A discussion of the CO2-reducing technologies 
employed on vehicles offered outside of the U.S. market but not 
available in the U.S., including a discussion as to why those vehicles 
and/or technologies are not being used to achieve CO2 
reductions for vehicles in the U.S. market.
    (D) An evaluation, at a minimum, of the technologies projected by 
the Environmental Protection Agency in a final rulemaking as those 
technologies likely to be used to meet greenhouse gas emission 
standards and the extent to which those technologies are employed or 
projected to be employed by the manufacturer. For any technology that 
is not projected to be fully employed, explain why this is the case.
    (iii) Alternative fleet average CO2 standards. (A) The 
most stringent CO2 level estimated to be feasible for each 
model, in each model year, and the technological basis for this 
estimate.
    (B) For each model year, a projection of the lowest feasible sales-
weighted fleet average CO2 value, separately for passenger 
automobiles and light trucks, and an explanation demonstrating that 
these projections are reasonable.
    (C) A copy of any application, data, and related information 
submitted to NHTSA in support of a request for alternative Corporate 
Average Fuel Economy standards filed under 49 CFR Part 525.
    (iv) Information supporting eligibility. (A) U.S. sales for the 
three previous model years and projected sales for the model years for 
which the manufacturer is seeking alternative standards.
    (B) Information regarding ownership relationships with other 
manufacturers, including details regarding the application of the 
provisions of Sec.  86.1838-01(b)(3) regarding the aggregation of sales 
of related companies,
    (5) Alternative standards. Upon receiving a complete application, 
the Administrator will review the application and determine whether an 
alternative standard is warranted. If the Administrator judges that an 
alternative standard is warranted, the Administrator will publish a 
proposed determination in the Federal Register to establish alternative 
standards for the manufacturer that the Administrator judges are 
appropriate. Following a 30 day public comment period, the 
Administrator will issue a final determination establishing alternative 
standards for the manufacturer. If the Administrator does not establish 
alternative standards for an eligible manufacturer prior to 12 months 
before the first model year to which the alternative standards would 
apply, the manufacturer may request an extension of the exemption under 
Sec.  86.1801-12(k) or an extension of previously approved alternative 
standards, whichever may apply.
    (6) Restrictions on credit trading. Manufacturers subject to 
alternative standards approved by the Administrator under this 
paragraph (g) may not trade credits to another manufacturer. Transfers 
between car and truck fleets within the manufacturer are allowed, and 
the carry-forward provisions for credits and deficits apply.
    (h) Mid-term evaluation of standards. No later than April 1, 2018, 
the Administrator shall determine whether the standards established in 
paragraph (c) of this section for the 2022 through 2025 model years are 
appropriate under section 202(a) of the Clean Air Act, in light of the 
record then before the Administrator. An opportunity for public comment 
shall be provided before making such determination. If the 
Administrator determines they are not appropriate, the Administrator 
shall initiate a rulemaking to revise the standards, to be either more 
or less stringent as appropriate.
    (1) In making the determination required by this paragraph (h), the 
Administrator shall consider the information available on the factors 
relevant to setting greenhouse gas emission standards under section 
202(a) of the Clean Air Act for model years 2022 through 2025, 
including but not limited to:
    (i) The availability and effectiveness of technology, and the 
appropriate lead time for introduction of technology;
    (ii) The cost on the producers or purchasers of new motor vehicles 
or new motor vehicle engines;
    (iii) The feasibility and practicability of the standards;
    (iv) The impact of the standards on reduction of emissions, oil 
conservation, energy security, and fuel savings by consumers;
    (v) The impact of the standards on the automobile industry;
    (vi) The impacts of the standards on automobile safety;
    (vii) The impact of the greenhouse gas emission standards on the 
Corporate Average Fuel Economy standards and a national harmonized 
program; and
    (viii) The impact of the standards on other relevant factors.
    (2) The Administrator shall make the determination required by this 
paragraph (h) based upon a record that includes the following:
    (i) A draft Technical Assessment Report addressing issues relevant 
to the standard for the 2022 through 2025 model years;
    (ii) Public comment on the draft Technical Assessment Report;
    (iii) Public comment on whether the standards established for the 
2022 through 2025 model years are appropriate under section 202(a) of 
the Clean Air Act; and
    (iv) Such other materials the Administrator deems appropriate.
    (3) No later than November 15, 2017, the Administrator shall issue 
a draft Technical Assessment Report addressing issues relevant to the 
standards for the 2022 through 2025 model years.
    (4) The Administrator will set forth in detail the bases for the 
determination required by this paragraph (h), including the 
Administrator's assessment of each of the factors listed in paragraph 
(h)(1) of this section.

0
14. Section 86.1823-08 is amended by revising paragraph (m)(2)(iii) to 
read as follows:

Sec.  86.1823-08  Durability demonstration procedures for exhaust 
emissions.

* * * * *
    (m) * * *
    (2) * * *
    (iii) For the 2012 through 2016 model years only, manufacturers may 
use alternative deterioration factors. For N2O, the 
alternative deterioration factor to be used to adjust FTP and HFET 
emissions is the deterioration factor determined for (or derived from, 
using good engineering judgment) NOX emissions according to 
the provisions of this section. For CH4, the alternative 
deterioration factor to be used to adjust FTP and HFET emissions is the 
deterioration factor determined for (or derived from, using good 
engineering judgment) NMOG or NMHC emissions according to the 
provisions of this section.
* * * * *

0
15. Section 86.1829-01 is amended by revising paragraph (b)(1)(iii) to 
read as follows:

Sec.  86.1829-01  Durability and emission testing requirements; 
waivers.

* * * * *
    (b) * * *
    (1) * * *
    (iii) Data submittal waivers. (A) In lieu of testing a methanol-
fueled diesel-cycle light truck for particulate emissions a 
manufacturer may provide a statement in its application for 
certification that such light trucks

[[Page 63162]]

comply with the applicable standards. Such a statement shall be based 
on previous emission tests, development tests, or other appropriate 
information and good engineering judgment.
    (B) In lieu of testing an Otto-cycle light-duty vehicle, light-duty 
truck, or heavy-duty vehicle for particulate emissions for 
certification, a manufacturer may provide a statement in its 
application for certification that such vehicles comply with the 
applicable standards. Such a statement must be based on previous 
emission tests, development tests, or other appropriate information and 
good engineering judgment.
    (C) A manufacturer may petition the Administrator for a waiver of 
the requirement to submit total hydrocarbon emission data. If the 
waiver is granted, then in lieu of testing a certification light-duty 
vehicle or light-duty truck for total hydrocarbon emissions the 
manufacturer may provide a statement in its application for 
certification that such vehicles comply with the applicable standards. 
Such a statement shall be based on previous emission tests, development 
tests, or other appropriate information and good engineering judgment.
    (D) A manufacturer may petition the Administrator to waive the 
requirement to measure particulate emissions when conducting Selective 
Enforcement Audit testing of Otto-cycle vehicles.
    (E) In lieu of testing a gasoline, diesel, natural gas, liquefied 
petroleum gas, or hydrogen fueled Tier 2 or interim non-Tier 2 vehicle 
for formaldehyde emissions when such vehicles are certified based upon 
NMHC emissions, a manufacturer may provide a statement in its 
application for certification that such vehicles comply with the 
applicable standards. Such a statement must be based on previous 
emission tests, development tests, or other appropriate information and 
good engineering judgment.
    (F) In lieu of testing a petroleum-, natural gas-, liquefied 
petroleum gas-, or hydrogen-fueled heavy-duty vehicle for formaldehyde 
emissions for certification, a manufacturer may provide a statement in 
its application for certification that such vehicles comply with the 
applicable standards. Such a statement must be based on previous 
emission tests, development tests, or other appropriate information and 
good engineering judgment.
    (G) For the 2012 through 2016 model years, in lieu of testing a 
vehicle for N2O emissions, a manufacturer may provide a 
statement in its application for certification that such vehicles 
comply with the applicable standards. Such a statement may also be used 
for 2017 and 2018 model year vehicles only if the application for 
certification for those vehicles is based upon data carried over from a 
prior model year, as allowed under this subpart. No 2019 and later 
model year vehicles may be waived from testing for N2O 
emissions. Such a statement must be based on previous emission tests, 
development tests, or other appropriate information and good 
engineering judgment. Vehicles certified to N2O standards 
using a compliance statement in lieu of submitting test data are not 
required to collect and submit N2O emission data under the 
in-use verification testing requirements of Sec.  86.1845.
* * * * *

0
16. Section 86.1838-01 is amended by adding paragraph (d) to read as 
follows:

Sec.  86.1838-01  Small volume manufacturer certification procedures.

* * * * *
    (d) Operationally independent manufacturers. Manufacturers may 
submit an application to EPA requesting treatment as an operationally 
independent manufacturer. A manufacturer that is granted operationally 
independent status may qualify for certain specified regulatory 
provisions on the basis of its own vehicle production and/or sales 
volumes, and would not require aggregation with related manufacturers. 
In this paragraph (d), the term ``related manufacturer(s)'' means 
manufacturers that would qualify for aggregation under the requirements 
of paragraph (b)(3) of this section.
    (1) To request consideration for operationally independent status, 
the manufacturer must submit an application demonstrating that the 
following criteria are met, and have been continuously met for at least 
two years prior to submitting the application to EPA. The application 
must be signed by the president or the chief executive officer of the 
manufacturer.
    (i) The applicant does not receive any financial or other means of 
support of economic value from any related manufacturers for purposes 
of vehicle design, vehicle parts procurement, research and development, 
and production facilities and operation. Any transactions with related 
manufacturers must be conducted under normal commercial arrangements 
like those conducted with other external parties. Any such transactions 
with related manufacturers shall be demonstrated to have been at 
competitive pricing rates to the applicant.
    (ii) The applicant maintains wholly separate and independent 
research and development, testing, and vehicle manufacturing and 
production facilities.
    (iii) The applicant does not use any vehicle engines, powertrains, 
or platforms developed or produced by related manufacturers.
    (iv) The applicant does not hold any patents jointly with related 
manufacturers.
    (v) The applicant maintains separate business administration, 
legal, purchasing, sales, and marketing departments as well as wholly 
autonomous decision making on all commercial matters.
    (vi) The Board of Directors of the applicant may not share more 
than 25 percent of its membership with any related manufacturer. No top 
operational management of the applicant may be shared with any related 
manufacturer, including the president, the chief executive officer 
(CEO), the chief financial officer (CFO), and the chief operating 
officer (COO). No individual director or combination of directors that 
is shared with a related manufacturer may exercise exclusive management 
control over either or both companies.
    (vii) Parts or components supply agreements between the applicant 
and related companies must be established through open market 
processes. An applicant that sells or otherwise provides parts and/or 
vehicle components to a manufacturer that is not a related manufacturer 
must do so through the open market at competitive pricing rates.
    (2) Manufacturers that have been granted operationally independent 
status must report any material changes to the information provided in 
the application within 60 days of the occurrence of the change. If such 
a change occurs that results in the manufacturer no longer meeting the 
requirements of the application, the manufacturer will lose the 
eligibility to be considered operationally independent. The EPA will 
confirm that the manufacturer no longer meets one or more of the 
criteria and thus is no longer considered operationally independent, 
and will notify the manufacturer of the change in status. A 
manufacturer who loses the eligibility for operationally independent 
status must transition to the appropriate emission standards no later 
than the third model year after the model year in which the loss of 
eligibility occurred. For example, a manufacturer that loses 
eligibility in their 2018 model year would be required to meet 
appropriate standards in the 2021 model year. A manufacturer that loses 
eligibility must meet the applicable criteria for three

[[Page 63163]]

consecutive model years before they are allowed to apply for a 
reinstatement of their operationally independent status.
    (3) The manufacturer applying for operational independence shall 
engage an independent certified public accountant, or firm of such 
accountants (hereinafter referred to as ``CPA''), to perform an agreed-
upon procedures attestation engagement of the underlying documentation 
that forms the basis of the application as required in this paragraph 
(d).
    (i) The CPA shall perform the attestation engagements in accordance 
with the Statements on Standards for Attestation Engagements 
established by the American Institute of Certified Public Accountants.
    (ii) The CPA may complete the requirements of this paragraph with 
the assistance of internal auditors who are employees or agents of the 
applicant, so long as such assistance is in accordance with the 
Statements on Standards for Attestation Engagements established by the 
American Institute of Certified Public Accountants.
    (iii) Notwithstanding the requirements of paragraph (d)(2)(ii) of 
this section, an applicant may satisfy the requirements of this 
paragraph (d)(2) if the requirements of this paragraph (d)(2) are 
completed by an auditor who is an employee of the applicant, provided 
that such employee:
    (A) Is an internal auditor certified by the Institute of Internal 
Auditors, Inc. (hereinafter referred to as ``CIA''); and
    (B) Completes the internal audits in accordance with the standards 
for internal auditing established by the Institute of Internal 
Auditors.
    (iv) Use of a CPA or CIA who is debarred, suspended, or proposed 
for debarment pursuant to the Governmentwide Debarment and Suspension 
Regulations, 2 CFR part 1532, or the Debarment, Suspension, and 
Ineligibility Provisions of the Federal Acquisition Regulations, 48 CFR 
part 9, subpart 9.4, shall be deemed in noncompliance with the 
requirements of this section.

0
17. Section 86.1848-10 is amended by adding paragraphs (c)(9)(iii) 
through (v) to read as follows:

Sec.  86.1848-10  Compliance with emission standards for the purpose of 
certification.

* * * * *
    (c) * * *
    (9) * * *
    (iii) For manufacturers using the conditional exemption under Sec.  
86.1801(k), failure to fully comply with the fleet production 
thresholds that determine eligibility for the exemption will be 
considered a failure to satisfy the terms and conditions upon which the 
certificate(s) was (were) issued and the vehicles sold in violation of 
the stated sales and/or production thresholds will not be covered by 
the certificate(s).
    (iv) For manufacturers that are determined to be operationally 
independent under Sec.  86.1838(d), failure to report a material change 
in their status within 60 days as required by Sec.  86.1838(d)(2) will 
be considered a failure to satisfy the terms and conditions upon which 
the certificate(s) was (were) issued and the vehicles sold in violation 
of the operationally independent criteria will not be covered by the 
certificate(s).
    (v) For manufacturers subject to an alternative fleet average 
greenhouse gas exhaust emission standard approved under Sec.  
86.1818(g), failure to comply with the annual sales thresholds that are 
required to maintain use of those standards, including the thresholds 
required for new entrants into the U.S. market, will be considered a 
failure to satisfy the terms and conditions upon which the 
certificate(s) was (were) issued and the vehicles sold in violation of 
stated sales and/or production thresholds will not be covered by the 
certificate(s).
* * * * *

0
18. Section 86.1865-12 is amended as follows:
0
a. By revising paragraph (k)(5) introductory text.
0
b. By revising paragraph (k)(5)(i) through (iii).
0
c. By redesignating paragraph (k)(5)(iv) as (k)(5)(v).
0
d. By adding paragraph (k)(5)(iv).
0
e. By revising paragraph (k)(6).
0
f. By revising paragraph (k)(7)(i).
0
g. By adding paragraph (k)(7)(iv).
0
h. By adding paragraph (k)(7)(v).
0
i. By revising paragraph (k)(8)(iv)(A).
0
j. By revising paragraph (l)(1)(ii) introductory text.
0
k. By revising paragraph (l)(1)(ii)(F).
0
l. By revising paragraph (l)(2)(iii) introductory text.
0
m. By revising paragraph (l)(2)(iv) introductory text.
0
n. By revising paragraph (l)(2)(v).
    The revisions and additions read as follows:

Sec.  86.1865-12  How to comply with the fleet average CO2 
standards.

* * * * *
    (k)  * * *
    (5) Total credits or debits generated in a model year, maintained 
and reported separately for passenger automobiles and light trucks, 
shall be the sum of the credits or debits calculated in paragraph 
(k)(4) of this section and any of the following credits, if applicable, 
minus any N2O and/or CH4 CO2-
equivalent debits calculated according to the provisions of Sec.  
86.1818-12(f)(4):
    (i) Air conditioning leakage credits earned according to the 
provisions of Sec.  86.1867-12(b);
    (ii) Air conditioning efficiency credits earned according to the 
provisions of Sec.  86.1868-12(c);
    (iii) Off-cycle technology credits earned according to the 
provisions of Sec.  86.1869-12(d).
    (iv) Full size pickup truck credits earned according to the 
provisions of Sec.  86.1870-12(c).
* * * * *
    (6) The expiration date of unused CO2 credits is based 
on the model year in which the credits are earned, as follows:
    (i) Unused CO2 credits from the 2009 model year shall 
retain their full value through the 2014 model year. Credits from the 
2009 model year that remain at the end of the 2014 model year shall 
expire.
    (ii) Unused CO2 credits from the 2010 through 2015 model 
years shall retain their full value through the 2021 model year. 
Credits remaining from these model years at the end of the 2021 model 
year shall expire.
    (iii) Unused CO2 credits from the 2016 and later model 
years shall retain their full value through the five subsequent model 
years after the model year in which they were generated. Credits 
remaining at the end of the fifth model year after the model year in 
which they were generated shall expire.
    (7) * * *
    (i) Credits generated and calculated according to the method in 
paragraphs (k)(4) and (5) of this section may not be used to offset 
deficits other than those deficits accrued with respect to the standard 
in Sec.  86.1818. Credits may be banked and used in a future model year 
in which a manufacturer's average CO2 level exceeds the 
applicable standard. Credits may be transferred between the passenger 
automobile and light truck fleets of a given manufacturer. Credits may 
also be traded to another manufacturer according to the provisions in 
paragraph (k)(8) of this section. Before trading or carrying over 
credits to the next model year, a manufacturer must apply available 
credits to offset any deficit, where the deadline to offset that credit 
deficit has not yet passed.
* * * * *
    (iv) Credits generated in the 2017 through 2020 model years under 
the provisions of Sec.  86.1818(e)(3)(ii) may not be traded or 
otherwise provided to another manufacturer.
    (v) Credits generated under any alternative fleet average standards

[[Page 63164]]

approved under Sec.  86.1818(g) may not be traded or otherwise provided 
to another manufacturer.
* * * * *
    (8) * * *
    (iv) * * *
    (A) If a manufacturer ceases production of passenger automobiles 
and light trucks, the manufacturer continues to be responsible for 
offsetting any debits outstanding within the required time period. Any 
failure to offset the debits will be considered a violation of 
paragraph (k)(8)(i) of this section and may subject the manufacturer to 
an enforcement action for sale of vehicles not covered by a 
certificate, pursuant to paragraphs (k)(8)(ii) and (iii) of this 
section.
* * * * *
    (l) * * *
    (1) * * *
    (ii) Manufacturers producing any passenger automobiles or light 
trucks subject to the provisions in this subpart must establish, 
maintain, and retain all the following information in adequately 
organized records for each passenger automobile or light truck subject 
to this subpart:
* * * * *
    (F) Carbon-related exhaust emission standard, N2O 
emission standard, and CH4 emission standard to which the 
passenger automobile or light truck is certified.
* * * * *
    (2) * * *
    (iii) Manufacturers calculating air conditioning leakage and/or 
efficiency credits under paragraph Sec.  86.1871-12(b) shall include 
the following information for each model year and separately for 
passenger automobiles and light trucks and for each air conditioning 
system used to generate credits:
* * * * *
    (iv) Manufacturers calculating advanced technology vehicle credits 
under paragraph Sec.  86.1871-12(c) shall include the following 
information for each model year and separately for passenger 
automobiles and light trucks:
* * * * *
    (v) Manufacturers calculating off-cycle technology credits under 
paragraph Sec.  86.1871-12(d) shall include, for each model year and 
separately for passenger automobiles and light trucks, all test results 
and data required for calculating such credits.
* * * * *

0
19. Section 86.1866-12 is revised to read as follows:

Sec.  86.1866-12  CO2 credits for advanced technology 
vehicles.

    (a) Electric vehicles, plug-in hybrid electric vehicles, and fuel 
cell vehicles, as those terms are defined in Sec.  86.1803-01, that are 
certified and produced for U.S. sale, where ``U.S.'' means the states 
and territories of the United States, in the 2012 through 2025 model 
years may use a value of zero (0) grams/mile of CO2 to 
represent the proportion of electric operation of a vehicle that is 
derived from electricity that is generated from sources that are not 
onboard the vehicle, as specified by this paragraph (a).
    (1) Model years 2012 through 2016: The use of zero (0) grams/mile 
CO2 is limited to the first 200,000 combined electric 
vehicles, plug-in hybrid electric vehicles, and fuel cell vehicles 
produced for U.S. sale, where ``U.S.'' means the states and territories 
of the United States, in the 2012 through 2016 model years, except that 
a manufacturer that produces 25,000 or more such vehicles for U.S. sale 
in the 2012 model year shall be subject to a limitation on the use of 
zero (0) grams/mile CO2 to the first 300,000 combined 
electric vehicles, plug-in hybrid electric vehicles, and fuel cell 
vehicles produced and delivered for sale by a manufacturer in the 2012 
through 2016 model years.
    (2) Model years 2017 through 2021: For electric vehicles, plug-in 
hybrid electric vehicles, and fuel cell vehicles produced for U.S. 
sale, where ``U.S.'' means the states and territories of the United 
States, in the 2017 through 2021 model years, such use of zero (0) 
grams/mile CO2 is unrestricted.
    (3) Model years 2022 through 2025: The use of zero (0) grams/mile 
CO2 is limited to the first 200,000 combined electric 
vehicles, plug-in hybrid electric vehicles, and fuel cell vehicles 
produced for U.S. sale by a manufacturer in the 2022 through 2025 model 
years, except that a manufacturer that produces for U.S. sale 300,000 
or more such vehicles in the 2019 through 2021 model years shall be 
subject to a limitation on the use of zero (0) grams/mile 
CO2 to the first 600,000 combined electric vehicles, plug-in 
hybrid electric vehicles, and fuel cell vehicles produced for U.S. sale 
by a manufacturer in the 2022 through 2025 model years. Vehicles 
produced for U.S. sale in excess of these limitations will account for 
greenhouse gas emissions according to Sec.  600.113(n).
    (b) For electric vehicles, plug-in hybrid electric vehicles, fuel 
cell vehicles, dedicated natural gas vehicles, and dual-fuel natural 
gas vehicles as those terms are defined in Sec.  86.1803-01, that are 
certified and produced for U.S. sale in the 2017 through 2021 model 
years and that meet the additional specifications in this section, the 
manufacturer may use the production multipliers in this paragraph (b) 
when determining the manufacturer's fleet average carbon-related 
exhaust emissions under Sec.  600.512 of this chapter. Full size pickup 
trucks eligible for and using a production multiplier are not eligible 
for the performance-based credits described in Sec.  86.1870-12(b).
    (1) The production multipliers, by model year, for electric 
vehicles and fuel cell vehicles are as follows:

------------------------------------------------------------------------
             Model year                     Production multiplier
------------------------------------------------------------------------
                   2017                                  2.0
                   2018                                  2.0
                   2019                                  2.0
                   2020                                 1.75
                   2021                                  1.5
------------------------------------------------------------------------

    (2)(i) The production multipliers, by model year, for plug-in 
hybrid electric vehicles, dedicated natural gas vehicles, and dual-fuel 
natural gas vehicles are as follows:

------------------------------------------------------------------------
             Model year                     Production multiplier
------------------------------------------------------------------------
                   2017                                  1.6
                   2018                                  1.6
                   2019                                  1.6
                   2020                                 1.45
                   2021                                  1.3
------------------------------------------------------------------------

    (ii) The minimum all-electric driving range that a plug-in hybrid 
electric vehicle must have in order to qualify for use of a production 
multiplier is 10.2 miles on its nominal storage capacity of electricity 
when operated on the highway fuel economy test cycle. Alternatively, a 
plug-in hybrid electric vehicle may qualify for use of a production 
multiplier by having an equivalent all-electric driving range greater 
than or equal to 10.2 miles during its actual charge-depleting range as 
measured on the highway fuel economy test cycle and tested according to 
the requirements of SAE J1711, Recommended Practice for Measuring the 
Exhaust Emissions and Fuel Economy of Hybrid-Electric Vehicles, 
Including Plug-In Hybrid Vehicles (incorporated by reference in Sec.  
86.1). The equivalent all-electric range of a PHEV is determined from 
the following formula:

EAER = RCDA x ((CO2CS - CO2CD/
CO2CS))

Where:

EAER = the equivalent all-electric range attributed to charge-
depleting operation of a plug-in hybrid electric vehicle on the 
highway fuel economy test cycle.

[[Page 63165]]

RCDA = The actual charge-depleting range determined 
according to SAE J1711, Recommended Practice for Measuring the 
Exhaust Emissions and Fuel Economy of Hybrid-Electric Vehicles, 
Including Plug-In Hybrid Vehicles (incorporated by reference in 
Sec.  86.1).
CO2CS = The charge-sustaining CO2 emissions in 
grams per mile on the highway fuel economy test determined according 
to SAE J1711, Recommended Practice for Measuring the Exhaust 
Emissions and Fuel Economy of Hybrid-Electric Vehicles, Including 
Plug-In Hybrid Vehicles (incorporated by reference in Sec.  86.1).
CO2CD = The charge-depleting CO2 emissions in 
grams per mile on the highway fuel economy test determined according 
to SAE J1711, Recommended Practice for Measuring the Exhaust 
Emissions and Fuel Economy of Hybrid-Electric Vehicles, Including 
Plug-In Hybrid Vehicles (incorporated by reference in Sec.  86.1).

    (3) The actual production of qualifying vehicles may be multiplied 
by the applicable value according to the model year, and the result, 
rounded to the nearest whole number, may be used to represent the 
production of qualifying vehicles when calculating average carbon-
related exhaust emissions under Sec.  600.512 of this chapter.

0
20. Section 86.1867-12 is revised to read as follows:

Sec.  86.1867-12  CO[bdi2] credits for reducing leakage of air 
conditioning refrigerant.

