From: William Charmley/AA/USEPA/US To: "Achanta, Chandana L." <Ch andana_L._Achanta@ omb.eop.gov> Cc: james.tamm@dot.gov, Maureen Delaney/DC/USEPA/US@EPA, rebecca.yoon@dot.gov, Robin Moran/AA/USEPA/US@EPA, Steve.Wood@dot.gov Date: 03/30/2010 12:55 PM Subject: Final versions of EPA high-leve l cost/benefits/net ben efit table from preamble and RIA Exec. Summary

Chandana -

On the phone earlier today you asked to see the fi nal version of the tables which we have added to Section I.C.2 of the preamble and the new Ta ble 1 of the Executive Summary of the final EPA RIA.

They are attached.

thanks Bill

[attachment "First few pages of RIA Exec Summary with Table 1.doc" deleted by Tad Wysor/AA/USEPA/US]

[attachment "Beginning of Preamble Section I.C.2 with Table I.C.2-1.doc" deleted by Tad Wysor/AA/USEPA/US]

### 2. Summary of Costs and Benefits of EPA's GHG Standards

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

Table I.C.2-1 EPA’s Estimated 2012-2016 Model Year Lifetime Discounted Costs, Benefits, and Net Benefits assuming the $21/ton SCC Value a,b,c,d 

### (2007 dollars) 3% Discount Rate $billions

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

Costs $51.5 Benefits $192 Net Benefits $140

a Although EPA estimated the benefits associated with four different values of a one ton GHG reduction ($5, $21, $35, $65), for the purposes of this overview presentation of estimated costs and benefits EPA is showing the benefits associated with the marginal va lue deemed to be central by the interagency working group on this topic: $21 per ton of CO2e, in 2007 dollars and 2010 emissions. The $21/ton value applies to 2010 CO2 emissions and grows over time.

b As noted in Section III.H, SCC increases over time. The $21/ton value applies to 2010 CO 2 emissions and grows larger over time.

c 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.

d Monetized GHG benefits exclude the value of reductions in non-CO 2 GHG emissions (HFC, CH 4 and N 2 O) expected under this final rule. Although EPA has not monetized the benefits of reductions in these non-CO 2 emissions, the value of these reductions should not be interpreted as zero. Rather, the reductions in non-CO 2 GHGs will contribute to this rule’s climate benefits, as explained in Section III.F.2. The SCC TSD notes the difference between the social cost of non-CO 2 emissions and CO 2 emissions, and specifies a goal to develop methods to value non-CO 2 emissions in future analyses.

# Executive Summary

The Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) are issuing a joint fina l rulemaking to establish new standards for light-duty highway vehicles that will reduce greenhouse gas emi ssions (GHG) and improve fuel economy. The joint rulemaking is consistent with the National Fuel Efficiency Policy announced by President Obama on May 19, 2009, respondi ng to the country’s critical need to address global climate change and to reduce o il consumption. EPA is finalizing greenhouse gas emissions standards under the Clean Air Act, an d NHTSA is finalizing Corporate Average Fuel Economy standards under the Energy Policy and C onservation Act (EPCA), as amended. These standards apply to passenger cars, light-duty trucks, and me dium-duty passenger vehicles, covering model years (MY) 2012 through 2016. The st andards will require these vehicles to meet an estimated combined average emissions level of 250 grams of CO2 per mile in MY 2016 under EPA’s GHG program, and 34.1 mpg in MY 2016 under NHTSA’s CAFE program and represent a harmonized and consistent national pr ogram (National Program). These standards are designed such that compliance can be achieved with a single nationa l vehicle fleet whose emissions and fuel economy performance improves year over year. The National Program will result in approximately 960 million metric tons of CO2 emission reductions and approximately 1.8 billion barrels of oil savings over the lifetim e of vehicles sold in model years 2012 through 2016.

Mobile sources are signifi cant contributors to air pollu tant emissions (both GHG and non-GHG) across the country, internationally, an d into the future. The Agency has determined that these emissions cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare, and is ther efore establishing sta ndards to control these emissions as required by secti on 202 (a) of the Clean Air Act. 1 

### The health- and environmentally-related effects associated with these emissions are a classic example of an externality-related market failure. An extern ality occurs when one party's actions impose uncompensated costs on another party. EPA’s fina l rule will deliver additional environmental and energy benefits, as well as cost savings, on a nationwide basis that would likely not be available if the rule were not in place.

Table 1 shows EPA’s estimated lifetime discounted cost, benefits and net benefits for all vehicles projected to be sold in model years 2012-2016. It is important to note that there is significant overlap in costs and benefits for NHTSA’s CAFE program and EPA’s GHG program and therefore combined program costs and benefi ts are not a sum of the individual programs.

1 “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.html . See also State of Massachusetts v. EPA, 549 U.S. 497, 533 ("If EPA makes a finding of endangerment, the Clean Air Ac t requires the agency to regulate emissions of the deleterious pollutant from new motor vehicles").Table 1 EPA’s Estimated 2012-2016 Model Year Lifeti me Discounted Costs, Benefits, and Net Benefits assuming the $21/ton SCC Value a,b,c,d (Millions of 2007 dollars) 3% Discount Rate

Costs $51,500 Benefits $240,200 Net Benefits $188,700 7% Discount Rate

Costs $51,500 Benefits $191,700 Net Benefits $140,200

a As noted in Section III.H, SCC increases over time. The $21/ton value applies to 2010 CO2 emissions and grows larger over time.

b Although EPA estimated the be nefits associated with four different values of a one ton GHG reduction ($5, $21, $35, $65), for the purposes of this overview presentation of estimated costs and benefits EPA is showing the benefits associated with the marginal value deemed to be central by the interagency working group on this topic: $21 per ton of CO2e, in 2007 dollars and 2010 emissions. The $21/ton value applies to 2010 CO2 emissions and grows over time.

c 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.

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