Revised 8/16/101Question #/ TOPICResponsibleAgencyOMB CommentProposed Response1.Emissions forElectric VehiclesEPAInteragency reviewers recommend that the agenciesaccept comments on a more complete range of issuesregarding what emissions information to include on thelabel, how to calculate emissions data, and how topresent it.•Forthcoming2.Objective Languagepp.16,34,101EPACommenters recommend that the agencies modifylanguage that may be perceived as trying to manipulateconsumers into making certain consumption decisionsthat the Administration viewsas socially desirable froma policy perspective.2Instead, the rule should bedescribed as an objective attempt to provide more andbetter information to consumers so that they can moreeasily assess the true costsand emissions of differentvehicles and make fully-informed decisions. Theagencies should not imply that consumers who do notbuy more fuel efficient vehicles are making poorerdecisions, when it may be their preference to do so evenwith more information. Please make these revisionsthroughout the entire document.•The agencies will update language in thepreamble in appropriate places to insureobjectivity.3. Median BaselineVehiclep.36EPAWhat alternatives did the agencies consider in decidinghow to help consumers compare vehicles? The currentproposal to shift each year’s median vehicle mightmake it very difficult or even misleading whenconsumers are comparing identical vehicles butdifferent model years. A new model year vehicle mighthave lower ratings and costsavings than the previousyear model year even if it ismore efficient because ofthe shifting median vehicle. Do the agencies think thiscould be problematic?•The agencies understand the concernsexpressed in this comment. However,there is no perfect choice here and wethink using each year's median vehicle forcomparison is the best choice as theunderlying assumptions need to be up-todate to be most useful to consumers.When the Agencies conduct focus grouptesting post-proposal, we will continue toprobe on this and other underlyingRevised 8/16/102assumptions issues.•We will invite comments on the issuesraised by the commenter. In addition, wewill review this section II.A. 4 and II.A.10.of the preamble again and determineif we need to more explicit in thediscussion.4. Display of ModelYearEPAUnder the grading scale, the model year of a vehicle isextremely important because the relative metrics areupdated every year. The agencies should thereforesolicit comments on whetherto highlight the modelyear more prominently on the label. Also, the agenciesshould consider – in greater detail – that consumersmay want to compare essentially identical vehicles, butfor different model years. As described above, under theupdated grading scheme, the newer vehicle could havea lower grade even if it is more efficient than an oldermodel, due to a different baseline for the grading scale.A similar condition could exist for the presentation of“fuel savings” information.•Model year is clearly marked on the top ofall Monroney labels. Since the FE labeland the NHTSA safety label are bothincorporated into the overall Monroneylabel, it would be duplicative to requiremodel year on the fuel economy label aswell. Many consumers keep the entireMonroney label, since it has additionalinformation on the vehicle. The ideal wayto compare a new vehicle with an oldervehicle is with www.fueleconomy.gov.5. Half letter upgradefor PHEVSpp46-47EPACurrently, the rule allows all vehicles to receive a half aletter grade upgrade if theyperform well on “other HGemissions” except for PHEVs. The agencies state thatPHEVs are excluded from receiving an upgrade if theyare eligible to receive it because they want only EVs toget the A+ rating. PHEVs get an A for just the CO2emissions and if they perform well on other GHGemissions, could get an A+. Excluding PHEVs fromgetting this upgrade might notlevel the playing field.Have the agencies considered implications from not•The agencies are not proposing the half aletter upgrade/downgrade for criteriapollutants, simply asking for publiccomment on the option, as well as onseveral other optionsrelated to the lettergrades•We will delete preamble language thatexcludes PHEVs from obtaining thehighest letter grade.(Section II. A.7):Revised 8/16/103allowing for a leveled playing field? Commentersrecommended that the agencies not exclude PHEVsfrom getting this half letter upgrade if they are eligibleto receive it.6. Overall MonroneyLabel ImpactsEPAHow would changes from this NPRM impact othercomponents of the Monroney label? What is the relativesize of the fuel economy component compared to thesafety ratings component? How might the difference insize of the various components influence consumerperception about other vehicle attributes -- such assafety?•The proposal does seek comment on theeffects that the proposed label may haveon other Monroney label information, suchas the safety ratings. See excerpt fromproposal in Section IV.E. page 128: "Theagencies also seek comment concerningthe potential for the new label informationto create confusion about otherinformation found on the Monroney Label,in particular, the star safety ratings.Specifically, the agencies seek commenton whether consumers might interpret thelarge letter grade on Label 1 as applying toother aspects of the vehicle’s performance(such as safety) besides fuel economy andenvironmental impacts. To mitigate thisconcern, the agencies have created aprominent black border and title indicatingthe purpose of the information.Nevertheless the agencies seek commenton whether additional measures should berequired under 32908(b) and (g) to addressthis potential confusion.•The agencies also seek comment onwhether the co-proposed labels, inparticular Label 1 with its use of color andRevised 8/16/104large font for the overall letter grade,might inadvertently distract consumersfrom the black-and-white star safetyratings. As one way of addressing thispotential issue, NHTSA proposes torequire under 49 CFR 575.301 that the starsafety ratings be located as close asphysically possible to the new fueleconomy and environmental label to helpensure that the starsafety ratings do notget “lost” on the Monroney Label.Similarly, the agencies seek comment onwhether their regulations for the new fueleconomy and environmental label shouldrequire that it be located as close asphysically possible to the star safetyratings."7. Explain text on p.29- cumulative cap onupstream emissionsEPA•The phrase referenced in the interagencycomments is not on page 29 and we do notbelieve it is anywhere in the Preamble•The phrase on page 29 is "cumulativeproduction cap per manufacturer" and thisrefers to the provision in the MY2012-2016 light-duty vehicle GHG rule thatestablishes a threshold for the cumulativeproduction (or sales) for an individualmanufacturer during the MY2012-2016timeframe, below which they can use azero gram per mile compliance value forEVs, and the electricportion of PHEVs,Revised 8/16/105and above which they must use acompliance value based on a full netupstream GHG emissions accounting. Thethreshold is 200,000 vehicles formanufacturers who sell less than 25,000EVs/PHEVs/FCVs in MY2012, and300,000 vehicles for other manufacturers8. Label TitleEPACommenters recommended that the agencies use “GHGPerformance” instead of“Environment” on the labelitself because the agencies are only considering GHGimpacts. It is more accurate to refer to it as GHGreductions instead of “Environment.” Please make thischange in the NPRM as well.•The title on both co-proposed labels, “FuelEconomy and EnvironmentalComparisons” refers to all environmentalinformation on each label, bothperformance metrics and ratinginformation, and does not solely refer togreenhouse gases butincludes otheremissions as well. The agencies believethe title is appropriate and helps alertconsumers to all the environmentalinformation available on each label.9. List of acronymsneededpp9-11EPAIt would be helpful if the proposed rule included a listof acronyms at the beginning of the document.•The agencies have prepared a list ofacronyms for inclusion in the preamble.10. Effect onaftermarketp.145EPACould the agencies please clarify whether the proposedrule would affect “aftermarket” manufacturers (firmsthat purchase passenger cars or light trucks) andcustomize them for (re)sale. Would these firms berequired to provide a label when they resold thevehicle? (Commenter asked this because theseaftermarket” firms are likelyto be small businesses, andif they are covered by the ruleneed to be included in theRegulatory Flexibility Act (RFA) analysis.)(Commenter notes that Sec. 600-316-08 says that the•Because the “aftermarket” term coversseveral different types of modifications,the response to whether the FE labelingrequirement applies is different for eachsituation. The different “aftermarket”situations are as follows:1) Independent Commercial Importers (ICIs);ICIs are companies that imports cars fromoverseas either because the owners are movingRevised 8/16/106“final stage” manufactureris treated as themanufacturer for purposesof compliance withthe rule.)to the U.S., or because the vehicle is nototherwise available inthe U.S. (e.g., highperformance sports cars and right-hand drivepostal vehicles). Under EPA’s currentregulations, such imported vehicles arerequired to be emission-certified and have aFE label. Small business ICIs are included inour Regulatory Flexibility Act (RFA) analysis.2) Alternative-fuel converters; Under EPA’scurrent regulations, alternative fuel convertersare not subject to the FE labelingrequirements. We are not proposing anychanges for alternative-fuel converter with theFE label proposal. Therefore, small businessalternative-fuel converters are not included inour RFA analysis.3) Manufacturer-approved modifications(e.g., limousines); Some car manufacturerscertify vehicles that allow for aftermarketcompanies to modify the vehicles up to acertain weight limit and still be covered by theemissions certificate. The car manufacturersalso provide fuel economy information to theaftermarket companies with the correct FEestimates for the modified vehicles (based onthe weight of the modified vehicle). UnderEPA’s current regulations, an aftermarketcompany does not need to certify foremissions as long as they do not exceed theRevised 8/16/107weight limit specified by the car manufacturer,but they do need to put a revised fuel economylabel on the modified vehicle (if themanufacturer provided FE estimate changesfrom the non-modified version of the vehicle).We are not proposing any changes to theseprovisions with theFE label proposal.Therefore, small business aftermarketconverters covered under manufacturerapproved modifications, such as limousinemanufacturers are regulated parties and shouldbe included in our RFA analysis. We willadjust the text in the RFA section to reflectthis.4) Other types of modifications: Under anEPA Advisory Circular (Number 64 fromMarch 1977) that clarifies EPA’s position ontampering, aftermarket companies may modifya vehicle from it certified configuration aslong as they do not add more than 500 poundsof accessories to the vehicle and as long asthey do not modify the exhaust or evaporativeemission control systems in any manner. Insuch cases the aftermarket company is notrequired to obtain a separate emissionscertification or put their own FE label on thevehicle. Therefore, small business aftermarketcompanies engaged in such minormodifications are notincluded in our RFAanalysis.Revised 8/16/108•We do not believe we need to make anychanges to the proposal to address the“aftermarket” issue because we havealready included the one type of“aftermarket” situation where a new FElabel is required (i.e., ICIs) in our RFAanalysis/discussion.11. RFA andautodealersp.145EPAThe RFA analysis/certification should also include“auto dealers,” as the rule (Subpart E, Sec. 600-405)requires them to ensure thatlabels are in place and toobtain, display, and make available to consumers theFuel Economy Guide (comparison booklet).Commenter assumes these costs are de minimus, soincluding them in the RFA analysis could be done in abrief sentence or two (but theyshould be included in theanalysis and table of regulated entities).•We agree that “auto dealers” haveresponsibilities under the existing FElabeling regulations. However, theproposal does not add any newrequirements to these responsibilities, sothere is no incremental impact on “autodealers” due to the proposed rule.•We will revise our list of regulated entities(in both the introductory section of thepreamble, see “SUPPLEMENTARYINFORMATION: A. Does this ActionApply to Me?” and the RFA section, seesection VIII.B.3, Table VIII.B.3-1) to addin “auto dealers”.•We will also add discussion in the RFAsection of the preamble that notes there isno incremental impact on “auto dealers”due to the proposed FE label regulations.12. Font size of MPGvs. GMP Label 2p85EPAThe NPRM does a great joboutlining the benefits ofgallons per mile instead ofmiles per gallon. But thenlabel 2 has MPG in huge font(the biggest on the label)and GPM in tiny font. And allthe labels have the sliderbar as MPG rather than GMP. Commenter understands•The agencies did consider increasing theprominence of GPM over time. Theagencies agree to take comment on thisissue in section III.A.2.We will add thefollowing language to this section:Revised 8/16/109that people now are used tothe concept of MPG, butdid the agencies considergradually transitioning thelabel from emphasizing MPG to emphasizing GPM?Commenters could imagine, for example, the relativefont sizes or placements changing over a decade.“The agencies are seeking comment aboutwhether to gradually increase the prominenceof gallons per hundred miles to facilitate theconsumer familiarity and usage of aconsumption metric.”13. p. 30 AC Leakagep32EPAOn page 30 of the preamble there is a discussion onusing A/C leakage adjustments in the determination ofGHG emissions. If this option were adopted would it beinconsistent with labeling the emission as “tailpipeemissions”? Wouldn’t including A/C leakageadjustments also lead to widening the gap between whatis on the label and what consumers get in the “realworld”?•The agencies are not proposing to allow anA/C leakage adjustment, only asking forcomments•We agree to seek comment in the preambleon the issue raised by the interagencycomment: “Would including A/C leakageadjustments lead to widening the gapbetween what is on the label and whatconsumers get in the real world”.14. p. 66p70EPAOn page 66 in the forth sentence of the last paragraph,the word “actually” should be replaced with “typically”as shown below. This change would make the sentenceconsistent with the discussion preceding this sentenceand corresponds to DOE’s findings in testing E85-FFVsenergy efficiency and fuel economy. “While the E85mpg values are lower than the gasoline mpg values, theuse of E85 isactuallytypicallyslightly more energyefficient than the use of gasoline.”We will make this proposed language changein the preamble: “While the E85 mpg valuesare lower than the gasoline mpg values, theuse of E85 isactuallytypicallyslightly moreenergy efficient than the use of gasoline.”15. p. 67 methodologyfor assigning ghg valuefor FFVsEPAOn page 67, the proposed methodology for assigning anoverall combined value for greenhouse gas emissions orfuel economy for FFVs based on the fraction ofalternative fuel currently in use seems uninformative forconsumers. Especially withFFVs, it is unlikely that anyindividual consumer uses the national average fraction•The agencies are specifically seekingcomment on this issue. The proposal, onpage 68, is not to use the national averagefraction of E85 use (currently about 99%gasoline/1% E85), butrather to use 100%gasoline use as the default value, sinceRevised 8/16/1010of alternative fuel. Possiblyderiving a merged value fora clearly stated percentage of the alternative fuel (say10% or 25% E85 usage for an FFV) would be of morevalue to the consumer.most flexible fuel vehicle owners are usinggasoline all the time. However, theproposal does allow a manufacturer to usea different gasoline-to-E85 mix if it canprovide data to show that its flexible fuelvehicles are in fact using this different fuelmix, on average, in use. This proposedapproach is consistent with that used forflexible fuel vehicle GHG emissionscompliance under the EPA GHG standardsfor 2016 and later model year vehicles.16. labeling option forE85-FFVp73EPACombined fuel economy labeling options for E85-FFVand diesel vehicles: It is notclear from the discussion ifthe combined FE ratings for diesel and E85-FFVvehicles would be on a gasoline equivalent basis or aper gallon basis of diesel or E85. DOE’s believes itwould be more useful to consumers if the combined FEratings for diesel and E85-FFV vehicles were on adiesel or E85 volumetric basis since these fuels are alsosold on a per gallon basis. However, it is appropriate forthe combined FE ratings for non liquid fuels such asCNG and electricity to be on a gasoline equivalentbasis.•With respect to E85 flexible fuel vehicles,on page 67 the proposal discusses both thempg (volumetric) and mpg-e (gasolineequivalent) metrics and asks for publiccomment on whether to use one of these orboth. With respect to diesel, the proposalis silent on this issue,and our intention isto continue to report diesel mpg on avolumetric basis as has been the case inthe past. We will add the following sectionII.C.4 to address this issue for diesels:"EPA proposes to continue to calculate thefuel economy of diesel vehicles in milestraveled on a gallon ofdiesel fuel. Dieselfuel has a long history of being sold on avolumetric basis, and the energy contentdifferences between a gallon of gasolineand a gallon of diesel fuel are relativelysmall."Revised 8/16/101117, Saves/SpendDisclosure Issuesp51EPALabel 1 “Saves/Spend” Disclosures: For vehicles withbelow-average economy, proposed Label 1 woulddisclose the additional cost of fuel as compared to theaverage vehicle. Forexample, the disclosure on Figure III-5 states “Overfive years, you willspend $3,600more in fuel costs compared to the average vehicle.”Similarly, for above averagevehicles, Label 1 containsa savings claim (e.g., “Overfive years, this vehiclesaves$5,700in fuel costs compared tothe average vehicle”).These disclosures present severalpotential problems. First,commenter expects that manyconsumers will interpret the“spend” disclosure to be a representation of totaloperating cost withoutrealizing thatfigure is only a portion of that total. In addition, thebasis for the saves/spend disclosure isfive years of operation while, elsewhere on the label,the basis for the total operating costdisclosure is one year ofoperation. This may causeconfusion. In addition, weexpect the five yearassumption will be lost on many consumers. Finally,because the saves/spend figures compare to an “averagevehicle” that may not be ina consumer’s decision set,these figures may not be particularly useful to manyconsumers. Given these concerns, the “saves/spend”disclosure should be testedfor these potential problems.Commenter notes that FTC has found through onsumerresearch that the annualoperating cost provides a•The Expert Panel felt strongly that savingsis a much more powerful message thancost. The Agencies recognize that there areopportunities for consumers to misspertinent information, such as the meaningof “spend” and the fact that this valuerepresents a five year estimate. However,the Agencies also sought to follow theOMB June 18, 2010 memorandum whichcalls for simple summary disclosures.•The commenter stated,“The saves/spendfigures compare to an “average vehicle”that may not be in a consumer’s decisionset, these figures may not be particularlyuseful to many consumers.”In selectingthe median vehicle, the agencies intendedit to be a reference point for consumers.Unfortunately, it is not possible to have avalue on the label that is compared tospecific vehicles that a consumer isconsidering. However, the agencies intendto have specific comparison capabilitiessuch as this on a website, allowingconsumers to personalize their drivinghabits and vehicle comparisons. Theagencies are taking comment on otherways to demonstrate five year savingscomparisons (see Page 48, SectionII.A.10)Revised 8/16/1012useful, straightforward disclosure that allows for easycomparisons among all products (regardless of size andconfiguration). Commenterrecommends that EPA andDOT consider displaying the annual operating costfigure prominently in lieu of the problematicsaves/spend disclosure. Such achange is likely to makethe label clearer, simpler to read and less cluttered.•The agencies are committed to postproposal engaging with FTC to explorethe additional research referenced in thiscomment. In addition, the agenciesbelieve both Internet Survey that will beconducted as well as additional focusgroups which are contemplated postproposal will provide additional usefuldata on this issue.•We will seek comment on the issues raisedby FTC and include new preamblelanguage as in Section II.A.10 p. 48beginning after, “The agencies seekcomment on this and alternativeapproaches, as opposed to the proposedapproach of displaying a vehicle’s fuelcost savings relative to the median vehiclein the fleet.” “ The agencies are alsoseeking comment on whether there is apotential of consumer confusion caused bythe two different costs values displayed onLabel 1 with regard to the estimatedannual fuel cost of operating the vehicleand the 5 year fuel cost savings numbercompared to the average vehicle. We areinterested in receiving comments on howthese values may interact with each otherand we intend to explore this issue furtherprior to finalizing this proposal includingRevised 8/16/1013exploring research conducted in executivebranch agencies.”18. Environmental &Combined MPG ScalesNHTSAEnvironmental and Combined MPG Scales: The threesmall scales on Label 1 (combined MPG, CO2, and AirPollutants) are difficult to read and clutter the label.Accordingly, commenter suspects that consumers willhave difficulty understanding these scales and theirpresence may detract from other label information. Tothe extent that such rating scales are required under thestatute, commenter suggests that EPA and DOTconsider whether the simpleletter rating on Label 1meets such requirements. If they do, commenterrecommends that these small scales be removed fromthe label. This would increase label space and allow thesize of the disclosures abovethe ranges to beincreased.Similarly, to the extent that environmental impacts arecollinear with fuel economy, commenter suggests thatEPA and DOT consider consolidating information (orsignificantly reducing the prominence of environmentaldisclosures) wherever possible to reduce clutter. Forexample, the greenhouse gas and air pollutant scales inLabel 2 could be eliminated or made less prominent tosimplify the label and make it easier for consumers touse.•The agencies believe they have alreadyaddressed this comment please seeattached document with excerptedlanguage from preamble.19. p. 61-FTC LabelReferencep65EPAFTC Label Reference: On page 61, the term “hang tag”should be replaced withthe term “label.”•The agencies will make the requestedpreamble language change.20. Overall RatingutilityNHTSASome commenters questioned the utility of the overallsummary rating because it does not by itself provideuseful information to consumers. Have the agenciesconsidered increasing the font of information that•Please Pages 24 and 25 of the Preambleregarding thisdiscussion.Revised 8/16/1014consumers might find more useful and decreasingthe font of the overall summary rating that might notprovide any useful information?21. Should any carreceive an A+p35EPASome consideration should be given to the question ofwhether any car ought to receive a grade of A+. Theremay be undue psychologicaleffects on consumers’environmental choices. Consumers might get theimpression that their environmental obligations arefulfilled after getting an A+car. In addition, people tendto drive more miles if they think their car is more fuelefficient, and so if someone is led to believe their carhas NOenvironmental impact, then who knows howthey’ll change their behavior. In fact, there•The agencies believe that an 11 stepgrading scale is important and providesnecessary differentiation that will beuseful to both consumers andmanufacturers. The agencies agree toadd language to the preamble specificallyinviting comment on this issue.22. GHG performancebased on tailpipemisleading bias againstethanol or biodieselEPABiofuel issues•These comments raise many issues, allinterrelated•One primary thrust of the comments--that we should consider upstreamGHG issues--is addressed by oursuggested changes to the Preamble aspart of our response to Comment #1 onEV emissions issues•A second thrust of the comments--thatwe should show energy andenvironmental performance on E85fuel--is already addressed in the draftPreamble as on page 67, in both the23.Alt Fuel Labelsshould include info ongasoline savings inaddition to fuel savings24. p.28, SecII.3-upstream emissionsissue25. SectionII.3proposed languageaddition from RFS factsheetRevised 8/16/1015p. 29 suggested langchange to include RFSlanguagethird and fourth paragraphs, theagencies discuss the option ofproviding E85-specific information,and we ask for public comment on allof the E85 flexible fuel vehicle options•EPA is opposed to any changes to theproposed labels, though that does notpreclude changes being made betweenproposal and a final rule, of course.p. 57-adding upstreamemissions languagep. 58 – upstream langp. 66 – suggest addingco2 reduction fromcombusting E85 fuelsalongside tailpipe CO2p.71 – Renewable fuelslbenefits- add info tolabelPages 12-16(alternative labels)

### 1 Draft EPA Response to Interagency Comments on Upstream GHG Emissions

Draft Preamble Section II.B.4.a (new language in bold, deleted language in strikeout):

a. Life-Cycle Fuel Production-Related GHG and Energy Issues

49 U.S.C. 32908(g)(1)(A)(i) states that NHTSA must require vehicles to be labeled with information “reflecting an automobile’s performance ... [with respect to] greenhouse gas ...

emissions ... of the automobile.” 1 

### NHTSA and EPA propose that the greenhouse gas emissions
represented on the label include vehicle tailpipe emissions of CO2, but not any GHG emissions generated upstream of the vehicle. However, the agencies recognize that all automotive fuels have upstream GHG emissions associated with the production and distribution of the fuel used by the motor vehicle. This includes gasoline, diesel, and other fuels such as natural gas, electricity, and renewable biofuels. Operation of vehicles can result in GHG emissions from the vehicle itself as well as GHG emissions from the production and distribution of the fuel used by the vehicle. This section discusses how the agencies should address the issue of upstream emissions, focused on the advanced technology vehicles that use electricity from the grid to power the vehicle, such as electric vehicles and plug-in hybrids that are expected to enter the market in larger numbers in the coming years.

NHTSA believes that the EISA provision is somewhat ambiguous as written and thus provides a degree of discretion in its interpretation. One reasonable interpretation of this provision is that only GHG emissions directly from the vehicle itself are required for the label. Those would be the direct “automobile’s performance” with respect to “greenhouse gas emissions.” If this approach was taken, the agen cies could supplement the label information by providing on their websites extensive inform ation on upstream emissions from electricity generation. We note that this approach is also consistent with the joint EPA/DOT standards for fuel economy and greenhouse gas emissions from passenger cars and light trucks for model years 2012-2016, which treat GHG emissions for electric operation as zero up to a cumulative
production cap per manufacturer. 2 Accordingly, the agencies propose that vehicle operation on grid elect ricity be reflected on the label for now as having tailpipe greenhouse gas emissions

of zero.

Alternatively, NHTSA believes that it would also be reasonable to interpret the statutory language as permitting it to require that the required label information on GHG emissions include information on the upstream GHG emissions associated with electricity or other fuels used by the vehicle, insofar as the upstream GHG emissions are related to the automobile’s GHG performance. As noted above, the agencies recognize that there are upstream GHG emissions associated with the production and distribution of the fuel used by the vehicle, including electricity from the grid used by EVs and PHEVs. In light of that, the agencies are considering and request comment on the following alternative for the label for EVs and PHEVs. This alternative would be a modified approach to displaying “tailpipe only” CO2g/mile data for

1 32908(g)(1)(A)(ii) also refers to GHG “emissions of automobiles,” and further requires a designation of automobiles “with the lowest greenhouse gas emissions over the useful life of the vehicles.”

2 EPA placed a cumulative production cap on the total pr oduction of EVs, PHEVs, and FCVs for which an individual manufacturer can claim the zero grams/mile compliance value during model years 2012-2016. The cumulative production cap will be 200,000 vehicles, except that those manufacturers t hat sell at least 25,000 EVs, PHEVs, and FCVs in MY 2012 will have a cap of 300,000 vehicl es for MY 2012-2016. See 75 FR 25436 (May 7, 2010)

### 2 EVs and PHEVs. Under this alternative, the EV label would eliminate the "0" CO2g/mile
number currently displayed on the co-proposed labels (Figure III-2, III-10). This number would be replaced with either a symbol or an asterisk and explanatory text which states, "The only C02emissions are from electricity generation". Likewise, the agencies would modify the coproposed PHEV labels (Figure III-3, III-6, III-1, III-12) inserting either a symbol or asterisk next to the current CO2g/mile number displayed with the following explanatory text, “Does not include CO2 from electricity generation.” The phrase “tailpipe only” would be deleted from all of the labels, as not necessary. This alternative would avoid potentially confusing or misleading
purchasers by more explicitly indicating that the CO2 emissions from generation of electricity are not reflected in the CO2 numbers on the label. Figures III-X, III-Y, III-Z illustrate one way this information could be displayed. The agencies request comment on this alternative option.

In addition, the agencies recognize that consumers may want to have access to information on the total GHG emissions associated with the operation of their vehicles, not just the tailpipe only emissions, and that access to such information can help consumers understand the GHG emissions that result from operation of the vehicle. The agencies recognize that developing such information and providing it in a manner that is both accurate and useful for the consumer raises a number of issues. For example, the upstream GHG emissions from electricity generation can vary significantly based on the different fuels used at generating
stations. At a minimum, under this proposal the agencies intend to provide consumers with easily accessible web information that will inform them about the projected upstream GHG emissions and energy impacts of vehicle operat ion, based on both national average values and, where appropriate because of regional variability, regional values as well.

The agencies are also considering and invite comment on an alternative where some information on upstream emissions is provided on the label itself. The agencies recognize that accounting for upstream GHG emissions from production and distribution of the fuel, including electricity, can be complex. We encourage commenters to be as specific as possible with any recommendations on how to address such upstream GHG emissions. Given that the label itself
provides opportunity to provide only a limited amount of information, while much broader and detailed information can be provided on web sites, the agencies invite comment both on what kind of information should be provided to prospective purchasers, and where such information
should be provided, the label or the web site.

For example, the agencies invite comment on whether information on upstream emissions should be provided, on either the labels or the websites? In general, if information on
upstream emissions is provided on the label, what information? If information is provided on the website, what information? The agencies specifically invite comment on how to address
upstream emissions associated with the elec tricity used to power the advanced technology vehicles starting to enter commerce, electric vehicle and plug-in hybrid vehicles. Should upstream emissions be provided specifically for the emissions associated with the combustion of fuel to produce electricity? Should such upstream emissions be determined on a regional or a national basis? Should upstream emissions be provided as a relative comparison to a gasoline or diesel fuel, the current predominant fuels? In general, the agencies invite comment on the appropriate metrics to use and the specific suggestions for label content and design, if appropriate. For the label, commenters should take into consideration the limited amount of information that can be provided

### 3 For the convenience of commenters, we have prepared the Table below as an illustrative example of one way that some upstream emissions could be accounted for, based on the assumptions that follow: 3



### Proposal

‐‐ Tailpipe

‐ Only Tailpipe + Upstream

Vehicle CO2/mile CO2/mile

EV 0 197

PHEV 1 89 210

PHEV 2 133 217

Toyota Prius HEV 178 224

Honda Civic HEV 212 266

Honda Insight HEV 217 273

Ford Fusion HEV 228 287

3 The key assumptions underlying the illustrative numbers in the right-hand column are that:



### • EV and PHEVs all assumed to use 200 Watt-hours per mile when operating on electricity over the EPA test and assuming a 30% range (43% electricity consumption) shortfall from test to road.



### • PHEV 1 assumed to operate on electricity 50% of the time.



### • PHEV 2 assumed to operate on electricity 25% of the time.



### • Uses 2005 nationwide average value of 0.642 grams of upstream GHG per Watt-hour at powerplant (adjusted to include
GHG emissions from feedstock extraction, transportation, and processing as well) from MY2012-2016 light-duty vehicle GHG final rule (75 Federal Register 25437).



### • Assumes typical 7% electricit y grid transmission losses.



### • Uses 2250 grams upstream GHG per gallon of gasoline.

### 4 Figure III-Xa

### 5 Figures III-Xb

### 6 Figure III-Ya

### 7 Figure III-Za

### 8 Figure III-ZbFuel Economy Labeling NPRM for OMB Review 8

- 14 -10

Page 1 of 150 ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 86 and 600

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 575

[EPA–HQ–OAR–2009–0865; FRL_XXXX-X; NHTSA-2010-0087]

RIN 2060-AQ09; RIN 2127-AK73

Revisions and Additions to Motor Vehicle Fuel Economy Label

AGENCY: Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration (NHTSA).

ACTION: Proposed Rule.

SUMMARY: The Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) are conducting a joint rulemaking to redesign and add

information to the current fuel eco nomy label that is posted on the window sticker of all new cars and light-duty trucks sold in the U.S. The redesigned label will provide new information to American consumers about the fuel economy and consumption, fuel costs, and environmental impacts associated with purchas ing new vehicles beginning with model year 2012 cars and trucks. This action will also develop new labels for certain advanced technology vehicles, which are poised to enter the U.S. market, in particular plug-in hybrid electric vehicles and electric

vehicles.

NHTSA and EPA are proposing these changes because the Energy Independence and Security Act (EISA) of 2007 imposes several new labeling requirements, because the agencies believe that labels for conventional vehicles can be improved to help consumers make more informed vehicle purchase decisions, and because the time is right to develop new labels for advanced technology vehicles that are being comm ercialized. This proposal is also consistent with the recent joint rulemaking by EPA an d NHTSA that established harmonized federal greenhouse gas (GHG) emissions and corporate average fuel economy (CAFE) standards for new cars, sport utility vehicl es, minivans, and pickup truc ks for model years 2012-2016. 1

DATES : Comments : Comments must be received on or before [Insert date 60 days after publication in the Federal Register]

, sixty days after date of publication in the Federal Register . Under the Paperwork Reduction Act, comments on the information collection provisions must be received by the Office of Management and Budget (OMB) on or before [Insert date 30 days after publication in the Federal Register], thirty days after date of

1 75 FR 25324, May 7, 2010.Fuel Economy Labeling NPRM for OMB Review 8

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Page 2 of 150 publication in the Federal Register . See the SUPPLEMENTARY INFORMATION section on “Public Participation” for more information about written comments.

Hearings: NHTSA and EPA will jointly hold xx public hearings on the following dates: [Insert Date] , in [insert location], and [insert any additiona l dates and locations]. The hearings will start at 9 a.m. local time and continue until everyone has had a chance to speak. See the

SUPPLEMENTARY INFORMATION section on “Public Participation.” for more information about the public hearings.

ADDRESSES : Submit your comments, identified by Docket ID No. EPA-HQ-OAR-2009-0865 and/or NHTSA-2010-0087, by one of the following methods:

• www.regulations.gov: Follow the on-line instructions for submitting comments.

• Email: a-and-r-Docket@epa.gov

• Fax: EPA: (202) 566–1741; NHTSA: (202) 493-2251.

• Mail:

o EPA: Environmental Protection Agency, EPA Docket Center (EPA/DC), Air and Radiation Docket, Mail Code 2822T, 1200 Pennsylvania Avenue, NW., Washington, DC 20460, Attention Docket ID No. EPA-HQ-OAR-2009-0865

.

o NHTSA: Docket Management Facility, M-30, U.S. Department of Transportation, West Building, Ground Floor, Rm. W12-140, 1200 New Jersey Avenue, SE, Washington, DC 20590.

o In addition, please mail a copy of your comments on the information collection provisions to the Office of Informatio n and Regulatory Affairs, Office of Management and Budget (OMB), Attn: Desk Officer for EPA, 725 17th St., NW., Washington, DC 20503.

• Hand Delivery:

o EPA: Docket Center, (EPA/DC) EPA West, Room B102, 1301 Constitution Ave., NW., Washington, DC, Attention Docket ID No. EPA-HQ-OAR-2009-

0865 . Such deliveries are only accepted during the Docket’s normal hours of operation, and special arrangements should be made for deliveries of boxed

information.

o NHTSA: West Building, Ground Floor, Rm. W12-140, 1200 New Jersey Avenue, SE, Washington, DC 20590, between 9 a.m. and 5 p.m. Eastern Time, Monday through Friday, except Federal Holidays.

Instructions : Direct your comments to Dock et ID No. EPA-HQ-OAR-2009-0865 and/or

NHTSA-2010-0087. See the SUPPLEMENTARY INFORMATION section on “Public Participation” for more informatio n about submitting written comments.

Public Hearing : NHTSA and EPA will jointly hold [insert number] public hearings on the following dates: [Insert Date, Location, & Address] . OR [The agencies will announce the addresses for each hearing location in a supplemental Federal Register Notice.] See the

SUPPLEMENTARY INFORMATION section on “Public Particip ation” for more information about the public hearings.Fuel Economy Labeling NPRM for OMB Review 8

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Page 3 of 150 Docket : All documents in the dockets are listed in the www.regulations.gov index. Although listed in the index, some inform ation 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 pu blicly available in hard copy in EPA’s docket, and electronically in NHTSA’s online docket. Pub licly available docket materials are available either electronically in www.regulations.gov 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, West Building, Ground Floor , Rm. W12-140, 1200 New Jersey Avenue, SE, Washington, DC 20590. The 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: Lucie Audette, Office of Transportation and Air Quality, Assessment a nd Standards Division, Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor MI 48105; telephone number: 734-214-4850; fax number: 734-214-4816; email address: audette.lucie@epa.gov

, or Assessment and Standards Division Hotline; telephone number (734) 214 -4636; e-mail address asdinfo@epa.gov

. NHTSA: Gregory Powell National Highway Traffic Safety Administration, 1200 New Jersey Avenue, SE, Washington, DC 20590. Telephone: (202) 366-5206; Fax: (202) 493-2990; email

address: gregory.powell@dot.gov

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, 2 and passenger automobiles (passenger cars) and non-passenger automobiles (light trucks) as defined under NHTSA’s CAFE regulations. 3 Regulated categories and entities include:

Category NAICS Codes A Examples of Potentially Regulated Entities
Industry 336111

336112 Motor vehicle manufacturers.

Industry 811112

811198

423110 Commercial Importers of Vehicles and Vehicle Components.

Industry 336211 Stretch limousine manufacturers and hearse manufacturers.
Industry 441110 Automobile dealers.

A North American Industry Classification System (NAICS)

2 “Light-duty vehicle,” “light-duty truck,” and “medium-dut y 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 lb s gross vehicle weight rating, and “medium-duty passenger vehicle” means a sport-utility vehicle or passenger van fr om 8,500 to 10,000 lbs gross vehicle weight rating. Medium-duty passenger vehicles do not include pick-up trucks.

3 “Passenger car” and “light truck” are defined in 49 CFR Part 523.Fuel Economy Labeling NPRM for OMB Review 8

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Page 4 of 150 This list is not intended to be exhaustive, but rather provides a guide regarding entities likely to be regulated by this action. To dete rmine 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

.

B. Public Participation

NHTSA and EPA request comment on all aspects of this joint proposed rule. This section describes how you can participate in this process.

How Do I Prepare and Submit Comments?

In this joint proposal, there are many issues common to both EPA’s and NHTSA’s proposals. For the convenience of all parties, comments submitted to the EPA docket (whether hard copy or electronic) will be considered comments submitted to both EPA and the NHTSA docket, and vice versa. Therefore, the public only needs to submit one set of comments to either one of the two agency dockets that will be revi ewed by both agencies. Comments that are submitted for consideration by only one agency should be identified as such, and comments that are submitted for consideration by both agencies should be identified as such. Absent such identification, each agency will exercise its best judgment to determine whether a comment is submitted on its proposal.

Further instructions for submitting comments to either the EPA or NHTSA docket are

described below.

EPA: Direct your comments to Docket ID No EPA-HQ-OAR-2009-0865 . EPA’s policy

is that all comments received will be included in the public docket wit hout change and may be made available online at www.regulations.gov , including any personal information provided,

unless the comment includes information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI or otherwise protected through www.regulations.gov or e-mail. The www.regulations.gov Web site is an ‘‘anonymous access’’ system, which means EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send an e-mail comment directly to EPA without going through www.regulations.gov your e-mail address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet. If you submit an electronic comment, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD–ROM you submit. If EPA cannot read your comment due to technical difficulties and cannot contact you for cl arification, EPA may not be able to consider your comment. Electronic files should avoid th e use of special characters, any form of encryption, and be free of any defects or viruses. For additional information about EPA’s public docket visit the EPA Docket Center homepage at http:// www.epa.gov/epahome/dockets.htm.Fuel Economy Labeling NPRM for OMB Review 8

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Page 5 of 150 NHTSA: Your comments must be written and in English. To ensure that your comments are correctly filed in the docket, please include the Docket Number NHTSA-2010-0087 in your comments. Your comments must not be more than 15 pages long. 4 NHTSA established this limit to encourage you to write your primary comments in a concise fashion. However, you may attach necessary additional documents to your comme nts. There is no limit on the length of the attachments. If you are submitting comments electronically as a PDF (Adobe) file, we ask that the documents submitted be scanned using the Optical Character Recognition (OCR) process, thus allowing the agency to search and copy certain portions of your submissions. 5 Please note that pursuant to the Data Quality Act, in order for the substantive data to be relied upon and used by the agencies, it must meet the informatio n quality standards set forth in the OMB and Department of Transportation (DOT) Data Qualit y Act guidelines. Accordingly, we encourage you to consult the guidelines in preparing your comments. OMB’s guidelines may be accessed

at http://www.whitehouse.gov/omb/fedreg_reproducible (last accessed June 2, 2010), and DOT’s guidelines may be accessed at http://regs.dot.gov (last accessed June 22, 2010).

Tips for Preparing Your Comments

When submitting comments, please remember to:

• Identify the rulemaking by docket numbers and other identifying information (subject heading, Federal Register date and page number).

• Follow directions - The agencies may ask you to respond to specific questions or organize comments by referencing a Code of Federal Regulations (CFR) part or

section number.

• Explain why you agree or disagree, suggest alternatives, and substitute language for your requested changes.

• Describe any assumptions and provide any technical information and/or data that you used.

• If you estimate potential costs or burde ns, explain how you arrived at your

estimate in sufficient detail to allow for it to be reproduced.

• Provide specific examples to illustrate your concerns and suggest alternatives.

• Explain your views as clearly as possible, avoiding the use of profanity or personal threats. Make sure to submit your comments by the co mment period deadline identified in the DATES

section above.

How Do I Submit Confidential Business Information?

Any confidential business inform ation (CBI) submitted to one of the agencies will also be available to the other agency. 6 However, as with all public comments, any CBI information only

4 49 CFR 553.21.

5 Optical character recognition (OCR) is the process of converting an image of text, such as a scanned paper document or electronic fax file, into computer-editable text.

6 This statement constitutes notice to commenters pursuan t to 40 CFR 2.209(c) that EPA will share confidential information received with NHTSA unless commenters specify that they wish to submit their CBI only to EPA and not to both agencies.Fuel Economy Labeling NPRM for OMB Review 8

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Page 6 of 150 needs to be submitted to either one of the agencies’ dockets, and it will be available to the other. Following are specific instructions for submitting CBI to either agency.

EPA: Do not submit CBI to EPA through www.regulations.gov or e-mail. Clearly mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD ROM that you mail to EPA, mark the outside of the disk or CD ROM as CBI and then identify electronically within the disk or CD ROM the sp ecific information that is claimed as CBI. In addition to one complete version of the comment that includes information claimed as CBI, a copy of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the public docket. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR Part 2. In addition, you should submit a copy from which you have deleted the claimed confidential busines s information to the Docket by one of the

methods set forth above.

NHTSA: If you wish to submit any information under a claim of confidentiality, you should submit three copies of your complete submission, including the information you claim to be confidential business information, to the Chief Counsel, NHTSA, at the address given above

under FOR FURTHER INFORMATION CONTACT . When you send a comment containing confidential business information, you should include a cover letter setting forth the information specified in our confidential business information regulation. 7 In addition, you should submit a copy from which you have deleted the claimed confidential business information to the Docket by one of the methods set forth above.

Will the Agencies Consider Late Comments?

NHTSA and EPA will consider all comments received before the close of business on the comment closing date indicated above under DATES . To the extent practicable, we will also consider comments received after that date. If interested persons believe that any new information the agency places in the docket affects their comments, they may submit comments after the closing date concerning how the agency should consider that information for the final rule. However, the agencies’ ability to consider any such late comments in this rulemaking will be limited due to the time frame for issuing a final rule.

If a comment is received too late for us to practicably consider it in developing a final rule, we will consider that comment as an in formal suggestion for fu ture rulemaking action.

How Can I Read the Comments Submitted By Other People?

You may read the materials placed in the docket for this document ( e.g. , the comments submitted in response to this document by other interested persons) at any time by going to http://www.regulations.gov. Follow the online instructions for accessing the dockets. You may

also read the materials at the EPA Docket Ce nter or NHTSA Docket Management Facility by going to the street addresses given above under ADDRESSES

.

How do I participate in the public hearings?

7 49 CFR part 512.Fuel Economy Labeling NPRM for OMB Review 8

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Page 7 of 150 NHTSA and EPA will jointly host [insert number] public hearings on the dates and

locations described in the DATES and ADDRESSES sections above.

If you would like to present testimony at the public hearings, we ask that you notify the EPA and NHTSA contact persons listed under FOR FURTHER INFORMATION CONTACT at least ten days before the hearing. Once EPA and NHTSA learn how many people have registered to speak at the public hearing, we will allocate an appr opriate amount of time to each participant, allowing time for lunch and necessary breaks throughout the day. For planning purposes, each speaker should anticipate speaking for approximately ten minutes, although we may need to adjust the time for each speaker if there is a large turnout. We suggest that you bring copies of your statement or other material for the EPA and NHTSA panels and the audience. It would also be helpful if you send us a copy of your statement or other materials before the hearing. To accommodate as many speakers as possible, we prefer that speakers not use technological aids ( e.g. , audio-visuals, computer slideshows). However, if you plan to do so, you must notify the contact persons in the FOR FURTHER INFORMATION CONTACT section above. You also must make arrangements to provide your presentation or any other aids

to NHTSA and EPA in advance of th e hearing in order to facilitate set-up. In addition, we will reserve a block of time for anyone else in the audience who wants to give testimony.

The hearing will be held at a site accessible to individuals with disabilities. Individuals who require accommodations such as sign language interpreters should contact the persons listed

under FOR FURTHER INFORMATION CONTACT section above no later than ten days before the date of the hearing.

NHTSA and EPA will conduct the hearing informally, and technical rules of evidence will not apply. We will arrange for a written transcript of the hearing and keep the official record of the hearing open for 30 days to allow you to submit supplementary information. You may make arrangements for copies of the transcript directly with the court reporter.

