Proposed Rulemaking to Establish2012-2016 Light-Duty Vehicle CAFEand GHG StandardsBriefing for Clean Air Act Advisory CommitteeOctober 7, 20092AgendaOverviewEPA CO2 StandardsKey Elements of Proposed Joint NationalProgramEstimated Costs and ImpactsNext Steps3OverviewOn September 15 EPA Administrator Jackson and DOT SecretaryLaHood signed a joint NPRM proposing closely-related standardsthat together comprise a National Program for reducing GHGemissions and improving fueleconomy of light-duty vehiclesThe National Program proposesstrong and coordinated federalGHG and CAFE standards for Model Year 2012-2016 vehiclesConsistent with the May 19, 2009 Joint Notice of IntentCoordinated national standards can provide regulatory certainty andconsistency for the auto industryWould avoid separate NHTSA, EPA, and state regulationsAutomakers could meet NHTSA, EPA, and California requirementswith a single national fleetNational Program will achieve substantial reductions in fuelconsumption and GHG emissionsTo a large extent, the joint proposal relies on joint technical andeconomic analyses and uses similar program design elements andcompliance provisions4EPA CO2StandardsEPA’s proposed standards estimatedto achieve a fleet-wide level of250 grams/mile of CO2in model year 2016Standards would phase in beginning in model year 2012Fleetwide CO2standard could be met partially through credits fromimproved air conditioner (A/C) operationA/C credits include CO2& hydrofluorocarbon (HFC) refrigerant reductionsHFC refrigerant is a powerful GHGThe 250 gram/mile CO2standard corresponds to 35.5 mpg“equivalent” if all reductionsresulted from fuel economyimprovementsNHTSA also proposed new CAFE standards which would lead to anestimated fleet average level of 34.1 mpg in 2016The difference between the EPA and NHTSA standardslies mostly in the airconditioning technologies manufacturers are projected to use5Robust Technical Analysis and Transparencyare Key Underpinnings of the Proposal6Standards are Footprint Attribute-basedVehicle TypeExample ModelsExample Model Footprint(sq. ft.)CO2Emissions Target(g/mi)Fuel Economy Target(mpg)Example Passenger CarsCompact carHonda Fit4021441.4Midsize carFord Fusion4623737.3Fullsize carChrysler 3005327032.8Example Light-duty TrucksSmall SUV4WD Ford Escape4426932.8MidsizecrossoverNissan Murano4928930.6MinivanToyota Sienna5531328.2Large pickuptruckChevy Silverado6735824.7Internal EPA Material - Do Not Cite or Quote - Deliberative Process7Proposed EPA CO2 Car andTruck Standard Curves:20025030035040030 35 40 45 50 55 60 65 70Footprint (sq feet)

CO2 (grams per mile)20122016`20025030035040030 35 40 45 50 55 60 65 70Footprint (sq feet)

CO2 (grams per mile)20122016Car standard curvesTruck standardcurves7Internal EPA Material - Do Not Cite or Quote - Deliberative Process8Proposed NHTSA MPG Car andTruck Standard Curves:20253035404535 40 45 50 55 60 65 70Footprint (sf)

Target (mpg)20112016201520142013201220253035404535 40 45 50 55 60 65 70Footprint (sf)

Target (mpg)201120162015201420132012Truck standard curvesCar standard curves9EPA Projected Fleet-wide CO2TargetsandAchieved LevelsThese values are the projected fleet-widetargetsunder the footprint-based approachand the projectedachieved levelsEPA projects that achieved levels for MY2012-2015 would be less stringent than thetargets due to a number of flexibilitiessuch as flexible fueled vehicle credits250 grams/mi CO2 = 35.5 mpg if all GHG reductions are achieved through fueleconomy improvementsTargets [g/mi CO2]20122013201420152016Passenger Cars261253246235224Light Trucks352341332317302Combined Cars & Trucks295286276263250Achieved [g/mi CO2]20122013201420152016Passenger Cars264254245232220Light Trucks365355346332311Combined Cars & Trucks302291281267250Car & Trucks MPG-equivalent*29.430.531.633.335.5* Note: MPG-equivalent if all GHG reductions come from fuel-economy improvements10NHTSA Projected Fleet-wide MPGTargetsandAchieved LevelsAchieved [mpg]20122013201420152016Passenger Cars32.533.434.335.336.5Light Trucks24.124.625.326.327.0Combined Cars & Trucks28.729.630.431.632.7Targets [mpg]2011(base)20122013201420152016Passenger Cars30.233.634.435.236.438.0Light Trucks24.125.025.626.227.128.3Combined Cars & Trucks27.329.830.631.432.634.1These values are the projected fleet-widetargetsunder the footprint-basedapproach and the projectedachieved levelsNHTSA projects that achieved levels for MY2012-2016 would be less stringentthan the targets due to a number of flexibilities such as flexible fueled vehiclecredits11EPA Program FlexibilitiesEmission banking and trading elementsFlex-fuel vehicle (FFV) creditsMY2012 – 2015 credits similar to CAFE,MY2016+ credits based on actual E85 fuel useAir conditioning HFC and CO2reductioncreditsEarly credit opportunities for doing betterthan California or CAFEAdvance technology creditsInnovative technology creditsEPA Program Flexibilities -OptionalTemporary Lead-time Allowance Alternative StandardsManufacturers with limited productlines and/or have traditionallypaid fines to NHTSA may be especially challenged technologicallyin the early years of the programUnder the Clean Air Act, manufacturers cannot pay fines in lieu ofcomplying with motor vehicle emissions standardsEPA is proposing an optional,temporary alternative standard,which is only slightly less stringent, and limited to the first fourmodel years (2012–2015) of the National ProgramAn option for companies with 2009 US sales <400,000 vehiclesA portion of a company’s fleet (for example 25,000 per year) couldmeet a less stringent standardequal to 1.25 times the primarystandard. Allotment cannot exceed 100,000 over the four yearsIntended to provide these manufacturers sufficient lead time to meetthe tougher model year 2016 greenhouse gas standardsWould preserve consumer choice of vehicles during this limited periodDesigned to discourage use of this flexibility by imposing severalrestrictionsEligible companies include all of the traditional CAFE fine-paying firms12Summary of Costs and Benefits13Proposed Standards do not require“next generation”technologies14Consumer ImpactsPayback period for Model Year 2016 vehicleLess than 3 years for buyers who pay cashFuel savings greater than loan paymentincrease by $130 to $160 each year for atypical 5-year loanLifetime savings of more than $3,000(usinga 3% discount rate)15Next Steps for Light-duty Joint ProposalNPRM published in Federal Register on Sept. 28Comment period ends on Nov. 27Three joint public hearingsOct. 21 in Detroit, Oct. 23 in New York, Oct. 27 in Los AngelesNHTSA also has issued an Environmental Impact Statement insupport of the CAFE standards45 day comment period ends November 9Separate public hearing October 30Goal for final rule is by end of March, 201016