    Manufacturers may generate credits applicable to the CO2 
fleet average program described in Sec.  86.1865-12 by implementing 
specific air conditioning system technologies designed to reduce air 
conditioning refrigerant leakage over the useful life of their 
passenger automobiles and/or light trucks. Credits shall be calculated 
according to this section for each air conditioning system that the 
manufacturer is using to generate CO2 credits. Manufacturers 
may also generate early air conditioning refrigerant leakage credits 
under this section for the 2009 through 2011 model years according to 
the provisions of Sec.  86.1871-12(b).
    (a) The manufacturer shall calculate an annual rate of refrigerant 
leakage from an air conditioning system in grams per year according to 
the procedures specified in SAE J2727 (incorporated by reference in 
Sec.  86.1). In doing so, the refrigerant permeation rates for hoses 
shall be determined using the procedures specified in SAE J2064 
(incorporated by reference in Sec.  86.1) The annual rate of 
refrigerant leakage from an air conditioning system shall be rounded to 
the nearest tenth of a gram per year. The procedures of SAE J2727 may 
be used to determine leakage rates for HFC-134a and HFO-1234yf; 
manufacturers should contact EPA regarding procedures for other 
refrigerants. The annual rate of refrigerant leakage from an air 
conditioning system shall be rounded to the nearest tenth of a gram per 
year.
    (b) The CO2-equivalent gram per mile leakage reduction 
used to calculate the total leakage credits generated by an air 
conditioning system shall be determined according to this paragraph 
(b), separately for passenger automobiles and light trucks, and rounded 
to the nearest tenth of a gram per mile:
    (1) Passenger automobile leakage credit for an air conditioning 
system:
[GRAPHIC] [TIFF OMITTED] TR15OC12.038

    Where:

    MaxCredit is 12.6 (grams CO2-equivalent/mile) for air 
conditioning systems using HFC-134a, and 13.8 (grams CO2-
equivalent/mile) for air conditioning systems using a refrigerant 
with a lower global warming potential.
    LeakScore means the annual refrigerant leakage rate determined 
according to the procedures in SAE J2727 (incorporated by reference 
in Sec.  86.1), where the refrigerant permeation rates for hoses 
shall be determined using the procedures specified in SAE J2064 
(incorporated by reference in Sec.  86.1). If the calculated rate is 
less than 8.3 grams/year (or 4.1 grams/year for systems using only 
electric compressors), the rate for the purpose of this formula 
shall be 8.3 grams/year (or 4.1 grams/year for systems using only 
electric compressors).
    GWPREF means the global warming potential of the 
refrigerant as indicated in paragraph (e) of this section or as 
otherwise determined by the Administrator;
    HiLeakDis means the high leak disincentive, which is zero for 
model years 2012 through 2016, and for 2017 and later model years is 
determined using the following equation, except that if 
GWPREF is greater than 150 or if the calculated result of 
the equation is less than zero, HiLeakDis shall be set equal to 
zero, or if the calculated result of the equation is greater than 
1.8 g/mi, HiLeakDis shall be set to 1.8 g/mi:
[GRAPHIC] [TIFF OMITTED] TR15OC12.039

Where,

LeakThreshold = 11.0 for air conditioning systems with a refrigerant 
capacity less than or equal to 733 grams; or
LeakThreshold = [Refrigerant Capacity x 0.015] for air conditioning 
systems with a refrigerant capacity greater than 733 grams, where 
RefrigerantCapacity is the maximum refrigerant capacity specified 
for the air conditioning system, in grams.

    (2) Light truck leakage credit for an air conditioning system:
    [GRAPHIC] [TIFF OMITTED] TR15OC12.040
    
Where:

MaxCredit is 15.6 (grams CO2-equivalent/mile) for air 
conditioning systems using HFC-134a, and 17.2 (grams CO2-
equivalent/mile) for air conditioning systems using a refrigerant 
with a lower global warming potential.
LeakScore means the annual refrigerant leakage rate determined 
according to the provisions of SAE J2727 (incorporated by reference 
in Sec.  86.1),, where the refrigerant permeation rates for hoses 
shall be determined using the procedures specified in SAE J2064 
(incorporated by reference in Sec.  86.1). If the calculated rate is 
less than 10.4 grams/year (or 5.2 grams/year for systems using only 
electric compressors), the rate for the purpose of this formula 
shall be 10.4 grams/year (or 5.2 grams/year for systems using only 
electric compressors).

[[Page 63166]]

GWPREF means the global warming potential of the 
refrigerant as indicated in paragraph (e) of this section or as 
otherwise determined by the Administrator;
HiLeakDis means the high leak disincentive, which is zero for model 
years 2012 through 2016, and for 2017 and later model years is 
determined using the following equation, except that if 
GWPREF is greater than 150 or if the calculated result of 
the equation is less than zero, HiLeakDis shall be set equal to 
zero, or if the calculated result of the equation is greater than 
2.1 g/mi, HiLeakDis shall be set to 2.1 g/mi:
[GRAPHIC] [TIFF OMITTED] TR15OC12.041

Where:

LeakThreshold = 11.0 for air conditioning systems with a refrigerant 
capacity less than or equal to 733 grams; or
LeakThreshold = [Refrigerant Capacity x 0.015] for air conditioning 
systems with a refrigerant capacity greater than 733 grams, where 
RefrigerantCapacity is the maximum refrigerant capacity specified 
for the air conditioning system, in grams.

    (c) The total leakage reduction credits generated by the air 
conditioning system shall be calculated separately for passenger 
automobiles and light trucks according to the following formula:

Total Credits (Megagrams) = (Leakage x Production x VLM) / 1,000,000

Where:

Leakage = the CO2-equivalent leakage credit value in 
grams per mile determined in paragraph (b)(1) or (b)(2) of this 
section, whichever is applicable.

Production = The total number of passenger automobiles or light 
trucks, whichever is applicable, produced with the air conditioning 
system to which to the leakage credit value from paragraph (b)(1) or 
(b)(2) of this section applies.
VLM = vehicle lifetime miles, which for passenger automobiles shall 
be 195,264 and for light trucks shall be 225,865.

    (d) The results of paragraph (c) of this section, rounded to the 
nearest whole number, shall be included in the manufacturer's credit/
debit totals calculated in Sec.  86.1865-12(k)(5).
    (e) The following values for refrigerant global warming potential 
(GWPREF), or alternative values as determined by the 
Administrator, shall be used in the calculations of this section. The 
Administrator will determine values for refrigerants not included in 
this paragraph (e) upon request by a manufacturer.
    (1) For HFC-134a, GWPREF = 1430;
    (2) For HFC-152a, GWPREF = 124;
    (3) For HFO-1234yf, GWPREF = 4;
    (4) For CO2, GWPREF = 1.

0
21. Section 86.1868-12 is added to read as follows:

Sec.  86.1868-12  CO[bdi2] credits for improving the efficiency of air 
conditioning systems.

    Manufacturers may generate credits applicable to the CO2 
fleet average program described in Sec.  86.1865-12 by implementing 
specific air conditioning system technologies designed to reduce air 
conditioning-related CO2 emissions over the useful life of 
their passenger automobiles and/or light trucks. Credits shall be 
calculated according to this section for each air conditioning system 
that the manufacturer is using to generate CO2 credits. 
Manufacturers may also generate early air conditioning efficiency 
credits under this section for the 2009 through 2011 model years 
according to the provisions of Sec.  86.1871-12(b). For model years 
2012 and 2013 the manufacturer may determine air conditioning 
efficiency credits using the requirements in paragraphs (a) through (d) 
of this section. For model years 2014 through 2016 the eligibility 
requirements specified in either paragraph (e) or (f) of this section 
must be met before an air conditioning system is allowed to generate 
credits. For model years 2017 and later the eligibility requirements 
specified in paragraph (g) of this section must be met before an air 
conditioning system is allowed to generate credits.
    (a)(1) 2012 through 2016 model year air conditioning efficiency 
credits are available for the following technologies in the gram per 
mile amounts indicated in the following table:

------------------------------------------------------------------------
                                                                 Credit
                 Air conditioning technology                   value  (g/
                                                                  mi)
------------------------------------------------------------------------
Reduced reheat, with externally-controlled, variable-                1.7
 displacement compressor (e.g. a compressor that controls
 displacement based on temperature setpoint and/or cooling
 demand of the air conditioning system control settings
 inside the passenger compartment)...........................
Reduced reheat, with externally-controlled, fixed-                   1.1
 displacement or pneumatic variable displacement compressor
 (e.g. a compressor that controls displacement based on
 conditions within, or internal to, the air conditioning
 system, such as head pressure, suction pressure, or
 evaporator outlet temperature)..............................
Default to recirculated air with closed-loop control of the          1.7
 air supply (sensor feedback to control interior air quality)
 whenever the ambient temperature is 75 [deg]F or higher: Air
 conditioning systems that operated with closed-loop control
 of the air supply at different temperatures may receive
 credits by submitting an engineering analysis to the
 Administrator for approval..................................
Default to recirculated air with open-loop control air supply        1.1
 (no sensor feedback) whenever the ambient temperature is 75
 [deg]F or higher. Air conditioning systems that operate with
 open-loop control of the air supply at different
 temperatures may receive credits by submitting an
 engineering analysis to the Administrator for approval......
Blower motor controls which limit wasted electrical energy           0.9
 (e.g. pulse width modulated power controller)...............
Internal heat exchanger (e.g. a device that transfers heat           1.1
 from the high-pressure, liquid-phase refrigerant entering
 the evaporator to the low-pressure, gas-phase refrigerant
 exiting the evaporator).....................................
Improved condensers and/or evaporators with system analysis          1.1
 on the component(s) indicating a coefficient of performance
 improvement for the system of greater than 10% when compared
 to previous industry standard designs)......................
Oil separator. The manufacturer must submit an engineering           0.6
 analysis demonstrating the increased improvement of the
 system relative to the baseline design, where the baseline
 component for comparison is the version which a manufacturer
 most recently had in production on the same vehicle design
 or in a similar or related vehicle model. The
 characteristics of the baseline component shall be compared
 to the new component to demonstrate the improvement.........
------------------------------------------------------------------------

     (2) 2017 and later model year air conditioning efficiency credits 
are available for the following technologies in the gram per mile 
amounts indicated for each vehicle category in the following table:

[[Page 63167]]

 
------------------------------------------------------------------------
                                                    Passenger
                                                     automo-     Light
           Air conditioning technology             biles  (g/    trucks
                                                       mi)       (g/mi)
------------------------------------------------------------------------
Reduced reheat, with externally-controlled,               1.5        2.2
 variable-displacement compressor (e.g. a
 compressor that controls displacement based on
 temperature setpoint and/or cooling demand of
 the air conditioning system control settings
 inside the passenger compartment)...............
Reduced reheat, with externally-controlled, fixed-        1.0        1.4
 displacement or pneumatic variable displacement
 compressor (e.g. a compressor that controls
 displacement based on conditions within, or
 internal to, the air conditioning system, such
 as head pressure, suction pressure, or
 evaporator outlet temperature)..................
Default to recirculated air with closed-loop              1.5        2.2
 control of the air supply (sensor feedback to
 control interior air quality) whenever the
 ambient temperature is 75 [deg]F or higher: Air
 conditioning systems that operated with closed-
 loop control of the air supply at different
 temperatures may receive credits by submitting
 an engineering analysis to the Administrator for
 approval........................................
Default to recirculated air with open-loop                1.0        1.4
 control air supply (no sensor feedback) whenever
 the ambient temperature is 75 [deg]F or higher.
 Air conditioning systems that operate with open-
 loop control of the air supply at different
 temperatures may receive credits by submitting
 an engineering analysis to the Administrator for
 approval........................................
Blower motor controls which limit wasted                  0.8        1.1
 electrical energy (e.g. pulse width modulated
 power controller)...............................
Internal heat exchanger (e.g. a device that               1.0        1.4
 transfers heat from the high-pressure, liquid-
 phase refrigerant entering the evaporator to the
 low-pressure, gas-phase refrigerant exiting the
 evaporator).....................................
Improved condensers and/or evaporators with               1.0        1.4
 system analysis on the component(s) indicating a
 coefficient of performance improvement for the
 system of greater than 10% when compared to
 previous industry standard designs).............
Oil separator. The manufacturer must submit an            0.5        0.7
 engineering analysis demonstrating the increased
 improvement of the system relative to the
 baseline design, where the baseline component
 for comparison is the version which a
 manufacturer most recently had in production on
 the same vehicle design or in a similar or
 related vehicle model. The characteristics of
 the baseline component shall be compared to the
 new component to demonstrate the improvement....
------------------------------------------------------------------------

    (b) Air conditioning efficiency credits are determined on an air 
conditioning system basis. For each air conditioning system that is 
eligible for a credit based on the use of one or more of the items 
listed in paragraph (a) of this section, the total credit value is the 
sum of the gram per mile values for the appropriate model year listed 
in paragraph (a) of this section for each item that applies to the air 
conditioning system.
    (1) In the 2012 through 2016 model years the total credit value for 
an air conditioning system for passenger automobiles or light trucks 
may not be greater than 5.7 grams per mile.
    (2) In the 2017 and later model years the total credit value for an 
air conditioning system may not be greater than 5.0 grams per mile for 
any passenger automobile or 7.2 grams per mile for any light truck.
    (c) The total efficiency credits generated by an air conditioning 
system shall be calculated separately for passenger automobiles and 
light trucks according to the following formula:

Total Credits (Megagrams) = (Credit x Production x VLM) / 1,000,000

Where:

Credit = the CO2 efficiency credit value in grams per 
mile determined in paragraph (b) or (e) of this section, whichever 
is applicable.
Production = The total number of passenger automobiles or light 
trucks, whichever is applicable, produced with the air conditioning 
system to which to the efficiency credit value from paragraph (b) of 
this section applies.
VLM = vehicle lifetime miles, which for passenger automobiles shall 
be 195,264 and for light trucks shall be 225,865.

    (d) The results of paragraph (c) of this section, rounded to the 
nearest whole number, shall be included in the manufacturer's credit/
debit totals calculated in Sec.  86.1865-12(k)(5).
    (e) For the 2014 through 2016 model years, manufacturers must 
validate air conditioning credits by using the Air Conditioning Idle 
Test Procedure according to the provisions of this paragraph (e) or, 
alternatively, by using the AC17 reporting requirements specified in 
paragraph (f) of this section. The Air Conditioning Idle Test Procedure 
is not applicable after the 2016 model year.
    (1) For each air conditioning system selected by the manufacturer 
to generate air conditioning efficiency credits, the manufacturer shall 
perform the Air Conditioning Idle Test Procedure specified in Sec.  
86.165-12 of this part.
    (2) Using good engineering judgment, the manufacturer must select 
the vehicle configuration to be tested that is expected to result in 
the greatest increased CO2 emissions as a result of the 
operation of the air conditioning system for which efficiency credits 
are being sought. If the air conditioning system is being installed in 
passenger automobiles and light trucks, a separate determination of the 
quantity of credits for passenger automobiles and light trucks must be 
made, but only one test vehicle is required to represent the air 
conditioning system, provided it represents the worst-case impact of 
the system on CO2 emissions.
    (3) The manufacturer shall determine an idle test threshold (ITT) 
for the tested vehicle configuration. A comparison of this threshold 
value with the CO2 emissions increase recorded over the Air 
Conditioning Idle Test Procedure in Sec.  86.165-12 determines the 
total credits that may be generated by an air conditioning system. The 
manufacturer may choose one of the following idle test threshold (ITT) 
values for an air conditioning system:
    (i) 14.9 grams per minute; or
    (ii) The value determined from the following equation, rounded to 
the nearest tenth of a gram per minute:
[GRAPHIC] [TIFF OMITTED] TR15OC12.042

[[Page 63168]]

Where:
Displacement = the engine displacement of the test vehicle, 
expressed in liters and rounded to the nearest one tenth of a liter.

    (4)(i) If the CO2 emissions value determined from the 
Idle Test Procedure in Sec.  86.165-12 is less than or equal to the 
idle test threshold (ITT) determined in paragraph (e)(3) of this 
section, the total CO2 efficiency credit value (Credit) for 
use in paragraph (c) of this section shall be the applicable value 
determined in paragraph (b) of this section.
    (ii) If the CO2 emissions value determined from the Idle 
Test Procedure in Sec.  86.165-12 is greater than the idle test 
threshold (ITT) determined in paragraph (e)(3) of this section, the 
total CO2 efficiency credit value (Credit) for use in 
paragraph (c) of this section shall be determined using the following 
formula:
[GRAPHIC] [TIFF OMITTED] TR15OC12.043

Where:

Credit = The CO2 efficiency credit value (Credit) that 
must be used in paragraph (c) of this section to calculate the total 
credits (in Megagrams) of air conditioning efficiency credits;
TCV = The total CO2 efficiency credit value determined 
according to paragraph (b) of this section; and
ITP = the increased CO2 emissions determined from the 
Idle Test Procedure in Sec.  86.165-14.
ITT = the idle test threshold determined in paragraph (e)(3) of this 
section and rounded to the nearest one tenth of a gram per minute:

    (iii) Air conditioning systems that record an increased 
CO2 emissions value on the Idle Test Procedure in Sec.  
86.165-14 that is greater than or equal to the idle test threshold 
(ITT) determined in paragraph (e)(3) of this section plus 6.4 grams per 
minute are not eligible for an air conditioning efficiency credit.
    (5) Air conditioning systems with compressors that are solely 
powered by electricity shall submit Air Conditioning Idle Test 
Procedure data to be eligible to generate credits in the 2014 and later 
model years, but such systems are not required to meet a specific 
threshold to be eligible to generate such credits, as long as the 
engine remains off for a period of at least 2 minutes during the air 
conditioning on portion of the Idle Test Procedure in Sec.  86.165-
12(d).
    (f) AC17 reporting requirements. Manufacturers may use the 
provisions of this paragraph (f) as an alternative to the use of the 
Air Conditioning Idle Test to demonstrate eligibility to generate air 
conditioning efficiency credits for the 2014 through 2016 model years. 
This paragraph (f) is required for the 2017 through 2019 model years.
    (1) The manufacturer shall perform the AC17 test specified in Sec.  
86.167-17 of this part on each unique air conditioning system design 
and vehicle platform combination for which the manufacturer intends to 
accrue air conditioning efficiency credits. The manufacturer must test 
at least one unique air conditioning system within each vehicle 
platform in a model year, unless all unique air conditioning systems 
within a vehicle platform have been previously tested. A unique air 
conditioning system design is a system with unique or substantially 
different component designs or types and/or system control strategies 
(e.g., fixed-displacement vs. variable displacement compressors, 
orifice tube vs. thermostatic expansion valve, single vs. dual 
evaporator, etc.). In the first year of such testing, the tested 
vehicle configuration shall be the highest production vehicle 
configuration within each platform. In subsequent model years the 
manufacturer must test other unique air conditioning systems within the 
vehicle platform, proceeding from the highest production untested 
system until all unique air conditioning systems within the platform 
have been tested, or until the vehicle platform experiences a major 
redesign. Whenever a new unique air conditioning system is tested, the 
highest production configuration using that system shall be the vehicle 
selected for testing. Air conditioning system designs which have 
similar cooling capacity, component types, and control strategies, yet 
differ in terms of compressor pulley ratios or condenser or evaporator 
surface areas will not be considered to be unique system designs. The 
test results from one unique system design may represent all variants 
of that design. Manufacturers must use good engineering judgment to 
identify the unique air conditioning system designs which will require 
AC17 testing in subsequent model years. Results must be reported 
separately for all four phases (two phases with air conditioning off 
and two phases with air conditioning on) of the test to the 
Environmental Protection Agency, and the results of the calculations 
required in Sec.  86.167 paragraphs (m) and (n) must also be reported. 
In each subsequent model year additional air conditioning system 
designs, if such systems exist, within a vehicle platform that is 
generating air conditioning credits must be tested using the AC17 
procedure. When all unique air conditioning system designs within a 
platform have been tested, no additional testing is required within 
that platform, and credits may be carried over to subsequent model 
years until there is a significant change in the platform design, at 
which point a new sequence of testing must be initiated. No more than 
one vehicle from each credit-generating platform is required to be 
tested in each model year.
    (2) The manufacturer shall also report the following information 
for each vehicle tested: the vehicle class, model type, curb weight, 
engine displacement, transmission class and configuration, interior 
volume, climate control system type and characteristics, refrigerant 
used, compressor type, and evaporator/condenser characteristics.
    (g) AC17 validation testing and reporting requirements. For the 
2020 and later model years, manufacturers must validate air 
conditioning credits by using the AC17 Test Procedure according to the 
provisions of this paragraph (g).
    (1) For each air conditioning system selected by the manufacturer 
to generate air conditioning efficiency credits, the manufacturer shall 
perform the AC17 Air Conditioning Efficiency Test Procedure specified 
in Sec.  86.167-17 of this part, according to the requirements of this 
paragraph (g).
    (2) Complete the following testing and calculations:
    (i) Perform the AC17 test on a vehicle that incorporates the air 
conditioning system with the credit-generating technologies.
    (ii) Perform the AC17 test on a vehicle which does not incorporate 
the credit-generating technologies. The tested vehicle must be similar 
to the vehicle tested under paragraph (g)(2)(i) of this section and 
selected using good engineering judgment. The tested vehicle may be 
from an earlier design generation. If the manufacturer cannot identify 
an appropriate vehicle to test under this paragraph (g)(2)(ii), they 
may submit an engineering analysis that describes why an appropriate 
vehicle is

[[Page 63169]]

not available or not appropriate, and includes data and information 
supporting specific credit values, using good engineering judgment.
    (iii) Subtract the CO2 emissions determined from testing 
under paragraph (g)(1)(i) of this section from the CO2 
emissions determined from testing under paragraph (g)(1)(ii) of this 
section and round to the nearest 0.1 grams/mile. If the result is less 
than or equal to zero, the air conditioning system is not eligible to 
generate credits. If the result is greater than or equal to the total 
of the gram per mile credits determined in paragraph (b) of this 
section, then the air conditioning system is eligible to generate the 
maximum allowable value determined in paragraph (b) of this section. If 
the result is greater than zero but less than the total of the gram per 
mile credits determined in paragraph (b) of this section, then the air 
conditioning system is eligible to generate credits in the amount 
determined by subtracting the CO2 emissions determined from 
testing under paragraph (g)(1)(i) of this section from the 
CO2 emissions determined from testing under paragraph 
(g)(1)(ii) of this section and rounding to the nearest 0.1 grams/mile.
    (3) For the first model year for which an air conditioning system 
is expected to generate credits, the manufacturer must select for 
testing the projected highest-selling configuration within each 
combination of vehicle platform and unique air conditioning system. The 
manufacturer must test at least one unique air conditioning system 
within each vehicle platform in a model year, unless all unique air 
conditioning systems within a vehicle platform have been previously 
tested. A unique air conditioning system design is a system with unique 
or substantially different component designs or types and/or system 
control strategies (e.g., fixed-displacement vs. variable displacement 
compressors, orifice tube vs. thermostatic expansion valve, single vs. 
dual evaporator, etc.). In the first year of such testing, the tested 
vehicle configuration shall be the highest production vehicle 
configuration within each platform. In subsequent model years the 
manufacturer must test other unique air conditioning systems within the 
vehicle platform, proceeding from the highest production untested 
system until all unique air conditioning systems within the platform 
have been tested, or until the vehicle platform experiences a major 
redesign. Whenever a new unique air conditioning system is tested, the 
highest production configuration using that system shall be the vehicle 
selected for testing. Credits may continue to be generated by the air 
conditioning system installed in a vehicle platform provided that:
    (i) The air conditioning system components and/or control 
strategies do not change in any way that could be expected to cause a 
change in its efficiency;
    (ii) The vehicle platform does not change in design such that the 
changes could be expected to cause a change in the efficiency of the 
air conditioning system; and
    (iii) The manufacturer continues to test at least one unique air 
conditioning system within each platform using the air conditioning 
system, in each model year, until all unique air conditioning systems 
within each platform have been tested.
    (4) Each air conditioning system must be tested and must meet the 
testing criteria in order to be allowed to generate credits. Credits 
may continue to be generated by an air conditioning system in 
subsequent model years if the manufacturer continues to test at least 
one unique air conditioning system within each platform on an annual 
basis, unless all systems have been previously tested, as long as the 
air conditioning system and vehicle platform do not change 
substantially.
    (h) The following definitions apply to this section:
    (1) Reduced reheat, with externally-controlled, variable 
displacement compressor means a system in which compressor displacement 
is controlled via an electronic signal, based on input from sensors 
(e.g., position or setpoint of interior temperature control, interior 
temperature, evaporator outlet air temperature, or refrigerant 
temperature) and air temperature at the outlet of the evaporator can be 
controlled to a level at 41 [deg]F, or higher.
    (2) Reduced reheat, with externally-controlled, fixed-displacement 
or pneumatic variable displacement compressor means a system in which 
the output of either compressor is controlled by cycling the compressor 
clutch off-and-on via an electronic signal, based on input from sensors 
(e.g., position or setpoint of interior temperature control, interior 
temperature, evaporator outlet air temperature, or refrigerant 
temperature) and air temperature at the outlet of the evaporator can be 
controlled to a level at 41 [deg]F, or higher.
    (3) Default to recirculated air mode means that the default 
position of the mechanism which controls the source of air supplied to 
the air conditioning system shall change from outside air to 
recirculated air when the operator or the automatic climate control 
system has engaged the air conditioning system (i.e., evaporator is 
removing heat), except under those conditions where dehumidification is 
required for visibility (i.e., defogger mode). In vehicles equipped 
with interior air quality sensors (e.g., humidity sensor, or carbon 
dioxide sensor), the controls may determine proper blend of air supply 
sources to maintain freshness of the cabin air and prevent fogging of 
windows while continuing to maximize the use of recirculated air. At 
any time, the vehicle operator may manually select the non-recirculated 
air setting during vehicle operation but the system must default to 
recirculated air mode on subsequent vehicle operations (i.e., next 
vehicle start). The climate control system may delay switching to 
recirculation mode until the interior air temperature is less than the 
outside air temperature, at which time the system must switch to 
recirculated air mode.
    (4) Blower motor controls which limit waste energy means a method 
of controlling fan and blower speeds which does not use resistive 
elements to decrease the voltage supplied to the motor.
    (5) Improved condensers and/or evaporators means that the 
coefficient of performance (COP) of air conditioning system using 
improved evaporator 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 designs (SAE J2765 is incorporated by 
reference in Sec.  86.1). The manufacturer must submit an engineering 
analysis demonstrating the increased improvement of the system relative 
to the baseline design, where the baseline component(s) for comparison 
is 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 characteristics (e.g., tube configuration/thickness/
spacing, and fin density) of the baseline component(s) shall be 
compared to the new component(s) to demonstrate the improvement in 
coefficient of performance.
    (6) 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, or a compressor design which does not rely on the circulation of 
an oil/refrigerant mixture for lubrication.

[[Page 63170]]

0
22. Section 86.1869-12 is added to read as follows:

Sec.  86.1869-12  CO[bdi2] credits for off-cycle CO2-reducing 
technologies.