Table of Contents

I. Overview of Joint EPA/NHTSA Proposal on New Vehicle Labels

A. Summary of and Rationale for Proposed Label Changes

B. A Comprehensive Research Program Informed the Development of Proposed Labels

C. When Would The Proposed Label Changes Take Effect?

D. What Are The Estimated Costs and Benefits of the Proposed Label Changes?

E. Relationship of This Proposal to Other Federal and State Programs

F. History of Federal Fuel Economy Label Requirements

G. Statutory Provisions and Legal Authority

1. Energy Policy and Conservation Act (EPCA)

2. Energy Independence and Security Act (EISA) II. Proposed Revisions to the Fuel Eco nomy Label Content (Metrics and Rating Systems)

A. Conventional Gasoline, Diesel and Hybrid Vehicles

1. Fuel Economy PerformanceFuel Economy Labeling NPRM for OMB Review 8

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Page 8 of 150 2. Fuel Consumption

3. Greenhouse Gas Performance

4. Fuel Economy and Greenhouse Gas Rating Systems

5. Other Emissions Performance and Rating System

6. Overall Energy and Environmental Rating

7. Indicating Highest Fuel Economy/Lowest Greenhouse Vehicles

8. SmartWay Logo

9. Annual Fuel Cost

10. Relative Fuel Savings or Cost

11. Range of Fuel Economy of Comparable Vehicles

12. Other Label Text

13. Gas Guzzler Tax Information

B. Advanced Technology Vehicle Labels

1. Introduction

2. EPA Statutory Requirements

3. Principles Underlying the Co-Proposed Advanced Technology Vehicle Labels

4. Key Advanced Technology Vehicle Label Issues

C. Labels for Other Vehicle/Fuel Technologies

1. Flexible Fuel Vehicles

2. Compressed Natural Gas Vehicles

3. Dual Fuel Natural Gas & Gasoline Vehicles

III. Proposed Revisions to Fuel Economy Label Appearance

A. Proposed Label Designs

1. Label 1

2. Label 2

B. Alternative Label Design (Label 3)

IV. Agency Research On Fuel Economy Labeling

A. Methods of Research

1. Literature Review

2. Focus Groups

3. Internet Survey

4. Expert Panel

B. Key Research Questions and Findings

1. Effective Metrics and Rating Systems fo r Existing and New Label Information

2. Effective Metrics and Ratings Systems for Advanced Technology Vehicles

3. Effective Metrics to Enable Vehicle Comparison

4. Effective Whole Label Designs

5. Tools beyond the Label

V. Implementation of the New Label

A. Timing

B. Labels for 2011 model year advanced technology vehicles

C. Implementation of Label Content

VI. Additional Related EPA Proposals

A. Electric and Plug-In Hybrid El ectric Vehicle Test Procedures

1. Electric Vehicles

2. Plug-in Hybrid Electric VehiclesFuel Economy Labeling NPRM for OMB Review 8

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Page 9 of 150 B. Utility Factors

1. Utility Factor Background

2. General Application of Utility Factors

3. Calculating combined values using Cycle Specific Utility Factors

4. Low Powered Vehicles.

C. Comparable Class Categories

D. Using Smart Phone QR Codes to Link to Fuel Economy Information

E. Fuel Economy Information in the context of the “Monroney” Sticker

F. Miscellaneous Amendments and Corrections

VII. Projected Impacts Of The Proposed Requirements

A. Costs Associated with this Rule

1. Operations and Maintenance Costs and Labor Hours

2. Facility Costs

3. Startup Costs

4. Cost Summary

B. Impact of Proposing One Label to Meet EPCA/EISA

C. Benefits of Label Changes

D. Summary

VIII. Agencies’ Statutory Authority and Executive Order Reviews

A. Relationship of EPA’s Proposed Requirements With Other Statutes and Regulations

1. Automobile Disclosure Act

2. Internal Revenue Code

3. Clean Air Act

4. Federal Trade Commission Guide Concerning Fuel Economy Advertising for New

Vehicles

5. California Environmental Performance Label

B. Statutory and Executive Order Reviews

1. Executive Order 12866: Regulatory Planning and Review and DOT Regulatory Policies and Procedures (NHTSA only)

2. Paperwork Reduction Act

3. Regulatory Flexibility Act

4. Unfunded Mandates Reform Act

5. Executive Order 13132: Federalism

6. Executive Order 13175: Consultation and Coordination With Indian Tribal

Governments

7. G. Executive Order 13045: Protection of Children from Environmental Health and Safety Risks

8. Executive Order 13211: Actions That Signifi cantly Affect Energy Supply, Distribution

or Use

9. National Technology Transfer Advancement Act

10. Executive Order 12898: Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations.

List of Acronyms and Abbreviations

A/C Air Conditioning

AC Alternating CurrentFuel Economy Labeling NPRM for OMB Review 8

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Page 10 of 150 AIDA Automobile Informa tion Disclosure Act

BTU British Thermal Units

CAA Clean Air Act

CAFE Corporate Average Fuel Economy

CARB California Air Resources Board

CBI Confidential Business Information

CD Charge Depleting

CFR Code of Federal Regulations

CH 4 Methane

CNG Compressed Natural Gas

CO Carbon Monoxide

CO 2 Carbon Dioxide

CREE Carbon-related Exhaust Emissions

CS Charge Sustaining

DOE Department of Energy

DOT Department of Transportation

E85 A mixture of 85% ethanol and 15% gasoline

EISA Energy Independence and Security Act of 2007

EO Executive Order

EPA Environmental Protection Agency

EPCA Energy Policy and Conservation Act

EREV Extended Range Electric Vehicle

EV Electric Vehicle

FCV Fuel Cell Vehicle

FE Fuel Economy

FFV Flexible Fuel Vehicle

FTC Federal Trade Commission

FTP Federal Test Procedure

GHG Greenhouse Gas

GVWR Gross Vehicle Weight Rating

HCHO Formaldehyde

HEV Hybrid Electric Vehicle

HFC Hydrofluorocarbon

HFET Highway Fuel Economy Test

ICI Independent Commercial Importer

IT Information Technology

ICR Information Collection Request

LEVII Low Emitting Vehicle II LEV II opt 1 Low Emitting Vehicle II, option 1

MDPV Medium Duty Passenger Vehicle

MPG Miles per Gallon

MPGe Miles per Gallon equivalent

MY Model Year

N 2 O Nitrous Oxide

NAICS North American Industry Classification SystemFuel Economy Labeling NPRM for OMB Review 8

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Page 11 of 150 NEC Net Energy Change

NHTSA National Highway Traffic Safety Administration

NMOG Non-methane Organic Gases

NO X Oxides of Nitrogen

NPRM Notice of Proposed Rulemaking

NTTAA National Technology Transfer and Advancement Act of 1995

O&M Operations and Maintenance

OCR Optical Character Recognition

OMB Office of Management and Budget

PEF Petroleum Equivalency Factor

PHEV Plug-in Hybrid Electric Vehicle

PM Particulate Matter

PZEV Partial Zero-Emissions Vehicle

R CDA Actual Charge Depleting Range

RESS Rechargeable Energy Storage System

RFA Regulatory Flexibility Act

SAE Society of Automotive Engineers

SAFETEA-LU Safe, Accountable, Flexible, Effi cient Transportation Equity Act: A Legacy for Users

SBA Small Business Administration

SFTP Supplemental Federal Test Procedure

SOC State

- of

- Charge

SULEV II Super Ultra Low Emission Vehicles II

SUV Sport Utility Vehicle

UDDS Urban Dynamometer Driving Schedule s
UF Utility Factor

ULEV II Ultra Low Emission Vehicles II

UMRA Unfunded Mandates Reform Act

ZEV Zero Emission Vehicle

I. Overview of Joint EPA/NHTSA Proposal on New Vehicle Labels

A. Summary of and Rationale for Proposed Label Changes

T his joint action by the Environmental Protection Agency (EPA) and the National Highway Traffic Safety Admini stration (NHTSA) proposes what will likely be the most significant overhaul of the federal government’s fuel economy label or “sticker” since its inception over 30 years ago.

The current fuel economy label required on all new passenger cars, light-duty trucks, and medium-duty passenger vehicles contains the follow ing core information, as required by statute:

• City and highway fuel economy values in miles per gallonFuel Economy Labeling NPRM for OMB Review 8

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Page 12 of 150 • Comparison of the vehicle’s combined city/highway fuel economy to a range of comparable vehicles

• Estimated fuel cost to operate the vehicle for one year

This joint proposal is designed to update the current label in order to increase the usefulness of the label in helping consumers choose more efficient and environmentally friendly vehicles that would also meet new requirements added by Congress. This proposal also includes new label designs for electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs), two advanced vehicle technologies that are beginning to enter the market.

EPA and NHTSA are co-proposing two label designs for public comment without a single primary proposal, although the final rule will adopt only one label design. Both label designs meet statutory requirements and rely on th e same underlying data; they differ in how the data is used and presented on the label. One is a more traditional label design that retains the current label’s focus on fuel economy values and annual fuel cost projections, with a general label layout more similar to the current label. The second labe l design contains all appropriate information but prominently features a letter grade to communicate the overall fuel economy and greenhouse gas emissions – along with projected 5- year fuel cost or savings associated with a particular vehicle when compared to an average vehicle. The agencies are also seeking comment on an alternative third label design that follows a more traditional format but presents some information differently. All labels expand upon the content found on the current label and include the following information for conventional vehicles (advanced technology vehicle labels contain additional information tailored to the individual technology):

• City and highway fuel economy values in miles per gallon

• Combined city/highway fuel consumption in gallons per 100 miles

• Tailpipe carbon dioxide (CO 2 ) emissions in grams per mile

• Annual fuel cost in dollars per year

• A slider bar comparing the combined fuel economy to all other vehicles

• A slider bar comparing the CO 2 emissions to all other vehicles

• A slider bar comparing non-CO 2 (“other” or “smog-related”) emissions to all other

vehicles

• A symbol that can be read by a ‘Smartphone’ for additional consumer information (also known as a QR code)

• A reference to a federal government website for additional information

Despite the fact that the co-proposed labels are based on the same underlying data, they are significantly different in terms of presentation and prominence. The agencies encourage public feedback on the central question of which label design would be more useful and help consumers select more energy efficient and environmentally friendly vehicles that meet their needs, or whether the agencies should consider alternative designs.

NHTSA and EPA are proposing these changes because the Energy Independence and Security Act (EISA) of 2007 mandates several new labeling requirements intended to help consumers make more informed vehicle purchase decisions, and because this is an appropriate time to develop new labels for advanced technolo gy vehicles (Battery Electric or EVs and Plug-Fuel Economy Labeling NPRM for OMB Review 8

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Page 13 of 150 In Hybrid Vehicles or PHEVs) that are being co mmercialized. The agencies believe that a joint label meeting our separate statutory requirements and our shared consumer information objectives makes far more sense for both consumers and manufacturers than separate labels. As a joint rulemaking, this proposal is also consis tent with the recent joint rulemaking by EPA and

NHTSA that established harmonized federal greenhouse gas (GHG) emissions and corporate average fuel economy (CAFE) st andards for new cars, sport u tility vehicles, minivans, and pickup trucks for model years 2012-2016. 8

The agencies believe these new labeling requirements for automobiles are important in light of a growing national interest in both fu el economy and climate change. Historically, consumers have generally paid the most attenti on to fuel economy when fuel prices increase sharply over a short period of time, such as in 2008, but the agencies believe that this phenomenon has changed and consumers will continue in the future to pay more attention to fuel economy. Based on projections from the U.S. Energy Information Administration that future gasoline prices will increase over coming decades due to global economic growth and oil demand, we believe that it is likely that consumer interest in and use of the fuel economy label will grow over time. 9 In addition, given the increased awareness of consumers regarding climate change and air pollution, more comprehensive information on the emissions performance of vehicles, as required by EISA, could help consumers make more informed decisions on how a vehicle they buy may impact the environment.

It is also important for the agencies to defi ne labeling requirements for advanced vehicle technologies that are nearing commercialization. The existing label has long provided city and highway fuel economy in terms of miles per gallon (mpg) values, which the agencies believe are well recognized and understood by consumers, and which are widely used as metrics for comparing the efficiency of one vehicle to another. Since the late 1970s when the fuel economy label was first established by EPA as required under the Energy Policy Conservation Act(EPCA) of 1975, over 99 percent of the automobiles sold have been conventional, internalcombustion engine vehicles that run on petroleum-based fuels (or a liquid fuel blend dominated by petroleum). When manufacturers produced di fferent advanced technology vehicles, such ascompressed natural gas vehicles, EPA has generally addressed the need for labels on a case-bycase basis.

Over the next several model years, however, the agencies expect to see increasing numbers of EVs and PHEVs entering the marketplace. This proposal includes changes to the label to address some of the specific issues raised by the use of grid electricity as a fuel for EVs and PHEVs. These vehicles will be required to display labels contai ning the same kind of information as conventional vehicles, but some of that information may be better conveyed in different ways, and consumers may be interested in different information for these vehicles. For example, evaluating the performance of a vehicle that uses grid electricity as some or all of its fuel, or the cost of operating such a vehicle, presents unique challenges for making an informed comparison between different EVs and PHEVs, and between advanced technology vehicles and

8 75 FR 25324, May 7, 2010.

9 Annual Energy Outlook 2010, Department of Energy, Energy Information Administration, DOE/EIA-0383 (2010), May 11, 2010, available at http://www.eia.doe.gov/oiaf/aeo/index.html

.Fuel Economy Labeling NPRM for OMB Review 8

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Page 14 of 150 their conventional vehicle counterparts including ga soline and diesel fueled vehicles and hybrid gasoline electric vehicles (HEVs).

The co-proposed label designs present two approaches for addressing the complex challenges associated with labels for these a dvanced technology vehicles, and the agencies encourage the public to comment on a wide range of possible solutions. The agencies recognize that this is only the first generation of EV and PHEV labels, and we expect to refine them over

time as we have done with conven tional vehicle labels. Additionally, the agencies recognize that other advanced technology vehicles, such as fuel cell vehicles, may enter the marketplace in the near future as well, but for purposes of this fi rst effort we have chosen to focus on EVs and PHEVs. Specific label requirements for other adva nced technology vehicles will be developed at

a later time as those vehicles enter the market.

This joint proposal is designed to satisfy e ach agency’s statutory responsibilities in a manner that maximizes usefulness for the consumer, while avoiding unnecessary burden on the manufacturers who prepare the vehicle labels. Since 1977, EPA has required auto manufacturers to label all new automobiles, 10 pursuant to EPCA. 11 As amended, EPCA requires that labels shall contain the following information: (1) the fuel economy of the automobile; (2) the estimated annual fuel cost of operating the automobile; (3) the range of fuel economy of comparable vehicles of all manufacturers; (4) a statement that a booklet is available from the dealer to assist in making a comparison of fuel economy of other automobile s manufactured by all manufacturers in that model year; (5) the amount of the automobile fuel efficiency tax (“gas guzzler tax”) imposed on the sale of the automobile under section 4064 of the Internal Revenue Code of 1986 (26 U.S.C. 4064); and (6) other information required or authorized by the EPA Administrator that is related to the information required by (1) through (4) above. 12

In the Energy Independence and Security Act of 2007 (EISA), 13 Congress required that NHTSA, in consultation with EPA and the Department of Energy (DOE), establish regulations to implement several new labeling re quirements for new automobiles. 14

, NHTSA must develop a program that requires manufacturers to label new automobiles with information reflecting an automobile’s performance with respect to fuel economy and greenhouse gas and other emissions over the useful life of the automobile based on criteria provided by EPA. 15 NHTSA must also develop a rating system that makes it easy for consumers to compare the fuel economy and greenhouse gas and other emissions of automobiles at the point of purchase, including

10 An “automobile” is defined for these purposes as a “4-whe eled vehicle that is propelled by fuel, or by alternative fuel, manufactured primarily for use on public streets, ro ads, and highways” and “rated at not more than 8,500 pounds gross vehicle weight.” See 49 U.S.C. 32901(a)(3) and 32908(a)(1).

11 Pub. L. 94-163.

12 49 U.S.C. 32908(b).

13 Pub. L. 110-140.

14 EISA Sec. 108, codified at 49 U.S.C. 32908(g).

15 49 U.S.C. 32908(g)(1)(a)(i).Fuel Economy Labeling NPRM for OMB Review 8

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Page 15 of 150 designations of automobiles with the lowest GHG emissions over the useful life of the vehicles, and the highest fuel economy. 16

Thus, either the basic label for automobiles needs to be expanded to include additional information on performance in terms of fuel economy, greenhouse gas and other emissions, or a new label needs to be required. NHTSA and EPA believe that a joint rulemaking to combine all of these elements into a single revised fuel econo my label is the most appropriate way to meet the goals described above, rather than placing the information in two separate labels with duplicative and overlapping information, which could cause consumer confusion and impose unnecessary burden on the manufacturers. 17

Finally, given the goals described above and the need to provide additional information on the label, the agencies believe that the overall vehicle label design format and content should be reevaluated and could be improved. Simply including the additiona l information required under EISA for both conventional and advanced technology vehicles necessitates a review of the overall label design.

As described above, the agencies view the purpose of the label as providing information that will be most useful for consumers in making informed decisions regarding the energy efficiency and emissions impacts of the vehicl es they purchase. Providing information on energy, environmental performance, and cost can educate consumers in various ways. These metrics have the potential to he lp people who value this kind of information to make a more informed choice among different vehicles. It also has the potential to inform people who currently place less or even no value on this kind of information, but who may decide it is more important to them at some point in the future . NHTSA and EPA are mindful that this is a complicated issue and that there is no readily asce rtainable metric to determine whether we have achieved this somewhat subjective and qualitative purpose. Therefore, EPA and NHTSA are coproposing two options, and also taking comment on another alternative, that highlight a number of relevant issues on which we seek public co mment. The agencies w ill consider all public comments and publish a final rule in the near future.

B. A Comprehensive Research Program Informed the Development of Proposed

Labels

Sin ce today’s proposal includes adding import ant new elements to the existing label as well as creating new labels for advanced technology vehicles, EPA and NHTSA embarked on a comprehensive and innovative research program beginning in the fall of 2009. The research helped inform the development of the new labels being proposed and included three phases of consumer focus groups, a review of available literature, and a day long consultation with an expert panel of individuals who have introduced new products or have spearheaded national educational campaigns.

16 49 U.S.C. 32908(g)(1)(a)(ii).

17 The agencies also raised the issu e of the upcoming labeling requirements in the recent joint rulemaking for MYs 2012-2016 CAFE and GHG standards for light-dut y vehicles, 75 FR 25324 (May 7, 2010).Fuel Economy Labeling NPRM for OMB Review 8

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Page 16 of 150 For the focus groups, the agencies decided to use a three-phase approach in order to accommodate the sheer amount of information intended to be covered in the groups, as well as to use each phase to inform the next phase to help evolve the overall label design in regard to both content and appearance. Focus groups were held beginning in late February through May 2010 in four cities: Charlotte, H ouston, Chicago, and Seattle. Overall, 32 focus groups were convened with a total of 256 participants. We as ked the focus groups about the following issues:

• How they use the current fuel economy label

• What feedback they could give us on potential new information and metrics for the label for conventional and advanced technology vehicles (EVs and PHEVs), and

• What feedback they could give us, after reviewing draft labels, on designs and the level of information that makes sense, as well as overall preference for displaying information.

The insights received from the focus groups were key for the agencies with regard to

individual metrics that consumers wanted to see on labels and also with regard to effective label designs. Overall, focus groups indicated 18 that redesigned labels must:

 Create an immediate first impression for consumers

 Be easy to read and understand quickly

 Clearly identify vehicle technology (conventional, EV, PHEV)

 Utilize color

 Chunk information to allow people to deal with “more information”

 Be consistent in content and design across technologies

 Allow for comparison across technologies

 Make it easy to identify the mo st fuel efficient and environmentally friendly vehicles

Following the focus group research, we assembled an expert panel for a one day consultation and asked them to give us feedback on the draft label designs the focus groups had helped create and to also assist us in identifying opportunitie s and strategies to provide more and better information to consumers so that they can more easily assess the costs, emissions, and energy efficiency of different vehicles. The experts came from a variety of fields in advertising and product development, and were chosen because they have led successful national efforts to introduce new products or have spearheaded national educational campaigns. After viewing the draft labels, the expert panel offered the agencies the following insights and guidance 19 that were key in developing one of the co-proposed label designs, including:

 Keep it simple; we yearn for simplicity (fewer, bigger, better)

 Consumers don’t act on details

 Remember the reality of very short label vi ewing time - roll ratings and metrics up into a single score

 Use cost savings information- a very strong consumer motivator

18 Environmental Protection Agency Fuel Economy Label: Phase 1 Focus Groups, EPA420-R-10-903, August

2010 EPA Fuel Economy Label Phase 1 Focus Groups Technical Memorandum, Prepared by PRR, Inc

, July 2010 ;
, Environmental Protection Agency Fuel Economy Label: Phase 2 Focus Groups, EPA420-R-10-904, August 2010 EPA Fuel Economy Label Phase 2 Focus Groups Technical Memorandum, Prepared by PRR, Inc

, July 2010 ;
, and Environmental Protection Agency Fuel Economy Label: Phase 3 Focus Groups, EPA420-R-10-905, August

2010 EPA Fuel Economy Label Phase 3 Focus Groups Technical Memorandum, Prepared by PRR, Inc

, July 2010

. 19 Environmental Protection Agency Fuel Economy La bel: Expert Panel Report, EPA420-R-10-908, August

2010 EPA Fuel Economy Label Expert Panel Technical Memorandum, Prepare d by PRR, Inc, July 2010

.Fuel Economy Labeling NPRM for OMB Review 8

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Page 17 of 150  Develop a web site that would be launched in conjunction with the new label. This consumer-focused, user friendly web site would provide more specific information on the label including addition information on the letter grade, along with access to the tools, applications, and social media.

Beyond these two core research elements, the agencies also undertook a comprehensive

literature review 20 and drafted and had peer reviewed an internet survey. The agencies intend to administer the survey concurrently with the release of this proposal, and the results will be made publicly available in the dockets for this proposal prior to issuing a final rule with the new label requirements.

The agencies also met with a number of stakeholders, including environmental organizations, auto manufacturers, and dealers, to gather their input on what the label should and should not contain, as well as to ascertain particular concerns. 21 Comments received on labeling issues in the context of the joint rulemaking on fuel economy and GHG standards, 22 as well as for the 2006 fuel economy labeling rule, 23 have also been considered.

C. When Would The Proposed Label Changes Take Effect?

The ag encies propose that the final label changes will take effect for model year (MY) 2012 vehicles, consistent with the recent joint rulemaking by EPA and NHTSA that established harmonized federal GHG emissions and CAFE standards for new cars, sport utility vehicles, minivans, and pickup trucks for model years 2012 through 2016. 24 For those advanced technology vehicles that will be introduced to the market prior to MY2012, EPA will work with individual manufacturers on a case-by-case basis to develop interim labels under EPA’s current regulations that can be used prior to MY2012 and that are consistent with the proposed labels for advanced technology vehicles.

D. What Are The Estimated Costs and Benefits of the Proposed Label Changes?

Th e primary costs associated with this proposed rule come from revisions to the fuel economy label and new testing requirements. As discussed in Section VII of this preamble, we estimate that the costs of this rule are likely to be in the range of $649,000 – $2.8 million per year. This rule is not economically significant under E.O 12866 or any DOT or EPA policies and procedures because it does not exceed $100 million or meet other related standards.

The primary benefits associated with this proposed rule come from any improvements in consumer decision-making that may lead to reduced vehicle and fuel costs for them. There may be additional effects on criteria pollutants and gr eenhouse gas emissions. At this time, EPA and

20 Environmental Protection Agency Fuel Economy Labe l: Literature Review, EPA420-R-10-906, August 2010 EPA Fuel Economy Label Literature Review, Prepared by PRR, Inc, July 2010.

. 21 Pursuant to DOT Order 2100.2, NHTSA will place a memorandum recording those meetings it attended, and attach documents submitted by stakeholders, as appropriate , when the information received formed a basis for this proposal, and the information can be made public, in the docket for this rulemaking. .

22 Available at Docket No. NHTSA-20 09-0059 and EPA-HQ-OAR-2009-0472.

23 Available at Docket No. EPA-HQ-OAR-2005-0169

. 24 75 FR 25324, May 7, 2010.Fuel Economy Labeling NPRM for OMB Review 8

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Page 18 of 150 NHTSA do not believe it is feasible to fully deve lop a complete benefits analysis of the potential

benefits.

EPA and NHTSA request comment on the assessment of the benefits and costs presented

in Section VII below.

E. Relationship of This Proposal to Other Federal and State Programs

T his proposal involves th e addition of new informa tion and design changes to conventional vehicle labels and the creation of specific labels for certain advanced vehicle technologies, but will not impact other importan t elements of the federal government’s fuel economy and GHG emissions regulatory programs. For example, this proposal will not affect the fuel economy compliance values used in NHTSA’s CAFE program, or the GHG emissions compliance values used in EPA’s GHG emissions co ntrol program. Nor will this proposal affect the methodology by which EPA generates the consumer fuel economy values used on the vehicle labels and provided at www.fueleconomy.gov . The result of the additional information, including environmental informa tion, appearing on the label w ill necessitate that additional information also be displayed on th is website in the future. Finall y, this proposal does not affect the test procedures that are used by EPA and manufacturers to generate the federal government’s vehicle fuel economy and GHG emissions database.

This proposal also does not affect the ve hicle labels required by the California Air Resources Board which indicate relative ratings for “Smog” and “Global Warming,” in fulfillment of that state’s statutory requirements. The agencies are aware that the California labels provide information that is effectively d uplicative with some of the information on the labels that will result from this rulemaking effort, although using different underlying rating methodologies and presentational approaches. It is the hope of both NHTSA and EPA that the

Federal label can meet the C ARB requirements and, thus, preclude the need for a separate set of labels. However, it is ultimately up to Californi a to determine how to implement its statue and, thus, beyond the purview of this rulemaking to make any such determination.

F. History of Federal Fuel Economy Label Requirements

The fuel economy label has evolved several times since it was first required by Congress in the 1970s, both in response to new statutory requirements and to changing policy objectives. There have been important changes in the past to make the label more technically accurate and understandable to consumers. The changes being proposed are consistent with past efforts by EPA to make the fuel economy label more consumer friendly and effective over time. This section provides a brief historical summary of the development of the fuel economy label.

The Energy Policy and Conservation Act of 1975 (EPCA) established two primary fuel economy requirements: (1) fuel economy information, designed for public use, in the form of fuel economy labels posted on all new motor vehicles, and the publication of an annual booklet of fuel economy information to be made available free to the public by car dealers; and (2) calculation of a manufacturer's average fuel economy and compliance with a standard (later, this compliance program became known as the Corporate Average Fuel Economy (CAFE) program).Fuel Economy Labeling NPRM for OMB Review 8

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Page 19 of 150 The responsibilities for these requirements were split between EPA, the Department of Transportation (DOT) 25 and the Department of Energy (DOE). EPA is responsible for establishing the test methods and procedures both for determining the fuel economy estimates that are displayed on the labels and in the annual booklet, and for the calculation of a manufacturer's corporate average fuel economy. DO T, and by delegation, NHTSA, is responsible for administering the CAFE compliance program , which includes establishing standards, determining compliance, and assessing any pe nalties as needed. DOE is responsible for publishing and distributing the annual fuel economy information booklet.

EPA published regulations implementing portions of the EPCA statute in 1976. 26 The provisions in this regulation, effective with th e 1977 model year, established the first fuel economy label along with the procedures to calculate fuel economy values for labeling and CAFE purposes that used the Federal Test Procedure (FTP or “city” test) and the Highway Fuel Economy Test (HFET or “highway” test) data as the basis for the calculations. At that time, the fundamental process for determining fuel economy was the same for labeling as for CAFE, except that the CAFE calculations combined the city and highway fuel economy values into a single number for manufacturers’ compliance purposes. 27

After a few years of public exposure to the fuel economy estimates on the labels of new vehicles, it soon became apparent that drivers we re disappointed by not often achieving these estimates on the road and expected them to be as accurate as possible. In 1978, Congress recognized the concern about differences between EPA-estimated fuel economy values and actual consumer experience and mandated a study under section 404 of the National Energy Conservation Policy Act of 1978. 28 In February 1980, a set of hearings were conducted by the U.S. House of Representatives Subcommittee on Environment, Energy, and National Resources. One of the recommendations in the subsequent report by the Subcommittee was that “EPA devise a new MPG system for labeling new cars and for the Gas Mileage Guide that provides fuel economy values, or a range of values, that most drivers can reasonably expect to experience.” 29

EPA commenced a rulemaking process in 1980 to revise its fuel economy labeling procedures, and analyzed a vast amount of in-use fuel economy data as part of that rulemaking. 30
In 1984, EPA published new fuel economy labeling procedures that were applicable to 1985 and later model year vehicles. 31 The decision was made to retain the FTP and highway test

25 The CAFE-related responsibilities of the Secretary of Transportation are delegated to the NHTSA Administrator

at 49 CFR 1.50.

26 41 FR 38685, promulgated at 40 CFR Part 600.

27 EPCA requires that manufacturers simply comply with passenger car and light truck CAFE standards, it does not require separate city and highway standards for each type of automobile. Thus, EPA calculates the average fuel economy for a manufacturer by weighting and combining th e results of each automobile on the separate city and highway cycles. See 49 U.S.C. 32904(c).

28 Pub. L. 95-619, Title IV, 404, November 9, 1978.

29 House Committee on Government Operations, ``Automob ile Fuel Economy: EPA's Performance,'' Report 96- 948, May 13, 1980.

30 “Passenger Car Fuel Economy: EPA and Road,'' U.S. Environmental Protection Agency, Report no. EPA 460/3- 80-010, September, 1980, and ``Technical Support Repo rt for Rulemaking Action: Light Duty Vehicle Fuel Economy Labeling,'' U.S. Environmental Protection Agency, Report no. EPA/AA/CTAB/FE-81-6, October, 1980.

31 49 FR 13845, April 6, 1984, and 49 FR 48149, December 10, 1984.Fuel Economy Labeling NPRM for OMB Review 8

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Page 20 of 150 procedures, primarily because those procedures were also used for other purposes, including emissions certification and CAFE determination. Based on the in-use fuel economy data, however, it was evident that the final fuel economy values put on the labels needed to be adjusted downward in order to reflect more accurately consumers’ average fuel economy experience. The final rule, therefore, included downward adjustment factors for both the city and highway label fuel economy estimates. The city values (based on the raw FTP test data) were adjusted downward by 10 percent and the highway values (likewise based on the raw highway test data) were adjusted downward by 22 percent. 32

EPA projected at the time that these adjustments would put the average city and highway MPG values in the middle of the range of fuel economy values experienced by consumers. 33
During the rulemaking process, the Office of Management and Budget (OMB) expressed concern that fuel economy estimates based on the average experience would result in a significant number of drivers failing to achieve that fuel economy. OMB requested that EPA provide a range of values on the label that would encompass the expected fuel economy of about 75 percent of the driving population. 34 To address this concern, in the final rule, EPA required the label to contain the range of city and highway fuel economy that most drivers should expect. Based on our understanding of the frequency distribu tion of in-use fuel economy data at the time, the range was set at plus or minus 15 percent of the stated city and highway estimates, and appears on the current fuel economy label.

In the early 2000s, EPA again began investigating the accuracy of the fuel economy label estimates, and concluded that driving behavior (e.g., higher average speed and acceleration) and other factors (such as the use of ethanol as a gasoline blending agent) had changed significantly since the correction factors were implemented in 1985, leading again to a widening gap between real-world fuel economy and the label estimates that consumers saw when shopping for new vehicles. During the development of vehicle em issions regulations in the late 1990s, EPA hadalready conclusively found that the city and highway tests did not adequately represent realworld driving, and in December of 2006 EPA finalized new test methods for calculating the fuel economy label values. 35

The 2006 final rule made three important changes. First, EPA’s new methods brought the miles per gallon estimates closer to consumers' act ual fuel economy by including factors such as high speeds, quicker accelerations, air conditioning use, and driving in cold temperatures. These revised fuel economy estimates also reflect othe r conditions that influence fuel economy, like road grade, wind, tire pressure, load, and the effects of different fuel properties. The new estimates took effect with model year 2008 vehicles. Second, EPA now requires fuel economy labels on certain heavier vehicles up to 10,000 pounds gross vehicle weight, such as larger SUVs and vans. Manufacturers will be required to po st fuel economy labels on these vehicles beginning with the 2011 model year. Third, to convey fuel economy information to the public more effectively, EPA updated the design and content of the label. The rule required that new labels be placed on vehicles manufactured after September 1, 2007. The fuel economy for each

32 49 FR 13845, April 6, 1984.

33 49 FR 13832, April 6, 1984.

34 49 FR 13835, April 6, 1984.

35 71 FR 77872, December 27, 2006.Fuel Economy Labeling NPRM for OMB Review 8

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Page 21 of 150 vehicle model continues to be presented to consumers on the label as city and highway MPG

estimates.

G. Statutory Provisions and Legal Authority

1. Energy Policy and Conservation Act (EPCA)

Under EPCA, EPA is responsible for developing the fuel economy labels that are posted on all new light duty cars and trucks sold in the U.S and beginning in MY 2011 all new medium duty trucks as well. Medium-duty passenger vehicl es are a subset of vehicles between 8,500 and 10,000 pounds gross vehicle weight that includes large sport utility vehicles and vans, but not pickup trucks. EPCA requires the manufacturers of automobiles to attach the fuel economy label in a prominent place on each automobile manufactured in a model year and also requires auto dealerships to maintain the label on the automobile. 36

EPCA specifies the information that is minimally required on every fuel economy

label. 37 As stated above, labels must include:

• The fuel economy of the automobile,

• The estimated annual fuel cost of operating the automobile.

• The range of fuel economy of comparable automobiles of all manufacturers,

• A statement that a booklet is available from the dealer to assist in making a comparison of fuel economy of other automobiles manufactured by all manufacturers in that model year,

• The amount of the automobile fuel efficiency tax imposed on the sale of the automobile under section 4064 of the Internal Revenue Code of 1986; 38 and

• Other information required or authorized by the Administrator that is related to the information required [within the first four items].

Under the provision for “other information” EPA has previously required the statements “your actual mileage will vary depending on how you drive and maintain your vehicle,” and cost estimates “based on 15,000 miles at $2.80 per gallon” be placed on vehicle labels.

There are additional labeling requirements found in EPCA for “dedicated” automobiles and “dual fueled” automobiles. A dedicated automobile is an automobile that operates only on

an alternative fuel. 39 Dedicated automobile labels must also display the information noted

above.

36 49 U.S.C. 32908(b)(1).

37 49 U.S.C. 32908(b)(2)(A) through (F).

38 26 U.S.C. 4064.

39 49 U.S.C. 32901(a)(1) defines “alternative fuel” as in cluding —(A) methanol; (B) denatured ethanol; (C) other alcohols; (D) except as provided in subsection(b) of this section, a mixture containing at least 85 percent of methanol, denatured ethanol, and other alcohols by volume with gasoline or other fuels; (E) natural gas; (F) liquefied petroleum gas; (G) hydrogen; (H) coal derived liquid fuels; (I) fuels (except alcohol) derived from biological materials; (J) electricity (including electricity from solar energy); and (K) any other fuel the Secretary of Transportation prescribes by regulation that is not substa ntially petroleum and that would yield substantial energy security and environmental benefits.”Fuel Economy Labeling NPRM for OMB Review 8

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Page 22 of 150 A dual fueled vehicle is a vehicle which is “capable of operating on alternative fuel or a mixture of biodiesel and diesel fuel, and on gasoline or diesel fuel” for the minimum driving range (defined by the DOT). 40 Dual fueled vehicle labels must:

• Indicate the fuel economy of the automobile when operated on gasoline or diesel

fuel.

• Clearly identify the automobile as a dual fueled automobile.

• Clearly identify the fuels on which the automobile may be operated; and

• Contain a statement informing the consumer that the additional information required by subsection (c)(2) [the information booklet] is published and distributed by the Secretary of Energy.

. 41

EPCA defines “fuel economy” for purposes of these vehicles as “the average number of miles traveled by an automobile for each gallon of gasoline (or equivalent amount of other fuel) used, as determined by the Administrator [of the EPA] under section 32904(c) [of this title].” 42

Additionally, EPA is required under EPCA to prepare a fuel economy booklet containing information that is “simple and readily understandable.” 43 The booklet is commonly known as the annual “Fuel Economy Guide.” EPCA further instructs DOE to publish and distribute the booklet. EPA is required to “prescribe regula tions requiring dealers to make the booklet available to prospective buyers.” 44 While the booklet continues to be available in paper form, in 2006, EPA finalized regulations allowing manufact urers and dealers to make the Fuel Economy Guide available electronically to customers as an option. 45

2. Energy Independence and Security Act (EISA)

The 2007 passage of the Energy Independence and Security Act (EISA) amended EPCA by introducing additional new vehicle labeling requi rements, to be implemented by the National Highway Traffic Safety Administration (NHTSA). 46 While EPA retained responsibility for establishing test methods and calculation procedures for determining the fuel economy estimates of automobiles for the purpose of posting fuel economy information on labels and in an annual Fuel Economy Guide, NHTSA gained responsibility for requiring automobiles to be labeled with additional performance metrics and rating systems to help consumers compare vehicles to one another more easily at the point of purchase.

Specifically, and for purposes of this rulemaking, subsection “(g) Consumer Information” was added to 49 U.S.C. section 32908. Subsection (g), in relevant part, directed the Secretary of

40 49 U.S.C. 32901(a)(9), (c)

. 41 49 U.S.C. 32908(b)(3).

42 49 U.S.C. 32901(a)(11).

43 49 U.S.C. 32908(c).

44 Id.

45 71 FR 77915, Dec. 27, 2006.

46 P.L. 110-140.Fuel Economy Labeling NPRM for OMB Review 8

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Page 23 of 150 Transportation (by delegation, the NHTSA Admnistr ator) to “develop and implement by rule a program to require manufacturers –

(A) to label new automobiles sold in the United States with – (i) information reflecting an automobile’s performance on the basis of criteria that the [EPA] Administrator shall develop, not later than 18 months after the date of the of the Ten-in-Ten Fuel Economy Act, to reflect fuel economy and greenhouse gas and other emissions over the

useful life of the automobile: (ii) a rating system that would make it easy for consumers to compare the fuel economy and greenhouse gas and other emissions of automobiles at the point of purchase, including a designation of automobiles— (I) with the lowest greenhouse gas em issions over the useful life of the vehicles; and (II) the highest fuel economy...”

Thus, both EPA and NHTSA have authority over labeling requirements related to fuel economy and environmental information under EPCA and EISA, respectively. In order to implement that authority in the most coordinate d and efficient way, the agencies are jointly proposing the revised labels presented below.

II. Proposed Revisions to the Fuel Economy Label Content (Metrics and Rating Systems)

Th is section discusses the elements that th e agencies are proposing for the fuel economy label. Section A discusses the range of options considered and proposed for “conventional” petroleum-fueled vehicles (i.e., those powered solely by gasoline or diesel fuel). Current hybrid vehicles, which are fundamentally gasoline-fueled vehicles, 47 will continue to use the same label as other gasoline vehicles, just as they do today. Many of the approaches discussed in Section A, such as the rating systems, will apply across all vehicles, including advanced technology vehicles. Section B specifically discusses the special cases of advanced technology vehicles. These vehicles – such as electric vehicles (EVs ) and plug-in gasoline-electric hybrid vehicles (PHEVs) 48 – are one of the key reasons we are proposing new regulations. The agencies are concerned that current label requirements do not adequately address these vehicles, and we are seeking to develop labels that are useful and understandable to consumers, as well as equitable across the range of different vehicles and technological approaches. Section C addresses some

of the less common fuels and fuel combinations for which label templates must ultimately be developed, such as compressed natural gas and methanol.

A. Conventional Gasoline, Diesel and Hybrid Vehicles

47 Current hybrid vehicles obtain their electric power fr om their onboard conventional gasoline engine and energy captured through regenerative braking. Thus, the vehicle’s energy source is still gasoline.

48 Definitions for hybrid electric vehicles, electric vehicles , fuel cell vehicles, and plug-in hybrid electric vehicles can be found in EPA regulations at 40 CFR 86.1803-01.Fuel Economy Labeling NPRM for OMB Review 8

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Page 24 of 150 The complete effect of this proposal would be a single new label, which replaces the existing fuel economy label and which contains mo re information than is currently displayed, even in the case of conventional petroleum-fueled vehicles. An example of the current label is shown here to provide a basis for comparison with the proposed labels.

The new single label is the result of EPA and NHTSA’s decision that it is good public policy to consolidate label requirements called for by EPCA and EISA. This label would contain information not only on a new vehicle’s fuel economy, annual fuel cost, and range of fuel economy within class, but also, for the first time, information on a new vehicle’s fuel consumption, emissions, and comparative rating in formation, as required by statute. This expansion of the role of the label beyond fuel economy information reflects the new EISA requirements, which are premised on the concept that greenhouse gas and other environmental

information is also in the public interest.

In developing this proposal, the agencies came up with two distinct approaches for conveying information on the label. While both approaches rely on the same underlying data and both meet EPCA and EISA requirements, they differ in how they present and emphasize the information. One approach is more traditional, focusing primarily on mpg values and secondarily on annual fuel cost, but adding new elements, such as environmental information. A label using this approach would look familiar to the public, with a style similar to the existing label. Requiring a label based on the traditional approach assumes that potential vehicle purchasers will use the information that is most meaningful to th em, whether that is mpg, fuel cost, or other values. For example, participants in the focus groups leading up to this proposal indicated that, when considering the current fuel economy label, nearly all used the city and highway mpg values almost exclusively, despite the presence of other data elements on the label; some also used annual fuel cost and within-class comparison information. 49

49 Environmental Protection Agency Fuel Economy Label: Phase 1 Focus Groups, EPA420-R-10-903, August 2010,, EPA Fuel Economy Label Phase 1 Focus Groups Technical Memoran dum, Prepared by PRR, Inc, July 2010

, p. 10.Fuel Economy Labeling NPRM for OMB Review 8

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Page 25 of 150 The other approach uses the same data, but shifts the emphasis to a single, more prominent value that reflects fuel consumption and its counterpart, greenhouse gas emissions, using a format the consumers will easily recogni ze - a letter grade. The associated numerical values and other required elements would remain on the label, but with mu ch less prominence. This approach makes it simpler for the consumer to identify those vehicles that use less oil and have a lesser environmental impact and more clearly expands the role of the label beyond fuel economy information. Many of the focus group participants indicated that they trusted the EPA to determine which of these factors were important, and the agencies believe that consumers might be more likely to consider a vehicle with higher fuel economy and lesser environmental impact if they were provided with a simpler label. 50

The agencies believe each approach has merit and that the public will be well-served by having both be fully considered; therefore, EPA and NHTSA are co-proposing two label designs based on these two approaches, without either being the primary proposal. NHTSA and EPA expect that comments will provide valuable insight on these two proposed label designs, and seek comment on the merits and drawbacks of each, recognizing that the label design ultimately finalized may draw on elements from all the labels presented in this proposal. The labels are presented in Section III. Label designs 1 and 2 are co-proposed, with Label 1 being the letter grade approach and Label 2 being the more traditional approach. Label 3, on which comment is also sought, is an alternative version of the traditional approach.

The subsections that follow describe each of the data elements presented on the labels, how the agencies considered them, and how we are proposing that they be displayed on each of the co-proposed labels.

1. Fuel Economy Performance

Since 1977, the EPA fuel economy label has represented the fuel economy performance of a vehicle with estimates of city and highway miles per gallon (mpg). With more than 30 years of consumers seeing these estimates as the most prominent values displayed on the fuel economy labels, it is not surprising that the consumer re search conducted as part of this rulemaking has revealed a strong attachment to city and highway mpg values. A combined city and highway mpg value was first placed on the label starting with model year 2008 -- as part of the graphic showing the combined mpg value of the vehicle compared with other vehicles in the same class 51
but, even prior to this, the combined mpg value has always been a key input to estimating the annual fuel cost value required on the label. 52

Representing the vehicle’s fuel economy performance on the label with an estimate of miles per gallon is a core element of the fuel economy information requirements of EPCA, which

50 Environmental Protection Agency Fuel Economy Label: Phase 1 Focus Groups, EPA420-R-10-903, August 2010, EPA Fuel Economy Label Phase 1 Focus Groups Technical Memorandum, Prepared by PRR, Inc, July 2010, p. 36.

51 The vehicle classes are defined in EPA regulations at 40 CFR 600.315-08 and provide a basis for comparing a vehicle’s fuel economy to that of other vehicles in its clas s as required by statute. See the discussion in section VI.C

for a detailed discussion of the vehicle class structure.

52 Combined fuel economy is a harmonic average of th e City and Highway mpg values, with the City value weighted 55% and the Highway value weighted 45%. See 71 FR 7790 4, December 27, 2006.Fuel Economy Labeling NPRM for OMB Review 8

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Page 26 of 150 specifically states that the label must display “the fuel economy of the automobile” and defines “fuel economy” as “the average number of miles travelled...for each gallon of gasoline...” 53 In addition, EPA and NHTSA have determined that continuing to display the fuel economy values on the label would also meet the new requirements put in place by EISA that call for a label “reflecting an automobile’s performance [based on criteria determined by EPA] to reflect fuel economy...over the useful life of the vehicle.” 54 Because vehicle fuel economy depends primarily on fundamental vehicle design characteristics that do not change over time, theagencies believe that fuel economy remains essentially stable throughout the life of properlymaintained vehicles. Thus the agencies believe that the current test methods that determine label values for new vehicles will meet the EISA requ irements by providing reasonable estimates of fuel economy performance for the full useful life of a vehicle. Finally, consumers have shown a strong familiarity with and preference for mpg values, and have consistently indicated that these values are used as part of the vehicle purchase decision.

