Monday, 

March 30, 2009 

Part II 

Department of 

Transportation 

National Highway Traffic Safety 

Administration 

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

Average Fuel Economy Standards 

Passenger Cars and Light Trucks Model 

Year 2011; Final Rule 

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14196 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

DEPARTMENT OF TRANSPORTATION 

National Highway Traffic Safety 

Administration 

49 CFR Parts 523, 531, 533, 534, 536 

and 537 

[Docket No. NHTSA–2009–0062] 

RIN 2127–AK29 

Average Fuel Economy Standards 

Passenger Cars and Light Trucks 

Model Year 2011 

AGENCY: National Highway Traffic 

Safety Administration (NHTSA), 

Department of Transportation (DOT). 

ACTION: Final rule; record of decision. 

SUMMARY: The future of this country’s 

economy, security, and environment are 

linked to one key challenge: energy. To 

reduce fuel consumption, NHTSA has 

been issuing Corporate Average Fuel 

Economy (CAFE) standards since the 

late 1970’s under the Energy Policy and 

Conservation Act (EPCA). However, the 

principal effects of these standards are 

broader than their statutory purpose. 

Reducing fuel consumption conserves 

petroleum, a non-renewable energy 

source, saves consumers money, and 

promotes energy independence and 

security by reducing dependence on 

foreign oil. It also directly reduces the 

motor vehicle tailpipe emissions of 

carbon dioxide (CO2), which is the 

principal greenhouse gas emitted by 

motor vehicles. 

The Energy Independence and 

Security Act (EISA) amended EPCA by 

mandating that the model year (MY) 

2011–2020 CAFE standards be set 

sufficiently high to ensure that the 

industry-wide average of all new 

passenger cars and light trucks, 

combined, is not less than 35 miles per 

gallon by MY 2020. This is a minimum 

requirement, as NHTSA must set 

standards at the maximum feasible level 

in each model year. NHTSA will 

determine, based on all of the relevant 

circumstances, whether that additional 

requirement calls for establishing 

standards that reach the 35 mpg goal 

earlier than MY 2020. 

NHTSA published a proposal in May 

2008 to begin implementing EISA by 

establishing CAFE standards for MYs 

2011–2015. A draft final rule for those 

model years was completed, but not 

issued. 

In the context of his calls for the 

development of new national policies to 

prompt sustained domestic and 

international actions to address the 

closely intertwined issues of energy 

independence, energy security and 

climate change, the President issued a 

memorandum on January 26, 2009, 

requesting NHTSA to divide its 

rulemaking into two parts. First, he 

requested the agency to issue a final rule 

adopting CAFE standards for MY 2011 

only. Given the substantial time and 

analytical effort involved in developing 

CAFE standards and the limited amount 

of time before the statutory deadline of 

March 30, 2009 for establishing the MY 

2011 standards, the agency has 

necessarily based this one year final rule 

almost wholly on the information 

available to it and the analysis 

performed by it in support of the draft 

final rule completed last fall. 

Second, the President requested 

NHTSA to establish standards for MY 

2012 and later after considering the 

appropriate legal factors, the comments 

filed in response to the May 2008 

proposal, the relevant technological and 

scientific considerations, and, to the 

extent feasible, a forthcoming report by 

the National Academy of Sciences, 

mandated under section 107 of EISA, 

assessing existing and potential 

automotive technologies and costs that 

can practicably be used to improve fuel 

economy. The deferral of action on 

standards for the later model years 

provides the agency with an 

opportunity to review its approach to 

CAFE standard setting, including its 

methodologies, economic and 

technological inputs and 

decisionmaking criteria, so as to ensure 

that it will produce standards that 

contribute, to the maximum extent 

possible within the limits of EPCA/ 

EISA, to meeting the energy and 

environmental challenges and goals 

outlined by the President. 

NHTSA estimates that the MY 2011 

standards will raise the industry-wide 

combined average to 27.3 mpg, save 887 

million gallons of fuel over the lifetime 

of the MY 2011 cars and light trucks, 

and reduce CO2 emissions by 8.3 

million metric tons during that period. 

DATES: This final rule is effective May 

29, 2009. 

Petitions for reconsideration must be 

received by May 14, 2009. 

ADDRESSES: Petitions for reconsideration 

must be submitted to: Administrator, 

National Highway Traffic Safety 

Administration, 1200 New Jersey 

Avenue, SE., Washington, DC 20590. 

FOR FURTHER INFORMATION CONTACT: For 

policy and technical issues: Ms. Julie 

Abraham or Mr. Peter Feather, Office of 

Rulemaking, National Highway Traffic 

Safety Administration, 1200 New Jersey 

Avenue, SE., Washington, DC 20590. 

Telephone: Ms. Abraham (202) 366– 

1455; Mr. Feather (202) 366–0846. 

For legal issues: Mr. Stephen Wood or 

Ms. Rebecca Yoon, Office of the Chief 

Counsel, National Highway Traffic 

Safety Administration, 1200 New Jersey 

Avenue, SE., Washington, DC 20590. 

Telephone: (202) 366–2992. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Executive overview 

A. The President’s January 26, 2009 

Memorandum on CAFE Standards for 

Model Years 2011 and Beyond 

1. Rulemaking Background 

2. Requests in the President’s 

Memorandum 

(a) CAFE Standards for Model Year 2011 

(b) CAFE Standards for Model Years 2012 

and Beyond 

3. Implementing the President’s 

Memorandum 

B. Energy Independence and Security Act 

of 2007 

C. Notice of Proposed Rulemaking for MYs 

2011–2015 and Request for New Product 

Plans 

1. Key Economic Values for Benefits 

Computations and Standard Setting 

2. Standards 

(a) Classification of Vehicles 

(b) Stringency 

(c) Benefits and Costs 

(i) Benefits 

(ii) Costs 

(d) Effect of Flexibilities on Benefits and 

Costs 

3. Credits 

4. Preemption 

D. Brief Summary of Public Comments on 

the NPRM 

E. New Information Received or Developed 

by NHTSA Between the NPRM and Final 

Rule 

1. New Manufacturer Product Plans 

2. Revised Assessment of Technology 

Effectiveness and Costs 

3. Final Environmental Impact Statement 

F. Final Rule for MY 2011 

1. Introduction 

2. Key Economic Values for Benefits 

Computations 

3. Standards 

(a) Classification 

(b) Stringency 

(c) Benefits and Costs 

(i) Benefits 

(ii) Costs 

(d) Flexibilities 

4. Credits 

5. Preemption 

II. Background 

A. Role of Fuel Economy Improvements in 

Promoting Energy Independence, Energy 

Security, and a Low Carbon Economy 

B. Contributions of Fuel Economy 

Improvements to CO2 Tailpipe Emission 

Reductions Since 1975 

C. Chronology of Events Since the National 

Academy of Sciences Called for 

Reforming and Increasing CAFE 

Standards 

1. National Academy of Sciences Issues 

Report on Future of CAFE Program 

(February 2002) 

(a) Significantly Increasing CAFE 

Standards Without Making Them 

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Attribute-Based Would Adversely Affect 

Safety 

(b) Climate Change and Other Externalities 

Justify Increasing the CAFE Standards 

2. NHTSA Issues Final Rule Establishing 

Attribute-Based CAFE Standards for MY 

2008–2011 Light Trucks (March 2006) 

3. Supreme Court Issues Decision in 

Massachusetts v. EPA (April 2007) 

4. NHTSA and EPA Coordinate on 

Development of Rulemaking Proposals 

(Summer–Fall 2007) 

5. Ninth Circuit Issues Decision Re Final 

Rule for MY 2008–2011 Light Trucks 

(November 2007) 

6. Congress Enacts Energy Security and 

Independence Act of 2007 (December 

2007) 

7. NHTSA Proposes CAFE Standards for 

MYs 2011–2015 and Requests New 

Product Plans for Those Years (April 

2008) 

8. NHTSA Contracts With ICF International 

To Conduct Climate Modeling and Other 

Analyses in Support of Draft and Final 

Environmental Impact Statements (May 

2008) 

9. Manufacturers Submit New Product 

Plans (June 2008) 

10. NHTSA Contracts With Ricardo To Aid 

in Assessing Public Comments On Cost 

and Effectiveness of Fuel Saving 

Technologies (June 2008) 

11. Ninth Circuit Revises Its Decision Re 

Final Rule for MY 2008–2011 Light 

Trucks (August 2008) 

12. NHTSA Releases Final Environmental 

Impact Statement (October 2008) 

13. Office of Information and Regulatory 

Affairs Completes Review of a Draft MY 

2011–2015 Final Rule (November 2008) 

14. Department of Treasury Extends Loans 

to General Motors and Chrysler 

(December 2008) 

15. Department of Transportation Decides 

Not To Issue MY 2011–2015 Final Rule 

(January 2009) 

16. The President Requests NHTSA To 

Issue Final Rule for MY 2011 Only 

(January 2009) 

17. General Motors and Chrysler Submit 

Restructuring Reports to Department of 

Treasury (February 2009) 

D. Energy Policy and Conservation Act, as 

Amended 

1. Vehicles Subject to Standards for 

Automobiles 

2. Mandate To Set Standards for 

Automobiles 

3. Attribute-Based Standards 

4. Factors Considered in the Setting of 

Standards 

(a) Factors That Must Be Considered 

(i) Technological Feasibility 

(ii) Economic Practicability 

(iii) The Effect of Other Motor Vehicle 

Standards of the Government on Fuel 

Economy 

(iv) The Need of the United States To 

Conserve Energy 

1. Fuel Prices and the Value of Saving Fuel 

2. Petroleum Consumption and Import 

Externalities 

3. Air Pollutant Emissions 

(v) Other Factors—Safety 

(b) Factors That Cannot Be Considered 

(c) Weighing and Balancing of Factors 

5. Consultation in Setting Standards 

6. Test Procedures for Measuring Fuel 

Economy 

7. Enforcement and Compliance Flexibility 

III. The Anticipated Vehicles in the MY 2011 

Fleets and NHTSA’s Baseline Market 

Forecast 

A. Why does NHTSA establish a baseline 

market forecast? 

B. How does NHTSA develop the baseline 

market forecast? 

1. NHTSA first asks manufacturers for 

updated product plan data 

(a) Why does NHTSA use manufacturer 

product plans to develop the baseline? 

(b) What product plan data did NHTSA use 

in the NPRM? 

(c) What product plan data did NHTSA 

receive for the final rule? 

(d) How is the product plan data received 

for the final rule different from what the 

agency used in the NPRM analysis, and 

how does it impact the baseline? 

2. Once NHTSA has the product plans, 

how does it develop the baseline? 

3. How does NHTSA’s market forecast 

reflect current market conditions? 

IV. Fuel Economy-Improving Technologies 

A. NHTSA Analyzes What Technologies 

Can Be Applied Beyond Those in the 

Manufacturers’ Product Plans 

B How NHTSA Decides Which 

Technologies To Include 

1. How NHTSA Did This Historically, and 

How for the NPRM 

2. NHTSA’s Contract With Ricardo for the 

Final Rule 

C. What technology assumptions has 

NHTSA used for the final rule? 

1. How do NHTSA’s technology 

assumptions in the final rule differ from 

those used in the NPRM? 

2. How are the technologies applied in the 

model? 

3. Technology Application Decision Trees 

4. Division of Vehicles Into Subclasses 

Based on Technology Applicability, Cost 

and Effectiveness 

5. How did NHTSA develop technology 

cost and effectiveness estimates for the 

final rule? 

6. Learning Curves 

7. Technology Synergies 

8. How does NHTSA use full vehicle 

simulation? 

9. Refresh and Redesign Schedule 

10. Phase-In Caps 

D. Specific Technologies Considered for 

Application and NHTSA’s Estimates of 

Their Incremental Costs and 

Effectiveness 

1. What data sources did NHTSA evaluate? 

2. Individual Technology Descriptions and 

Cost/Effectiveness Estimates 

(a) Gasoline Engine Technologies 

(i) Overview 

(ii) Low Friction Lubricants (LUB) 

(iii) Engine Friction Reduction (EFR) 

(iv) Variable Valve Timing (VVT) 

1. Intake Cam Phasing (ICP) 

2. Coupled Cam Phasing (CCPS and CCPO) 

3. Dual Cam Phasing (DCP) 

(v) Discrete Variable Valve Lift (DVVLS, 

DVVLD, DVVLO) 

(vi) Continuously Variable Valve Lift 

(CVVL) 

(vii) Cylinder Deactivation (DEACS, 

DEACD, DEACO) 

(viii) Conversion to Double Overhead 

Camshaft Engine With Dual Cam Phasing 

(CDOHC) 

(ix) Stoichiometric Gasoline Direct 

Injection (SGDI) 

(x) Combustion Restart (CBRST) 

(xi) Turbocharging and Downsizing 

(TRBDS) 

(xii) Cooled Exhaust Gas Recirculation 

Boost (EGRB) 

(b) Diesel Engine Technologies 

(i) Diesel Engine With Lean NOX Trap 

(LNT) Catalyst After-Treatment 

(ii) Diesel Engine With Selective Catalytic 

Reduction (SCR) After-Treatment 

(c) Transmission Technologies 

(i) Improved Transmission Controls and 

Externals (IATC) 

(ii) Automatic 6-, 7- and 8-Speed 

Transmissions (NAUTO) 

(iii) Dual Clutch Transmissions/Automated 

Manual Transmissions (DCTAM) 

(iv) Continuously Variable Transmission 

(CVT) 

(v) 6-Speed Manual Transmissions (6MAN) 

(d) Hybrid and Electrification/Accessory 

Technologies 

(i) Overview 

(ii) Hybrid System Sizing and Cost 

Estimating Methodology 

(iii) Electrical Power Steering (EPS) 

(iv) Improved Accessories (IACC) 

(v) 12V Micro Hybrid (MHEV) 

(vi) High Voltage/Improved Alternator 

(HVIA) 

(vii) Integrated Starter Generator (ISG) 

(viii) Power Split Hybrid 

(ix) 2-Mode Hybrid 

(x) Plug-In Hybrid 

(e) Vehicle Technologies 

(i) Material Substitution (MS1, MS2, MS5) 

(ii) Low Drag Brakes (LDB) 

(iii) Low Rolling Resistance Tires (ROLL) 

(iv) Front or Secondary Axle Disconnect 

for Four-Wheel Drive Systems (SAX) 

(v) Aerodynamic Drag Reduction (AERO) 

(f) Technologies Considered But Not 

Included in the Final Rule Analysis 

(i) Camless Valve Actuation 

(ii) Lean-Burn Gasoline Direct Injection 

Technology 

(iii) Homogeneous Charge Compression 

Ignition 

(iv) Electric Assist Turbocharging 

E. Cost and Effectiveness Tables 

V. Economic Assumptions Used in NHTSA’s 

Analysis 

A. Introduction: How NHTSA Uses the 

Economic Assumptions in Its Analysis 

B. What economic assumptions does 

NHTSA use in its analysis? 

1. Determining Retail Price Equivalent 

2. Potential Opportunity Costs of Improved 

Fuel Economy 

3. The On-Road Fuel Economy ‘Gap’ 

4. Fuel Prices and the Value of Saving Fuel 

5. Consumer Valuation of Fuel Economy 

and Payback Period 

6. Vehicle Survival and Use Assumptions 

7. Growth in Total Vehicle Use 

8. Accounting for the Rebound Effect of 

Higher Fuel Economy 

9. Benefits From Increased Vehicle Use 

10. Added Costs From Congestion, Crashes, 

and Noise 

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1Record of OIRA’s action can be found at 

http://www.reginfo.gov/public/do/ 

eoHistReviewSearch (last visited March 8, 2009). To 

find the report on the clearance of the draft final 

rule, select ‘‘Department of Transportation’’ under 

‘‘Economically Significant Reviews Completed’’ 

and select ‘‘2008’’ under ‘‘Select Calendar Year.’’ 

11. Petroleum Consumption and Import 

Externalities 

12. Air Pollutant Emissions 

(a) Impacts on Criteria Pollutant Emissions 

(b) Reductions in CO2 Emissions 

(c) Economic Value of Reductions in CO2

Emissions 

13. The Value of Increased Driving Range 

14. Discounting Future Benefits and Costs 

15. Accounting for Uncertainty in Benefits 

and Costs 

VI. How NHTSA Sets the CAFE Standards 

A. Which attributes does NHTSA use to 

determine the standards? 

B. Which mathematical function does 

NHTSA use to set the standards? 

C. What other types of standards did 

commenters propose? 

D. How does NHTSA fit the curve and 

estimate the stringency that maximizes 

net benefits to society? 

E. Why has NHTSA used the Volpe model 

to support its analysis? 