    (a) Manufacturers may generate credits for CO2-reducing 
technologies where the CO2 reduction benefit of the 
technology is not adequately captured on the Federal Test Procedure 
and/or the Highway Fuel Economy Test. These technologies must have a 
measurable, demonstrable, and verifiable real-world CO2 
reduction that occurs outside the conditions of the Federal Test 
Procedure and the Highway Fuel Economy Test. These optional credits are 
referred to as ``off-cycle'' credits. Off-cycle technologies used to 
generate emission credits are considered emission-related components 
subject to applicable requirements, and must be demonstrated to be 
effective for the full useful life of the vehicle. Unless the 
manufacturer demonstrates that the technology is not subject to in-use 
deterioration, the manufacturer must account for the deterioration in 
their analysis. Durability evaluations of off-cycle technologies may 
occur at any time throughout a model year, provided that the results 
can be factored into the data provided in the model year report. Off-
cycle credits may not be approved for crash-avoidance technologies, 
safety critical systems or systems affecting safety-critical functions, 
or technologies designed for the purpose of reducing the frequency of 
vehicle crashes. Off-cycle credits may not be earned for technologies 
installed on a motor vehicle to attain compliance with any vehicle 
safety standard or any regulation set forth in Title 49 of the Code of 
Federal Regulations. The manufacturer must use one of the three options 
specified in this section to determine the CO2 gram per mile 
credit applicable to an off-cycle technology. Note that the option 
provided in paragraph (b) of this section applies only to the 2014 and 
later model years. The manufacturer should notify EPA in their pre-
model year report of their intention to generate any credits under this 
section.
    (b) Credit available for certain off-cycle technologies. The 
provisions of this paragraph (b) are applicable only to 2014 and later 
model year vehicles. EPA may request data, engineering analyses, or 
other information that supports a manufacturer's use of the credits in 
this paragraph (b).
    (1) The manufacturer may generate a CO2 gram/mile credit 
for certain technologies as specified in this paragraph (b)(1). 
Technology definitions are in paragraph (b)(4) of this section. 
Calculated credit values shall be rounded to the nearest 0.1 grams/
mile.
    (i) Waste heat recovery. The credit shall be calculated using the 
following formula, rounded to the nearest 0.1 grams/mile:
[GRAPHIC] [TIFF OMITTED] TR15OC12.044

Where:

ELR = the electrical load reduction of the waste heat recovery 
system, in Watts, calculated as an average over 5-cycle testing.

    (ii) High efficiency exterior lights. Credits may be accrued for 
high efficiency lighting as defined in paragraph (b)(4) of this section 
based on the lighting locations with such lighting installed. Credits 
for high efficiency lighting are the sum of the credits for the 
applicable lighting locations in the following table (rounded to the 
nearest 0.1 grams/mile), or, if all lighting locations in the table are 
equipped with high efficiency lighting, the total credit for high 
efficiency lighting shall be 1.0 grams/mile. Lighting components that 
result in credit levels less than those shown in the following table 
are not eligible for credits.

------------------------------------------------------------------------
                                                          Credit  (grams/
                   Lighting Component                          mile)
------------------------------------------------------------------------
Low beam................................................            0.38
High beam...............................................            0.05
Parking/position........................................            0.10
Turn signal, front......................................            0.06
Side marker, front......................................            0.06
Tail....................................................            0.10
Turn signal, rear.......................................            0.06
Side marker, rear.......................................            0.06
License plate...........................................            0.08
------------------------------------------------------------------------

    (iii) Solar panels. (A) Credits for solar panels used solely for 
charging the battery of an electric vehicle, plug-in hybrid electric 
vehicle, or hybrid electric vehicle shall be calculated using the 
following equation, and rounded to the nearest 0.1 grams/mile:
[GRAPHIC] [TIFF OMITTED] TR15OC12.045

Where:

Ppanel is the is the rated power of the solar panel, in 
Watts, determined under the standard test conditions of 1000 Watts 
per meter squared direct solar irradiance at a panel temperature of 
25 degrees Celsius (+/-2 degrees) with an air mass spectrum of 1.5 
(AM1.5).

    (B) Credits for solar panels used solely for active vehicle 
ventilation systems are those specified in paragraph (b)(1)(viii)(E).
    (C) Credits for solar panels used both for active cabin ventilation 
and for charging the battery of an electric vehicle, plug-in hybrid 
electric vehicle, or hybrid electric vehicle shall be calculated using 
the following equation, and rounded to the nearest 0.1 grams/mile:
[GRAPHIC] [TIFF OMITTED] TR15OC12.046

Where:

Cvent is the credit attributable to active cabin 
ventilation from paragraph (b)(1)(viii)(E) of this section;
    Ppanel is the is the rated power of the solar panel, 
in Watts, determined under the standard test conditions of 1000 
Watts per meter squared direct solar irradiance at a panel 
temperature of 25 degrees Celsius (+/-2 degrees) with an air mass 
spectrum of 1.5 (AM1.5); and
Pvent is the amount of power, in Watts, required to run 
the active cabin ventilation system.

    (iv) Active aerodynamic improvements. (A) The credit for active 
aerodynamic improvements for passenger automobiles shall be calculated 
using the following equation, and rounded to the nearest 0.1 grams/
mile:
[GRAPHIC] [TIFF OMITTED] TR15OC12.047

Where:

CDreduced is the percent reduction in the coefficient of 
drag (Cd), shown as a value from 0 to 1. The coefficient 
of drag shall be determined using good engineering

[[Page 63171]]

judgment consistent with standard industry test methods and 
practices.

    (B) The credit for active aerodynamic improvements for light trucks 
shall be calculated using the following equation, and rounded to the 
nearest 0.1 grams/mile:
[GRAPHIC] [TIFF OMITTED] TR15OC12.048

Where:

CDreduced is the percent reduction in the coefficient of 
drag (Cd), shown as a value from 0 to 1. The coefficient 
of drag shall be determined using good engineering judgment 
consistent with standard industry test methods and practices.

    (v) Engine idle start-stop.
    (A) The passenger automobile credit for engine idle start-stop 
systems is 2.5 grams/mile, provided that the vehicle is equipped with 
an electric heater circulation system (or a technology that provides a 
similar function). For vehicles not equipped with such systems the 
credit is 1.5 grams/mile.
    (B) The light truck credit for engine idle start-stop systems is 
4.4 grams/mile, provided that the vehicle is equipped with an electric 
heater circulation system (or a technology that provides a similar 
function). For vehicles not equipped with such systems the credit is 
2.9 grams/mile.
    (vi) Active transmission warm-up. Systems using a single heat-
exchanging loop that serves both transmission and engine warm-up 
functions are eligible for the credits in either paragraph (b)(1)(vi) 
or (b)(1)(vii) of this section, but not both.
    (A) The passenger automobile credit is 1.5 grams/mile.
    (B) The light truck credit is 3.2 grams/mile.
    (vii) Active engine warm-up. Systems using a single heat-exchanging 
loop that serves both transmission and engine warm-up functions are 
eligible for the credits in either paragraph (b)(1)(vi) or (b)(1)(vii) 
of this section, but not both.
    (A) The passenger automobile credit is 1.5 grams/mile.
    (B) The light truck credit is 3.2 grams/mile.
    (viii) Thermal control technologies. The maximum credit allowed for 
thermal control technologies is limited to 3.0 g/mi for passenger 
automobiles and to 4.3 g/mi for light trucks.
    (A) Glass or glazing. Glass or glazing credits are calculated using 
the following equation, and rounded to the nearest 0.1 grams/mile:
[GRAPHIC] [TIFF OMITTED] TR15OC12.049

Where:

Credit = the total glass or glazing credits, in grams per mile 
rounded to the nearest 0.1 grams/mile. The credit may not exceed 2.9 
g/mi for passenger automobiles or 3.9 g/mi for light trucks;
Z = 0.3 for passenger automobiles and 0.4 for light trucks;
Gi = the measured glass area of window i, in square 
meters and rounded to the nearest tenth;
G = the total glass area of the vehicle, in square meters and 
rounded to the nearest tenth;
Ti = the estimated temperature reduction for the glass area of 
window i, determined using the following formula:

Ti = 0.3987 x (Ttsbase - Ttsnew)

Where:

Ttsnew = the total solar transmittance of the glass, 
measured according to ISO 13837, ``Safety glazing materials--Method 
for determination of solar transmittance'' (incorporated by 
reference in Sec.  86.1).
Ttsbase = 62 for the windshield, side-front, side-rear, 
rear-quarter, and backlite locations, and 40 for rooflite locations.

    (B) Active seat ventilation. The passenger automobile credit is 1.0 
grams/mile. The light truck credit is 1.3 grams/mile.
    (C) Solar reflective surface coating. The passenger automobile 
credit is 0.4 grams/mile. The light truck credit is 0.5 grams/mile.
    (D) Passive cabin ventilation. The passenger automobile credit is 
1.7 grams/mile. The light truck credit is 2.3 grams/mile.
    (E) Active cabin ventilation. The passenger automobile credit is 
2.1 grams/mile. The light truck credit is 2.8 grams/mile.
    (2) The maximum allowable decrease in the manufacturer's combined 
passenger automobile and light truck fleet average CO2 
emissions attributable to use of the default credit values in paragraph 
(b)(1) of this section is 10 grams per mile. If the total of the 
CO2 g/mi credit values from the paragraph (b)(1) of this 
section does not exceed 10 g/mi for any passenger automobile or light 
truck in a manufacturer's fleet, then the total off-cycle credits may 
be calculated according to paragraph (f) of this section. If the total 
of the CO2 g/mi credit values from the table in paragraph 
(b)(1) of this section exceeds 10 g/mi for any passenger automobile or 
light truck in a manufacturer's fleet, then the gram per mile decrease 
for the combined passenger automobile and light truck fleet must be 
determined according to paragraph (b)(2)(i) of this section to 
determine whether the 10 g/mi limitation has been exceeded.
    (i) Determine the gram per mile decrease for the combined passenger 
automobile and light truck fleet using the following formula:
[GRAPHIC] [TIFF OMITTED] TR15OC12.050

Where:

Credits = The total of passenger automobile and light truck credits, 
in Megagrams, determined according to paragraph (f) of this section 
and limited to those credits accrued by using the default gram per 
mile values in paragraph (b)(1) of this section.
ProdC = The number of passenger automobiles produced by 
the manufacturer and delivered for sale in the U.S.
ProdT = The number of light trucks produced by the 
manufacturer and delivered for sale in the U.S.

    (ii) If the value determined in paragraph (b)(2)(i) of this section 
is greater than 10 grams per mile, the total credits, in Megagrams, 
that may be accrued by a manufacturer using the default gram per mile 
values in paragraph (b)(1) of this section shall be determined using 
the following formula:
[GRAPHIC] [TIFF OMITTED] TR15OC12.051

[[Page 63172]]

Where:

ProdC = The number of passenger automobiles produced by 
the manufacturer and delivered for sale in the U.S.
ProdT = The number of light trucks produced by the 
manufacturer and delivered for sale in the U.S.

    (iii) If the value determined in paragraph (b)(2)(i) of this 
section is not greater than 10 grams per mile, then the credits that 
may be accrued by a manufacturer using the default gram per mile values 
in paragraph (b)(1) of this section do not exceed the allowable limit, 
and total credits may be determined for each category of vehicles 
according to paragraph (f) of this section.
    (iv) If the value determined in paragraph (b)(2)(i) of this section 
is greater than 10 grams per mile, then the combined passenger 
automobile and light truck credits, in Megagrams, that may be accrued 
using the calculations in paragraph (f) of this section must not exceed 
the value determined in paragraph (b)(2)(ii) of this section. This 
limitation should generally be done by reducing the amount of credits 
attributable to the vehicle category that caused the limit to be 
exceeded such that the total value does not exceed the value determined 
in paragraph (b)(2)(ii) of this section.
    (3) In lieu of using the default gram per mile values specified in 
paragraph (b)(1) of this section for specific technologies, a 
manufacturer may determine an alternative value for any of the 
specified technologies. An alternative value must be determined using 
one of the methods specified in paragraph (c) or (d) of this section.
    (4) Definitions for the purposes of this paragraph (b) are as 
follows:
    (i) Active aerodynamic improvements means technologies that are 
automatically activated under certain conditions to improve aerodynamic 
efficiency (e.g., lowering of the coefficient of drag, or Cd), while 
preserving other vehicle attributes or functions.
    (ii) High efficiency exterior lighting means a lighting technology 
that, when installed on the vehicle, is expected to reduce the total 
electrical demand of the exterior lighting system when compared to 
conventional lighting systems. To be eligible for this credit, the high 
efficiency lighting must be installed in one or more of the following 
lighting components: low beam, high beam, parking/position, front and 
rear turn signals, front and rear side markers, taillights, backup/
reverse lights, and/or license plate lighting.
    (iii) Engine idle start-stop means a technology which enables a 
vehicle to automatically turn off the engine when the vehicle comes to 
a rest and restarts the engine when the driver applies pressure to the 
accelerator or releases the brake. Off-cycle engine start-stop credits 
will only be allowed for a vehicle if the Administrator has made a 
determination under the testing and calculation provisions in 40 CFR 
Part 600 that engine start-stop is the predominant operating mode for 
that vehicle.
    (iv) Solar panels means the external installation of horizontally-
oriented solar panels, with direct and unimpeded solar exposure to an 
overhead sun, on an electric vehicle, a plug-in hybrid electric 
vehicle, a fuel cell vehicle, or a hybrid electric vehicle, such that 
the solar energy is used to provide energy to the electric drive system 
of the vehicle by charging the battery or directly providing power to 
the electric motor or to essential vehicle systems (e.g., cabin heating 
or cooling/ventilation). The rated power of the solar panels used to 
determine the credit value must be determined under the standard test 
conditions of 1,000 W/m\2\ direct solar irradiance at a panel 
temperature of 25 +/-2[deg] C with an air mass of 1.5 spectrum (AM1.5).
    (v) Active transmission warmup means a system that uses waste heat 
from the vehicle to quickly warm the transmission fluid to an operating 
temperature range using a heat exchanger, increasing the overall 
transmission efficiency by reducing parasitic losses associated with 
the transmission fluid, such as losses related to friction and fluid 
viscosity.
    (vi) Active engine warmup means a system that uses waste heat from 
the vehicle to warm up targeted parts of the engine so that it reduces 
engine friction losses and enables the closed-loop fuel control more 
quickly. It allows a faster transition from cold operation to warm 
operation, decreasing CO2 emissions, and increasing fuel 
economy.
    (vii) Waste heat recovery means a system that captures heat that 
would otherwise be lost through the engine, exhaust system, or the 
radiator or other sources and converting that heat to electrical energy 
that is used to meet the electrical requirements of the vehicle or used 
to augment the warming of other load reduction technologies (e.g., 
cabin warming, active engine or transmission warm-up technologies). The 
amount of energy recovered is the average value over 5-cycle testing.
    (viii) Active seat ventilation means a device which draws air, 
pushes or forces air, or otherwise transfers heat from the seating 
surface which is in contact with the seat occupant and exhausts it to a 
location away from the seat. At a minimum, the driver and front 
passenger seat must utilize this technology for a vehicle to be 
eligible for credit.
    (ix) Solar reflective surface coating means a vehicle paint or 
other surface coating which reflects at least 65 percent of the 
impinging infrared solar energy, as determined using ASTM standards 
E903, E1918-06, or C1549-09 (incorporated by reference in Sec.  86.1). 
The coating must be applied at a minimum to all of the approximately 
horizontal surfaces of the vehicle that border the passenger and 
luggage compartments of the vehicle, (e.g., the rear deck lid and the 
cabin roof).
    (x) Passive cabin ventilation means ducts, devices, or methods 
which utilize convective airflow to move heated air from the cabin 
interior to the exterior of the vehicle.
    (xi) Active cabin ventilation means devices which mechanically move 
heated air from the cabin interior to the exterior of the vehicle.
    (xii) Electric heater circulation system means a system installed 
in a vehicle equipped with an engine idle start-stop system that 
continues to circulate heated air to the cabin when the engine is 
stopped during a stop-start event. This system must be calibrated to 
keep the engine off for a minimum of one minute when the external 
ambient temperature is 30 [deg]F and when cabin heating is enabled.
    (c) Technology demonstration using EPA 5-cycle methodology. To 
demonstrate an off-cycle technology and to determine a CO2 
credit using the EPA 5-cycle methodology, the manufacturer shall 
determine the off-cycle city/highway combined carbon-related exhaust 
emissions benefit by using the EPA 5-cycle methodology described in 40 
CFR Part 600. This method may not be used for technologies that include 
elements (e.g., driver-selectable systems) that require additional 
analyses, data collection, projections, or modeling, or other 
assessments to determine a national average benefit of the technology. 
Testing shall be performed on a representative vehicle, selected using 
good engineering judgment, for each model type for which the credit is 
being demonstrated. The emission benefit of a technology is determined 
by testing both with and without the off-cycle technology operating. If 
a specific technology is not expected to change emissions on one of the 
five test procedures, the manufacturer may submit an engineering 
analysis to the EPA that demonstrates that the

[[Page 63173]]

technology has no effect. If EPA concurs with the analysis, then 
multiple tests are not required using that test procedure; instead, 
only one of that test procedure shall be required--either with or 
without the technology installed and operating--and that single value 
will be used for all of the 5-cycle weighting calculations. Multiple 
off-cycle technologies may be demonstrated on a test vehicle. The 
manufacturer shall conduct the following steps and submit all test data 
to the EPA.
    (1) Testing without the off-cycle technology installed and/or 
operating. Determine carbon-related exhaust emissions over the FTP, the 
HFET, the US06, the SC03, and the cold temperature FTP test procedures 
according to the test procedure provisions specified in 40 CFR part 600 
subpart B and using the calculation procedures specified in Sec.  
600.113-12 of this chapter. Run each of these tests a minimum of three 
times without the off-cycle technology installed and operating and 
average the per phase (bag) results for each test procedure. Calculate 
the 5-cycle weighted city/highway combined carbon-related exhaust 
emissions from the averaged per phase results, where the 5-cycle city 
value is weighted 55% and the 5-cycle highway value is weighted 45%. 
The resulting combined city/highway value is the baseline 5-cycle 
carbon-related exhaust emission value for the vehicle.
    (2) Testing with the off-cycle technology installed and/or 
operating. Determine carbon-related exhaust emissions over the US06, 
the SC03, and the cold temperature FTP test procedures according to the 
test procedure provisions specified in 40 CFR part 600 subpart B and 
using the calculation procedures specified in Sec.  600.113-12 of this 
chapter. Run each of these tests a minimum of three times with the off-
cycle technology installed and operating and average the per phase 
(bag) results for each test procedure. Calculate the 5-cycle weighted 
city/highway combined carbon-related exhaust emissions from the 
averaged per phase results, where the 5-cycle city value is weighted 
55% and the 5-cycle highway value is weighted 45%. Use the averaged per 
phase results for the FTP and HFET determined in paragraph (c)(1) of 
this section for operation without the off-cycle technology in this 
calculation. The resulting combined city/highway value is the 5-cycle 
carbon-related exhaust emission value including the off-cycle benefit 
of the technology but excluding any benefit of the technology on the 
FTP and HFET.
    (3) Subtract the combined city/highway value determined in 
paragraph (c)(1) of this section from the value determined in paragraph 
(c)(2) of this section and round to the nearest 0.1 grams/mile. The 
result is the off-cycle benefit of the technology or technologies being 
evaluated, subject to EPA approval.
    (4) Submit all test values to EPA, and include an engineering 
analysis describing the technology and how it provides off-cycle 
emission benefits. EPA may request additional testing if we determine 
that additional testing would be likely to provide significantly 
greater confidence in the estimates of off-cycle technology benefits.
    (d) Technology demonstration using alternative EPA-approved 
methodology. (1) This option may be used only with EPA approval, and 
the manufacturer must be able to justify to the Administrator why the 
5-cycle option described in paragraph (c) of this section 
insufficiently characterizes the effectiveness of the off-cycle 
technology. In cases where the EPA 5-cycle methodology described in 
paragraph (c) of this section cannot adequately measure the emission 
reduction attributable to an off-cycle technology, the manufacturer may 
develop an alternative approach. Prior to a model year in which a 
manufacturer intends to seek these credits, the manufacturer must 
submit a detailed analytical plan to EPA. The manufacturer may seek EPA 
input on the proposed methodology prior to conducting testing or 
analytical work, and EPA will provide input on the manufacturer's 
analytical plan. The alternative demonstration program must be approved 
in advance by the Administrator and should:
    (i) Use modeling, on-road testing, on-road data collection, or 
other approved analytical or engineering methods;
    (ii) Be robust, verifiable, and capable of demonstrating the real-
world emissions benefit with strong statistical significance;
    (iii) Result in a demonstration of baseline and controlled 
emissions over a wide range of driving conditions and number of 
vehicles such that issues of data uncertainty are minimized;
    (iv) Result in data on a model type basis unless the manufacturer 
demonstrates that another basis is appropriate and adequate.
    (2) Notice and opportunity for public comment. The Administrator 
will publish a notice of availability in the Federal Register notifying 
the public of a manufacturer's proposed alternative off-cycle credit 
calculation methodology. The notice will include details regarding the 
proposed methodology, but will not include any Confidential Business 
Information. The notice will include instructions on how to comment on 
the methodology. The Administrator will take public comments into 
consideration in the final determination, and will notify the public of 
the final determination. Credits may not be accrued using an approved 
methodology until the first model year for which the Administrator has 
issued a final approval.
    (3) With respect to fuel consumption improvement values applicable 
to the determination of average fuel economy under 600.510-12(c)(3) for 
the 2017 and later model years, EPA will consult with the U.S. 
Department of Transportation, National Highway Traffic Safety 
Administration, prior to making a decision on a manufacturer's 
application submitted under the requirements of this paragraph (d).
    (e) Review and approval process for off-cycle credits. (1) Initial 
steps required. (i) A manufacturer requesting off-cycle credits under 
the provisions of paragraph (c) of this section must conduct the 
testing and/or simulation described in that paragraph.
    (ii) A manufacturer requesting off-cycle credits under the 
provisions of paragraph (d) of this section must develop a methodology 
for demonstrating and determining the benefit of the off-cycle 
technology, and carry out any necessary testing and analysis required 
to support that methodology.
    (iii) A manufacturer requesting off-cycle credits under paragraphs 
(b), (c), or (d) of this section must conduct testing and/or prepare 
engineering analyses that demonstrate the in-use durability of the 
technology for the full useful life of the vehicle.
    (2) Data and information requirements. The manufacturer seeking 
off-cycle credits must submit an application for off-cycle credits 
determined under paragraphs (c) and (d) of this section. The 
application must contain the following:
    (i) A detailed description of the off-cycle technology and how it 
functions to reduce CO2 emissions under conditions not 
represented on the FTP and HFET.
    (ii) A list of the vehicle model(s) which will be equipped with the 
technology.
    (iii) A detailed description of the test vehicles selected and an 
engineering analysis that supports the selection of those vehicles for 
testing.
    (iv) All testing and/or simulation data required under paragraph 
(c) or (d) of this section, as applicable, plus any other data the 
manufacturer has considered in the analysis.

[[Page 63174]]

    (v) For credits under paragraph (d) of this section, a complete 
description of the methodology used to estimate the off-cycle benefit 
of the technology and all supporting data, including vehicle testing 
and in-use activity data.
    (vi) An estimate of the off-cycle benefit by vehicle model and the 
fleetwide benefit based on projected sales of vehicle models equipped 
with the technology.
    (vii) An engineering analysis and/or component durability testing 
data or whole vehicle testing data demonstrating the in-use durability 
of the off-cycle technology components.
    (3) EPA review of the off-cycle credit application. Upon receipt of 
an application from a manufacturer, EPA will do the following:
    (i) Review the application for completeness and notify the 
manufacturer within 30 days if additional information is required.
    (ii) Review the data and information provided in the application to 
determine if the application supports the level of credits estimated by 
the manufacturer.
    (iii) For credits under paragraph (d) of this section, EPA will 
make the application available to the public for comment, as described 
in paragraph (d)(2) of this section, within 60 days of receiving a 
complete application. The public review period will be specified as 30 
days, during which time the public may submit comments. Manufacturers 
may submit a written rebuttal of comments for EPA consideration or may 
revise their application in response to comments. A revised application 
should be submitted after the end of the public review period, and EPA 
will review the application as if it was a new application submitted 
under this paragraph (e)(3).
    (4) EPA decision. (i) For credits under paragraph (c) of this 
section, EPA will notify the manufacturer of its decision within 60 
days of receiving a complete application.
    (ii) For credits under paragraph (d) of this section, EPA will 
notify the manufacturer of its decision after reviewing and evaluating 
the public comments. EPA will make the decision and rationale available 
to the public.
    (iii) EPA will notify the manufacturer in writing of its decision 
to approve or deny the application, and will provide the reasons for 
the decision. EPA will make the decision and rationale available to the 
public.
    (f) Calculation of total off-cycle credits. Total off-cycle credits 
in Megagrams of CO2 (rounded to the nearest whole number) 
shall be calculated separately for passenger automobiles and light 
trucks according to the following formula:

Total Credits (Megagrams) = (Credit x Production x VLM) / 1,000,000

Where:

Credit = the credit value in grams per mile determined in paragraph 
(d)(1), (d)(2) or (d)(3) of this section.
Production = The total number of passenger automobiles or light 
trucks, whichever is applicable, produced with the off-cycle 
technology to which to the credit value determined in paragraph (b), 
(c), or (d) of this section applies.
VLM = vehicle lifetime miles, which for passenger automobiles shall 
be 195,264 and for light trucks shall be 225,865.

0
23. Section 86.1870-12 is revised to read as follows:

Sec.  86.1870-12  CO2 credits for qualifying full-size 
pickup trucks.

    Full-size pickup trucks may be eligible for additional credits 
based on the implementation of hybrid technologies or on exhaust 
emission performance, as described in this section. Credits may be 
generated under either paragraph (a) or (b) of this section for a 
qualifying pickup truck, but not both.
    (a) Credits for implementation of hybrid electric technology. Full 
size pickup trucks that implement hybrid electric technologies may be 
eligible for an additional credit under this paragraph (a). Pickup 
trucks earning the credits under this paragraph (a) may not earn the 
credits described in paragraph (b) of this section. To claim this 
credit the manufacturer must measure the recovered energy over the 
Federal Test Procedure according to Sec.  600.116-12(c) to determine 
whether a vehicle is a mild or strong hybrid electric vehicle. To 
provide for EPA testing, the vehicle must be able to broadcast battery 
pack voltage via an on-board diagnostics parameter ID channel.
    (1) Full size pickup trucks that are mild hybrid electric vehicles 
and that are produced in the 2017 through 2021 model years are eligible 
for a credit of 10 grams/mile. To receive this credit in a model year, 
the manufacturer must produce a quantity of mild hybrid electric full 
size pickup trucks such that the proportion of production of such 
vehicles, when compared to the manufacturer's total production of full 
size pickup trucks, is not less than the amount specified in the table 
below for that model year.