For these reasons, the agencies are proposin g to continue to provide mile per gallon estimates to consumers, but with some changes re lative to the current label, and with markedly different approaches on the two co-proposed labels.

The agencies recognize that the focus group research suggested that consumers have a strong familiarity with and preference for the city and highway fuel economy values 55 (although this preference was much stronger for conventional vehicles than for advanced technology vehicles; in those cases perhaps the complexity of the labels encouraged th em to part with some of the numbers on the label). Focus group participants who argued strongly for separate city and highway mpg values on the label often stated, for example, that most of their driving is either city or highway, and that a combined city-highway mpg value might make it harder for them to determine what mpg they should reasonably expect for that vehicle. 56 The agencies believe that this apparent preference was formed in large part because of EPA’s decision to present these as the dominant figures on the label for decades, not because consumers demanded these metrics 33 years ago. Had EPA been presenting the combined number as the dominant figure on the label since 1977, we might expect to see a great deal of familiarity with and understanding of that particular value today. However, the distinction between city and highway driving does not address the key variables that could impact energy consumption for alternative technologies, such as ambient temperature. Thus, the agencies believe that, for labeling purposes, the city/highway distinction may be a less re levant metric than in the past.

Thus with Label 1, NHTSA and EPA propose that the mpg values be significantly reduced in prominence (i.e., smaller font and “b elow the fold” location on the label), with the letter grade rating assuming the predominant role. Given space constraints and the amount of information that is required to be provided on th e label, continuing to display mpg estimates with

53 49 U.S.C. 32908(b)(1)(A).

54 49 U.S.C. 32908(g)(1)(A)(i).

55 Environmental Protection Agency Fuel Economy Label: Phase 1 Focus Groups, EPA420-R-10-903, August

2010 EPA Fuel Economy Label Phase 1 Focus Groups Technical Memorandum, Prepared by PRR, Inc, July 2010,

, p. 10.

56 Environmental Protection Agency Fuel Economy Label: Phase 1 Focus Groups, EPA420-R-10-903, August

2010 EPA Fuel Economy Label Phase 1 Focus Groups Technical Memorandum, Prepared by PRR, Inc, July 2010 , p. 10.Fuel Economy Labeling NPRM for OMB Review 8

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Page 27 of 150 the same or similar prominence would be likely unnecessary and possibly untenable. The city and highway mpg values would be available for those who wish to use them, but the rating assumes the key role of informing the public about the relative energy use and carbon emissions of a vehicle. The agencies believe that this de-emphasis on mpg values would have two primary benefits: first, the rating’s predominance should encourage consumers to use it rather than the specific mpg values to compare across vehicle technology types (particularly as mpg values become less meaningful for vehicles that do not run, or only partially run, on fuels dispensed by the gallon); and second, to address the non-linearity of mpg with respect to energy use, emissions, and cost, discussed further in Section II A 2, which becomes more important as significantly higher mileage vehicles ar e poised to enter the marketplace.

The agencies are proposing a different approach for Label 2, in which the combined mpg value is displayed prominently, with separate city and highway values continuing to be shown on the label, but as subordinate values. This approach focuses attention on mpg since it is the

metric that consumers are the most familiar w ith and have come to utilize on the label. However, it downplays the separate city and highway value in favor of a single, combined mpg, because the agencies believe that continuing to highlight multiple pieces of fuel economy information with the same level of prominence could make it more difficult for consumers to compare vehicles, particularly across technology types, where mpg becomes a less meaningful metric. A similar approach is taken on Label 3.

The agencies seek comment generally on these two approaches to displaying fuel economy performance information on the labels. Specifically, comment is sought on whether or not the labels that emphasize combined city/highway mpg values over separate city and highway mpg values are helpful to consumers, and why or why not. If combined mpg is preferred, comment is sought on whether or not city and highway values should continue to be displayed, and why or why not.

2. Fuel Consumption

While miles per gallon is statutorily mandated for fuel economy labels and has appeared on the label for several decades, the agencies have some concern that it can be a potentially misleading comparative tool for consumers, particularly when it is used as a proxy for fuel costs. The problem can be easily illustrated by the following figure, which shows the non-linear relationship between gallons used over a given distance and miles per gallon. It can be seen that the difference in gallons it takes to go 1,000 miles between 10 and 15 mpg (about 33 gallons) is substantially greater than the difference in gallo ns it takes to go the same distance between 30 and 35 mpg (about 5 gallons). In other words, even if consumers clearly understand that higher mpg is better, those comparing vehicles with relatively low mpg values may not know that mpg differences that appear to be small, even one or two mpg, may actually have very different fuel consumption values, and that selecting the sli ghtly higher mpg vehicle could actually result in significantly less fuel used, thus saving a cons iderable amount of money. Fuel consumption numbers, unlike mpg, relate directly to the amount of fuel used. Mathematically, they represent gallon per mile, instead of miles per gallon. Not co incidentally, they also relate directly to the

amount of CO 2 emitted, because the grams of CO 2 produced are directly proportional to gallons

of fuel combusted.Fuel Economy Labeling NPRM for OMB Review 8

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Page 28 of 150 Illustration of "MPG Illusion"

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150

0 5 10 15 20 25 30 35 40 45 50
Miles per GallonGallons per 1,000 Miles

33 gals

5 gals

This so-called “mpg illusion,” which has b een widely written about by a number of economists to illustrate why mpg is a flawed measur e of how a vehicle’s efficiency relates to fuel

costs, 57 was raised as an issue during the development of the 2006 fuel economy labeling rule. Some vehicle manufacturers suggested at the time th at it may be more meaningful to express fuel efficiency in terms of consumption (e.g., gallons per mile or per 100 miles) rather than in terms of economy (miles per gallon). 58 Fuel consumption is the primary metric used in Europe, and the Canadian fuel economy labels report both mpg and a consumption metric (liters per 100 kilometers). Because a few stakeholders expressed an interest in a fuel consumption metric at the time, EPA requested comments on a gallons-per-mile metric and how it could be best used and presented publicly, such as whether it should be included in the Fuel Economy Guide.

The comments received in response to this request were mixed. Public Citizen, on the one hand, responded that, while there may be some merit to including a fuel consumption metric, consumers are comfortable with mpg. Any change, they argued, should be carefully deliberated and involve a massive public outreach campaign to educate consumers. 59 They also suggested

57 Allcott, H., Mullainathan, S., "Energy: Behavior an d Energy Policy," Science, March 5, 2010, available at:http://www.sciencemag.org/cgi/content/summary/327/5970 /1204; Larrick, R.L., Soll, J.B., "The MPG Illusion," Science, June 20, 2008, available at http://www.scien cemag.org/cgi/content/full/320/ 5883/1593; McArdle, M., "Department of Mathematical Illusion," The Atlantic, December 24, 2007, available at: http://www.theatlantic.com/business/archive/2007/12/ department-of-mathematical-illusion/2425/.

58 US EPA Response to Comments: Fuel Economy Labeling of Motor Vehicles, EPA-420-R-06-016, Dec 2006, pp.

60-61.

59 Public Citizen Comments on Proposed Fuel Economy Labeling Of Motor Vehicles, EPA-HQ-OAR-2005-0169- 0123.1, Apr 3, 2006, p.4.Fuel Economy Labeling NPRM for OMB Review 8

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Page 29 of 150 that the estimated annual fuel cost provides information derived from consumption values and is thus a suitable proxy for consumption. Toyota, in contrast, commented that fuel consumption is a more meaningful measure than mpg for expressing fuel efficiency, while acknowledging EPA’s statutory limitations. They noted - as have many others - that the mpg metric is fundamentally nonlinear in relation to issues of consumer interest, such as cost of fuel or gallons used, and noted that anecdotal evidence shows that the nonlinear aspects of mpg can lead to consumer confusion. Toyota concluded that “...this is a matter on which the EPA is obligated to educate the public as fuel consumption, not fuel economy, is a direct reflection of the environmental impact of vehicles in use.” 60

EPA responded to these comments in the 2006 final rule by concluding that switching to a consumption metric without a long-term cons umer education program would cause confusion and that, absent Congressional ac tion, the fuel economy labels would still have to continue to report mpg. EPA also agreed with commenters that the estimated annual fuel cost was a consumption-based metric which conveys essentially the same information (although the

estimated annual fuel cost on the label is not w ithout its own limitations, as described below).

To allow further consideration of this issue, the consumer focus groups conducted for this rulemaking were asked to specifi cally explore the mpg illusion. Most participants were unconvinced that consumption should be included on the label with primary prominence and, although many were unopposed to having it as add itional information, it was unclear whether it would add value from their perspective. 61 This was the case regardless of the consumption metric tested, ranging from gallons per 100 miles to annual gallons consumed.

However, there is general interest from a nu mber of parties in the inclusion of a fuel consumption metric on the label. The agencies, as well, believe that it is important to introduce the concept of consumption to enable consumers to more accurately consider fuel use and costs during the vehicle purchase process. Thus, the agencies propose to introduce such a metric along with the mpg values, expecting that, over time, and with some education, consumers will begin to understand energy consumption and the direct connection it has with the fuel costs and environmental impacts of the vehicle. EPA is therefore proposing to include an estimate of gallons per 100 miles on the label under its 49 U.S.C. 32908(b)(1)(F) authority to require other

information related to fuel econo my on the label, and requests comment on doing so, as well as on alternative options for reflecting fuel consumption, such as annual gallons consumed. 62 For consumers to use a consumption number, however, EPA and NHTSA believe that a comprehensive education campaign would have to accompany the roll-out of new labels.

The agencies also seek comment on the specifics of displaying a consumption metric on the two labels being co-proposed. Although the label may provide city and highway mpg values

60 Toyota Motor Corporation Comments on Proposed Fuel Economy Labeling Of Motor Vehicles, EPA-HQ-OAR2005-0169-0118.1, Mar 31, 2006, p.7.

61 Environmental Protection Agency Fuel Economy Label: Phase 1 Focus Groups, EPA420-R-10-903, August

2010 EPA Fuel Economy Label Phase 1 Focus Groups Technical Memorandum, Prepared by PRR, Inc, July 2010 , p. 17

. 62 This proposal is being made under EPA’s authority to require other information related to fuel economy on the label, as described in 49 U.S.C. 32908(b)(1)(F).Fuel Economy Labeling NPRM for OMB Review 8

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Page 30 of 150 as well as a combined city/highway mpg, we are proposing to require only the combined city/highway consumption value on the label. The agencies are concerned that requiring a consumption value corresponding to every mpg valu e would lead to an undesirable proliferation

of numbers on the label.

3. Greenhouse Gas Performance

In addition to the fuel economy performance information that has been provided on the labels since 1977, Congress directed NHTSA, through EISA, to require new vehicles to also be labeled with information reflecting their greenhouse gas performance, which would be determined on the basis of criteria provided by EPA to NHTSA. As with fuel economy, the GHG performance information would be per vehicle model type. EPA hereby proposes the criteria for determining greenhouse gas performance, addressing the greenhouse gases to be incorporated, the emissions sources to include, the underlying test procedures, and the specific metric to be used. The agencies seek comment on whether these criteria, as described below, are reasonable and appropriate for determining the greenhouse gas performance of new vehicles. For purposes of this NPRM, NHTSA is proposing that the greenhouse gas performance element of the label be based on these criteria. These same greenhouse gas performance values would also be used as the basis for the proposed greenhouse gas rating systems.

With regard to the greenhouse gases to be covered, the agencies propose that the label include greenhouse gas performance information solely on the basis of carbon dioxide (CO 2 ) emissions, which typically constitute approximat ely 95% of the tailpipe emissions of greenhouse gases. Including emission levels of the greenhouse gases methane (CH 4 ) and nitrous oxide (N 2 O) along with CO 2 would not provide additional differentiation between vehicles. This is because, for purposes of compliance with EPA’s GHG standards beginning in model year 2012,

CH 4 and N 2 O values would be based on emission factors–that is, set values applied to each vehicle, rather than direct measurements. Because these values would be set at the same level for all vehicles, the agencies do not believe th at including them would provide consumers with

additional useful information.

Similarly, the agencies propose that the greenhouse gas information be based on CO 2 emissions for the vehicle model type, rather than the carbon-related exhaust emissions (CREE) methodology used to determine fuel consumption for CAFE programs and compliance with the light duty greenhouse gas requirements. The use of CREE adds a level of complexity that, while useful for compliance purposes, may not be beneficial to public understanding of the relative

differences in GHG emissions between vehicles because the levels of other carbon-related

emissions are low relative to CO 2 emissions. Although the agencies propose that the greenhouse gas information on the label be based only on CO 2 , we also seek comment on whether and, if so, how, the other greenhouse gases and carbon- related emissions should be included.

Regarding the underlying test procedures to be used to determine the vehicle-specific GHG performance information for the labels, the agencies propose that the CO 2 values presented on the label be based on the five-cycle test procedures that are currently utilized for fuel economy labeling purposes. 63 These test procedures measure rates of tailpipe CO 2 and other

63 40 CFR part 600.210-08.Fuel Economy Labeling NPRM for OMB Review 8

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Page 31 of 150 emissions, which form the basis of the fuel economy values currently used for vehicle labeling. The five-cycle test procedures have been used for labeling since model year 2008, and have significantly improved the correlation between la bel values for MPG and those seen in actual

use. Manufacturers could thus calculate CO 2 emission rates using the same approach that they use for label fuel economy values, which the agencies know to be well-correlated with actual performance in use. More specifically, if a manu facturer uses the "derived five cycle" method for determining mpg for fuel economy labeling, they would use the same method for determining

CO 2 for labeling purposes. The city and highway CO 2 emissions test results would then be used in the derived five-cycle equations, which the EPA has converted from a mpg basis to a CO 2 basis for this purpose. Similarly, vehicle model types that are using the "full five cycle" method for fuel economy labeling would use the CO 2 results from those tests for purposes of fuel economy labeling. The agencies are therefore proposing that manufacturers use the same fivemethodology currently utilized for fuel economy labeling purposes for determining GHG values for purposes of the new label.

As far as emission sources to include, NHTSA and EPA propose that the greenhouse gas emissions represented on the label include only vehicle tailpipe emissions, 64 and do not account for any GHG emissions generated upstream of the vehicle. This approach is also consistent with the vehicle GHG emissions compliance levels recently adopted by EPA, which treat GHG emissions for electric operation as zero up to a cumulative production cap per manufacturer. 65

When exploring this issue with focus groups, the agencies found that most participants did not consider the issue of upstream emissions either way. A few raised it when they noted

that an electric vehicle indicated zero emissions, and suggested that these vehicles did cause some emissions at the power plant, which should be represented on the label. 66 On further discussion, they generally determined that it would be challenging for the label to meaningfully represent the range of emissions from power plan ts operated on different fuels, and suggested

that this information was obtainable from other sources. 67 Given space constraints and the difficulty of explaining the potential range of up stream emissions due to different fuel sources, participants tended to agree that this issue could be adequately addressed by a statement on the label indicating that the CO 2 values on the label represented vehicle tailpipe emissions only. The label designs presented in this NPRM include the words “Tailpipe Only” next to the CO 2 value presented; the agencies seek comment on whether this wording will be readily and uniformly understood to mean that upstream GHG emissi ons are not being reflected on the label, or whether other, more direct wording might be clearer and more helpful to consumers.

64 The agencies seek comment on the potential inclusion of GHG emissions reflecting from A/C leakage credits, as

described later in this section.

65 EPA placed a cumulative production cap on the total pr oduction of EVs, PHEVs, and FCVs for which an individual manufacturer can claim the zero grams/mile compliance value during model years 2012-2016. The cumulative production cap will be 200,000 vehicles, except that those manufacturers that sell at least 25,000 EVs, PHEVs, and FCVs in MY 2012 will have a cap of 300,000 vehicles for MY 2012-2016. See 75 FR 25436 (May 7, 2010)

66 Environmental Protection Agency Fuel Economy Label: Phase 3 Focus Groups, EPA420-R-10-905, August

2010 EPA Fuel Economy Label Phase 3 Focus Gr oups Technical Memorandum, Prepared by PRR, Inc, July 2010

, p.42.

67 Environmental Protection Agency Fuel Economy Label: Phase 3 Focus Groups, EPA420-R-10-905, August

2010 EPA Fuel Economy Label Phase 3 Focus Groups Technical Memorandum, Prepared by PRR , Inc, July 2010 , p. 42.Fuel Economy Labeling NPRM for OMB Review 8

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Page 32 of 150 Aside from tailpipe CO 2 , the agencies are not proposing, but seek comment on the inclusion of an additional factor in the GHG performance used for labeling: air conditioning (A/C) credits generated by a manufacturer under the light duty vehicle GHG requirements. Air conditioning (A/C) systems contribute to GHG emissions in two ways. Hydrofluorocarbon (HFC) refrigerants, which are powerful GHGs, can leak from the A/C system (direct A/C emissions). Operation of the A/C system also places an additional load on the engine, which

results in additional CO 2 tailpipe emissions (indirect A/C related emissions). The efficiencyrelated A/C impacts are accounted for in the five-cycle tests utilized for fuel economy labeling and proposed as the basis for GHG labeli ng purposes. However, EPA and NHTSA are considering whether allowing manufacturers that generate credits towards their GHG compliance obligation by reducing A/C leakage-related GHGs sh ould be allowed to fact or these credits into

the CO 2 value displayed on the label and used as the basis for the GHG rating. Allowing

manufacturers to factor A/C credits into the GHG performance metr ic on the label would reward them for making A/C leakage improvements, but it would also cause the GHG performance value and the fuel economy performance value to diverge, and would impact the methodology for any rating system that combines GHGs and fuel economy. EPA and NHTSA seek comment on a number of issues: whether including A/C leak age adjustments would lead to widening the gap between what is on the label and what consumers get in the real world; on whether and, if so, how, to allow the use of A/C credits for the pur poses of labeling, with specific focus on the methodology and how the labels might display the inclusion of A/C leakage credits if the agencies decided to allow their use.

EPA and NHTSA are proposing to use grams per mile as the metric to display greenhouse gas performance information on the label, which would be consistent with the metric used for GHG emission standards and compliance fo r light duty vehicles. The agencies believe that this metric is also consistent with requirements in 49 U.S.C. § 32908(g)(1)(A) that performance reflect emissions “over the useful life of the automobile.” As with fuel economy, the agencies do not at this time expect notable deterioration of greenhouse gas emissions levels over a vehicle’s useful life. However, the agen cies seek comment on alternative approaches to convey GHG performance information, such as tons per year, using an approach parallel to that

discussed in section II for annual cost information.

4. Fuel Economy and Greenhouse Gas Rating Systems

EISA requires that the label include a “rat ing system that would make it easy for consumers to compare the fuel economy and greenhouse gas and other emissions of automobiles at the point of purchase, including a designation of the automobiles with the lowest greenhouse gas emissions over the useful life of th e vehicles, and the highest fuel economy....” 68 The two co-proposed label designs present two variations on ratings systems for fuel economy and greenhouse gas emissions, based on two interpretations of the statutory language. These two approaches - separate absolute ratings for fuel economy and greenhouse gases, and a relative rating that combines the two factors - are not mu tually exclusive, and a label could contain one

or both.

68 49 U.S.C. 32908(g)(1)(A)(ii).Fuel Economy Labeling NPRM for OMB Review 8

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Page 33 of 150 In developing rating systems, the agencies are cognizant of the focus group testing conducted for this proposal, in which it appeared that many participants did not rely on any rating system. Perhaps due to their familiarity with the prominently displayed mpg numbers, many participants relied initiall y and sometimes exclusively on mpg or mpg-e label values to compare vehicles to one another. 69 Given this result, the agencies are proposing two different approaches to the ratings.

The first approach is displayed at the bottom of Label 1 and Label 2: separate ratings scales for fuel economy and greenhouse gas emissions, bounded by specific values for the “best” and the “worst” vehicles, and with specific fu el economy and GHG emissions values for the vehicle model type in question identified in the appropriate location on the scale. The scales on Label 2 are essentially larger versions of thos e on Label 1, with the addition of a within-class indicator on the fuel economy scale to meet the EPCA 70 requirement for comparison across comparable vehicles.

This variation - absolute rating scales - di rectly utilizes the actual fuel economy and CO 2 performance values per vehicle model type to define the rating, which the agencies believe has both potential benefits and drawbacks. The agencies believe that, by rating vehicles on an absolute scale, this approach clearly meets the text of the EISA requirement for providing fuel economy and GHG performance information and indicating highest fuel economy and lowest GHG vehicles. The rating system allows the consumer looking at the label on the dealer’s lot to identify precisely the highest and lowest fuel economy values available, the lowest and highest GHG emissions values available, and where the vehicle bearing the label falls in relation to these extremes. When this variation was presented in focus groups, some participants liked the level of detail provided by absolute rating scales and found it helpful in understanding how a vehicle compared to the “best” and “worst” vehicles available, although others found it to be more detail than they wanted or did not pay atte ntion to this information on the label. 71

However, even for those consumers who appreciate this level of detail in comparing vehicles by fuel economy and GHG emissions, there is the possibility that the “best” will change over the course of the model year and that the mpg or gram/mile value at the end of the scale may no longer be accurate. Highest and lowest values to be used on the scale would be provided to manufacturers by EPA prior to the start of the model year via annual guidance. Because these values will be based on the previous model year plus any additional information regarding the upcoming new sales fleet available to the EPA, they are expected to be relatively accurate. However, because they are projected values, the introduction during the model year of any new and unexpected vehicles not previously identified to EPA could potentially cause inaccuracy in the end points of the rating scales. In general, because of the expected introduction of electric vehicles, which have no tailpipe CO 2 emissions and thus anchor one end of the scale at zero, and because of the expectation that, for th e foreseeable future, one or more vehicles will

69 Environmental Protection Agency Fuel Economy Label: Phase 3 Focus Groups, EPA420-R-10-905, August

2010 EPA Fuel Economy Label Phase 3 Focus Groups Technical Memorandum, Prepared by PRR, Inc, July 2010 , p. 36.

70 49 U.S.C. 32908(b)(1)(C).

71 Environmental Protection Agency Fuel Economy Label: Phase 3 Focus Groups, EPA420-R-10-905, August

2010 EPA Fuel Economy Label Phase 3 Focus Groups Technical Memorandum, Prepared by PRR, Inc, July 2010 , p. 41.Fuel Economy Labeling NPRM for OMB Review 8

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Page 34 of 150 anchor the opposite end at a relatively constant level, the agencies believe that the end points will likely remain relatively constant, but they may not remain exactly constant. The agencies therefore seek comment on how significant this potential for inaccuracy could be on consumers’ ability to use the absolute rating scales to compare fuel economy and GHG emissions across vehicles, and on whether commenters believe the labels would have to be revised in order to meet the statutory requirement every time a new “best” vehicle was introduced if they were not accommodated by the end points.

The second approach to a rating system is also displayed on Label 1: a combined rating scale for fuel economy and GHG emissions, shown in the form of a letter grade. Because

vehicles that are low in CO 2 emissions have inherently good fuel economy (and vice versa), and

because CO 2 emissions are the primary determinant of fuel economy using EPA test procedures, vehicles would generally tend to have the same “score” for fuel economy as for GHG emissions. Thus, if the ratings are equivalent, as a practical matter, it would be consistent with the statutory requirement to provide a single, combined rating system.

The proposed letter grade scale would range from A+ to D, including plus and minus designations to provide more opportunities fo r improvement. All vehicles would receive a “passing” grade - that is, the ratings would not in clude an “E” or “F” grade - because all vehicles must meet CAA requirements in order to be sold, and the agencies do not wish to convey otherwise. Additionally, the “A+” vehicles - with associated text stating the range of letter grades - will indicate which vehicles are the “best,” thus, meeting the requirement that the label designate highest fuel economy an d lowest greenhouse gas vehicles.

This variation of a fuel economy and greenhouse gas rating system was suggested by the expert panel and was not presented in focus groups, but many focus group participants favored the simplification of information presented when possible, and the agencies believe that such a well-known rating approach will be immediately r ecognizable by the majority of consumers. The agencies are also hopeful that a rating system as simple as a letter grade may encourage consumers to rely more on the rating system itself in making purchasing decisions, rather than on, for example, mpg numbers, which are subject to the “mpg illusion” issue discussed above.

A letter grade allows vehicles purchasers to make a comparative relative assessment among vehicles with different grades , consolidating information so that consumers might more easily assess the GHG emissions and fuel economy of different vehicles and make more fully

informed decision. and may also motivate some consumers to make a more fuel efficient and environmentally

- friendly choice. The proposed letter grade scale would range from A+ to D, including plus and minus designations to provide more opportunities for improvement. All vehicles would receive a “passing” grade

- that is, the ratings would not include an “E” or “F” grade

- because all vehicles must meet Clean Air Ac t (CAA) requirements in order to be sold, and the agencies do not wish t o convey otherwise. The agencies also request comment on whether any vehicle should receive a grade of A+ or whether this might lead to mistaken consumer conclusion that the vehicle has no energy or environmental impacts.Fuel Economy Labeling NPRM for OMB Review 8

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Page 35 of 150 As noted above, CO 2 emissions are directly measured by EPA and form the basis for calculating the fuel efficiency of the vehicle; using CO 2 as the basis for th e rating is the most direct methodological approach and will avoid any r ounding discrepancies that could occur from converting to mpg and then to fuel consumption. It also avoids the need to adjust the mpg thresholds by fuel type to account for differen ces in the energy content of fuel. Utilizing CO 2 as the controlling factor in the rating thresholds is a practical consideration and is not meant to imply that GHG emissions are more important than energy use; both are relevant considerations and are viewed by the agencies as equally important under the rating system. 72

The agencies propose to base this rating system approach on the range of CO 2 emissions for the projected fleet, placing the middle of the rating scale at the combined 5-cycle CO 2 emissions rate for the median vehicle, 73 with equal-sized increments of CO 2 assigned to each grade or rating. 74 The higher-GHG end of the scale would therefore be twice the CO 2 emissions rate of the median value, although, effectively, any vehicle higher than this level would also receive the lowest rating. Under such an approach, the median value would become more stringent over time as a result of GHG emission s requirements and, thus, the entire scale would

shift toward lower GHG levels. Unless a vehicle model reduced its rate of CO 2 emissions across the model years, its ratings would gradually drop over time. This approach would be consistent with both the evolution of fuel economy and emission requirements, and the public expectation that products evolve over time. The CO 2 thresholds associated with each rating would be determined on an annual basis and provided through guidance in advance of the model year. EPA would require that manufacturers use the ratings from the prior year if they are in a position to need to label a vehicle before the annual guidance has been issued. The agencies recognize that revising the median baseline vehicle each year may lead to some consumer confusion, but this dilemma is no different than what consumers currently encounter when they view identical vehicles from different model years and their associated annual fuel cost or the comparative fuel economy slider bar for each vehicle displayed on today’s label. The agencies continue to believe that the underlying assumptions need to be up-to-date to be most useful to consumers.

72 The direct relationship between CO 2 and fuel consumption breaks down to some extent for vehicles with electric operation. For these vehicles, tailpipe CO 2 emissions are zero; however, energy is consumed by the vehicle and an energy efficiency value other than in finity can be assigned. Nevertheless, given that electric drive trains are currently much more efficient than th ose for conventional vehicles, the relationship between those vehicles emitting

zero CO 2 and having the highest energy efficiency holds true at the present time. This approach may need to

reassessed in the future if efficiencies of electric drive a nd conventional vehicles begin to approach each other, or if

it is desired to differentiate between the efficiencies of electric-powered vehicles, but should not be a necessary

consideration in the foreseeable future.

73 Median vehicle is determined by vehicle model type, with model type as defined in 40 CFR Part 600 .311-. (include exact citation)

74 The agencies evaluated several potential methodologies for creating this rating system besides equal increments of

CO 2 . We rejected an approach that would create the rati ng system based on establishing equal size categories for the ratings using miles per gallon – that is, taking the range of mpg of the vehicle fleet and dividing that range into ten equal segments. Given that the fleet will soon see vehicl es that achieve mpg-equivalent values of 75 to 100, the agencies were concerned that this methodology would create a situation where a vehicle such as the 2010 Toyota Prius (which gets a combined mpg of 50 mpg) would receive only an average rating. Using this method would result in the vast majority of vehicles receiving a rating well below the middle rating, which would not seem to be an appropriate result of a rating system. However, the ag encies seek comment on whether a combined rating system based on mpg instead of on CO 2 might be developed in a way that avoided these results.Fuel Economy Labeling NPRM for OMB Review 8

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Page 36 of 150 Nevertheless, the agencies request comment on what the agencies might do to avoid potential

confusion.

The following example is based on model year 2010 data and assumes that one or more

vehicles that emit zero CO 2 tailpipe emissions ( i.e. , electric or fuel cell vehicles) have entered the market. Gasoline-equivalent MPG values are provided in the table for clarity. However, the agencies propose that the CO 2 values be controlling for purposes of assigning the rating.

Table II.A.4-1 Example Fuel Economy and Greenhouse Gas Rating System

CO 2 Range (grams per mile) Rating Combined gasoline

MPG or MPGe

0-76 A+ 117 and higher

77-152 A 59-116

153-229 A- 40-58

230-305 B+ 30-39

306-382 B 24-29

383-458 B- 20-23

459-535 C+ 18-19

536-611 C 16-17

612-688 C- 14-15

689-764 D+ 13

765-842 and higher D 12 and lower

This example would result in the following distributions of ratings, based on 2010 vehicle model types, plus several additional vehicles indicat ed as “Electric Vehicle” and “Plug-in Hybrid

Electric Vehicle.” 75

75 The additional vehicles are examples of types expected to enter the co mmercial market. The CO 2 and mpge values shown are examples only and are not ba sed on any formal testing or certification data.Fuel Economy Labeling NPRM for OMB Review 8

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Page 37 of 150 Applying this rating system to model year 2010 data would assign the ratings as follows for the sample vehicles listed. Of course, future mode l year vehicles could receive different ratings from those shown in this example.

CO 2 g/mi MPGe Sample Vehicles

A+ 0-76 117 and up Electric Vehicle

A 77-152 59-116 Plug-In Hybrid Electric Vehicle

A- 153-

229 40-58 Ford Fusion Hybrid, Honda Civic Hybrid, Toyota Prius

B+ 230-

305 30-39 Chevrolet Cobalt (Manual), Ford Escape Hybrid (2WD), Honda Fit, Nissan Altima Hybrid, Toyota Camry Hybrid, Toyota Corolla (1.8L Manual), Toyota Yaris, Volkswagen GolfFuel Economy Labeling NPRM for OMB Review 8

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Page 38 of 150 B 306-

382 24-29 Chevrolet Cobalt (Automatic), Chevrolet Malibu (2.4L), Ford Escape (2.5L Manual), Ford Escape Hybrid (4WD), Ford Focus, Ford Fusion (2.5L), Ford Ranger (2.3L Manual), Honda Accord (2.4L), Honda Civic, Honda CR-V (2WD), Hyundai Elantra, Hyundai Sonata (2.4L), Jeep Patriot (2.0L, 2.4L Manual), Mazda 3, Nissan Altima (2.5L), Nissan Sentra, Porsche Boxster (Automatic), Toyota Camry (2.5L), Toyota Corolla (1.8L Automatic, 2.4L), Toyota High lander Hybrid, Toyota Matrix, Toyota RAV4 (2.5L)

B- 383-

458 20-23 Cadillac CTS (3.0/3.6L, Auto matic), Chevrolet Impala, Chevrolet Malibu (3.5L and 3.6L), Chevrolet Silverado 15 Hybrid, Chevrolet Tahoe 1500 Hybrid, Dodge Charger (2.7/3.5L with 4-speed Automatic), Dodge Grand Caravan (4.0L), Ford Escape (2.5L Automatic), Ford Fusion (3.5L), Ford Mustang (4.0L Manual), Ford Ranger (2.3L Automatic), GMC Canyon (2.9L), GMC Sierra 15 Hybrid, Honda Accord (3.5L), Honda CR-V (4WD), Hyundai Sonata (3.3L), Hyundai Santa Fe, Jeep Patriot (2.4L CVT), Nissan Altima (3.5L), Porsche Boxster (Manual), Subaru Forester, Toyota 4Runner (2.7L), Toyota Camry (3.5L), Toyota Highlander (2WD), Toyota RAV4 (3.5L), Toyota Tacoma (2.7L 2WD)

C+ 459-

535 18-19 BMW 750Li (4.4L 2WD), Cadillac CTS (3.0/3.6L, Manual), Chevrolet Corvette (6.2L Automa tic, 7.0L), Chevrolet Express 1500 (4.3L), Chevrolet Silverado 15 (4.3L 2WD, 5.3L), Chevrolet Tahoe 1500, Dodge Charger (3.5/5.7L with 5-speed Automatic), Dodge Grand Caravan (3.3L, 3.8L), Ford Explorer (4.6L 2WD), Ford F150 (2WD 6-speed Automatic), Ford Mustang(4.0L Automatic, 4.6L, 5.4L), Ford Ranger (4.0L Automatic), GMC Canyon (3.7L, 5.3L 2WD), GMC Sierra 15 (4.3L 2WD, 5.3L), Honda Pilot, Jaguar XJ, Jeep Grand Cherokee (3.7L), Kia Sedona, Toyota 4Runne r (4.0L), Toyota Highlander (4WD), Toyota Sienna, Toyota Tacoma (2.7L 4WD, 4.0L Automatic), Toyota Tundra (4.6L 2WD)

C 536-

611 16-17 BMW 750Li (4.4L 4WD, 6.0L 2WD), Cadillac CTS (6.2L, Manual), Chevrolet Corvette (6.2 L Manual), Chevrolet Express 1500 (5.3L), Chevrolet Silverado 15 (4.3L 4WD, 4.8L, 6.3L 2WD), Dodge Charger (6.1L), Ford Explorer (4.0L and 4.6L 4WD), Ford F150 (4-speed Automatic, 4WD 6-speed automatic), GMC Canyon (5.3L 4WD), GMC Sierra 15 (4.3L 4WD, 4.8L, 6.2L), Jeep Grand Cherokee (5.7L), Nissan Titan (2WD), Toyota Tacoma (4.0L Manual), Toyota Tundra (4.0L, 4.6L 4WD, 5.7L 2WD)Fuel Economy Labeling NPRM for OMB Review 8

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Page 39 of 150 C- 612-

688 14-15 Aston Martin DBS, BMW M5, Cadillac CTS (6.2L, Automatic), Chevrolet Silverado 15 (6.3L 4WD), GMC Sierra 15 (6.2L 4WD), Land Rover Range Rover, Lexus LX 570, Maserati Quattroporte, Nissan Titan (4WD), Toyota Tundra (5.7L 4WD)

D+ 689-

764 13 Ferrari 599 GTB Fiorano, Mercedes-Benz Maybach 57

D 765 and up 12 and

down Ferrari 612 Scaglietti

One potential issue with this approach is that a rating system based on CO 2 emissions may not be an adequate proxy for a fuel economy rating system if the agencies decide in the final rule to allow manufacturers to use A/C credits in determining their CO 2 emissions values. Since fuel economy by definition does not account for HFC leakage, a CO 2 rating boosted by A/C leakage credits would not accurately represent the vehicle’s fuel economy rating. EISA requires that labels include a rating system that allows consumers to compare fuel economy across vehicles, so a fuel economy rating system that includes HFC leakage arguably would not meet these requirements. The proposed Label 1 would a ddress this issue, whether A/C were included in the letter-grade rating or not, by virtue of also having the absolute rating scale for fuel economy at the bottom of the label. Still, the ag encies seek comment on whether a rating system that combined fuel economy and CO 2 emissions could accurately describe both if A/C credits were permitted to be included in the rating system for CO 2

.

Another issue with using a CO 2 -based method is the fact that some diesel vehicles would see their rating reduced by 1⁄2 letter grade – i.e. , diesel vehicles would appear “worse” to the consumer in the rating system – relative to an approach that relied on mpg or fuel consumption, given the higher carbon content of a gallon of diesel fuel compared to a gallon of gasoline. This could potentially discourage some sales of diesel vehicles if consumers are influenced by the rating system, which the agencies may not necessarily want to accomplish. However, because a consistent basis is needed across all fuels, mpg-e would need to be used rather than mpg: this would provide equivalency on an energy rather than a volume basis, and would allow the use of an mpg-type metric across fuels that are not dispensed by the gallon, such as CNG and electricity. Since gasoline, diesel, biodiesel, and ethanol have near ly equivalent ratios of energy to carbon, the choice of mpg-e versus CO 2 /mile has minimal impact on the rating system results, particularly for liquid fuels. The agencies nevertheless seek comment on how significantly a

CO 2 -based rating system might impact diesel sales, and whether an mpg-e-based rating system might ameliorate any such impact, and if so, how that rating system would need to be structured for technology neutrality.

In practical terms, this means that the rating system would include all vehicles for which fuel economy information and labeling is requi red, which currently includes all passenger automobiles and light trucks as defined by NHTSA at 49 CFR Part 523. More specifically, the rating system would span all automobiles up to 8,500 pounds gross vehicle weight, plus some vehicles (large SUVs and some passenger vans) between 8,500 and 10,000 pounds gross vehicle weight. We believe that this is consistent with the intent of Congress, based on the text of EISA Formatted: Italian (Italy)

Formatted: Italian (Italy)Fuel Economy Labeling NPRM for OMB Review 8

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Page 40 of 150 which refers clearly to labels for “automobiles” rather than “passenger” or “non-passenger automobiles,” and which states that the rating sy stem must include a designation of the vehicle with the highest fuel economy and lowest GHG emissions. 76 The approach of including all vehicles in a single rating system is supported by the market research and literature reviews done for this proposal, which show that, while prospec tive vehicle purchasers narrow their choices by vehicle type early in the buying decision, they do not focus narrowly on a single class, at least as defined by EPA. Focus group participants indicated that they shopped, on average, across two to

three vehicle classes. 77 For these consumers, a single rating system will enable them to make accurate vehicle comparisons across whichever vehicles they choose to shop. Market research also indicates that consumers have varying de finitions of what constitutes a specific vehicle class, thus making it challenging to categorize vehicl es in a way that is useful for all consumers.

Nevertheless, EPA is seeking comment on ra ting passenger cars separately from light duty trucks under its authority to require other information related to fuel economy as authorized by the Administrator at 49 U.S.C. 32908(b)(1)(F). 78 In this case, EPA would propose to use the

same definitions for cars and trucks used for li ght-duty fuel economy and GHG standards, which are NHTSA’s definitions provided in 49 CFR Part 523. Doing so would be consistent with automaker obligations under those requirements, in which cars and trucks have separate sets of standards. Additionally, market research shows that, while many people shop across several narrowly-defined classes, about two-thirds shop exclusively among either trucks or cars. These consumers might find it useful to compare among only those vehicles of interest. If a commenter believes that separate rating systems for cars and trucks would be preferable, EPA especially seeks comment on whether those consumers that shop among both cars and trucks could adequately compare across their vehicles of interest if ratings systems were separated, and whether or not the emerging “crossover” market will make this “car/truck” distinction increasingly less relevant and potentially confusing to the public. 79

5. Other Emissions Performance and Rating System

In addition to fuel economy and greenhouse gas information and ratings, EISA requires

new vehicles to also be labeled with informatio n reflecting a vehicle’s performance in terms of “other emissions,” and a rating system that would make it easy for consumers to compare the other emissions of automobiles at the point of purchase. 80 Unlike fuel economy and GHG emissions, EISA does not expressly require the designation of the “best” vehicle in terms of other emissions. This section lays out the crite ria that EPA proposes NHTSA use to form the

76 49 U.S.C. 32908 (g)(1)(A)(ii).

77 Environmental Protection Agency Fuel Economy Label: Pre-Focus Groups Online Survey Report, EPA420-R-10- 907, August 2010 EPA Fuel Economy Label Pre

- Focus Groups Online Survey Report, Prepared by PRR , Inc, July

2010 , p. 18

. 78 NHTSA does not interpret 49 U.S.C. 32908(g)(1)(A)(ii) as permitting rating systems based on less than the entire fleet, so a rating system for fuel econom y and/or GHG emissions based on only the car or truck fleet would not be sufficient to satisfy EISA’s requirement, although EPA could require such a rating system under its authority.

79 For example, under NHTSA’s and EPA’s definitions, the sa me version of a crossover could potentially be a “car” if it were two wheel drive and a “truck” if it were four wheel drive. A consumer looking at the labels of these two vehicles side by side might find it challenging to understand why their ratings were different.

80 49 U.S.C. 32908(g)(1)(A).Fuel Economy Labeling NPRM for OMB Review 8

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Page 41 of 150 basis for other emissions performance and ratings. Concurrently, NHTSA proposes that these criteria be used as the foundation for information that is provided on the label.

Congress did not precisely define in EISA which of the pollutants in the universe of possible candidates for “other emissions” should be included for labeling purposes. The agencies assume that Congress did not intend to create any new substantive requirements as part of this labeling provision for pollutants that are not currently regulated and, thus, propose that “other emissions” include those tailpipe emissions, other than CO 2 , for which vehicles are required to meet current emission standards. These air pollutants comprise both criteria emissions regulated under EPA's National Ambien t Air Quality Standards and air toxics, and

include:

• NMOG—non-methane organic gases;

• NOx—oxides of nitrogen;

• PM—particulate matter;

• CO—carbon monoxide; and

• HCHO—formaldehyde.

Auto manufacturers must provide the agency with emission rates of these pollutants for all new light duty vehicles each model year under EPA’s Tier 2 light duty vehicle emissions standards requirements, 81 or the parallel requirements for thos e vehicles certified instead to the

California emissions standards. 82 Emission standards for these pollutants are aggregated into bins; each bin contains emissions limits on a gram per mile basis for each of the aforementioned pollutants for the useful life of the vehicle, as show n in Table II.A.5-1. To be eligible for sale in the United States, each vehicle model and confi guration must be certified to a specific bin, meaning that the automaker is confirming that the vehicle is designed not to exceed the specified emission rates for any of the pollutants over the useful life of the vehicles. Automakers must submit data to EPA that demonstrates compliance with these levels, with a requirement that their fleet achieve a sales-weighted NOx average equivalent to the bin 5 level or cleaner annually. California and states that have adopted California emissions standards in lieu of the federal

standards have similar sets of emissions sta ndards, known as the Low Emitting Vehicle II (LEVII) standards. 83

81 40 CFR part 86, subpart S.

82 42 U.S.C. 7543(b), Clean Air Act Section 209, gives California special authority to enact stricter air pollution standards for motor vehicles than the federal government ’s, as long as under certain requirements are met. 42 U.S.C. 7507, Clean Air Act Section 177, allows states, under certain conditions, to adopt California’s vehicle

emission standards. See 40 CFR 86.1844-01.

83 The California Low-Emission Vehicle Regulations for Passenger Cars, Light-Duty Trucks and Medium-Duty Vehicles, Title 13, California Code of Regulations (last amended March 29, 2010).Fuel Economy Labeling NPRM for OMB Review 8

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Page 42 of 150 Table II.A.5-1 US EPA Light Duty Tier 2 Emission Standards Emission Limits at Full Useful Life (120,000 miles) for Model Year 2004 and Later Light Duty Vehicles, Light Duty Trucks, and Medium Duty Passenger Vehicles

NOx (g/mi) NMOG (g/mi) CO (g/mi) PM (g/mi) HCHO (g/mi)

Bin 1 0 0 0 0 0

Bin 2 0.02 0.01 2.1 0.01 0.004

Bin 3 0.03 0.055 2.1 0.01 0.011

Bin 4 0.04 0.07 2.1 0.01 0.011

Bin 5 0.07 0.09 4.2 0.01 0.018

Bin 6 0.1 0.09 4.2 0.01 0.018

Bin 7 0.15 0.09 4.2 0.02 0.018

Bin 8 0.2 0.125 4.2 0.02 0.018

The agencies considered whether to provide specific information and ratings for each of these individual pollutants listed above. EP A Tier 2 emission regulations do require manufacturers to submit specific information regarding the performance of each vehicle for each of these pollutants, but the agencies believe that attempting to require all of it to be represented on the fuel economy label, along with rating systems for each, would be unduly burdensome and not reasonable given space constraints and the need to present all the other information required by EPCA and EISA.

In addition, in the focus groups conducted for this proposal, consumers’ interest in actual emissions levels across multiple pollutants was mini mal, and this level of detail is likely to be well beyond that which most members of the public would seek or find useful. 84 Repeatedly, focus group participants reflected that it was th e job of the government to determine the relative importance of the pollutants, and that the label should not leave this determination up to the individual. Given that EISA did not specify exactly which pollutants would make up “other emissions” and given focus group feedback that differentiation between other emissions did not add value for many participants, the agencies are not proposing to provide pollutant-specific information on the label for “other emissions. Nevertheless, the agencies seek comment on whether pollutant-specific information and ratings might have value to consumers beyond what the agencies have seen in their focus group res earch, and if so, how the agencies might design a label to require pollutant-specific information and ratings that would make it easy for consumers to compare other pollutant emissions acro ss vehicles at the point of purchase.