VII. Determining the Appropriate Level of the 

Standards 

A. Analyzing the Preferred Alternative 

B. Alternative Levels of Stringency 

Considered for Establishment as the 

Maximum Feasible Level of Average 

Fuel Economy 

C. EPCA Provisions Relevant to the 

Selection of the Final Standards 

1. 35 in 2020 

2. Annual Ratable Increase 

3. Maximum Feasibility and the Four 

Underlying EPCA Considerations 

(a) Technological Feasibility 

(b) Economic Practicability 

(c) Effect of Other Motor Vehicle Standards 

of the Government on Fuel Economy 

(d) Need of the United States To Conserve 

Energy 

(i) Consumer Cost 

(ii) National Balance of Payments 

(iii) Environmental Implications 

(iv) Foreign Policy Considerations 

4. Comparison of Alternatives 

5. Other Considerations Under EPCA 

(a) Safety 

(b) AMFA Credits 

(c) Flexibility Mechanisms: Credits, Fines 

D. Analysis of Environmental 

Consequences in Selecting the Final 

Standards 

E. Picking the Final Standards 

1. Eliminating the Alternatives Facially 

Inconsistent With EPCA 

(a) No-Action Alternative 

(b) Technology Exhaustion Alternative 

2. Choosing Among the Remaining 

Alternatives 

(a) Difficulty and Importance of Achieving 

a Reasonable Balancing of the Factors 

(b) The Correct Balancing of the Factors for 

Setting the MY 2011 Standards Is To 

Maximize Societal Net Benefits 

VIII. Safety 

A. Summary of NHTSA’s Approach in This 

Final Rule 

B. Background 

1. NHTSA’s Early Studies 

2. The 2002 National Academy of Sciences 

Study 

3. NHTSA’s updated 2003 Study 

4. Summary of Studies Prior to This 

Rulemaking 

B. Response to Comments in This 

Rulemaking on Safety and Vehicle 

Weight 

1. Views of Other Government Agencies 

2. Comments From Other Parties 

C. Comments on Other Issues Related to 

Safety 

1. Vehicle Compatibility Design Issues 

2. Whether Manufacturers Downweight in 

Response to Increased CAFE Stringency 

3. Whether Flat Standards Are More or 

Less Harmful to Safety Than FootprintBased Standards 

4. Whether NHTSA Should Set Identical 

Targets for Passenger Cars and Light 

Trucks for Safety Reasons 

5. Whether NHTSA Should Have 

Considered the 2002 NAS Report Dissent 

in Deciding Not To Apply Material 

Substitution for Vehicles Under 5,000 

Pounds 

IX. The Final Fuel Economy Standards for 

MY 2011 

A. Final Passenger Car Standard 

B. Final Light Truck Standard 

C. Energy and Environmental Backstop 

D. Combined Fleet Performance 

E. Costs and Benefits of Final Standards 

1. Benefits 

2. Costs 

F. Environmental Impacts of Final 

Standards 

X. Other Fuel Economy Standards Required 

by EISA 

XI. Vehicle Classification 

A. Summary of Comments 

B. Response to Comments 

1. This Rule Substantially Tightens 

NHTSA’s Vehicle Classification 

Definitions 

(a) Under § 523.5(b), Only Vehicles That 

Actually Have 4WD Will Be Classified as 

4WD Vehicles 

(b) The Final Rule Amends § 523.5(a)(4) To 

Prevent Gaming That Might Jeopardize 

Fuel Savings Created by NHTSA’s 

Clarified Position on 2WD Vehicles 

2. Especially as Tightened by This Rule, 

NHTSA’s Classification Definitions Are 

More Difficult to Game Than 

Commenters Suggest 

3. Additional Changes in NHTSA’s 

Classification Definitions Would Not 

Result in Greater Fuel Savings and 

Lower CO2 Emissions 

4. The Vehicle Classification Definitions 

Embodied in This Final Rule Are 

Consistent With NHTSA’s Statutory 

Authority and Respond to the Ninth 

Circuit’s Opinion 

XII. Flexibility Mechanisms and Enforcement 

A. NHTSA’s Request for Comment 

Regarding Whether the Agency Should 

Consider Raising the Civil Penalty for 

CAFE Non-Compliance 

B. CAFE Credits 

C. Extension and Phasing Out of FlexibleFuel Incentive Program 

XIII. Test Procedure for Measuring 

Wheelbase and Track Width and 

Calculating Footprint 

A. Test Procedure Execution 

B. Measured Value Tolerances 

C. Administrative and Editorial Issues 

XIV. Sensitivity and Monte Carlo Analysis 

XV. NHTSA’s Record of Decision 

XVI. Regulatory Notices and Analyses 

A. Executive Order 12866 and DOT 

Regulatory Policies and Procedures 

B. National Environmental Policy Act 

1. Clean Air Act (CAA) 

2. National Historic Preservation Act 

(NHPA) 

3. Executive Order 12898 (Environmental 

Justice) 

4. Fish and Wildlife Conservation Act 

(FWCA) 

5. Coastal Zone Management Act (CZMA) 

6. Endangered Species Act (ESA) 

7. Floodplain Management (Executive 

Order 11988 & DOT Order 5650.2) 

8. Preservation of the Nation’s Wetlands 

(Executive Order 11990 & DOT Order 

5660.1a) 

9. Migratory Bird Treaty Act (MBTA), Bald 

and Golden Eagle Protection Act 

(BGEPA), Executive Order 13186 

10. Department of Transportation Act 

(Section 4(f)) 

C. Regulatory Flexibility Act 

D. Executive Order 13132 (Federalism) 

E. Executive Order 12988 (Civil Justice 

Reform) 

F. Unfunded Mandates Reform Act 

G. Paperwork Reduction Act 

H. Regulation Identifier Number (RIN) 

J. Executive Order 13045 

K. National Technology Transfer and 

Advancement Act 

L. Executive Order 13211 

M. Department of Energy Review 

N. Privacy Act 

XVII. Regulatory Text 

I. Executive Overview 

A. The President’s January 26, 2009 

Memorandum on CAFE Standards for 

Model Years 2011 and Beyond 

1. Rulemaking Background 

On May 2, 2008, NHTSA published a 

Notice of Proposed Rulemaking entitled 

Average Fuel Economy Standards, 

Passenger Cars and Light Trucks; Model 

Years 2011–2015, 73 FR 24352. In midOctober, the agency completed and 

released a final environmental impact 

statement in anticipation of issuing 

standards for those years. Based on its 

consideration of the public comments 

and other available information, 

including information on the financial 

condition of the automotive industry, 

the agency adjusted its analysis and the 

standards and prepared a final rule for 

MYs 2011–2015. On November 14, the 

Office of Information and Regulatory 

Affairs (OIRA) of the Office of 

Management and Budget cleared the 

rule as consistent with the Order.1

However, issuance of the final rule was 

held in abeyance. On January 7, 2009, 

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2The statement can be found at http:// 

www.dot.gov/affairs/dot0109.htm (last accessed 

February 11, 2009). 

3Currently, the National Highway Traffic Safety 

Administration does not have an Administrator. 

Ronald L. Medford is the Acting Deputy 

Administrator. 

the Department of Transportation 

announced that the final rule would not 

be issued, saying: 

The Bush Administration will not finalize 

its rulemaking on Corporate Fuel Economy 

Standards. The recent financial difficulties of 

the automobile industry will require the next 

administration to conduct a thorough review 

of matters affecting the industry, including 

how to effectively implement the Energy 

Independence and Security Act of 2007 

(EISA). The National Highway Traffic Safety 

Administration has done significant work 

that will position the next Transportation 

Secretary to finalize a rule before the April 

1, 2009 deadline.2

2. Requests in the President’s 

Memorandum 

In light of the requirement to 

prescribe standards for MY 2011 by 

March 30, 2009 and in order to provide 

additional time to consider issues 

concerning the analysis used to 

determine the appropriate level of 

standards for MYs 2012 and beyond, the 

President issued a memorandum on 

January 26, 2009, requesting the 

Secretary of Transportation and 

Administrator 3 of the National Highway 

Traffic Safety Administration NHTSA to 

divide the rulemaking into two parts: (1) 

MY 2011 standards, and (2) standards 

for MY 2012 and beyond. 

(a) CAFE Standards for Model Year 2011 

The request that the final rule 

establishing CAFE standards for MY 

2011 passenger cars and light trucks be 

prescribed by March 30, 2009 was based 

on several factors. One was the 

requirement that the final rule regarding 

fuel economy standards for a given 

model year must be adopted at least 18 

months before the beginning of that 

model year (49 U.S.C. 32902(g)(2)). The 

other was that the beginning of MY 2011 

is considered for the purposes of CAFE 

standard setting to be October 1, 2010. 

As part of that final rule, the President 

requested that NHTSA consider whether 

any provisions regarding preemption are 

consistent with the EISA, the Supreme 

Court’s decision in Massachusetts v. 

EPA and other relevant provisions of 

law and the policies underlying them. 

(b) CAFE Standards for Model Years 

2012 and Beyond 

The President requested that, before 

promulgating a final rule concerning the 

model years after model year 2011, 

NHTSA 

[C]onsider the appropriate legal factors 

under the EISA, the comments filed in 

response to the Notice of Proposed 

Rulemaking, the relevant technological and 

scientific considerations, and to the extent 

feasible, the forthcoming report by the 

National Academy of Sciences mandated 

under section 107 of EISA. 

In addition, the President requested 

that NHTSA further consider whether 

any provisions regarding preemption are 

appropriate under applicable law and 

policy. 

3. Implementing the President’s 

Memorandum 

In keeping with the President’s 

remarks on January 26 for new national 

policies to address the closely 

intertwined issues of energy 

independence, energy security and 

climate change, and for the initiation of 

serious and sustained domestic and 

international action to address them, 

NHTSA will develop CAFE standards 

for MY 2012 and beyond only after 

collecting new information, conducting 

a careful review of technical and 

economic inputs and assumptions, and 

standard setting methodology, and 

completing new analyses. 

For MY 2011, however, time 

limitations precluded the adoption of 

this approach. As noted above, EPCA 

requires that standards for that model 

year be established by the end of March 

of this year. Thus, immediate decisions 

had to be made about the establishment 

of the MY 2011 standards. There was 

insufficient time between the issuance 

of the President’s memorandum in late 

January and the end of March to revisit 

and, if and as appropriate, revise the 

extensive and complex analysis in any 

substantively significant way. This is 

particularly so given the requirement 

under EPCA to consult with the 

Environmental Protection Agency and 

the Department of Energy on these 

complicated and important technical 

matters. Decisions regarding those 

matters potentially affect not just 

NHTSA’s CAFE rulemaking, but also 

programs of other departments and 

agencies. Accordingly, the 

methodologies, economic and 

technological inputs and 

decisionmaking criteria used in this rule 

are necessarily largely those developed 

by NHTSA in the fall of 2008. 

In looking ahead to the next CAFE 

rulemaking, the agency emphasizes that 

while the methodologies, economic and 

technological inputs and 

decisionmaking criteria used in this rule 

were well-supported choices for the 

purposes of the MY 2011 rulemaking, 

they were not the only reasonable 

choices that the agency could have 

made for that purpose. Many of the key 

aspects of this rulemaking reflect 

decisions among several reasonable 

alternatives. The choices made in the 

context of last fall may or may not be 

the choices that will be made in the 

context of the follow-on rulemaking. 

The deferral of action on the CAFE 

standards for the years after MY 2011 

provides the agency with an 

opportunity to review its approach to 

CAFE standard setting, including its 

methodologies, economic and 

technological inputs, and 

decisionmaking criteria. It is reasonable 

to anticipate that this process may lead 

to changes, given the further review and 

analysis that will be conducted 

pursuant to the President’s request, and 

given the steady and potentially 

substantial evolution in technical and 

policy factors relevant to the next CAFE 

rulemaking. These factors include, but 

are not limited to, energy and climate 

change needs and policy choices 

regarding goals and approaches to 

achieving them, developments in 

domestic legislation and international 

negotiations regarding those goals and 

approaches, the financial health of the 

industry, technologies for reducing fuel 

consumption, fuel prices, and climate 

change science and damage valuation. 

The goal of the review and reevaluation will be to ensure that the 

approach used for MY 2012 and 

thereafter produces standards that 

contribute, to the maximum extent 

possible under EPCA/EISA, to meeting 

the energy and environmental 

challenges and goals outlined by the 

President. We will seek to craft our 

program with the goal of creating the 

maximum incentives for innovation, 

providing flexibility to the regulated 

parties, and meeting the goal of making 

substantial and continuing reductions in 

the consumption of fuel. To that end, 

we are committed to ensuring that the 

CAFE program for beyond MY 2011 is 

based on the best scientific, technical, 

and economic information available, 

and that such information is developed 

in close coordination with other federal 

agencies and our stakeholders, 

including the states and the vehicle 

manufacturers. 

We will also re-examine EPCA, as 

amended by EISA, to consider whether 

additional opportunities exist for 

achieving the President’s goals. For 

example, EPCA authorizes, within 

relatively narrow limits and subject to 

making specified findings, for 

increasing the amount of civil penalties 

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14200 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

4Under 49 U.S.C. 32904(c), EPA must ‘‘use the 

same procedures for passenger automobiles the 

Administrator used for model year 1975 (weighted 

55 percent urban cycle and 45 percent highway 

cycle), or procedures that give comparable results.’’ 5 49 U.S.C. 32912(c). 

6Public Law 110–140, 121 Stat. 1492 (Dec. 18, 

2007). 7Although NHTSA previously established an 

attribute-based standard for MY 2011 light trucks in 

its 2006 final rule, EISA mandates a new 

rulemaking, reflecting new statutory considerations 

and a new administrative record, and consistent 

with EPCA as amended by EISA, to establish the 

standard for those light trucks. 

8 73 FR 24352, May 2, 2008. In a separate notice 

published on the same day, the agency requested 

automobile manufacturers to submit new product 

plans for MYs 2011–15. 73 FR 24190. 

9Although Table V–3 Economic Values for 

Benefits Computations in the NPRM indicated that 

all of the values in that table were 2006$, several 

values were actually in 2005$. Thus, the 

monopsony component, which was shown in that 

table as $0.176, should have been shown as $0.182. 

Likewise, the price shock component should have 

been $0.113, instead of $0.109. The sum of those 

two values should have been $0.295, not $0.285. 

for violating the CAFE standards.4

Further, while EPCA prohibits updating 

the test procedures used for measuring 

passenger car fuel economy, it places no 

such limitation on the test procedures 

for light trucks.5 If the test procedures 

used for light trucks were revised to 

provide for the operation of air 

conditioning during fuel economy 

testing, vehicle manufacturers would 

have a regulatory incentive to increase 

the efficiency and reduce the weight of 

air conditioning systems, thereby 

reducing fuel consumption and tailpipe 

emissions of CO2. 

In response to the President’s request 

that NHTSA consider whether any 

provisions regarding preemption are 

consistent with EISA, the Supreme 

Court’s decision in Massachusetts v. 

EPA and other relevant provisions of 

law and the policies underlying them, 

NHTSA has decided not to include any 

provisions addressing preemption in the 

Code of Federal Regulations at this time. 

The agency will re-examine the issue of 

preemption in the content of its 

forthcoming rulemaking to establish 

Corporate Average Fuel Economy 

standards for 2012 and later model 

years. 

B. Energy Independence and Security 

Act of 2007 

The mandates in the Energy 

Independence and Security Act of 2007 

(EISA) 6 for reducing fuel consumption 

by motor vehicles and expanding the 

production of renewable fuels represent 

major steps forward in promoting 

energy independence and security and 

in addressing climate change risks by 

reducing CO2 emissions. EISA requires 

the first statutory increase in fuel 

economy standards for passenger 

automobiles (referred to below as 

‘‘passenger cars’’) since those standards 

were originally mandated in 1975. It 

also includes an important reform— 

switching to ‘‘attribute-based 

standards.’’ This switch will help to 

ensure that increased fuel efficiency 

does not come at the expense of 

automotive safety. 

More specifically, EISA made a 

number of important changes to EPCA. 

EISA: 

• Establishes a statutory mandate to 

establish passenger car standards for 

each model year at the maximum 

feasible level and eliminates the old 

statutory default standard of 27.5 mpg 

for passenger cars and the provision 

giving us discretion to amend that 

default standard. Thus, given that there 

will no longer be a default standard, the 

agency must act affirmatively to 

establish a new passenger car standard 

for each model year. 

• Retains the requirement to establish 

separate standards for passenger cars 

and light trucks and to set them at the 

maximum feasible level, but sets forth 

special requirements for the MY 2011– 

2020 standards. 