------------------------------------------------------------------------
                                                               Required
                                                               minimum
                                                              percent of
                         Model year                           full size
                                                                pickup
                                                                trucks
                                                              (percent)
------------------------------------------------------------------------
2017.......................................................           20
2018.......................................................           30
2019.......................................................           55
2020.......................................................           70
2021.......................................................           80
------------------------------------------------------------------------

    (2) Full size pickup trucks that are strong hybrid electric 
vehicles and that are produced in the 2017 through 2025 model years are 
eligible for a credit of 20 grams/mile. To receive this credit in a 
model year, the manufacturer must produce a quantity of strong hybrid 
electric full size pickup trucks such that the proportion of production 
of such vehicles, when compared to the manufacturer's total production 
of full size pickup trucks, is not less than 10 percent in that model 
year.
    (b) Credits for emission reduction performance. Full size pickup 
trucks that achieve carbon-related exhaust emission values below the 
applicable target value determined in Sec.  86.1818-12(c)(3) may be 
eligible for an additional credit. For the purposes of this paragraph 
(b), carbon-related exhaust emission values may include any applicable 
air conditioning leakage and/or efficiency credits as determined in 
Sec.  86.1867 and Sec.  86.1868. Pickup trucks earning the credits 
under this paragraph (b) may not earn credits described in paragraph 
(a) of this section and may not earn credits based on the production 
multipliers described in Sec.  86.1866-12(b).
    (1) Full size pickup trucks that are produced in the 2017 through 
2021 model years and that achieve carbon-related exhaust emissions less 
than or equal to the applicable target value determined in Sec.  
86.1818-12(c)(3) multiplied by 0.85 (rounded to the nearest gram/mile) 
and greater than the applicable target value determined in Sec.  
86.1818-12(c)(3) multiplied by 0.80 (rounded to the nearest gram/mile) 
in a model year are eligible for a credit of 10 grams/mile. A pickup 
truck that qualifies for this credit in a model year may claim this 
credit for subsequent model years through the 2021 model year if the 
carbon-related exhaust emissions of that pickup truck do not increase 
relative to the emissions in the model year in which the pickup truck 
qualified for the credit. To qualify for this credit in a model year, 
the manufacturer must produce a quantity of full size pickup trucks 
that meet the initial emission eligibility requirements

[[Page 63175]]

of this paragraph (b)(1) such that the proportion of production of such 
vehicles, when compared to the manufacturer's total production of full 
size pickup trucks, is not less than the amount specified in the table 
below for that model year.

------------------------------------------------------------------------
                                                               Required
                                                               minimum
                                                              percent of
                         Model year                           full size
                                                                pickup
                                                                truck
                                                              (percent)
------------------------------------------------------------------------
2017.......................................................           15
2018.......................................................           20
2019.......................................................           28
2020.......................................................           35
2021.......................................................           40
------------------------------------------------------------------------

    (2) Full size pickup trucks that are produced in the 2017 through 
2025 model years and that achieve carbon-related exhaust emissions less 
than or equal to the applicable target value determined in Sec.  
86.1818-12(c)(3) multiplied by 0.80 (rounded to the nearest gram/mile) 
in a model year are eligible for a credit of 20 grams/mile. A pickup 
truck that qualifies for this credit in a model year may claim this 
credit for a maximum of four subsequent model years (a total of five 
consecutive model years) if the carbon-related exhaust emissions of 
that pickup truck do not increase relative to the emissions in the 
model year in which the pickup truck first qualified for the credit. 
This credit may not be claimed in any model year after 2025. To qualify 
for this credit in a model year, the manufacturer must produce a 
quantity of full size pickup trucks that meet the emission requirements 
of this paragraph (b)(2) such that the proportion of production of such 
vehicles, when compared to the manufacturer's total production of full 
size pickup trucks, is not less than 10 percent in that model year. A 
pickup truck that qualifies for this credit in a model year and is 
subject to a major redesign in a subsequent model year such that it 
qualifies for the credit in the model year of the redesign may be 
allowed to qualify for an additional five years (not to go beyond the 
2025 model year) with the approval of the Administrator. Use good 
engineering judgment to determine whether a pickup truck has been 
subject to a major redesign.
    (c) Calculation of total full size pickup truck credits. Total 
credits in Megagrams of CO2 (rounded to the nearest whole 
number) shall be calculated for qualifying full size pickup trucks 
according to the following formula:

Total Credits (Megagrams) = ([(10 x ProductionMHEV) + (10 x 
ProductionT15) + (20 x ProductionSHEV) + (20 x 
ProductionT20)] x 225,865) / 1,000,000

Where:

ProductionMHEV = The total number of mild hybrid electric 
full size pickup trucks produced with a credit value of 10 grams per 
mile from paragraph (a)(1) of this section.
ProductionT15 = The total number of full size pickup 
trucks produced with a performance-based credit value of 10 grams 
per mile from paragraph (b)(1) of this section.
ProductionSHEV = The total number of strong hybrid 
electric full size pickup trucks produced with a credit value of 20 
grams per mile from paragraph (a)(2) of this section.
ProductionT20 = The total number of full size pickup 
trucks produced with a performance-based credit value of 20 grams 
per mile from paragraph (b)(2) of this section.

0
24. Section 86.1871-12 is added to read as follows:

Sec.  86.1871-12  Optional early CO2 credit programs.

    Manufacturers may optionally generate CO2 credits in the 
2009 through 2011 model years for use in the 2012 and later model years 
subject to EPA approval and to the provisions of this section. 
Manufacturers may generate early fleet average credits, air 
conditioning leakage credits, air conditioning efficiency credits, 
early advanced technology credits, and early off-cycle technology 
credits. Manufacturers generating any credits under this section must 
submit an early credits report to the Administrator as required in this 
section. The terms ``sales'' and ``sold'' as used in this section shall 
mean vehicles produced for U.S. sale, where ``U.S.'' means the states 
and territories of the United States.
    (a) Early fleet average CO2 reduction credits. 
Manufacturers may optionally generate credits for reductions in their 
fleet average CO2 emissions achieved in the 2009 through 
2011 model years. To generate early fleet average CO2 
reduction credits, manufacturers must select one of the four pathways 
described in paragraphs (a)(1) through (4) of this section. The 
manufacturer may select only one pathway, and that pathway must remain 
in effect for the 2009 through 2011 model years. Fleet average credits 
(or debits) must be calculated and reported to EPA for each model year 
under each selected pathway. Early credits are subject to five year 
carry-forward restrictions based on the model year in which the credits 
are generated.
    (1) Pathway 1. To earn credits under this pathway, the manufacturer 
shall calculate an average carbon-related exhaust emission value to the 
nearest one gram per mile for the classes of motor vehicles identified 
in this paragraph (a)(1), and the results of such calculations will be 
reported to the Administrator for use in determining compliance with 
the applicable CO2 early credit threshold values.
    (i) An average carbon-related exhaust emission value calculation 
will be made for the combined LDV/LDT1 averaging set, where the terms 
LDV and LDT1 are as defined in Sec.  86.1803.
    (ii) An average carbon-related exhaust emission value calculation 
will be made for the combined LDT2/HLDT/MDPV averaging set, where the 
terms LDT2, HLDT, and MDPV are as defined in Sec.  86.1803.
    (iii) Average carbon-related exhaust emission values shall be 
determined according to the provisions of Sec.  600.510-12 of this 
chapter, except that:
    (A) [Reserved]
    (B) The average carbon-related exhaust emissions for alcohol fueled 
model types shall be calculated according to the provisions of Sec.  
600.510-12(j)(2)(ii)(B) of this chapter, without the use of the 0.15 
multiplicative factor.
    (C) The average carbon-related exhaust emissions for natural gas 
fueled model types shall be calculated according to the provisions of 
Sec.  600.510-12(j)(2)(iii)(B) of this chapter, without the use of the 
0.15 multiplicative factor.
    (D) The average carbon-related exhaust emissions for alcohol dual 
fueled model types shall be the value measured using gasoline or diesel 
fuel, as applicable, and shall be calculated according to the 
provisions of Sec.  600.510-12(j)(2)(vi) of this chapter, without the 
use of the 0.15 multiplicative factor and with F = 0. For the 2010 and 
2011 model years only, if the California Air Resources Board has 
approved a manufacturer's request to use a non-zero value of F, the 
manufacturer may use such an approved value.
    (E) The average carbon-related exhaust emissions for natural gas 
dual fueled model types shall be the value measured using gasoline or 
diesel fuel, as applicable, and shall be calculated according to the 
provisions of Sec.  600.510-12(j)(2)(vii) of this chapter, without the 
use of the 0.15 multiplicative factor and with F = 0. For the 2010 and 
2011 model years only, if

[[Page 63176]]

the California Air Resources Board has approved a manufacturer's 
request to use a non-zero value of F, the manufacturer may use such an 
approved value.
    (F) Carbon-related exhaust emission values for electric, fuel cell, 
and plug-in hybrid electric model types shall be included in the fleet 
average determined under paragraph (a)(1) of this section only to the 
extent that such vehicles are not being used to generate early advanced 
technology vehicle credits under paragraph (c) of this section.
    (iv) Fleet average CO2 credit threshold values.

------------------------------------------------------------------------
                                                              LDT2/HLDT/
                    Model year                      LDV/LDT1     MDPV
------------------------------------------------------------------------
2009.............................................        323         439
2010.............................................        301         420
2011.............................................        267         390
------------------------------------------------------------------------

    (v) Credits are earned on the last day of the model year. 
Manufacturers must calculate, for a given model year, the number of 
credits or debits it has generated according to the following equation, 
rounded to the nearest megagram:

CO2 Credits or Debits (Mg) = [(CO2 Credit 
Threshold - Manufacturer's Sales Weighted Fleet Average CO2 
Emissions) x (Total Number of Vehicles Sold) x (Vehicle Lifetime 
Miles)] / 1,000,000

Where:

CO2 Credit Threshold = the applicable credit threshold 
value for the model year and vehicle averaging set as determined by 
paragraph (a)(1)(iv) of this section;
Manufacturer's Sales Weighted Fleet Average CO2 Emissions 
= average calculated according to paragraph (a)(1)(iii) of this 
section;
Total Number of Vehicles Sold = The number of vehicles domestically 
sold as defined in Sec.  600.511-80 of this chapter; and
Vehicle Lifetime Miles is 195,264 for the LDV/LDT1 averaging set and 
225,865 for the LDT2/HLDT/MDPV averaging set.

    (vi) Deficits generated against the applicable CO2 
credit threshold values in paragraph (a)(1)(iv) of this section in any 
averaging set for any of the 2009-2011 model years must be offset using 
credits accumulated by any averaging set in any of the 2009-2011 model 
years before determining the number of credits that may be carried 
forward to the 2012. Deficit carry forward and credit banking 
provisions of Sec.  86.1865-12 apply to early credits earned under this 
paragraph (a)(1), except that deficits may not be carried forward from 
any of the 2009-2011 model years into the 2012 model year, and credits 
earned in the 2009 model year may not be traded to other manufacturers.
    (2) Pathway 2. To earn credits under this pathway, manufacturers 
shall calculate an average carbon-related exhaust emission value to the 
nearest one gram per mile for the classes of motor vehicles identified 
in paragraph (a)(1) of this section, and the results of such 
calculations will be reported to the Administrator for use in 
determining compliance with the applicable CO2 early credit 
threshold values.
    (i) Credits under this pathway shall be calculated according to the 
provisions of paragraph (a)(1) of this section, except credits may only 
be generated by vehicles sold in a model year in California and in 
states with a section 177 program in effect in that model year. For the 
purposes of this section, ``section 177 program'' means State 
regulations or other laws that apply to vehicle emissions from any of 
the following categories of motor vehicles: Passenger automobiles, 
light-duty trucks up through 6,000 pounds GVWR, and medium-duty 
vehicles from 6,001 to 14,000 pounds GVWR, as these categories of motor 
vehicles are defined in the California Code of Regulations, Title 13, 
Division 3, Chapter 1, Article 1, Section 1900.
    (ii) A deficit in any averaging set for any of the 2009-2011 model 
years must be offset using credits accumulated by any averaging set in 
any of the 2009-2011 model years before determining the number of 
credits that may be carried forward to the 2012 model year. Deficit 
carry forward and credit banking provisions of Sec.  86.1865-12 apply 
to early credits earned under this paragraph (a)(1), except that 
deficits may not be carried forward from any of the 2009-2011 model 
years into the 2012 model year, and credits earned in the 2009 model 
year may not be traded to other manufacturers.
    (3) Pathway 3. Pathway 3 credits are those credits earned under 
Pathway 2 as described in paragraph (a)(2) of this section in 
California and in the section 177 states determined in paragraph 
(a)(2)(i) of this section, combined with additional credits earned in 
the set of states that does not include California and the section 177 
states determined in paragraph (a)(2)(i) of this section and calculated 
according to this paragraph (a)(3).
    (i) Manufacturers shall earn additional credits under Pathway 3 by 
calculating an average carbon-related exhaust emission value to the 
nearest one gram per mile for the classes of motor vehicles identified 
in this paragraph (a)(3). The results of such calculations will be 
reported to the Administrator for use in determining compliance with 
the applicable CO2 early credit threshold values.
    (ii) An average carbon-related exhaust emission value calculation 
will be made for the passenger automobile averaging set. The term 
``passenger automobile'' shall have the meaning given by the Department 
of Transportation at 49 CFR 523.4 for the specific model year for which 
the calculation is being made.
    (iii) An average carbon-related exhaust emission value calculation 
will be made for the light truck averaging set. The term ``light 
truck'' shall have the meaning given by the Department of 
Transportation at 49 CFR 523.5 for the specific model year for which 
the calculation is being made.
    (iv) Average carbon-related exhaust emission values shall be 
determined according to the provisions of Sec.  600.510-12 of this 
chapter, except that:
    (A) Vehicles sold in California and the section 177 states 
determined in paragraph (a)(2)(i) of this section shall not be 
included.
    (B) The average carbon-related exhaust emissions for alcohol fueled 
model types shall be calculated according to the provisions of Sec.  
600.510-12(j)(2)(ii)(B) of this chapter, without the use of the 0.15 
multiplicative factor.
    (C) The average carbon-related exhaust emissions for natural gas 
fueled model types shall be calculated according to the provisions of 
Sec.  600.510-12(j)(2)(iii)(B) of this chapter, without the use of the 
0.15 multiplicative factor.
    (D) The average carbon-related exhaust emissions for alcohol dual 
fueled model types shall be calculated according to the provisions of 
Sec.  600.510-12(j)(2)(vi) of this chapter, without the use of the 0.15 
multiplicative factor and with F = 0.
    (E) The average carbon-related exhaust emissions for natural gas 
dual fueled model types shall be calculated according to the provisions 
of Sec.  600.510-12(j)(2)(vii) of this chapter, without the use of the 
0.15 multiplicative factor and with F = 0.
    (F) Electric, fuel cell, and plug-in hybrid electric model type 
carbon-related exhaust emission values shall be included in the fleet 
average determined under paragraph (a)(1) of this section only to the 
extent that such vehicles are not being used to generate early advanced 
technology vehicle credits under paragraph (c) of this section.
    (v) Pathway 3 fleet average CO2 credit threshold values.
    (A) For 2009 and 2010 model year passenger automobiles, the fleet 
average

[[Page 63177]]

CO2 credit threshold value is 323 grams/mile.
    (B) For 2009 model year light trucks the fleet average 
CO2 credit threshold value is 381 grams/mile, or, if the 
manufacturer chose to optionally meet an alternative manufacturer-
specific light truck fuel economy standard calculated under 49 CFR 
533.5 for the 2009 model year, the gram per mile fleet average 
CO2 credit threshold shall be the CO2 value 
determined by dividing 8887 by that alternative manufacturer-specific 
fuel economy standard and rounding to the nearest whole gram per mile.
    (C) For 2010 model year light trucks the fleet average 
CO2 credit threshold value is 376 grams/mile, or, if the 
manufacturer chose to optionally meet an alternative manufacturer-
specific light truck fuel economy standard calculated under 49 CFR 
533.5 for the 2010 model year, the gram per mile fleet average 
CO2 credit threshold shall be the CO2 value 
determined by dividing 8887 by that alternative manufacturer-specific 
fuel economy standard and rounding to the nearest whole gram per mile.
    (D) For 2011 model year passenger automobiles the fleet average 
CO2 credit threshold value is the value determined by 
dividing 8887 by the manufacturer-specific passenger automobile fuel 
economy standard for the 2011 model year determined under 49 CFR 531.5 
and rounding to the nearest whole gram per mile.
    (E) For 2011 model year light trucks the fleet average 
CO2 credit threshold value is the value determined by 
dividing 8887 by the manufacturer-specific light truck fuel economy 
standard for the 2011 model year determined under 49 CFR 533.5 and 
rounding to the nearest whole gram per mile.
    (vi) Credits are earned on the last day of the model year. 
Manufacturers must calculate, for a given model year, the number of 
credits or debits it has generated according to the following equation, 
rounded to the nearest megagram:

CO2 Credits or Debits (Mg) = [(CO2 Credit 
Threshold - Manufacturer's Sales Weighted Fleet Average CO2 
Emissions) x (Total Number of Vehicles Sold) x (Vehicle Lifetime 
Miles)] / 1,000,000

Where:

CO2 Credit Threshold = the applicable credit threshold 
value for the model year and vehicle averaging set as determined by 
paragraph (a)(3)(v) of this section.
Manufacturer's Sales Weighted Fleet Average CO2 Emissions 
= average calculated according to paragraph (a)(3)(iv) of this 
section.
Total Number of Vehicles Sold = The number of vehicles domestically 
sold as defined in Sec.  600.511 of this chapter except that 
vehicles sold in California and the section 177 states determined in 
paragraph (a)(2)(i) of this section shall not be included.
Vehicle Lifetime Miles is 195,264 for the LDV/LDT1 averaging set and 
225,865 for the LDT2/HLDT/MDPV averaging set.

    (vii) Deficits in any averaging set for any of the 2009-2011 model 
years must be offset using credits accumulated by any averaging set in 
any of the 2009-2011 model years before determining the number of 
credits that may be carried forward to the 2012. Deficit carry forward 
and credit banking provisions of Sec.  86.1865-12 apply to early 
credits earned under this paragraph (a)(3), except that deficits may 
not be carried forward from any of the 2009-2011 model years into the 
2012 model year, and credits earned in the 2009 model year may not be 
traded to other manufacturers.
    (4) Pathway 4. Pathway 4 credits are those credits earned under 
Pathway 3 as described in paragraph (a)(3) of this section in the set 
of states that does not include California and the section 177 states 
determined in paragraph (a)(2)(i) of this section and calculated 
according to paragraph (a)(3) of this section. Credits may only be 
generated by vehicles sold in the set of states that does not include 
California and the section 177 states determined in paragraph (a)(2)(i) 
of this section.
    (b) Early air conditioning leakage and efficiency credits. (1) 
Manufacturers may optionally generate air conditioning refrigerant 
leakage credits according to the provisions of Sec.  86.1867 and/or air 
conditioning efficiency credits according to the provisions of Sec.  
86.1868 in model years 2009 through 2011. The early credits are subject 
to five year carry forward limits based on the model year in which the 
credits are generated. Credits must be tracked by model type and model 
year.
    (2) Manufacturers must be participating in one of the early fleet 
average credit pathways described in paragraphs (a)(1), (2), or (3) of 
this section in order to generate early air conditioning credits for 
vehicles sold in California and the section 177 states as determined in 
paragraph (a)(2)(i) of this section. Manufacturers that select Pathway 
4 as described in paragraph (a)(4) of this section may not generate 
early air conditioning credits for vehicles sold in California and the 
section 177 states as determined in paragraph (a)(2)(i) of this 
section. Manufacturers not participating in one of the early fleet 
average credit pathways described in this section may generate early 
air conditioning credits only for vehicles sold in states other than in 
California and the section 177 states as determined in paragraph 
(a)(2)(i) of this section.
    (c) Early advanced technology vehicle incentive. Vehicles eligible 
for this incentive are electric vehicles, fuel cell vehicles, and plug-
in hybrid electric vehicles, as those terms are defined in Sec.  
86.1803-01. If a manufacturer chooses to not include electric vehicles, 
fuel cell vehicles, and plug-in hybrid electric vehicles in their fleet 
averages calculated under any of the early credit pathways described in 
paragraph (a) of this section, the manufacturer may generate early 
advanced technology vehicle credits pursuant to this paragraph (c).
    (1) The manufacturer shall record the sales and carbon-related 
exhaust emission values of eligible vehicles by model type and model 
year for model years 2009 through 2011 and report these values to the 
Administrator under paragraph (e) of this section.
    (2) Manufacturers may use the 2009 through 2011 eligible vehicles 
in their fleet average calculations starting with the 2012 model year, 
subject to a five-year carry-forward limitation.
    (i) Eligible 2009 model year vehicles may be used in the 
calculation of a manufacturer's fleet average carbon-related exhaust 
emissions in the 2012 through 2014 model years.
    (ii) Eligible 2010 model year vehicles may be used in the 
calculation of a manufacturer's fleet average carbon-related exhaust 
emissions in the 2012 through 2015 model years.
    (iii) Eligible 2011 model year vehicles may be used in the 
calculation of a manufacturer's fleet average carbon-related exhaust 
emissions in the 2012 through 2016 model years.
    (3)(i) To use the advanced technology vehicle incentive, the 
manufacturer will apply the 2009, 2010, and/or 2011 model type sales 
volumes and their model type emission levels to the manufacturer's 
fleet average calculation.
    (ii) The early advanced technology vehicle incentive must be used 
to offset a deficit in one of the 2012 through 2016 model years, as 
appropriate under paragraph (c)(2) of this section.
    (iii) The advanced technology vehicle sales and emission values may 
be included in a fleet average calculation for passenger automobiles or 
light trucks, but may not be used to generate credits in the model year 
in which they are included or in the averaging set in which they are 
used. Use of early

[[Page 63178]]

advanced technology vehicle credits is limited to offsetting a deficit 
that would otherwise be generated without the use of those credits. 
Manufacturers shall report the use of such credits in their model year 
report for the model year in which the credits are used.
    (4) Manufacturers may use zero grams/mile to represent the carbon-
related exhaust emission values for the electric operation of 2009 
through 2011 model year electric vehicles, fuel cell vehicles, and 
plug-in hybrid electric vehicles subject to the limitations in Sec.  
86.1866. The 2009 through 2011 model year vehicles using zero grams per 
mile shall count against the 200,000 or 300,000 caps on use of this 
credit value, whichever is applicable under Sec.  86.1866.
    (d) Early off-cycle technology credits. Manufacturers may 
optionally generate credits for the implementation of certain 
CO2-reducing technologies according to the provisions of 
Sec.  86.1869 in model years 2009 through 2011. The early credits are 
subject to five year carry forward limits based on the model year in 
which the credits are generated. Credits must be tracked by model type 
and model year.
    (e) Early credit reporting requirements. Each manufacturer shall 
submit a report to the Administrator, known as the early credits 
report, that reports the credits earned in the 2009 through 2011 model 
years under this section.
    (1) The report shall contain all information necessary for the 
calculation of the manufacturer's early credits in each of the 2009 
through 2011 model years.
    (2) The early credits report shall be in writing, signed by the 
authorized representative of the manufacturer and shall be submitted no 
later than 90 days after the end of the 2011 model year.
    (3) Manufacturers using one of the optional early fleet average 
CO2 reduction credit pathways described in paragraph (a) of 
this section shall report the following information separately for the 
appropriate averaging sets (e.g. LDV/LDT1 and LDT2/HLDT/MDPV averaging 
sets for pathways 1 and 2; LDV, LDT/2011 MDPV, LDV/LDT1 and LDT2/HLDT/
MDPV averaging sets for Pathway 3; LDV and LDT/2011 MDPV averaging sets 
for Pathway 4):
    (i) The pathway that they have selected (1, 2, 3, or 4).
    (ii) A carbon-related exhaust emission value for each model type of 
the manufacturer's product line calculated according to paragraph (a) 
of this section.
    (iii) The manufacturer's average carbon-related exhaust emission 
value calculated according to paragraph (a) of this section for the 
applicable averaging set and region and all data required to complete 
this calculation.
    (iv) The credits earned for each averaging set, model year, and 
region, as applicable.
    (4) Manufacturers calculating early air conditioning leakage and/or 
efficiency credits under paragraph (b) of this section shall report the 
following information for each model year separately for passenger 
automobiles and light trucks and for each air conditioning system used 
to generate credits:
    (i) A description of the air conditioning system.
    (ii) The leakage and efficiency credit values and all the 
information required to determine these values.
    (iii) The total credits earned for each averaging set, model year, 
and region, as applicable.
    (5) Manufacturers calculating early advanced technology vehicle 
credits under paragraph (c) of this section shall report, for each 
model year and separately for passenger automobiles and light trucks, 
the following information:
    (i) The number of each model type of eligible vehicle produced.
    (ii) The carbon-related exhaust emission value by model type and 
model year.
    (6) Manufacturers calculating early off-cycle technology credits 
under paragraph (d) of this section shall report, for each model year 
and separately for passenger automobiles and light trucks, all test 
results and data required for calculating such credits.

PART 600--FUEL ECONOMY AND GREENHOUSE GAS EXHAUST EMISSIONS OF 
MOTOR VEHICLES

0
25. The authority citation for part 600 continues to read as follows:

    Authority:  49 U.S.C. 32901-23919q, Pub. L. 109-58.

Subpart A--General Provisions

0
26. Section 600.002 is amended as follows:
0
a. By revising the definition for ``base tire.''
0
b. By revising the definition for ``combined fuel economy.''
0
c. By adding a definition for ``emergency vehicle'' in alphabetical 
order.
0
d. By revising the definition for ``fuel economy.''
    The revisions and addition read as follows:

Sec.  600.002  Definitions.

* * * * *
    Base tire means the tire size specified as standard equipment by 
the manufacturer on each unique combination of a vehicle's footprint 
and model type. Standard equipment is defined in 40 CFR 86.1803-01.
* * * * *
    Emergency vehicle means a motor vehicle manufactured primarily for 
use as an ambulance or combination ambulance-hearse or for use by the 
United States Government or a State or local government for law 
enforcement.
* * * * *
    Combined fuel economy means:
    (1) The fuel economy value determined for a vehicle (or vehicles) 
by harmonically averaging the city and highway fuel economy values, 
weighted 0.55 and 0.45, respectively.
    (2) For electric vehicles, for the purpose of calculating average 
fuel economy pursuant to the provisions of part 600, subpart F, the 
term means the equivalent petroleum-based fuel economy value as 
determined by the calculation procedure promulgated by the Secretary of 
Energy. For the purpose of labeling pursuant to the provisions of part 
600, subpart D, the term means the fuel economy value as determined by 
the procedures specified in Sec.  600.116-12.
* * * * *
    Fuel economy means:
    (1) The average number of miles traveled by an automobile or group 
of automobiles per volume of fuel consumed as calculated in this part; 
or
    (2) For the purpose of calculating average fuel economy pursuant to 
the provisions of part 600, subpart F, fuel economy for electrically 
powered automobiles means the equivalent petroleum-based fuel economy 
as determined by the Secretary of Energy in accordance with the 
provisions of 10 CFR 474. For the purpose of labeling pursuant to the 
provisions of part 600, subpart D, the term means the fuel economy 
value as determined by the procedures specified in Sec.  600.116-12.
* * * * *

Subpart B--Fuel Economy and Carbon-Related Exhaust Emission Test 
Procedures

0
27. Section 600.111-08 is amended by revising the introductory text to 
read as follows:

Sec.  600.111-08  Test procedures.