Instead, the agencies believe that a rating based on the groups of emissions standards-- either the Federal Tier 2 bin system or the California LEVII system, as appropriate—can and should be used to meet this requirement. This approach mirrors the current Air Pollution Score on EPA’s Green Vehicle Guide ( www.epa.gov/greenvehicle ). Vehicle certification under either the Federal Tier 2 bin system or the California LEVII system allows auto manufacturers to

84 Environmental Protection Agency Fuel Economy Label: Phase 1 Focus Groups, EPA420-R-10-903, August

2010 EPA Fuel Economy Label Phase 1 Focus Groups Technical Memorandum, Prepared by PRR, Inc, July 2010 , p. 29.Fuel Economy Labeling NPRM for OMB Review 8

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Page 43 of 150 certify that their vehicles will fall into an emissions range across each of the regulated pollutants. In effect, the Federal and California systems rate vehicles according to their air pollution emissions by compiling the requirements across multiple pollutants into one category (a Tier 2 bin or a LEVII standard). Though these systems are useful for regulatory compliance, they have limited recognition among consumers. However, relative rating systems are well-recognized by the public, and the Federal emissions bins and California standards categories are well-suited to conversion to a relative rating system that would be readily understandable.

EPA and NHTSA therefore propose to establish a rating system for “other emissions” in which each rating is associated with a bin from the Federal Tier 2 emissions standards (or comparable California emissions standard). Table II.A.5-2 provides an example of how such a system would work for a ten-point rating scale. 85 Various graphical representations of this rating are being contemplated, as discussed in Section III.

Table II.A.5-2 Proposed Rating System for Other Emissions

Rating EPA Tier 2

Emissions

Standard California Air

Resources Board LEV II

Emissions Standard

10 Bin 1 ZEV

9 N/A PZEV

8 Bin 2 SULEV II

7 Bin 3 N/A

6 Bin 4 ULEV II

5 Bin 5 LEV II

4 Bin 6 LEV II opt 1

3 Bin 7 N/A

2 Bin 8 SULEV II large trucks

1 N/A ULEV & LEV II large

trucks

Because such a rating would be directly reflective of the emissions standards requirements for air pollutants to which the vehicle is certified, the agencies believe that it could serve the dual purposes of performance information and ratings for “other emissions” as required by 49 U.S.C. § 32908(g)(1)(A)(i) and (A)(ii). Such an approach would have the advantage of avoiding requiring detailed information on the label that would detract from the key elements and could be of minimal use to the majority of the public. NHTSA and EPA seek comment on

85 Under EPA regulations, Independent Co mmercial Importers (ICIs) are allowed to import a limited number of

older vehicles that can be certified to the emission standards which were in effect at the time the vehicle was produced. In some cases, these standards may be pre-Tier 2 standards. Because the rating system being proposed for other pollutants on the FE label is based on the Tier 2 bi n structure, we are proposing that vehicles imported by ICIs that are not subject to the Tier 2 standards will automatically be rated as a "1" (i.e., the rating assigned to vehicles with the worst emissions under the Tier 2 bin structure).Fuel Economy Labeling NPRM for OMB Review 8

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Page 44 of 150 whether also utilizing the rating system to meet the requirement for performance information on other emissions would be permissible under EISA.

6. Overall Energy and Environmental Rating

One of the issues that came up frequently in the focus groups conducted for this proposal was how to design a label that balanced the comp eting interests of completeness and simplicity.

It became clear that different consumers wanted different amounts of information and levels of detail about fuel economy, GHG emissions, and other emissions, and how vehicles compare to one another. Many focus group participants ex pressed an interest in most or all of the information that might be offered, until they saw that the label they had “designed” would be cluttered and difficult to read; at this point, ma ny culled their desired information down to a few key elements. Other participants simply were not interested in much detail. Yet other participants insisted that they wanted more detail anyway and would not find labels with more information distracting or confusing. 86

One approach that emerged to condense the level of detail was to combine rating systems: for example, a rating system that combined fuel economy and CO 2 emissions, or that

combined CO 2 and other pollutant emissions, or that combined all three. Because they have different sets of units and different scales, rating systems that combine different data elements must employ relative or unit-free scales, such as the letter grade system, rather than absolute approaches like the separate rating scales discussed above. Using the bar as an example, if CO 2 and other pollutants were combined into a single bar, a vehicle that falls at one point between the absolute end points for CO 2 emissions may not fall at the same point between the (different) end points for other emissions, which would make co mbining the ratings challenging at best, and unhelpful at worst. Similarly, while a vehicle may fall at roughly the same point between “best” and “worst” absolute values for both fuel economy and CO 2 emissions, differences in scale make presenting that visually difficult and possibly factually incorrect.

Thus, if the agencies wanted to try to combine rating systems for visual simplicity and to appeal to consumers who want labels with less information, a relative scale – 1 to 10, 1 to 5, A+ to D – is needed. The agencies tested combined relative scales for GHG and other pollutant emissions fairly extensively in the focus group s, with mixed results. When environmental ratings were shown in the context of the label, the preference was for a consolidated environmental rating, with participants expressing minimal interest in having separate information on greenhouse gases and other air pollutant emissions; these participants often stated that the EPA was in a better position to assess the relative concerns regarding the various environmental factors than were the participants themselves. 87 In contrast, however, when the environmental rating approaches were shown in is olation, apart from the context of the entire

86 Environmental Protection Agency Fuel Economy Label: Phase 1 Focus Groups, EPA420-R-10-903, August

2010 EPA Fuel Economy Label Phase 1 Focus Groups Technical Memorandum, Prepared by PRR, Inc, July 2010 , p. 29.

87 Environmental Protection Agency Fuel Economy Label: Phase 1 Focus Groups, EPA420-R-10-903, August

2010 EPA Fuel Economy Label Phase 1 Focus Grou ps Technical Memorandum, Prepared by PRR, Inc, July 2010 , p. 25.Fuel Economy Labeling NPRM for OMB Review 8

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Page 45 of 150 label, many participants indicated a preference for two separate ratings, arguing that more complete information holds more value. 88

Congress required in EISA that each new vehicle must be labeled with a “rating system that would make it easy for consumers to compare the fuel economy and greenhouse gases and other emissions of automobiles at the point of purchase, including a designation of automobiles

with the lowest GHG emissions over the useful life of the vehicles; and the highest fuel economy . . . .” Thus, for purposes of meeting the statute, the question is whether a rating that combined two or all three elements could accurately refl ect which vehicle achieves the lowest GHG and the highest fuel economy. For purposes of meeting consumers’ needs in a label, the question is how to design a label that is helpful both to the pe ople who want more inform ation and detail and to the people who want less information and detail. Given the EPCA requirements for fuel economy and annual cost information, and the EISA requirements for performance information on fuel economy, greenhouse gases, and other emi ssions, the agencies believe that the needs for

more detail-oriented consumers w ill likely be adequately met.

In the previous section we discussed an approach to combining fuel economy and CO 2 into one overall rating; in this section the ag encies discuss the additional option of also combining “other emissions” with either CO 2 or with a combined fuel economy/CO 2 rating. EPA and NHTSA recognize that there is not a strong correlation between CO 2 and other emissions, due to sophisticated emission control systems, such as catalytic converters and exhaust gas recirculation, which target reductions of specific pollutants but do not also reduce CO 2 emissions. In addition, the agencies are cognizant of the very real challenges automakers must overcome to achieve the required emissions levels and do not wish to deprive them of public recognition of advancements in reducing air pollutants that could come with a separate rating system for pollutants. Moreover, a separate rating would provide information for purchasers who value low emission levels and an opportunity to raise awareness among other consumers of which vehicles produce lower emissions. And finally, as discussed above, the agencies have determined that a rating for “other emissions” also meets the EISA requirement of providing vehicle performance information for those emissions. Combining this rating for “other emissions” with ratings for fuel economy and greenhouse gases would potentially be at odds with this requirement. For these reasons, the agencies propose that the rating for “other emissions” be separate from the rating(s) for fuel economy and greenhouse gases.

Nevertheless, while some focus group participants wanted more information, most clearly wanted less and suggested that they would glean li ttle additional value from a label with separate ratings. The agencies seek comment on whethe r it would be more useful to provide a single rating that captures all three elements: fuel ec onomy, greenhouse gases, and other emissions. As a matter of technical appropriateness, although there is not a strong correlation between

emissions of CO 2 and emission of other pollutants, there is some correlation. The vehicles with the lowest fuel economy levels and highest CO 2 emissions do not typically meet the cleaner emission bins; conversely, those with high fuel economy and low CO 2 emissions are rarely, if ever, certified to the higher emission bins.

88 Environmental Protection Agency Fuel Economy Label: Phase 3 Focus Groups, EPA420-R-10-905, August

2010 EPA Fuel Econo my Label Phase 3 Focus Groups Technical Memorandum, Prepared by PRR, Inc, July 2010 , p. 39.Fuel Economy Labeling NPRM for OMB Review 8

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Page 46 of 150 Including other emissions in the rating system to form one rating would simplify for the consumer the overall energy and environmental impact of using the vehicle, thus reducing their need to weigh the relative importance of the various elements. It also allows the label to be less

cluttered and more streamlined.

Therefore, it is possible and perhaps reasonable to combine “other emissions” with the fuel economy/CO 2 letter grade approach. Under this approach, the rating for fuel economy and greenhouse gases applicable to a vehicle would be adjusted upward or downward, based on the Federal emissions bin (or California standard) to wh ich the vehicle is certified. That is, vehicles that are certified to the cleanest bins would have their rating increased—for example, under a letter grade system, a bin 2 vehicle otherwise eligible for a B+ would have their rating increased to an A-. Table II.A.6-1 illustrates how such a system could work

.

Table II.A.6-1 Potential Comprehensive Rating Fuel Economy/

Greenhouse Gas Rating Overall Energy and Environment Rating

Bin 1, 2, 3 Bin 4, 5 Bin 6, 7, 8

A+ A+ A+ A

A A+ or A (see next section) A AA- A A- B+

B+ A- B+ B

B B+ B BB- B B- C+

C+ B- C+ C

C C+ C CC- C C- D+

D+ C- D+ D

D D+ D DThe agencies seek comment on whether the public information purposes of EISA are met by incorporating the ratings for “other emi ssions” into the ratings for fuel economy and greenhouse gases and, if so, on the specific methodology described above. The age ncies particularly seek comment on whether the possibil ity that an “A” vehicle for fuel economy and GHG emissions can be made an “A+” vehicle by the addition of the higher rating for other

emissions is consistent with EISA ’s requirement that label rating s ystems clearly designate the

vehicle that achieves the lowest GHG emissions and the highest fuel economy. This issue is discussed further in the following section.

7. Indicating Highest Fuel Economy/Lowest Greenhouse VehiclesFuel Economy Labeling NPRM for OMB Review 8

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Page 47 of 150 In addition to ratings indicating relative emissions performance, EISA also requires the rating system to include “a designation of auto mobiles with the lowest greenhouse gas emissions over the useful life of the vehicles; and the highest fuel economy.”

Depending on the rating system(s) selected, differing approaches may be needed to achieve this requirement. For example, if the fuel economy and greenhouse gas ratings are provided separately, such as with the absolute bars shown on labels 1 and 2, consumers would be able to easily identify the highest fuel economy and lowest greenhouse gas emitting vehicles by looking for those that have the highest absolute values. If fuel economy and greenhouse gases are combined into one rating, such as with the letter grade system, but are provided separately from other emissions, again consumers should be able to easily identify the highest fuel economy/lowest GHG vehicles by looking for t hose that achieve the best rating category. However, this will likely encompass more models than would be designated “best” under an absolute rating system, which may or may not have been the intent of EISA. In that instance, the rating system itself meets the requirement for designation of lowest GHG automobiles, defined in that case as the group of vehicles that achieve the best rating category.

If, on the other hand, fuel economy and greenhouse gases are combined with other emissions into a comprehensive rating, and no other information on the label indicates the highest fuel economy/lowest GHG vehicles, then the rating system would need to be adjusted in order to ensure that EISA requirements were met . If the system were crafted as described previously

-- with the fuel economy/greenhouse gas rating adjusted upward or downward based on a vehicle’s criteria pollutant emission bin

— then the vehicles achieving the best category for fuel economy and greenhouse gases will also achieve the best comprehensive rating. This will certainly be the case under an approach based on tailpipe emissions, in which electric operation counts as zero for all emissions and the fuel economy/greenhouse gas score is based primarily on tailpipe emissions of CO 2 . In this situation, electric vehicles will receive the best possible rating

for both fuel ec onomy/greenhouse gases and other emissions.

However, to ensure that only those vehicles with the highest fuel economy and lowest greenhouse gas emissions receive the best rating, th e system would be adjusted so that vehicles from the next group down would not be promoted to the highest ratings based on their air pollutant levels. In other words, under the letter grade system, vehicles would not be able to

move from an A to a n A+ grade if they were certified to bin 2 or 3. Therefore, only those vehicles that are eligible for the highest rating based fuel economy and CO 2 would receive the best possible rating, which would then serve the purpose of designating the highest fuel economy/lowest GHG vehicles. The practical eff ect of this approach is that only electric

powered vehicles would be eligible for a n A+ rating. The agencies seek comment on whether separate ratings should be provided for other emissions or whether a single combined rating for fuel economy, GHG and other emissions should be provided.

8. SmartWay Logo

EPA and NHTSA additionally seek comment on utilizing the SmartWay logo as an indicator of a high level of overall environmental performance. The SmartWay Logo appears as

follows:Fuel Economy Labeling NPRM for OMB Review 8

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Page 48 of 150 The SmartWay logo could be added to the label as a way of highlighting the top environmental performers each model year. This approach is contemplated for labels 2 and 3.

The trademarked SmartWay designation was launched in 2005 on the EPA’s Green Vehicle Guide website ( www.epa.gov/greenvehicle ) to provide consumers with a quick and easy way to determine which vehicles were the cleanest and most fuel efficient for each model year.

It has been awarded to those vehicle models that achieve certain thresholds on the Greenhouse Gas score (which is tied to the vehicle’s fuel economy and fuel type) and the Air Pollution score (which is tied to the Tier 2 bins or Californi a standards, as applicable). Historically, the SmartWay thresholds determined by EPA have b een targeted to approximately the top 20% of vehicle models each model year, and have been tightened over time as the fleet has become

cleaner and more fuel efficient.

The SmartWay logo for light duty vehicles is currently being used on a voluntary basis by auto manufacturers, vehicle-search web sites, rental car companies, banks/credits unions (green vehicle loan programs), and private co mpanies (light duty commercial fleets and employee incentive programs). The SmartWay logo was included on labels shown to focus group participants for this rulemaking. Although participants did not recognize the logo, most readily understood that they could use it when shopping for vehicles to quickly identify those that were environmentally friendly, without havi ng to review the rest of the environmental

information on the label. 89

Because focus groups have indicated that some consumers prefer more detailed information while others prefer a simpler pres entation, the agencies are seeking comment on whether to require or optionally allow the SmartW ay logo on the label for applicable vehicles. This logo would indicate in a binary fashion, si milar to other eco-labels, whether \ a vehicle meets certain environmental and energy use thresholds. Specifically, the agencies seek comment on whether including the SmartWay logo would be helpful to consumers on a label that already addresses fuel economy, GHGs, and other emissions in other formats.

9. Annual Fuel Cost

EPCA requires the estimated annual fuel cost be displayed on the fuel economy label. 90
Prior to 2008, the label simply displayed the estimated annual cost with no explanatory information. EPA’s consumer research in 2006 found that consumers paid little attention to this metric, and the reason most frequently stated was that the assumptions behind the estimate (annual miles and fuel price) were unknown to them. 91 As a result, the 2008 label modifications

89 Environmental Protection Agency Fuel Economy Label: Phase 3 Focus Groups, EPA420-R-10-905, August

2010 EPA Fuel E conomy Label Phase 3 Focus Groups Technical Memorandum, Prepared by PRR, Inc, July 2010 , p. 41.

90 49 U.S.C. 32908(b)(1)(B).

91 PRR, Inc., EPA Fuel Economy Label Focus Groups: Report of Findings, prepared for U.S. Environmental Protection Agency, March 2005.Fuel Economy Labeling NPRM for OMB Review 8

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Page 49 of 150 included a requirement that these assumptions be placed on the label. 92 EPA publishes annual guidance directing manufacturers what fuel price to use for determining annual cost—based on projections made by the Department of Energy 93 --so that all vehicles in a given model year use the same assumptions. The estimated annual fuel cost can therefore be used to compare across vehicles of the same model year. As an example, the estimated annual fuel cost to be used for labels on model year 2009 gasoline-fueled vehicles is $2.80.

Despite the addition to the label of the assumptions behind the annual fuel cost starting in 2008, the early focus groups conducted in 2010 showed that many participants still did not pay

much attention to the estimated annual fuel cost metric. Participants often stated that this was because fuel prices fluctuate and, therefore, th ey did not think that the fuel price assumption stated on the label reflected what they were actually paying. Less frequently, participants additionally said that the fact that they did not drive 15,000 miles a year made the estimated annual cost not meaningful to them. Participants remained sk eptical of the use of estimated

annual fuel cost even when asked to consider whether it could be a useful comparative metric across other vehicles of the same model year. In retrospect, it is possible that providing this information on the label about the assumptions behind the annual fuel cost number resolved one issue and caused others, in that now there are two more numbers for the consumer to process and question. There is also the possibility that c onsumers are not aware that the two assumptions are used universally across all vehicles, which would call into question the usefulness of the metric as a comparative tool at the point of purchase (fo r example, if they believe that the manufacturers individually determine the inputs to the estimated annual fuel cost). However, participants in the Phase 3 focus groups leading up to this NPRM consistently employed the annual fuel cost information (along with mpg) when asked to compare the fuel efficiency of advanced technology vehicles like PHEVs and EVs with conventional vehicles, with their more complicated set of energy metrics. 94

Recognizing the EPCA statutory requirement to continue to display the estimated annual fuel cost, EPA requests comment on how to improve consumers’ understanding of the estimated annual fuel cost, whether it is a useful compar ative tool across technologies, and if so, how to best communicate on the label that it is a valid comparative tool. EPA also requests comment on whether there might be an additional way to display fuel cost information – or a better way of displaying the required information – that might be more useful or might have a greater impact on consumers. In the 2010 focus groups, some groups were presented with a number of different ways of displaying fuel costs on the label, ranging in magnitude from dollars per mile to dollars per five years. 95 A fairly clear preference emerged for dollars per year, with dollars per month a

92 40 CFR 600.307-08.

93 The Department of Energy’s Energy Information Administ ration publishes gasoline and diesel fuel price forecasts at least annually in its Annual Energy Outlook , available at http://www.eia.doe.gov/oiaf/aeo/index.html

. 94 Environmental Protection Agency Fuel Economy Label: Phase 3 Focus Groups, EPA420-R-10-905, August

2010 EPA Fuel Economy L abel Phase 3 Focus Groups Technical Memorandum, Prepared by PRR, Inc, July 2010

, p.37

. Environmental Protection Agency Fuel Economy Label: Phase 1 Focus Groups, EPA420-R-10-903, August 2010, 95
EPA Fuel Economy Label Phase 2 Focus Groups Technical Memorandum, Prepared by PRR, Inc, July 2010 p. 19

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Page 50 of 150 frequent second choice. 96 EPA is thus proposing labels that continue to prominently display the estimated annual fuel cost and the associated assumptions. EPA is requesting comment on whether the label should include the estimated monthly fuel cost, or other alternative cost information. Commenters should bear in mind the statutory requirement that estimated annual fuel cost be on the label; thus any other cost would have to be an additional piece of information.

10. Relative Fuel Savings or Cost

The expert panel recommended another approach to presenting fuel cost information—to focus on the savings attainable by purchasing a more fuel efficient vehicle. These panelists felt strongly that savings is a much more powerful message than cost, which tends to be discounted, as just discussed. Although savings calculations would necessarily also rely on assumptions, they suggested that the value of savings to the consumer is significant enough to overcome these drawbacks, at least for a substantial portion of the population. NHTSA and EPA therefore propose including a five-year savings value on Label 1. No such value is proposed for Labels 2 or 3, although the agencies could also require savings information on these labels, if one of them

were finalized.

The agencies explored a number of methods for calculating savings. The most promising approach seems to be savings compared to the projected median vehicle for that model year, and the agencies propose this method. Thus, some vehicles would show a savings, while others would show consumers paying more for fuel over five years compared to a reference vehicle; these values would increase in magnitude the furt her the vehicle is in terms of fuel consumption from the reference value. This approach appr opriately reflects that fuel cost savings become larger the more a vehicle improves their fuel econom y, and conversely that vehicles cost more to fuel when fuel efficiency is decreased when compared to the reference, median, vehicle.

As with the fuel economy and greenhouse gas rating system and comparable class information, the EPA would provide annual guidance indicating the value to be used as the reference against which the fuel cost savings would be measured. The reference five-year fuel cost would be calculated by applying the gasoline fuel price to the average miles driven over the first five years of the reference vehicle’s life, assuming a particular fuel economy for the reference vehicle; these values would be provided in the annual guidance. We propose that the fuel economy value for the reference vehicle be based on the projected fuel economy value of the median vehicle model type for sale the previous model year, not sales-weighted, and adjusted based on projections regarding the upcoming model year. This value is expected to change slightly from one year to the next as the fleet becomes more fuel efficient in response to regulations and market forces. The guidance would also include the fuel prices to be used to calculate fuel cost savings for the particular vehicle, based on its applicable fuel type. Finally, we propose to round the fuel cost savings values used on the label to the nearest one hundred dollars to avoid implying more precision than is warranted, as well as for ease of recall.

96 Environmental Protection Agency Fuel Economy Label: Phase 1 Focus Groups, EPA420-R-10-903, August

2010 EPA Fuel Economy Label Phase 2 Focus Groups Technical Memorandum, Prepared by PRR, Inc, July 2010 , p. 19

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Page 51 of 150 As previously stated, vehicles with a higher fuel economy than the median vehicle would be designated as saving the consumer a certain number of dollars over a five year period. For those vehicles with fuel economy lower than the median vehicle, the label would state that the consumer would spend a certain number of dollars more over a five year period. Vehicles that are within fifty dollars of the reference vehicl e fuel cost could be designated as saving zero dollars. Alternatively, text could indicate that this vehicle is comparable to the average vehicle. Although the agencies recognize that “median” is a more accurate term than “average,” we propose the use of the term ‘average” as being more readily understandable.

Other methods considered include savings compared to the average vehicle one grade lower, and fuel cost savings compared to vehicles 10 mpg lower. These approaches had certain positive aspects, particularly in that they demons trated the value of incr emental improvements in vehicle choice. In the main, however, they provided values that seemed to be difficult to interpret and could perhaps cause perverse effects. For example, a vehicle at the high end of their grade or rating would have a higher savings value than a vehicle at the low end of their grade or rating. This might be valuable for th ose who are considering vehicles within the same grade. However, for those shoppers who glanced at the number quickly, they might erroneously conclude that, for instance, a vehicle at the low en d of the B- grade would save less on fuel costs than a vehicle at the high end of the D+ grade. The agencies seek comment on this and alternative approaches, as opposed to the proposed approach of displaying a vehicle’s fuel cost savings relative to the median vehicle in the fleet. The agencies are also seeking comment on whether there is a potential for consumer confusi on caused by two different cost values displayed on Label 1 with regard to the estimated annual fuel cost of operating the vehicle and the 5 year fuel cost savings number compared to the average vehicle. We are interested in receiving

comments on how consumers may perceive these values as interact ing with each other and we intend to explore this issue further prior to fina lizing this proposal, including exploring research conducted in executive branch agencies.

11. Range of Fuel Economy of Comparable Vehicles

EPCA requires that the label contain “the range of fuel economy of comparable automobiles of all manufacturers,” a requirement that the label addressed somewhat awkwardly for many years. 97 As a result of EPA’s 2006 labeling rule, the labels now use a graphical element to show the performance of the labeled ve hicle relative to the best and worst within that

vehicle class. 98 In the 2010 focus groups, it became clear that this information, though more prominently displayed on today’s fuel economy labe l than in previous iterations of the label, continued to be under-utilized by consumers as a tool to assist them in making vehicle purchase

decisions.

EPA is now proposing two possible ways of meeting this statutory requirement. Given the likelihood of more information on the label, a graphic as used on the current label that repeats the combined fuel economy number may overly complicate the new label. Thus one option being proposed is simply a text statement that would read “Combined fuel economy for [insert

97 49 U.S.C. 32908(b)(1)(C).

98 40 CFR 600.307-08. A discussion of the comparable class categories and a proposed change to those categories

can be found in section VI.B.Fuel Economy Labeling NPRM for OMB Review 8

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Page 52 of 150 vehicle class] ranges from XX to XX.” This approach is used on Labels 1 and 3. The other option EPA is proposing is essentially an updated version of the current graphical representation, which combines the fuel economy rating across al l vehicles with the within-class information into one graphical element, as shown in Section III as part of Label 2.

The agencies believe that one of these approaches could be used to satisfy the statutory requirements in 49 U.S.C. 32908(b)(1)(C) (“the range of fuel economy of comparable automobiles”). As an alternative, EPA seeks comment on whether the requirement to indicate fuel economy of comparable vehicles is met by the overall fuel economy rating required by 49 U.S.C. 32908(g)(1)(A)(ii) (“a rating system that would make it easy to compare the fuel economy . . . of automobiles”), given that consumers tend to consider vehicles from several classes during their purchase process.

12. Other Label Text

EPA is proposing some minor changes and an addition to the text on the label not previously discussed, and seeks comment on each of these text changes.

First, each of the proposed labels has information that indicates the fuel on which the vehicle operates. The agencies believe it will become increasingly important, as different technologies emerge, to display clearly the kind of vehicle a consumer is viewing. For duel fuel vehicles (e.g., current gasoline/ethanol vehicles), EPA is required by statute to identify the vehicle as a dual fuel vehicle and to identify the fuels that the vehicle operates on. 99 In the case of current flexible-fuel vehicles, for example, th is text would read “Dual Fuel: Gasoline-Ethanol (E85),” and for plug-in hybrid vehicles arriving soon on the market this text would read “Dual Fuel: Gasoline-Electricity.” In addition, we are proposing the use of various icons on the label to distinguish between different technologies and be tween different operating modes. These icons include stylized electric plugs, fuel pumps, and fuel dispensing nozzles.

Second, because of the expanded information on the label and DOT requirements under EISA, EPA is proposing to change the label heading from the current text (“EPA Fuel Economy Estimates”) to “EPA/DOT Fuel Economy & Environmental Comparisons.” We also propose adding the DOT logo to the label, to provide appropriate recognition of DOT’s role mandated by

EISA.

Third, EPA is proposing to change the Fuel Economy Guide statement found on the label to reflect the expanding features that comprise www.fueleconomy.gov , with the hope that this website will become the first Internet stop for a vehicle’s fuel economy and environmental information. The proposed text would read: “Visit www.fueleconomy.gov to calculate estimates personalized for your driving, and to download the Fuel economy Guide (also available at dealers).”

EPCA requires EPA and the Department of Energy (DOE) to prepare and distribute to dealers a fuel economy booklet, commonly known as the annual “Fuel Economy Guide,”

99 49 U.S.C. 32908(b)(3).Fuel Economy Labeling NPRM for OMB Review 8

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Page 53 of 150 containing information that is “simple and readily understandable.” 100 EPCA requires that the guide include fuel economy and estimated annual fuel costs of operating automobiles manufactured in each model year, as well as some additional information for dual fueled automobiles (such as the fuel economy and driving range on both fuels). Further, EPCA requires that a statement appear on the fuel economy label that this booklet is available from dealers. 101
Starting in the 2008 model year, the statement on the label was broadened to include a reference

to www.fueleconomy.gov as another source for the Fuel Economy Guide; this website is based on the EPA fuel economy information and jointly run by EPA and DOE. Thus the current text now reads: “See the FREE Fuel Economy Guide at dealers or www.fueleconomy.gov .”

Both the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy and the EPA currently maintain www.fueleconomy.gov . The site helps fulfill DOE and EPA’s responsibility under EPCA of 1992 to provide accurate mpg information to consumers. The site provides fuel economy estimates, energy and environmental impact ratings, fuel-saving tips, as well as a downloadable version of the fuel economy guide and other useful information. Since its inception in 1999 this website has been used by millions of consumers, and the latest data from 2008 indicates that more that 30 million user sessions occurred in that year.

Because of the extensive amount of information and user features available on the website beyond simply providing electronic access to the Fuel Economy Guide, the agencies wish to direct consumers to this website when they are researching their vehicle purchases. For example, the website allows a user to persona lize their fuel economy information by inputting their specific driving habits and fuel prices. This ability will be even more important for understanding the impacts of driving distance and battery charging habits on the fuel consumption of vehicles like plug-in hybrid el ectric vehicles, and EPA expects to work with DOE to develop a web-based system to allow users to customize the fuel economy estimates for these advanced technology vehicles. Further, information that some consumers may want but that is not available on the label is likely to be available on the website. For example, in the 2010 focus groups some participants expressed an inte rest in knowing the cost to fill the tank, or the volume of the fuel tank, or how many miles could be driven on a tank. The website provides all this information, and information such as the miles per tank can be personalized to reflect a person’s relative amount of city and highway driving. Finally, the website also has developed a

version tailored to mobile devices.

During the expert panel, EPA provided the panelists with a copy of the current Fuel Economy Guide. The panelists all expressed concerns that the public probably didn’t know it was available, didn’t access it at the dealer showrooms if they did know it was available, and would not respond well to it in its current format. They recommended a simple one-sheet “guide” that dealers would distribute in the form of a checklist, that would allow EPA to deliver the top ten points on fuel economy that could not (and should not) be included on the label. It also would

ensure that even if individuals did not utilize the website, they would receive this information. It was also suggested that if possible, distribution of this document be mandatory.

100 49 U.S.C. 32908(c)(1)(A).

101 49 U.S.C. 32908(b)(1)(D).Fuel Economy Labeling NPRM for OMB Review 8

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Page 54 of 150 EPA requests comments on the usefulness of the Fuel Economy Guide in its current form and also requests comments on whether EPA and DOE should develop a different approach in the future to the Fuel Economy Guide -- including the idea of transforming the guide into a consumer friendly “checklist” guide. While EPA recognizes that it does not have the authority to mandate distribution of this guide by dealers we also request comments on how we could better encourage and work with dealers to more prominently display and distribute the fuel economy guide in the future.

The expert panel also strongly recommended that the new fuel economy label prominently display an easy to remember URL. Panelists suggested that not only should such a URL be easy to remember, it should also provide a consistent platform for educational messages that would be highly visible for consumers and serve as a portal for web users to engage each other on fuel economy issues, including exchangi ng helpful tips and tools. Panelists indicated that this type of URL and message platform is of critical importance in today’s marketplace and

that EPA should make better use of the label to e ngage the public in this manner. Finally, the panelists recommended this new URL not be a '.gov' website, which they suggested is generally perceived as static and uninviting by consumers th at are increasingly reliant on highly interactive

social media networks and tools. Label 1 series found in Section III currently displays how this URL concept might be incorporated in Label 1. We note that President Obama has an initiative on transparency and open government, 102 and as part of this initiative, the Executive Branch has already made some significant improvements to its websites.

The agencies request comment on the new URL concept displayed on Label 1, along with the underlying approach recommended by the expert panel: that the agencies create and display a prominent URL on the label that will provide both a visible consumer message and an easy to remember web portal or gateway to a more interactive consumer website. As envisioned, this website would introduce the new label approach, layi ng out what is new and unique to this label. It would explain what the agencies are trying to accomplish with the new design, and detail the concept of the grading system and underlying scoring method. It would include applications that consumers can use to personalize their vehicle buying decisions, based on their own driving habits and needs. It would also provide information that is not available on the label, such as the upstream emissions associated with each vehicle choice. It would also link to the detailed vehicle information and consumer discussion pages on fueleconomy.gov, capitalizing on the existing government website and further maximi zing its consumer friendliness and usability.

Finally, for conventional vehicles, EPA is not proposing any changes to the statement that currently reads “Your actual mileage will va ry depending on how you drive and maintain your vehicle.” However, because some advanced technology vehicles are especially susceptible to certain conditions, such as cold weather, EPA is considering the addition of some specific qualifications to this statement for some vehi cle technologies, and seeks comment on what qualifications might be most helpful.

102 See Presidential Memorandum on Transparency and Open Government, available at http://www.whitehouse.gov/the_press_office/Transparenc y_and_Open_Government/ (las t accessed July 20, 2010);

see also Open Government Directive from OMB, available at http://www.whitehouse.gov/omb/a ssets/memoranda_2010/m10-06.pdf (last accessed July 20, 2010).Fuel Economy Labeling NPRM for OMB Review 8

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Page 55 of 150 13. Gas Guzzler Tax Information

EPCA requires that “Gas Guzzler” tax information be included on the fuel economy

label. 103 These taxes are required under the Internal Revenue Code 26 U.S.C. 4064(c)(1). This part of the Internal Revenue Code contains th e provisions governing the administration of the Gas Guzzler Tax, and specifically contains the table of applicable taxes and defines which vehicles are subject to the taxes. The IRS code specifies that the fuel economy to be used to assess the amount of tax will be the combined city and highway fuel economy as determined by using the procedures in place in 1975, or procedures that give comparable results (similar to EPCA’s requirements for determining CAFE for passenger automobiles). These provisions have been codified in 40 CFR 600.513-08. This prop osed rule would not impact these provisions.

The current labeling requirements for the Gas Guzzler Tax require that an affected vehicle have the following statement on the label (the regulations provide different ways of displaying this depending on the label; for example, an alternative fuel vehicle label has some additional information that limits space, thus the template for labeling such a vehicle accounts for this). In the limited situations in whic h this labeling requirement applies, EPA expects to provide label templates including this information th at are consistent with the label design that is ultimately selected. For example, for Label 1 pr esented in Section III, one potential option is to place the gas guzzler information in the position for fuel cost savings. EPA seeks comment on this approach.

B. Advanced Technology Vehicle Labels

1. Introduction

In the past, EPA has not devoted much effort to fuel economy label issues for advanced technology vehicles. There is a simple reason for this--if EPA defines a conventional vehicle to be that which derives all of its propulsive energy from a petroleum fuel (or a liquid fuel blend dominated by petroleum) stored on-board the vehicle, then conventional vehicles have represented well over 99% of all vehicles sold since the advent of fuel economy labels in the 1970s. EPA made the judgment that the very small number of consumers who might have considered the purchase of an electric or natural gas or other type of advanced technology vehicle over the last 35 years did not justify a major investment of government resources to address the more complex issues associated with advanced technology labels. Rather, EPA addressed the occasional need for an advanced technology vehicle label on a case-by-case basis.

But, this situation is changing and as the ma rket evolves, this approach is no longer

sufficient. For the first time since labels have been in use (in fact for the first time since the early days of the automotive industry), it appears increasingly likely that the future automotive marketplace will offer a much more diverse set of technological choices to consumers. EPA and NHTSA believe that now is the time to begin to design labels that are more appropriate for

103 49 U.S.C. 32908(b)(1)(E).Fuel Economy Labeling NPRM for OMB Review 8

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Page 56 of 150 advanced technology vehicles that we expect to be commercialized in the next few years. For purposes of this rulemaking, the agencies intend to focus on two advanced technologies:

• Electric vehicles (EVs) are vehicles that ar e powered exclusively by batteries (charged with electricity from the grid) and electric motors, and which do not have a conventional internal combustion engine or any other powertrain. Several automakers sold EVs in the early and mid-1990s 104 , but the only EV on the U.S. market today is the luxury Tesla

Roadster with annual sales of a few hundred vehicles. The first more mainstream-priced

EV offered for sale in the U.S. is the Niss an Leaf, for which orders are now being taken and first deliveries are projected for late this year in selected markets. 105 In addition, Ford has announced plans for a model year 2012 Ford Focus EV. 106

• Plug-in hybrid electric vehicles (PHEVs) can be powered in as many as three different ways: 1) like an EV, exclusively by batteries and electric motors, 2) like a conventional hybrid vehicle, when the vehicle gets all of its propulsive energy from a conventional internal combustion engine/transmission (u sually fueled with gasoline), though the battery still assists with rege nerative braking and engine bu ffering, and 3) a combination of both conventional hybrid and electric operation. PHEVs entail a family of different engineering approaches, and will continue to evolve as the technology matures. One distinct type of PHEV is called an extend ed range electric vehicle (EREV). An EREV PHEV has a very distinct operational profile: as long as the battery is above its minimal charge level, the vehicle is operated exclusively on the electric powertrain, and then when the battery is at its minimal charge, it operates like a conventional hybrid getting all of its power from gasoline or other liquid fuel. In a way, an EREV PHEV can be considered to be a combination of an EV and a conventional hybrid, with an emphasis on operating like an EV as much as possible. There have been no commercial EREV PHEVs sold in the U.S. to date but the first commercial offering is likely to be the Chevrolet Volt, which is

scheduled to be introduced in late 2010. 107 A second type of PHEV is called a “blended” PHEV. As long as the battery is charged, it will operate on a combination of gridelectricity and gasoline (while a blended PHEV might not have any “guaranteed” allelectric range, it is possible that some blended PHEV designs may have some all-electric range under certain driving conditions), then wh en the battery is at its minimal charge, the vehicle gets all of its propulsive energy from the gasoline fuel and engine (though the battery still assists with regenerative braking and engine buffering, as with a conventionalhybrid). In this respect, a blended PHEV can be viewed as a combination of a “gridenhanced” hybrid and a conventional hybrid, but without the emphasis on using only electricity for shorter trips as with the EREV PHEV. To the degree that a blended PHEV

104 Ehsani,M., Gao,Y., and Einadi, A. (2010). Modern Electric, Hybrid Electric and Fuel Cell Vehicles: F Fundamentals, Theory, and Design. Second Edition. Pp 12-14.

105 “Nissan’s Electric Leaf Set for Production,” Detroit News. May 26, 2010, http://detnews.com/article/20100526/AUTO01/5260357, (last accessed May 26, 2010).

106 Abuelsamid, Sam, “Detroit 2010: 2012 Focus Electric c ould be both sedan and hatch”, green.autoblog.com, Jan 11, 2010, available at: http://green.autoblog.com/2010/01/11/detroit-2010-2012-ford-focus-electric-could-be-bothsedan-and-h. (last accessed July 12, 2010).

107 “Chevy Volt’s Rollout to Include New York City,”New York Times, July 1, 2010, http://wheels.blogs.nytimes.com/2010/07/01/chevy-vol ts-initial-rollout-to-include-new-york-city/. (last accessed July 12, 2010).Fuel Economy Labeling NPRM for OMB Review 8

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Page 57 of 150 does have some practical all-electric range, the boundary between a blended PHEV and an EREV PHEV begins to blur. There have been no original equipment blended PHEV offerings in the U.S. to date, but many automakers are developing prototypes and some aftermarket conversions are available. The first commercial U.S. blended PHEV may be a Toyota Prius, likely offered as a 2012 model. 108

Other advanced technology vehi cles will also likely be on the market in the near future-- for example, Honda continues to sell a dedicated compressed natural gas Civic in selected states and several manufacturers plan to sell fuel cell vehicles in the future. 109 In any case, the issues

associated with and the decisions that we make about labels for EVs and PHEVs will go a long way toward preparing us to address labels from other advanced technologies in the future. EPA and NHTSA seek comments on whether there are other advanced technologies that have the potential to achieve mainstream interest in the near future and for which the agencies should develop labels in a future rulemaking.

PHEVs and EVs represent a fundamental departure from the powertrain and fueling infrastructure that has exclusively dominated the U.S. market for the last century—a single powertrain (an internal combustion engine with a mechanical transmission) and a single fuel (gasoline) available at public service stations. While PHEVs retain this option, they also offer the consumer the option to charge the on-board battery from the electric grid at home and to propel the vehicle exclusively or partially by the battery and electric motor. An EV must be operated this way. These fundamentally different powertrains and refueling approaches raise many challenging issues from a consumer info rmation standpoint that may affect how the agencies decide to require these vehicles to be labeled.

.

• These technologies are still evolving. EPA has been able to test only a small number of these advanced technology vehicles, and it is unclear whether the vehicles that we have tested are a good reflection of the technologies that will ultimately be offered in the

market.

• Gasoline and electricity are very different automo tive fuels. Gasoline is a liquid fuel with a high energy density that is stored on-board the vehicle in a relatively simple and lightweight tank that can be filled in a few minutes, while electricity is generated by chemical reactions inside a much lower energy density (and therefore heavier) battery pack and which can take many hours to recharge. Gasoline is produced very efficiently from crude oil, but is a less efficient vehicl e fuel, while electricity is less efficient to produce from a wide variety of resources (such as coal, nuclear, natural gas, hydropower, and wind), but is a more efficient vehicle fu el. Approximately 80% of the “life-cycle”

108 “Detroit 2010: Toyota’s 2011 plug-in Prius release date is “aggressive” target,” Green Autoblog, January 14,
2010, http://green.autoblog.com/2010/01/14/detroit-2010-toyotas-2011-plug-in-prius-release-date-is-aggre

. (last accessed July 12, 2010).

109 “GM Plans Fuel-Cell Vehicle Pilot Program in Hawaii,: Environmental Leader, Energy & Environmental News for Business, May 12, 2010, http://www.environmentalleader.com/2010/ 05/12/gm-plans-fuel-cell-vehicle-pilotprogram-in-hawaii/ . (last accessed July 12, 2010).Fuel Economy Labeling NPRM for OMB Review 8

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Page 58 of 150 greenhouse gas emissions from a gasoline ve hicle are emitted directly from the vehicle tailpipe, while all of the life-cycle greenhous e gas emissions associated with an electric vehicle are “upstream” of the vehicle. As just one simple example, miles per gallon, the core metric that has been used on gasoline labels for the last 35 years, is a much more complicated metric for a fuel like electricity which is not measured in gallons.

• Some advanced technologies can operate on more than one fuel, either simultaneously (e.g., the use of gasoline and electricity in the charge depleting mode of a blended PHEV) or at different times (e.g., an EREV PHEV uses electricity in charge depleting mode, then gasoline in hybrid mode). By itself, this suggests that a consumer label for a vehicle that operates on two fuels might have to have approximately twice as much information as a label for a vehicle that operates on a single fuel.

• Consumer behavior can have a much larger impact on the operation of an advanced technology vehicle, relative to that of a conventional vehicle. Whether the owner of a PHEV charges the battery every night and how many miles per day they drive—neither of which affects average energy consumption for a conventional vehicle—can have a dramatic impact on energy and environmental performance. Again using the standard miles per gallon of gasoline metric as an example, one EREV PHEV design may vary from 35 or 40 mpg on the low end (when the battery is empty and the vehicle is in hybrid mode) to essentially “infinite” mpg-gasoline if the vehicle is operated only off the battery pack. This fuel economy variability is much greater than with conventional vehicles, where mpg values for most individual vehicles are typically within 15-20% of the average value.

• Consumers have no practical experience with these new technologies,or in some cases might not even understand the basics of how the technologies work. While EPA has sponsored focus groups to gauge what consumers want on advanced technology labels, there can be little question that consumers are in a stronger position to provide meaningful input on conventional labels, with which they have decades of experience, than on advanced technology labels, where they may not now know now what they will want and need to know in the future to make informed purchase decisions.

All of these factors suggest that there is th e likelihood of significant consumer confusion when multiple advanced technology vehicles begi n to compete in the marketplace. We have no illusions that our advanced technology labels will completely resolve this consumer confusion, but we do hope they will help to reduce the confusion. We are certain that advanced technology labels will be more complicated than conventiona l vehicle labels. Just as EPA has repeatedly refined the much simpler conventional vehicle labels over time, the agencies expect to do so withadvanced technology vehicle labels as well. Accordingly, while EPA and NHTSA are coproposing two specific labels for EVs and PHEVs, the agencies also seek public comment on as many of the key issues as possible.