• The standards must increase ratably 

each year and, at a minimum, be set 

sufficiently high to ensure that the 

average fuel economy of the combined 

industry-wide fleet of all new passenger 

cars and light trucks sold in the United 

States during MY 2020 is at least 35 

mpg.7

• Mandates the reforming of CAFE 

standards for passenger cars by 

requiring that all CAFE standards be 

based on one or more vehicle attributes 

related to fuel economy (like size or 

weight). Fuel economy targets are set for 

individual vehicles and increase as the 

attribute decreases and vice versa. For 

example, size-based (i.e., size-indexed) 

standards assign higher fuel economy 

targets to smaller vehicles and lower 

ones to larger vehicles. Use of this 

approach helps to ensure that the 

improvements in fuel economy do not 

come at the expense of safety. NHTSA 

pioneered that approach in its last 

rulemaking on CAFE standards for light 

trucks. 

• Requires that for each model year, 

beginning with MY 2011, each 

manufacturer’s domesticallymanufactured passenger car fleet must 

achieve a measured average fuel 

economy that is not less than 92 percent 

of the average fuel economy of the 

combined industry-wide fleet of 

domestic and non-domestic passenger 

cars sold in the United States in that 

model year. 

• Limits to five the number of model 

years for which standards can be 

established in a single rulemaking. 

• Provides greater flexibility for 

automobile manufacturers by (a) 

increasing from three to five the number 

of years that a manufacturer can carry 

forward the compliance credits it earns 

by exceeding CAFE standards, (b) 

allowing a manufacturer to transfer the 

credits it has earned from one of its 

compliance categories of automobiles to 

another class, and (c) authorizing the 

trading of credits between 

manufacturers. 

C. Notice of Proposed Rulemaking for 

MYs 2011–2015 and Request for New 

Product Plans 

1. Key Economic Values for Benefits 

Computations and Standard Setting 

NHTSA’s analysis of the proposed 

and alternative CAFE standards in the 

Notice of Proposed Rulemaking 

(NPRM) 8 relied on a range of 

information, economic estimates, and 

input parameters. These economic 

assumptions play a role in the 

determination of the level of the 

standards, with some having greater 

impacts than others. The cost of 

technologies, the price of gasoline, and 

discount rate used for discounting 

future benefits had the greatest 

influence over the level of the 

standards. In order of impact, the full 

list of the economic assumptions is as 

follows: (1) Technology cost; (2) fuel 

prices; (3) discount rate; (4) oil import 

externalities; (5) rebound effect; (6) 

criteria air pollutant damage costs; (7) 

carbon costs. The table below shows the 

NPRM assumptions on which the 

agency received the most extensive 

public comment. 

TABLE I–1—NPRM KEY ECONOMIC VALUES FOR BENEFITS COMPUTATIONS (2006$) 9

Fuel Prices (average retail gasoline price per gallon, 2011–30) ................................................................................................................ $2.34 

Discount Rate Applied to Future Benefits ................................................................................................................................................... 7% 

Economic Costs of Oil Imports ($/gallon): 

‘‘Monopsony’’ Component .................................................................................................................................................................... $0.182 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14201 

10The externalities included in our analysis do 

not, however, include those associated with the 

reduction of the other GHG emitted by automobiles, 

i.e., methane (CH4), nitrous oxide (N2O), and 

hydroflurocarbons (HFCs). Actual air conditioner 

operation is not included in the test procedures 

used to obtain both (1) emission rates for purposes 

of determining compliance with EPA criteria 

pollutant emission standards and (2) fuel economy 

values for purposes of determining compliance with 

NHTSA CAFE standards, although air conditioner 

operation is included in ‘‘supplemental’’ federal 

test procedures used to determine compliance with 

corresponding and separate EPA criteria pollutant 

emission standards. As noted above, EPCA 

precludes basing passenger car standards on those 

other test procedures, but places no such limit on 

the test procedures used as the basis for light truck 

standards. 

11 Given the contributions made by CAFE 

standards to addressing not only energy 

independence and security, but also to reducing 

tailpipe emissions of CO2, fleet performance was 

stated in the above discussion both in terms of fuel 

economy and the associated reductions in tailpipe 

emissions of CO2 since the CAFE standards would 

have the practical effect of limiting those emissions 

approximately to the indicated levels during the 

official CAFE test procedures established by EPA. 

The relationship between fuel consumption and 

carbon dioxide emissions is discussed ubiquitously, 

such as at www.fueleconomy.gov, a fuel economyrelated web site managed by DOE and EPA (see 

http://www.fueleconomy.gov/feg/contentIncludes/ 

co2_inc.htm, which provides a rounded value of 20 

pounds of CO2 per gallon of gasoline). (Last 

accessed March 8, 2009.) The CO2 emission rates 

shown were based on gasoline characteristics. 

Because diesel fuel contains more carbon (per 

gallon) than gasoline, the presence of diesel engines 

in the fleet—which NHTSA expects to increase in 

response to the proposed CAFE standards—will 

cause the actual CO2 emission rate corresponding 

to any given CAFE level to be slightly higher than 

shown here. (The agency projected that 4 percent 

of the MY 2015 passenger car fleet and 10 percent 

of the MY 2015 light truck fleet would have diesel 

engines.) Conversely (and hypothetically), applying 

the same CO2 emission standard to both gasoline 

and diesel vehicles would discourage 

manufacturers from improving diesel engines, 

which show considerable promise as a means to 

improve fuel economy. 

TABLE I–1—NPRM KEY ECONOMIC VALUES FOR BENEFITS COMPUTATIONS (2006$) 9—Continued 

Price Shock Component ....................................................................................................................................................................... $0.113 

Military Security Component ................................................................................................................................................................ ................

Total Economic Costs ................................................................................................................................................................... $0.295 

Emission Damage Costs: 

Carbon Dioxide ($/metric ton) .............................................................................................................................................................. $7.00 

Annual Increase in CO2 Damage Cost ................................................................................................................................................ 2.4% 

2. Standards 

(a) Classification of Vehicles 

In the NPRM, the agency classified 

the vehicles subject to the proposed 

standards as passenger cars or as light 

trucks in the same way that the vehicles 

had been traditionally classified under 

the CAFE program. In particular, sport 

utility vehicles (SUVs), mini-vans and 

pickup trucks were classified as light 

trucks. However, the agency raised the 

possibility of reclassifying many of the 

two-wheel drive SUVs as passenger cars 

for the purposes of the final rule. 

(b) Stringency 

We proposed setting separate 

attribute-based fuel economy standards 

for passenger cars and light trucks 

consistent with the size-based approach 

that NHTSA used in establishing the 

light truck standards for MY 2008–2011 

light trucks. 

Compared to the April 2006 final rule 

that established those attribute-based 

standards, the NPRM more thoroughly 

evaluated the value of the costs and 

benefits of setting CAFE standards. This 

was important because assumptions 

regarding projected gasoline prices, 

along with assumptions about the value 

of reducing the negative externalities 

(economic and environmental) from 

producing and consuming fuel, were 

based on changed economic, 

environmental, and energy security 

conditions. These environmental 

externalities include, among other 

things, an estimation of the value of 

reducing tailpipe emissions of CO2.10

In light of EISA and the need to 

balance the statutory considerations in a 

way that reflects the current need of the 

nation to conserve energy, including the 

current assessment of climate change 

risks, the agency revisited the various 

assumptions used to determine the level 

of the standards. Specifically, the 

agency used higher gasoline prices and 

higher estimates for energy security 

values ($0.29 per gallon instead of $0.09 

per gallon). The agency also monetized 

carbon dioxide (at $7.00/ton), which it 

did not do in the previous rulemaking, 

and expanded the list of technologies it 

used in assessing the capability of 

manufacturers to improve fuel economy. 

In addition, the agency used cost 

estimates that reflect economies of scale 

and estimated ‘‘learning’’-driven 

reductions in the cost of technologies as 

well as quicker penetration rates for 

advanced technologies. 

The agency could not set out the exact 

level of CAFE that each manufacturer 

would be required to meet for each 

model year under the passenger car or 

light truck standards since the levels 

would depend on information that 

would not be available until the end of 

each of the model years, i.e., the final 

actual production figures for each of 

those years. The agency could, however, 

project what the industry-wide level of 

average fuel economy would be for 

passenger cars and for light trucks if 

each manufacturer produced its 

expected mix of automobiles and just 

met its obligations under the proposed 

‘‘optimized’’ standards for each model 

year. Adjacent to each average fuel 

economy figure in the NPRM was the 

estimated associated level of tailpipe 

emissions of CO2 that would be 

achieved.11

For passenger cars: 

MY 2011: 31.2 mpg (285 g/mi of tailpipe 

emissions of CO2) 

MY 2012: 32.8 mpg (271 g/mi of tailpipe 

emissions of CO2) 

MY 2013: 34.0 mpg (261 g/mi of tailpipe 

emissions of CO2) 

MY 2014: 34.8 mpg (255 g/mi of tailpipe 

emissions of CO2) 

MY 2015: 35.7 mpg (249 g/mi of tailpipe 

emissions of CO2) 

For light trucks: 

MY 2011: 25.0 mpg (355 g/mi of tailpipe 

emissions of CO2) 

MY 2012: 26.4 mpg (337 g/mi of tailpipe 

emissions of CO2) 

MY 2013: 27.8 mpg (320 g/mi of tailpipe 

emissions of CO2) 

MY 2014: 28.2 mpg (315 g/mi of tailpipe 

emissions of CO2) 

MY 2015: 28.6 mpg (310 g/mi of tailpipe 

emissions of CO2) 

The combined industry-wide average 

fuel economy (in miles per gallon, or 

mpg) levels (in grams per mile, or g/mi) 

for both cars and light trucks, if each 

manufacturer just met its obligations 

under the proposed ‘‘optimized’’ 

standards for each model year, would be 

as follows: 

MY 2011: 27.8 mpg (2.5 mpg increase 

above MY 2010; 320 g/mi CO2) 

MY 2012: 29.2 mpg (1.4 mpg increase 

above MY 2011; 304 g/mi CO2) 

MY 2013: 30.5 mpg (1.3 mpg increase 

above MY 2012; 291 g/mi CO2) 

MY 2014: 31.0 mpg (0.5 mpg increase 

above MY 2013; 287 g/mi CO2) 

MY 2015: 31.6 mpg (0.6 mpg increase 

above MY 2014; 281 g/mi CO2) 

The annual average increase during 

this five year period was approximately 

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14202 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

12Congress required that DOT establish a credit 

‘‘transferring’’ regulation, to allow individual 

manufacturers to move credits from one of their 

fleets to another (e.g., using a credit earned for 

exceeding the light truck standard for compliance 

in the domestic passenger car standard). Congress 

allowed DOT to establish a credit ‘‘trading’’ 

regulation, so that credits may be bought and sold 

between manufacturers and other parties. 

4.5 percent. Due to the uneven 

distribution of new model introductions 

during this period and to the fact that 

significant technological changes could 

be most readily made in conjunction 

with those introductions, the annual 

percentage increases were greater in the 

early years in this period. 

(c) Benefits and Costs 

(i) Benefits 

We estimated that the proposed 

standards for the five-year period would 

save approximately 54.7 billion gallons 

of fuel (18.7 billion gallons for 

passenger cars and 36 billion gallons for 

light trucks) and reduce tailpipe CO2

emissions by 521 million metric tons 

(178 million metric tons for passenger 

cars and 343 million metric tons for 

light trucks) over the lifetime of the 

vehicles sold during those model years, 

compared to the fuel use and emissions 

reductions that would occur if the 

standards remained at the adjusted 

baseline (i.e., the higher of 

manufacturer’s plans and the 

manufacturer’s required level of average 

fuel economy for MY 2010). 

We estimated that the value of the 

total benefits of the proposed standards 

would be approximately $88 billion 

($31 billion for passenger cars and $57 

billion for light trucks) over the lifetime 

of the vehicles sold during those model 

years. 

(ii) Costs 

The total costs for manufacturers to 

comply with the standards for the fiveyear period would be approximately $47 

billion ($16 billion for passenger cars 

and $31 for light trucks) compared to 

the costs they would incur if the 

standards remained at the adjusted 

baseline. 

(d) Effect of Flexibilities on Benefits and 

Costs 

The above benefit and cost estimates 

did not reflect the availability and use 

of flexibility mechanisms, such as 

compliance credits and credit trading, 

because EPCA prohibits NHTSA from 

considering the effects of those 

mechanisms in setting CAFE standards. 

However, the agency noted that, in 

reality, manufacturers were likely to 

rely to some extent on flexibility 

mechanisms provided by EPCA and 

would thereby reduce the cost of 

complying with the proposed standards 

to a meaningful extent. 

3. Credits 

NHTSA also proposed a new Part 536 

on trading and transferring ‘‘credits’’ 

earned for exceeding applicable CAFE 

standards.12 Under the proposed Part 

536, credit holders (including, but not 

limited to, manufacturers) would have 

credit accounts with NHTSA, and 

would be able to hold credits, apply 

them to compliance with CAFE 

standards, transfer them to another 

‘‘compliance category’’ for application 

to compliance there, or trade them. 

Traded credits would be subject to an 

‘‘adjustment factor’’ to ensure total oil 

savings are preserved, as required by 

EISA. EISA also prohibits credits earned 

before MY 2011 from being transferred, 

so NHTSA developed several regulatory 

restrictions on trading and transferring 

to facilitate Congress’ intent in this 

regard. 

4. Preemption 

In the proposal, the agency continued 

its discussion, conducted in a series of 

rulemaking proposals and final rules 

spanning a six-year period, of the issue 

of preemption of state regulations 

regulating tailpipe emissions of GHGs, 

especially carbon dioxide. 

D. Brief Summary of Public Comments 

on the NPRM 

Standard stringency: Automobile 

manufacturers argued that the 

standards, especially those for light 

trucks in the early years, should be 

lower. Environmental and consumer 

groups and states wanted higher 

standards throughout the five-year 

period. 

Footprint attribute: Commenters 

generally supported the agency’s choice 

of footprint as an attribute, although 

several urged consideration of 

additional attributes and a few argued 

for different attributes. 

Setting standards at levels at which 

net benefits are projected to be 

maximized (optimized standards) vs. 

using other decision-making formulae: 

A consumer group urged setting 

standards at the optimized + 50% 

alternative level, while some 

environmental groups favored setting 

them at levels at which total benefits 

equal total costs. Manufacturers 

contended that the optimized approach 

does not assure economic practicability, 

especially for manufacturers needing to 

borrow at high interest rates to finance 

design changes. A manufacturer 

association and other commenters said 

agency did not assess the ability of the 

manufacturers to raise the capital 

necessary to develop and implement 

sufficient technologies. 

Front-loading/ratable increase: Some 

commenters, especially the 

manufacturers, argued that the statutory 

requirement for ‘‘ratable’’ increases in 

standards means that the increases must 

be proportional or at least must not be 

disproportionately large or small in 

relation to one another. They did not 

discuss how that requirement is to be 

read together with either the statutory 

requirement to set standards for each 

model year at the level that is the 

maximum feasible level for that model 

year, or the separate statutory 

requirement for the overall fleet to 

achieve at least 35 mpg. 

Key economic and other assumptions 

affecting stringency— 

• Technology costs and 

effectiveness—The manufacturers said 

that NHTSA underestimated the costs. 

A manufacturer association submitted a 

study by Sierra Research challenging the 

cost and effectiveness estimates 

developed by NHTSA and EPA for the 

NPRM. 

• Fuel prices—A manufacturer 

association and dealer associations said 

that Energy Information 

Administration’s (EIA) reference case 

should be used. Environmental and 

consumer groups, states and some 

members of Congress said NHTSA 

should use at least the EIA high price 

case. The EIA Administrator stated at a 

June 2008 Congressional hearing that 

the then current prices were at or above 

EIA’s high case and that he would use 

that case in the CAFE rulemaking. 

• Discount rate—The manufacturers 

said the rate should be at least 7%, 

while environmental and consumer 

groups and states said it should not be 

greater than 3 percent. 

• Military costs—Many commenters 

argued that NHTSA should place a 

value other than zero on military 

security externalities. 

• Social cost of carbon—Some 

commenters said the domestic value of 

reducing CO2 emissions should be lower 

than the NPRM value of $7; 

environmental and consumer groups 

and states said it should be much 

higher. The former tended to favor a 

value reflecting damage to the U.S. only, 

while the latter favored a global value. 

• Weight reduction—States and 

environmental and consumer groups 

said that NHTSA should consider 

downweighting for vehicles under 5,000 

lbs; an insurance safety research group 

supported the proposal not to consider 

that. 

Rate of application of advanced 

technologies (diesels and hybrids): 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14203 

13The Final Environmental Impact Statement can 

be found on the NHTSA website at http:// 

www.nhtsa.gov/staticfiles/DOT/NHTSA/ 

Rulemaking/Rules/Associated%20Files/ 

CAFE%20FEIS.pdf (last accessed March 8, 2009). 