    This section provides test procedures for the FTP, highway, US06, 
SC03, and the cold temperature FTP tests. Testing

[[Page 63179]]

shall be performed according to test procedures and other requirements 
contained in this part 600 and in part 86 of this chapter, including 
the provisions of part 86, subparts B, C, and S. Test hybrid electric 
vehicles using the procedures of SAE J1711 (incorporated by reference 
in Sec.  600.011). For FTP testing, this generally involves emission 
sampling over four phases (bags) of the UDDS (cold-start, transient, 
warm-start, transient); however, these four phases may be combined into 
two phases (phases 1 + 2 and phases 3 + 4). Test plug-in hybrid 
electric vehicles using the procedures of SAE J1711 (incorporated by 
reference in Sec.  600.011) as described in Sec.  600.116-12. Test 
electric vehicles using the procedures of SAE J1634 (incorporated by 
reference in Sec.  600.011) as described in Sec.  600.116-12.
* * * * *

0
28. Section 600.113-12 is amended by revising paragraphs (g)(2)(iv)(C) 
and (j) through (n) to read as follows:

Sec.  600.113-12  Fuel economy, CO2 emissions, and carbon-related 
exhaust emission calculations for FTP, HFET, US06, SC03 and cold 
temperature FTP tests.

* * * * *
    (g) * * *
    (2) * * *
    (iv) * * *
    (C) For the 2012 through 2016 model years only, manufacturers may 
use an assigned value of 0.010 g/mi for N2O FTP and HFET 
test values. This value is not required to be adjusted by a 
deterioration factor.
* * * * *
    (j)(1) For methanol-fueled automobiles and automobiles designed to 
operate on mixtures of gasoline and methanol, the fuel economy in miles 
per gallon of methanol is to be calculated using the following 
equation:

mpg = (CWF x SG x 3781.8)/((CWFexHC x HC) + (0.429 x CO) + 
(0.273 x CO2) + (0.375 x CH3OH) + (0.400 x HCHO))

Where:

CWF = Carbon weight fraction of the fuel as determined in paragraph 
(f)(2)(ii) of this section and rounded according to paragraph (g)(3) 
of this section.
SG = Specific gravity of the fuel as determined in paragraph 
(f)(2)(i) of this section and rounded according to paragraph (g)(3) 
of this section.
CWFexHC = Carbon weight fraction of exhaust hydrocarbons 
= CWF as determined in paragraph (f)(2)(ii) of this section and 
rounded according to paragraph (g)(3) of this section (for M100 
fuel, CWFexHC = 0.866).
HC = Grams/mile HC as obtained in paragraph (g)(1) of this section.
CO = Grams/mile CO as obtained in paragraph (g)(1) of this section.
CO2 = Grams/mile CO2 as obtained in paragraph 
(g)(1) of this section.
CH3OH = Grams/mile CH3OH (methanol) as 
obtained in paragraph (g)(1) of this section.
HCHO = Grams/mile HCHO (formaldehyde) as obtained in paragraph 
(g)(1) of this section.

    (2)(i) For 2012 and later model year methanol-fueled automobiles 
and automobiles designed to operate on mixtures of gasoline and 
methanol, the carbon-related exhaust emissions in grams per mile while 
operating on methanol is to be calculated using the following equation 
and rounded to the nearest 1 gram per mile:

CREE = (CWFexHC/0.273 x HC) + (1.571 x CO) + (1.374 x 
CH3OH) + (1.466 x HCHO) + CO2

Where:

CREE means the carbon-related exhaust emission value as defined in 
Sec.  600.002.
CWFexHC = Carbon weight fraction of exhaust hydrocarbons 
= CWF as determined in paragraph (f)(2)(ii) of this section and 
rounded according to paragraph (g)(3) of this section (for M100 
fuel, CWFexHC = 0.866).
    HC = Grams/mile HC as obtained in paragraph (g)(2) of this 
section.
    CO = Grams/mile CO as obtained in paragraph (g)(2) of this 
section.
    CO2 = Grams/mile CO2 as obtained in 
paragraph (g)(2) of this section.
    CH3OH = Grams/mile CH3OH (methanol) as 
obtained in paragraph (g)(2) of this section.
    HCHO = Grams/mile HCHO (formaldehyde) as obtained in paragraph 
(g)(2) of this section.

    (ii) For manufacturers complying with the fleet averaging option 
for N2O and CH4 as allowed under Sec.  86.1818 of 
this chapter, the carbon-related exhaust emissions in grams per mile 
for 2012 and later model year methanol-fueled automobiles and 
automobiles designed to operate on mixtures of gasoline and methanol 
while operating on methanol is to be calculated using the following 
equation and rounded to the nearest 1 gram per mile:

CREE = [(CWFexHC/0.273) x NMHC] + (1.571 x CO) + (1.374 x 
CH3OH) + (1.466 x HCHO) + CO2 + (298 x 
N2O) + (25 x CH4)

Where:

CREE means the carbon-related exhaust emission value as defined in 
Sec.  600.002.
CWFexHC = Carbon weight fraction of exhaust hydrocarbons 
= CWF as determined in paragraph (f)(2)(ii) of this section and 
rounded according to paragraph (g)(3) of this section (for M100 
fuel, CWFexHC = 0.866).
NMHC = Grams/mile HC as obtained in paragraph (g)(2) of this 
section.
CO = Grams/mile CO as obtained in paragraph (g)(2) of this section.
CO2 = Grams/mile CO2 as obtained in paragraph 
(g)(2) of this section.
CH3OH = Grams/mile CH3OH (methanol) as 
obtained in paragraph (g)(2) of this section.
HCHO = Grams/mile HCHO (formaldehyde) as obtained in paragraph 
(g)(2) of this section.
N2O = Grams/mile N2O as obtained in paragraph 
(g)(2) of this section.
CH4 = Grams/mile CH4 as obtained in paragraph 
(g)(2) of this section.

    (k)(1) For automobiles fueled with natural gas and automobiles 
designed to operate on gasoline and natural gas, the fuel economy in 
miles per gallon of natural gas is to be calculated using the following 
equation:
[GRAPHIC] [TIFF OMITTED] TR15OC12.052

Where:

mpge = miles per gasoline gallon equivalent of natural 
gas.
CWFHC/NG = carbon weight fraction based on the 
hydrocarbon constituents in the natural gas fuel as obtained in 
paragraph (f)(3) of this section and rounded according to paragraph 
(g)(3) of this section.
DNG = density of the natural gas fuel [grams/ft\3\ at 
68[emsp14][deg]F (20 [deg]C) and 760 mm Hg (101.3 kPa)] pressure as 
obtained in paragraph (g)(3) of this section.
CH4, NMHC, CO, and CO2 = weighted mass exhaust 
emissions [grams/mile] for methane, non-methane HC, carbon monoxide, 
and carbon dioxide as obtained in paragraph (g)(2) of this section.
CWFNMHC = carbon weight fraction of the non-methane HC 
constituents in the fuel as determined from the speciated fuel 
composition per paragraph (f)(3) of this section and rounded 
according to paragraph (g)(3) of this section.
CO2NG = grams of carbon dioxide in the natural gas fuel 
consumed per mile of travel.
CO2NG = FCNG x DNG x 
WFCO2

Where:

[[Page 63180]]

[GRAPHIC] [TIFF OMITTED] TR15OC12.053

= cubic feet of natural gas fuel consumed per mile

Where:

CWFNG = the carbon weight fraction of the natural gas 
fuel as calculated in paragraph (f)(3) of this section.
WFCO2 = weight fraction carbon dioxide of the natural gas 
fuel calculated using the mole fractions and molecular weights of 
the natural gas fuel constituents per ASTM D 1945 (incorporated by 
reference in Sec.  600.011).

    (2)(i) For automobiles fueled with natural gas and automobiles 
designed to operate on gasoline and natural gas, the carbon-related 
exhaust emissions in grams per mile while operating on natural gas is 
to be calculated for 2012 and later model year vehicles using the 
following equation and rounded to the nearest 1 gram per mile:

CREE = 2.743 x CH4 + CWFNMHC/0.273 x NMHC + 1.571 
x CO + CO2

Where:

CREE means the carbon-related exhaust emission value as defined in 
Sec.  600.002.
CH4 = Grams/mile CH4 as obtained in paragraph 
(g)(2) of this section.
NMHC = Grams/mile NMHC as obtained in paragraph (g)(2) of this 
section.
CO = Grams/mile CO as obtained in paragraph (g)(2) of this section.
CO2 = Grams/mile CO2 as obtained in paragraph 
(g)(2) of this section.
CWFNMHC = carbon weight fraction of the non-methane HC 
constituents in the fuel as determined from the speciated fuel 
composition per paragraph (f)(3) of this section and rounded 
according to paragraph (f)(3) of this section.

    (ii) For manufacturers complying with the fleet averaging option 
for N2O and CH4 as allowed under Sec.  86.1818 of 
this chapter, the carbon-related exhaust emissions in grams per mile 
for 2012 and later model year automobiles fueled with natural gas and 
automobiles designed to operate on gasoline and natural gas while 
operating on natural gas is to be calculated using the following 
equation and rounded to the nearest 1 gram per mile:

CREE = (25 x CH4) + [(CWFNMHC/0.273) x NMHC] + 
(1.571 x CO) + CO2 + (298 x N2O)

Where:

CREE means the carbon-related exhaust emission value as defined in 
Sec.  600.002.
CH4 = Grams/mile CH4 as obtained in paragraph 
(g)(2) of this section.
NMHC = Grams/mile NMHC as obtained in paragraph (g)(2) of this 
section.
CO = Grams/mile CO as obtained in paragraph (g)(2) of this section.
CO2 = Grams/mile CO2 as obtained in paragraph 
(g)(2) of this section.
CWFNMHC = carbon weight fraction of the non-methane HC 
constituents in the fuel as determined from the speciated fuel 
composition per paragraph (f)(3) of this section and rounded 
according to paragraph (f)(3) of this section.
N2O = Grams/mile N2O as obtained in paragraph 
(g)(2) of this section.

    (l)(1) For ethanol-fueled automobiles and automobiles designed to 
operate on mixtures of gasoline and ethanol, the fuel economy in miles 
per gallon of ethanol is to be calculated using the following equation:

mpg = (CWF x SG x 3781.8)/((CWFexHC x HC) + (0.429 x CO) + 
(0.273 x CO2) + (0.375 x CH3OH) + (0.400 x HCHO) 
+ (0.521 x C2H5OH) + (0.545 x 
C2H4O))

Where:

CWF = Carbon weight fraction of the fuel as determined in paragraph 
(f)(4) of this section and rounded according to paragraph (f)(3) of 
this section.
SG = Specific gravity of the fuel as determined in paragraph (f)(4) 
of this section and rounded according to paragraph (f)(3) of this 
section.
CWFexHC = Carbon weight fraction of exhaust hydrocarbons 
= CWF as determined in paragraph (f)(4) of this section and rounded 
according to paragraph (f)(3) of this section.
HC = Grams/mile HC as obtained in paragraph (g)(1) of this section.
CO = Grams/mile CO as obtained in paragraph (g)(1) of this section.
CO2 = Grams/mile CO2 as obtained in paragraph 
(g)(1) of this section.
CH3OH = Grams/mile CH3OH (methanol) as 
obtained in paragraph (g)(1) of this section.
HCHO = Grams/mile HCHO (formaldehyde) as obtained in paragraph 
(g)(1) of this section.
C2H5OH = Grams/mile 
C2H5OH (ethanol) as obtained in paragraph 
(g)(1) of this section.
C2H4O = Grams/mile C2H4O 
(acetaldehyde) as obtained in paragraph (g)(1) of this section.

    (2)(i) For 2012 and later model year ethanol-fueled automobiles and 
automobiles designed to operate on mixtures of gasoline and ethanol, 
the carbon-related exhaust emissions in grams per mile while operating 
on ethanol is to be calculated using the following equation and rounded 
to the nearest 1 gram per mile:

CREE = (CWFexHC/0.273 x HC) + (1.571 x CO) + (1.374 x 
CH3OH) + (1.466 x HCHO) + (1.911 x 
C2H5OH) + (1.998 x C2H4O) + 
CO2

Where:

CREE means the carbon-related exhaust emission value as defined in 
Sec.  600.002.
CWFexHC = Carbon weight fraction of exhaust hydrocarbons 
= CWF as determined in paragraph (f)(4) of this section and rounded 
according to paragraph (f)(3) of this section.
HC = Grams/mile HC as obtained in paragraph (g)(2) of this section.
CO = Grams/mile CO as obtained in paragraph (g)(2) of this section.
CO2 = Grams/mile CO2 as obtained in paragraph 
(g)(2) of this section.
CH3OH = Grams/mile CH3OH (methanol) as 
obtained in paragraph (g)(2) of this section.
HCHO = Grams/mile HCHO (formaldehyde) as obtained in paragraph 
(g)(2) of this section.
C2H5OH = Grams/mile 
C2H5OH (ethanol) as obtained in paragraph 
(g)(2) of this section.
C2H4O = Grams/mile C2H4O 
(acetaldehyde) as obtained in paragraph (g)(2) of this section.

    (ii) For manufacturers complying with the fleet averaging option 
for N2O and CH4 as allowed under Sec.  86.1818 of 
this chapter, the carbon-related exhaust emissions in grams per mile 
for 2012 and later model year ethanol-fueled automobiles and 
automobiles designed to operate on mixtures of gasoline and ethanol 
while operating on ethanol is to be calculated using the following 
equation and rounded to the nearest 1 gram per mile:

CREE = [(CWFexHC/0.273) x NMHC] + (1.571 x CO) + (1.374 x 
CH3OH) + (1.466 x HCHO) + (1.911 x 
C2H5OH) + (1.998 x C2H4O) + 
CO2 + (298 x N2O) + (25 x CH4)

Where:

CREE means the carbon-related exhaust emission value as defined in 
Sec.  600.002.
CWFexHC = Carbon weight fraction of exhaust hydrocarbons 
= CWF as determined in paragraph (f)(4) of this section and rounded 
according to paragraph (f)(3) of this section.
NMHC = Grams/mile HC as obtained in paragraph (g)(2) of this 
section.
CO = Grams/mile CO as obtained in paragraph (g)(2) of this section.
CO2 = Grams/mile CO2 as obtained in paragraph 
(g)(2) of this section.
CH3OH = Grams/mile CH3OH (methanol) as 
obtained in paragraph (g)(2) of this section.
HCHO = Grams/mile HCHO (formaldehyde) as obtained in paragraph 
(g)(2) of this section.
C2H5OH = Grams/mile 
C2H5OH (ethanol) as obtained in paragraph 
(g)(2) of this section.
C2H4O = Grams/mile C2H4O 
(acetaldehyde) as obtained in paragraph (g)(2) of this section.
N2O = Grams/mile N2O as obtained in paragraph 
(g)(2) of this section.

[[Page 63181]]

CH4 = Grams/mile CH4 as obtained in paragraph 
(g)(2) of this section.

    (m)(1) For automobiles fueled with liquefied petroleum gas and 
automobiles designed to operate on gasoline and liquefied petroleum 
gas, the fuel economy in miles per gallon of liquefied petroleum gas is 
to be calculated using the following equation:
[GRAPHIC] [TIFF OMITTED] TR15OC12.054

Where:

mpge = miles per gasoline gallon equivalent of liquefied 
petroleum gas.
CWFfuel = carbon weight fraction based on the hydrocarbon 
constituents in the liquefied petroleum gas fuel as obtained in 
paragraph (f)(3) of this section and rounded according to paragraph 
(g)(3) of this section.
SG = Specific gravity of the fuel as determined in paragraph (f)(4) 
of this section and rounded according to paragraph (f)(3) of this 
section.
3781.8 = Grams/mile of H2O per gallon conversion factor.
CWFHC = Carbon weight fraction of exhaust hydrocarbons = 
CWFfuel as determined in paragraph (f)(4) of this section 
and rounded according to paragraph (f)(3) of this section.
HC = Grams/mile HC as obtained in paragraph (g)(2) of this section.
CO = Grams/mile CO as obtained in paragraph (g)(2) of this section.
CO2 = Grams/mile CO2 as obtained in paragraph 
(g)(2) of this section.

    (2)(i) For automobiles fueled with liquefied petroleum gas and 
automobiles designed to operate on gasoline and liquefied petroleum 
gas, the carbon-related exhaust emissions in grams per mile while 
operating on liquefied petroleum gas is to be calculated for 2012 and 
later model year vehicles using the following equation and rounded to 
the nearest 1 gram per mile:

CREE = (CWFHC/0.273 x HC) + (1.571 x CO) + CO2

Where:
CREE means the carbon-related exhaust emission value as defined in 
Sec.  600.002.
CWFHC = Carbon weight fraction of exhaust hydrocarbons = 
CWFfuel as determined in paragraph (f)(2)(ii) of this 
section and rounded according to paragraph (g)(3) of this section 
(for M100 fuel, CWFexHC = 0.866).
HC = Grams/mile HC as obtained in paragraph (g)(2) of this section.
CO = Grams/mile CO as obtained in paragraph (g)(2) of this section.
CO2 = Grams/mile CO2 as obtained in paragraph 
(g)(2) of this section.

    (ii) For manufacturers complying with the fleet averaging option 
for N2O and CH4 as allowed under Sec.  86.1818 of 
this chapter, the carbon-related exhaust emissions in grams per mile 
for 2012 and later model year methanol-fueled automobiles and 
automobiles designed to operate on mixtures of gasoline and methanol 
while operating on methanol is to be calculated using the following 
equation and rounded to the nearest 1 gram per mile:

CREE = [(CWFexHC/0.273) x NMHC] + (1.571 x CO) + 
CO2 + (298 x N2O) + (25 x CH4)

Where:
CREE means the carbon-related exhaust emission value as defined in 
Sec.  600.002.
CWFHC = Carbon weight fraction of exhaust hydrocarbons = 
CWFfuel as determined in paragraph (f)(2)(ii) of this 
section and rounded according to paragraph (g)(3) of this section.
NMHC = Grams/mile HC as obtained in paragraph (g)(2) of this 
section.
CO = Grams/mile CO as obtained in paragraph (g)(2) of this section.
CO2 = Grams/mile CO2 as obtained in paragraph 
(g)(2) of this section.
N2O = Grams/mile N2O as obtained in paragraph 
(g)(2) of this section.
CH4 = Grams/mile CH4 as obtained in paragraph 
(g)(2) of this section.

    (n) Manufacturers shall determine CO2 emissions and 
carbon-related exhaust emissions for electric vehicles, fuel cell 
vehicles, and plug-in hybrid electric vehicles according to the 
provisions of this paragraph (n). Subject to the limitations on the 
number of vehicles produced and delivered for sale as described in 
Sec.  86.1866 of this chapter, the manufacturer may be allowed to use a 
value of 0 grams/mile to represent the emissions of fuel cell vehicles 
and the proportion of electric operation of a electric vehicles and 
plug-in hybrid electric vehicles that is derived from electricity that 
is generated from sources that are not onboard the vehicle, as 
described in paragraphs (n)(1) through (3) of this section. For 
purposes of labeling under this part, the CO2 emissions for 
electric vehicles shall be 0 grams per mile. Similarly, for purposes of 
labeling under this part, the CO2 emissions for plug-in 
hybrid electric vehicles shall be 0 grams per mile for the proportion 
of electric operation that is derived from electricity that is 
generated from sources that are not onboard the vehicle. For 
manufacturers no longer eligible to use 0 grams per mile to represent 
electric operation, and for all 2026 and later model year electric 
vehicles, fuel cell vehicles, and plug-in hybrid electric vehicles, the 
provisions of this paragraph (m) shall be used to determine the non-
zero value for CREE for purposes of meeting the greenhouse gas emission 
standards described in Sec.  86.1818 of this chapter.
    (1) For electric vehicles, but not including fuel cell vehicles, 
the carbon-related exhaust emissions in grams per mile is to be 
calculated using the following equation and rounded to the nearest one 
gram per mile:

CREE = CREEUP - CREEGAS

Where:

CREE means the carbon-related exhaust emission value as defined in 
Sec.  600.002, which may be set equal to zero for eligible 2012 
through 2025 model year electric vehicles for a limited number of 
vehicles produced and delivered for sale as described in Sec.  
86.1866-12(a) of this chapter.
[GRAPHIC] [TIFF OMITTED] TR15OC12.055

[[Page 63182]]

Where:

EC = The vehicle energy consumption in watt-hours per mile, for 
combined FTP/HFET operation, determined according to procedures 
established by the Administrator under Sec.  600.116-12.
GRIDLOSS = 0.93 for the 2012 through 2016 model years, and 0.935 for 
the 2017 and later model years (to account for grid transmission 
losses).
AVGUSUP = 0.642 for the 2012 through 2016 model years, and 0.534 for 
the 2017 and later model years (the nationwide average electricity 
greenhouse gas emission rate at the powerplant, in grams per watt-
hour).
2478 is the estimated grams of upstream greenhouse gas emissions per 
gallon of gasoline.
8887 is the estimated grams of CO2 per gallon of 
gasoline.
TargetCO2 = The CO2 Target Value for the fuel 
cell or electric vehicle determined according to Sec.  86.1818 of 
this chapter for the appropriate model year.

    (2) For plug-in hybrid electric vehicles the carbon-related exhaust 
emissions in grams per mile is to be calculated according to the 
provisions of Sec.  600.116, except that the CREE for charge-depleting 
operation shall be the sum of the CREE associated with gasoline 
consumption and the net upstream CREE determined according to paragraph 
(n)(1)(i) of this section, rounded to the nearest one gram per mile.
    (3) For 2012 and later model year fuel cell vehicles, the carbon-
related exhaust emissions in grams per mile shall be calculated using 
the method specified in paragraph (n)(1) of this section, except that 
CREEUP shall be determined according to procedures 
established by the Administrator under Sec.  600.111-08(f). As 
described in Sec.  86.1866 of this chapter the value of CREE may be set 
equal to zero for a certain number of 2012 through 2025 model year fuel 
cell vehicles.

0
29. Section 600.116-12 is amended as follows:
0
a. By revising the heading.
0
b. By revising paragraph (a) introductory text.
0
c. By adding paragraph (c).
    The revisions and addition read as follows:

Sec.  600.116-12  Special procedures related to electric vehicles, 
hybrid electric vehicles, and plug-in hybrid electric vehicles.

    (a) Determine fuel economy values for electric vehicles as 
specified in Sec. Sec.  600.210 and 600.311 using the procedures of SAE 
J1634 (incorporated by reference in Sec.  600.011), with the following 
clarifications and modifications:
* * * * *
    (c) Determining the proportion of recovered energy for hybrid 
electric vehicles. Testing of hybrid electric vehicles under this part 
may include a determination of the proportion of energy recovered over 
the FTP relative to the total available braking energy required over 
the FTP. This determination is required for pickup trucks accruing 
credits for implementation of hybrid technology under Sec.  86.1870-12, 
and requires the measurement of electrical current (in amps) flowing 
into the hybrid system battery for the duration of the test. Hybrid 
electric vehicles are tested for fuel economy and GHG emissions using 
the 4-bag FTP as required by Sec.  600.114(c). Alternative measurement 
and calculation methods may be used with prior EPA approval.
    (1) Calculate the theoretical maximum amount of energy that could 
be recovered by a hybrid electric vehicle over the FTP test cycle, 
where the test cycle time and velocity points are expressed at 10 Hz, 
and the velocity (miles/hour) is expressed to the nearest 0.01 miles/
hour, as follows:
    (i) For each time point in the 10 Hz test cycle (i.e., at each 0.1 
seconds):
    (A) Determine the road load power in kilowatts using the following 
equation:
[GRAPHIC] [TIFF OMITTED] TR15OC12.056

Where:

Proadload is the road load power in kilowatts, where road 
load is negative because it always represents a deceleration (i.e., 
resistive) force on the vehicle;
A, B, and C are the vehicle-specific dynamometer road load 
coefficients in lb-force, lb-force/mph, and lb-force/mph\2\, 
respectively;
Vmph = velocity in miles/hour, expressed to the nearest 
0.01 miles/hour;
0.44704 converts speed from miles/hour to meters/second;
4.448 converts pound force to Newtons; and
1,000 converts power from Watts to kilowatts.

    (B) Determine the applied deceleration power at each sampling point 
in time, t, in kilowatts, using the following equation. Positive values 
indicate acceleration and negative values indicate deceleration.
[GRAPHIC] [TIFF OMITTED] TR15OC12.057

Where:

ETW = the vehicle Equivalent Test Weight (lbs);
Vt = velocity in miles/hour, rounded to the nearest 0.01 
miles/hour, at each sampling point;
Vt-1 = the velocity in miles/hour at the previous time 
point in the 10 Hz speed vs. time table, rounded to the nearest 0.01 
miles/hour;
0.1 represents the time in seconds between each successive velocity 
data point;
0.44704 converts speed from miles/hour to meters/second;
2.205 converts weight from pounds to kilograms; and
1,000 converts power from Watts to kilowatts.

    (C) Determine braking power in kilowatts using the following 
equation. Note that during braking events, Pbrake, 
Paccel, and Proadload will all be negative (i.e., 
resistive) forces on the vehicle.
[GRAPHIC] [TIFF OMITTED] TR15OC12.058

Where:

 Paccel = the value determined in paragraph (c)(1)(i)(B) 
of this section;
Proadload = the value determined in paragraph 
(c)(1)(i)(A) of this section; and
Pbrake = 0 if Paccel is greater than or equal 
to Proadload.

    (ii) The total maximum braking energy (Ebrake) that 
could theoretically be recovered is equal to the absolute value of the 
sum of all the values of Pbrake determined in paragraph 
(c)(1)(i)(C) of this section, divided by 36000 (to convert 10 Hz data 
to hours) and

[[Page 63183]]

rounded to the nearest 0.01 kilowatt hours.
    (2) Calculate the actual amount of energy recovered 
(Erec) by a hybrid electric vehicle when tested on the FTP 
according to the provisions of this part, as follows:
    (i) Measure the electrical current in Amps to and from the hybrid 
electric vehicle battery during the FTP. Measurements should be made 
directly upstream of the battery at a 10 Hz sampling rate.
    (ii) At each sampling point where current is flowing into the 
battery, calculate the current flowing into the battery, in Watt-hours, 
as follows:
[GRAPHIC] [TIFF OMITTED] TR15OC12.059

Where:

Et = the current flowing into the battery, in Watt-hours, 
at time t in the test;
It = the electrical current, in Amps, at time t in the 
test; and
Vnominal = the nominal voltage of the hybrid battery 
system determined according to paragraph (c)(4) of this section.