While this section will discus s EVs and EREV PHEVs as well, in many cases blended PHEVs will be the illustrative technology because they often raise the mo st challenging issues due to the fact that two different fuels can be used simultaneously.Fuel Economy Labeling NPRM for OMB Review 8

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Page 59 of 150 2. EPA Statutory Requirements

a. Electric Vehicles (EVs)

Electricity is an alternative fuel under the statute and vehicles fueled only by alternative

fuel are “dedicated automobiles.” 110

b. Plug-In Hybrid Electric Vehicles (PHEVs)

Some PHEVs are dual fueled automobiles under 49 U.S.C. 32901(a)(9). 111 They are capable of operating on a mixture of electricity an d gasoline, provide superior energy efficiency when operating on electricity compared to operating on gasoline, and provide superior efficiency when operating on a mixture of electricity and gasoline as when operating on gasoline. 112 These vehicles also meet the requirement that a dual fueled automobile must meet the minimum driving range under 49 U.S.C. 32901(c). 113 DOT has set the minimum driving range for electric vehicles at 7.5 miles on its nominal storage capaci ty of electricity when operated on the EPA urban test cycle and 10.2 miles on its nominal st orage capacity of electricity when operated on the EPA highway test cycle. 114

The statute contains particular requirements for dual fueled automobile labels. Section 32908(b)(3) requires that each label (A) indicate the fuel economy of the automobile when operated on gasoline or diesel fuel, (B) clearly identify the automobile as a dual fueled automobile, (C) clearly identify the fuels on which the automobile may be operated; and (D) contain a statement that additional information required by the statute is in the fuel economy booklet. The additional information required in the booklet for dual fuel automobiles is described in 32908(c) (2) and states that the label will in clude the energy efficiency and cost operation of the automobile when operated on gasoline as compared to when operated on alternative fuel and the driving range when operated on gasoline as compared to when operated

on alternative fuel. It should also include in formation on the miles per gallon achieved when operated on alternative fuel and a statement explaining how these estimates may change when the automobile is operated on mixtures of alternative fuel and gasoline.

For simplicity and consistency, the agencies plan for all PHEV fuel economy labels to contain the information required for dual fueled vehicles under the statute, even though only some PHEVs are dual fuel automobiles. We seek comment on this approach.

The fuel economy required on the label means the average number of miles traveled by an automobile for each gallon of gasoline (or equivalent amount of other fuel) used. 115
Therefore, in order to meet the statutory re quirement that fuel economy be displayed on the

110 49 U.S.C. 32901(a)(1) and (a)(8).

111

112 49 U.S.C. 32901(a)(9)(A), (B), (C). EPA is ex tending the application of the subclause (C).

113 49 U.S.C. 32901(a)(9)(D).

114 49 CFR 538.5(b).

115 49 U.S.C. 32901(a)(11).Fuel Economy Labeling NPRM for OMB Review 8

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Page 60 of 150 label, the electricity use for EVs and PHEVs on th e fuel economy label is converted to gallons of gasoline equivalent.

EPA recognizes that the statutory requirements in the Energy Policy and Conservation Act of 1975 were adopted long before advanced technologies like EREV PHEVs and blended

PHEVs were even conceived. While EPA must m eet the statutory requirements, the agencies are concerned that requiring electricity to be conve yed in mpg equivalent values might actually make an advanced technology vehicle label less useful to consumers. The agencies seek public comment on this question as explained in more detail below.

3. Principles Underlying the Co-Proposed Advanced Technology Vehicle Labels

The agencies have found it helpful to identify a few basic principles to guide our thinking about and development of advanced technology vehicle labels.

• The advanced technology vehicle labels should provide objective information that helps consumers make good decisions for both themselves and the environment. The market research undertaken for this rulemaking found that the current fuel economy label is a trusted source of information regarding the fuel economy of today’s conventional gasoline vehicles and the agencies seek to build on this foundation by ensuring that consumers receive objective, useful and essential information that helps inform their advanced technology vehicle purchasing decisions. 116 The agencies recognize that many of the most important drivers for the public and private interest in advanced vehicle technologies are in fact related to energy and environmental considerations.

• The advanced technology vehicle labels should aim for the simplest way to provide fairly complex information. As discussed above in the introduction to this section and with specific examples later in this section, the agencies are aware that advanced technology vehicle labels will inherently be more complex than conventional vehicle labels. We strive to strike a balance between providing sufficient information to be helpful and credible (too simple runs th e risk of misinformation with such complex technologies), without trying to “do everything” on the label (which could be a source of confusion for many consumers). We believe that automakers and respected third-party organizations (and possibly the federal government via fueleconomy.gov or other websites) will develop sophisticated on-line (and possibl y on-vehicle) calculators that will allow consumers to customize energy, environmenta l, and cost information for their unique driving and battery re-charging habits. We believe that labels should be aimed at the consumer who wants a quick overview of energy, environmental, and cost performance, and that those consumers who want detailed, customized informatio n will look to other

sources.

• The advanced technology vehicle labels must be as equitable as possible across different technologies, both advanced and conventional. For example, the agencies want to avoid

116 Environmental Protection Agency Fuel Economy Label: Pre-Focus Groups Online Survey Report, EPA420-R10-907, August 2010 EPA Fuel Economy Label Pre

- Focus Groups Online Survey Report, Prepared by PRR, Inc, July 2010 , p. 5

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Page 61 of 150 picking a label design or label metric that inherently favors a certain advanced technology beyond the energy and environmental merits of the individual vehicles. There could be considerable consumer confusion when multiple advanced technology vehicles reach the market, each with their ow n marketing strategy, and labels are one way to minimize consumer confusion. We specifically solicit comments from automakers on whether we have achieved this goal of equity with our proposed label designs.

• Finally, while labels should provide one or more metrics to compare across vehicle technologies, both advanced and conventional, the advanced technology vehicle labels do not have to have the same precise design as conventional vehicle labels. Given that many

of the label content issues associated with advanced vehicle technologies are much more complex than for conventional vehicles, it would probably be impossible for the labels to look the same. On the other hand, we do want the “look and feel” of the advanced technology and conventional vehicle labels to be as consistent as possible.

EPA and NHTSA seek public comment on the appropriateness of each of these principles, and whether there are additional principles that we should consider.

4. Key Advanced Technology Vehicle Label Issues

Most of the content on advanced technology vehicle labels will be similar to that on conventional vehicle labels. This section addresses those issues that are unique to advanced technology vehicle labels.

a. Life-Cycle Fuel Production-Related GHG and Energy Issues

This rulemaking addresses EPA’s and NHTSA’s authority and responsibilities under the Energy Policy and Conservation Act (EPCA), as amended by the Energy Independence and Security Act (EISA) of 2007. Among other things, EPCA requires the fuel economy of the automobile to be on the label. Vehicle fuel economy has been the cornerstone of the label since its inception, and EPA has not included fuel production-related, or “upstream,” impacts on fuel economy labels in the past. While vehicle fuel economy and vehicle tailpipe GHG emissions are directly measured by EPA and automakers via prototype vehicle testing, upstream impacts

associated with an individual vehicle’s fuel cons umption are not measured in vehicle testing. Likewise, EISA requires that the label cont ain information reflecting the automobile’s performance with respect to fuel economy and greenhouse gas and other emissions over the useful life of the automobile. The agencies believe that these various requirements are met by providing information on the performance of the vehicle itself on the label and not including upstream emissions. In addition, using vehicle ta ilpipe GHG emission levels is consistent with the tailpipe zero gram per mile GHG emissions compliance level that EPA adopted for EVs, FCVs, and the electric portion of PHEV operati on in the light-duty vehicle GHG rule for MYs 2012-2016, for the vehicle production that remains below an individual manufacturer’s cumulative vehicle production cap. However, EPA notes that some consumers may be interested in estimates of the upstream GHG and energy imp acts associated with vehicles that they are considering purchasing. We plan to provide information on websites that will inform consumersFuel Economy Labeling NPRM for OMB Review 8

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Page 62 of 150 of the projected upstream GHG and energy impacts of vehicle operation, based on both national average values and, where appropriate because of regional variability, regional values as well.

b. Energy Consumption Metrics

Energy consumption metrics are another issue which becomes more complicated with advanced technology vehicles. For conventional gasoline vehicles, the mpg metric has been the foundation of the consumer label for 35 years. It is not a perfect metric, and some have expressed concerns about its “non-linearity,” e.g., the absolute fuel consumption savings associated with improving one mile per gallon from 10-11 mpg is over ten times greater than the fuel consumption savings associated with impr oving from 35-36 mpg as discussed above. But, in some respects, mpg has been a good metric for a consumer information program: lay people had used the mpg metric prior to its use on the label, the concept was simple and understood by almost all consumers, the practical range of 10-50 mpg was accessible to lay people and facilitated simple calculations that most consumers could perform, etc. The results from recent EPA focus groups conducted by the agencies were unequivocal—the mpg values were, by far,

the most trusted and usef ul values on the label. 117

Unfortunately, while the miles per gallon metric has been very useful when 99+% of all vehicles operated on petroleum fuels, its usefulness as a metric is less clear for a future vehicle fuel such as electricity, which is not measured in gallons, but rather in kilowatt-hours. Therefore, for an electric vehicle, or for an EREV PHEV when operated exclusively on grid electricity, there are three broad choices for a consumption metric, independent of statutory considerations, to characterize the amount of electricity and all have advantages and disadvantages:

• Kilowatt-hours. The rationale for kilowatt-hours is that this is the metric by which electricity is “counted ” and sold. In their monthly u tility bills, consumers are charged a certain rate (or price) per kilowatt-hour, and this rate is multiplied by the number of kilowatt-hours that the consumer uses, to ge nerate the overall mont hly electricity bill. This is analogous to what happens at a gasoline service station, where a consumer pays a certain rate (or price) per gallon of ga soline, and this rate is multiplied by the number of gallons of gasoline that the consumer buys, to generate the overall gasoline bill. The primary argument against using kilowatt-hours is that the focus groups conducted by the agencies clearly indicat es that few consumers understand what a kilowatt-hour is, and most of the consumers who do not know what a kilowatt-hour is say that they do not want to learn. 118

• Gallons of gasoline-equivalent. From an engineering perspective, energy can be measured, and different forms of energy can be compared through the use of energy unit conversion factors. For example, a gallon of gasoline has the energy equivalent

Environmental Protection Agency Fuel Economy Label: Phase 1 Focus Groups, EPA420-R-10-903, August 2010 117
EPA Fuel Economy Label Phase 1 Focus Groups Technical Memorandum, Prepared by PRR, Inc, July 2010 , p. 10

. 118 Environmental Protection Agency Fuel Economy Label: Phase 2 Focus Groups, EPA420-R-10-904, August 2010 EPA Fuel Economy Label Phase 2 Focus Groups Technical Memorandum, Prepared by PRR, Inc, July 2010 and

. Environmental Protection Agency Fuel Economy Label: Phase 3 Focus Groups, EPA420-R-10-905, August 2010.Fuel Economy Labeling NPRM for OMB Review 8

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Page 63 of 150 of 33.7 kilowatt-hours, and any value for kilowatt-hours can be converted to an energy-equivalent value of gallons of gasoline. 119 For example, a vehicle that used 33.7 kilowatt-hours would have used an amount of energy equivalent to 1 gallon of gasoline, while a vehicle that used twice as much electricity would have used an amount of energy equivalent to 2 gallons of gasoline. The rationale for using gallons of gasoline-equivalent is that consumers understand the concept of “gallons” much more than they understand any other energy metric. In the focus groups conducted for this rulemaking, the agencies found that participants believed they understood the equivalency approach and felt comfortable with this metric since it closely aligns with the miles per gallon metric that they have always relied upon. 120 The primary argument against using gallons of gasoline-equivalent is that the concept requires the conversion of one form of energy to another, and while this reflects a technical measurement of energy equivalency, it may or may not be useful to the consumer. For example, gasoline and electricity are very different fuels in many ways: how they are produced, how consumers buy them and refuel, whether consumer fuel expenditures stay in the local or regional economy or are exported, etc.

• A generic energy unit not directly connected to either gasoline or electricity, such as British Thermal Units (BTUs) or joules. The argument here would be to pick an energy metric that is “fuel neutral.” The primary arguments against this are both that few consumers understand such a metric, and that no motor fuels are counted or sold in such units. While the agencies recognize this as another concep tual alternative, we have rejected this approach.

As discussed previously, EPCA requires that electricity use for EVs and PHEVs on the fuel economy label is converted to gallons of ga soline-equivalent. But the statute also provides discretion to EPA on the relative prominence of a gallons of gasoline-equivalent metric and a

kilowatt-hours metric.

For EV labels, the agencies propose to show el ectricity consumption in both metrics: as miles per gallon of gasoline-equivalent (mpg-e) and as kilowatt-hours per 100 miles. The agencies recognize that higher mpg-e values are better, while lower kw-hr/100 miles values are better. The agencies seek comment on whether this is helpful or confusing to consumers.

The most complicated advanced technology vehicle in this regard is a blended PHEV that is operating simultaneously on gasoline and grid electricity. There are two options for energy metrics for blended PHEVs, which are based on the general concepts introduced above.

• Retain separate energy metric s for gasoline and electricity. The gasoline metric would continue to be miles per gallon of gasoline (supplemented by a gallons/100 miles consumption value as well), while the electricity metric would be kilowatt-hours of electricity (either miles per kilowatt-hour or kilowatt-hours per 100 miles). The

119 65 FR 36990.

120 Environmental Protection Agency Fuel Economy Label: Phase 2 Focus Groups, EPA420-R-10-904, August

2010 EPA Fuel Economy Label Phase 2 Focus Groups Technical Memorandum, Prepared by PRR, Inc, July 2010 , p. 22

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Page 64 of 150 advantages of this approach are 1) it includes the values that EPA measures, 2) the metrics reflect how these forms of energy are counted and how consumers pay for them, 3) the separate values do not require judgments about whether consumers “value” gasoline and electricity equally or not, an d 4) it would avoid possible confusion over what a combined miles per gallon of gasoline-equivalent value means (i.e., some, maybe many, consumers would probably assume that a miles per gallon of gasoline-equivalent value was equal to a miles per gallon of gasoline value, which would be inaccurate). The disadvantages of such an approach are 1) few consumers understand the metric of kilowatt-hours, 2) dual energy metrics make it extremely difficult to compare energy efficiency across vehicles, and 3) those cons umers who focus only on miles per gallon of gasoline and ignore kilowatt-hours of electricity, will believe that a blended PHEV is more energy efficient than it actually is.

• Combine to a single energy metric of mile s per gallon of gasoline-equivalent. This would require the use of the conversion factor of 33.7 kilowatt-hours per gallon of gasoline-equivalent value cited above. The advantages of this approach are 1) it yields a single value that simplifies the label and faci litates vehicle comparisons, 2) it avoids the kilowatt-hour metric that consumers do not like or understand, and 3) some consumers (though not all) said they liked the concept of miles per gallon of gasoline-equivalent. The disadvantages of such an approach are 1) it requires the simplifying assumption that all forms of energy (in this case, gasoline and electricity) are equally valued, 2) it does not allow the consumer to see the individual energy consumption values for gasoline and electricity, and 3) it will yield labels with both miles per gallon of gasoline and miles per gallon of gasoline-equivalent, which could be confusing to some consumers.

The agencies are proposing to use the miles per gallon of gasoline-equivalent metric only for PHEVs, but seek public comment on the relativ e merits of doing so versus using the separate energy metrics. The agencies believe that both approaches have advantages and disadvantages. In formulating comments on this topic, comm enters could also consider three additional questions. One, do consumers care equally about gasoline and electricity, i.e., are they just two different ways of fueling their vehicles, with a Bt u of gasoline equivalent to a Btu of electricity, or do some or most consumers care more about one or the other form of energy? Two, how should the agencies interpret the focus group input in which most participants indicated that they

did not understand kilowatt-hours on their electric bills and did not want to have this metric included on advanced vehicle labels? Three, shou ld we view this as an opportunity to educate consumers about the importance of kilowatt-hours as a fundamental measurement of electricity consumption?

c. Driving Range Information (including 5-Cycle Adjustment)

EPA does not include range information on conventional fuel economy labels. Petroleum fuels have high energy densities and are stored on-board the vehicle in relatively cheap and lightweight fuel tanks. The combination of high driving range values (gasoline vehicles typically have ranges of 300-500 miles) and the fact that range can be increased by simply increasing the size of the fuel tank, means that range for petroleum-fueled vehicles has not been a top consumer priority. In recognition of the fact that non-petroleum fuels generally have lower energyFuel Economy Labeling NPRM for OMB Review 8

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Page 65 of 150 densities resulting in reduced driving ranges than petroleum fuels, the Federal Trade Commission (FTC) requires a “hang tag” label that lists the “manufacturer’s estimated cruising range” for alternative-fueled vehicles. 121

The primary issue addressed in this section is whether range should be included on advanced technology vehicle labels. For an EV, the primary range parameter of interest would

be the miles that can be traveled between ba ttery charges. For an EREV PHEV, the most important range parameter would be the miles that can be traveled in all-electric mode. For a blended PHEV, the primary range parameter would be the number of miles over which the battery is providing assistance in the form of grid electricity, but it is also possible that there could be some guaranteed or likely all-electric range as well.

The primary arguments for including range include 1) focus groups strongly supported including the range for EVs and PHEVs 122

, 123 2) range is a critical factor for what the consumer gets for his or her investment in a more expensive EV or PHEV, and is obviously a core utility attribute for an EV and a primary determinant of the overall environmental and energy performance of a PHEV, and 3) EPA can easily measure range.

The arguments against including range include 1) it is not a direct measurement of energy or environmental performance (in fact, for an EV, other things being equal, a higher range means a larger battery pack, a heavier vehicle, and therefore higher energy consumption, relative to the same vehicle with a lower range and smaller batter y pack), 2) there will likely be much greater variability in EV range than we have faced with gasoline fuel economy in the past, so there are greater challenges involved in defining a specific range estimate, and 3) adding range would add to an already busy label.

The agencies are proposing to include range information on alternative technology vehicle labels and seek public comment on this issue.

A related issue is how EPA will determine the appropriate adjustment factor to use in converting 2-cycle test values for range to 5-cycle test values for vehicle labels. Under current EPA regulations established by the 2006 fuel economy label rulemaking, automakers would have two choices: 1) submitting 5-cycle test data, and 2) using the mpg-based (derived 5-cycle) equations. 124 Based on preliminary EPA analysis, it appears that u U sing the mpg-based equations for EVs would yield an approximate 40 percent % downward adjustment for EV

range. 125 EPA notes that there were no EV or PHEV data in the database used to generate the

121 16 CFR part 309.

122 Environmental Protection Agency Fuel Economy Label: Phase 2 Focus Groups, EPA420-R-10-904, August

2010 EPA Fuel Economy Label Phase 2 Focus Groups Technical Memorandum, Prepared by PRR, Inc, July 2010

, pp 17, 28, and 38

. 123 Environmental Protection Agency Fuel Economy Label: Phase 2 Focus Groups, EPA420-R-10-904, August 2010, pp 17, 28, and 38.

124 71 FR77887-77888, Dec 27, 2006.

125 See 40 CFR 600.210-08. Using the equations in these regulations to adjust 2-cycle test values for extremely high mpg vehicles (or mpge for EVs) will result in adjustme nts approaching 40 percent. Because the data used to determine these equations did not include any such vehicles, EPA is uncertain as to the applicability of the formulae to EVs and other extremely high mpg vehicles. Cite

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Page 66 of 150 mpg-based equations, and that the downward adjustment appropriate for EVs (which have low direct vehicle energy consumption levels) is the result of extrapolating the results of the conventional vehicle data that was used to generate the equations.

EPA proposes a new set of options for automakers to choose for purposes of identifying the appropriate 5-cycle range adjustment for EVs and the electric portion of PHEV operation. One, automakers could provide full 5-cycle test data, which is one option under current EPA regulations. Two, automakers could provide ve hicle-specific real world range data collected from in-use vehicles. Three, automakers could use the mpg-based equations discussed above, but with the downward adjustment capped at the percent reduction represented by the worst-case gasoline vehicle in the EPA database. The worst-case gasoline vehicle is the highest-mpg gasoline vehicle, which is currently the Toyota Prius. Based on the application of the mpg-based equations to the Prius’ mpg values, the Prius would get about a 30% downward adjustment from its 2-cycle data to its derived 5-cycle value, and this would therefore be the level that automakers could use for EVs and the electric operation of PHEVs.

EPA seeks comment on this proposal for the downward 5-cycle adjustment for EVs and

PHEVs.

d. Battery Charging Time Information

EPA does not include information on the m echanisms for or time associated with refueling vehicles on conventional vehicle fuel economy labels. Refueling with petroleum fuels is a fairly quick and ubiquitous process, and has not been a topic of consumer concern. Refueling, or charging, a battery pack will be different in many ways. While gasoline vehicle refueling typically takes 5-10 minutes, charging a battery pack can take up to 12 hours or more, depending on the charging hardware. EPA focus group participants expressed strong interest in including some type of information on charging time on labels for EVs and PHEVs. 126

The arguments for including battery charging time information on EV and PHEV labels include 1) focus groups supported doing so, 2) it is a core consumer utility parameter (i.e., if the charging time is so long as to be onerous, consumers will recharge less frequently and this will have an effect on the vehicle’s energy and environmental performance), and 3) EPA could develop a test procedure for generating standardized information.

An example of a simple approach for measuring EV recharge time would be to use the method for recharging the battery recommended by the manufacturer and available to the consumer. Full battery recharge time could be defined as the time required to charge the vehicle battery to full capacity from the end of the electric vehicle range test or "empty." A fully charged battery would be defined as the same battery state of charge used to determine electric vehicle range. EPA is also seeking comment on partial recharge time. Partial recharge time could be measured and expressed as the time of recharge required to travel a given distance.

126 Environmental Protection Agency Fuel Economy Label: Phase 2 Focus Groups, EPA420-R-10-904, August 2010, pp. 16, 26, and 38. EPA Fuel Economy Label Phase 2 Focus Groups Technical Memorandum, Prepared by PRR, Inc, July 2010.Fuel Economy Labeling NPRM for OMB Review 8

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Page 67 of 150 Arguments for excluding battery charging time on EV and PHEV labels include 1) there is only an indirect relationship between charging time and energy and environmental performance, 2) EPA does not now have a test procedure for generating standardized data, 3) it will be fairly easy for consumers and third parties to verify automaker claims on this basic question, and 4) adding battery charging time will make the advanced technology vehicle labels

more cluttered.

The agencies seek comments on whether we should include battery charging time

information on labels for EVs and PHEVs.

e. Merged Vehicle Operating Mode Information for PHEVs

Conventional vehicles have a single “operating mode,” i.e., all the powertrain components contribute to propel the vehicle at all times. Some advanced technology vehicles have more than one operating mode. For example, a blended PHEV could have up to three operating modes: an all-electric mode where the vehicle is propelled exclusively by grid electricity via the battery and electric motor, a second mode where the vehicle is propelled by a combination of both grid electricity and an internal combustion engine, and a third mode that uses only the internal combustion engine. For su ch vehicles, the agencies propose to provide consumers with basic performance information about each of the PHEV’s individual operating modes. One advantage of this approach is that it will allow c onsumers to tailor the information from the individual operating modes to their own driving habits, and therefore develop

“customized” information relevant to their own situ ations. One issue is whether the vehicle label should also provide information that combines the various operating modes into a single “merged” value reflecting an “average driver.” One group that is developing guidance for how individual operating mode data could be combined for an “average driver” is the Society of Automotive Engineers Hybrid Technical Standards Committee, 127 and the agencies will continue

to monitor the work of this and other relevant committees.

The rationale for including a merged value is that 1) some consumers may find information on the individual operating modes to be “too much” and may be more likely to pay attention to a single set of performance information, 2) few, if any, consumers will exclusively drive in a single operating mode, so some kind of combined information could be helpful, and 3) a single, merged value can f acilitate comparisons across diffe rent vehicle technologies and models and 4). Customers of this new technolog y will not know how much they will operate the vehicle in each mode, so an average provides more complete information to them.

The arguments against including merged values are 1) the variability between the performance values for different operating modes can be very large, and so any assumptions about an “average driver” will be accurate for so me consumers, but very inaccurate for many other consumers, and 2) including merged values, in addition to individual operating mode values, will add to an already busy label.

127 SAE J2841.Fuel Economy Labeling NPRM for OMB Review 8

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Page 68 of 150 The agencies seek public comment on the question of whether labels for advanced technology vehicles with mul tiple operating modes should also include merged values that combines the various vehicle operating modes, and if so, on the best methodology for doing so.

f. City/Highway versus Combined Values

EPA’s conventional vehicle labels have long reported fuel economy values for both city and highway driving. For most conventional vehicles, highway fuel economy values are typically 40-50% higher than city fuel economy values. The agencies believe that this is another issue that is worth reexamining with respect to advanced technology vehicle labels.

Arguments for including separate city and highway information on advanced technology vehicle labels include 1) focus group feedback and other research has consistently shown that consumers find it useful to have separate fuel economy values for both city and highway driving for conventional vehicles, 128 and 2) since driving habits can vary widely, separate city and highway performance information can be helpful to those consumers who want to “customize” label information to their own driving habits.

Arguments for not including separate city and highway information on advanced technology vehicle labels include 1) some advan ced technologies, for example EVs, show less of a change in energy consumption values between city and highway driving than do conventional vehicles which was one of the primary reasons why EPA originally displayed separate city and highway mpg values on conventional fuel economy labels, and 2) not reporting separate city and highway values can reduce some information by either a factor of two (if a combined value is shown instead of separate city and highway values) or three (if city, highway, and combined values were all shown), thus reducing the “number of numbers” on the label and possibly making the labels more readable and accessible for consumers. Focus group participants, when viewing whole labels for both conventional and advanced technology vehicles, did not express a preference for displaying city/highway numbers for advanced technology vehicles, although they did express a clear preference for city/highway values for conventional vehicles.

The agencies seek public comment on the following questions related to separate city and highway information for advanced technology vehicle labels. One, should EPA never report separate city and highway values, always report separate city and highway values, or retain discretion for doing so only when it is appropriat e (i.e., when the differences between city and highway are significant enough to be meaningf ul)? Two, would it be acceptable for EPA to require the use of separate city and highway fu el economy values for conventional vehicles, but to not do so, in some or all cases, for advanced technology vehicles?

g. Methodology for Merg ed Values for PHEVs

128 Environmental Protection Agency Fuel Economy Label: Phase 1 Focus Groups, EPA420-R-10-903, August 2010 and Environmental Protection Agency Fuel Economy Label: Phase 3 Focus Groups, EPA420-R-10-905, August 2010, p. 12 EPA Fuel Economy Label Phase 1 Focus Groups Technical Memorandum, Prepared by PRR, Inc, July

2010

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Page 69 of 150 One specific issue for PHEVs is the methodology for determining a single merged value that combines the various operating modes into a single overall value, given that PHEVs use both gasoline and grid electricity. The agencies expect that consumers who purchase a PHEV will do so with the intention of utilizing the capab ility of both fuels (e.g., it seems reasonable to assume that most consumers who purchase a more expensive PHEV would then charge the PHEV as frequently as possible in order to ach ieve fuel savings by maximizing their use of electricity and minimizing their use of gasoline) . It thus seems appropriate to include the operation on both fuels in any merged values, using a weighted average of the appropriate metric for each of the modes of operation. The agencies propose and seek comment on using a methodology developed by SAE and DOE based on utility factors (UFs) - which predict the fractions of total distance driven in each mode of operation (electricity and gas) - to assign weighting factors for gasoline and electricity use for PHEVs for the purposes of determining merged values for fuel economy and/or greenhouse gas ratings and for any other metrics for which a single, merged value is appropriate. The proposed UF methodology is described in

detail in Section VI.B.

h. Advertising Restrictions

The federal lead on guidelines for the use of vehicle label info rmation in automaker marketing campaigns rests with the Federal Trade Commission (FTC). The agencies believe that the unique issues, as well as in the likely increased complexity and “number of numbers,” associated with advanced technology vehicle labe ls, warrant additional consideration of whether there needs to be new guidelines for the use of la bel information in private marketing campaigns. The agencies intend to raise this issue with the FTC, and seek comments from the public that could help inform our input to the FTC.

C. Labels for Other Vehicle/Fuel Technologies

Lab els for conventional gasoline and diesel vehicles and for certain advanced technology vehicles are the primary focus of this proposed rule. Conventional gasoline and diesel vehicles are expected to make up a majority of the fleet well into the future, and improving on the communication of conventional vehicle fuel economy and related information is a continued priority of EPA and NHTSA. Electric vehicles a nd plug-in hybrid electric vehicles are entering the fleet in the near term, and there is the poten tial for a rapidly increasing market penetration of these vehicles in the future, yet labeling these vehicles in an understandable and equitable way presents significant challenges. However, ther e are several other specific vehicle technologies for which EPA currently has labels, and EPA is also proposing new label templates for those as

well.

1. Flexible Fuel Vehicles

Flexible fuel vehicles (FFVs) (also called flex -fuel, dual-fueled or bi-fueled vehicles) are vehicles that can operate either on gasoline or di esel fuel, on an alternative fuel such as ethanol or methanol, or on a mixture of conventional and alternative fuels. Produced since the 1980s, flexible fuel vehicles (FFVs) are the most numerous of the currently available alternative fuel vehicles, with dozens of 2010 car and truck models available from General Motors, Chrysler,Fuel Economy Labeling NPRM for OMB Review 8

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Page 70 of 150 Ford, Mazda, Mercedes, Nissan, and Toyota. Essentially all FFVs today are E85 vehicles, which can run on a mixture of up to 85 percent ethanol and gasoline. These vehicles are considered “dual fueled vehicles” under EPCA, which states that the label for dual fuel vehicles must:

‘‘(A) indicate the fuel economy of the automobile when operated on gasoline or diesel fuel; (B) clearly identify the automobile as a dual fueled automobile; (C) clearly identify the fuels on which the automobile may be operated; and (D) contain a statement informing the consum er that the additional information required by subsection (c)(2) of this section is publ ished and distributed by the Secretary of Energy.’’ 129

The current labeling requirements for dual-f ueled vehicles are consistent with these requirements. While not required, manufacturers may voluntarily include the fuel economy estimates (and estimated annual fuel costs) for th e alternative fuel on the la bel, in addition to the gasoline information. 130 Consumers can view the gasoline and E85 fuel economy estimates of all FFVs in the Fuel Economy Guide and at www.fueleconomy.gov . In fact, EPCA requires that the Fuel Economy Guide contain information such as: (1) the fuel economy when operating on the alternative fuel, (2) the driving range when operating on the alternative fuel, and (3) information about how the performance might change when operating on mixtures of the two

fuels.

EPA did not propose changes to these requirements in the 2006 labeling rule and did not seek comment on the topic. However, EPA received late public comments from several environmental and consumer groups urging EPA to require additional information on the use of E85 on FFV labels. Since EPA did not propose and request comments on this topic in the 2006 rulemaking, the agency did not finalize any such requirements.

EPA and NHTSA request public comment on three options for FFV labels.

One option is to make no changes to th e current requirements for FFV labels and continue to use fueleconomy.gov and the Fuel Economy Guide to provide information on E85

use to consumers. 131 Consistent with the current requirements, EPA and NHTSA would finalize regulations that would allow manuf acturers to display the E85 fuel economy values on the label on a voluntary basis. 132 The final regulations would include a template for such a label.

A second option is to requir e the addition of E85 fuel economy values to FFV labels using the units of miles per gallon. Since E85 has a lower energy density (i.e., about 25% less energy per gallon) than gasoline, this means that , other things being equal, an FFV will have a lower fuel economy on E85 than it will on gasoline . EPA recognizes that this does not mean that

129 49 U.S.C. 32908(c)(3).

130 40 CFR 600.307-08(b)(14).

131 Consumers do get some information regarding E85 efficiency on a label required by the FTC. Currently the FTC label for FFVs displays the driving range on both fuel s and some additional information regarding the use of

alternative fuels. See 16 CFR Part 309.

132 Label examples for FFVs are shown in Section III, but th ese reflect only a transition of the currently used label content (some of which is required by statute) to the proposed label designs.Fuel Economy Labeling NPRM for OMB Review 8

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Page 71 of 150 ethanol is a “less efficient” fuel than gasoline; in fact, FFVs are typically slightly more efficient on E85 than on gasoline in terms of miles per unit of energy. Accordingly, one approach under this option would be to add text such as the following wording on the label that conveys this message: “While the E85 mpg valu es are lower than the gasoline mpg values, the use of E85 is actually typically slightly more energy efficient than the use of gasoline.” Under this option, it would also be possible to add E85 values for CO 2 emissions (an FFV typically emits slightly less

CO 2 per mile on E85 than on gasoline) and fuel costs (an FFV typically costs somewhat more to operate on E85 than gasoline, though this can vary by region). If CO 2 values are not shown, it would also be possible to include a statement such as “Using E85 uses less oil and typically produces less CO 2 emissions than gasoline.”

A third option is to utilize the concept of miles per gallon of gasoline-equivalent (mpg-e), which is a way to quantitatively account for the sl ightly higher miles per unit of energy that an FFV achieves on E85 relative to gasoline. Because a gallon of gasoline has about 33 percent more energy than a gallon of E 85, this means that an E85 mpg is multiplied by about 1.33 to convert it to a mpg-e value. For most current FFVs, an E85 mpg-e value will be slightly higher than the gasoline mpg value. The E85 mpg-e value could be in place of, or in addition to, an E85 mpg value. As with the second option above, CO 2 and fuel costs values for E85 could also be

included.

The Federal Trade Commission (FTC) currently requires the use of a label that displays the cruising range of FFVs and other alternative fu el vehicles. If the agencies finalize one of the options to include E85 information, and the FTC de termines that that information is duplicative with its own information, it opens up the possibi lity that the FTC might review its requirement.

One remaining issue with FFVs is the methodology for assigning an overall combined value for greenhouse gas or fuel economy-based ratings or for any other metrics for which a single “merged” value is shown, given that two different fuels can be used. There is empirical evidence that approximately 99% of all FFV owners currently use gasoline rather than E85 fuel. Given this, the agencies propose, as a default, to base any merged values for FFVs on the assumption that the vehicle is operated on gasoline 100% of the time. However, if a manufacturer can demonstrate that some of its FFVs are in fact using E85 fuel in use, then the merged values can be based in part on E85 performance, prorated based on the percentage of the fleet using E85 use in the field. This approach is consistent with that used for vehicle GHG emissions compliance under the joint EPA/DOT standards for 2016 and later model year

vehicles. 133 The agencies seek comment on applying the same approach here.

2. Compressed Natural Gas Vehicles

EPA regulations currently provide a label template for vehicles operating on compressed natural gas (CNG), and there is one major manufacturer currently selling a natural gas vehicle in

selected markets. Given that a CNG vehicle is a single-fuel vehicle, EPA believes that the label designs developed for conventional or other alternative fuel vehicles can be easily adapted to gaseous-fueled vehicles, as has been done in the past. In fact, EPCA provided specific instructions regarding how to determine the fuel economy for dedicated alternative fuel vehicles

133 75 FR 25433, May 7, 2010.Fuel Economy Labeling NPRM for OMB Review 8

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Page 72 of 150 such as gaseous-fueled vehicles. The statute states that for dedicated automobiles the fuel economy “is the fuel economy for those automobiles when operated on alternative fuel, measured under section 32905(a) or (c) of this title, multiplied by 0.15.” 134 Section 32905(c) applies to gaseous-fueled vehicles, and it requires the following:

“For any model of gaseous fuel dedicated automobile manufactured by a manufacturer after model year 1992, the Administrator shall measure the fuel economy for that model based on the fuel content of the gaseous fuel used to operate the automobile. One hundred cubic feet of natural gas is deemed to contain .823 gallon equivalent of natural gas. The Secretary of Transportation shall determine the appropriate gallon equivalent of other gaseous fuels. A gallon equivalent of gaseous fu el is deemed to have a fuel content of .15 gallon of fuel.” 135

This methodology is currently specified in EPA regulations. Note that 32905(c) applies a factor of 0.15, which is essentially a “credit” that increases the fuel economy of gaseous-fueled vehicles by a factor of about 6.7 for the purpose of CAFE calculations. But the statute recognizes that incorporation of this credit factor in the label values is not appropriate, hence the provision in 32908(b)(3) to multiply the 32905(c) result by 0. 15, thus removing the credit value and resulting in an appropriate real-w orld label value.

The current EPA regulations interpret the statute as requiring that the label for CNG vehicles display a gasoline-equivalent value, an d a label template for CN G is provided in the current regulations. 136 As can be seen, the current label for CNG vehicles is fundamentally the same as for gasoline vehicles, except that the fuel economy values are described as “gasoline equivalent” values, and the estimated annual fuel cost is based on a combined city/highway gasoline equivalent value and the price per gallon equivalent of CNG. The current label also contains text that reads “This vehicle operates on natural gas fuel only. Fuel economy is expressed in gasoline equivalent values.”

We are therefore proposing that labels for CNG vehicles be essentially the same in terms of content and appearance as those proposed for conventional vehicles, with only a few exceptions. First, where the proposed labels i ndicate the fuel type, labels for CNG vehicles would state “Compressed Natural Gas Vehicle.” Second, the fuel economy value(s) would be stated as gasoline-equivalent values. As is the case for the proposed labels for electric vehicles,

the CNG labels would indicate the conversion f actor that is used to determine the gasoline equivalent values (0.823 gallons-equivalent per 100 cubic feet of CNG, as required by statute). 137
Third, the estimated annual fuel cost would be calculated using the combined city/highwaygasoline equivalent value and the cost per gallon equivalent of CNG. The use of gasolineequivalent gallons is appropriate because this is how CNG is dispensed, priced, and sold at current CNG fueling stations. Finally, because the cruising range of CNG vehicles is typically limited relative to conventional vehicles, we are proposing the addition of cruising range to the CNG vehicle label (in this way the label would mimic the electric vehicle label). As is the case

134 49 U.S.C. 32908(b)(3).

135 49 U.S.C. 32905(c).

136 Appendix IV to 40 CFR Part 600, Sample Fuel Econom y Labels for 2008 and Later Model Year Vehicles.

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Page 73 of 150 with electric vehicles, we believe that range is a key piece of information for the consumer who is considering a CNG vehicle. Other information on the label, such as the greenhouse gas and other pollutant emissions and ratings, would be de termined from emission and fuel economy test results and the proposed calculation methodologies as is the case for all vehicles.

Section III presents the proposed and alternative label designs, including a proposed design for CNG vehicles. We request comment on the proposed approach for CNG vehicles, and whether there is additional information specific to CNG or alternative fuels that should be on the

label.

3. Dual Fuel Natural Gas & Gasoline Vehicles

Although there is currently a template for dua l fuel CNG/gasoline vehicles in the existing regulations, there are no manufacturers that are currently manufacturing new vehicles that run on CNG and on gasoline. 138 Thus we request comment on whether there is a need to develop a template for these vehicles based on the new labels. The agencies envision that such a label would be based largely on the proposed approach for dual fuel gasoline/ethanol vehicles discussed in above, in that the fuel economy and related information for both fuels would be displayed on the label.

Although this proposal addresses most current technologies, it does not need to address every possible fuel and technology combination ei ther in existence or that may emerge in the future. EPA has the authority to prescribe test procedures and label content for vehicles that are not specifically addressed by the regulations, and expects to do so on an as-needed basis to address new technologies and fuels. 139 In fact, EPA expects to exercise this authority with respect to labels for electric vehicles and plug -in hybrid electric vehicles that arrive on the market before the 2012 model year.

4. Diesel Fueled Vehicles

EPA proposes to continue to calculate the fuel economy of diesel vehicles in miles traveled on a gallon of diesel fuel. Diesel fuel has a long history of being sold on a volumetric basis, and the energy content differences between a gallon of gasoline and a gallon of diesel fuel are relatively small.

III. Proposed Revisions to Fuel Economy Label Appearance

Th is section presents and requests comment on three label designs. The agencies are coproposing label 1 and label 2 design options, meaning that the agencies currently expect to finalize one of the two options. A third label de sign is being presented as an alternative on which the agencies are requesting comment. All of these designs take into account and meet the variety of statutory requirements in EPCA and EISA as discussed in Section I. It is important to

138 Some aftermarket aftermarket fuel conversion companies offer such ve hicles, but EPA regulations do not currently require fuel economy labels for aftermarket fuel conversions.

139 40 CFR 600.111-08(f) (test procedures) and 40 CFR 600.307-08(k) (label format requirements).Fuel Economy Labeling NPRM for OMB Review 8

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Page 74 of 150 note that although all of the label designs shown in this section make use of color to varying degrees, this Federal Register notice is capable of only displaying gray-s cale versions. Full colorversions can be viewed and/or downloaded from the docket (search for docket number EPA-HQOAR-2009-0865 or docket number NHTSA-2010-0087 at www.regulations.gov ) or from the agencies’ web sites where all information related to this action will be posted ( http://www.epa.gov/fueleconomy/regulations.htm and http://www.nhtsa.gov /fuel-economy). To the extent possible this section will describe the us e of color on the labels, but interested parties should view the color versions to understand the full effect of the label designs.

Each design family consists of a set of labels applicable to an array of vehicle technology/fuel types. Specifically, we show labe l examples that apply to conventional vehicles (that is, vehicles operating on a single fuel w ith internal combustion engines or hybrid electric drive), flexible-fuel vehicles (for example gasoline-ethanol), compressed natural gas vehicles, electric vehicles, and plug-in hybrid electric vehicles. Each label family could be readily adapted to accommodate additional vehicle technologies or fuels, such as vehicles powered by fuel cells or other upcoming technologies. The agencies intend to finalize a label family with a consistent look and feel across vehicle types, in the belief that such consistency will most effectively allow for recognition of the label as well as comprehension of its content.

The agencies found through the focus groups and expert panel that many consumers will view the fuel economy label quickly, some using it to confirm the vehicle information they have previously researched on a manufacturers’ website or a third party website such as Consumer Reports or Edmunds.com. Other consumers, in contrast, will view the fuel economy information for the first time when they visit a dealer lot or showroom. While a new vehicle purchase represents a significant financial outlay, the agencies learned through their research that consumers like it simple, and do not necessarily act on details. Therefore, while the agencies want and need to add certain pieces of information to meet statutory requirements and to help

consumers make informed decisions about the fu el consumption and environmental impacts of their vehicle choices we must balance these objectives with the need to keep the new labels consumer friendly. To accomplish this, the agencies were guided by a set of core principles in designing these labels. The labels should:

 Create an immediate first impression for consumers

 Be easy to read and understand quickly

 Clearly identify vehicle technology (conventional, EV, EREV, PHEV)

 Utilize color

 Chunk information to allow people to deal with “more information”

 Be consistent in content and design across technologies

 Allow for comparison across technologies

 Make it easy to identify the mo st fuel efficient and environmentally friendly vehicles

The agencies are requesting comment on both the design and content of each label. Design issues are self-evident on the labels as presented, and we seek comment on the design aspects of each label family, including format, color, font, and graphical elements. Content issues have been extensively discussed throughout the preamble; for illustrative purposes, presentation of content varies somewhat from one label family to another and we seek comment on the various approaches. Specifically, we seek comment on the layout, prominence, andFuel Economy Labeling NPRM for OMB Review 8

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Page 75 of 150 grouping of label elements in terms of clarity, apparent relative importance, responsiveness to consumer information needs, and effectiveness at meeting public policy goals. These sample labels do not present every possible configuration of each label; for example, gas guzzler information is not depicted, as it is utilized on on ly a small subset of labels. The final rule will provide specific templates for these unique cases. Detailed specifications for presenting all required label information will be included in the regulations.

Although we will finalize labels with a uniform look and feel, commenters should not view the content of the labels below as being necessarily tied to one label design. For example, just because Labels 1 and 3 for PHEV are the only labels that display the all-electric range for a PHEV does not mean that the information could not be incorporated into Label 2 or into other label designs. We are interested in comments that relate both to content that should be on the label, how it should be communicated, and what overall label presentation is most effective and consumer friendly.

Finally, please note that although the agencies have made every effort to make these labels as realistic as possible and to ensure that the values on each label are internally consistent, the labels presented here should be considered examples that are not intended to represent real

automobiles.

A. Proposed Label Designs

The agencies are proposing two label designs, presenting both designs as equal “coproposals” but expecting to finalize only one design based on public comments and other information gathered after the proposal. Although the two designs shown below have fundamentally different visual appearances and will no doubt elicit very different reactions from some viewers, they essentially present exactly the same basic information. For conventional vehicles, for example, each design displays the following:

• City MPG

• Highway MPG

• Combined gallons/100 miles

• CO 2 grams per mile (combined city/highway)

• Estimated annual fuel cost

• Range of fuel economy within the class

• The fuel the vehicle uses

• Three “slider bars” showing the performance of the labeled vehicle relative to other vehicles for mpg, CO 2 , and other air pollutants

• Annual fuel cost assumptions

• A symbol that can be read by a “‘Smartphone”’ for additional consumer interactions (i.e., a “QR” Code)

• A Fuel Economy Guide statement

• EPA, DOE, and DOT logos

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Page 76 of 150 Label 1 is fundamentally different from Label 2 and 3 designs presented in this section in three different ways:

 First, the orientation is a portrait orientation, rather than the landscape style of the

current label.