Manufacturers argued that NHTSA was 

overly optimistic; environmental/ 

consumer groups and states argued that 

NHTSA relied too much on 

manufacturer product plans and should 

require manufacturers to improve fuel 

economy more quickly. 

Fitting of standard curve to data: A 

manufacturer association and two 

manufacturers questioned the empirical 

and technical bases for the shape of the 

curves. 

Steepness of car standard curve: The 

two manufacturer associations and 

several environmental groups said that 

the proposed car curves were too steep: 

manufacturers did so because of 

impracticability; environmental groups, 

because of what they saw as an 

incentive to increase vehicle size. 

Backstop standard: Environmental 

and consumer groups argued that 

NHTSA must establish absolute 

backstop standards for all vehicles. 

Manufacturers argued that antibacksliding features of the attributebased standards function as a backstop. 

‘‘SUV loophole’’: In general, 

manufacturers agreed with the agency’s 

decision to reclassify 2 WD SUVs from 

the light truck fleet to the passenger car 

fleet, as long as this change would take 

effect after MY 2010. Environmental and 

consumer groups argued that the 

classification system should be further 

revised to address ‘‘gaming’’ and did not 

address the agency’s justification for the 

proposed revisions. 

Credits: Manufacturers argued that 

earned carry forward/back credits, as 

long as they were not acquired by 

transfer or trade, should be available to 

meet the minimum standard for 

domestic cars. Manufacturers also 

requested flexibility to manage their 

own credit shortfalls, instead of having 

the agency automatically decide upon 

and implement plans for them. One 

manufacturer asked that the new 

statutory provision giving credits a 5 

year life be applied to all existing 

credits, instead of only those credits 

earned in model year 2009 or thereafter. 

Impact on small/limited-line 

manufacturers: Small/limited-line 

manufacturers argued that the proposed 

standards impact them more than fullline manufacturers, and requested either 

that the car standards be set based on 

the plans of all car manufacturers, 

instead of just the seven largest, or that 

some alternative form of standard be set 

for them. 

Preemption: Manufacturers argued 

that the effects of state regulation of CO2

emissions are ‘‘related to’’ the regulation 

of fuel economy within the meaning of 

section 32919(a) of EPCA; 

environmental and consumer groups 

and states argued that the purpose of 

regulating CO2 emissions may overlap 

with, but is different from the purpose 

of regulating fuel economy 

E. New Information Received or 

Developed by NHTSA Between the 

NPRM and Final Rule 

There were a number of changes after 

the NPRM that made possible analytical 

improvements for the final rule. These 

changes also caused the CAFE levels, 

fuel savings, and CO2 emissions that are 

attributable to each alternative and 

scenario examined for this final rule to 

differ from those presented in the 

NPRM. 

1. New Manufacturer Product Plans 

As discussed in the NPRM, the agency 

requested new product plans from 

manufacturers to aid in determining 

appropriate standards for the final rule. 

The product plans submitted in May 

2007 naturally did not take into 

consideration the later passage of EISA 

and its minimum 35 mpg combined 

fleet requirement by 2020. In addition, 

during that time, the fuel prices rose 

substantially. 

The new product plans submitted in 

the summer of 2008 in response to the 

NPRM reflect those new realities in a 

couple of ways. First, companies 

provided product plans that reflected 

the manufacturers’ implementation of 

some of the cost-effective technologies 

that the agency had projected in the 

NPRM. This increased the baseline 

against which the fuel saving from the 

standards are calculated. As a result, 

some of the savings and CO2 emission 

reductions that were attributed in the 

NPRM to the rulemaking action are now 

attributed to actions taken 

‘‘independently by the manufacturers, 

as reflected in the improved product 

plans. Second, the size of the overall 

fleet had declined from the time of the 

NPRM to the final rule, resulting in 

fewer vehicle miles traveled. 

2. Revised Assessment of Technology 

Effectiveness and Costs 

With the aid of an expert consulting 

firm, NHTSA revised the technology 

assumptions in the NPRM based on 

comments and new information 

received during the comment period 

and used those revised assumptions for 

analyzing alternatives and scenarios for 

the Final Environmental Impact 

Assessment (FEIS) and final rule. In 

several cases, the agency concluded on 

the basis of analysis of that additional 

information that the costs in the NPRM 

and Draft EIS were underestimated and 

benefits overestimated, and in most 

cases, these estimates were not well 

differentiated by vehicle class. The 

agency also revised its phase-in 

schedule of the technologies to account 

more fully for needed lead time. 

3. Final Environmental Impact 

Statement 

With the aid of an expert consulting 

firm, the agency completed a final 

environmental impact statement (FEIS), 

the first FEIS prepared by a federal 

agency to examine climate change 

issues comprehensively.13 The FEIS 

examines the climate change and other 

environmental effects of the changes in 

emissions of greenhouse gases and 

criteria air pollutants resulting from a 

wide variety of alternative standards. 

For this purpose, the agency relied 

extensively on the 2007 reports of the 

Intergovernmental Panel on Climate 

Change and contracted with ICF 

International to perform climate 

modeling. That impact statement also 

carefully assesses the cumulative 

impacts of past, present and future 

CAFE rulemakings. 

F. Final Rule for MY 2011 

1. Introduction 

As discussed above, and at length 

later in this rule, NHTSA’s review and 

analysis of comments on its proposal 

have led the agency to make many 

changes to its methods for analyzing 

potential MY 2011 CAFE standards, as 

well as to the data and other 

information to which the agency has 

applied these methods. The following 

are some of the more prominent 

changes: 

• After receiving, reviewing, and 

integrating updated product plans from 

vehicle manufacturers, NHTSA has 

revised its forecast of the future light 

vehicle market. 

• NHTSA has changed the methods 

and inputs it uses to represent the 

applicability, availability, cost, and 

effectiveness of future fuel-saving 

technologies. 

• NHTSA has based its fuel price 

forecast on the AEO 2008 High Case 

price scenario instead of the AEO 2008 

Reference Case. 

• NHTSA has reduced mileage 

accumulation estimates (i.e., vehicle 

miles traveled) to levels consistent with 

this increased fuel price forecast. 

• NHTSA has applied increased 

estimates for the value of oil import 

externalities. 

• NHTSA has now included all 

manufacturers—not just the largest 

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14204 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

14 Derived from NHTSA’s $33 per metric ton 

estimate of the global value of reducing CO2

emissions. 

seven—in the process used to fit the 

curve and estimate the stringency at 

which societal net benefits are 

maximized. 

• NHTSA has tightened its 

application of the definition of 

‘‘nonpassenger automobiles,’’ causing a 

reassigning of over one million vehicles 

from the light truck fleet to the 

passenger car fleet. 

• NHTSA has now fitted the shape of 

the curve based on ‘‘exhaustion’’ of 

available technologies instead of on 

manufacturer-level optimization of 

CAFE levels. 

These changes affected both the shape 

and stringency of the attribute-based 

standards. Taken together, the last three 

of the above changes reduced the 

steepness of the curves defining fuel 

economy targets for passenger cars, and 

also less significantly reduced the 

steepness of the light truck curves. 

NHTSA recognizes that, when 

considered in isolation, some of the 

above changes might, on an ‘‘intuitive’’ 

basis, be expected to result in higher 

average required fuel economy levels. 

For example, setting aside other 

changes, the increase in estimated fuel 

prices and oil import externalities might 

be expected to result in higher average 

fuel economy requirements. On the 

other hand, again setting aside other 

changes, the updated characterization of 

fuel-saving technologies, the 

reassignment of over one million 

vehicles to the passenger car fleet, the 

reduction in mileage accumulation, and 

the inclusion of all manufacturers in the 

standard setting process might 

intuitively be expected to result in 

lower average fuel economy 

requirements. 

However, there are theoretical reasons 

for which even such isolated 

expectations might not be met. For 

example, if a change in inputs caused 

societal net benefits to increase equally 

at all stringencies, the level of 

stringency that maximized societal net 

benefits would remain unchanged, 

although it would produce greater net 

benefits after the change in inputs. 

Further, some of the changes listed 

above are interdependent, making it 

difficult, if not impossible, to isolate the 

effect attributable to every change. For 

example, NHTSA applied the reduced 

mileage accumulation, which reduces 

the benefits of adding technology, in 

conjunction with applying increased 

fuel prices, which increase the benefits 

of adding technology. 

There is no obvious way to determine 

reliably the net effect of all these (and 

other) changes short of applying all of 

the revised values to the model and 

looking at the results. We devote a good 

deal of the preamble discussion to these 

changes and their net implications for 

the standards in this rule. 

The final rule reflects the combined 

effect of all of these changes, as well as 

minor changes not listed above. 

2. Key Economic Values for Benefits 

Computations 

NHTSA’s analysis of the final 

standards and alternative CAFE 

standards for MYs 2011 relied on an 

expanded range of information and 

revised economic estimates and input 

parameters. These economic 

assumptions played a role in the 

determination of the level of the 

standards, with some having greater 

impacts than others. The agency, 

following discussions with other 

agencies of the U.S. government, 

updated its estimate of the global value 

of the social cost of carbon (i.e., the 

value of reducing CO2 emissions) and 

developed a domestic value, as well as 

updated its estimates for other 

externalities based on comments and 

updated information received during 

the comment period. Specifically, the 

final standards are based the following 

revised economic assumptions: 

TABLE I–2—FINAL RULE KEY ECONOMIC VALUES FOR BENEFITS COMPUTATIONS (2007$) 

Fuel Prices (average retail gasoline price per gallon, 2011–30) .............................................................................................................. $3.33 

Discount Rates Applied to Future Benefits: 

Reductions in CO2 Emissions ............................................................................................................................................................ 3% 

Other Benefits ..................................................................................................................................................................................... 7% 

Economic Costs of Oil Imports ($/gallon): 

‘‘Monopsony’’ Component .................................................................................................................................................................. $0.27 

Price Shock Component ..................................................................................................................................................................... $0.12 

Military Security Component .............................................................................................................................................................. ..................

Total Economic Costs ................................................................................................................................................................. $0.39 

Emission Damage Costs: 

Carbon Dioxide ($/metric ton): 

(U.S. domestic value) .................................................................................................................................................................. 14 $2.00 

(Mean global value from Tol (2008)) .......................................................................................................................................... $33.00 

(One standard deviation above mean global value) ................................................................................................................... $80.00 

Annual Increase in CO2 Damage Cost .............................................................................................................................................. 2.4% 

3. Standards 

(a) Classification 

In the NPRM, the two-wheel drive 

sport-utility vehicles (2WD SUVs) were 

classified in the same way they were 

classified by their manufacturers in 

their May 2007 product plans. For the 

purposes of this final rule, however, 

they were reclassified in accordance 

with the discussion in the NPRM of the 

proper classification of those vehicles. 

This resulted in the shifting of over one 

million two-wheel drive vehicles from 

the truck fleet to the car fleet. This shift 

had the effect of lowering the average 

fuel economy for cars due to the 

inclusion of vehicles previously 

categorized as trucks, and lowered 

average fuel economy for trucks because 

the truck category now has a larger 

proportion of heavier trucks. Following 

our careful consideration of the public 

comments on that discussion, we 

reaffirm the reasoning and conclusions 

of that discussion. 

(b) Stringency 

This final rule establishes footprintbased fuel economy standards for MY 

2011 passenger cars and light trucks. 

Each vehicle manufacturer’s required 

level of CAFE is based on target levels 

of average fuel economy set for vehicles 

of different sizes and on the distribution 

of that manufacturer’s vehicles among 

those sizes. Size is defined by vehicle 

footprint. The curves defining the 

performance target at each footprint 

reflect the technological and economic 

capabilities of the industry. The target 

for each footprint is the same for all 

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15The agency notes, for NEPA purposes, that the 

‘‘optimized standard’’ alternative adopted as the 

final standards corresponds to the ‘‘Optimized Mid2’’ scenario described in Section 2.2.2 of the FEIS. 

16See supra note 6. 

17Those numbers set out several paragraphs 

above. 

manufacturers, regardless of differences 

in their overall fleet mix. Compliance 

will be determined by comparing a 

manufacturer’s harmonically averaged 

fleet fuel economy levels in a model 

year with a required fuel economy level 

calculated using the manufacturer’s 

actual production levels and the targets 

for each footprint of the vehicles that it 

produces. 

The standards were developed with 

the aid of a computer model (known as 

the ‘‘Volpe Model’’). NHTSA uses the 

Volpe model as a tool to inform its 

consideration of potential CAFE 

standards for MY 2011. The Volpe 

model requires the following types of 

information as inputs: (1) A forecast of 

the future vehicle market, (2) estimates 

of the availability, applicability, and 

incremental effectiveness and cost of 

fuel-saving technologies, (3) estimates of 

vehicle survival and mileage 

accumulation patterns, the rebound 

effect, future fuel prices, the social cost 

of carbon, and many other economic 

factors, (4) fuel characteristics and 

vehicular emissions rates, and (5) 

coefficients defining the shape and level 

of CAFE curves to be examined. These 

inputs are selected by the agency based 

on best available information and data. 

The agency analyzed seven regulatory 

alternatives, one of which maximizes 

net benefits within the limits of 

available information and is known as 

the ‘‘optimized standards.’’ The 

optimized standards are set at levels, 

such that, considering all of the 

manufacturers together, no other 

alternative is estimated to produce 

greater net benefits to society. Those net 

benefits reflect the difference between 

(1) the present value of all monetized 

benefits of the standards, and (2) the 

total costs of all technologies applied in 

response to the standards. Many of the 

other alternative standards exceed the 

level at which the estimated net benefits 

are maximized, including one 

alternative in which standards are set at 

a level at which total costs equal total 

benefits and another alternative set at a 

level of maximum technology 

application without regard to cost. For 

each alternative, the model estimates 

the costs associated with additional 

technology utilization, as well as 

accompanying changes in travel 

demand, fuel consumption, fuel outlays, 

emissions, and economic externalities 

related to petroleum consumption and 

other factors. These comprehensive 

analyses, which also included scenarios 

with different economic input 

assumptions as presented in the Final 

Environmental Impact Statement (FEIS) 

and the Final Regulatory Impact 

Analysis (FRIA), informed and 

contributed to the agency’s 

consideration of the ‘‘need of the United 

States to conserve energy,’’ as well as 

the other statutory factors in 49 U.S.C. 

32902(f), and safety impacts. In 

addition, they informed the agency’s 

consideration of environmental impacts 

under NEPA. The agency identified the 

optimized standards as its preferred 

alternative in the FEIS. 

NHTSA considered the results of 

analyses conducted on alternative 

standards for MY 2011 by the Volpe 

model and analyses conducted outside 

of the Volpe model, including analysis 

of the impacts of emissions of carbon 

dioxide and criteria pollutants, and 

analysis of which technologies are 

available now and which will not be 

available until the longer term, and 

analysis of the extent to which changes 

in vehicle prices and fuel economy 

might affect vehicle production and 

sales. Further, NHTSA considered 

whether it could expedite the entry of 

any technologies into the market 

through these standards. Using all of 

this information, the agency considered 

the governing statutory factors, along 

with environmental issues and other 

relevant societal issues such as safety, 

and is promulgating the maximum 

feasible standards based on its best 

judgment on how to balance these 

factors. 

Upon a considered analysis of all 

information available, including all 

information submitted to NHTSA in 

comments, the agency is adopting the 

‘‘optimized standard’’ alternative as the 

final standards for MY 2011.15 We note 

that we used the Volpe Model in the last 

two light truck rulemakings and that we 

adopted ‘‘optimized standards’’ in the 

last light truck rulemaking. We believe 

that use of the Volpe model is a valid 

and objective way to establish attributebased standards under EPCA. Further, 

by limiting the standards to levels that 

can be achieved using technologies each 

of which are estimated to provide 

benefits that at least equal its costs, the 

net benefit maximization approach 

helps to assure the marketability of the 

manufacturers’ vehicles and thus 

economic practicability of the 

standards. 

Providing this assurance assumes 

increased importance in view of current 

and anticipated conditions in the 

industry in particular and the economy 

in general. As has been widely reported 

in the public domain throughout this 

rulemaking, and as shown in public 

comments, the national and global 

economies raise serious concerns. Even 

before those recent developments, the 

automobile manufacturers were already 

facing substantial difficulties. Together, 

these problems have made NHTSA’s 

economic practicability analysis 

particularly important and challenging 

in this rulemaking. 