    (iii) The total energy recovered (Erec) is the absolute 
value of the sum of all values of Et that represent current 
flowing into the battery, divided by 1000 (to convert Watt-hours to 
kilowatt-hours).
    (3) The percent of braking energy recovered by a hybrid system 
relative to the total available energy is determined by the following 
equation, rounded to the nearest one percent:
[GRAPHIC] [TIFF OMITTED] TR15OC12.060

Where:

Erec = The actual total energy recovered, in kilowatt 
hours, as determined in paragraph (c)(2) of this section; and
Ebrake = The theoretical maximum amount of energy, in 
kilowatt hours, that could be recovered by a hybrid electric vehicle 
over the FTP test cycle, as determined in paragraph (c)(1) of this 
section.

    (4)(i) Determination nominal voltage (Vnominal) using 
the following equation:
[GRAPHIC] [TIFF OMITTED] TR15OC12.061

Where:

VS is the battery voltage measured at the start of the 
FTP test, where the measurement is made after the key-on event but 
not later than 10 seconds after the key-on event; and
VF is the battery voltage measured at the conclusion of 
the FTP test, where the measurement is made before the key-off event 
but not earlier than 10 seconds prior to the key-off event.

    (ii) If the absolute value of the measured current to and from the 
battery during the measurement of either VS or VF 
exceeds three percent of the maximum absolute value of the current 
measured over the FTP, then that VS or VF value 
is not valid. If no valid voltage measurement can be made using this 
method, the manufacturer must develop an alternative method of 
determining nominal voltage. The alternative must be developed using 
good engineering judgment and is subject to EPA approval.

Subpart C--Procedures for Calculating Fuel Economy and Carbon-
Related Exhaust Emission Values

0
30. Section 600.210-12 is amended by revising paragraphs (a) 
introductory text and (a)(5) to read as follows:

Sec.  600.210-12  Calculation of fuel economy and CO2 emission values 
for labeling.

    (a) General labels. Except as specified in paragraphs (d) and (e) 
of this section, fuel economy and CO2 emissions for general 
labels may be determined by one of two methods. The first is based on 
vehicle-specific model-type 5-cycle data as determined in Sec.  
600.209-12(b). This method is available for all vehicles and is 
required for vehicles that do not qualify for the second method as 
described in Sec.  600.115 (other than electric vehicles). The second 
method, the derived 5-cycle method, determines fuel economy and 
CO2 emissions values from the FTP and HFET tests using 
equations that are derived from vehicle-specific 5-cycle model type 
data, as determined in paragraph (a)(2) of this section. Manufacturers 
may voluntarily lower fuel economy values and raise CO2 
values if they determine that the label values from any method are not 
representative of the fuel economy and CO2 emissions for 
that model type. MPG values may not be lowered without also making a 
corresponding change to the CO2 value for a model type.
* * * * *
    (5) General alternate fuel economy and CO2 emissions 
label values for fuel cell vehicles. Determine FTP-based city and HFET-
based highway fuel economy label values for fuel cell vehicles using 
procedures specified by the Administrator. Convert kilograms of 
hydrogen/mile results to miles per kilogram of hydrogen and miles per 
gasoline gallon equivalent. CO2 label information is based 
on tailpipe emissions only, so CO2 emissions from fuel cell 
vehicles are assumed to be zero.
* * * * *

Subpart D--Fuel Economy Labeling

0
31. Section 600.303-12 is amended as follows:
0
a. By revising the introductory text.
0
b. By revising paragraph (b) introductory text.
0
c. By revising paragraph (b)(6).
0
d. By revising paragraph (c).
    The revisions read as follows:

Sec.  600.303-12  Fuel economy label--special requirements for 
flexible-fuel vehicles.

    Fuel economy labels for flexible-fuel vehicles must meet the 
specifications described in Sec.  600.302, with the modifications 
described in this section. This section describes how to label 
flexible-fuel vehicles equipped with gasoline engines. If the vehicle 
has a diesel engine, all the references to ``gas'' or ``gasoline'' in 
this section are understood to refer to ``diesel'' or ``diesel fuel'', 
respectively. All values described in this section are based on 
gasoline operation, unless otherwise specifically noted.
* * * * *
    (b) Include the following elements instead of the information 
identified in Sec.  600.302-12(c)(1):
* * * * *
    (6) Add the following statement after the statements described in 
Sec.  600.302-12(c)(2): ``Values are based on gasoline and do not 
reflect performance and ratings based on E85.'' Adjust this statement 
as appropriate for vehicles designed to operate on different fuels.
    (c) You may include the sub-heading ``Driving Range'' below the 
combined fuel economy value, with range bars below this sub-heading as 
follows:
    (1) Insert a horizontal range bar nominally 80 mm long to show how 
far the vehicle can drive from a full tank of gasoline. Include a 
vehicle logo at the right end of the range bar. Include the following 
left-justified expression inside

[[Page 63184]]

the range bar: ``Gasoline: x miles''. Complete the expression by 
identifying the appropriate value for total driving range from Sec.  
600.311.
    (2) Insert a second horizontal range bar as described in paragraph 
(c)(1) of this section that shows how far the vehicle can drive from a 
full tank with the second fuel. Establish the length of the line based 
on the proportion of driving ranges for the different fuels. Identify 
the appropriate fuel in the range bar.

0
32. Section 600.310-12 is amended by revising paragraph (a) to read as 
follows:

Sec.  600.310-12  Fuel economy label format requirements--electric 
vehicles.

* * * * *
    (a) Include the following statement instead of the statement 
specified in Sec.  600.302-12(b)(4): ``Actual results will vary for 
many reasons, including driving conditions and how you drive and 
maintain your vehicle. The average new vehicle gets a MPG and costs $ b 
to fuel over 5 years. Cost estimates are based on c miles per year at $ 
d per kW-hr. MPGe is miles per gasoline gallon equivalent. Vehicle 
emissions are a significant cause of climate change and smog.'' For a, 
b, c, and d, insert the appropriate values established by EPA.
* * * * *

0
33. Section 600.311-12 is amended as follows:
0
a. By revising paragraph (c)(1).
0
b. By revising paragraph (e)(3)(vii).
0
c. By adding paragraph (e)(4).
    The revisions and addition read as follows:

Sec.  600.311-12  Determination of values for fuel economy labels.

* * * * *
    (c) * * *
    (1) For vehicles with engines that are not plug-in hybrid electric 
vehicles, calculate the fuel consumption rate in gallons per 100 miles 
(or gasoline gallon equivalent per 100 miles for fuels other than 
gasoline or diesel fuel) with the following formula, rounded to the 
first decimal place:

Fuel Consumption Rate = 100/MPG

Where:

MPG = The value for combined fuel economy from Sec.  600.210-12(c), 
rounded to the nearest whole mpg.

* * * * *
    (e) * * *
    (3) * * *
    (vii) Calculate the annual fuel cost based on the combined values 
for city and highway driving using the following equation:

Annual fuel cost = ($/milecity x 0.55 + $/milehwy x 0.45) x Average 
Annual Miles

    (4) Round the annual fuel cost to the nearest $50 by dividing the 
unrounded annual fuel cost by 50, then rounding the result to the 
nearest whole number, then multiplying this rounded result by 50 to 
determine the annual fuel cost to be used for purposes of labeling.
* * * * *

Subpart F--Procedures For Determining Manufacturer's Average Fuel 
Economy and Manufacturer's Average Carbon-Related Exhaust Emissions

0
33. Section 600.510-12 is amended as follows:
0
a. By removing and reserving paragraph (b)(3)(iii).
0
b. By adding paragraph (b)(4).
0
c. By revising paragraph (c).
0
d. By revising paragraph (g)(1) introductory text.
0
e. By revising paragraph (g)(3).
0
f. By revising paragraph (h) introductory text.
0
g. By revising paragraph (i).
0
h. By revising paragraph (j)(2)(vii).
    The addition and revisions read as follows:

Sec.  600.510-12  Calculation of average fuel economy and average 
carbon-related exhaust emissions.

* * * * *
    (b) * * *
    (4) Emergency vehicles may be excluded from the fleet average 
carbon-related exhaust emission calculations described in paragraph (j) 
of this section. The manufacturer should notify the Administrator that 
they are making such an election in the model year reports required 
under Sec.  600.512 of this chapter. Such vehicles should be excluded 
from both the calculation of the fleet average standard for a 
manufacturer under 40 CFR 86.1818-12(c)(4) and from the calculation of 
the fleet average carbon-related exhaust emissions in paragraph (j) of 
this section.
    (c)(1) Average fuel economy shall be calculated as follows:
    (i) Except as allowed in paragraph (d) of this section, the average 
fuel economy for the model years before 2017 will be calculated 
individually for each category identified in paragraph (a)(1) of this 
according to the provisions of paragraph (c)(2) of this section.
    (ii) Except as permitted in paragraph (d) of this section, the 
average fuel economy for the 2017 and later model years will be 
calculated individually for each category identified in paragraph 
(a)(1) of this section using the following equation:
[GRAPHIC] [TIFF OMITTED] TR15OC12.062

Where:

Average MPG = the fleet average fuel economy for a category of 
vehicles;
MPG = the average fuel economy for a category of vehicles determined 
according to paragraph (c)(2) of this section;
FCIVAC = Air conditioning fuel economy credits for a 
category of vehicles, in gallons per mile, determined according to 
paragraph (c)(3)(i) of this section;
FCIVOC = Off-cycle technology fuel economy credits for a 
category of vehicles, in gallons per mile, determined according to 
paragraph (c)(3)(ii) of this section; and
FCIVPU = Pickup truck fuel economy credits for the light 
truck category, in gallons per mile, determined according to 
paragraph (c)(3)(iii) of this section.

    (2) Divide the total production volume of that category of 
automobiles by a sum of terms, each of which corresponds to a model 
type within that category of automobiles and is a fraction determined 
by dividing the number of automobiles of that model type produced by 
the manufacturer in the model year by:
    (i) For gasoline-fueled and diesel-fueled model types, the fuel 
economy calculated for that model type in accordance with paragraph 
(b)(2) of this section; or
    (ii) For alcohol-fueled model types, the fuel economy value 
calculated for that model type in accordance with paragraph (b)(2) of 
this section divided by 0.15 and rounded to the nearest 0.1 mpg; or
    (iii) For natural gas-fueled model types, the fuel economy value 
calculated for that model type in accordance with paragraph (b)(2) of 
this section divided by 0.15 and rounded to the nearest 0.1 mpg; or

[[Page 63185]]

    (iv) For alcohol dual fuel model types, for model years 1993 
through 2019, the harmonic average of the following two terms; the 
result rounded to the nearest 0.1 mpg:
    (A) The combined model type fuel economy value for operation on 
gasoline or diesel fuel as determined in Sec.  600.208-12(b)(5)(i); and
    (B) The combined model type fuel economy value for operation on 
alcohol fuel as determined in Sec.  600.208-12(b)(5)(ii) divided by 
0.15 provided the requirements of paragraph (g) of this section are 
met; or
    (v) For alcohol dual fuel model types, for model years after 2019, 
the combined model type fuel economy determined according to the 
following equation and rounded to the nearest 0.1 mpg:
[GRAPHIC] [TIFF OMITTED] TR15OC12.063

Where:

F = 0.00 unless otherwise approved by the Administrator according to 
the provisions of paragraph (k) of this section;
MPGA = The combined model type fuel economy for operation 
on alcohol fuel as determined in Sec.  600.208-12(b)(5)(ii) divided 
by 0.15 provided the requirements of paragraph (g) of this section 
are met; and
MPGG = The combined model type fuel economy for operation 
on gasoline or diesel fuel as determined in Sec.  600.208-
12(b)(5)(i).

    (vi) For natural gas dual fuel model types, for model years 1993 
through 2019, the harmonic average of the following two terms; the 
result rounded to the nearest 0.1 mpg:
    (A) The combined model type fuel economy value for operation on 
gasoline or diesel as determined in Sec.  600.208-12(b)(5)(i); and
    (B) The combined model type fuel economy value for operation on 
natural gas as determined in Sec.  600.208-12(b)(5)(ii) divided by 0.15 
provided the requirements of paragraph (g) of this section are met; or
    (vii)(A) For natural gas dual fuel model types, for model years 
after 2019, the combined model type fuel economy determined according 
to the following formula and rounded to the nearest 0.1 mpg:
[GRAPHIC] [TIFF OMITTED] TR15OC12.064

Where:

MPGCNG = The combined model type fuel economy for 
operation on natural gas as determined in Sec.  600.208-12(b)(5)(ii) 
divided by 0.15 provided the requirements of paragraph (g) of this 
section are met; and
MPGG = The combined model type fuel economy for operation 
on gasoline or diesel fuel as determined in Sec.  600.208-
12(b)(5)(i).
UF = A Utility Factor (UF) value selected from the following table 
based on the driving range of the vehicle while operating on natural 
gas, except for natural gas dual fuel vehicles that do not meet the 
criteria in paragraph (c)(2)(vii)(B) the Utility Factor shall be 
0.5. Determine the vehicle's driving range in miles by multiplying 
the combined fuel economy as determined in Sec.  600.208-
12(b)(5)(ii) by the vehicle's usable fuel storage capacity (as 
defined at Sec.  600.002 and expressed in gasoline gallon 
equivalents), and rounding to the nearest 10 miles.

------------------------------------------------------------------------
       Driving range (miles)                          UF
------------------------------------------------------------------------
                       10                                0.228
                       20                                0.397
                       30                                0.523
                       40                                0.617
                       50                                0.689
                       60                                0.743
                       70                                0.785
                       80                                0.818
                       90                                0.844
                      100                                0.865
                      110                                0.882
                      120                                0.896
                      130                                0.907
                      140                                0.917
                      150                                0.925
                      160                                0.932
                      170                                0.939
                      180                                0.944
                      190                                0.949
                      200                                0.954
                      210                                0.958
                      220                                0.962
                      230                                0.965
                      240                                0.968
                      250                                0.971
                      260                                0.973
                      270                                0.976
                      280                                0.978
                      290                                0.980
                      300                                0.981
------------------------------------------------------------------------

    (B) Natural gas dual fuel model types must meet the following 
criteria to qualify for use of a Utility Factor greater than 0.5:
    (1) The driving range using natural gas must be at least two times 
the driving range using gasoline.
    (2) The natural gas dual fuel vehicle must be designed such that 
gasoline is used only when the natural gas tank is effectively empty, 
except for limited use of gasoline that may be required to initiate 
combustion.
    (3) Fuel consumption improvement. Calculate the separate air 
conditioning, off-cycle, and pickup truck fuel consumption improvement 
as follows:
    (i) Air conditioning fuel consumption improvement values are 
calculated separately for each category identified in paragraph (a)(1) 
of this section using the following equation:
[GRAPHIC] [TIFF OMITTED] TR15OC12.065

Where:

FCIVAC = the fleet production-weighted total value of air 
conditioning efficiency credits (fuel consumption improvement value) 
for all air conditioning systems in the applicable fleet, expressed 
in gallons per mile;
ACCredit = the total of all air conditioning efficiency credits for 
the applicable vehicle category, in megagrams, from 40 CFR 86.1868-
12(c), and rounded to the nearest whole number;
VLM = vehicle lifetime miles, which for passenger automobiles shall 
be 195,264 and for light trucks shall be 225,865; and
Production = the total production volume for the applicable category 
of vehicles.

[[Page 63186]]

    (ii) Off-cycle technology fuel consumption improvement values are 
calculated separately for each category identified in paragraph (a)(1) 
of this section using the following equation:
[GRAPHIC] [TIFF OMITTED] TR15OC12.066

Where:

FCIVOC = the fleet production-weighted total value of 
off-cycle technology credits (fuel consumption improvement value) 
for all off-cycle technologies in the applicable fleet, expressed in 
gallons per mile;
OCCredit = the total of all off-cycle technology credits for the 
applicable vehicle category, in megagrams, from 40 CFR 86.1869-
12(e), and rounded to the nearest whole number;
VLM = vehicle lifetime miles, which for passenger automobiles shall 
be 195,264 and for light trucks shall be 225,865; and
Production = the total production volume for the applicable category 
of vehicles.

    (iii) Full size pickup truck fuel consumption improvement values 
are calculated for the light truck category identified in paragraph 
(a)(1) of this section using the following equation:
[GRAPHIC] [TIFF OMITTED] TR15OC12.067

Where:

FCIVPU = the fleet production-weighted total value of 
full size pickup truck credits (fuel consumption improvement value) 
for the light truck fleet, expressed in gallons per mile;
PUCredit = the total of all full size pickup truck credits, in 
megagrams, from 40 CFR 86.1870-12(c), and rounded to the nearest 
whole number; and
Production = the total production volume for the light truck 
category.
* * * * *
    (g)(1) Dual fuel automobiles must provide equal or greater energy 
efficiency while operating on the alternative fuel as while operating 
on gasoline or diesel fuel to obtain the CAFE credit determined in 
paragraphs (c)(2)(iv) and (v) of this section or to obtain the carbon-
related exhaust emissions credit determined in paragraphs (j)(2)(ii) 
and (iii) of this section. The following equation must hold true:

Ealt/Epet= 1

Where:

Ealt = [FEalt/(NHValtx 
Dalt)] x 10\6\ = energy efficiency while operating on 
alternative fuel rounded to the nearest 0.01 miles/million BTU.
Epet = [FEpet/(NHVpetx 
Dpet)] x 10\6\ = energy efficiency while operating on 
gasoline or diesel (petroleum) fuel rounded to the nearest 0.01 
miles/million BTU.
FEalt is the fuel economy [miles/gallon for liquid fuels 
or miles/100 standard cubic feet for gaseous fuels] while operated 
on the alternative fuel as determined in Sec.  600.113-12(a) and 
(b).
FEpet is the fuel economy [miles/gallon] while operated 
on petroleum fuel (gasoline or diesel) as determined in Sec.  
600.113-12(a) and (b).
NHValt is the net (lower) heating value [BTU/lb] of the 
alternative fuel.
NHVpet is the net (lower) heating value [BTU/lb] of the 
petroleum fuel.
Dalt is the density [lb/gallon for liquid fuels or lb/100 
standard cubic feet for gaseous fuels] of the alternative fuel.
Dpet is the density [lb/gallon] of the petroleum fuel.

* * * * *
    (3) Dual fuel passenger automobiles manufactured during model years 
1993 through 2019 must meet the minimum driving range requirements 
established by the Secretary of Transportation (49 CFR part 538) to 
obtain the CAFE credit determined in paragraphs (c)(2)(iv) and (v) of 
this section.
    (h) For model years 1993 and later, and for each category of 
automobile identified in paragraph (a)(1) of this section, the maximum 
increase in average fuel economy determined in paragraph (c) of this 
section attributable to dual fuel automobiles, except where the 
alternative fuel is electricity, shall be as follows:

------------------------------------------------------------------------
                                                               Maximum
                         Model year                            increase
                                                                (mpg)
------------------------------------------------------------------------
1993-2014..................................................          1.2
2015.......................................................          1.0
2016.......................................................          0.8
2017.......................................................          0.6
2018.......................................................          0.4
2019.......................................................          0.2
2020 and later.............................................          0.0
------------------------------------------------------------------------

* * * * *
    (i) For model years 2012 through 2015, and for each category of 
automobile identified in paragraph (a)(1) of this section, the maximum 
decrease in average carbon-related exhaust emissions determined in 
paragraph (j) of this section attributable to alcohol dual fuel 
automobiles and natural gas dual fuel automobiles shall be calculated 
using the following formula, and rounded to the nearest tenth of a gram 
per mile:
[GRAPHIC] [TIFF OMITTED] TR15OC12.068

Where:

FltAvg = The fleet average CREE value in grams per mile, rounded to 
the nearest whole number, for passenger automobiles or light trucks 
determined for the applicable model year according to paragraph (j) 
of this section, except by assuming all alcohol dual fuel and 
natural gas dual fuel automobiles are operated exclusively on 
gasoline (or diesel) fuel. For the purposes of these calculations, 
the values for natural gas dual fuel automobiles using the optional 
Utility Factor approach in paragraph (j)(2)(vii) of this section 
shall not be the gasoline CREE values, but the CREE values 
determined in paragraph (j)(2)(vii) of this section.
MPGMAX = The maximum increase in miles per gallon 
determined for the

[[Page 63187]]

appropriate model year in paragraph (h) of this section.

    (1) The Administrator shall calculate the decrease in average 
carbon-related exhaust emissions to determine if the maximum decrease 
provided in this paragraph (i) has been reached. The Administrator 
shall calculate the average carbon-related exhaust emissions for each 
category of automobiles specified in paragraph (a) of this section by 
subtracting the average carbon-related exhaust emission values 
determined in paragraph (j) of this section from the average carbon-
related exhaust emission values calculated in accordance with this 
section by assuming all alcohol dual fuel and natural gas dual fuel 
automobiles are operated exclusively on gasoline (or diesel) fuel. For 
the purposes of these calculations, the values for natural gas dual 
fuel automobiles using the optional Utility Factor approach in 
paragraph (j)(2)(vii) of this section shall not be the gasoline CREE 
values, but the CREE values determined in paragraph (j)(2)(vii) of this 
section. The difference is limited to the maximum decrease specified in 
paragraph (i) of this section.
    (2) [Reserved]
    (j) * * *
    (2) * * *
    (vii)(A) For natural gas dual fuel model types, for model years 
2016 and later, or optionally for model years 2012 through 2015, the 
combined model type carbon-related exhaust emissions value determined 
according to the following formula and rounded to the nearest gram per 
mile:
[GRAPHIC] [TIFF OMITTED] TR15OC12.069

Where:

CREECNG = The combined model type carbon-related exhaust 
emissions value for operation on natural gas as determined in Sec.  
600.208-12(b)(5)(ii); and
CREEGAS = The combined model type carbon-related exhaust 
emissions value for operation on gasoline or diesel fuel as 
determined in Sec.  600.208-12(b)(5)(i).
UF = A Utility Factor (UF) value selected from the following table 
based on the driving range of the vehicle while operating on natural 
gas, except for natural gas dual fuel vehicles that do not meet the 
criteria in paragraph (j)(2)(vii)(B) the Utility Factor shall be 
0.5. Determine the vehicle's driving range in miles by multiplying 
the combined fuel economy as determined in Sec.  600.208-
12(b)(5)(ii) by the vehicle's usable fuel storage capacity (as 
defined at Sec.  600.002 and expressed in gasoline gallon 
equivalents), and rounding to the nearest 10 miles.

------------------------------------------------------------------------
       Driving range (miles)                          UF
------------------------------------------------------------------------
                       10                                0.228
                       20                                0.397
                       30                                0.523
                       40                                0.617
                       50                                0.689
                       60                                0.743
                       70                                0.785
                       80                                0.818
                       90                                0.844
                      100                                0.865
                      110                                0.882
                      120                                0.896
                      130                                0.907
                      140                                0.917
                      150                                0.925
                      160                                0.932
                      170                                0.939
                      180                                0.944
                      190                                0.949
                      200                                0.954
                      210                                0.958
                      220                                0.962
                      230                                0.965
                      240                                0.968
                      250                                0.971
                      260                                0.973
                      270                                0.976
                      280                                0.978
                      290                                0.980
                      300                                0.981
------------------------------------------------------------------------

    (B) Natural gas dual fuel model types must meet the following 
criteria to qualify for use of a Utility Factor greater than 0.5:
    (1) The driving range using natural gas must be at least two times 
the driving range using gasoline.
    (2) The natural gas dual fuel vehicle must be designed such that 
gasoline is used only when the natural gas tank is effectively empty, 
except for limited use of gasoline that may be required to initiate 
combustion.
* * * * *

0
34. Section 600.514-12 is amended as follows:
0
a. By revising paragraph (b)(1)(v).
0
b. By revising paragraph (b)(1)(vii).
0
c. By redesignating paragraph (b)(1)(ix) as (x).
0
d. By adding paragraphs (b)(1)(ix).
    The revisions and addition read as follows:

Sec.  600.514-12  Reports to the Environmental Protection Agency.

* * * * *
    (b) * * *
    (1) * * *
    (v) A description of the various credit, transfer and trading 
options that will be used to comply with each applicable standard 
category, including the amount of credit the manufacturer intends to 
generate for air conditioning leakage, air conditioning efficiency, 
off-cycle technology, advanced technology vehicles, hybrid or low-
emission full size pickup trucks, and various early credit programs;
* * * * *
    (vii) A summary by model year (beginning with the 2009 model year) 
of the number of electric vehicles, fuel cell vehicles, plug-in hybrid 
electric vehicles, dedicated compressed natural gas vehicles, and dual 
fuel natural gas vehicles using (or projected to use) the advanced 
technology vehicle credit and incentives program, including the 
projected use of production multipliers;
    (viii) The methodology which will be used to comply with 
N2O and CH4 emission standards;
    (ix) Notification of the manufacturer's intent to exclude emergency 
vehicles from the calculation of fleet average standards and the end-
of-year fleet average, including a description of the excluded 
emergency vehicles and the quantity of such vehicles excluded.
* * * * *

Title 49

National Highway Traffic Safety Administration

    In consideration of the foregoing, under the authority of 49 U.S.C. 
32901, 32902, and 32903, and delegation of authority at 49 CFR 1.50, 
NHTSA amends 49 CFR Chapter V as follows:

PART 523--VEHICLE CLASSIFICATION

0
35. The authority citation for part 523 continues to read as follows:

    Authority: 49 U.S.C 32901, delegation of authority at 49 CFR 
1.50.

0
36. Revise Sec.  523.2 to read as follows:

Sec.  523.2  Definitions.