 Second, a rating reflecting the energy efficiency and environmental impacts of the vehicle is given overall prominence. Instead of providing a series of numbers on the label with varying or equal prominence, which may make it difficult for consumers to evaluate at a glance, this label presents the energy and environment rating as a letter grade (a system familiar to all consumers) with major prominence at the top of the label. The letter grade is simply another familiar scale on which to present a linear rating, comparable to the star system or a 1-10 rating. This grade would be based on

CO 2 emissions and fuel economy consumption as described in Section II. To further help consumers identify the grade of a vehicle on the dealer sales lot, the agencies are proposing that different colors be used to differentiate between grade “families.” In other words, the dominant color on all the “A” grade labels would be one color, the “B” grade labels would use a different color, and so on. For example, the circle which surrounds the letter grade would be a different color depending on the grade. The color versions of the labels demonstrate this, using green for A grades, yellow for B grades, orange for C grades, and a dark orange for D grades.

 Third, this label provides new fuel cost savings information not seen on any other label designs. Secondary only in prominence to the letter grade, and immediately below the letter grade, Label 1 would display the 5-year fuel cost of the vehicle in comparison to the average vehicle. For vehicles with fuel economy ratings above the median vehicle, the label would display how much the consumer would save, and for vehicles with ratings below average the label would display how much more the consumer would be spending.

All the remaining information is displayed in the bottom portion of the label and would

be available to consumers who want to know th e more detailed information or who take a more analytical approach to evaluating the vehicle. The agencies believe that this approach uses a rating system that is easily understood by consumers and that would dramatically simplify the process of evaluating the overall energy efficiency and environmental impacts of the vehicles they are considering. The de-emphasis of mpg on this label – indeed, one purpose of directing consumers to the overall rating – is intended to enable consumers to make the best fuel consumption and environmental choices, choices made easier by the addition of the comparative cost information. Additionally, a consumer that us es the letter grade and cost information on this label may be able to avoid the effect of the “mpg illusion” described in Section II.

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Page 77 of 150 Figure III-1. Label 1 for conven tional (gas) vehicle, B grade.Fuel Economy Labeling NPRM for OMB Review 8

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Page 78 of 150 Figure III-2. Label 1 for electric vehicle, A+ grade.Fuel Economy Labeling NPRM for OMB Review 8

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Page 79 of 150 Figure III-3. Label 1 for PHEV, A grade.Fuel Economy Labeling NPRM for OMB Review 8

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Page 80 of 150 Figure III-4. Label 1 for conventional (gas) vehicle, C grade.Fuel Economy Labeling NPRM for OMB Review 8

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Page 81 of 150 Figure III-5. Label 1 for conventional (gas) vehicle, D grade.Fuel Economy Labeling NPRM for OMB Review 8

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Page 82 of 150 Figure III-6. Label 1 for PHEV, Option 2.Fuel Economy Labeling NPRM for OMB Review 8

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Page 83 of 150 Figure III-7. Label 1 for CNG vehicle, A- grade.Fuel Economy Labeling NPRM for OMB Review 8

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Page 84 of 150 Figure III-8. Label 1 for FFV, B grade.Fuel Economy Labeling NPRM for OMB Review 8

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Page 85 of 150 Option 2 for the PHEV version is offered as an alternative representation of plug-in hybrid electric vehicles. This option was developed to be consistent with other dual-fuel vehicle labeling approaches. It also provides an example of how more information about the different modes of operation for PHEVs could be displayed on Label 1. The agencies seek comment on whether this alternate approach to PHEV labeling for La bel 1 provides better information for consumers or whether the first option is more useful.

2. Label 2

Label 2, shown below takes a more tradi tional approach, similar to the current fuel economy label and highlights the key metrics of mpg and annual fuel cost. The agencies are seeking comment about whether, if this label were finalized, the prominence of gallons per hundred miles should be gradually increased on the label through one or more rulemakings to facilitate consumer familiarity with and usage of a consumption metric. As explained in Section II, these labels show the comb ined city/highway mpg with the highest prominence. The additional ratings are essentially identical to those of Label 1, except with the additional space for the mpg rating “slider bar.” Because of this extra space for the slider bars, Label 2 can also display the range of fuel economy of the appl icable vehicle class (Label 1 provides this information in text form) in the context of the range of fuel economy for the whole fleet.. Label 2 uses the slider bar approach like Label 1 for all of the specific ratings, and, like Label 1, has separate ratings for mpg, greenhouse gases, and ot her air pollutants. The electric vehicle label in this series does have an additional piece of informa tion relative to Label 1 -- the battery charging time. And unlike Label 1 and Label 3, the PHEV label in this series pr ovides separate annual cost estimates for both the electric and gas modes of operation, which may be more useful to consumers who want to understand the costs specifically associated with operating the vehicle solely on mode either when operating on electricity or in gas-only operating mode.

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Page 86 of 150 Figure III-9. Label 2 for conventional (gas) vehicle.Fuel Economy Labeling NPRM for OMB Review 8

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Page 87 of 150 Figure III-10. Label 2 for electric vehicle.Fuel Economy Labeling NPRM for OMB Review 8

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Page 88 of 150 Figure III-12. Label 2 for PHEV (predominantly blended type). Figure III-11. Label 2 for PHEV, extended range electric (series) type.Fuel Economy Labeling NPRM for OMB Review 8

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Page 89 of 150Fuel Economy Labeling NPRM for OMB Review 8

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Page 90 of 150 Figure III-13. Label 2 for CNG vehicle.Fuel Economy Labeling NPRM for OMB Review 8

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Page 91 of 150 Figure III-14. Label 2 for FFV.Fuel Economy Labeling NPRM for OMB Review 8

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Page 92 of 150 B. Alternative Label Design (Label 3)

The agencies also seek comment on a third label design that includes the same information as the other labels, but displays alte rnative ways of communicating the information. For example, this label (Label 3) combines the greenhouse gas and fuel economy ratings into one slider bar using a 1-10 rating scale (rather than the absolute values us ed in the other label designs), and instead of a relative “slider bar” scale for the other air pollutant rating, Label 3 uses a star rating system. Other than the difference in the rating systems, the Label 3 electric vehicle label provides essentially the same information as Label 2. For PHEVs, Label 3 provides only one annual fuel cost number (like Label 1) that merges the electric and gasoline modes. This label also displays for PHEVs an all-electric range , if the vehicle is capable of such operation.

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Page 93 of 150 Figure III-14. Label 3 for conventional (gas) vehicle.Fuel Economy Labeling NPRM for OMB Review 8

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Page 94 of 150 Figure III-15. Label 3 for electric vehicle.Fuel Economy Labeling NPRM for OMB Review 8

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Page 95 of 150 Figure III-16. Label 3 for PHEV, extended range electric (series) type.Fuel Economy Labeling NPRM for OMB Review 8

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Page 96 of 150 Figure III-17. Label 3 for PHEV, predominantly blended type.Fuel Economy Labeling NPRM for OMB Review 8

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Page 97 of 150 IV. Agency Research On Fuel Economy Labeling

As discusse d above, the fuel economy label must contain certain pieces of information by statute, and may additionally contain other pieces of information considered helpful to

consumers. Given that all of the label inform ation must be presented so as to maximize usefulness and minimize confusion for the consumer, EPA and NHTSA embarked upon a comprehensive research program beginning in the fall of 2009. Developing an effective label – one that conveys the required and desired information to consumers so that they can understand

and use it to make decisions-- involves some inhe rent subjectivity, since what is understandable and useful for one consumer may be confusing or unhelpful to another. To better ground our proposed label designs in actual human responses, the agencies set out to better understand the following general issues: whether, how, and to what extent consumers use the current fuel economy label in the vehicle purchase process; the barriers to consumer understanding of the fuel efficiency of vehicles relative to one another (including both conventional vehicles and advanced technology vehicles); and how a newly redesigned label could most effectively convey information to consumers on fuel economy, fuel consumption, fuel cost, greenhouse gas, and

other emissions.

When EPA last redesigned the fuel economy label in 2006, consumer research was valuable in helping to inform the development of that label. 140 Since today’s proposal includes adding important new elements to the existing label as well as cr eating new labels for advanced technology vehicles, EPA and NHTSA embarked on a more comprehensive consumer research program than that undertaken in 2006 and have used this research to help develop the labels proposed in this NPRM.

A. Methods of Research

To gather information about the topics described below, the agencies designed a research plan including a review of literature on the vehicle buying process, three sets of focus groups in four different cities, a day-long facilitated c onsultation with experts in the field of shifting consumer behavior, and an internet survey of responses to proposed label designs (which will occur during the comment period following this NPRM). A more thorough discussion of each research method is provided below.

1. Literature Review

EPA and NHTSA conducted a review of the existing literature to understand the vehicle buying process. Specifically, the literature revi ew addressed the sources of information that consumers use to research vehicles, their decision- making process, and the factors that influence which vehicles consumers choose to buy. These include vehicle-specific factors such as price, fuel economy, and safety, as well as the role that demographics and psychographics play in purchasing decisions. Literature examining consumer attitudes toward buying more fuel

140 The current label was redesigned and implemented for model year (MY) 2008 vehicles. See 71 FR 77871-77969 (December 27 2006).Fuel Economy Labeling NPRM for OMB Review 8

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Page 98 of 150 efficient and environmentally friendly (i.e., “green ”) vehicles was also reviewed. Understanding when and how consumers consider fuel economy and the environmental impact in their vehicle purchase decisions helped the agencies determine the most effective ways to provide useful

information to consumers on the vehicle label.

Additionally, the literature review report in cluded an overview of existing educational campaigns aimed at helping consumers use information on the fuel efficiency and the environmental effects of their transportation choices. Review of these campaigns may help inform the agencies’ development of educational tools and messages beyond the label to provide

consumers with useful information on fuel effi cient and environmentally friendly vehicles.

A broad range of sources were reviewed for this report, including journals in marketing, economics, and transportation research; business magazines; government documents; conference proceedings; and a variety of websites. Some of the key findings from the literature review are described in Section IV.B. A more detailed report is available in the docket. 141

2. Focus Groups

The agencies felt it was critical to consider understandability and consumer reaction to a variety of label concepts given that the purpose of the fuel economy label is to inform consumers of the vehicle’s fuel economy and, with the amendments enacted by EISA, greenhouse gases and other emissions. EPA and NHTSA additionally saw a need to conduct research beyond that of the previous rulemaking due to the advancements in vehicle technology underway, the increased market share of vehicles that use fuels other than gasoline, and the introduction of environmental information to the label. The agencies determin ed that they would gather in-depth, qualitative feedback about fuel economy labeling, potential new label information, and ways of displaying the information through focus groups. The focus group format allowed for in-depth probing around a variety of topics, including comprehension of potential elements on the fuel economy label and how consumers may use that information in making purchase decisions. The focus groups were not intended to provide quantitative results, but were instead designed to help EPA and NHTSA discern the subtleties of the large number of decisions that are necessary when creating a label that should convey numerous and sometimes complicated information.

The focus group process included a recruitment screener, on-line pre-focus group survey, and at least two gender-differentiated focus groups in four different cities for each of the three separate phases. The focus group methodology and results, including the recruitment screener and pre-focus group on-line surveys, are discussed in greater detail in the focus group Technical Memoranda available in the pub lic docket for this rulemaking. 142

The agencies concluded that conducting three phases of focus groups, each with a different concentration, was necessary to gather adequate information to explore the complex and numerous issues raised by this rulemaking . Phase 1 gathered qualitative information on consumer understanding and use of the current fuel economy label, consumer reaction to

141 Environmental Protection Agency Fuel Economy La bel: Literature Review, EPA420-R-10-906, August

2010 EPA Fuel Economy Label Project Literature Review, Prepared by PRR, Inc, July 2010

. 142 EPA-HQ-OAR-2009-0865.Fuel Economy Labeling NPRM for OMB Review 8

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Page 99 of 150 potential new information and metrics on the labe l for conventional vehicles, and also initial

identification of effective displays for this information. Phase 2 asked consumers to identify what information they were interested in seeing on the label for advanced technology vehicles and explored the understandability a nd sufficiency of various information and metrics for PHEVs and EVs. Phase 3 explored the understandabilit y and usefulness of new information integrated into whole label designs for both conventional and advanced technology vehicles. Thus, overall, focus groups were used to obtain a qualitative un derstanding of consumer s’ comprehension and reactions to fuel economy label information.

The agencies assumed that individuals who had recently purchased vehicles would have the best insight into how the current fuel economy label is used and would therefore also be best suited to provide input about any changes that might be made to the label. To that end, participants were selected based on having purchased a vehicle within the past year, but not during the “cash for clunkers” purchase window. 143 A “participant screener” was used to ensure a reasonable cross-section of purchasers was represented in each group. Some of the demographic variations purposefully considered included the type of new vehicle purchased, price range of the new vehicle, average daily dr iving distance, and whether the individual had seriously considered or actually purchased an advanced technology vehicle such as a gasoline hybrid.

Each focus group participant was also asked to complete a short on-line survey before attending the session. This survey served thr ee purposes: 1) to collect demographic data about the participants and information about their sp ecific vehicle purchase process; 2) to provide participants with some background information about advanced technology vehicles so that the participants would have some exposure to new technologies prior to the focus group meeting; and 3) to gather information about how the participants had used the current fuel economy label in their purchase decisions, if at all. This su rvey data was not intended to be examined as a nationally representative sample and was only used as supplementary information when describing the focus group results.

The agencies anticipate that there will be addi tional focus groups prior to rule finalization

in each of the f our cities where focu s groups were held pre-proposal. These focus groups will examine revised labels based on feedback the agencies receive during the comment period and will provide additional input on whole label designs. The agencies will place information obtained from these focus groups in the docket as it becomes available and encourages all interested parties to check the docket for updated information.

3. Internet Survey

While the focus groups were used to develop new label designs, the internet survey is meant to examine how understandable the new label designs are, and whether the proposed new label and alternative labels will improve consumers’ knowledge about more efficient vehicles.

143 “Cash for Clunkers” (Consumer Assistance to Recycle and Save Act of 2009, Pub. L. 11132) was a NHTSA program that provided a tax incentive to tr ade-in low fuel efficient vehicles for new, higher fuel efficient vehicles. The purchase period in which this program operated was excluded to avoid any bias of participants, since the program was explicitly focused on fuel economy.Fuel Economy Labeling NPRM for OMB Review 8

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Page 100 of 150 The planned survey is scheduled to begin concur rent with the signing of this proposal and will test these questions for both conventional and ad vanced technology vehicles. A notice of the survey, published in the Federal Register on May 12, 2010, requested comment on the survey methodology. 144 No substantive comments were received.

This survey will use two samples: self-selected U.S. new vehicle purchasers and people who expressed an intention to purchase a new vehicle by requesting a price quote from a

dealer. 145 Each of these samples is di vided into three separate groups. One version of the survey was developed for each group, identical in every wa y except that each of the groups will see only one of the label designs.

The survey tests respondents’ understanding of the labels by showing each respondent a series of label pairs. In each pair, all vehi cle characteristics are held constant except the information on the vehicle label. For instance, the fuel economy of the vehicles may differ, or one may have a conventional vehicle and one an electric vehicle. Respondents are then asked to identify which vehicle is better to use for trips of specified distances. 146 The key metric of interest is whether the label designs produce sta tistically significantly different results. If one label produces more correct responses than other labels, then it can be considered more understandable; if the labels do not produce statistically different results, then the labels can be considered equivalently understandable.

To test the potential influence of the labels on vehicle purchases, respondents see pairs of

labels for vehicles with all vehicle attributes co nstant except those varied on the label, such as the technologies of the vehicles, their efficiencies , and their energy costs. Instead of using the label to identify the better vehicle for a scenario, the respondents are asked which of these vehicles they would prefer to buy, based on their individual driving patterns. Comparisons involve both conventional and advanced technology vehicles. Because the survey asks respondents about their typical daily driving dist ances, it is possible to see whether respondents

chose the vehicle better suited for their habits. The key variable is whether the responses differ for different label designs.

The internet survey data collection is planned to occur in early to mid-August 2010. The results of the survey will be made public as soon as they are available. The results will be made available in the public docket for this rulemaking at regulations.gov. If the results are not placed in the docket 30 days before the end of the comment period, the agencies will accept comments on these results up to 30 days from when they were placed in the docket.

144 U.S. EPA, “Agency Information Collection Activities; Proposed Collection; Comment Request; Internet Survey Research for Improving Fuel Economy Label Design and Content; EPA ICR No. 2390.01, OMB Control No. 2060- NEW,” 75 Fed. Reg. 26751 (May 12, 2010).

145 Sources of respondents were databases owned by Aut obytel, http://www.autobytel.com (for those intending to buy new vehicles), and Focus USA (for those who purchas ed a vehicle in the last year), http://www.focus-usa1.com.

146 Respondents were asked which was better, rather than whic h was more fuel-efficient or less costly, so as to leave the respondents with the choice of what information on the label to use for the comparison. A later question asked which information they used in their response. While this somewhat ambiguous approach may reduce the absolute number of correct answers to the questions, the goal is tes ting the relative effects of the labels, not the absolute

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Page 101 of 150 4. Expert Panel

In order to gather additiona l feedback on the label desi gns developed from the focus groups and to identify opportunities and strategies to provide more and better information to consumers so that they can more easily assess the costs, emissions, and energy efficiency of

different vehicles, EPA and NHTSA convened an expert panel. “Experts” were selected based on their past experience in changing social norms either by successfully launching new products or leading national education campaigns that have had a broad and significant impact. The method for selecting the panel began by first generating a list of products and social changes that met the criteria of impacting a significant percentage of the population quickly, while also demonstrating staying power. Individuals who had roles criti cal to the success of these efforts were then identified and recruited. Nine “experts” participat ed on the panel, with experiences that included launching very successful public health campai gns, internet sites, new technologies, and cable networks. The meeting was held from 9 A.M. to 3 P.M. in Washington D.C. on June 9, 2010.

The topics covered include: background information, review and feedback on the EPA/NHTSA research process, messaging tech niques, outreach strategies, and feedback on possible label designs. The Expert Panel is discussed in greater detail in the Expert Panel Complete Report in the public dock et for this rulemaking. 147

B. Key Research Questions and Findings

The agencies identified the following key research questions, given the overarching issues provided above:

• How should labels portray information about fuel consumption and fuel economy, fuel cost, greenhouse gas, and other emissions for consumers in a way that is most

understandable and useful to them?

• How should labels for advanced technology vehicles portray information about fuel economy, fuel cost, greenhouse gas, and other emissions for consumers in a way that is

most understandable and useful to them?

• How should the new labels be designed to m eet the statutory requirements while best raising consumers’ understanding of fuel effi ciency, fuel cost and environmental impact?

• How can consumers compare vehicles when they are shopping?

• What purchase process do consumers currently use to make new vehicle purchasing decisions? Given this process, when are the most effective opportunities to communicate fuel economy and environmental information?

1. Effective Metrics and Rating Systems for E xisting and New Label Information

How should labels portray information about fuel consumption and fuel economy, fuel cost, greenhouse gas, and other emissions for consumers in a way that is most understandable

and useful to them?

147 Environmental Protection Agency Fuel Economy Labe l: Expert Panel Report, EPA420-R-10-908, August

2010 EPA Fuel Economy Label Expert Panel Report, Prepared by PRR, Inc, July 2010

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Page 102 of 150 As described in Section I, EPCA and EISA require the fuel economy label to provide fuel economy, cost, and environmental information, as well as provide a means to compare vehicles based on fuel economy, greenhouse gases, and other emissions. The agency’s research program explored how this information might be displayed on the label in a useful and accessible format

for consumers.

a. Fuel Consumption and Fuel Economy

EPCA requires the label to di splay the “fuel economy of the automobile.” However, fuel economy, commonly thought of as “mpg” (the number of miles that can be traveled consuming one gallon of fuel) is often misunderstood by consumers. As discussed more extensively in Section II, because mpg is not linear, when people compare vehicles with different mpg values they are apt to incorrectly estimate the fuel savings of one vehicle over another. For example, switching from a 15 mpg vehicle to a 20 mpg vehicle will save more fuel than switching from a 30 mpg vehicle to a 35 mpg vehicle. Thus, comparing vehicles based on mpg is not as helpful to consumers in making quick and accurate comparisons as consumers may believe it to be. Fuel consumption (the number of gallons of fuel consumed to travel a given distance), on the other hand, does yield the type of linear comparison that consumers should find useful. Therefore, the agencies explored ways to convey fuel consumption on the label.

Focus groups were instrumental in helpi ng the agencies learn about communicating fuel consumption. Specifically, Phase 1 focus groups set out to gauge how receptive consumers were to a fuel consumption value and whether there were particular presentations of that value which

were more understandable. To do this the ‘Fuel Economy (MPG) Illusion’ was introduced in the pre-focus group on-line survey, followed by specific probing in each group around what “fuel consumption” means. Phase 1 focus groups generally responded that it was the distance one can travel on a gallon of gas (which is fuel economy, rather than fuel consumption). Following this discussion the participants were presented with four different designs, each conveying fuel consumption and fuel economy information. The prominent value displayed within each design was fuel consumption, given in gallons per 100 miles while the less prominent value was fuel economy, given in miles per gallon. Even when participants demonstrated that they properly understood fuel consumption, mo st still indicated that they pr eferred miles per gallon over gallons per 100 miles. Particip ants indicated this to be the case even after the moderator explained the ‘MPG Illusion.’ A few participan ts did indicate that viewing gallons per 100 miles, instead of miles per gallon, might get them to switch to more efficient vehicle types. Some participants also said that they believed they would use the gallons per 100 mile fuel consumption information on the label to learn about the vehicle’s city and highway gas consumption and to compare between different vehicles in making their purchase decision. However, most participants were not enthusiastic about using the fuel consumption information.

Almost all focus group participants showed a strong attachment to mpg. They like and use the city and highway mpg and are not familiar with gallons per 100 miles. If a new fuel consumption metric, such as gallons per 100 miles, were added to the label participants would still want the familiar mpg metric to be promin ent on the label. Rec ognizing that consumers believe they derive significant value from mpg, but that consumption information may be moreFuel Economy Labeling NPRM for OMB Review 8

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Page 103 of 150 accurate and ultimately valuable to consumers, another approach to displaying fuel consumption was also devised and presented to focus groups: an “annual gallons used” value. The basis for deriving this new metric was that 1) it makes the magnitude of comparing vehicles based on consumption more apparent, and 2) it provides a clear link between the annual cost value and fuel consumption value. An annual gallons metric was also found to be one of the more effective ways to demonstrate the fuel economy illusion. While the agencies considered displaying the annual gallons of fuel information on the label we ultimately determined that the gallons per 100

mile metric should be introduced on the labe l as the new consumption metric, and that the introduction of the five year cost or savi ngs information would also help consumers in overcoming the effects of the mpg illusion wh ile also providing important additional

information.

Phase 1 focus group participants also evalua ted four different graphical display options for fuel consumption and were asked which was the most understandable design. Participants responded by identifying the desi gn they felt was simple, informat ive and in a familiar format. However, participants did not agree on which design accomplished this.

The agencies further explored fuel economy and fuel consumption designs in Phase 3 where focus group participants were asked to evaluate whole label designs encompassing both fuel economy and fuel consumption values. In each of the three labels presented, the mpg value

was a dominant metric. 148 For each design participants were asked to determine between two labels, which represented the more fuel efficient vehicle. Participants were also asked to identify what piece of information on the label they used to make this determination. Fuel consumption was rarely identified as being used by participants. Instead, participants used mpg and cost

values most often. 149

In Phase 3, the agencies explored simplification of the labels by displaying on two of the three label designs only the combined (55% city and 45% highway) fuel economy value in lieu of listing the city and highway values separately. (See Section IV.B.4 for a discussion of whole label designs and why simplification is perceived as an overarching goal.) When participants were probed about why they did or did not like certain label designs, the presence of city and highway values was often cited as a positive for a label design, and the absence of the city and highway values was cited as a negative for a la bel design. In addition, when asked how to improve the label designs, several focus group participants asked for the city and highway values to be added to the label design s that did not include them.

The agencies gathered additional input on th e most effective approaches for portraying fuel economy and fuel consumption information during the expert panel meeting. After viewing three label designs, expert panel participants provided comments on how the label could be made more understandable and useful for consumers. The expert panel emphasized that in order to be

148 Environmental Protection Agency Fuel Economy Label: Phase 3 Focus Groups, EPA420-R-10-905, August

2010 EPA Fuel Economy Label Phase 3 Focus Groups Technical Memorandum, Prepared by PRR, Inc, July 2010

. (Contains visual depictions of each of the Phase III label series.)

149 Environmental Protection Agency Fuel Economy Label: Phase 3 Focus Groups, EPA420-R-10-905, August

2010 EPA Fuel Economy Label Phase 3 Focus Groups Technical Memorandum, Prepared by PRR, Inc. July 2010.

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Page 104 of 150 effective, the fuel economy label should be simple and able to be understood by consumers within a short amount of viewing time. To impl ement this goal, the expert panel suggested that the agencies develop a single, overall metric for vehicles that is easy for consumers to understand, such as a letter grade (A±, B±, etc.)

. 150

.

The expert panel also suggested that the agencies consider redesigning the label such that the single metric is prominentl y featured on the top half, and any additional vehicle information and more specific metrics be included on the label in smaller font and in a less prominent location. The expert panel stated that this a pproach would provide interested consumers with more detailed information without distracting from the simpler, overall metric that all consumers could easily understand. The rationale for this label design is that it can provide useful comparative information to the c onsumer who may only glance at it, while also providing the necessary details to those who want more in-dep th information. Additionally, the expert panel suggested prominently featuring a website URL and a QR code for smart phones to provide

consumers with access to more detailed vehicle information elsewhere. 151 For example, the website and smart phone application might contai n tools for consumers to calculate the fuel economy they can expect based on their own dr iving habits or allow consumers to quickly compare fuel economy and consumption for different vehicle models.

b. Fuel Cost

EPCA requires the fuel economy label display the “annual fuel cost of operating the automobile.” Recognizing that some consumers ha ve previously appeared to distrust or dismiss annual costs as not representative of their own experience, EPA and NHTSA explored whether there were other cost units (such as cost per month, per mile, per week, etc.) that could be additionally provided that would be more meaningful to consumers.

Throughout the focus groups in Phase 1 and 2, participants indicated that they tended to dismiss the annual cost information on the current label because gas prices fluctuate and vary with location, and they do not drive 15,000 miles per year. 152 Nevertheless, Phase 1 focus group participants identified the estimated annual fuel cost as the second most used piece of information on the label. In addition, in Phase 2 focus groups, where participants were asked to create labels from scratch, most groups placed a cost value on the label. When cost values are used, focus group members indicated they used it as a comparative tool to evaluate the fuel efficiency of different vehicles.

When asked what they thought about cost, focus group participants indicated they thought about the cost to fill a gas tank, the fuel cost over a period of time (daily, weekly, monthly, yearly, etc.), and the fuel cost over a given distance (cost per mile, 100 miles, 1000 miles, etc.). When Phase 1 focus group participants were presented with a variety of cost units, the two most popular choices among cost units were annual cost and cost per month. However,

150 Environmental Protection Agency Fuel Economy Label: Expert Panel Report, EPA420-R-10-908, August 2010, p. 15-17.

151 Ibid.

152 15,000 miles per year is the current annual mileage assu mption used on all fuel economy labels to estimate the annual fuel cost of operating a vehicle.Fuel Economy Labeling NPRM for OMB Review 8

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Page 105 of 150 in Phase 3, when presented with labels that displayed both a monthly cost and an annual cost, participants suggested that the monthly cost value could be dropped.

Participants in the expert panel meeting suggested that the agencies provide information on the savings consumers could achieve by purchasing a more fuel efficient vehicle. One expert panel participant noted that the current label de signs demonstrate costs, but that it would be better to demonstrate savings, which tends to be a very strong motivator. 153 One approach to communicating this information on the label would be to display the savings a consumer might expect over five years by purchasing and driving a vehicle with a higher overall letter grade.

c. Environmental Metrics

Environmental information on greenhouse gase s (GHGs) and other emissions has not been previously displayed on the fuel economy label, so the agencies were interested in learning how a label might best convey to consumers information about the emissions impact of a new

vehicle. The available literature on the im pact of “eco-labeling” vehicles is mixed. 154 Some of the research indicates that consumers may welcom e an eco-label on their vehicle, although they say that it is unlikely to impact their purchase decision. Through its consumer research, the agencies investigated what combination of metr ics and ratings might be displayed on the fuel economy label to provide this information in an effective and consumer-friendly way, including

a stand-alone CO 2 performance metric, relative versus absolute rating systems, a comparison system, and an environmental certification mark.

For the most part, Phase 1 focus group participants indicated that they did not research environmental information (beyond fuel economy) as part of the vehicle purchase process. While some participants indicated that they would use environmental information to compare different vehicles if it was placed on the fuel economy label the majority of focus group participants were indifferent to the inclusion of environmental impact information on the label and indicated they were not likely to visit a website for environmental information. However, when presented with whole label designs in Phase 3 many respondents indicated that the environmental metric should be on the label, so that it is available for those who were interested.

In Phase 1, participants were presented with four different environmental metric options and approaches to displaying environmental information, and were asked to rate the most understandable and least understandable. Participants stated that they understood the environmental information in general, but did not understand what “grams of CO 2 ” meant. The display featuring a rating for other emissions in stars and grams of CO 2 numerically was most frequently chosen by Phase 1 participants to be the most understandable. Participants generally favored presentations that showed information in a simple format, though there was no consensus on which format achieved this. In general Phase 1 and 2 focus group findings indicate that we must keep environmental information simp le if we want consumers to pay any attention to this information on a label. An overall environmental rating was most favorably received with

153 Environmental Protection Agency Fuel Economy Label: Expert Panel Report, EPA420-R-10-908, August

2010 EPA Fuel Economy Label Expert Panel Report, Prepared by PRR, Inc, July 2010

, . p. 12 17

. 154 Environmental Protection Agency Fuel Economy La bel: Literature Review, EPA420-R-10-906, August

2010 EPA Fuel Economy Label Project Literature Review, Prepared by PRR, Inc, July 2010.

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Page 106 of 150 the general reaction being that EPA was trusted to decide how to combine environmental impacts into a single rating.

Phase 1 focus groups were also asked if they recognized and knew what the “SmartWay” logo meant. None of the participants recognized the logo. However, when probed, most ascertained that it was an EPA designation of some sort. While some participants indicated the logo may confer credibility to an environmentall y friendly vehicle, none indicated they would be less likely to purchase a vehicle without the logo.

In Phase 3 focus groups the agencies sought to examine further how environmental information might be displayed most effectively. Several permutations of graphical rating systems were shown to participants. These included designs in which “greenhouse gases” and “other air pollutants” were displayed as one combined environmental rating or separately. Rating scales were examined that were based on relative values, such as a “5 leaf” rating system

as well as a linear scale that had the vehicle’s absolute CO 2 value identified on a scale that had end-points identifying the approximate highest and lowest emitting vehicles available. 155

The expert panel, when shown the labels designed by the agencies based on focus group input, stated that they neither understood the environmental information presented nor found it compelling. As described in Section IV.B.4, the expert panel recommended developing an overall rating for vehicles, which could combine fuel economy and environmental impacts. The expert panel noted that additional metrics (e.g., CO 2 performance) could be included in a less prominent position on the label for consumers interested in more detailed environmental information. Expert panel participants also suggested that environmental performance

information could be made available on a web site and accessed through the smart phone interactive (QR Code) featured on the label. 156

2. Effective Metrics and Ratings Systems for Advanced Technology Vehicles

How should labels for advanced technology vehicles portray information about fuel economy, fuel cost, greenhouse gas, and other emissions for consumers in a way that is most

understandable and useful to them?

In addition to the issues discussed above for conveying information generally on labels, advanced technology vehicles that operate on fuels which differ from conventional gasoline and diesel fuel require new strategies to co mmunicate and display fuel economy information effectively. 157 Through the research program, we explored potential approaches to communicating useful fuel economy, cost, and en vironmental information about electric vehicles and several variations of plug-in hybrid electr ic vehicles. As discussed further below, the research probed consumers to identify what specific information they would need if they were to

155 See Environmental Protection Agency Fuel Economy Label: Phase 3 Focus Groups, EPA420-R-10-905, August 2010, EPA Fuel Economy Label Phase 3 Focus Groups Technical Memorandum, Prepared by PRR, Inc, J uly 2010

. p. 39-40 for a detailed description of the metrics examined.

156 Environmental Protection Agency Fuel Economy La bel: Expert Panel Report, EPA420-R-10-908, August 2010, EPA Fuel Economy Label Expert Panel Report, Prepared by PRR, Inc, July 2010. p. 1 1 4 5-17

. 157 See Section III.B. and III.C. for a discussion of the challenges that advanced technology and other non-traditional vehicles present for consumers when making vehicle purchase decisions.Fuel Economy Labeling NPRM for OMB Review 8

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Page 107 of 150 seriously consider purchasing an advanced tech nology vehicle and what information would be most helpful on an advanced technology fuel economy label. 158

Phase 2 focus groups were devoted to exploring what label information consumers believed was most important to display for adva nced technology vehicles given the limited space provided on the fuel economy label. The focus group discussions were broken into segments based on three different vehicle technologies: EVs, extended range PHEVS, and blended PHEVs. Focus group discussions thus separated the different technologies in order to ascertain more accurately what information would be most useful to consumers to understand these new technologies. Phase 2 focus groups were tasked with “building” three different labels, each for different advanced technology vehicles and were given a large number of metrics from which to choose the building blocks. Almost all of the labels built by each focus group included the following elements: (1) the range that the vehicle could travel while depleting a full battery, the charge depleting operation; (2) the length of time it takes to charge the battery; (3) the cost of charging the battery, and if operating in two separate fuel modes, the cost associated with each mode of operation; and (5) an environmental metric. 159 When asked to identify the two most important pieces of information on the label, participants said, regardless of the city, gender, or technology discussed, that information on the range an advanced technology vehicle can travel on a fully changed battery and the length of time is takes to charge the battery were the most important information they needed to have in order to seriously consider purchasing these type of

vehicle.

The expert panel’s label recommendations did not differentiate between conventional and advanced technology vehicles. The recommendations they made for the conventional vehicle label would apply to the advanced technology vehicle label as well.

a. Range

Focus group participants stated that for any vehicle that operates, even just part of the time, on electricity, it is important for them to know the distance the vehicle can travel on a fully charged battery. Participants saw this as vi tal to their understanding of the vehicle’s fuel economy. While Phase 2 focus groups expressed interest in seeing the range displayed for both city and highway values, when Phase 3 participants were presented with full labels, no one asked for the range to be broken down by city and highway values.

b. Fuel Cost

Across all advanced technologies, participants were interested in battery charging costs. There was a fairly even split between cost pe r mile, annual cost and monthly cost values, regardless of technology. For any vehicle with a gasoline-only mode of operation, participants expressed a desire to see the cost expressed annual ly. The groups also indicated that labels for

158 Environmental Protection Agency Fuel Economy Label: Phase 2 Focus Groups, EPA420-R-10-904, August

2010 EPA Fuel Economy Label Phase 2 Focus Groups Technical Memorandum, Prepared by PRR, Inc, July 2010

. 159 Environmental Protection Agency Fuel Economy Label: Phase 2 Focus Groups, EPA420-R-10-904, August

2010 EPA Fuel Economy Label Phase 2 Focus Groups Technical Memorandum, Prepared by PRR, Inc, July 2010

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Page 108 of 150 any vehicle that operated in a combined gas and electric mode should provide cost information on an annual basis. In Phase 3, when presented with annual fuel cost and monthly fuel cost options, many participants used the annual fuel cost when comparing across advanced technology vehicles. Some indicated that the monthly cost was useful for these advanced technology vehicles. In particular, people equated the electricity consumption to their monthly home electricity statements.

c. Fuel Consumption and Fuel Economy

For any advanced technology vehicle that operates in a gas-only mode, the Phase 2 focus groups indicated a strong desire to see fuel consumption expressed in miles per gallon. In any vehicle that had an electric-only mode of opera tion, the focus groups favored seeing the electric consumption information expressed in an MPG equivalent of “MPGs”. (See Section II.B for a detailed discussion of MPGe). The second most understandable metric of electric-only operation was kilowatt-hour per 100 miles, bu t many participants felt strong ly that kilowatt hours are very unfamiliar and should not be chosen as a metric. For the PHEVs with a blended mode (gas and electric), focus groups were interested in seeing an MPGe that combined the MPGe of electric operation and the MPG of gas operation. In any vehicle that could operate in more than one mode of operation, such as an EREV or PHEV, participants were interested in seeing fuel consumption values for each mode of operation, although some were interested in seeing a consumption value for the two modes expressed in MPGe 160 in addition to displaying the separate consumption information.

d. Environmental Information

Focus group participants did not independently identify the need to have environmental information on the label. However, in Phase 2, with the exception of one group, when given the option, all the groups elected to include environmental information on the label. Of the designs provided many participants selected a horizontal s lider scale that ranked the vehicle’s impact as the most understandable conveyance of environmental information.

Other displays of environmental metrics were examined in Phase 3. These displays included sliding scales segmented with relative rating systems as well as those with absolute values. Relative ratings such as stars or leaves were also shown. Participants commented that they wanted something that was quick and easy to read. Most focus group participants preferred something that was quick with little detail while some wanted more detaile d information to help inform their decisions. Based on this finding, the agencies incorporated this approach into the coproposed label designs in attempt to find the right balance of simple and detail information presentation. See section IV.B.1 for more comprehensive discussion of the environmental information focus group findings.

3. Effective Metrics to Enable Vehicle Comparison

How can consumers compare vehicles when they are shopping?

160 Participants were given this option using existing utility factor data as the method for combing the two modes of operation. See Section VI.B for a discussion about utility factors.Fuel Economy Labeling NPRM for OMB Review 8

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Page 109 of 150 Beyond the statutory requirement to develop rating systems for fuel economy, GHGs, and other emissions, with designations of the “best” vehicles in terms of fuel economy and GHG emissions, the agencies recognize that the labels need to be consumer-friendly in terms of facilitating cross-vehicle and cross-technology comparisons. If consumers first encounter advanced technology vehicles on the dealer’s lot, and are not predisposed to buy one, a label that effectively conveys the benefits of purchasing such a vehicle through a clear and understandable rating system will be helpful in informing consumers and potentia lly educating consumers about the benefits of these vehicles. Through the research program, the agencies also investigated how the fuel economy labels might be designed so that consumers could easily compare the fuel economy, costs, and environmental impacts across a range of vehicle technologies -- from conventional gasoline and diesel vehicles to electric and plug-in hybrid vehicles.

Focus groups also provided feedback about various metrics which were intended to help a consumer compare a vehicle to other vehicles, as required by statute. In Phases 1 and 3, participants were shown not only rating scales such as a numerical or five stars system, but also a slider scale similar to the bar that exists on the current fuel economy label for within-class comparisons, both of which the agencies believ ed would meet the statutory requirement to provide a rating system. The participants seem to be split into two camps: those that prefer the analytical detail of the value scale, and those that pr efer the simplicity of a star-type rating scale.

For fuel economy and fuel consumption, Phase 1 participants were shown two kinds of examples: one that compared vehicles only within their current fuel economy class, and one that showed both a within-class comparison and a comparison among all vehicles. These comparisons were shown using gallons per hundred mile values and miles per gallon values. The majority of participants preferred the metric that showed the subject vehicle as it compared to all vehicles and as it compared to its fuel economy class in units of miles per gallon.

In Phase 2 most focus group participants said that they would like an effective way to compare among disparate vehicle technologies. Many settled on miles per gallon equivalent as a comparative metric, but most did not know what the equivalency was based upon. In Phase 3, when comparing advanced technology vehicles, most participants either used the MPGe value or the annual cost value to compare across vehicles. Some used the fuel economy rating systems that were provided. In general, the findings from the focus groups established no clear preference or approach for how to effectively communicate comparative vehicle information that

would be useful to most consumers.

The expert panel disagreed that the focus group generated labels could be used effectively to compare across vehicle technologies -- especially to the level of information found on the advanced technology labels, which they described as “scary” and “unfriendly.” They were clear to point out, however, that their issues were with the label design, and that they were not rejecting the information contained on the label. The expert panel stated that there are inherent differences in reviewing labels in a focus group compared to on a dealership lot, where you have, on average, very short viewing time. The expert panel suggested that processing this amount of information quickly would be challenging, which could lead many consumers to tune out the label completely. As mentioned above, the panel recommended that the agencies roll upFuel Economy Labeling NPRM for OMB Review 8

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Page 110 of 150 fuel economy, environmental impacts and cost information into a single easily understood letter/grade approach that will be intuitive for mo st consumers. The grad e could be used across all technologies providing consumers easy comparative information. The expert panel allowed that the more complicated information could be made available in the bottom half of the label but argued that it would be crucial to retain a simp le compelling comparison in the top portion of the label. The panel also suggested including a compar ative metric that show s the potential savings from buying a more fuel efficient vehicle, as sa ving money historically has been a very strong

motivator for consumers.

4. Effective Whole Label Designs

How should the new labels be designed to m eet the statutory requirements while best raising consumers’ understanding of fuel efficiency, fuel cost and environmental impact?

In addition to the examination of individual label elements described above, consumer research designed by EPA and NHTSA investigated the effects of various whole label designs on consumer comprehension and utilizatio n, in order to test whether the labels would still be useful when all of the elements were put together. This inquiry is important because there is only so much space that information can occupy both on the label and in the consumer’s mind when standing on the dealer’s lot and confronted with so much other information. In order to provide sufficient information while ensuring that it re mains understandable for the greatest number of consumers, a balancing act is inevitable. The consumer research attempted to assess how best the balance could be struck, as discussed further below in Section III.

The expert panel offered very strong opinions on what, given their experience, would make a label effective in engaging the public. They strongly recommended that the top portion of the label contain only one element – a “grade” that would combine as many of our required metrics as possible. This information should be big, bold, and easy to process while walking around a dealership. The label space under the grade would be reserved for the specific information required in the statute or deemed important in focus groups and other market research. When the panel was presented with label designs that had multiple metrics, explanatory text, and graphical icons, with no one element standing out, they felt that the labels were confusing and intimidating. The expert panel’s consensus view, after viewing the draft labels developed through the focus groups, was that these labels would be daunting for most consumers to process, making them inclined to “tune out” even the most basic information. Their strongest recommendation: Keep it simple. 161

5. Tools beyond the Label

What purchase process do consumers currently use to make new vehicle purchasing decisions? Given this process, when are the most effective opportun ities to communicate fuel economy and environmental information?

a. Vehicle Purchase Process

161 Environmental Protection Agency Fuel Economy Label: Expert Panel Report, EPA420-R-10-908, August 2010, p. 15-17.Fuel Economy Labeling NPRM for OMB Review 8

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Page 111 of 150 The vehicle purchase process is complex and iterative. There may be many opportunities to inform consumers about the fuel economy and environmental impact of the vehicles they are considering. Although much of this proposal focuses on the actual fuel economy label, the agencies recognize that consumers seek out fu el economy and environmental information at other times in the purchase process beyond simply viewing the fuel economy label on vehicles during visits to dealerships. In order to determine the most effective means to provide fuel economy and environmental information to consumers, the agencies sought to better understand when and how consumers encounter or search for this type of information in their vehicle purchase decision-making process.

Information on this vehicle buying process was obtained in an on-line survey of focus group participants prior to the actual focus groups. In addition, at the start of each session, participants were asked to discuss their purchase process so we could better understand thenuances associated with the responses we had received through the on-line survey. The pregroup online survey indicated that a majority of respondents already had a vehicle type in mind when they began the process. Consumers appear to narrow the spectrum from all available vehicles to the vehicle type or types they w ill research depending on their specific needs and interests. In general, the focus groups used broad categories to describe vehicle groupings, such as SUVs, minivans, sport cars, trucks, economy cars, and midsize cars. 162 For example, some focus group respondents said they narrowed their search based on vehicle cargo space, for others it was sedans, and for others it was SUVs and minivans.

According to the pre-focus group online survey and the focus groups themselves, a majority of the participants indi cated that price/affordability was one of the top five factors that influenced their vehicle choice. Other key factors that influenced participants’ vehicle choice included gas mileage/fuel economy, safety, reliability, size, interior and exterior appearance, comfort, brand name and performance. The agenci es also reviewed existing literature on the factors that influence vehicle choice. For example, a 2009 survey of people between the ages of 18 and 30 (“Generation Y”) found gas mileage to be the top factor indicated by participants as critical to vehicle purchasing decisions , followed by affordability/price. 163 Both demographic and psychographic factors (e.g., ‘what a vehicle says about me’) also play a role in the vehicle purchase process. 164

At present however, environmental impacts are not top purchasing considerations for most consumers. Focus group participants i ndicated that environmental impacts were not a consideration in the type of the vehicle they purchase. Only a small fraction of the participants in the pre-group online survey considered “low emissions” to be key factor when making a vehicle purchase decision. This finding is also supported by the literature review. Consumer

162 These categories are not necessarily related to the curren t 14 EPA-designated classes of vehicles. Vehicle classes

are described in 40 CFR 600.315-08.