The agency cannot set out the exact 

level of CAFE that each manufacturer 

will be required to meet for MY 2011 

under the passenger car or light truck 

standards because the levels will 

depend on information that will not be 

available until the end of that model 

year, i.e., the final actual production 

figures for that year. The agency can, 

however, project what the industrywide level of average fuel economy will 

be for passenger cars and for light trucks 

if each manufacturer produced its 

expected mix of automobiles and just 

met its obligations under the 

‘‘optimized’’ standards. Adjacent to 

each average fuel economy figure is the 

estimated associated level of tailpipe 

emissions of CO2 that will be 

achieved.16

MY 2011 passenger cars: 30.2 mpg (294 

g/mi of tailpipe emissions of CO2) 

MY 2011 light trucks: 24.1 mpg (369 g/ 

mi of tailpipe emissions of CO2) 

The combined industry-wide average 

fuel economy (in miles per gallon, or 

mpg) levels (in grams per mile, or g/mi) 

for both cars and light trucks, if each 

manufacturer just met its obligations 

under the ‘‘optimized’’ standards, will 

be as follows: 

MY 2011: 27.3 mpg (2.0 mpg increase 

above MY 2010; 326 g/mi CO2) 

In addition, per EISA, each 

manufacturer’s domestic passenger fleet 

is required in MY 2011 to achieve 27.5 

mpg or 92 percent of the CAFE of the 

industry-wide combined fleet of 

domestic and non-domestic passenger 

cars 17 for that model year, whichever is 

higher. This requirement results in the 

following alternative minimum standard 

(not attribute-based) for domestic 

passenger cars: 

MY 2011: 27.8 mpg (320 g/mi of tailpipe 

emissions of CO2) 

(c) Benefits and Costs 

(i) Benefits 

We estimate that the MY 2011 

standards will save approximately 887 

million gallons of fuel and reduce 

tailpipe emissions of CO2 by 8.3 million 

metric tons. 

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18The slightly over $1 billion estimate is based 

on a 7 percent discount rate for valuing future 

impacts. 

19The $921 million estimate is based on a 7 

percent discount rate for valuing future impacts. 

20See Section V.B.5 below for discussion of 

payback period. 

21The fuel prices (shown here in 2007 dollars) 

used to calculate the length of the payback period 

are those projected (Annual Energy Outlook 2008) 

by the Energy Information Administration over the 

life of the MY 2011 light trucks, not current fuel 

prices. 

22Congress required that DOT establish a credit 

‘‘transferring’’ regulation, to allow individual 

manufacturers to move credits from one of their 

fleets to another (e.g., using a credit earned for 

exceeding the light truck standard for compliance 

with the domestic passenger car standard). Congress 

allowed DOT to establish a credit ‘‘trading’’ 

regulation, so that credits may be bought and sold 

between manufacturers and other parties. 

23Among the reports and studies noting this 

point are the following: 

John Podesta, Todd Stern and Kim Batten, 

‘‘Capturing the Energy Opportunity; Creating a 

Low-Carbon Economy,’’ Center for American 

Progress (November 2007), pp. 2, 6, 8, and 24–29, 

Available at: http://www.americanprogress.org/ 

issues/2007/11/pdf/energy_chapter.pdf (last 

accessed March 8, 2009). 

Sarah Ladislaw, Kathryn Zyla, Jonathan Pershing, 

Frank Verrastro, Jenna Goodward, David Pumphrey, 

and Britt Staley, ‘‘A Roadmap for a Secure, LowCarbon Energy Economy; Balancing Energy Security 

and Climate Change,’’ World Resources Institute 

and Center for Strategic and International Studies 

(January 2009), pp. 21–22; Available at: http:// 

pdf.wri.org/ 

secure_low_carbon_energy_economy_roadmap.pdf. 

(last accessed March 7, 2009). 

Alliance to Save Energy et al., ‘‘Reducing the Cost 

of Addressing Climate Change Through Energy 

Efficiency (2009). Available at: http://Aceee.org/ 

energy/climate/leg.htm. (last accessed March 7, 

2009). 

For passenger cars, the standards will 

save approximately 463 million gallons 

of fuel and reduce tailpipe CO2

emissions by 4.3 million metric tons 

over the lifetime of the MY 2011 

passenger cars, compared to the fuel 

savings and emissions reductions that 

would occur if the standards remained 

at the adjusted baseline (i.e., the higher 

of manufacturer’s plans and the 

manufacturer’s required level of average 

fuel economy for MY 2010). The value 

of the total benefits of the passenger car 

standards are estimated to be slight over 

$1 billion 18 over the lifetime of the MY 

2011 cars. This estimate of societal 

benefits includes direct impacts from 

lower fuel consumption as well as 

externalities and also reflects offsetting 

societal costs resulting from the rebound 

effect. 

We estimate that the standards for 

light trucks will save approximately 424 

million gallons of fuel and prevent the 

tailpipe emission of 4.0 million metric 

tons of CO2 over the lifetime of the light 

trucks sold during those model years, 

compared to the fuel savings and 

emissions reductions that would occur 

if the standards remained at the 

adjusted baseline. The value of the total 

benefits of the light truck standards will 

be approximately $921 million 19 over 

the lifetime of the MY 2011 light trucks. 

This estimate of societal benefits 

includes direct impacts from lower fuel 

consumption as well as externalities 

and also reflects offsetting societal costs 

resulting from the rebound effect. 

(ii) Costs 

NHTSA estimates that, as a result of 

the final standards for MY 2011, 

manufacturers will incur costs of 

approximately $1.460 billion for 

additional fuel-saving technologies, 

compared to the costs they would incur 

if the standards remained at MY 2010 

levels. 

For passenger cars, we estimate that 

manufacturers will incur costs of 

approximately $595 million for 

additional fuel-saving technologies, 

compared to the costs they would incur 

if the standards remained at MY 2010 

levels. Our estimate is that the resulting 

vehicle price increases to buyers of MY 

2011 passenger cars will be recovered or 

paid back 20 in additional fuel savings in 

an average of 4.4 years (53 months), 

assuming fuel prices ranging from $2.95 

per gallon in 2011 to $3.62 per gallon 

in 2030.21

The agency further estimates that, in 

response to the final standards for MY 

2011 light trucks, manufacturers will 

incur costs of approximately $865 

million for additional fuel-saving 

technologies, compared to the costs they 

would incur if the standards remained 

at MY 2010 levels. We estimate that the 

resulting vehicle price increases to 

buyers of MY 2011 light trucks will be 

paid back in additional fuel savings in 

an average of 7.7 years (92 months), 

assuming the same fuel prices as 

mentioned above. 

(d) Flexibilities 

Manufacturers are likely to rely 

extensively on flexibility mechanisms 

provided by EPCA (as described in 

Section XII) and will thereby reduce the 

costs (and benefits) of complying with 

the standards to a meaningful extent. 

However, the benefit and compliance 

cost estimates used by the agency in 

determining the maximum feasible level 

of the CAFE standards and shown above 

assume that manufacturers will rely 

solely on the installation of fuel 

economy technology to achieve 

compliance with the standards. The 

estimates do not reflect the availability 

and use of flexibility mechanisms, such 

as compliance credits and credit 

trading. The reason for this is because 

EPCA prohibits NHTSA from 

considering the effects of those 

mechanisms in setting CAFE standards. 

EPCA has precluded consideration of 

the FFV adjustments ever since it was 

amended to provide for those 

adjustments. The prohibition against 

considering compliance credits was 

added by EISA. 

4. Credits 

NHTSA is also adopting a new Part 

536 on use of ‘‘credits’’ earned for 

exceeding applicable CAFE standards. 

Part 536 will implement the provisions 

in EISA authorizing NHTSA to establish 

by regulation a credit trading program 

and directing it to establish by 

regulation a credit transfer program.22

Since its enactment, EPCA has 

permitted manufacturers to earn credits 

for exceeding the standards and to apply 

those credits to compliance obligations 

in years other than the model year in 

which it was earned. EISA extended the 

‘‘carry-forward’’ period to five model 

years, and left the ‘‘carry-back’’ period 

at three model years. Under Part 536, 

credit holders (including, but not 

limited to, manufacturers) will have 

credit accounts with NHTSA, and will 

be able to hold credits, apply them to 

compliance with CAFE standards, 

transfer them to another ‘‘compliance 

category’’ for application to compliance 

there, or trade them. A credit may also 

be cancelled before its expiry date, if the 

credit holder so chooses. Traded and 

transferred credits will be subject to an 

‘‘adjustment factor’’ to ensure total oil 

savings are preserved, as required by 

EISA. EISA also prohibits credits earned 

before MY 2011 from being transferred, 

so NHTSA has developed several 

regulatory restrictions on trading and 

transferring to facilitate Congress’ intent 

in this regard. Additional information 

on Part 536 is available in Section XII 

below. 

5. Preemption 

As noted above, NHTSA has decided 

not to include any preemption 

provisions in the regulatory text at this 

time and will re-examine the issue of 

preemption in the context of the 

rulemaking for MY 2012 and later years. 

II. Background 

A. Role of Fuel Economy Improvements 

in Promoting Energy Independence, 

Energy Security, and a Low Carbon 

Economy 

Improving vehicle fuel economy has 

been long and widely recognized as one 

of the key ways of achieving energy 

independence, energy security, and a 

low carbon economy.23 Most recently, 

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John DeCicco and Freda Fung, ‘‘Global Warming 

on the Road; The Climate Impact of America’s 

Automobiles,’’ Environmental Defense (2006) pp. 

iv–vii; available at: http://www.edf.org/documents/ 

5301_Globalwarmingontheroad.pdf. (last accessed 

March 7, 2009). 

‘‘Why is Fuel Economy Important?,’’ a Web page 

maintained by the Department of Energy and 

Environmental Protection Agency, Available at 

http://www.fueleconomy.gov/feg/why.shtml (last 

accessed February 17, 2009); 

Robert Socolow, Roberta Hotinski, Jeffery B. 

Greenblatt, and Stephen Pacala, ‘‘Solving The 

Climate Problem: Technologies Available to Curb 

CO2 Emissions,’’ Environment, volume 46, no. 10, 

2004. pages 8–19. Available at: http:// 

www.princeton.edu/∼cmi/resources/ 

CMI_Resources_new_files/Environ_08-21a.pdf. (last 

accessed March 7, 2009). 24 ‘‘50BY50 Global Fuel Economy Initiative, 

Making Cars 50% More Fuel Efficient by 2050 

Worldwide,’’ Available at: http:// 

www.fiafoundation.org/50by50/Documents/ 

50BY50_report.pdf (last accessed March 7, 2009). 25EPA Inventory of U.S. Greenhouse Gas 

Emissions and Sinks: 1990–2006 (April 2008), pp. 

ES–4, ES–8, and 2–24. 26Podesta et al., p. 25; Ladislaw et al. p. 21; 

DeCicco et al. p. vii; ‘‘Reduce Climate Change,’’ a 

Web page maintained by the Department of Energy 

and Environmental Protection Agency at http:// 

www.fueleconomy.gov/feg/climate.shtml (last 

accessed March 7, 2009). 

27Panel on Policy Implications of Greenhouse 

Warming, National Academy of Sciences, National 

Academy of Engineering, Institute of Medicine, 

‘‘Policy Implications of Greenhouse Warming: 

Mitigation, Adaptation, and the Science Base,’’ 

National Academies Press, 1992. p. 287. 

28The graph is the same as the one shown on 

Reduce Climate Change, a Web page maintained by 

the Department of Energy and Environmental 

Protection Agency. Available at: http:// 

www.fueleconomy.gov/feg/climate.shtml (last 

accessed March 8, 2009). 

29To the extent that manufacturers comply with 

a CAFE standard with diesel automobiles instead of 

gasoline ones, the level of CO2 tailpipe emissions 

would be higher. As noted above, the agency 

projects that 4 percent of the MY 2015 passenger 

car fleet and 10 percent of the MY 2015 light truck 

fleet will have diesel engines. The CO2 tailpipe 

emissions of a diesel powered passenger car are 15 

percent per mile higher than those of a comparable 

gasoline powered-passenger car achieving the same 

mpg. 

the United Nations Environment 

Programme, International Energy 

Agency, International Transport Forum 

and FIA Foundation released a report 24

in March 2009 calling for a 50 percent 

increase in fuel economy in response to 

predictions by the IEA that fuel 

consumption and CO2 emissions from 

the global light duty fleet will otherwise 

roughly double between 2000 and 2050. 

The significance accorded improving 

fuel economy reflects several factors. 

The emission of CO2 from the tailpipes 

of cars and light trucks is one of the 

largest sources of U.S. CO2 emissions.25

Further, using vehicle technology to 

improve fuel economy, thereby reducing 

tailpipe emissions of CO2, is one of the 

three main measures of reducing those 

tailpipe emissions of CO2.26 The two 

other measures for reducing the tailpipe 

emissions of CO2 are switching to 

vehicle fuels with lower carbon content 

and changing driver behavior, i.e., 

inducing people to drive less. 

In order to reduce the amount of 

tailpipe emissions of CO2 per mile, 

either the amount of fuel consumed per 

mile must be reduced or lower carbon 

intensive fuels must be used. While 

there are emission control technologies 

that can capture or destroy the 

pollutants (e.g., carbon monoxide) that 

are produced by imperfect combustion 

of fuel, there is no current or anticipated 

control technology for CO2. Thus, the 

technologies for reducing tailpipe 

emissions of CO2 are the technologies 

that reduce fuel consumption and 

thereby reduce CO2 emissions as well, 

as well as the technologies for 

accommodating the use of alternative 

fuels. Consequently, substantially 

reducing fuel use through using 

automotive technology to improve fuel 

economy is indispensable if automobile 

manufacturers are to make substantial 

and continuing progress in reducing 

those emissions. 

The relationship between improving 

fuel economy and reducing CO2 tailpipe 

emissions is a very direct and close one. 

CO2 is the natural by-product of the 

combustion of fuel in motor vehicle 

engines. The more fuel efficient a 

vehicle is, the less fuel it burns to travel 

a given distance. The less fuel it burns, 

the less CO2 it emits in traveling that 

distance.27 Since the amount of CO2

emissions is essentially constant per 

gallon combusted of a given type of fuel, 

the amount of fuel consumption per 

mile is directly related to the amount of 

CO2 emissions per mile. Thus, requiring 

improvements in fuel economy 

necessarily has the effect of requiring 

reductions in tailpipe emissions of CO2

emissions. 

This can be seen in the graph 28 and 

table below. The graph shows how the 

amount of CO2 emitted by a vehicle per 

year varies according to the vehicle’s 

fuel economy. The table shows the limit 

that a CAFE standard would indirectly 

place on tailpipe CO2 emissions. To take 

the first value of fuel economy from the 

table below as an example, a standard 

of 21.0 mpg would indirectly place 

substantially the same limit on tailpipe 

CO2 emissions as a tailpipe CO2

emission standard of 423.2 g/mi of CO2, 

and vice versa.29

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30This is the method that EPA uses to determine 

compliance with NHTSA’s CAFE standards. 

The relationship between improving 

fuel economy and reducing tailpipe 

emissions of CO2 is so strong that EPA 

determines fuel economy by the simple 

expedient of measuring the amount of 

CO2 emitted from the tailpipe, not by 

attempting to measure directly the 

amount of fuel consumed during a 

vehicle test, a difficult task to 

accomplish with precision. EPA then 

uses the carbon content of the test fuel 30

to calculate the amount of fuel that had 

to be consumed per mile in order to 

produce that amount of CO2. Finally, 

EPA converts that fuel figure into a 

miles-per-gallon figure. 


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31 IPCC (2007): Climate Change 2007: Mitigation 

of Climate Change. Contribution of Working Group 

III to the Fourth Assessment Report of the 

Intergovernmental Panel on Climate Change [B. 

Metz, O. Davidson, P. Bosch, R. Dave, and L. Meyer 

(eds.)]. Cambridge University Press, Cambridge, 

United Kingdom and New York, NY, USA. 

32These figures are not real world fuel economy 

figures. They are based on the laboratory figures 

fuel economy test procedures used for the CAFE 

program. Real world fuel economy figures would be 

less (and CO2 emission figures higher). 

B. Contribution of Fuel Economy 

Improvements to CO2 Tailpipe Emission 

Reductions Since 1975 

The need to take action to reduce 

GHG emissions, e.g., motor vehicle 

tailpipe emissions of CO2, in order to 

forestall and even mitigate climate 

change is well recognized.31 Less well 

recognized are two related facts. 

First, improving fuel economy is the 

only method available to motor vehicle 

manufacturers for making substantial 

and continuing reductions in the CO2

tailpipe emissions of motor vehicles and 

thus must be the core element of any 

effort to achieve those reductions. 

Second, the significant improvements 

in fuel economy since 1975, due to the 

CAFE standards and other market 

conditions as well, have directly caused 

reductions in the rate of CO2 tailpipe 

emissions per vehicle. 