    Approach angle means the smallest angle, in a plane side view of an 
automobile, formed by the level surface on which the automobile is 
standing and a line tangent to the front tire static loaded radius arc 
and touching the underside of the automobile forward of the front tire.
    Axle clearance means the vertical distance from the level surface 
on which an automobile is standing to the lowest

[[Page 63188]]

point on the axle differential of the automobile.
    Base tire (for passenger automobiles, light trucks, and medium duty 
passenger vehicles) means the tire size specified as standard equipment 
by the manufacturer on each unique combination of a vehicle's footprint 
and model type. Standard equipment is defined in 40 CFR 86.1803-01.
    Basic vehicle frontal area is used as defined in 40 CFR 86.1803.
    Breakover angle means the supplement of the largest angle, in a 
plan side view of an automobile, that can be formed by two lines 
tangent to the front and rear static loaded radii arcs and intersecting 
at a point on the underside of the automobile.
    Cab-complete vehicle means a vehicle that is first sold as an 
incomplete vehicle that substantially includes the vehicle cab section 
as defined in 40 CFR 1037.801. For example, vehicles known commercially 
as chassis-cabs, cab-chassis, box-deletes, bed-deletes, and cut-away 
vans are considered cab-complete vehicles. A cab includes a steering 
column and a passenger compartment. Note that a vehicle lacking some 
components of the cab is a cab-complete vehicle if it substantially 
includes the cab.
    Cargo-carrying volume means the luggage capacity or cargo volume 
index, as appropriate, and as those terms are defined in 40 CFR 
600.315-08, in the case of automobiles to which either of these terms 
apply. With respect to automobiles to which neither of these terms 
apply, ``cargo-carrying volume'' means the total volume in cubic feet, 
rounded to the nearest 0.1 cubic feet, of either an automobile's 
enclosed non-seating space that is intended primarily for carrying 
cargo and is not accessible from the passenger compartment, or the 
space intended primarily for carrying cargo bounded in the front by a 
vertical plane that is perpendicular to the longitudinal centerline of 
the automobile and passes through the rearmost point on the rearmost 
seat and elsewhere by the automobile's interior surfaces.
    Class 2b vehicles are vehicles with a gross vehicle weight rating 
(GVWR) ranging from 8,501 to 10,000 pounds (lbs).
    Class 3 through Class 8 vehicles are vehicles with a GVWR of 10,001 
lbs or more, as defined in 49 CFR 565.15.
    Commercial medium- and heavy-duty on-highway vehicle means an on-
highway vehicle with a GVWR of 10,000 lbs or more, as defined in 49 
U.S.C. 32901(a)(7).
    Complete vehicle means a vehicle that requires no further 
manufacturing operations to perform its intended function and is a 
functioning vehicle that has the primary load-carrying device or 
container (or equivalent equipment) attached or is designed to pull a 
trailer. Examples of equivalent equipment include fifth wheel trailer 
hitches, firefighting equipment, and utility booms.
    Curb weight is defined the same as vehicle curb weight in 40 CFR 
86.1803-01.
    Departure angle means the smallest angle, in a plane side view of 
an automobile, formed by the level surface on which the automobile is 
standing and a line tangent to the rear tire static loaded radius arc 
and touching the underside of the automobile rearward of the rear tire.
    Final stage manufacturer has the meaning given in 49 CFR 567.3.
    Footprint is defined as the product of track width (measured in 
inches, calculated as the average of front and rear track widths, and 
rounded to the nearest tenth of an inch) times wheelbase (measured in 
inches and rounded to the nearest tenth of an inch), divided by 144 and 
then rounded to the nearest tenth of a square foot. For purposes of 
this definition, ``track width'' is the lateral distance between the 
centerlines of the base tires at ground, including the camber angle. 
For purposes of this definition, ``wheelbase'' is the longitudinal 
distance between front and rear wheel centerlines.
    Full-size pickup truck has the meaning given in 40 CFR 86.1803-01.
    Gross combination weight rating (GCWR) means the value specified by 
the manufacturer as the maximum allowable loaded weight of a 
combination vehicle (e.g., tractor plus trailer).
    Gross vehicle weight rating (GVWR) means the value specified by the 
manufacturer as the maximum design loaded weight of a single vehicle 
(e.g., vocational vehicle).
    Heavy-duty engine means any engine used for (or which the engine 
manufacturer could reasonably expect to be used for) motive power in a 
heavy-duty vehicle. For purposes of this definition in this part, the 
term ``engine'' includes internal combustion engines and other devices 
that convert chemical fuel into motive power. For example, a fuel cell 
and motor used in a heavy-duty vehicle is a heavy-duty engine.
    Heavy-duty off-road vehicle means a heavy-duty vocational vehicle 
or vocational tractor that is intended for off-road use meeting either 
of the following criteria:
    (1) Vehicles with tires installed having a maximum speed rating at 
or below 55 mph.
    (2) Vehicles primarily designed to perform work off-road (such as 
in oil fields, forests, or construction sites), and meeting at least 
one of the criteria of paragraph (2)(i) of this definition and at least 
one of the criteria of paragraph (2)(ii) of this definition.
    (i) Vehicles must have affixed components designed to work in an 
off-road environment (for example, hazardous material equipment or 
drilling equipment) or be designed to operate at low speeds making them 
unsuitable for normal highway operation.
    (ii) Vehicles must:
    (A) Have an axle that has a gross axle weight rating (GAWR), as 
defined in 49 CFR Sec.  571.3, of 29,000 pounds or more;
    (B) Have a speed attainable in 2 miles of not more than 33 mph; or
    (C) Have a speed attainable in 2 miles of not more than 45 mph, an 
unloaded vehicle weight that is not less than 95 percent of its GVWR, 
and no capacity to carry occupants other than the driver and operating 
crew.
    Heavy-duty vehicle means a vehicle as defined in Sec.  523.6.
    Incomplete vehicle means a vehicle which does not have the primary 
load carrying device or container attached when it is first sold as a 
vehicle or any vehicle that does not meet the definition of a complete 
vehicle. This may include vehicles sold to secondary vehicle 
manufacturers. Incomplete vehicles include cab-complete vehicles.
    Innovative technology means technology certified as such under 40 
CFR 1037.610.
    Light truck means a non-passenger automobile as defined in Sec.  
523.5.
    Medium duty passenger vehicle means a vehicle which would satisfy 
the criteria in Sec.  523.5 (relating to light trucks) but for its 
gross vehicle weight rating or its curb weight, which is rated at more 
than 8,500 lbs GVWR or has a vehicle curb weight of more than 6,000 lbs 
or has a basic vehicle frontal area in excess of 45 square feet, and 
which is designed primarily to transport passengers, but does not 
include a vehicle that:
    (1) Is an ``incomplete vehicle'' as defined in this subpart; or
    (2) Has a seating capacity of more than 12 persons; or
    (3) Is designed for more than 9 persons in seating rearward of the 
driver's seat; or
    (4) Is equipped with an open cargo area (for example, a pick-up 
truck box or bed) of 72.0 inches in interior length or more. A covered 
box not readily

[[Page 63189]]

accessible from the passenger compartment will be considered an open 
cargo area for purposes of this definition.
    Mild hybrid vehicle has the meaning given in in 40 CFR 86.1803-01.
    Motor home has the meaning given in 49 CFR 571.3.
    Motor vehicle has the meaning given in 40 CFR 85.1703.
    Passenger-carrying volume means the sum of the front seat volume 
and, if any, rear seat volume, as defined in 40 CFR 600.315-08, in the 
case of automobiles to which that term applies. With respect to 
automobiles to which that term does not apply, ``passenger-carrying 
volume'' means the sum in cubic feet, rounded to the nearest 0.1 cubic 
feet, of the volume of a vehicle's front seat and seats to the rear of 
the front seat, as applicable, calculated as follows with the head 
room, shoulder room, and leg room dimensions determined in accordance 
with the procedures outlined in Society of Automotive Engineers 
Recommended Practice J1100a, Motor Vehicle Dimensions (Report of Human 
Factors Engineering Committee, Society of Automotive Engineers, 
approved September 1973 and last revised September 1975).
    (1) For front seat volume, divide 1,728 into the product of the 
following SAE dimensions, measured in inches to the nearest 0.1 inches, 
and round the quotient to the nearest 0.001 cubic feet.
    (i) H61-Effective head room--front.
    (ii) W3-Shoulder room--front.
    (iii) L34-Maximum effective leg room--accelerator.
    (2) For the volume of seats to the rear of the front seat, divide 
1,728 into the product of the following SAE dimensions, measured in 
inches to the nearest 0.1 inches, and rounded the quotient to the 
nearest 0.001 cubic feet.
    (i) H63-Effective head room--second.
    (ii) W4-Shoulder room--second.
    (iii) L51-Minimum effective leg room--second.
    Pickup truck means a non-passenger automobile which has a passenger 
compartment and an open cargo area (bed).
    Recreational vehicle or RV means a motor vehicle equipped with 
living space and amenities found in a motor home.
    Running clearance means the distance from the surface on which an 
automobile is standing to the lowest point on the automobile, excluding 
unsprung weight.
    Static loaded radius arc means a portion of a circle whose center 
is the center of a standard tire-rim combination of an automobile and 
whose radius is the distance from that center to the level surface on 
which the automobile is standing, measured with the automobile at curb 
weight, the wheel parallel to the vehicle's longitudinal centerline, 
and the tire inflated to the manufacturer's recommended pressure.
    Strong hybrid vehicle has the meaning given in 40 CFR 86.1803-01.
    Temporary living quarters means a space in the interior of an 
automobile in which people may temporarily live and which includes 
sleeping surfaces, such as beds, and household conveniences, such as a 
sink, stove, refrigerator, or toilet.
    Van means a vehicle with a body that fully encloses the driver and 
a cargo carrying or work performing compartment. The distance from the 
leading edge of the windshield to the foremost body section of vans is 
typically shorter than that of pickup trucks and sport utility 
vehicles.
    Vocational tractor means a tractor that is classified as a 
vocational vehicle according to 40 CFR 1037.630.
    Vocational vehicle means a vehicle that is equipped for a 
particular industry, trade or occupation such as construction, heavy 
hauling, mining, logging, oil fields, refuse and includes vehicles such 
as school buses, motorcoaches and RVs.
    Work truck means a vehicle that is rated at more than 8,500 pounds 
and less than or equal to 10,000 pounds gross vehicle weight, and is 
not a medium-duty passenger vehicle as defined in 40 CFR 86.1803 
effective as of December 20, 2007.

PART 531--PASSENGER AUTOMOBILE AVERAGE FUEL ECONOMY STANDARDS

0
37. The authority citation for part 531 continues to read as follows:

    Authority: 49 U.S.C. 32902; delegation of authority at 49 CFR 
1.50

0
38. Amend Sec.  531.5 by revising paragraph (a) introductory text, 
revising paragraphs (b), (c), and (d), redesignating paragraph (e) as 
paragraph (f), and adding a new paragraph (e).
    The revisions and addition read as follows:

Sec.  531.5  Fuel economy standards.

    (a) Except as provided in paragraph (f) of this section, each 
manufacturer of passenger automobiles shall comply with the fleet 
average fuel economy standards in Table I, expressed in miles per 
gallon, in the model year specified as applicable:
* * * * *
    (b) For model year 2011, a manufacturer's passenger automobile 
fleet shall comply with the fleet average fuel economy level calculated 
for that model year according to Figure 1 and the appropriate values in 
Table II.
[GRAPHIC] [TIFF OMITTED] TR15OC12.070

Where:

N is the total number (sum) of passenger automobiles produced by a 
manufacturer;
N i is the number (sum) of the ith passenger automobile 
model produced by the manufacturer; and
T i is the fuel economy target of the ith model passenger 
automobile, which is determined according to the following formula, 
rounded to the nearest hundredth:
[GRAPHIC] [TIFF OMITTED] TR15OC12.071

Where:

Parameters a, b, c, and d are defined in Table II;
e = 2.718; and
x = footprint (in square feet, rounded to the nearest tenth) of the 
vehicle model.

[[Page 63190]]

                      Table II-Parameters for the Passenger Automobile Fuel Economy Targets
----------------------------------------------------------------------------------------------------------------
                                                                      Parameters
             Model year              ---------------------------------------------------------------------------
                                           a (mpg)            b (mpg)        c (gal/mi/ft\2\)      d (gal/mi)
----------------------------------------------------------------------------------------------------------------
2011................................             31.20              24.00              51.41               1.91
----------------------------------------------------------------------------------------------------------------

    (c) For model years 2012-2025, a manufacturer's passenger 
automobile fleet shall comply with the fleet average fuel economy level 
calculated for that model year according to Figure 2 and the 
appropriate values in Table III.
[GRAPHIC] [TIFF OMITTED] TR15OC12.072

Where:

CAFE required is the fleet average fuel economy standard for a given 
fleet (domestic passenger automobiles or import passenger 
automobiles);
Subscript i is a designation of multiple groups of automobiles, 
where each group's designation, i.e., i = 1, 2, 3, etc., represents 
automobiles that share a unique model type and footprint within the 
applicable fleet, either domestic passenger automobiles or import 
passenger automobiles;
Production i is the number of passenger automobiles produced for 
sale in the United States within each ith designation, i.e., which 
share the same model type and footprint;
    TARGET i is the fuel economy target in miles per gallon (mpg) 
applicable to the footprint of passenger automobiles within each ith 
designation, i.e., which share the same model type and footprint, 
calculated according to Figure 3 and rounded to the nearest 
hundredth of a mpg, i.e., 35.455 = 35.46 mpg, and the summations in 
the numerator and denominator are both performed over all models in 
the fleet in question.
[GRAPHIC] [TIFF OMITTED] TR15OC12.073

Where:

TARGET is the fuel economy target (in mpg) applicable to vehicles of 
a given footprint (FOOTPRINT, in square feet);
Parameters a, b,c, and d are defined in Table III; and
The MIN and MAX functions take the minimum and maximum, 
respectively, of the included values.

              Table III-Parameters for the Passenger Automobile Fuel Economy Targets, MYs 2012-2025
----------------------------------------------------------------------------------------------------------------
                                                                            Parameters
                                                 ---------------------------------------------------------------
                   Model year                                                       c (gal/mi/
                                                      a (mpg)         b (mpg)         ft\2\)        d (gal/mi)
----------------------------------------------------------------------------------------------------------------
2012............................................           35.95           27.95       0.0005308        0.006057
2013............................................           36.80           28.46       0.0005308        0.005410
2014............................................           37.75           29.03       0.0005308        0.004725
2015............................................           39.24           29.90       0.0005308        0.003719
2016............................................           41.09           30.96       0.0005308        0.002573
2017............................................           43.61           32.65       0.0005131        0.001896
2018............................................           45.21           33.84       0.0004954        0.001811
2019............................................           46.87           35.07       0.0004783        0.001729
2020............................................           48.74           36.47       0.0004603        0.001643
2021............................................           50.83           38.02       0.0004419        0.001555
2022............................................           53.21           39.79       0.0004227        0.001463
2023............................................           55.71           41.64       0.0004043        0.001375

[[Page 63191]]

 
2024............................................           58.32           43.58       0.0003867        0.001290
2025............................................           61.07           45.61       0.0003699        0.001210
----------------------------------------------------------------------------------------------------------------

     (d) In addition to the requirements of paragraphs (b) and (c) of 
this section, each manufacturer shall also meet the minimum fleet 
standard for domestically manufactured passenger automobiles expressed 
in Table IV:

 Table IV--Minimum Fuel Economy Standards for Domestically Manufactured
                  Passenger Automobiles, MYs 2011-2021
------------------------------------------------------------------------
                                                              Minimum
                       Model year                            standard
------------------------------------------------------------------------
2011....................................................            27.8
2012....................................................            30.7
2013....................................................            31.4
2014....................................................            32.1
2015....................................................            33.3
2016....................................................            34.7
2017....................................................            36.7
2018....................................................            38.0
2019....................................................            39.4
2020....................................................            40.9
2021....................................................            42.7
2022....................................................            44.7
2023....................................................            46.8
2024....................................................            49.0
2025....................................................            51.3
------------------------------------------------------------------------

     (e) For model years 2022-2025, each manufacturer shall comply with 
the standards set forth in paragraphs (c) and (d) in this section, if 
NHTSA determines in a rulemaking, initiated after January 1, 2017, and 
conducted in accordance with 49 U.S.C. 32902, that the standards in 
paragraphs (c) and (d) are the maximum feasible standards for model 
years 2022-2025. If, for any of those model years, NHTSA determines 
that the maximum feasible standard for passenger cars and the 
corresponding minimum standard for domestically manufactured passenger 
cars should be set at a different level, manufacturers shall comply 
with those different standards in lieu of the standards set forth for 
those model years in paragraphs (c) and (d), and NHTSA will revise this 
section to reflect the different standards.
* * * * *

0
39. Revise Sec.  531.6 to read as follows:

Sec.  531.6  Measurement and calculation procedures.

    (a) The fleet average fuel economy performance of all passenger 
automobiles that are manufactured by a manufacturer in a model year 
shall be determined in accordance with procedures established by the 
Administrator of the Environmental Protection Agency under 49 U.S.C. 
32904 and set forth in 40 CFR part 600. For model years 2017 to 2025, a 
manufacturer is eligible to increase the fuel economy performance of 
passenger cars in accordance with procedures established by EPA set 
forth in 40 CFR part 600, including any adjustments to fuel economy EPA 
allows, such as for fuel consumption improvements related to air 
conditioning efficiency and off-cycle technologies.
    (b) The eligibility of a manufacturer to increase its fuel economy 
performance through use of an off-cycle technology requires an 
application request made to EPA in accordance with 40 CFR Part 86.1869-
12 and an approval granted by EPA made in consultation with NHTSA. In 
order to expedite NHTSA's consultation with EPA, a manufacturer's 
application as part of the off-cycle credit approval process under 40 
CFR 86.1869-12(b) or 40 CFR 86.1869-12(c) shall also be submitted to 
NHTSA at the same time if the manufacturer is seeking off-cycle fuel 
economy improvement values under the CAFE program for those 
technologies. For off-cycle technologies which are covered under 40 CFR 
86.1869-12(b) or 40 CFR 86.1869-12(c), NHTSA will consult with EPA 
regarding NHTSA's evaluation of the specific off-cycle technology to 
ensure its impact on fuel economy and the suitability of using the off-
cycle technology to adjust the fuel economy performance. NHTSA will 
provide its views on the suitability of the technology for that purpose 
to EPA. NHTSA's evaluation and review will consider:
    (1) Whether the technology has a direct impact upon improving fuel 
economy performance;
    (2) Whether the technology is related to crash-avoidance 
technologies, safety critical systems or systems affecting safety-
critical functions, or technologies designed for the purpose of 
reducing the frequency of vehicle crashes;
    (3) Information from any assessments conducted by EPA related to 
the application, the technology and/or related technologies; and
    (4) Any other relevant factors.

0
40. Revise Appendix A to part 531 to read as follows:

Appendix to Part 531--Example of Calculating Compliance Under Sec.  
531.5(c)

    Assume a hypothetical manufacturer (Manufacturer X) produces a 
fleet of domestic passenger automobiles in MY 2012 as follows:

                                                Appendix Table I
----------------------------------------------------------------------------------------------------------------
                              Model type                                                   Actual
----------------------------------------------------------------------                    measured
                                                                         Description        fuel        Volume
            Group                Carline       Basic     Transmission                     economy
                                   name      engine (L)      class                         (mpg)
----------------------------------------------------------------------------------------------------------------
1............................     PC A FWD          1.8            A5  2-door sedan...         34.0        1,500
2............................     PC A FWD          1.8            M6  2-door sedan...         34.6        2,000
3............................     PC A FWD          2.5            A6  4-door wagon...         33.8        2,000
4............................     PC A AWD          1.8            A6  4-door wagon...         34.4        1,000
5............................     PC A AWD          2.5            M6  2-door                  32.9        3,000
                                                                        hatchback.
6............................     PC B RWD          2.5            A6  4-door wagon...         32.2        8,000
7............................     PC B RWD          2.5            A7  4-door sedan...         33.1        2,000
8............................     PC C AWD          3.2            A7  4-door sedan...         30.6        5,000

[[Page 63192]]

 
9............................     PC C FWD          3.2            M6  2-door coupe...         28.5        3,000
                              ----------------------------------------------------------------------------------
    Total....................  ...........  ...........  ............  ...............  ...........       27,500
----------------------------------------------------------------------------------------------------------------
Note to Appendix Table I: Manufacturer X's required fleet average fuel economy standard level would first be
  calculated by determining the fuel economy targets applicable to each unique model type and footprint
  combination for model type groups 1-9 as illustrated in Appendix Table II:

    Manufacturer X calculates a fuel economy target standard for 
each unique model type and footprint combination.

                                                                                        Appendix Table II
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Model type                                                                                                                                     Fuel
------------------------------------------------------------------------------------------------                                                        Track                           economy
                                                                                                         Description          Base tire   Wheelbase   width F&R  Footprint    Volume     target
                  Group                          Carline name            Basic     Transmission                                 size       (inches)    average    (ft\2\)               standard
                                                                       engine (L)      class                                                           (inches)                          (mpg)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................  PC A FWD..................          1.8            A5  2-door sedan..............  205/75R14          99.8       61.2       42.4      1,500      35.01
2.......................................  PC A FWD..................          1.8            M6  2-door sedan..............  215/70R15          99.8       60.9       42.2      2,000      35.14
3.......................................  PC A FWD..................          2.5            A6  4-door wagon..............  215/70R15         100.0       60.9       42.3      2,000      35.08
4.......................................  PC A AWD..................          1.8            A6  4-door wagon..............  235/60R15         100.0       61.2       42.5      1,000      35.95
5.......................................  PC A AWD..................          2.5            M6  2-door hatchback..........  225/65R16          99.6       59.5       41.2      3,000      35.81
6.......................................  PC B RWD..................          2.5            A6  4-door wagon..............  265/55R18         109.2       66.8       50.7      8,000      30.33
7.......................................  PC B RWD..................          2.5            A7  4-door sedan..............  235/65R17         109.2       67.8       51.4      2,000      29.99
8.......................................  PC C AWD..................          3.2            A7  4-door sedan..............  265/55R18         111.3       67.8       52.4      5,000      29.52
9.......................................  PC C FWD..................          3.2            M6  2-door coupe..............  225/65R16         111.3       67.2       51.9      3,000      29.76
                                         -------------------------------------------------------------------------------------------------------------------------------------------------------
    Total...............................  ..........................  ...........  ............  ..........................  ..........  ...........  .........  .........     27,500  .........
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note to Appendix Table II: With the appropriate fuel economy targets determined for each unique model type and footprint combination, Manufacturer X's required fleet average fuel economy
  standard would be calculated as illustrated in Appendix Figure 1:

    Appendix Figure 1--Calculation of Manufacturer X's fleet average 
fuel economy standard using Table II:

Fleet average fuel economy standard =
[GRAPHIC] [TIFF OMITTED] TR15OC12.074

[[Page 63193]]

= 31.6 mpg

    Appendix Figure 2--Calculation of Manufacturer X's actual fleet 
average fuel economy performance level using Table I:
Fleet average fuel economy performance =

[GRAPHIC] [TIFF OMITTED] TR15OC12.075

= 32.0 mpg

    Note to Appendix Figure 2: Since the actual fleet average fuel 
economy performance of Manufacturer X's fleet is 32.0 mpg, as 
compared to its required fleet fuel economy standard of 31.6 mpg, 
Manufacturer X complied with the CAFE standard for MY 2012 as set 
forth in Sec.  531.5(c).

PART 533--LIGHT TRUCK FUEL ECONOMY STANDARDS

0
41. The authority citation for part 531 continues to read as follows:

    Authority: 49 U.S.C. 32902; delegation of authority at 49 CFR 
1.50.

0
42. Amend Sec.  533.5 by revising paragraphs (a), (f), (g), (h), (i) 
and adding paragraphs (j) and (k) to read as follows:

Sec.  533.5  Requirements.

    (a) Each manufacturer of light trucks shall comply with the 
following fleet average fuel economy standards, expressed in miles per 
gallon, in the model year specified as applicable:

                                                     Table I
----------------------------------------------------------------------------------------------------------------
                                                    2-wheel drive light       4-wheel drive light
                                                          trucks                    trucks             Limited
                   Model year                   ----------------------------------------------------   product
                                                   Captive                   Captive                  line light
                                                   imports       Other       imports       Other        trucks
----------------------------------------------------------------------------------------------------------------
1979...........................................  ...........         17.2  ...........         15.8  ...........
1980...........................................         16.0         16.0         14.0         14.0         14.0
1981...........................................         16.7         16.7         15.0         15.0         14.5
----------------------------------------------------------------------------------------------------------------

                                                    Table II
----------------------------------------------------------------------------------------------------------------
                                        Combined standard        2-wheel drive light       4-wheel drive light
                                   --------------------------          trucks                    trucks
            Model year                                       ---------------------------------------------------
                                      Captive       Others      Captive                   Captive
                                      imports                   imports       Others      imports       Others
----------------------------------------------------------------------------------------------------------------
1982..............................         17.5         17.5         18.0         18.0         16.0         16.0
1983..............................         19.0         19.0         19.5         19.5         17.5         17.5
1984..............................         20.0         20.0         20.3         20.3         18.5         18.5
1985..............................         19.5         19.5         19.7         19.7         18.9         18.9
1986..............................         20.0         20.0         20.5         20.5         19.5         19.5
1987..............................         20.5         20.5         21.0         21.0         19.5         19.5
1988..............................         20.5         20.5         21.0         21.0         19.5         19.5
1989..............................         20.5         20.5         21.5         21.5         19.0         19.0
1990..............................         20.0         20.0         20.5         20.5         19.0         19.0
1991..............................         20.2         20.2         20.7         20.7         19.1         19.1
----------------------------------------------------------------------------------------------------------------

                                Table III
------------------------------------------------------------------------
                                                    Combined standard
                                               -------------------------
                  Model year                      Captive
                                                  imports       Other
------------------------------------------------------------------------
1992..........................................         20.2         20.2
1993..........................................         20.4         20.4
1994..........................................         20.5         20.5
1995..........................................         20.6         20.6
------------------------------------------------------------------------

                                Table IV
------------------------------------------------------------------------
                         Model year                            Standard
------------------------------------------------------------------------
2001.......................................................         20.7
2002.......................................................         20.7
2003.......................................................         20.7
2004.......................................................         20.7
2005.......................................................         21.0

[[Page 63194]]

 
2006.......................................................         21.6
2007.......................................................         22.2
2008.......................................................         22.5
2009.......................................................         23.1
2010.......................................................         23.5
------------------------------------------------------------------------

    Figure 1:
    [GRAPHIC] [TIFF OMITTED] TR15OC12.076
    
Where:

N is the total number (sum) of light trucks produced by a 
manufacturer;
Ni is the number (sum) of the ith light truck model type 
produced by a manufacturer; and
Ti is the fuel economy target of the ith light truck 
model type, which is determined according to the following formula, 
rounded to the nearest hundredth:
[GRAPHIC] [TIFF OMITTED] TR15OC12.077

Where:

Parameters a, b, c, and d are defined in Table V;
e = 2.718; and
x = footprint (in square feet, rounded to the nearest tenth) of the 
model type.

                 Table V--Parameters for the Light Truck Fuel Economy Targets for MYs 2008-2011
----------------------------------------------------------------------------------------------------------------
                                                                                  Parameters
                                                             ---------------------------------------------------
                         Model year                                                      c (gal/mi/
                                                                a (mpg)      b (mpg)       ft\2\)     d (gal/mi)
----------------------------------------------------------------------------------------------------------------
2008........................................................        28.56        19.99        49.30         5.58
2009........................................................        30.07        20.87        48.00         5.81
2010........................................................        29.96        21.20        48.49         5.50
2011........................................................        27.10        21.10        56.41         4.28
----------------------------------------------------------------------------------------------------------------

    Figure 2:
    [GRAPHIC] [TIFF OMITTED] TR15OC12.078
    

Where:

    CAFErequired is the fleet average fuel economy 
standard for a given light truck fleet;
    Subscript i is a designation of multiple groups of light trucks, 
where each group's designation, i.e., i = 1, 2, 3, etc., represents 
light trucks that share a unique model type and footprint within the 
applicable fleet.
    Productioni is the number of light trucks produced 
for sale in the United States within each ith 
designation, i.e., which share the same model type and footprint;
    TARGETi is the fuel economy target in miles per gallon (mpg) 
applicable to the footprint of light trucks within each ith 
designation, i.e., which share the same model type and footprint, 
calculated according to either Figure 3 or Figure 4, as appropriate, 
and rounded to the nearest hundredth of a mpg, i.e., 35.455 = 35.46 
mpg, and the summations in the numerator and denominator are both 
performed over all models in the fleet in question.