163 Deloitte. “Connecting with Gen Y: Making the short list,” 2010, p.2. Available athttp://www.deloitte.com/assets/DcomUnitedStates/Local%20Assets/Documents/us_automoti ve_Deloitte%20Automotive%20Gen%20Y%20Executive%2 0Summary_0107.pdf (last accessed August 13 June 30 , 2010).

164 Environmental Protection Agency Fuel Economy La bel: Literature Review, EPA420-R-10-906, August

2010 EPA Fuel Economy Label Project Literature Review, Prepared by PRR, Inc, July 2010 , p. 30-39 23

– 30

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Page 112 of 150 research indicates that although consumers have a growing interest in purchasing “greener” vehicles, environmental impact is not sufficient by itself for most consumers to be willing to pay a premium. 165

Another important aspect of the vehicle purchase process is how consumers research vehicles. Two-thirds of the respondents to the pre-focus group online survey reported they hadresearched fuel economy prior to buying their vehicle. Based on the available choices in the prefocus group survey, respondents reported gathering fuel economy information from manufacturer websites, Consumer Reports, auto dealers, vehicle search websites, automobile magazines, others with similar vehicles, government websites, television advertisements, and the Fuel Economy label itself. The literature review found that consumers increasingly research fuel economy information online. For example, traffic on the DOE and EPA web site www.fueleconomy.gov increased from 400,000 user sessions in 1999 to more than 30 million in

2008. 166 Other Internet sources used to research vehicles during the purchase process include consumer-to-consumer tools such as blogs and web forums. 167

Another finding from the literature review is that consumers are likely to be closer to purchasing a vehicle when by the time they visit the dealership than they were in the past. 168 This highlights the value of educational tools beyond the label to provide cons umers with information on a vehicle’s fuel economy and environmental impact. Online tools may be particularly important. In addition to the Inte rnet being a source of informatio n for consumers, online sales of cars have been steadily increasing in the U.S. in recent years (although they still represent a small percentage of total car sales). 169

b. Consumer Education

As described above, the vehicle purchase decision is not based entirely on the fuel economy label informati on, but is complex and iterative, and messages presented in contexts beyond the label may be even more helpful in getting consumers the information they need about fuel economy, fuel cost, GHGs, and other emission s. Several resources maintained by EPA and DOE are already available to help consumers obta in information about comparative vehicle fuel economy and environmental information, including www.fueleconomy.gov, 170 the Fuel Economy Guide, 171 and the Green Vehicle Guide. 172 In addition to the information sources and tools already available, under EISA, Congress re quires NHTSA, in consultation with EPA and

165 Ibid., p. 8 7

. 166 Greene, D.L., Gibson, R., and Hopson, J., “Reducing Oil Use and CO 2 Emissions by Informing Consumers’ Fuel Economy Decisions: The Role for Clean Cities,” prepared by Oak Ridge National Laboratory, Oak Ridge, TN, August 2009, p.1. Available at http ://www1.eere.energy.gov/cleancities/pdf s/fuel_economy_strat_paper.pdf (last

accessed August 13 June 30 , 2010).

167 Environmental Protection Agency Fuel Economy La bel: Literature Review, EPA420-R-10-906, August 2010, “EPA Fuel Economy Label Project: Literature Review,” Prepared by PRR Inc., July 2010, p. 23 15

– 17

. 168 Ibid., p. 1 18-19 3

. 169 Deloitte. “A new era: Accelerating toward 2020 – An au tomotive industry transformed, ” 2009, p.12. Available at http://www.deloitte.com/assets/Dcom-India/Lo cal%20Assets/Document s/A%20New%20Era%20-

%20Auto%20Transformation%20Re port_Online.pdf (last accessed August 13 June 30 , 2010).

170 http://www.fueleconomy.gov/

171 http://www.fueleconomy.gov/feg/feg2000.htm

172 http://www.epa.gov/greenvehicles/Index.doFuel Economy Labeling NPRM for OMB Review 8

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Page 113 of 150 DOE, to develop a consumer education program to improve consumer understanding of automobile performance with regard to fuel economy, greenhouse gas and other emissions.

While this campaign is still in its very ear ly stages and is not the subject of this rulemaking, it will be investigat ing modifications to existing tools, new collaborations for information dissemination and, po tentially, new forms of media utilization in communicating the relationship of automobile performance to fuel economy and emissions. Particularly given the changes to the label that we anticipate will resu lt from this rulemaking, introducing consumers to the new information available to them and how it can be used as they consider their next vehicle purchase will be very important.

Since the vehicle purchase process is multifaceted, EPA and NHTSA would like to better understand how various information tools beyond the label can provide critical fuel economy information to consumers. EPA and NHTSA especially seek to understand what additional types

of consumer information and tools are most important and what level of individualized information is needed by consumers in the future.

There are a variety of existing education campaigns and resources to help enable consumers to make more fuel efficient and environmentally friendly transportation choices. These include the Federal Highway Administrati on’s initiative “It All Adds Up to Cleaner Air, ” 173 the “Cleaner Cars for Maine” 174 program, and the “Drive Smarter Challenge” campaign. 175 Brief descriptions of these and other education campaigns are available in the literature review report. 176 Such campaigns may inform the agencies’ development of educational tools to help consumers make more informed vehicle purchasing decisions.

The agencies request comment on ideas for the most effective means to educate consumers about the new elements and metrics being proposed on the label. In addition, EPA and NHTSA request specific comment on what a dditional tools we could provide to increase consumer comprehension about complex advanced technology vehicles and automobile performance related to fuel economy and emissions. We are proposing that this campaign potentially include both traditional marketing mech anisms, such as brochures, public service advertisements, media placements, and dealership-distributed checklists, along with more innovative approaches, which may include crowdsour cing with social media, interactive web site displays at dealerships that would allow cons umers to “personalize” their fuel economy label, smart phone applications. In addition, per the recommendation of the expert panel, we are proposing to develop a web site that would be launched in conjunction with the new label. This consumer-focused, user friendly web site would provide more specific information on the label, along with access to the tools, applications, social media, and materials mentioned above.

173 See http://www.italladdsup.gov (last accessed June 30 August 13 , 2010).

174 See http://www.maine.gov/dep/air/lev4me/index.html (last accessed August 13 June 30 , 2010).

175 See http://drivesmarterchallenge.org/ (last accessed August 13 June 30 , 2010).

176 Environmental Protection Agency Fuel Economy La bel: Literature Review, EPA420-R-10-906, August

2010 EPA F uel Economy Label Literature Review, Prepared by PRR, Inc, July 2010.

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Page 114 of 150 All messages and materials will be tailore d according to the meth od of communication and the target audience. EPA is requesting comment on effective messaging, materials, and

methods of communication.

V. Implementation of the New Label

A. Timing

As previously noted, the agencies are propos ing that the new label regulations initially take effect with the 2012 model year. Model year 2012 vehicles can be introduced as early as January 2011, and in fact EPA has already heard from at least one manufacturer that plans such an early introduction. Given that this regulator y action is not scheduled to be finalized until December of 2010 and that it is possible, based on when the final rule is published in the Federal Register for the effective date of the new regulations to be a date in March of 2011, it is clear that not all of the 2012 model year can be captured by the proposed regulations. There may also be cases where a manufacturer prints label “blanks” early in the model year, even if they plan to introduce vehicles in the more typical time frame of late summer and early fall. Although the proposed regulations do not presume anything regarding the date of finalization of the new label and only specify applicability to the 2012 model year , we expect that the final rule will have to

take these issues into account.

The final rule will likely specify a date of applicability of the ne w regulations that is some date certain after publication of the final rule that would allow manufacturers adequate time to plan for and implement the new designs. We believe that a date on the order of 90-120 days after publication would be appropriate, where vehicles produced after that date would have to use the new label format. We would of course encourage the voluntary use of the new label to the greatest extent possible prior to any specified absolute effective date. The agencies request comments on the appropriate timeframe for implementing these new label requirements. The agencies recognize that some of the potential changes in label design, including color graphics that would be printed at production run-time and differing footprints that necessitate redesign of the overall Monroney label may impact the amount of lead time required by manufacturers. While we believe that it is extremely important fo r the final label changes to take effect as soon as possible, we seek comment on these specific potential lead time issues.

To introduce the new label and ensure that the public understands the new information and format, the agencies plan to conduct extensive public outreach concurrent with the implementation of a final rule. We will provide information about the new label and how to use it via web-based information, fact sheets, a nd other communication methods. This information will be designed to explain all aspects of the new label.

B. Labels for 2011 model year advanced technology vehicles

The new fuel economy label will address adva nced technology vehicles, such as EVs and PHEVs, which some manufacturers are planning to introduce into the U.S. market prior to the 2012 model year. EPA issued regulations in 2009 that provided EPA discretion to authorizeFuel Economy Labeling NPRM for OMB Review 8

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Page 115 of 150 appropriate changes to the current fuel economy label with individual manufacturers, specifically with respect to advanced technology. 177 These regulations are applicable until this

rule is finalized.

To address labels for advanced technology vehicles introduced before this rule is finalized, EPA may allow any manufacturer of such vehicles that will be introduced prior to the 2012 model year to use one of the co-proposed labels, or an alternative label that meets EPA’s approval. Manufacturers intending to introduce an advanced technology vehicle as a 2011 model year vehicle should meet with EPA to discuss the details of actual implementation. For example,

EPA would discuss with the manufacturer the fa ct that the label form at and information may only be used for the 2011 model year and may change for 2012 depending on the outcome of the final label regulations. EPA would also disc uss in conjunction w ith the Federal Trade Commission (FTC) what aspects of the label info rmation could be advertised and would also discuss with the manufacturer the details of speci fic test values used, such as mile per gallon equivalent, kW-hr per 100 miles, blended mode operation for a PHEV, etc.

C. Implementation of Label Content

Although much of the information presented on the label is determined from test data specific to the labeled vehicle or can be codified in the regulations, ther e are elements that will require annual (or in some cases, possibly less frequent) information provided by EPA. This is no different from today’s label and the annual gu idance letter published by EPA that includes the fuel economy ranges for each class of automobile, the fuel price information to be used to calculate costs, and other relevant information. This information will have to continue to be provided by EPA on an annual basis, but the new ratings proposed for th e new labels will also require that EPA provide annually the range of fuel economy of all vehicles as well as the range

of CO 2 emissions of all vehicles.

VI. Additional Related EPA Proposals

A. Electric and Plug-In Hybrid El ect ric Vehicle Test Procedures

1. Electric Vehicles

There currently is no federal test procedure for measuring fuel economy for electric vehicles. EPA has periodically performed fuel economy testing for electric vehicles utilizing test procedures and protocols developed by the Soci ety of Automotive Engineers (SAE), specifically J1634. Manufacturers may continue to use SAEJ1634 test protocols, as cancelled in October 2002, with the exception of not using the C coefficient adjustment in paragraph 4.4.2. Until recently, there have been very few electric vehicles sold in the U.S. market. The few exceptions, such as the EV1 from General Motors (GM), were only made available to a select few customers for a limited time. As such, there was not a pressing need for an electric vehicle test procedure. However, with the imminent release of several new battery electric vehicles from manufacturers

177 74 FR 61537, Nov 25, 2009.Fuel Economy Labeling NPRM for OMB Review 8

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Page 116 of 150 such as Ford and Nissan, the need for a federal test procedure for measuring fuel economy or fuel consumption for electric vehicles is apparent.

Fuel economy estimates are measured for “city” and “highway” operation. Prior to the 2008 model year, all vehicles were fuel economy tested over just two test cycles: the Federal Test Procedure (FTP or “city” test) and the Highway Fuel Economy Test (HFET or “highway” test). In December, 2006, EPA published revisions to improve the calculation of fuel economy estimates to better reflect real world fuel economy performance 178 . These revisions included three additional chassis dynamome ter test cycles to the curren t FTP and HFET for fuel economy testing purposes. The three additional cycles were the US06, SC03, and the Cold Temperature FTP. Prior to the 2008 model year, all three test cycles were used for emissions purposes for either the Supplemental Federal Test Procedure (SFTP) emissions standards (US06 and SC03) or the cold temperature (20oF) emission standards. Beginning in the 2008 model year, all vehicles tested for fuel economy labeling purposes had to use the new “5-cycle” fuel economy methodology which either required testing all vehicles over the five test cycles discussed above or apply an equivalent 5-cycle correction referred to as the derived MPG- based approach. For alternative fueled vehicles, including electric ve hicles, manufacturers have the option for fuel economy testing to test their vehicle over all five test cycles or use a derived MPG-based approach

a. FTP or “City” Test

The procedure for testing and measuring fu el economy and vehicle driving range for electric vehicles is similar to the process used by the average consumer to calculate the fuel economy of their personal vehicle. The distan ce the vehicle can operate until the battery is completely discharged and can no longer provide sufficient propulsive energy is measured and divided by the total amount of electrical energy necessary to fully recharge the battery, similar to refueling the gas tank of a gasoline powered vehicle.

The first step of the procedure is to determine the distance the vehicle operates before the battery becomes fully discharged. This begins with the preconditioning of the vehicle. The electric vehicle is preconditioned per 40 CFR Part 86, Section 132. Following preconditioning, the Rechargeable Energy Storage System (RESS) will be brought to full charge. The RESS will remain plugged into the electrical source for a mi nimum of 12 hours. For the FTP or city test cycles, the chassis dynamometer procedures w ill be conducted pursuant to 40 CFR 86.135 with the exception that the vehicle will run consecuti ve test cycles until the vehicle is unable to maintain the FTP speed tolerances as expressed in 40 CFR 86.115-78. To clarify, an FTP historically consisted of 2 Urban Dynamometer Driving Schedules. The Ftp was later shortened to one full UDDS and only the first bag or phase of the second UDDS. The second phase of the second UDDS was considered just a repeat of the second phase of the first UDDS. In the context of electric vehicles, an FTP is two full consecu tive UDDS’s. If an electric vehicle cannot reach the FTP top speed, then the vehicle will te rminate once the vehicle top speed cannot be maintained. For low powered electric vehicles that cannot reach the FTP top speed, the vehicle top speed is the maximum speed the vehicle reached during the first FTP. The Administrator may approve alternate end of test criteria. For low powered electric vehicles that by design

178 71 FR 77931, Dec. 27, 2006.Fuel Economy Labeling NPRM for OMB Review 8

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Page 117 of 150 cannot maintain the speed tolerances as expressed in 40 CFR 86.115-78, low powered vehicles, the vehicle will continue testing if the vehicle is operated at maximum pow er. This provision is intended to apply uniformly throughout all the consecutive FTP cycles. A vehicle that can maintain trace speed on the first FTP cannot then be declared a low powered vehicle for proceeding FTP cycles. Upon reaching the end of test criteria, the distance driven shall be

recorded and the vehicl e decelerated to a stop. The second UDDS of any FTP cycle will be started 10 minutes after the cold start as per 86.135. Subsequent FTP cycles may require up to 30 minutes between starts due to test facility limitations. Between starts, the RESS is not to be charged. During the 10 minute or other longer soaks, the vehicle should have the hood closed and the cooling fans shut off. Measurement of DC watt-hours shall be taken for each phase of testing (2 bags or phases per UDDS).

The final stage of the electric vehicle test procedure is the measurement of the electrical energy used to operate the vehicle. The end of test recharging procedure is intended to return the RESS to the full charge equivalent of the pre te st conditions. Within three hours of completing the EV testing, the RESS should be brought to fu ll charge. The vehicle will remain on charge for a minimum of 12 hours to a maximum of 36 hours. After reaching full charge and the minimum soak time of 12 hours has been reached, the manufacturer may physically disconnect the RESS from the grid. The alternating current (AC) watt-hours must be recorded throughout the charge time and soak time. It is important that the ve hicle soak conditions must not be violated. The measured AC watt-hours must include the efficiency of the charger system. The measured AC watt hours are intended to reflect all applicable electricity consumption including charger losses, battery and vehicle conditioning during the recharge and soak, and the electricity consumption during the drive cycles. Finally, the raw electri city consumption is calculated by dividing the recharge AC watt-hours by the distance traveled before the end of the test criteria is reached.

b. HFET or “Highway” Test

Similar to the FTP test procedure, the first step of the procedure is to determine the distance the vehicle operates before the battery b ecomes fully discharged. This begins with the preconditioning of the vehicle. Vehicle preconditio ning is to be conducted as per 40 CFR Part 86, Section 132. Following preconditioning, the RE SS will be brought to full charge. The RESS will remain plugged into the electrical source for a minimum of 12 hours. The vehicle may remain plugged into the electrical source up to 36 hours.

Dynamometer procedures will be conducted pursuant to 40 CF R 600.111 with the exceptions that electric vehicles will run consecutive cycles of the HFET until the end of test criteria is reached. Subsequent HFET cycle pairs may require up to 30 minutes of soak time between HFET cycle pairs due to facility limitations. If a pause between cycle pairs is required and exceeds 1 minute, the vehicle hood is to be closed and the cooling fans shut off. Between starts, the RESS is not to be charged.

If an electric vehicle cannot reach the HFET top speed, then the vehicle will terminate once the vehicle top speed cannot be maintained. For low powered electric vehicles that cannot reach the HFET top speed, the vehicle top speed is the maximum speed the vehicle reached during the first HFET. The Administrator may approve alternate end of test criteria. For lowFuel Economy Labeling NPRM for OMB Review 8

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Page 118 of 150 powered electric vehicles that by design cannot maintain the speed tolerances as expressed in 40 CFR 86.115-78, the vehicle will continue testing if the vehicle is operated at maximum power. This provision is intended to apply uniformly throughout all the consecutive HFET cycles. A vehicle that can maintain trace speed on the first HFET cannot then be declared a low powered vehicle for proceeding HFET cycles.

Similar to the FTP test procedure, the final stage of the HFET test procedure is the measurement of the electrical energy used to operate the vehicle. The end of test recharging procedure is intended to return the RESS to the full charge equivalent of the pre test conditions. Within three hours of completing the EV testing, the RESS should be brought to full charge. The vehicle will remain on charge for a minimum of 12 hours to a maximum of 36 hours. After reaching full charge and the minimum soak time of 12 hours has been reached, the manufacturer may physically disconnect the RESS from the grid. The alternating current (AC) watt-hours must be recorded throughout the charge time and soak time. It is important that the vehicle soak

conditions must not be violated. The measured AC watt-hours must include the efficiency of the charger system. The measured AC watt hours are intended to reflect all applicable electricity consumption including charger losses, battery and vehicle conditioning during the recharge and soak, and the electricity consumption during the drive cycles. Finally, the raw electricity consumption is calculated by dividing the rech arge AC watt-hours by the distance traveled

before the end of the test criteria is reached.

c. Other EV Test Procedures

The Administrator may approve or require equivalent or additional EV test procedures including incorporating via reference SAEJ1634 published after this notice.

2. Plug-in Hybrid Electric Vehicles

a. PHEV Test Procedure Rationale

Test procedures for plug-in hybrid electric vehicles (PHEV) are required to quantify some operation unique to plug-in hybrids. The intent in developing new PHEV test procedures is to use existing test cycles and test procedures where applicable. PHEV operation can be generally classified into two modes of opera tion, charge depleting and charge sustaining operation. Charge depleting operation can be described as vehicle operation where the rechargeable energy storage system (RESS), commonly batteries, is being depleted of its “wall” charge. Charge sustaining operation is vehicle operation where the RESS in is not being depleted or charged more than could be expected due to regenerative braking or vehicle optimization beyond the limits specified by the Administrator. Charge sustaining operation can best be described as conventional hybrid operation . For the purposes of clarification, charge depleting operation would include any operation not included in charge sustaining operation.

New procedures for charge depleting operation would consist of existing test cycles repeated until the PHEV RESS is depleted to char ge sustaining operation. Whereas in the past a conventional vehicle would be expected to co nsume fuel and emit emissions over repetitive identical test cycles consistently, the same cannot be said of PHEVs. PHEV fuel consumption,Fuel Economy Labeling NPRM for OMB Review 8

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Page 119 of 150 fuel mix, and emissions may change as the RESS is depleted. In order to accurately assess the emissions and fuel efficiency of a PHEV, the PHEV requires testing over the entire charge depleting range. Testing over the entire charge depleting range requires new test provisions to address vehicle setup and prep, measuring and char ging the RESS, operation over repetitive test cycles, and calculating any new va lues that are now measured over repetitive test cycle.

Charge sustaining operation can best be described as “conventional” hybrid operation. EPA would continue to use existing hybrid electric vehicle test procedures. The primary differences between HEV and other conventional vehicle testing are the need to monitor RESS state of charge and the extra drive time required to insure vehicle warm operation during the Federal Test Procedure. The RESS is measured and subject to the state of charge tolerances, below, to insure all energy is accurately accounted. The fully warm operation is satisfied by running a full 4 phase Ftp instead of the abbreviated 3 phase Ftp as traditionally used for conventional vehicle testing.

For the purposes of fuel economy label testing, PHEVs would be subject to the same test cycles as other light duty vehicles with a few exceptions. While operating in charge depleting mode, a PHEV is using electricity originally from an off board source. This is to say that a PHEV is operating at least partially on an alte rnative fuel while operating in charge depleting mode. For the purposes of fuel economy, PHEVs could continue to use the derived 5-cycle adjustment while in charge depleting mode. The derived 5-cycle adjustment would be applied to the total city and total highway fuel economies se parately. For the purposes of applying the 5- cycle correction, the total fuel economies in charge depleting mode include both of the fuels consumed, typically gas and electricity, as expressed in a miles per gallon of gasoline equivalent unit. The 5-cycle correction is to be applied to the combined energy of each mode of operation even if the energy consumption is ultimately fuel specific. Applying a correction to the gasoline and electricity consumption separately could lead to a smaller adjustment than other vehicles since the 5-cycle correction is not linear. Wh ile in charge sustain mode, PHEVs would be subject to the same test procedures as conventional hybrid electric vehicles.

PHEVs must meet all applicable emissions sta ndards regardless of RESS state of charge. EPA will consider a RESS as an adjustable parameter for the sake of emissions testing. It is the manufacturer’s responsibility to insure vehicles are emissions compliant. EPA typically allows good engineering judgment in applying worse case emission testing criteria. For the purposes of certification compliance, EPA will consider charge sustain operation as worse case. EPA may confirmatory test or request the manufacturer to pr ovide test data for any test cycle at any state of charge. Evaluation of fuel economy testing emissions may be used to change worse case emissions assumptions.

b. PHEV Test Procedure and Calculations

The EPA proposes intends to incorporate by reference SAEJ 1711, in part, for PHEV test procedures.

Charge Depleting Operation – FTP or “City” Test and HFET or “Highway” TestFuel Economy Labeling NPRM for OMB Review 8

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Page 120 of 150 The EPA proposes intends to incorporate by reference SAEJ1711 chapters 3 and 4 for definitions and test procedures, respectively, where appropriate, with the following exceptions

and clarifications.

Test cycles will continue until the end of the phase in which charge sustain operation is confirmed. Charge sustain operation is confirmed when one or more phases or cycles satisfy the Net Energy Change requirements below. Optionally, a manufacturer may terminate charge deplete testing before charge sustain operation is confirmed provided that the RESS has a higher SOC at charge deplete testing termination than in charge sustain operation. In the case of Plug In Hybrid Electric Vehicles with an all electric range, engine start time will be recorded but the test does not necessarily terminate with engine start. PHEVs with all electric operation follow the

same test termination criteria as blended mode PHEVs. Testing can only be terminated at the end of a test cycle. The Administrator may approve alternate end of test criteria.

For the purposes of charge depleting CO 2 and fuel economy testing, manufacturers may elect to report one measurement per phase (one bag per UDDS). Exhaust emissions need not be reported or measured in phases the engine does not operate.

End of test recharging procedure is intended to return the RESS to a full charge equivalent to pre test conditions. The recharge AC watt hours must be recorded throughout the charge time and soak time. Vehicle soak conditions must not be violated. The AC watt hours must include the charger efficiency. The measured AC watt hours are intended to reflect all applicable electricity consumption including charger losses, battery and vehicle conditioning during the recharge and soak, and the electricity consumption during the drive cycles.

Net Energy Change Tolerance, NEC, is to be applied to the RESS to confirm charge sustaining operation. The EPA is proposing intends to adopt the 1% of fuel energy NEC state of charge criteria as expressed in SAEJ1711. The Admini strator may approve alternate NEC tolerances and state of charge correction factors.

Hybrid Charge Sustaining Operation – FTP or “City” Test and HFET or “Highway” Test

The EPA proposes intends to incorporate by reference SAEJ1711 chapters 3 and 4 for definitions and test procedures, respectively, where appropriate, with the following exceptions

and clarifications.

The EPA proposes intends to adopt the 1% of fuel energy NEC state of charge criteria as expressed in SAEJ1711. The Administrator may approve alternate NEC tolerances and state of charge correction factors.

Preconditioning special procedures are optional for traditional “warm” test cycles that are now required to test starting at full RESS charge due to charge depleting range testing. If the vehicle is equipped with a charge sustain switch, the preconditioning cycle may be conducted per 600.111 provided that the RESS is not charged. Exhaust emissions are not taken in preconditioning drives. Alternate vehicle warm up strategies may be approved by the

Administrator.Fuel Economy Labeling NPRM for OMB Review 8

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Page 121 of 150 Charge Depleting Range Determination

Actual Charge Depleting Range (R CDA ) will be a calculated value that uses the charge sustaining state of charge of the RESS to define the R CDA endpoint. Due to the nature of PHEVs,

R CDA will require calculation and is not necessarily when the engine first starts. Defining R CDA using only engine on could leave PHEVs with three modes of operation. These three modes would be charge depletion, charge regeneration, and charge sustaining. If the regeneration of the RESS from the engine is not accounted for in the charge depleting mode, the RESS could be deep cycled beyond the CS SOC to gain range while the increase in CO 2 emissions due to the RESS regeneration would not be captured in the charge sustaining testing.

Calculation of R CDA will require monitoring the RESS SOC throughout charge depleting testing. The R CDA for each cycle would be the driven cycle distance from start of CD testing until the charge sustaining SOC is “crossed”. The EPA is proposing to incorporate intends on incorporating by reference the SAEJ1711 calculation for Actual Charge Depleting Range.

c. Other Test Cycles

PHEV and Electric vehicle testing over the SC 03, US06, or Cold CO test cycles would follow the same general procedure as the FTP and HFED. EPA would consider the use of alternate or equivalent PHEV test procedures and may incorporate by reference SAEJ1711.

d. Test Tolerances

State of Charge tolerance correction factors may be approved by the Administrator. RESS state of charge tolerances beyond the 1% of fuel energy may be approved by the Administrator.

e. Mileage and Service Accumulation

The EPA is seeking comment on modifying the minimum and maximum allowable test vehicle accumulated mileage for both EVs and PHEVs. Due to the nature of PHEV and EV operation, testing may require many more vehicle miles than conventional vehicles. Furthermore, EVs and PHEVs either do not have engines or may use the engine for only a

fraction of the miles driven.

f. Test Fuels

Electric Vehicles and PHEVs are to be recharged using the supplied manufacturer method provided that the methods are available to consumers. This method could include the electricity service requirements such as servi ce amperage, voltage, and phase. Manufacturers may employ the use of voltage regulators in orde r to reduce test to test variability with prior Administrator approval.Fuel Economy Labeling NPRM for OMB Review 8

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Page 122 of 150 B. Utility Factors

1. Utility Factor Background

Utility Factors are a method of combining CO 2 emissions, fuel consumption, or other metrics from multiple modes of ope ration into one value. The extent to which utility factors are used on a fuel economy label is completely depe ndent upon label format. That is to say, some PHEV label formats may not require utility factors at all or possibly only for CO 2. This discussion on utility factor is required to unders tand the different PHEV label formats within this proposal.

As discussed previously, PHEVs can use two types of energy sources: (1) an onboard battery charged by plugging the vehicle into th e electrical grid possibly via a conventional wall outlet to power an electric motor, as well as (2) a gas or diesel-powered engine to propel the vehicle or power a generator used to provide electricity to the electric motor. Depending on how these vehicles are operated, they can use electrici ty exclusively, never us e electricity and operate like a conventional hybrid, or operate in some combination of these two modes. This can make it difficult to estimate fuel economy, fuel consumption, annual cost, or CO 2 emissions from these

vehicles.

The EPA has worked closely with stakeholders including vehicle manufacturers, the Society of Automotive Engineers (SAE), the State of California, the Department of Energy (DOE), and others to develop an approach for es timating fuel economy, fuel consumption, cost,

CO 2 emission, or any other metric for vehicles that can operate using more than one energy source. EPA believes the appropriate method for combining the operation of vehicles that can operate with more than one fuel would be a weighted average of the appropriate metric for the two modes of operation. A methodology developed by SAE and DOE to predict the fractions of total distance driven in each mode of operation (electricity and gas) uses a term known as a utility factor (UF). UF’s were developed usin g data from the 2001 Department of Transportation “National Household Travel Survey”. A detailed method of UF development can be found in the Society of Automotive Engineers (SAE) J2841 “U tility Factor Definitions for Plug-In Hybrid Electric Vehicles Using Travel Surv ey Data”. At the time of this proposal, SAEJ2841 was in the process of balloting prior to publishing. SAE reference documents can be obtained at www.SAE.org . By using a utility factor, it is possible to determine a weighted average of the electric and gasoline modes. For example, a UF of 0.8 would indicate that a PHEV operates in an all electric mode 80% of the time and uses the gasoline engine the other 20% of the time. In this example, the weighted average fuel economy value would be influenced more by the electrical operation than the gasoline operation.

For the purposes of PHEVs, UF development makes several assumptions. These assumptions may be changed by the Administrator with the emergence of new data. Assumptions include: the first mode of operation is always electric assist or all electric drive, vehicles will be charged once per day, and that future PHEV drivers will follow drive patterns exhibited by the drivers in the surveys used in SAEJ2841.Fuel Economy Labeling NPRM for OMB Review 8

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Page 123 of 150 2. General Application of Utility Factors

While acknowledging the assumptions above, a UF could be assigned to each successive test or phase of testing until the battery charge was depleted to the point where the PHEV sole source of power was from the gasoline or diesel engine. One minus the sum of all the utility factors would then represent the fraction of driving performed in this “gasoline or diesel mode.” Carbon dioxide emissions could then be expressed as:

Equation VI.B.2-1

Where:

Y

m is the Utility Factor averaged mass of carbon dioxide for a specific drive cycle.

Y i are the C0 CO 2 mass emissions or C0 CO 2 equivalent mass emissions for each phase or test cycle. For electricity, a carbon dioxide equivalent may be used as determined by the Administrator.

Y

cs is the charge sustain carbon dioxide mass emissions and for hybrids in the case of the FTP can be expressed as Y

cs = 0.43* Y

c + 0.57* Y H. , where Y

c is the charge sustain cold start test and Y H is the charge sustain hot start mass emissions of carbon dioxide.

UF i is the driving cycle and sequen tially specific utility factor.

Likewise, the electrical consumption would be expressed by adding the electricity consumption from each mode. Since there is no electrical consumption in hybrid mode, the equation for electricity consumption would be as follows:

Equation VI.B.2-2

Where E

m is the utility factor averaged electricity consumption, E i is the electricity consumption proportioned to each successive drive cycle, and UF i is the driving cycle and sequentially specific utility factor.

3. Calculating combined values using Cycle Specific Utility Factors

Utility factors could be cycle specific not only due to different battery ranges on different test cycles but also due to the fact that “highw ay” type driving may imply longer trips than urban driving. This would lead to different utility factors for urban and highway driving. The 

# ∑ ×= i

ii m 

## EUF E

1 

## )( CS i

i i

ii m 

## YUF YUF Y ×−+×= 

# ∑ ∑ )1()(

1 1Fuel Economy Labeling NPRM for OMB Review 8

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Page 124 of 150 following section explains the EPA proposal of assigning a utility factor to each successive phase or test cycle performed in charge depleting or “PHEV” mode.

Utility factors can be assigned to each mode of operation according to the distance driven in each mode. Rather than calculating a unique UF for each cycle based on measure distance driven, UF’s will be assigned to each succe ssive phase of consecutive Urban Dynamometer Driving Schedules, and each successive Highway Fuel Economy Driving schedule of

consecutive HFEDs. Composite Combined city and combined composite highway C0 CO 2 emissions will first be calculated using test results and UFs from the respective cycles. Final combined values will then be an averaged 55 % city and 45% highway value. The proposed cycle specific utility factors for UDDS or “city” driving are provided in Table VI.B.2-1 and the proposed cycle specific utility factors for HFED S or “highway” driving are provided in Table VI.B.2-2. The method used to develop cycle specific utility factors can be found in SAEJ2841. Finally, example CO 2 calculations are provided below.

Table VI.B.2-1 FTP Phase Specific Utility Factors

Urban Driving, “City”

Phase Distance,

mi Cumulative UF UF

1 3.59 0.125 0.125

2 7.45 0.243 0.118

3 11.04 0.340 0.096

4 14.9 0.431 0.091

5 18.49 0.505 0.074

6 22.35 0.575 0.070

7 25.94 0.632 0.057

8 29.8 0.685 0.054

9 33.39 0.729 0.044

10 37.25 0.770 0.041

11 40.84 0.803 0.033

12 44.7 0.834 0.031

13 48.29 0.859 0.025

14 52.15 0.882 0.023

15 55.74 0.900 0.018

16 59.6 0.917 0.017

Table VI.B.2-2 HFED Cycle Specific Utility Factors

Highway Driving

HFEDS Distance,

mi Cumulative UF UF

1 10.3 0.125 0.125

2 20.6 0.252 0.127

3 30.9 0.378 0.126

4 41.2 0.500 0.121

5 51.5 0.610 0.111Fuel Economy Labeling NPRM for OMB Review 8

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Page 125 of 150 6 61.8 0.707 0.097

7 72.1 0.787 0.080

Example CO 2 Calculations

A PHEV was tested with the following results. The example PHEV operated over four consecutive UDDS to quantify charge depleting or “PHEV” mode and ran the required bag hybrid UDDS test to represent charge sustaining or “hybrid” mode.

Table VI.B.2-3 Charge Depleting Example CO 2 Emissions

UDDS Bag Cycle

Miles CO 2 g/mi CO 2
g Dc Integrated Amp Hrs Proportioned

W hrs Measured Distance, mi UF Whr/mi

1 1 3.59 50.0 180.5 4 705.88 3.61 0.125 195.5

1 2 7.45 35.0 134.8 3.8 670.59 3.85 0.118 174.2

2 3 11.04 30.0 107.4 3.7 652.94 3.58 0.096 182.4

2 4 14.9 37.0 143.2 3.5 617.65 3.87 0.091 159.6

3 5 18.49 55.7 198.3 2 352.94 3.56 0.074 99.1

3 6 22.35 232.5 902.2 0 0 3.88 0.07 0.0

4 7 25.94 249.2 877.3 0 0 3.52 0.057 0.0

4 8 29.8 230.0 897.0 0 0 3.90 0.054 0.0

Table VI.B.2-4 Charge Sustaining Example CO 2 Emissions

UDDS Bag Cycle

Miles CO 2 g/mi CO 2 g Measured Distance, mi

1 1 3.59 251.4 910 3.62

1 2 7.45 233.8 900 3.85

2 3 11.04 251.4 890 3.54

2 4 14.9 228.1 885 3.88

Applying the above data for the example PHEV to the General UF formula in Equation VI.B.2-1 using Table VI.B.2-1 will yield the City CO 2 value. Ym=50 CO 2 g/mi x 0.125+ 35 CO 2 g/mi x 0.118 + 30g CO 2 g/mi + 0.096 + 37g CO 2 g/mi x 0.091+ 55.7 CO 2 g/mi x 0.074 + 232.5

CO 2 g/mi + 0.070 + 249.2 CO 2 g/mi x 0.057 + 230 CO 2 g/mi x 0.054 + (1- (0.125+0.118+0.096+0.091+0.074+0.070+0.057+0.054) x (Ycs). Where Ycs = 0.43 x (910+900)/(3.62+3.85) + 0.57 x ( 890+885)/(3.54+3.88) = 241g CO 2 g/mi. The total CO 2 g/mi, Ym, excluding any electricity CO 2 equivalence would then be 139 g/mi.

To determine electricity consumption one would apply utility factors in a similar fashion using equation VI.B.2-2 and Table VI.B.2-1. Em= 195.5 W hr/mi x 0.125+ 174.2 W hr/mi x

0.118 + 182.4 W hr/mi + 0.096 + 159.6 W hr/mi x 0.091+ 99.1 W hr/mi x 0.074 = 84.4 W hr/miFuel Economy Labeling NPRM for OMB Review 8

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Page 126 of 150 The combined CO 2 from engine operation and the CO 2 from the electrical consumption could be calculated by summing the two values, given a CO 2 equivalency for electricity. For example, if the Watt hour CO 2 equivalent was 0.26g CO 2 per Watt hour, the total CO 2 emissions could then be expressed as the sum of the if the CO 2 and CO 2 - equivalent emissions from both modes of operation. From the example above, the overall CO 2 emissions would be 139 gCO 2 per mile + (84.4 Whr/mi) 22gCO 2 equiv per mile = 161g CO 2 per mile.

Utility factors can also be used to calculate a miles per gallon equivalent measurement

similar to the CO 2 example above. Additional assump tions are required, however, when applying utility factors to a Corporate Average Fuel Economy and possibly a fuel economy labeling miles per gallon of gasoline equivalent measure.

Previously, when calculating PHEV CO 2 emissions, the CO 2 emissions w h ere part of a manufacturer fleet average. The same is true of Corporate Average Fuel Economy. CAFE is a fleet average. Except where explicitly noted for dual fueled vehicles, both CAFÉ and CO 2 fleet calculations would use the cycle speci fic fleet utility factors. For the purposes of a possible label fuel economy, a fleet average is not the aim, but rather what the average driver would likely experience or expect. For this reason, the EPA is proposing the use of the cycle specific Multiday Individual Utility Factors. The indivi dual utility factors do no t weight vehicle miles traveled towards the longer trips like fleet util ity factors. For a detailed explanation on utility factor development see SAEJ2841.

Similar to determining a total CO 2 emissions value for PHEVs, calculating a miles per gallon total for PHEVs will require an electricity to gasoline conversion. This miles per gallon equivalent of gasoline would be calculated differently for CAFÉ and label. For a FE label
number, EPA would use a miles per gallon of gasoline equivalent energy factor for electricity of 33,705 watt hours per gallon. 179 This same gasoline equivalency would be used for CAFÉ

calculation, if the PHEV did not meet the mini mum distance requirements of a dual fueled

vehicle. 180 In the case of PHEVs with diesel engines, EPA proposes to similarly require calculation of a miles per gallon equivalent for battery operation, but specifying instead to rely on a conversion using the energy content of diesel fuel. We propose to specify an energy content of 36,700 Watt hours per gallon of diesel fuel. This is based on the approximately 9 percent higher energy density for diesel fuel relative to gasoline. We request comment on this approach to calculating fuel economy values for diesel-fueled hybrid electric vehicles.

If the PHEV met the dual fuel range minimums for electricity a Petroleum Equivalency Factor would be used instead of the gasoline equi valent energy factor. For a PHEV without fuel fired accessories, the PEF would be 82,049 watt h ours per gallon of gasoline. For details on PEF and gasoline equivalent energy content see FR Vol.65 No113. Using the procedure for calculating a dual fueled vehicle FE for CAFÉ the fuel economy of both modes of operation
would be harmonically averaged 50/50 and a utility factor would not be necessary. 181

179 65 FR 36990, June 12, 2000.

180 49 U.S.C. 32901(c) and 49 CFR 538.5 Minimum Driving Range.

181 49 U.S.C. 32905(b).Fuel Economy Labeling NPRM for OMB Review 8

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Page 127 of 150 4. Low Powered Vehicles.

Vehicles using the low powered vehicle provision in 40 CFR 86.115-78(b)(4) shall use the actual distance driven in calculating cycle speci fic utility factors. The coefficients used in determining UF shall be as follows in table VI.B.2-5

Table VI.B.2-5 City/Highway Specific Utility Factor Coefficients

City Hwy

norm_dist 399 399

C1 14.86 4.80

C2 2.97 13.00

C3 -84.05 -65.00

C4 153.70 120.00

C5 -43.59 -100.00

C6 -96.94 31.00

C7 14.47

C8 91.70

C9 -46.36

Equation VI.B.2-5



## ∑

∑ −

= = − ⎥ ⎥
⎦ ⎤

⎢ ⎢
⎣ ⎡

⎟ ⎟

⎠ ⎞

⎜ ⎜

⎝ ⎛
⎟ ⎟ ⎠ ⎞ ⎜ ⎜ ⎝ ⎛

× ⎟ ⎠ ⎞ ⎜ ⎝ ⎛

−= 1

0 1 1 i

i i k

j j j

i

i UF c ND d eUF

Where ND is the normalized distance, j is the coe fficient index, k is the number of coefficients for city (9) and for highway (6), c are the coefficients listed in table VI.B.2-5, d is distance driven in each cycle or phase, and i is each cycle or phase.

The calculated cycle specific utility factors fo r low powered vehicles would be applied in the same manner as paragraph B.3, except that the utility factors would be calculated based on measured distance and not assigned based on phase or cycle distance.

C. Comparable Class Categories

EPCA r equires that the label include the range of fuel economy of comparable vehicles of

all manufacturers. 182 EPA’s comparable class structure provides a basis for comparing a vehicle’s fuel economy to that of other vehicles in its class. 183 The definitions of vehicle classes were last revised by EPA’s 2006 labeling final ru le. That action finalized two specific changes to the vehicle class structure. Separate new cla sses were added for sport utility vehicles (SUVs) and minivans (these were previously included in the Special Purpose Vehicle category), and the weight limit for Small Pickup Trucks was increased from 4,500 pounds gross vehicle weight rating (GVWR) to 6,000 pounds GVWR. These were non-controversial changes that were generally seen as a move to keep the class structure as current as possible given the changing

182 49 U.S.C. 32908(b)(1)(C).

183 40 CFR 600.315-08.Fuel Economy Labeling NPRM for OMB Review 8

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Page 128 of 150 vehicle market. The resulting structure is one th at contains nine car categories, five truck categories, and a “special purpose vehicle” categ ory. It should also be noted that the EPAdefined vehicle classes are used only to prov ide consumer information about fuel economy and serve no other regulatory purpose.

EPA is proposing one modification to the class categories. Consistent with the distinction currently made between small and large pickup trucks, EPA is proposing to divide the SUV class into small and large SUVs. We do not believe that it is appropriate, for example, to include a Toyota RAV4 in the same class as a Toyota Sequoia, or a Ford Escape in the same class as a Ford Expedition. The single SUV category currently described in the regulations would be replaced by the two following proposed categories:

• Small sport utility vehicles: Sport utility vehicles with a gross vehicle weight rating less than 6,000 pounds.

• Standard sport utility vehicles: Sport utili ty vehicles with a gross vehicle weight rating of 6,000 pounds up to 10,000 pounds. Although the standard pickup truck class only goes up to 8,500 pounds GVWR, SUVs between 8,500 and 10,000 pounds GVWR are defined as medium-duty passenger vehicles, and they will be subject to fuel economy labeling starting with the 2011 model year. EPA requests comment on whether this is an appropriate way to distinguish the SUV classes.

Although EPA received many comments on the 2006 rule regarding the class structure, some of its inherent problems, and how people may or may not shop within classes, there were no specific suggestions on how to revise the structure to resolve the issues that were raised. We believe that with the refinement to the SUV category we are proposing, the comparable class structure would generally represent the physical di stinctions between vehicle types offered in the fleet today. However, there may be other dis tinctions between vehicles not captured in these categories, such as the luxury vehicle segment. The DOE/EPA web site ( www.fueleconomy.gov ) incorporates vehicle cost into the sedan category, for example, dividing sedans into “family,” “upscale,” and “luxury.” EPA requests comment on incorporating such an approach into the comparable class categories, and specifically, how it might be done given the changing nature of vehicles and vehicle prices. We welcome interested parties to continue working with EPA in the future on how to ensure that the comparable classes are kept current with the dynamic vehicle fleet. If it becomes necessary in the future to further modify the comparable class structure, EPA would do so through a rulemaking. EPA requests general comments on the proposed modifications to comparable classes, and also welcomes comments on other possible ways to classify vehicles for comparison purposes. Comments should address how the classifications will be useful for the consumer who is comparison shopping.

D. Using Smart Phone QR Codes to Link to Fuel Economy Information

For all the label designs being considered, EPA is proposing that manufacturers place a QR CodeTM on the label that will link the web br owser of a properly configured smart phone to the mobile version of the EPA/DOE fuel economy in formation web site, or alternatively, to theFuel Economy Labeling NPRM for OMB Review 8

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Page 129 of 150 vehicle-specific information located on the EPA/DOE website. 184 (Note that although the proposed Label 1 design incorporates a different website URL, the intent would remain the same: to use the QR Code to directly link the users smart phone to vehicle-specific information while providing additional tools for making ve hicle comparisons, learning more about the vehicle, etc.) Many focus group participants expressed excitement and interest in the prospects of being able to access information in this way us ing their mobile devices, and EPA believes it is a potentially useful and valuable tool for consumers.