In 1975, passenger cars manufactured 

for sale in the U.S. averaged only 15.8 

mpg (562.5 grams of CO2 per mile or 

562.5 g/mi of CO2). By 2007, the average 

fuel economy of new passenger cars had 

increased to 31.3 mpg, causing the 

emission of CO2 to fall to 283.9 g/mi.32

Similarly, in 1975, light trucks 

produced for sale in the U.S. averaged 

13.7 mpg (648.7 g/mi of CO2). By 2007, 

the average fuel economy of new light 

trucks had risen to 23.1 mpg, causing 

emission of CO2 to fall to 384.7 g/mi. 


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If fuel economy had not increased above 

the 1975 level, cars and light trucks 

would have emitted an additional 11 

billion metric tons of CO2 into the 

atmosphere between 1975 and 2005. 

That is nearly the equivalent of 

emissions from all U.S. fossil fuel 

combustion for two years (2004 and 

2005). The figure below shows the 

amount of CO2 emissions avoided due 

to increases in fuel economy. 

BILLING CODE 4910–59–P 


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33National Research Council, ‘‘Effectiveness and 

Impact of Corporate Average Fuel Economy (CAFE) 

Standards,’’ National Academy Press, Washington, 

DC (2002). Available at http://www.nap.edu/ 

openbook.php?isbn=0309076013 (last accessed 

March 8, 2009). The conference committee report 

for the Department of Transportation and Related 

Agencies Appropriations Act for FY 2001 (Pub. L. 

106–346) directed NHTSA to fund a study by NAS 

to evaluate the effectiveness and impacts of CAFE 

standards (H. Rep. No. 106–940, p. 117–118). In 

response to the direction from Congress, NAS 

published this lengthy report. 

34NHTSA formerly used this approach for CAFE 

standards. EISA prohibits its use after MY 2010. 

35NAS, p. 29. 

36NAS, p. 3 (Finding 2). 

37Two of the 12 members of the committee 

dissented from the majority’s safety analysis and 

conclusions. 

38NAS, p. 9. 

39NAS, pp. 3 and 20. 

40NAS, p. 20. 

BILLING CODE 4910–59–C 

Some commenters on the NPRM 

argued that some of improvements in 

fuel economy, and thus some of the 

reductions in CO2, shown in that figure 

would have occurred in the absence of 

any CAFE standards. We agree. 

Similarly, and to the same extent, some 

of the improvements in fuel economy 

and accompanying reductions in CO2

that would occur under a regulation 

directly regulating CO2 would occur in 

the absence of any such regulation. We 

note that no published research has 

isolated the contribution of CAFE 

standards themselves to historical 

increases in fuel economy from those of 

the many other factors that can affect 

fuel economy. 

C. Chronology of Events Since the 

National Academy of Sciences Called 

for Reforming and Increasing CAFE 

Standards 

1. National Academy of Sciences Issues 

Report on Future of CAFE Program 

(February 2002) 

(a) Significantly Increasing CAFE 

Standards Without Making Them 

Attribute-Based Would Adversely Affect 

Safety 

In the 2002 congressionally-mandated 

report entitled ‘‘Effectiveness and 

Impact of Corporate Average Fuel 

Economy (CAFE) Standards,’’ 33 a 

committee of the National Academy of 

Sciences (NAS) (‘‘2002 NAS Report’’) 

concluded that the then-existing form of 

passenger car and light truck CAFE 

standards permitted vehicle 

manufacturers to comply in part by 

downweighting and even downsizing 

their vehicles and that these actions had 

led to additional fatalities. The 

committee explained that this safety 

problem arose because, at that time, the 

CAFE standards were not attributedbased and thus subjected all passenger 

cars to the same fuel economy target and 

all light trucks to the same target, 

regardless of their weight, size, or loadcarrying capacity.34 The committee said 

that this experience suggests that 

consideration should be given to 

developing a new system of fuel 

economy targets that reflects differences 

in such vehicle attributes. 

Looking to the future, the committee 

made a critical distinction between 

possible ways of improving fuel 

economy and the ways likely to be 

chosen for doing so. It said that while 

it was technically feasible and 

potentially economically practicable for 

manufacturers to improve fuel economy 

without reducing vehicle weight or size 

and, therefore, without significantly 

affecting the safety of motor vehicle 

travel, the actual strategies chosen by 

manufacturers to improve fuel economy 

would depend on a variety of factors. In 

the committee’s judgment, the extensive 

downweighting and downsizing that 

occurred after fuel economy 

requirements were established in the 

1970s suggested that the likelihood of a 

similar response to further increases in 

fuel economy requirements must be 

considered seriously. Any reduction in 

vehicle size and weight would have 

safety implications. 

The committee said, ‘‘to the extent 

that the size and weight of the fleet have 

been constrained by CAFE requirements 

* * * those requirements have caused 

more injuries and fatalities on the road 

than would otherwise have 

occurred.’’ 35 Specifically, it noted: ‘‘the 

downweighting and downsizing that 

occurred in the late 1970s and early 

1980s, some of which was due to CAFE 

standards, probably resulted in an 

additional 1300 to 2600 traffic fatalities 

in 1993.’’ 36

The committee cautioned that the 

safety effects of future downsizing and 

downweighting were likely to be hidden 

by the generally increasing safety of the 

light-duty vehicle fleet.37 It said that 

some might argue that this improving 

safety picture means that there is room 

to improve fuel economy without 

adverse safety consequences; however, 

such an approach would not achieve the 

goal of avoiding the adverse safety 

consequences of fuel economy 

increases. Rather, the safety penalty 

imposed by increased fuel economy (if 

weight reduction were used as one of 

the fuel economy improving measures) 

would be more difficult to identify in 

light of the continuing improvement in 

vehicle safety. NAS said that although it 

anticipated that these safety innovations 

would improve the safety of vehicles of 

all sizes, that fact did not mean 

downsizing to achieve fuel economy 

improvements would not have any 

safety costs. If two vehicles of the same 

size were modified, one both by 

downsizing it and adding the safety 

innovations and the other solely by 

adding safety innovations, the latter 

vehicle would in all likelihood be safer. 

The committee concluded that if an 

increase in fuel economy were 

implemented pursuant to standards that 

were structured so as to encourage 

either downsizing or the increased 

production of smaller vehicles, some 

additional traffic fatalities would be 

expected. It said that the larger and 

faster the required increases, the more 

likely adverse impacts. Without a 

thoughtful restructuring of the program, 

there would be the trade-offs that must 

be made if CAFE standards were 

increased by any significant amount.38

In response to these conclusions, 

NHTSA issued attribute-based CAFE 

standards for light trucks and sought 

legislative authority to issue attributebased CAFE standards for passenger 

cars before undertaking to raise the car 

standards. Congress went a step further 

in enacting EISA, not only authorizing 

the issuance of attribute-based 

standards, but also mandating them. 

(b) Climate Change and Other 

Externalities Justify Increasing the CAFE 

Standards 

The 2002 NAS report also concluded 

that the CAFE standards have increased 

fuel economy, which in turn has 

reduced dependence on imported oil, 

improved the nation’s terms of trade, 

and reduced emissions of carbon 

dioxide, (a principal GHG), relative to 

what they otherwise would have been. 

If fuel economy had not improved, 

gasoline consumption (and crude oil 

imports) in 2002 would have been about 

2.8 million barrels per day (mmbd) 

greater than it was then.39 As noted 

above, reducing fuel consumption in 

vehicles also reduces carbon dioxide 

emissions. If the nation were using 2.8 

mmbd more gasoline in 2002, carbon 

emissions would have been more than 

100 million metric tons of carbon 

(mmtc) higher. Thus, improvements in 

light-duty vehicle (4 wheeled motor 

vehicles under 10,000 pounds gross 

vehicle weight rating) fuel economy 

reduced overall U.S. emissions by about 

7 percent as of 2002.40

The report concluded that 

technologies exist that could 

significantly reduce fuel consumption 

by passenger cars and light trucks 

further within 15 years (i.e., by about 

2017), while maintaining vehicle size, 

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41NAS, p. 3 (Finding 5). 

42NAS, p. 4 (Finding 5). 

43NAS, pp. 4 (Finding 6) and 64). 

44NAS, pp. 8–9. 

45NAS, pp. 2, 13, and 83. 

46NAS, pp. 4 and 85–86. 

47NAS, pp. 4–5 (Finding 10). 

48NAS, p. 5 (Finding 12). 

49NAS, p. 87. 50 71 FR 17566; April 6, 2006. 

weight, utility and performance.41

Given their lower fuel economy, light 

duty trucks were said to offer the 

greatest potential for reducing fuel 

consumption.42 The report also noted 

that vehicle development cycles—as 

well as future economic, regulatory, 

safety and consumer preferences— 

would influence the extent to which 

these technologies could lead to 

increased fuel economy in the U.S. 

market. 

To assess the economic trade-offs 

associated with the introduction of 

existing and emerging technologies to 

improve fuel economy, the NAS 

conducted what it called a ‘‘costefficient analysis’’ based on the direct 

benefits (value of saved fuel) to the 

consumer—‘‘that is, the committee 

identified packages of existing and 

emerging technologies that could be 

introduced over the next 10 to 15 years 

that would improve fuel economy up to 

the point where further increases in fuel 

economy would not be reimbursed by 

fuel savings.’’ 43

The committee emphasized that it is 

critically important to be clear about the 

reasons for considering improved fuel 

economy. While it said that the dollar 

value of the saved fuel would be the 

largest portion of the potential benefits, 

the committee noted that there is 

theoretically insufficient reason for the 

government to issue higher standards 

just to obtain those direct benefits since 

consumers have a wide variety of 

opportunities to buy a fuel-efficient 

vehicle.44

The committee said that there are two 

compelling concerns that justify a 

government-mandated increase in fuel 

economy, both relating to externalities. 

The first and most important concern, it 

argued, is the accumulation in the 

atmosphere of greenhouse gases, 

principally carbon dioxide.45

A second concern is that petroleum 

imports have been steadily rising 

because of the nation’s increasing 

demand for gasoline without a 

corresponding increase in domestic 

supply. The high cost of oil imports 

poses two risks: downward pressure on 

the strength of the dollar (which drives 

up the cost of goods that Americans 

import) and an increase in U.S. 

vulnerability to macroeconomic shocks 

that cost the economy considerable real 

output. 

To determine how much the fuel 

economy standards should be increased, 

the committee urged that all social 

benefits be considered. That is, it urged 

not only that the dollar value of the 

saved fuel be considered, but also that 

the dollar value to society of the 

resulting reductions in greenhouse gas 

emissions and in dependence on 

imported oil should be calculated and 

considered. The committee said that if 

it is possible to assign dollar values to 

these favorable effects, it becomes 

possible to make at least crude 

comparisons between the socially 

beneficial effects of measures to 

improve fuel economy on the one hand, 

and the costs (both out-of-pocket and 

more subtle) on the other. The 

committee chose a value of about $0.30/ 

gal of gasoline for the externalities 

associated with the combined impacts 

of fuel consumption on greenhouse gas 

emissions and on world oil market 

conditions.46

The report expressed concerns about 

increasing the standards under the 

CAFE program as currently structured. 

While raising CAFE standards under the 

existing structure would reduce fuel 

consumption, doing so under alternative 

structures ‘‘could accomplish the same 

end at lower cost, provide more 

flexibility to manufacturers, or address 

inequities arising from the present’’ 

structure.47

To address those structural problems, 

the report suggested various possible 

reforms. The report found that the 

‘‘CAFE program might be improved 

significantly by converting it to a system 

in which fuel targets depend on vehicle 

attributes.’’ 48 The report noted further 

that under an attribute-based approach, 

the required CAFE levels could vary 

among the manufacturers based on the 

distribution of their product mix. NAS 

stated that targets could vary among 

passenger cars and among trucks, based 

on some attribute of these vehicles such 

as weight, size, or load-carrying 

capacity. The report explained that a 

particular manufacturer’s average target 

for passenger cars or for trucks would 

depend upon the fractions of vehicles it 

sold with particular levels of these 

attributes.49

2. NHTSA Issues Final Rule 

Establishing Attribute-Based CAFE 

Standards for MY 2008–2011 Light 

Trucks (March 2006) 

The 2006 final rule reformed the 

structure of the CAFE program for light 

trucks by introducing an attribute-based 

approach and using that approach to 

establish higher CAFE standards for MY 

2008–2011 light trucks.50 Reforming the 

CAFE program enables it to achieve 

larger fuel savings, while enhancing 

safety and preventing adverse economic 

consequences. 

As noted above, under Reformed 

CAFE, fuel economy standards were 

restructured so that they are based on a 

vehicle attribute, a measure of vehicle 

size called ‘‘footprint.’’ It is the product 

of multiplying a vehicle’s wheelbase by 

its track width. A target level of fuel 

economy was established for each 

increment in footprint (0.1 ft2). Trucks 

with smaller footprints have higher fuel 

economy targets; conversely, larger ones 

have lower targets. A particular 

manufacturer’s compliance obligation 

for a model year is calculated as the 

harmonic average of the fuel economy 

targets for the manufacturer’s vehicles, 

weighted by the distribution of the 

manufacturer’s production volumes 

among the footprint increments. Thus, 

each manufacturer is required to comply 

with a single overall average fuel 

economy level for each model year of 

production. 

The approach for determining the fuel 

economy targets was to set them just 

below the level where the increased cost 

of technologies that could be adopted by 

manufacturers to improve fuel economy 

would first outweigh the added benefits 

that would result from those 

technologies. These targets translate into 

required levels of average fuel economy 

that are technologically feasible because 

manufacturers can achieve them using 

technologies that are or will become 

available. Those levels also reflect the 

need of the nation to reduce energy 

consumption because they reflect the 

economic value of the savings in 

resources, as well as of the reductions 

in economic and environmental 

externalities that result from producing 

and using less fuel. 

We carefully balanced the estimates 

costs of the rule with the estimated 

benefits of reducing energy 

consumption. Compared to Unreformed 

(non-attributed-based) CAFE, Reformed 

CAFE enhances overall fuel savings 

while providing vehicle manufacturers 

with the flexibility they need to respond 

to changing market conditions. 

Reformed CAFE also provides a more 

equitable regulatory framework by 

creating a level playing field for 

manufacturers, regardless of whether 

they are full-line or limited-line 

manufacturers. We were particularly 

encouraged that Reformed CAFE will 

confer no compliance advantage if 

vehicle makers choose to downsize 

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51 127 S.Ct. 1438 (2007). 

52 68 FR 52922, September 8, 2003. 

53As noted above, a CAFE standard and its 

mathematically equivalent CO2 tailpipe emission 

standard would each have the same effect on those 

emissions and thus on the risk of further harm 

except to the extent, as noted in a footnote above, 

diesel engines are used to comply with the CAFE 

standards. 

54 508 F.3d 508. 

55As noted above in the preamble, the agency has 

developed a value for those reductions and used it 

in the analyses underlying the standards adopted in 

this final rule. For further discussion, see Section 

V of this preamble. 

56EISA’s requirement that standards be based on 

one or more vehicle attributes appears to preclude 

the specification of such a backstop standard for the 

latter two categories of automobiles. For further 

discussion, see Section VI of this preamble. 

57 In this final rule, NHTSA has moved 1.4 

million 2 wheel drive SUVs from the light truck 

class to the passenger car class. It re-examined the 

legislative history of the statutory definitions of 

‘‘automobile’’ and ‘‘passenger automobile’’ and the 

term ‘‘nonpassenger automobile’’ and analyzed the 

impact of that moving any vehicles out of the 

nonpassenger automobile (light truck) category into 

the passenger automobile (passenger car) category 

would have the level of standards for both groups 

of automobiles. For further discussion, see Section 

XI of this preamble. 

some of their fleet as a CAFE 

compliance strategy, thereby reducing 

the adverse safety risks associated with 

the Unreformed CAFE program. 

3. Supreme Court Issues Decision in 

Massachusetts v. EPA (April 2007) 

On April 2, 2007, the U.S. Supreme 

Court issued its opinion in 

Massachusetts v. EPA,51 a case 

involving a 2003 order of the 

Environmental Protection Agency (EPA) 

denying a petition for rulemaking to 

regulate greenhouse gas emissions from 

motor vehicles under the Clean Air 

Act.52 The Court ruled that the state of 

Massachusetts had standing to sue EPA 

because it had already lost an amount of 

land and stood to lose more due to 

global warming-induced increases in sea 

level; that some portion of this harm 

was traceable to the absence of a 

regulation issued by EPA requiring 

reductions in GHG emissions (CO2

emissions, most notably) by motor 

vehicles; and that EPA’s issuance of 

such a regulation would reduce the risk 

of further harm to Massachusetts.53 On 

the merits, the Court ruled that 

greenhouse gases are ‘‘pollutants’’ under 

the Clean Air Act and that the Act 

therefore authorizes EPA to regulate 

greenhouse gas emissions from motor 

vehicles if that agency makes the 

necessary findings and determinations 

under section 202 of the Act. 