    Figure 3:
    [GRAPHIC] [TIFF OMITTED] TR15OC12.079
    
Where:

    TARGET is the fuel economy target (in mpg) applicable to 
vehicles of a given footprint (FOOTPRINT, in square feet);
    Parameters a, b, c, and d are defined in Table VI; and
    The MIN and MAX functions take the minimum and maximum, 
respectively, of the included values.

[[Page 63195]]

                 Table VI--Parameters for the Light Truck Fuel Economy Targets for MYs 2012-2016
----------------------------------------------------------------------------------------------------------------
                                                                            Parameters
                                                 ---------------------------------------------------------------
                   Model year                                                      c (gal/mi/ft
                                                      a (mpg)         b (mpg)          \2\)         d (gal/mi)
----------------------------------------------------------------------------------------------------------------
2012............................................           29.82           22.27       0.0004546        0.014900
2013............................................           30.67           22.74       0.0004546        0.013968
2014............................................           31.38           23.13       0.0004546        0.013225
2015............................................           32.72           23.85       0.0004546        0.011920
2016............................................           34.42           24.74       0.0004546        0.010413
----------------------------------------------------------------------------------------------------------------

    Figure 4:
    [GRAPHIC] [TIFF OMITTED] TR15OC12.080
    
Where:

    TARGET is the fuel economy target (in mpg) applicable to 
vehicles of a given footprint (FOOTPRINT, in square feet);
    Parameters a, b, c, d, e, f, g, and h are defined in Table VII; 
and
    The MIN and MAX functions take the minimum and maximum, 
respectively, of the included values.

                                     Table VII-Parameters for the Light Truck Fuel Economy Targets for MYs 2017-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                Parameters
                                                 -------------------------------------------------------------------------------------------------------
                   Model year                                               c  (gal/mi/                                         g  (gal/mi/
                                                    a  (mpg)     b  (mpg)      ft\2\)    d  (gal/mi)    e  (mpg)     f  (mpg)      ft\2\)    h  (gal/mi)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2017............................................        36.26        25.09    0.0005484     0.005097        35.10        25.09    0.0004546     0.009851
2018............................................        37.36        25.20    0.0005358     0.004797        35.31        25.20    0.0004546     0.009682
2019............................................        38.16        25.25    0.0005265     0.004623        35.41        25.25    0.0004546     0.009603
2020............................................        39.11        25.25    0.0005140     0.004494        35.41        25.25    0.0004546     0.009603
2021............................................        41.80        25.25    0.0004820     0.004164        35.41        25.25    0.0004546     0.009603
2022............................................        43.79        26.29    0.0004607     0.003944        35.41        25.25    0.0004546     0.009603
2023............................................        45.89        27.53    0.0004404     0.003735        35.41        25.25    0.0004546     0.009603
2024............................................        48.09        28.83    0.0004210     0.003534        35.41        25.25    0.0004546     0.009603
2025............................................        50.39        30.19    0.0004025     0.003343        35.41        25.25    0.0004546     0.009603
--------------------------------------------------------------------------------------------------------------------------------------------------------

* * * * *
    (f) For each model year 1996 and thereafter, each manufacturer 
shall combine its captive imports with its other light trucks and 
comply with the fleet average fuel economy standard in paragraph (a) of 
this section.
    (g) For model years 2008-2010, at a manufacturer's option, a 
manufacturer's light truck fleet may comply with the fuel economy 
standard calculated for each model year according to Figure 1 and the 
appropriate values in Table V, with said option being irrevocably 
chosen for that model year and reported as specified in Sec.  537.8.
    (h) For model year 2011, a manufacturer's light truck fleet shall 
comply with the fleet average fuel economy standard calculated for that 
model year according to Figure 1 and the appropriate values in Table V.
    (i) For model years 2012-2016, a manufacturer's light truck fleet 
shall comply with the fleet average fuel economy standard calculated 
for that model year according to Figures 2 and 3 and the appropriate 
values in Table VI.
    (j) For model years 2017-2025, a manufacturer's light truck fleet 
shall comply with the fleet average fuel economy standard calculated 
for that model year according to Figures 2 and 4 and the appropriate 
values in Table VII.
    (k) For model years 2022-2025, each manufacturer shall comply with 
the standards set forth in paragraph (j) in this section, if NHTSA 
determines in a rulemaking, initiated after January 1, 2017, and 
conducted in accordance with 49 U.S.C. 32902, that the standards in 
paragraph (j) are the maximum feasible standards for model years 2022-
2025. If, for any of those model years, NHTSA determines that the 
maximum feasible standard for light trucks should be set at a different 
level, manufacturers shall comply with those different standards in 
lieu of the standards set forth for those model years in paragraph (j), 
and NHTSA will revise this section to reflect the different standards.

0
43. Amend Sec.  533.6 by revising paragraph (b) and adding paragraph 
(c) to read as follows:

Sec.  533.6  Measurement and calculation procedures.

* * * * *
    (b) The fleet average fuel economy performance of all vehicles 
subject to Part 533 that are manufactured by a manufacturer in a model 
year shall be determined in accordance with procedures established by 
the Administrator of the Environmental Protection Agency under 49 
U.S.C. 32904 and set forth in 40 CFR part 600. For model years 2017 to 
2025, a manufacturer is eligible to increase the fuel economy 
performance of light trucks in accordance with procedures established 
by EPA set forth in 40 CFR part 600, including any adjustments to fuel 
economy EPA allows, such as for fuel consumption improvements related

[[Page 63196]]

to air conditioning efficiency, off-cycle technologies, and 
hybridization and other performance-based technologies for full-size 
pickup trucks.
    (c) The eligibility of a manufacturer to increase its fuel economy 
performance through use of an off-cycle technology requires an 
application request made to EPA in accordance with 40 CFR Part 86.1869-
12 and an approval granted by EPA made in consultation with NHTSA. In 
order to expedite NHTSA's consultation with EPA, a manufacturer's 
application as part of the off-cycle credit approval process under 40 
CFR 86.1869-12(b) or 40 CFR 86.1869-12(c) shall also be submitted to 
NHTSA at the same time if the manufacturer is seeking off-cycle fuel 
economy improvement values under the CAFE program for those 
technologies. For off-cycle technologies which are covered under 40 CFR 
86.1869-12(b) or 40 CFR 86.1869-12(c), NHTSA will consult with EPA 
regarding NHTSA's evaluation of the specific off-cycle technology to 
ensure its impact on fuel economy and the suitability of using the off-
cycle technology to adjust the fuel economy performance. NHTSA will 
provide its views on the suitability of the technology for that purpose 
to EPA. NHTSA's evaluation and review will consider:
    (1) Whether the technology has a direct impact upon improving fuel 
economy performance;
    (2) Whether the technology is related to crash-avoidance 
technologies, safety critical systems or systems affecting safety-
critical functions, or technologies designed for the purpose of 
reducing the frequency of vehicle crashes.
    (3) Information from any assessments conducted by EPA related to 
the application, the technology and/or related technologies; and
    (4) Any other relevant factors.

0
44. Revise Appendix A to part 533 to read as follows:

Appendix to Part 533--Example of Calculating Compliance Under Sec.  
533.5(I)

    Assume a hypothetical manufacturer (Manufacturer X) produces a 
fleet of light trucks in MY 2012 as follows:

                                                Appendix Table I
----------------------------------------------------------------------------------------------------------------
                           Model type
----------------------------------------------------------------                      Actual
                                  Basic engine    Transmission     Description     measured fuel      Volume
    Group       Carline name          (L)             class                        economy (mpg)
----------------------------------------------------------------------------------------------------------------
1...........  Pickup A 2WD....              4                A5  Reg cab, MB....            27.1             800
2...........  Pickup B 2WD....              4                M5  Reg cab, MB....            27.6             200
3...........  Pickup C 2WD....              4.5              A5  Reg cab, LB....            23.9             300
4...........  Pickup C 2WD....              4                M5  Ext cab, MB....            23.7             400
5...........  Pickup C 4WD....              4.5              A5  Crew cab, SB...            23.5             400
6...........  Pickup D 2WD....              4.5              A6  Crew cab, SB...            23.6             400
7...........  Pickup E 2WD....              5                A6  Ext cab, LB....            22.7             500
8...........  Pickup E 2WD....              5                A6  Crew cab, MB...            22.5             500
9...........  Pickup F 2WD....              4.5              A5  Reg cab, LB....            22.5           1,600
10..........  Pickup F 4WD....              4.5              A5  Ext cab, MB....            22.3             800
11..........  Pickup F 4WD....              4.5              A5  Crew cab, SB...            22.2             800
                                                                                                 ---------------
    Total...  ................  ...............  ..............  ...............  ..............           6,700
----------------------------------------------------------------------------------------------------------------
Note to Appendix Table I: Manufacturer X's required fleet average fuel economy standard level would first be
  calculated by determining the fuel economy targets applicable to each unique model type and footprint
  combination for model type groups 1-11 as illustrated in Appendix Table II.

    Manufacturer X calculates a fuel economy target standard for 
each unique model type and footprint combination.

                                                                    Appendix Table II
--------------------------------------------------------------------------------------------------------------------------------------------------------
                        Model type                                                                                                               Fuel
----------------------------------------------------------                                                   Track                              economy
                                    Basic                     Description     Base tire size   Wheelbase   width F&R   Footprint    Volume      target
    Group        Carline name      engine    Transmission                                      (inches)     average     (ft\2\)                standard
                                     (L)         class                                                     (inches)                              (mpg)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1...........  Pickup A 2WD.....           4           A5   Reg cab, MB......  235/75R15.....       100.0        68.8        47.8         800       27.30
2...........  Pickup B 2WD.....           4           M5   Reg cab, MB......  235/75R15.....       100.0        68.2        47.4         200       27.44
3...........  Pickup C 2WD.....         4.5           A5   Reg cab, LB......  255/70R17.....       125.0        68.8        59.7         300       23.79
4...........  Pickup C 2WD.....           4           M5   Ext cab, MB......  255/70R17.....       125.0        68.8        59.7         400       23.79
5...........  Pickup C 4WD.....         4.5           A5   Crew cab, SB.....  275/70R17.....       150.0        69.0        71.9         400       22.27
6...........  Pickup D 2WD.....         4.5           A6   Crew cab, SB.....  255/70R17.....       125.0        68.8        59.7         400       23.79
7...........  Pickup E 2WD.....           5           A6   Ext cab, LB......  255/70R17.....       125.0        68.8        59.7         500       23.79
8...........  Pickup E 2WD.....           5           A6   Crew cab, MB.....  285/70R17.....       125.0        69.2        60.1         500       23.68
9...........  Pickup F 2WD.....         4.5           A5   Reg cab, LB......  255/70R17.....       125.0        68.9        59.8       1,600       23.76
10..........  Pickup F 4WD.....         4.5           A5   Ext cab, MB......  275/70R17.....       150.0        69.0        71.9         800       22.27
11..........  Pickup F 4WD.....         4.5           A5   Crew cab, SB.....  285/70R17.....       150.0        69.2        72.1         800       22.27
    Total...  .................  ..........  ............  .................  ..............  ..........  ..........  ..........       6,700  ..........
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note to Appendix Table II: With the appropriate fuel economy targets determined for each unique model type and footprint combination, Manufacturer X's
  required fleet average fuel economy standard would be calculated as illustrated in Appendix Figure 1:

[[Page 63197]]

Appendix Figure 1--Calculation of Manufacturer X's Fleet Average Fuel 
Economy Standard Using Table II

Fleet average fuel economy standard =
[GRAPHIC] [TIFF OMITTED] TR15OC12.081

= 23.7 mpg

Appendix Figure 2--Calculation of Manufacturer X's Actual Fleet Average 
Fuel Economy Performance Level Using Table I

Fleet average fuel economy performance =
[GRAPHIC] [TIFF OMITTED] TR15OC12.082

= 23.3 mpg

    Note to Appendix Figure 2:  Since the actual fleet average fuel 
economy performance of Manufacturer X's fleet is 23.3 mpg, as 
compared to its required fleet fuel economy standard of 23.7 mpg, 
Manufacturer X did not comply with the CAFE standard for MY 2012 as 
set forth in Sec.  533.5(i).

PART 536--TRANSFER AND TRADING OF FUEL ECONOMY CREDITS

0
45. The authority citation for part 536 it is revised to read as 
follows:

    Authority: 49 U.S.C. 32903; delegation of authority at 49 CFR 
1.50.

0
46. Amend Sec.  536.4 by revising paragraph (c) to read as follows:

Sec.  536.4  Credits.

* * * * *
    (c) Adjustment factor. When traded or transferred and used, fuel 
economy credits are adjusted to ensure fuel oil savings is preserved. 
For traded credits, the user (or buyer) must multiply the calculated 
adjustment factor by the number of its shortfall credits it plans to 
offset in order to determine the number of equivalent credits to 
acquire from the earner (or seller). For transferred credits, the user 
of credits must multiply the calculated adjustment factor by the number 
of its shortfall credits it plans to offset in order to determine the 
number of equivalent credits to transfer from the compliance category 
holding the available credits. The adjustment factor is calculated 
according to the following formula:
[GRAPHIC] [TIFF OMITTED] TR15OC12.083

Where:

A = Adjustment factor applied to traded and transferred credits;
VMTe = Lifetime vehicle miles traveled as provided in the 
following table for the model year and compliance category in which 
the credit was earned;
VMTu = Lifetime vehicle miles traveled as provided in the 
following table for the model year and compliance category in which 
the credit is used for compliance;

[[Page 63198]]

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Lifetime Vehicle Miles Traveled (VMT)
               Model year                ---------------------------------------------------------------------------------------------------------------
                                               2011            2012            2013            2014            2015            2016          2017-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passenger Cars..........................         152,922         177,238         177,366         178,652         180,497         182,134         195,264
Light Trucks............................         172,552         208,471         208,537         209,974         212,040         213,954         225,865
--------------------------------------------------------------------------------------------------------------------------------------------------------

MPGse = Required fuel economy standard for the 
originating (earning) manufacturer, compliance category, and model 
year in which the credit was earned;
MPGae = Actual fuel economy for the originating 
manufacturer, compliance category, and model year in which the 
credit was earned;
MPGsu = Required fuel economy standard for the user 
(buying) manufacturer, compliance category, and model year in which 
the credit is used for compliance; and
MPGau = Actual fuel economy for the user manufacturer, 
compliance category, and model year in which the credit is used for 
compliance.

0
47. Amend Sec.  536.9 by revising paragraph (c) to read as follows:

Sec.  536.9  Use of credits with regard to the domestically 
manufactured passenger automobile minimum standard.

* * * * *
    (c) Transferred or traded credits may not be used, pursuant to 49 
U.S.C. 32903(g)(4) and (f)(2), to meet the domestically manufactured 
passenger automobile minimum standard specified in 49 U.S.C. 
32902(b)(4) and in 49 CFR 531.5(d).
* * * * *

0
48. Amend Sec.  536.10 by revising paragraphs (b) and (c) and adding 
paragraph (d) to read as follows:

Sec.  536.10  Treatment of dual-fuel and alternative-fuel vehicles--
consistency with 49 CFR part 538.

* * * * *
    (b) If a manufacturer's calculated fuel economy for a particular 
compliance category, including any statutorily-required calculations 
for alternative fuel and dual fuel vehicles, is higher or lower than 
the applicable fuel economy standard, manufacturers will earn credits 
or must apply credits or pay civil penalties equal to the difference 
between the calculated fuel economy level in that compliance category 
and the applicable standard. Credits earned are the same as any other 
credits, and may be held, transferred, or traded by the manufacturer 
subject to the limitations of the statute and this regulation.
    (c) For model years up to and including MY 2019, if a manufacturer 
builds enough dual fuel vehicles (except plug-in hybrid electric 
vehicles) to improve the calculated fuel economy in a particular 
compliance category by more than the limits set forth in 49 U.S.C. 
32906(a), the improvement in fuel economy for compliance purposes is 
restricted to the statutory limit. Manufacturers may not earn credits 
nor reduce the application of credits or fines for calculated 
improvements in fuel economy based on dual fuel vehicles beyond the 
statutory limit.
    (d) For model years 2020 and beyond, a manufacturer must calculate 
the fuel economy of dual fueled vehicles in accordance with 40 CFR 
600.510-12(c).

PART 537--AUTOMOTIVE FUEL ECONOMY REPORTS

0
49. The authority citation for part 537 continues to read as follows:

    Authority:  49 U.S.C. 32907, delegation of authority at 49 CFR 
1.50.

0
50. Amend Sec.  537.5 by revising paragraph (c)(4) to read as follows:

Sec.  537.5  General requirements for reports.

* * * * *
    (c) * * *
    (4) Be submitted on CD-ROM for confidential reports provided in 
accordance with Part 537.12 and by email for non-confidential (i.e., 
redacted) versions of reports. The content of reports must be provided 
in a pdf or MS Word format except for the information required in 537.7 
which must be provided in a MS Excel format. Submit 2 copies of the CD-
ROM to: Administrator, National Highway Traffic Administration, 1200 
New Jersey Avenue SW., Washington, DC 20590, and submit reports 
electronically to the following secure email address: cafe@dot.gov;
* * * * *

0
51. Amend Sec.  537.7 by revising paragraphs (b)(3), (c)(4), (c)(5) and 
adding (c)(7) to read as follows:

Sec.  537.7  Pre-model year and mid-model year reports.

* * * * *
    (b) * * *
    (3) State the projected required fuel economy for the 
manufacturer's passenger automobiles and light trucks determined in 
accordance with 49 CFR 531.5(c) and 49 CFR 533.5 and based upon the 
projected sales figures provided under paragraph (c)(2) of this 
section. For each unique model type and footprint combination of the 
manufacturer's automobiles, provide the information specified in 
paragraph (b)(3)(i) and (ii) of this section in tabular form. List the 
model types in order of increasing average inertia weight from top to 
bottom down the left side of the table and list the information 
categories in the order specified in paragraphs (b)(3)(i) and (ii) of 
this section from left to right across the top of the table. Other 
formats, such as those accepted by EPA, which contain all of the 
information in a readily identifiable format are also acceptable.
    (i) In the case of passenger automobiles:
    (A) Beginning model year 2013, base tire as defined in 49 CFR 
523.2,
    (B) Beginning model year 2013, front axle, rear axle and average 
track width as defined in 49 CFR 523.2,
    (C) Beginning model year 2013, wheelbase as defined in 49 CFR 
523.2, and
    (D) Beginning model year 2013, footprint as defined in 49 CFR 
523.2.
    (E) Optionally, beginning model year 2013, the target standard for 
each unique model type and footprint entry listed in accordance with 
the equation provided in 49 CFR 531 Figure 3.
    (ii) In the case of light trucks:
    (A) Beginning model year 2013, base tire as defined in 49 CFR 
523.2,
    (B) Beginning model year 2013, front axle, rear axle and average 
track width as defined in 49 CFR 523.2,
    (C) Beginning model year 2013, wheelbase as defined in 49 CFR 
523.2, and
    (D) Beginning model year 2013, footprint as defined in 49 CFR 
523.2.
    (E) Optionally, beginning model year 2013, the target standard for 
each unique model type and footprint entry listed in accordance with 
the equation provided in 49 CFR 533 Figure 4.
* * * * *
    (c) * * *
    (4) (i) Loaded vehicle weight;
    (ii) Equivalent test weight;
    (iii) Engine displacement, liters;
    (iv) SAE net rated power, kilowatts;
    (v) SAE net horsepower;
    (vi) Engine code;
    (vii) Fuel system (number of carburetor barrels or, if fuel 
injection is used, so indicate);
    (viii) Emission control system;
    (ix) Transmission class;
    (x) Number of forward speeds;

[[Page 63199]]

    (xi) Existence of overdrive (indicate yes or no);
    (xii) Total drive ratio (N/V);
    (xiii) Axle ratio;
    (xiv) Combined fuel economy;
    (xv) Projected sales for the current model year;
    (xvi) (A) In the case of passenger automobiles:
    (1) Interior volume index, determined in accordance with subpart D 
of 40 CFR part 600;
    (2) Body style;
    (B) In the case of light trucks:
    (1) Passenger-carrying volume;
    (2) Cargo-carrying volume;
    (xvii) Frontal area;
    (xviii) Road load power at 50 miles per hour, if determined by the 
manufacturer for purposes other than compliance with this part to 
differ from the road load setting prescribed in 40 CFR 86.177-11(d);
    (xix) Optional equipment that the manufacturer is required under 40 
CFR parts 86 and 600 to have actually installed on the vehicle 
configuration, or the weight of which must be included in the curb 
weight computation for the vehicle configuration, for fuel economy 
testing purposes.
    (5) For each model type of automobile which is classified as a non-
passenger vehicle (light truck) under part 523 of this chapter, provide 
the following data:
    (i) For an automobile designed to perform at least one of the 
following functions in accordance with 523.5 (a) indicate (by ``yes'' 
or ``no'' for each function) whether the vehicle can:
    (A) Transport more than 10 persons (if yes, provide actual 
designated seating positions);
    (B) Provide temporary living quarters (if yes, provide applicable 
conveniences as defined in 523.2);
    (C) Transport property on an open bed (if yes, provide bed size 
width and length);
    (D) Provide, as sold to the first retail purchaser, greater cargo-
carrying than passenger-carrying volume, such as in a cargo van and 
quantify the value which should be the difference between the values 
provided in (4)(xvi)(B)(1) and (2) above; if a vehicle is sold with a 
second-row seat, its cargo-carrying volume is determined with that seat 
installed, regardless of whether the manufacturer has described that 
seat as optional; or
    (E) Permit expanded use of the automobile for cargo-carrying 
purposes or other non-passenger-carrying purposes through:
    (1) For non-passenger automobiles manufactured prior to model year 
2012, the removal of seats by means installed for that purpose by the 
automobile's manufacturer or with simple tools, such as screwdrivers 
and wrenches, so as to create a flat, floor level, surface extending 
from the forward-most point of installation of those seats to the rear 
of the automobile's interior; or
    (2) For non-passenger automobiles manufactured in model year 2008 
and beyond, for vehicles equipped with at least 3 rows of designated 
seating positions as standard equipment, permit expanded use of the 
automobile for cargo-carrying purposes or other nonpassenger-carrying 
purposes through the removal or stowing of foldable or pivoting seats 
so as to create a flat, leveled cargo surface extending from the 
forward-most point of installation of those seats to the rear of the 
automobile's interior.
    (ii) For an automobile capable of off-highway operation, identify 
which of the features below qualify the vehicle as off-road in 
accordance with 523.5 (b) and quantify the values of each feature:
    (A) 4-wheel drive; or
    (B) A rating of more than 6,000 pounds gross vehicle weight; and
    (C) Has at least four of the following characteristics calculated 
when the automobile is at curb weight, on a level surface, with the 
front wheels parallel to the automobile's longitudinal centerline, and 
the tires inflated to the manufacturer's recommended pressure. The 
exact value of each feature should be quantified:
    (1) Approach angle of not less than 28 degrees.
    (2) Breakover angle of not less than 14 degrees.
    (3) Departure angle of not less than 20 degrees.
    (4) Running clearance of not less than 20 centimeters.
    (5) Front and rear axle clearances of not less than 18 centimeters 
each.
* * * * *
    (7) Identify any air-conditioning (AC), off-cycle and full-size 
pick-up truck technologies used each model year to calculate the 
average fuel economy specified in 40 CFR 600.510-12.
    (i) Provide a list of each air conditioning efficiency improvement 
technology utilized in your fleet(s) of vehicles for each model year. 
For each technology identify vehicles by make and model types that have 
the technology, which compliance category those vehicles belong to and 
the number of vehicles for each model equipped with the technology. For 
each compliance category (domestic passenger car, import passenger car 
and light truck) report the ``Air conditioning fuel consumption 
improvements'' value in gallons/mile in accordance with the equation 
specified in 40 CFR 600.510-12(c)(3)(i).
    (ii) Provide a list of off-cycle efficiency improvement 
technologies utilized in your fleet(s) of vehicles for each model year 
that is pending or approved by EPA. For each technology identify 
vehicles by make and model that have the technology, which compliance 
category those vehicles belong to, the number of vehicles for each 
model equipped with the technology, and the associated fuel efficiency 
credits (grams/mile) available for each technology. For each compliance 
category (domestic passenger car, import passenger car and light truck) 
calculate the fleet ``Off-Cycle Credit'' value in gallons/mile in 
accordance with the equation specified in 40 CFR 600.510-12(c)(3)(ii).
    (iii) Provide a list of full-size pick-up trucks in your fleet that 
meet the mild and strong hybrid vehicle definitions. For each mild and 
strong hybrid type, identify vehicles by make and model that have the 
technology, the number of vehicles produced for each model equipped 
with the technology, the total number of full size pick-up trucks 
produced with and without the technology, the calculated percentage of 
hybrid vehicles relative to the total number of vehicles produced and 
the associated fuel efficiency credits (grams/mile) available for each 
technology. For the light truck compliance category calculate the fleet 
``Pick-up Truck Credit'' value in gallons/mile in accordance with the 
equation specified in 40 CFR 600.510-12(c)(3)(iii).
    (iv) For each model year and compliance category, provide the 
``MPG'' and ``Average MPG'' which are the fleet CAFE value before and 
the revised fleet CAFE value after taking into consideration 
adjustments for AC, Off-Cycle and full-size pick-up truck technologies 
calculated in accordance with 40 CFR 600.510-12 (c)(1)(ii).

0
52. Amend Sec.  537.8 by revising paragraph (a)(3) to read as follows:

Sec.  537.8  Supplementary reports.

    (a) * * *
    (3) Each manufacturer whose pre-model year report omits any of the 
information specified in Sec.  537.7(b), (c)(1) and (2), or (c)(4) 
shall file a supplementary report containing the information specified 
in paragraph (b)(3) of this section.
* * * * *

[[Page 63200]]

    Dated: August 28, 2012.
Ray LaHood,
Secretary, Department of Transportation.
    Dated: August 28, 2012.
Lisa P. Jackson,
Administrator, Environmental Protection Agency.
[FR Doc. 2012-21972 Filed 10-12-12; 8:45 am]
BILLING CODE 6560-50-P
```