QR Codes, like other two-dimensional bar codes, are simply used to store information. QR Codes were originally develo ped for use in tracking parts in vehicle manufacturing, and are now being used for other purposes, such as stori ng a web site URL into an encoded graphic thatcan be scanned. These codes – the use of which is growing in popularity in the U.S. – are twodimensional black and white codes (like a bar code) that eliminate the need to type a web link into a mobile phone (an action th at can be cumbersome and that many mobile users might prefer avoiding). Reading a QR Code requires that scanning software be installed on the mobile phone. Many smart phone manufacturers have begun to pre-install QR Code readers, but for those that do not, the readers are very easy to download, and many are available for free for nearly every type of mobile device. Once equipped with the correct scanning application, consumers can point and scan to instantly connect to information they actually want, versus information pushed to

them.

For example, scanning the proposed code would link the phone’s web browser to the

mobile version of the DOE/EPA website. At that point the user could view additional information about the efficiency and environmental impacts of the vehicle, with available options such as creating customized estimates based on the user’s personal driving habits and

distances. The user could also l ook up other vehicles and compare those to the vehicle they are viewing.

EPA is proposing that the manufacturer place one of two QR Codes on the fuel economy label. These QR Codes would be determined based on an international standard that would be incorporated by reference in the regulations. 185 The default option would be to insert the QR

Code that would take the user’s web browser to the mobile version of the DOE/EPA fuel economy information web site. The QR Code for th is site, including the text that EPA proposes accompanies it, would look like this:

Smartphone Interactive
Scan QR Code for more information about this vehicle, to get customized estimates, or to compare it with other vehicles.

184 The term QR Code is a registered trademark of Denso Wave Incorporated, which owns the patent rights to the QR Code. However, the patent right is not exercised, a llowing the specification of the QR Code to be disclosed and open for widespread use. For more information, see http://www.denso-wave.com/en/adcd/index.html

. 185 International Organization for Standardization, IS O/IEC 18004:2006, Information technology – automatic identification and data capture techniques – QR Code 2005 bar code symbology specification, August 31, 2006.Fuel Economy Labeling NPRM for OMB Review 8

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Page 130 of 150 Alternatively and preferably, the manufacturer w ould use the QR Code that represents the URL where information for the specific labeled vehicle is available. However, this would depend upon resolving some specific data issues. For example, the manufacturer would have to know the vehicle-specific URL at the time the label is pr inted. This could require that EPA issue more frequent updates to the web site throughout the year, or that EPA assign a vehicle identification early in the process. It may be the case that even if the vehicle is not yet included on the DOE/EPA web site that a URL, and thus a QR Code, could be easily assigned or determined. EPA is confident that we can work with DOE to resolve any potential implementation issues prior to the 2012 model year.

E. Fuel Economy Information in the context of the “Monroney” Sticker

As noted in Section VIII, the Automobile In formation Disclosure Act (AIDA) requires the affixing of a retail price sticker to the windshield or side window of new automobiles indicating the Manufacturer's Suggested Retail Price of the vehicle and other required vehicle information. AIDA is more commonly known as the Monroney Act (Senator Mike Monroney was the chief sponsor of AIDA) or Price Sticker Act. See 15 U.S.C. 1231-1233. This sticker is commonly called the “Monroney” label. EPCA st ates that EPA “may allow” a manufacturer to comply with the EPCA labeling requirements by placing the fuel economy information on the label required by AIDA, a practice that has been used by most manufacturers. See 49 U.S.C. 32908(b)(2). In fact, EPA regulations express a specific preference that manufacturers do this, “provided that the prominence and legibility of the fuel economy label is maintained.” See 40 CFR 600.306-08(c).

In the third phase of focus groups we had participants consider the placement of the fuel economy on the Monroney label, and whether participants had a specific preference for where to locate the fuel economy information. Although participants expressed a variety of opinions, a slight preference emerged for displaying the fuel economy information in the upper right portion of the Monroney label.

The agencies recognize that EPCA does not require that the fuel economy information be on the Monroney label, and that there are instances when auto manufacturers may want to display the fuel economy information separately (e.g., if window space is limited on a small vehicle and the Monroney label size needs to be reduced). EPA does not intend to preclude the option of placing the new label in any appropriate and prominent location on the vehicle. However, the agencies request comment on whether we should require that the fuel economy information be placed in a specific location on the Monroney label (such as the upper right corner, or on the right side) as a condition of al lowing the information to be included on that

label. 186 Although consumer preference for a specific location on the Monroney was vague, the agencies believe that consumers would be able to locate the new label information on the vehicle more easily if it appeared in a consiste nt location within the Monroney sticker.

186 Based on 49 U.S.C. 32908(b)(2), EPA currently c onditions placement of the fuel economy label in the Monroney label on a general requirement that the prominen ce and legibility of the label be maintained. EPA is inviting comment on expanding the conditions for placement in the Monroney label through addition of more specific requirements related to the location of the fuel economy label in the Monroney label.Fuel Economy Labeling NPRM for OMB Review 8

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Page 131 of 150 The agencies also seek comment concerning the potential for the new label information to create confusion about other information found on the Monroney Label, in particular, the star safety ratings. Specifically, the agencies seek comment on whether consumers might interpret the large letter grade on Label 1 as applying to other aspects of the vehicle’s performance (such as safety) besides fuel economy and environmen tal impacts. To mitigate this concern, the agencies have create d a prominent black border and title indicating the purpose of the information. Nevertheless the agencies seek comment on whether additional measures should be required under 32908(b) and (g) to address this potential confusion.

The agencies also seek comment on whether the co-proposed labels, in particular Label 1 with its use of color and large font for the overall letter grade, might inadvertently distract consumers from the black-and-white star safety ra tings. As one way of addressing this potential issue, NHTSA proposes to require under 49 CFR 575.301 that the star safety ratings be located as close as physically possible to the new fuel economy and environmental label to help ensure that the star safety ratings do not get “lost” on the Monroney Label. Similarly, the agencies seek comment on whether their regulations for the new fuel economy and environmental label should require that it be located as close as physi cally possible to the star safety ratings.

Another way of addressing this potential is sue is by re-visiting the minimum size requirements for the safety ratin g label and the font of information on it. In a final rule 187
implementing the requirement in the Safe, Acc ountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) for placing safety rating information on the Monroney vehicle price label, the agency interp reted that Act’s specification of a minimum size for the label as indicating the agency did not have any discretion regarding minimum size, instead of interpreting the specification as merely establishing a floor on the discretion of the agency to specify a minimum size. In comments made in response to a subsequent proposal 188 to place an overall safety rating on the safety rating label, the Advocates for Highway and Auto Safety questioned that interpretation. In a recen t meeting with Bosch, representatives of that company also questioned that interpretation. In light of the i ssues in this rulemaking and those questions, the agency is re-e xamining that interpretation.

F. Miscellaneous Amendments and Corrections

EPA is al so proposing a number of non-controversial amendments and corrections to the existing regulations.

First, we are making a number of corrections to the recently finalized regulations for controlling automobile greenhouse gas emissions. 189 These changes include correcting typographical errors, correcting some incorrect regulatory references, and some simple

clarifications.

187 71 FR 53572, 53576, September 12, 2006.

188 75 FR 10740, March 9, 2010.

189 75 FR 25324, May 7, 2010.Fuel Economy Labeling NPRM for OMB Review 8

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Page 132 of 150 Second, we are correcting an oversight from the 2006 labeling rule regarding the applicability of testing requirements to indepe ndent commercial importers (ICIs). Currently several vehicle categories (dedicated alternative fuel, dual fuel while operating on alternative fuel, and MDPVs) are exempted from having to perform full 5-cycle fuel economy testing. These categories are allowed to use the “derived 5-cycle” method, whereas other vehicles must use data from all five test cycles at certification to perform an evaluation that determines whether the test group can use the derived 5-cycle method or whether they must complete full 5-cycle testing. The reason for exempting these vehicles is that the evaluation required at certification requires the use of all 5 cycles as run for emi ssions certification, but these categories are not subject to the SFTP requirements, and thus such vehicles do not perform two of the five test procedures (the US06 high speed/acceleration test and the SC03 air conditioning test). Thus when EPA finalized the 2006 label rule we recognized that these categories would not have the data required to perform the certification evaluation, and we decided to exempt them from five cycle testing. However, this same exemption should have been applied to ICIs. Like the vehicle categories noted above, vehicles imported by ICIs are not required to perform the SFTP emission tests, and thus also won’t have the necessary data to perform the 5-cycle certification evaluation. Therefore, we are proposing to extend the allowance to use the derived 5-cycle method to ICIs.

VII. Projected Impacts Of The Proposed Requirements

Vehicle manufacturers have been required to provide fuel economy labels on vehicles since 1977. The costs and benefits of label revisions would be those associated with changes to the current label, not the costs and benefits asso ciated with production of the label itself. The change in cost from this proposed rule comes in the physical revisions to the label itself and the possible efficiencies achieved by meeting EPCA an d EISA labeling requirements in one label, as well as proposed modified vehicle testing procedures. The benefits of the rule come from providing labels for mass-market advanced technology vehicles for the first time, and from any improvements in the effectiveness of labels for conventional vehicles in providing accurate and useful consumer information on fuel consumption and environmental performance.

A. Costs Associated with this Rule

Testin g requirements for vehicles are not new. Advanced technology and alternative fuel vehicles have been required to undergo testing requirements in the past. For advanced technology vehicles, though, the test procedures have not previously been standardized; they have been handled on a case-by-case basis. Because EPA expects more advanced technology vehicles to come to market, we propose to codify testing procedures in a public process and are requesting comment on them. See section VI of this preamble. The testing costs described here therefore are not really new costs for manufacturer s, since they would have to test the vehicles even in the absence of this rule. The cost estimates are provided here because they have previously not been presented, and EPA seeks comment on the analysis of costs presented here.

The analysis of the projected costs of this rule follows conceptually the approach in the 2006 (“five-cycle”) fuel economy labeling rule. Increased on-going operations and maintenanceFuel Economy Labeling NPRM for OMB Review 8

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Page 133 of 150 (O&M) costs and labor hours result from the costs of printing the labels and increases in testing costs for electric vehicles (EVs) and plug-in hybrids (PHEVs). We also allow for the costs of increased facility capacity to accommodate the increased testing time involved for these two categories of vehicles. Startup costs are treated as capital costs, and are amortized over ten years at 7% interest. Startup costs for this rule include some one-time graphic design work for each manufacturer subject to the rule and updating information systems and testing equipment for those manufacturers subject to new testing. As an aid to the analysis and to help articulate the range of uncertainty, we include both low and high cost estimates for each of these cost and labor hour elements. The cost estimates are $649,000 per year for the low estimate, and $2.8 million per year for the high estimate. For details of this analysis, see the “Draft Supporting Statement for Information Collection Request, Fuel Economy Labeling of Motor Vehicles (Proposed Rule)”, in the docket. 190

1. Operations and Maintenance Costs and Labor Hours

a. New Testing Requirements for Electr ic Vehicles and Plug-in Hybrid Electric

Vehicles

i. Testing requirements for Electric Vehicles

As explained in Section VI of this Preamble, EPA currently has no federal test procedure for measuring fuel economy for electric vehicles (EVs). To date, EPA has performed some fuel economy testing connected with certification a pplications for electric vehicles using the procedures developed by the Society of Automotive Engineers (SAE), specifically SAE J1634, as cancelled in October 2002. This proposal spells out EV testing requirements that are similar to SAE J1634, as cancelled in October 2002, and al lows continued use of that procedure.

In estimating the costs of this action, there is no clear baseline cost that manufacturers of EVs would have incurred in satisfying federal requirements, because existing fuel economy measurements are entirely specified in terms of exhaust and greenhouse gas emissions. For purposes of the analysis, we assume these EV costs are entirely new costs rather than incrementsto pre-existing costs. Here and in the facility costs section, this also means we assume no carryover applications for EVs. Both these assumptions are more likely to lead to an overstatement of

costs than an understatement.

In 2004 the Federal Trade Commission promulgated a rule requiring “alternative fueled vehicles” to include a consumer label indicating their estimated cruising ranges (69 FR 26926, April 9, 2004; 16 CFR part 309, subpart C). Th e covered vehicles include EVs but not plug-in hybrid electric vehicles (PHEVs). Estimated cr uising range for an EV is the range determined according to SAE J1634 (16 CFR 309.22(a)(2)). Consequently, EV manufacturers selling vehicles in the United States have already been subject to the same SAE J1634 testing requirements allowed in this ru lemaking for several years. However, for purposes of the analysis

190 U.S. Environmental Protection Agency, Office of Transportation and Air Quality. “Draft Supporting Statement for Information Collection Request, Fuel Economy Labeling of Motor Vehicles (Proposed Rule), EPA ICR 2392.01.” Compliance and Innovative Strategies Divisi on and Assessment and Standards Division, July, 2010.Fuel Economy Labeling NPRM for OMB Review 8

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Page 134 of 150 below we treat the costs of compliance for manufacturers subject to the proposed rule as new costs in order to insure that they are fully considered in this rulemaking,

The salient feature of SEA J1634 for cost purposes is that it requires, similar to a conventional vehicle, the Federal Test Procedure (FTP or City Test), preceded by vehicle preparation; this is followed by the Highway Test (HFET). The off-cycle tests (USO6, SCO3, cold FTP) are optional under EPA’s proposal. Furthermore, cruising range determination requires that the FTP be repeated until the battery system is no longer able to maintain the FTP speed tolerances; the FTP in question is the full four-phase FTP, repeated as cold and hot start “UDDS” or “LA-4” cycles until that point is reached.

Preparation costs are estimated to be $3,163 and 30 hours per vehicle, per Information Collection Request (ICR) 0783.54 (OMB 2060-0104), the certification ICR for conventional vehicles. Preparation includes several coast downs, a UDDS, and a soak period. The low and high EV test distances for FTP and HFET tests are estimated as 50 to 250 miles. For purposes of this estimate, the cost of an FTP/HFET pair is $1,860, allocated 70% to the FTP and 30% to the HFET and incremented either by 50 or 250 divided by 7.45 (the distance of a normal FTP), or by 50 or 250 divided by 10.3 (the distance of the nor mal HFET). These increases are applied to an estimated five to eight EV families in the year s through MY2013. Labor hours, estimated at 30 hours per FTP/HFET pair, are allocated and incr emented in a similar manner. The bottom line is a cost between $75,300 and $486,784, and 1,073 to 7,625 hours, per year for the EV industry.

ii. Testing Requirements for Plug- in Hybrid Electric Vehicles

As explained in Part VI, the proposed EPA test procedure for PHEVs is an extension of the existing test procedure for hybrid vehicles. Off-cycle tests are alr eady required for test groups that do not meet the “litmus test;” othe rs would use the derived five-cycle adjustment. Hybrid vehicles already do FTP and HFET tests for fuel economy determination. The new FTP procedure would essentially run repeated FTPs un til the charge is depleted. This is the “chargedepleting” operation, when the vehicle is mainly running on its battery. The battery would then be recharged, and a single additional four-phase FTP would be conducted in what is denominated as the “charge-sustain” operation. Following this, the vehicle will be recharged, if necessary, by running any appropriate test cycle followed by HFET cycles in charge-depleting operation, followed by a cycle in charge-sustain operation.

For purposes of this cost analysis, the charge-sustain FTP and HFET cycles along with potential other cycles mandated by emissions and fuel economy testing requirements are considered to be continuations of existing requirements. The cost increment due to this proposal consequently derives entirely from the increased testing time in depleting mode. The duration of the depleting modes is estimated as 7.45 to 50 miles over the repeated 7.45 mile FTP or 10.3 mile HFET test cycles. These together, applie d to 5 to 8 families with no carryovers, add an estimated $8,528 to $80,564 in operation and maintenance (O&M) costs and 138 to 923 labor hours to existing hybrid testing costs.

b. Printing Costs for New LabelsFuel Economy Labeling NPRM for OMB Review 8

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Page 135 of 150 The primary variable cost for the new label design is the difference in cost between black-and-white and color printing. To estimate this cost difference, the agencies note two sources. First, in 2007 the California Air Resources Board (CARB) examined the effects of requiring an environmental label that included color printing. It estimated the combined capital and operating costs of color labels to be as low as $0.02 per vehicle for large manufacturers; 191
CARB expected small-scale manufacturers to switch to pre-printed color labels at an incremental cost of $0.05 per label, for a 4-by-6-inch label. Secondly, in 2006 Hewlett-Packard estimated the per-page cost of color printing on its HP Color LaserJet 4700n printer as $0.09 per letter-sized page, and black-and-white printing on a dedicated black-and-white printer as $0.015, for a cost difference of $0.075 per page. 192

The existing fuel economy label measures 4.5 by 7 inches, slightly larger than the CARB label but about 1/3 the size of a standard page. For the cost estimates developed here, the agencies consider a low estimate of $0.03 per label in additional printing costs (based on the CARB label, adjusted for size), and a high estimate of $0.08 per label (based on the HP estimate, which may overestimate the cost based on page size). For the number of labels, we estimate the subject fleet from the April 20, 2010, U.S. Department of Transportation’s Summary of Fuel Economy Performance, 193 taking MY2009’s 9.83 million as the low and MY2005’s 15.9 million as the high estimate. This yields a new printing cost of $294,690 to $1,274,634 per year.

The O&M costs and labor hours discussed above can be summarized as follows:

Table VII.A.1-1 Testing Costs (Labor And O&M Costs For Running The Tests)

191 State of California, Air Resources Board. “Staff Report: Initial Statement of Reasons for Rulemaking: Proposed Amendments to the Smog Index Vehicle Emissions Label,” May 4, 2007, http://www.climatechange.ca.gov/publications/arb/200 7-06-21_isor.pdf , (last accessed May 3, 2010).

192 Hewlett-Packard, “Head to head comparis on: color versus black-and-white printing,” http://www.officeproductnews.net/files/hpc2447wpcol orvsbwgov.pdf, (last accessed May 4, 2010).

193 U. S. Department of Transportation, National Highway Tr affic Safety Administration, “Summary of Fuel Economy Performance,” http://www.nhtsa.gov/staticfiles/rulemaking/pdf /cafe/CAFE_Performance_Report_April_2010.pdf , accessed June 17, 2010.Fuel Economy Labeling NPRM for OMB Review 8

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Page 136 of 150 2. Facility Costs

In addition to new equipment (treated as a startup cost, below), the new testing requirements for EVs and PHEVs will in theory require expanded testing facilities for those manufacturers choosing to produce and sell them in the U.S. Because the cost of new facility capacity is highly dependent on manufacturer-s pecific factors (the costs of capital, the availability of land, the structure of work shifts, the existing excess capacity, etc.), we use the approximation of unitizing in creased test costs by assuming that a facility capable of performing 750 FTP/HFET pairs would cost $4 million. Here, the new tests are deemed to require these facilities in proportion to the increases in test time, and the costs are then annualized over ten years and amortized at 7% interest compounded monthly. This assumption is more likely to produce an overestimate of costs rather than an underestimate, since it does not attempt to account for the current excess capacity that exists in manufacturers’ current test facilities. We assume that there is no excess capacity in our analysis. Note that other features of the EV and PHEV test cycles, such as recharging times, have been harmonized with existing test protocols. Furthermore, consistent with other informati on burden analyses for the emissions and fuel economy programs, we consider these as ongoing ra ther than startup costs (i.e., as the facilities depreciate they are continually being replaced), another conservative assumption. Applying these costs to a low and high estimate of 5 to 8 EV families and 5 to 8 PHEV families per year yields an annualized facilities cost between $25,278 and $2 10,779 per year.

Facility costs can be summarized as in Table VII.A.2-1: Vehicle Type/Test Cycle Increase In Number of Tests Increase in Hours

Min Tests Min Cost

Increase Max Tests Max Cost

Increase Min Max

EV Prep 5.0 $18,065 8.0 $28,904 150 240

FTP 5.0 $43,691 8.0 $349,530 705 5,638

HFET 5.0 $13,544 8.0 $108,350 218 1,748

EV Total $75,300 $486,784 1,073 7,625

PHEV

FTP 5.0 $6,510 8.0 $50,563 105 705

HFET 5.0 $2,018 8.0 $30,001 33 218

PHEV Total $8,528 $80,564 138 923

Total $83,828 $567,348 1,211 8,548

PRINTING COSTS Number Vehicles Min@$0.03 Number Vehicles Max@$0.08

Color Labels 9, 832,000 $294,690 15,932,920 $1,274,634

TOTAL O&M $378,518 $1,841,981Fuel Economy Labeling NPRM for OMB Review 8

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Page 137 of 150 Table VII.A.2-1

Increase In Test Facilities Undepreciated capital costs Minimum Maximum

EV test distance increase $154,210 $1,233,683

PHEV test distance increase $22,977 $246,737

Total $177,188 $1,480,420 Amortized, 10yrs @ 7 % $25,278 $210,779

3. Startup Costs

Startup costs are counted as one-time costs that are amortized or discounted at an interest rate of 7% over ten years.

a. Updating Information Systems and Testing Equipment

The estimate includes the cost of upgrading information systems for the estimated 8 to 10 manufacturers who will need to comply with the new EV and PHEV testing requirements, such as recording multiple tests, recording battery charge data, and communicating the resulting data to the information system that gets it to EPA a nd the label. Both low and high estimates use 4 weeks for four IT staff for analysis and code, and 4 weeks for two IT staff for testing, at $100 per hour, for each manufacturer, resulting in an indust ry cost of $768,000 to $960,000. In addition, each manufacturer who has not previously produced hybrid-electric vehicles is assumed to need new testing equipment costing $25,000 for an ammeter and $50,000 for voltage stabilizers; we estimate that 5-8 manufacturers will fall in this category.

b. Label Redesign

The proposed label designs are presented in Section III. The changes being proposed in

this rule would not affect either the existence or size of the label. Auto companies currently have significant flexibility in whether fuel economy labe l should be a stand-alone label or included in the “Monroney label” (which provides information on the price and options included for a specific vehicle), or where it is placed on the Mo nroney label. The agencies are not proposing any changes to this flexibility. The agencies estimate 16 to 24 hours at $100 per hour for this work, assuming at this time that no specific location or size within the Monroney label is required. This cost is applied to the universe of separate manufacturer entities subject to the rule. Many specific automotive brands are parts of marketing groups or are owned and managed by other, parent companies. Allowing for these relati onships, the best guess is that the rule would apply to 24 manufacturers and 11 independent commercial importers (ICIs) importing nonconforming vehicles into the U.S. for sale. A pplied to 35 companies, then, the label redesign cost is estimated to be $56,000 to $84,000.

c. Annualized Startup CostsFuel Economy Labeling NPRM for OMB Review 8

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Page 138 of 150 Total startup costs are between $1.2 and 1.6 million. When annualized and subjected to 7% loan repayment/discounting, the startup costs total $170,711 to $234,069 per year. These are

summarized in Table VII.A.3-1:

Table VII.A.3-1 Startup Costs

Item Cost

Minimum Maximum

Updating Information systems $768,000 $960,000

Ammeter/stabilizer $375,000 $600,000

Label redesign $56,000 $84,000

TOTAL $1,199,000 $1,644,000

Amortized, 10 years at 7% $170,711 $234,069

4. Cost Summary

Table VII.A.4-1 summarizes the costs presented he re. The total costs of this rule, excluding labor, are estimated to be about $575,000 to $2,287,000 per year. Adding the cost of labor (estimated to be $61.49 per hour overall) to the above estimates brings the total cost to $648,952 to $2,812,465. Note that startup capital is not budgeted as labor. EPA and NHTSA request comment on the costs estimates, including any omitted costs and any other information regarding the costs of these requirements.Fuel Economy Labeling NPRM for OMB Review 8

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Page 139 of 150 Table VII.A.4-1

Total Annual Cost and Hours Increase

COST BURDEN

Min Max O&M: testing and label $378,518 $1,841,981
Facility Capital $25,278 $210,779 Startup: one-time IT, label redesign, and reg familiarization, 10 yrs 7% $170,711 $234,069

Total $574,507 $2,286,829

HOURS BURDEN

Min Max
O&M: testing and label 1,211 8,548

Facility Capital 0 0

Total 1,211 8,548

Labor Cost $74,446 $525,635

Total Costs, Including Labor $648,952 $2,812,465

B. Impact of Proposing One Label to Meet EPCA/EISA

As discussed in Section I.C., EPCA a nd EISA create similar but not identical requirements for labeling vehicles. EPA conducts a labeling program under EPCA, and NHTSA is required to conduct a labeling program under EISA, in consultation with EPA. While the agencies could require that manufacturers produce two separate labels to meet the requirements of the statutes, much of the information on the two labels would be duplicative. In addition, two different fuel economy labels might confuse ve hicle purchasers, frustrating the purpose of providing fuel economy information to purchasers. Requiring that auto makers put two fuel economy labels on vehicles would also crowd the limited labeling space on vehicles. For these reasons, EPA and NHTSA are proposing to comb ine both the EPCA and the EISA requirements

into one label.

Because NHTSA’s labeling under EISA is a new requirement that has not previously been implemented, there is no cost reduction associated with the proposal to use a joint label. The use of the joint label avoids a cost increase that would result from two separate labels. EPA and NHTSA are not including this cost saving in the cost analysis because we believe that the benefits of coordinating labeling requirem ents outweigh any possible disadvantages.

C. Benefits of Label ChangesFuel Economy Labeling NPRM for OMB Review 8

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Page 140 of 150 The benefits of this rule would come from improved provision of information to vehicle buyers, and more informed consumer decisions resulting from the changes. These benefits are difficult to estimate. Doing so would require predictions of changes in consumer behavior as a

result of the label modifications. The internet su rvey discussed in Section IV.A.2 is intended to provide some insights into the comprehensibility a nd usefulness of the labels, but the results are

not available at this time.

Improved fuel economy reduces costs of driving a mile, but the technology to improve fuel economy may increase the cost of a vehicle. Evaluating this tradeoff requires comparing future fuel savings based on expectations of future fuel prices and driving patterns with known and immediate increases in vehicle purchase price. Some evidence suggests that consumers may not accurately compare future fuel savings with the up-front costs of fuel-saving technology when buying vehicles. 194 As a result, consumers may buy less or more fuel-saving technology than is financially sensible for them to buy. This problem may be compounded by the presence of miles per gallon (mpg) as a primary metric for fuel economy comparison. 195 As discussed in Section II.A.2, consumers can save much more fuel by choosing a 1-mpg improvement in fuel economy for a low-mpg vehicle than by choosing a 1-mpg improvement for a high-mpg vehicle. However, research on the “mpg illusion” finds that consumers expect a 1-mpg improvement to produce the same fuel savings regardless of the efficiency of a vehicle. 196 Thus, the tendency of consumers to use mpg as a primary metric for fuel economy increases the difficulty of estimating the fuel savings resulting from increased fuel ec onomy. As a result, consumers may not be able to find the most cost-effective amount of fuel economy for their driving habits. For gasoline vehicles, new metrics on the label, such as gallons per hundred miles, fuel savings over 5 years, or environmental metrics, may ma ke it easier for consumers to identify the fuel savings they are likely to receive from a vehicle, and therefore to judge better between vehicles with different fuel savings, costs, and environmental impacts.

Finding the most cost-effective vehicle may be even more confusing with the advent of advanced technology vehicles such as EVs or PHEVs. Most consumers are not accustomed to shopping for vehicles that use energy sources other than gasoline. In addition, the cost effectiveness of different technologies depends on a person’s driving patterns. A person with a short commute may have lower per-mile costs with a vehicle with some all-electric range, but someone with a long commute may have higher per- mile costs or insufficient range with such a vehicle and may want to consider different technologies. For advanced technology vehicles, the label can help vehicle shoppers to understand the new technologies, and it can present metrics that allow consumers to make useful comparisons across different vehicle technologies.

EPA and NHTSA request comment on the benef its described here, and on any additional

benefits.

D. Summary

194 Turrentine, Thomas S., and Kenneth S. Kurani , “Car buyers and fuel economy?” Energy Policy 35 (2007): 1213-

1223.

195 Larrick, Richard P., and Jack B. Soll, “The MPG Illusion.” Science 320 (5883) (June 20, 2008): 1593-94.

196 Ibid.Fuel Economy Labeling NPRM for OMB Review 8

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Page 141 of 150 The primary benefits associated with this proposed rule are associated with improved consumer decision-making resulting from improved presentation of information. At this time, EPA and NHTSA do not have data to quantify these impacts.

The primary costs associated with this proposed rule come from revisions to the fuel economy label and additional testing procedures. These costs are estimated to be $649,000 – $2.8 million per year.

EPA and NHTSA request comment on this assessment of the benefits and costs.

VIII. Agencies’ Statutory Authority and Executive Order Reviews

A. Relationship of EPA’s Proposed Requirements With Other Statutes and

Re gulations

1. Automobile Disclosure Act

The Automobile Information Disclosure Act (A IDA) requires the affixing of a retail price

sticker to the windshield or side window of new automobiles indicating the Manufacturer's Suggested Retail Price, the “sticker price.” 197 Additional information, such as a list of any optional equipment offered or transportation charges, is also required. The Act prohibits the sticker from being removed or alte red prior to sale to a consumer.

Under EPCA, EPA may allow manufacturers of new automobiles to comply with the EPCA labeling requirements by placing the fuel economy information on the label required by

AIDA . 198 Normally, the price sticker label and EPA label are combined as one large label.

Failure to maintain the EPA label on the ve hicle is considered a violation of AIDA.

2. Internal Revenue Code

EPCA requires “Gas Guzzler” tax information to be included on the fuel economy label, under 26 U.S.C. 4064(c)(1). The Internal Revenue code contains the provisions governing the administration of the Gas Guzzler Tax. It contains the table of applicable taxes and defines which vehicles are subject to the taxes. The IRS code specifies that the fuel economy to be used

to assess the amount of tax will be the combined city and highway fuel economy as determined by using the procedures in place in 1975, or procedures that give comparable results (similar to EPCA's requirements for determining CAFE for passenger automobiles). This proposal would not impact these provisions.

3. Clean Air Act

197 More commonly known as the Monroney Act (Senator Mike Monroney was the chief sponsor of the Act) or

Price Sticker Act. See 15 U.S.C. 1231-1233.

198 49 U.S.C. 32908(b)(2).Fuel Economy Labeling NPRM for OMB Review 8

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Page 142 of 150 EPCA states that fuel economy tests shall, to the extent practicable, be carried out with the emissions tests required under Section 206 of the Clean Air Act. 199 EPA is not proposing

additional emissions tests.

4. Federal Trade Commission Guide Concerning Fuel Economy Advertising for

New Vehicles

In the mid-1970's when EPCA was passed, the Federal Trade Commission (FTC) “took note of the dramatic increase in the number of fuel economy claims then being made and of the proliferation of test procedures then being used as the basis for such claims.” 200 They responded by promulgating regulations in 16 CFR part 259 entitled “Guide Concerning Fuel Economy Advertising for New Vehicles” (“Fuel Guide”). The Fuel Guide, adopted in 1975 and subsequently revised twice, provides guidance to automobile manufacturers to prevent deceptive advertising and to facilitate the use of fuel econo my information in advertising. The Fuel Guide advises vehicle manufacturers and dealers how to disclose the established fuel economy of a vehicle, as determined by the Environmental Protection Agency's rules pursuant to the Automobile Information Disclosure Act (15 U.S.C. 2996), in advertisements that make representations regarding the fuel economy of a new vehicle. 201 The disclosure is tied to the claim made in the advertisement. If both city and highway fuel economy claims are made, both city and highway EPA figures should be disclosed. A claim regarding either city or highway fuel economy should be accompanied by the corresponding EPA figure. A general fuel economy claim would trigger disclosure of the EPA city figure, although the advertiser would be free to state the highway figure as well. The authority for the Fuel Guide is tied to the Federal Trade Commission Act (15 U.S.C. 41-58) which, briefly stated, makes it illegal for one to engage in “unfair methods of competition in or affect ing commerce and unfair or deceptive acts or practices in or affecting commerce.”

5. California Environmental Performance Label

California requires each new and used vehicle offered for sale in the state to affix a “Smog Index Number” and “Global Warming Inde x” decal to the car window which indicates the pollution standard that applies to that particular car, and its exhaust emissions. 202 This proposal would not impact Ca lifornia’s regulations.

B. Statutory and Executive Order Reviews

1. Executive Order 12866: Regulatory Planning and Review and DOT Regulatory Policies and Procedures (NHTSA only)

Under Executive Order (EO) 12866 (58 FR 51735, October 4, 1993), this action is a "significant regulatory action” because the act ion raises novel legal or policy issues. Accordingly, EPA and NHTSA submitted this act ion to the Office of Management and Budget

199 49 U.S.C. 32904(c).

200 40 FR 42003, Sept. 10, 1975.

201 43 FR 55747, Nov. 29, 1978; and 60 FR 56230, Nov. 8, 1995.

202 SB 2050 (Presley), Chapter 1192, Statutes of 1994, and AB 1229 (2005).Fuel Economy Labeling NPRM for OMB Review 8

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Page 143 of 150 (OMB) for review under E.O. 12866 and any changes made in response to OMB recommendations have been documented as OMB requests in the docket for this action.

NHTSA is also subject to the Department of Transportation’s Regulatory Policies and Procedures. This proposed rule is also signi ficant within the meaning of the DOT Regulatory Policies and Procedures. E.O. 12866 also requires NHTSA to submit this action to OMB for review and document any changes made in response to OMB recommendations

In addition, EPA and NHTSA both prepared an analysis of the potential costs and benefits associated with this action. This analys is is available in Section VII of this document.

2. Paperwork Reduction Act

The information collection requirements in this proposed 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 2239.01. Since this is a joint proposal, the burden associated with these information collection requir ements could be attributed to either agency. However, since a significant portion of the burden result from new EPA testing requirements, EPA has agreed to assume respon sibility for the complete paperw ork burden. Both agencies will consider the comments submitted regarding these pot ential costs as part of their decision in the

final rule.

The information being collected is used by EPA to calculate the fuel economy estimates that appear on new automobile, light truck and medium-duty passenger vehicle sticker labels. EPA currently collects this information annually as part of its vehicle certification and fuel economy program, and will continue to do so. This proposed rule changes some of the content of the information submitted. Responses to this in formation collection are mandatory to obtain the benefit of vehicle certification under Title II of the Clean Air Act (42 U.S.C. 7521 et seq. ) and as required under Title III of the Motor Vehicle Information and Cost Savings Act (15 U.S.C. 2001

et seq. ). Information submitted by manufacturers is he ld as confidential until the specific vehicle to which it pertains is available for purchase. After vehicles are available for purchase, most information associated with the manufacturer’s application is available to the public. Under section 208 of the Clean Air Act (42 U.S.C. 7542(c)), all information, other than trade secret processes or methods, must be publicly available. Proprietary information is granted confidentiality in accordance with the Freedom of Information Act, EPA regulations at 40 CFR part 2, and class determinations issued by EPA’s Office of General Counsel.

The projected yearly increased cost within the three-year horizon of the pending information collection request is $2,812,000 including $2,286,000 in operations and maintenance costs and $526,000 in labor costs. The estimated number of likely respondent manufacturers is 35. Responses are submitted annually by engine family, with the number of responses per respondent varying widely depending on the number of engine families being certified. Under the current fuel economy information authorization, an average of 12.2 responses a year are approved for each of 33 respondents requiring 451.2 hours per response and 80 hours ofFuel Economy Labeling NPRM for OMB Review 8

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Page 144 of 150 recordkeeping at a total cost of $10,012 per response for an industry total of 184,127 hours and $4,274,932 million annually, including capital and operations and maintenance costs. Burden is defined at 5 CFR 1320.3(b).

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 cont rol number. The OMB control numbers for EPA's regulations in 40 CFR are listed in 40 CFR part 9.

To comment on the EPA's need for this information, the accuracy of the provided burden estimates, and any suggested methods for minimizing respondent burden, EPA has established a public docket for this rule, which includes th is ICR, under Docket ID number EPA-HQ-OAR2009-0865. Submit any comments related to the ICR to EPA and OMB. See ADDRESSES section at the beginning of this notice for where to submit comments to EPA. Send comments to OMB at the Office of Information and Regulatory Affairs, Office of Management and Budget, 725 17th Street, NW, Washington, DC 20503, Attention: Desk Office for EPA. Since OMB is required to make a decision concerning the ICR between 30 and 60 days after [Insert date of publication in the Federal Register.] , a comment to OMB is best assured of having its full effect if OMB receives it by [Insert date 30 days after publication in the Federal Register.]

. The final rule will respond to any OMB or public comments on the information collection requirements contained in this proposal.

3. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) generally re quires agencies 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 agencies certify that the rule will not have a significant economic impact on a substa ntial number of small entities. Small entities include small businesses, small organizati ons, and small governmental jurisdictions.

For purposes of assessing the impacts of this proposed rule on small entities, a small entity is defined as: (1) A small business as de fined by the Small Business Administration (SBA) by category of business using North America In dustrial Classification System (NAICS) and codified at 13 CFR 121.201; (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 VIII.B.3-1 provides an overview of the primary SBA small business categories included in the light-duty vehicle sector that are subject to the proposed rule:Fuel Economy Labeling NPRM for OMB Review 8

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Page 145 of 150 Table VIII.B.3-1 Primary SBA Small Business Categories in the Light-Duty Vehicle Sector

Industry Defined as small entity by SBA if less

than or equal to: NAICS Codes a

Light-duty vehicles:

- vehicle manufacturers

- independent commercial importers

- automobile dealers

- stretch limousine manufacturers and

hearse manufacturers 1,000 employees

$7 million annual sales
$23 million annual sales 100 employees

$29 million annual sales

1,000 employees 336111

811111, 811112, 811198

441120

423110

441110

336211

Notes:

a North American Industrial Classification System

After considering the economic impacts of today’s proposed rule on small entities, we certify that this action will not have a signifi cant economic impact on a substantial number of small entities. The small entities directly regulated by this proposed rule cover several two main types of small businesses including vehicle manufacturers, automobile dealers, limousine and hearse manufacturers, and independent commercial importers (ICIs). ICIs are companies that import used vehicles into the U.S. that must be certified for emissions compliance and labeled for fuel economy purposes. Small governmental jurisdictions and small organizations as described above will not be impacted. We have determined that the estimated effect of the proposed rule is to impact 1 small business vehicle manufacturer and 11 ICIs who currently certify vehicles with costs less than one percen t of revenues. These 12 companies represent all of the small businesses impacted by the proposed regulations. The proposed regulations will

have no new impact s on small business automobile dealers or small business limousine and

hearse manufacturers. An analysis of the impacts of the pr oposed rule on small businesses has been prepared and placed in the docket for this rulemaking. 203

Although this proposed rule will not have a significant impact on a substantial number of small entities, we nonetheless have tried to reduce th e impact of this rule on small entities. EPA is proposing to reduce the testing burden on ICIs that would be needed for the fuel economy label. Under the proposal, ICIs would be allowed to test over two driving cycles when determining the fuel economy estimate for the fuel economy label instead of testing over five driving cycles as required for vehicle manufacturers.

203 “Screening Analysis: Small Business Impacts from Re visions to Motor Vehicle Fuel Economy Label,” EPA

report, August 12 June 30 , 2010. Formatted: Font: 11 ptFuel Economy Labeling NPRM for OMB Review 8

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Page 146 of 150 Both agencies continue to be interested in the potential impacts of the proposed rule on

small entities and welcome comments on the small business analysis and other issues related to impacts on small businesses.

4. Unfunded Mandates Reform Act

This proposed rule does not contain a Federal mandate that may result in expenditures of $100 million (adjusted for inflation) or more for State, local, and tribal governments, in the aggregate, or the private sector in any one year. This rule contains no federal mandates for state, local, or tribal governments as defined by the provisions of Title II of the UMRA. The rule imposes no enforceable duties on any of these gov ernmental entities. Nothing in the rule would significantly or uniquely affect small governments. The proposed rule only affects vehicle manufacturers and the agencies estimate annual costs of less than $100 million (adjusted forinflation). EPA and NHTSA believe that the proposal represents the least costly, most costeffective approach to achieve the statutory requirements of the rule. The agencies’ estimated costs are provided in section VI. Thus, this rule is not subject to the requirements of sections 202 or 205

of UMRA.

This rule is also not subject to the requirements of section 203 of UMRA because it contains no regulatory requirements that might significantly or unique ly affect small governments. As noted above, the proposed rule only affects vehicle manufacturers.

5. Executive Order 13132: Federalism

This action does not have federalism implications. It will not 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, as specified in Executive Order 13132

. This rulemaking would apply to manufacturers of motor vehicles and not to state or local governments. Thus, Executive Order 13132 does not apply to

this action

. Although section 6 of Executive Order 13132 does not apply to this action, EPA and NHTSA did consult with representatives of st ate governments in developing this action.

In the spirit of Executive Order 13132, and consistent with the agencies’ policy to promote communications between Federal, State and local governments, the agencies specifically solicits comment on this proposed action from State and local officials.

6. 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 proposed rule would be implemented at the Federal level and imposes compliance costs only on vehicle manufacturers. Tribal governments would be affected only to the extent they purchase and use regulated vehicles. Thus, Executive Order 13175 does not apply to this action. The agencies specifically solicit additional comment on this proposed action from tribal officials.Fuel Economy Labeling NPRM for OMB Review 8

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Page 147 of 150 7. G. Executive Order 13045: Protection of Children from Environmental Health and Safety Risks

EPA and NHTSA interpret E.O. 13045 (62 FR 19885, April 23, 1997) as applying only to those regulatory actions that concern health or safety risks, such that the analysis required under section 5-501 of th e E.O. has the potential to influence the regulation. This action is not subject to E.O. 13045 because it does not establish an

environmental standard intended to mi tigate health or safety risks.

8. Executive Order 13211: Actions That Significantly Affect Energy Supply,

Distribution or Use

This action is not a “significant energy acti on” as defined in Executive Order 13211 (66 FR 28355 (May 22, 2001)), because it is not likely to have a significant adverse effect on the supply, distribution, or use of energy. The proposed regulations do not require manufacturers to improve or otherwise change the fuel economy of their vehicles. The purpose of this proposed regulation is to provide consumers with better information on which to base their vehicle purchasing decisions. Therefore, we have concluded that this rule is not likely to have any adverse energy effects.

9. National Technology Transfer Advancement Act

Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (“NTTAA”), Public Law No. 104-113 (15 U.S.C. 272 note) directs the agencies to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Volunt ary consensus standards are technical standards (e.g., materials specifications, test methods, samp ling procedures, and business practices) that are developed or adopted by voluntary consensus sta ndards bodies. NTTAA directs the agencies to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards.

EPA’s portion of this proposed rulemaking involves technical standards. EPA proposes to use elements of testing standards developed with the Society of Automotive Engineers (SAE). Where possible, EPA proposes to incorporate by reference portions of SAEJ1711, SAE J2841, and SAE J1634. At the time of this proposal, all the above SAE documents are either open for update or in the process of balloting prior to publishing. SAE reference documents can be

obtained at www.SAE.org . In the absence of final published reference documents, EPA is proposing procedures that may differ from final SAE procedures. Also, differences between EPA proposed procedures and final SAE procedures may be due to statutory or existing regulatory EPA requirements, worst case emissions testing re quirements by EPA, and the need for EPA to address policy concerns and concerns of manufacturers not involved in developing SAE procedures.Fuel Economy Labeling NPRM for OMB Review 8

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Page 148 of 150 EPA welcomes comments on this aspect of the proposed rulemaking and, specifically, invites the public to identify po tentially-applicable voluntary consensus standards and to explain why such standards should be used in this regulation.

10. 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 orenvironmental effects of their programs, policies, and activities on minority populations and lowincome populations in the United States.

The agencies have determined that this proposed rule will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations because it does not affect the level of protection provided to human health or the environment. The proposed regulations do not require manufacturers to improve or otherwise change the emissions control or fuel economy of their vehicles. The purpose of this proposed regulation is to provide consumers with better information on which to base their vehicle purchasing

decisions.

List of Subjects

40 CFR Part 86 Administrative practice and procedure, Confid ential business informat ion, Labeling, Motor vehicle pollution, Reporting and recordkeeping requirements.

40 CFR Part 600 Administrative practice and pro cedure, Electric power, Fuel economy, Labeling, Reporting and recordkeeping requirements.

Add NHTSA SubjectsFuel Economy Labeling NPRM for OMB Review 8

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Page 149 of 150 [Insert regs]Fuel Economy Labeling NPRM for OMB Review 8

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Page 150 of 150 Dated:

____________________ Ray LaHood, Secretary, Department of Transportation

Dated:

____________________ Lisa P. Jackson, Administrator, Environmental Protection Agency