The Court considered EPCA briefly, 

stating 

[T]hat DOT sets mileage standards in no 

way licenses EPA to shirk its environmental 

responsibilities. EPA has been charged with 

protecting the public’s ‘‘health’’ and 

‘‘welfare,’’ 42 U.S.C. 7521(a)(1), a statutory 

obligation wholly independent of DOT’s 

mandate to promote energy efficiency. See 

Energy Policy and Conservation Act, § 2(5), 

89 Stat. 874, 42 U.S.C. 6201(5). The two 

obligations may overlap, but there is no 

reason to think the two agencies cannot both 

administer their obligations and yet avoid 

inconsistency. 

127 S.Ct. at 1462. 

The Supreme Court did not address or 

define the nature or extent of the 

overlap or explore the types of benefits 

considered in establishing the levels of 

the CAFE standards. Further, the Court 

did not address the express preemption 

provision in EPCA. 

4. NHTSA and EPA Coordinate on 

Development of Rulemaking Proposals 

(Summer–Fall 2007) 

In the wake of the Supreme Court’s 

decision, on May 14, 2007, President 

Bush responded to the Supreme Court’s 

opinion, stating 

* * * I’m directing the EPA and the 

Departments of Transportation, Energy, and 

Agriculture to take the first steps toward 

regulations that would cut gasoline 

consumption and greenhouse gas emissions 

from motor vehicles * * * 

On May 14, 2007, President Bush 

issued Executive Order 13432, which 

announces 

[i]t is the policy of the United States to 

ensure the coordinated and effective exercise 

of the authorities of the President and the 

heads of the Department of Transportation, 

the Department of Energy, and the 

Environmental Protection Agency to protect 

the environment with respect to greenhouse 

gas emissions from motor vehicles, nonroad 

vehicles, and nonroad engines, in a manner 

consistent with sound science, analysis of 

benefits and costs, public safety, and 

economic growth. 

The Executive Order goes on to 

require coordination among the agencies 

when taking action to directly regulate 

(or substantially and predictably affect) 

greenhouse gas emissions from motor 

vehicles, nonroad vehicles, and use of 

motor vehicle fuels. Such action is to be 

undertaken jointly ‘‘to the maximum 

extent permitted by law and determined 

by the head of the agency to be 

practicable.’’ 

Consistent with these directives, 

NHTSA and EPA took the first steps 

toward regulations that would cut 

gasoline consumption and greenhouse 

gas emissions from motor vehicles 

pursuant to Presidential directive. 

NHTSA and EPA staff jointly assessed 

which technologies would be available 

and their effectiveness and cost. They 

also jointly assessed the key economic 

and other assumptions affecting the 

stringency of future standards. Finally, 

they worked together in updating and 

further improving the Volpe model that 

had been used to help determine the 

stringency of the MY 2008–2011 light 

truck CAFE standards. Much of the 

work between NHTSA and EPA staff 

was reflected in rulemaking proposals 

being developed by NHTSA prior to the 

enactment of EISA and was 

substantially retained when NHTSA 

revised its proposals to be consistent 

with that legislation. Ultimately, the 

NPRM published by the agency in May 

and today’s final rule are based on 

NHTSA’s assessments of how they meet 

EPCA, as amended by EISA. 

5. Ninth Circuit Issues Decision Re Final 

Rule for MY 2008–2011 Light Trucks 

(November 2007) 

On November 15, 2007, the United 

States Court of Appeals for the Ninth 

Circuit issued its decision in Center for 

Biological Diversity v. NHTSA,54 the 

challenge to the MY 2008–11 light truck 

CAFE rule. The Court rejected the 

petitioners’ argument that EPCA 

precludes the use of a marginal costbenefit analysis that attempted to weigh 

all of the social benefits (i.e., 

externalities as well as direct benefits to 

consumers) of improved fuel savings in 

determining the stringency of the CAFE 

standards. 

The Court found that NHTSA had 

been arbitrary and capricious in the 

following respects: 

• NHTSA’s decision that it could not 

monetize the benefit of reducing CO2

emissions for the purpose of conducting 

its marginal benefit-cost analysis based 

on its view that the value of the benefit 

of CO2 emission reductions resulting 

from fuel consumption reductions was 

too uncertain to permit the agency to 

determine a value for those emission 

reductions; 55

• NHTSA’s lack, in the Court’s view, 

of a reasoned explanation for its 

decision not to establish a ‘‘backstop’’ 

(i.e., a fixed minimum CAFE standard 

applicable to manufacturers); 56

• NHTSA’s lack, again in the Court’s 

view, of a reasoned explanation for its 

decision not to revise the regulatory 

definitions for the passenger car and 

light truck categories of automobiles so 

that some vehicles currently classified 

as light trucks are instead classified as 

passenger cars; 57

• NHTSA’s decision not to subject 

most medium- and heavy-duty pickups 

and most medium- and heavy-duty 

cargo vans (i.e., those between 8,500 

and 10,000 pounds gross vehicle weight 

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58EISA removed these vehicles from the statutory 

definition of ‘‘automobile’’ and mandated the 

establishment of CAFE standards for them 

following the completion of reports by the National 

Academy of Sciences and NHTSA. 

59On February 6, 2008, the Government 

petitioned for en banc rehearing by the 9th Circuit 

on the limited issue of whether it was appropriate 

for the panel, having held that the agency 

insufficiently explored the environmental 

implications of the MY 2008–11 rulemaking in its 

EA, to order the agency to prepare an EIS rather 

than simply remanding the matter to the agency for 

further analysis. The Court subsequently modified 

its order as described below. 

60The deadline in EPCA for issuing a final rule 

establishing, for the first time, a CAFE standard for 

a model year is 18 months before the beginning of 

that model year. 49 U.S.C. 32902(g)(2). The same 

deadline applies to issuing a final rule amending an 

existing CAFE standard so as to increase its 

stringency. Given that the agency has long regarded 

October 1 as the beginning of a model year, the 

statutory deadline for increasing the MY 2009 

standard was March 30, 2007, and the deadline for 

increasing the MY 2010 standard is March 30, 2008. 

Thus, the only model year for which there was 

sufficient time at the time of the Court’s decision 

to gather all of the necessary information, conduct 

the necessary analyses and complete a rulemaking 

was MY 2011. As noted earlier in this notice, 

however, EISA requires that a new standard be 

established for that model year. This rulemaking 

was conducted pursuant to that requirement. 

61A description of the NPRM appears in section 

I.C of this preamble. 

62See CBD v. NHTSA, 538 F.3d 1172 (9th Cir. 

2008). 

63 73 FR 61859. 

rating (GVWR,) to the CAFE 

standards; 58

• NHTSA’s decision to prepare and 

publish an Environmental Assessment 

(EA) and making a finding of no 

significant impact notwithstanding what 

the Court found to be an insufficiently 

broad range of alternatives, insufficient 

analysis of the climate change effects of 

the CO2 emissions, and limited 

assessment of cumulative impacts in its 

EA under the National Environmental 

Policy Act (NEPA).59

The Court did not vacate the 

standards, but instead said it would 

remand the rule to NHTSA to 

promulgate new standards consistent 

with its opinion ‘‘as expeditiously as 

possible and for the earliest model year 

practicable.60 Under the decision, the 

standards established by the April 2006 

final rule would remain in effect unless 

and until amended by NHTSA. In 

addition, it directed the agency to 

prepare an Environmental Impact 

Statement. 

As of the date of the issuance of this 

final rule, the Court has not yet issued 

its mandate in this case. 

6. Congress Enacts Energy Security and 

Independence Act of 2007 (December 

2007) 

As noted above in Section I.B., EISA 

significantly changed the provisions of 

EPCA governing the establishment of 

future CAFE standards. These changes 

made it necessary for NHTSA to pause 

in its efforts so that it could assess the 

implications of the amendments made 

by EISA and then, as required, revise 

some aspects of the proposals it had 

been developing (e.g., the model years 

covered and credit issues). 

7. NHTSA Proposes CAFE Standards for 

MYs 2011–2015 and Requests New 

Product Plans for Those Years (April 

2008) 61

8. NHTSA Contracts With ICF 

International To Conduct Climate 

Modeling and Other Analyses in 

Support of Draft and Final 

Environmental Impact Statements (May 

2008) 

NHTSA contracted with ICF 

International (ICF) to support it in 

conducting its environmental analyses 

and preparing the draft and final 

environmental impact statements. ICF 

provides consulting services and 

technology solutions in energy, climate 

change, environment, transportation, 

social programs, health, defense, and 

emergency management. 

9. Manufacturers Submit New Product 

Plans (June 2008) 

These product plans identify which 

vehicle models manufacturers intend to 

build and which technologies the 

manufacturers intend to apply and 

when to their vehicles. NHTSA began 

its analysis of the MY 2011 CAFE 

standards with the product plans and 

used them to establish a baseline, which 

is then used to evaluate different 

potential levels of future CAFE 

stringency. 

10. NHTSA Contracts With Ricardo To 

Aid in Assessing Public Comments on 

Cost and Effectiveness of Fuel Saving 

Technologies (June 2008) 

NHTSA received numerous public 

comments on the types of potential fuel 

saving technologies that we discussed in 

the NPRM, their costs and effectiveness 

in improving fuel economy, and in 

which model year and to which vehicles 

they may be applied. To aid the agency 

in analyzing and responding to these 

comments, and to ensure that the 

analysis for the final rule is thorough 

and robust, NHTSA contracted with 

Ricardo, a highly reputable and neutral 

source of outside expertise in the areas 

of powertrain and vehicle technologies. 

NHTSA chose Ricardo because of its 

extensive experience and expertise in 

working with both government and 

industry on fuel economy-improving 

technology issues. 

11. Ninth Circuit Revises Its Decision Re 

Final Rule for MY 2008–2011 Light 

Trucks (August 2008) 

In response to the Government 

petition for rehearing, the Ninth Circuit 

modified its decision by replacing its 

direction to prepare an EIS with a 

direction to prepare either a new EA or, 

if necessary, an EIS.62

12. NHTSA Releases Final 

Environmental Impact Statement 

(October 2008) 

On October 17, 2008, EPA published 

a notice announcing the availability of 

NHTSA’s final environmental impact 

statement (FEIS) for this rulemaking.63

Throughout the FEIS, NHTSA relied 

extensively on findings of the United 

Nations Intergovernmental Panel on 

Climate Change (IPCC) and the U.S. 

Climate Change Science Program 

(USCCSP). In particular, the agency 

relied heavily on the most recent, 

thoroughly peer-reviewed, and credible 

assessments of global climate change 

and its impact on the United States: the 

IPCC Fourth Assessment Report 

Working Group I4 and II5 Reports, and 

reports by the USCCSP that include 

Scientific Assessments of the Effects of 

Global Climate Change on the United 

States and Synthesis and Assessment 

Products. 

In the FEIS, NHTSA compared the 

environmental impacts of its preferred 

alternative and those of reasonable 

alternatives. It considered direct, 

indirect, and cumulative impacts and 

describes these impacts to inform the 

decisionmaker and the public of the 

environmental impacts of the various 

alternatives. 

Among other potential impacts, 

NHTSA analyzed the direct and indirect 

impacts related to fuel and energy use, 

emissions, including carbon dioxide 

and its effects on temperature and 

climate change, air quality, natural 

resources, and the human environment. 

Specifically, the FEIS used a climate 

model to estimate and report on four 

direct and indirect effects of climate 

change, driven by alternative scenarios 

of GHG emissions, including: 

1. Changes in CO2 concentrations; 

2. Changes in global mean surface 

temperature; 

3. Changes in regional temperature 

and precipitation; and 

4. Changes in sea level. 

NHTSA also considered the 

cumulative impacts of the proposed 

standards for MY 2011–2015 passenger 

cars and light trucks, together with 

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64http://www.reginfo.gov/public/do/ 

eoHistReviewSearch (last visited March 8, 2009). To 

find the report on the clearance of the draft final 

rule, select ‘‘Department of Transportation’’ under 

‘‘Economically Significant Reviews Completed’’ 

and select ‘‘2008’’ under ‘‘Select Calendar Year.’’ 

65http://www.treasury.gov/initiatives/eesa/ 

program-descriptions/aifp.shtml (last visited March 

8, 2009). 

66While EISA excluded work trucks from 

‘‘automobiles,’’ it did not exclude them from 

regulation under EPCA. As amended by EISA, 

EPCA requires that work trucks be subjected to 

average fuel economy standards (49 U.S.C. 

32902(b)(1)(C)), but only after first the National 

Academy of Sciences completes a study and then 

NHTSA completes a follow-on study. Congress thus 

recognized and made allowances for the practical 

difficulties that led NHTSA to decline to include 

work trucks in its final rule for MY 2008–11 light 

trucks. 

67 49 U.S.C. 32902(a)(19). 68 49 U.S.C. 32902(a)(3). 

estimated impacts of NHTSA’s 

implementation of the CAFE program 

through MY 2010 and NHTSA’s future 

CAFE rulemaking for MYs 2016–2020. 

NHTSA intends to review all analyses 

for model years after MY 2011 in 

connection with the rulemaking for MY 

2012 and thereafter, consistent with the 

President’s Memorandum of January 26, 

2009. 

13. Office of Information and Regulatory 

Affairs Completes Review of a Draft MY 

2011–2015 Final Rule (November 2008) 

The Office of Information and 

Regulatory Affairs of the Office of 

Management and Budget completed 

review of the rule under Executive 

Order 12866, Regulatory Planning and 

Review, on November 14, 2008.64

14. Department of Treasury Extends 

Loans to General Motors and Chrysler 

(December 2008) 

The Department of the Treasury 

established the Automotive Industry 

Financing Program ‘‘to prevent a 

significant disruption of the American 

automotive industry that poses a 

systemic risk to financial market 

stability and will have a negative effect 

on the real economy of the United 

States.’’ 65 Under that program, initial 

loans were made to General Motors and 

Chrysler. 

15. Department of Transportation 

Decides Not To Issue MY 2011–2015 

Final Rule (January 2009) 

On January 7, 2009, the Department of 

Transportation announced that the Bush 

Administration would not issue the 

final rule. 

16. The President Requests NHTSA To 

Issue Final Rule for MY 2011 Only 

(January 2009) 

As explained above, in his 

memorandum of January 26, 2009, the 

President requested the agency to issue 

a final rule adopting CAFE standards for 

MY 2011 only. Further, the President 

requested NHTSA to establish standards 

for MY 2012 and later after considering 

the appropriate legal factors, the 

comments filed in response to the May 

2008 proposal, the relevant 

technological and scientific 

considerations, and, to the extent 

feasible, a forthcoming report by the 

National Academy of Sciences assessing 

automotive technologies that can 

practicably be used to improve fuel 

economy. 

17. General Motors and Chrysler Submit 

Restructuring Reports to Department of 

the Treasury (February 2009) 

The reports were required under the 

terms of the loans made available to 

these companies in December to assist 

the domestic auto industry in becoming 

financially viable. 

D. Energy Policy and Conservation Act, 

as Amended 

EPCA, which was enacted in 1975, 

mandates a motor vehicle fuel economy 

regulatory program to meet the various 

facets of the need to conserve energy, 

including ones having environmental 

and foreign policy implications. EPCA 

allocates the responsibility for 

implementing the program between 

NHTSA and EPA as follows: NHTSA 

sets CAFE standards for passenger cars 

and light trucks; EPA establishes the 

procedures for testing, test vehicles, 

collects and analyzes manufacturers’ 

data, and calculates the average fuel 

economy of each manufacturer’s 

passenger cars and light trucks; and 

NHTSA enforces the standards based on 

EPA’s calculations. 

We have summarized below EPCA, as 

amended by EISA. 

1. Vehicles Subject to Standards for 

Automobiles 

With two exceptions specified in 

EPCA, all four-wheeled motor vehicles 

with a gross vehicle weight rating of 

10,000 pounds or less will be subject to 

the CAFE standards, beginning with MY 

2011. The exceptions will be work 

trucks 66 and multi-stage vehicles. Work 

trucks are defined as vehicles that are: 

—Rated at between 8,500 and 10,000 

pounds gross vehicle weight; and 

—Are not a medium-duty passenger 

vehicle (as defined in section 

86.1803–01 of title 40, Code of 

Federal Regulations, as in effect on 

the date of the enactment of the Tenin-Ten Fuel Economy Act).67

Medium-duty passenger vehicles 

(MDPV) include 8,500 to 10,000 lb. 

GVWR sport utility vehicles (SUVs), 

short bed pick-up trucks, and passenger 

vans, but exclude pickup trucks with 

longer beds and cargo vans rated at 

between 8,500 and 10,000 lb. GVWR. It 

is those excluded pickup trucks and 

cargo vans that are work trucks. ‘‘Multistage vehicle’’ includes any vehicle 

manufactured in different stages by 2 or 

more manufacturers, if no intermediate 

or final-stage manufacturer of that 

vehicle manufactures more than 10,000 

multi-stage vehicles per year.68

Under EPCA, as it existed before 

EISA, the agency had discretion 

whether to regulate vehicles with a 

GVWR between 6,000 lb and 10,000 

GVWR. It could regulate the fuel 

economy of vehicles with a GVWR 

within that range under CAFE if it 

determined that (1) standards were 

feasible for these vehicles, and (2) either 

(a) that these vehicles were used for the 

same purpose as vehicles rated at not 

more than 6,000 lbs. GVWR, or (b) that 

their regulation would result in 

significant energy conservation. 

EISA eliminated the need for 

administrative determinations in order 

to subject vehicles between 6,000 and 

10,000 lb. GVWR to the CAFE standards 

for automobiles. Congress did so by 

making the determination itself that all 

vehicles within that GVWR range 

should be included, with the exceptions 

noted above. 

2. Mandate To Set Standards for 

Automobiles 

For each future model year, EPCA 

requires that the agency establish 

standards for all new automobiles at the 

maximum feasible levels for that model 

year. EISA made no change in this 

requirement. A manufacturer’s 

individual passenger cars and light 

trucks are not required to meet a 

particular fuel economy level. Instead, 

EPCA requires that the average fuel 

economy of a manufacturer’s fleet of 

passenger cars (or light trucks) in a 

particular model year must meet the 

standard for those automobiles for that 

model year. 

For MYs 2011–2020 and for MYs 

2021–2030, EPCA specifies additional 

requirements regarding standard setting. 

Each of those requirements and the 

maximum feasible requirement must be 

interpreted in the context of the other 

requirements. For MYs 2011–2020, 

separate standards for passenger cars 

and for light trucks must be set at high 

enough levels to ensure that the CAFE 

of the industry-wide combined fleet of 

new passenger cars and light trucks for 

MY 2020 is not less than 35 mpg. 

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69 67 FR 77015, 77021; December 16, 2002. 

70CEI–I, 793 F.2d 1322, 1352 (D.C. Cir. 1986). 

In light of the evident confusion of 

some commenters about the 35 mpg 

requirement, we want to emphasize that 

that figure is not the CAFE level that 

any individual manufacturer’s 

combined CAFE will be required to 

meet. The 35 mpg requirement applies 

solely to the agency’s standard setting 

and concerns the required combined 

effect that the separate MY 2020 

standards for passenger cars and light 

trucks must achieve with respect to the 

single fleet containing the MY 2020 

passenger cars and light trucks of all 

manufacturers. That single industrywide fleet must have a CAFE of at least 

35 mpg. If that requirement were exactly 

met, we anticipate that manufacturers 

with relatively larger proportions of 

smaller automobiles would be required 

to achieve combined CAFEs greater than 

35 mpg, while manufacturers with 

relatively largely proportions of larger 

automobiles would be required to 

achieve combined CAFEs that might in 

that year be somewhat below 35 mpg. 

EISA does not specify precisely how 

compliance with this minimum 

requirement is to be ensured or how or 

when the CAFE of the industry-wide 

combined fleet for MY 2020 is to be 

calculated for purposes of determining 

the agency’s compliance. 

If the current gap between passenger 

car CAFE and light truck CAFE persists, 

the standard for MY 2020 passenger cars 

would likely, as a practical matter, need 

to be set high enough to ensure that the 

industry-wide level of average fuel 

economy for passenger cars is not less 

than 40 mpg in order for the CAFE of 

the combined industry-wide fleet to 

reach 35 mpg,. The standard for MY 

2020 light trucks could be somewhat 

below 35 mpg. Again, these are the 

levels of stringency necessary to meet 

the minimum requirement of an 

industry-wide combined average of at 

least 35 mpg in MY 2020. Reaching 35 

mpg earlier than MY 2020 would 

require even higher car and light truck 

standards in MY 2020. In addition, the 

CAFE of each manufacturer’s fleet of 

domestic passenger cars must meet a 

sliding, absolute minimum level in each 

model year: 27.5 mpg or 92 percent of 

the projected CAFE of the industry-wide 

fleet of new domestic and non-domestic 

passenger cars for that model year. 

The standards for passenger cars and 

those for light trucks must increase 

ratably each year. We interpret this 

requirement, in combination with the 

requirement to set the standards for 

each model year at the level determined 

to be the maximum feasible level for 

that model year, to mean that the annual 

increases should not be 

disproportionately large or small in 

relation to each other. 

EPCA, as it existed before EISA, 

required that light truck standards be set 

at the maximum feasible level for each 

model year, but simply specified a 

default standard of 27.5 mpg for 

passenger cars for MY 1985 and 

thereafter. It permitted, but did not 

require that NHTSA establish a higher 

or lower standard for passenger cars if 

the agency found that the maximum 

feasible level of fuel economy is higher 

or lower than 27.5 mpg. Henceforth, the 

agency must establish a standard for 

each model year at the maximum 

feasible level. 

3. Attribute-Based Standards 

The standards for passenger cars and 

light trucks must be based on one or 

more vehicle attributes, like size or 

weight, that correlate with fuel economy 

and must be expressed in terms of a 

mathematical function. Fuel economy 

targets are set for individual vehicles 

and increase as the attribute decreases 

and vice versa. For example, size-based 

(i.e., size-indexed) standards assign 

higher fuel economy targets to smaller 

(and generally, but not necessarily 

lighter) vehicles and lower ones to 

larger (and generally, but not necessarily 

heavier) vehicles. The fleet wide average 

fuel economy that a particular 

manufacturer must achieve depends on 

the size mix of its fleet, i.e., the 

proportion of the fleet that is small-, 

medium- or large-sized. 

This approach can be used to require 

virtually all manufacturers to increase 

significantly the fuel economy of a 

broad range of both passenger cars and 

light trucks. Further, this approach can 

do so without creating an incentive for 

manufacturers to make small vehicles 

smaller or large vehicles larger, with 

attendant implications for safety. 

4. Factors Considered in the Setting of 

Standards 

In determining the maximum feasible 

level of average fuel economy for a 

model year, EPCA requires that the 

agency consider four factors: 

Technological feasibility, economic 

practicability, the effect of other 

standards of the Government on fuel 

economy, and the need of the nation to 

conserve energy. EPCA does not define 

these terms or specify what weight to 

give each concern in balancing them; 

thus, NHTSA defines them and 

determines the appropriate weighting 

based on the circumstances in each 

CAFE standard rulemaking. 

(a) Factors That Must Be Considered 

(i) Technological Feasibility 

‘‘Technological feasibility’’ refers to 

whether a particular method of 

improving fuel economy can be 

available for commercial application in 

the model year for which a standard is 

being established. Thus, the agency is 

not limited in a CAFE rulemaking to 

technology that is already being 

commercially applied at that time. 

(ii) Economic Practicability 

‘‘Economic practicability’’ refers to 

whether a standard is one ‘‘within the 

financial capability of the industry, but 

not so stringent as to’’ lead to ‘‘adverse 

economic consequences, such as a 

significant loss of jobs or the 

unreasonable elimination of consumer 

choice.’’ 69 In an attempt to ensure the 

economic practicability of attribute 

based standards, the agency considers a 

variety of factors, including the annual 

rate at which manufacturers can 

increase the percentage of its fleet that 

has a particular type of fuel saving 

technology, and cost to consumers. 

Since consumer acceptability is an 

element of economic practicability, the 

agency, in this rule, has limited its 

consideration of fuel saving 

technologies to be added to vehicles to 

those that provide benefits that match 

their costs. The agency believes this 

approach is reasonable for the MY 2011 

standards in view of the facts before it 

at this time. The agency is aware, 

however, that facts relating to a variety 

of key issues in CAFE rulemaking are 

steadily evolving and will review its 

balancing of these factors in light of the 

facts before it in the next rulemaking 

proceeding. 

At the same time, the law does not 

preclude a CAFE standard that poses 

considerable challenges to any 

individual manufacturer. The 

Conference Report for EPCA, as enacted 

in 1975, makes clear, and the case law 

affirms, ‘‘(A) determination of maximum 

feasible average fuel economy should 

not be keyed to the single manufacturer 

which might have the most difficulty 

achieving a given level of average fuel 

economy.’’ 70 Instead, the agency is 

compelled ‘‘to weigh the benefits to the 

nation of a higher fuel economy 

standard against the difficulties of 

individual automobile manufacturers.’’ 

Id. The law permits CAFE standards 

exceeding the projected capability of 

any particular manufacturer as long as 

the standard is economically practicable 

for the industry as a whole. Thus, while 

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71 42 FR 63184, 63188; Dec. 15, 1977. See also 42 

FR 33534, 33537; June 30, 1977. 

72This report was prepared in compliance with 

Section 10 of the Energy Supply and Environmental 

Coordination Act of 1974, Public Law 93–319. 

73See pages 6–8 and 91–93. 

74See page 22 of Senate Report 94–179, pages 88 

and 90 of House Report 94–340, and pages 155–7 

of the Conference Report, Senate Report 94–516. 75 42 FR 63184, 63188 (1977). 

76Center for Auto Safety v. NHTSA, 793 F.2d 

1322, 1325 n. 12 (D.C. Cir. 1986); Public Citizen v. 

NHTSA, 848 F.2d 256, 262–3 n. 27 (D.C. Cir. 1988) 

(noting that ‘‘NHTSA itself has interpreted the 

factors it must consider in setting CAFE standards 

as including environmental effects’’); and Center for 

Biological Diversity v. NHTSA, 508 F.3d 508, 529 

(9th Cir. 2007). 

77 42 FR 63,184, 63,188 (Dec. 15, 1977) (emphasis 

added). 

78For example, the final rules establishing CAFE 

standards for MY 1981–84 passenger cars, 42 FR 

33533, 33540–1 and 33551; June 30, 1977, and for 

MY 1983–85 light trucks, 45 FR 81593, 81597; 

December 11, 1980. 

79 53 FR 39275, 39302; October 6, 1988. 

80 54 FR 21985, 

a particular CAFE standard may pose 

difficulties for one manufacturer, it may 

also present opportunities for another. 

The CAFE program is not necessarily 

intended to maintain the competitive 

positioning of each particular company. 

Rather, it is intended to enhance fuel 

economy of the vehicle fleet on 

American roads, while protecting motor 

vehicle safety and being mindful of the 

risk of harm to the overall United States 

economy. 

(iii) The Effect of Other Motor Vehicle 

Standards of the Government on Fuel 

Economy 

‘‘The effect of other motor vehicle 

standards of the Government on fuel 

economy’’ means, according to the 

agency’s longstanding view, ‘‘the 

unavoidable adverse effects on fuel 

economy of compliance with emission, 

safety, noise, or damageability 

standards.’’ 71 The purpose of this 

provision was to ensure that any 

adverse effects of other standards on 

fuel economy were taken into 

consideration in connection with the 

fuel economy standards. The concern 

about adverse effects is evident in a 

1974 report, entitled ‘‘Potential for 

Motor Vehicle Fuel Economy 

Improvement,’’ prepared and submitted 

to Congress by the Department of 

Transportation and Environmental 

Protection Agency.72 That report noted 

that the weight added by safety 

standards would reduce, and one set of 

emissions standards might temporarily 

reduce, the level of achievable fuel 

economy.73 The same concern can also 

be found in the congressional committee 

reports on the bills that became EPCA.74

In the case of emission standards, this 

includes standards adopted by the 

Federal government and can include 

standards adopted by the States as well, 

since in certain circumstances the Clean 

Air Act allows States to adopt and 

enforce State standards different from 

the Federal ones. 

(iv) The Need of the United States To 

Conserve Energy 

‘‘The need of the United States to 

conserve energy’’ means ‘‘the consumer 

cost, national balance of payments, 

environmental, and foreign policy 

implications of our need for large 

quantities of petroleum, especially 

imported petroleum.’’ 75 Environmental 

implications principally include 

reductions in emissions of criteria 

pollutants and carbon dioxide. A prime 

example of foreign policy implications 

are energy independence and security 

concerns. 

1. Fuel Prices and the Value of Saving 

Fuel 

Projected future fuel prices are a 

critical input into the preliminary 

economic analysis of alternative CAFE 

standards, because they determine the 

value of fuel savings both to new 

vehicle buyers and to society. In this 

rule, NHTSA relies on fuel price 

projections from the U.S. Energy 

Information Administration’s (EIA) 

Annual Energy Outlook (AEO) for this 

analysis. 

2. Petroleum Consumption and Import 

Externalities 

U.S. consumption and imports of 

petroleum products impose costs on the 

domestic economy that are not reflected 

in the market price for crude petroleum, 

or in the prices paid by consumers of 

petroleum products such as gasoline. 

These costs include (1) higher prices for 

petroleum products resulting from the 

effect of U.S. oil import demand on the 

world oil price; (2) the risk of 

disruptions to the U.S. economy caused 

by sudden reductions in the supply of 

imported oil to the U.S.; and (3) 

expenses for maintaining a U.S. military 

presence to secure imported oil supplies 

from unstable regions, and for 

maintaining the strategic petroleum 

reserve (SPR) to cushion against 

resulting price increases. Higher U.S. 

imports of crude oil or refined 

petroleum products increase the 

magnitude of these external economic 

costs, thus increasing the true economic 

cost of supplying transportation fuels 

above the resource costs of producing 

them. Conversely, reducing U.S. imports 

of crude petroleum or refined fuels or 

reducing fuel consumption can reduce 

these external costs. 

3. Air Pollutant Emissions 

While reductions in domestic fuel 

refining and distribution that result 

from lower fuel consumption will 

reduce U.S. emissions of various 

pollutants, additional vehicle use 

associated with the rebound effect from 

higher fuel economy will increase 

emissions of these pollutants. Thus, the 

net effect of stricter CAFE standards on 

emissions of each pollutant depends on 

the relative magnitudes of its reduced 

emissions in fuel refining and 

distribution, and increases in its 

emissions from vehicle use. 

Fuel savings from stricter CAFE 

standards also result in lower emissions 

of CO2, the main greenhouse gas emitted 

as a result of refining, distribution, and 

use of transportation fuels. Lower fuel 

consumption reduces carbon dioxide 

emissions directly, because the primary 

source of transportation-related CO2

emissions is fuel combustion in internal 

combustion engines. 

The agency has considered 

environmental issues, both within the 

context of EPCA and the National 

Environmental Policy Act, in making 

decisions about the setting of standards 

from the earliest days of the CAFE 

program. As courts of appeal have noted 

in three decisions stretching over the 

last 20 years,76 the agency defined the 

‘‘need of the Nation to conserve energy’’ 

in the late 1970s as including ‘‘the 

consumer cost, national balance of 

payments, environmental, and foreign 

policy implications of our need for large 

quantities of petroleum, especially 

imported petroleum.’’ 77 Pursuant to 

that view, the agency declined in the 

past to include diesel engines in 

determining the maximum feasible level 

of average fuel economy for passenger 

cars and for light trucks because 

particulate emissions from diesels were 

then both a source of concern and 

unregulated.78

In the late 1980s, NHTSA cited 

concerns about climate change as one of 

its reasons for limiting the extent of its 

reduction of the CAFE standard for MY 

1989 passenger cars 79 and for declining 

to reduce the standard for MY 1990 

passenger cars.80

Since then, DOT has considered the 

indirect benefits of reducing tailpipe 

carbon dioxide emissions in its fuel 

economy rulemakings pursuant to the 

statutory requirement to consider the 

nation’s need to conserve energy by 

reducing consumption. In this 

rulemaking, consistent with the Ninth 

Circuit’s decision and its observations 

about the potential effect of changing 

information about climate change on the 

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81The IPCC 2007 reports can be found at 

http://www.ipcc.ch/. (Last accessed March 8, 2009.) 

82See, e.g., Center for Auto Safety v. NHTSA 

(CAS), 793 F. 2d 1322 (D.C. Cir. 1986) 

(Administrator’s consideration of market demand as 

component of economic practicability found to be 

reasonable); Public Citizen 848 F.2d 256 (Congress 

established broad guidelines in the fuel economy 

statute; agency’s decision to set lower standard was 

a reasonable accommodation of conflicting 

policies). As the United Staets Court of Appeals 

pointed out in upholding NHTSA’s exercise of 

judgment in setting the 1987–1989 passenger car 

standards, ‘‘NHTSA has always examined the safety 

consequences of the CAFE standards in its overall 

consideration of relevant factors since its earliest 

rulemaking under the CAFE program.’’ Competitive 

Enterprise Institute v. NHTSA (CEI I), 901 F.2d 107, 

120 at n.11 (D.C. Cir. 1990). 

83 49 U.S.C. 32902(h). 

84 In addition, Executive Order No. 13432 

provides that a Federal agency undertaking a 

regulatory action that can reasonably be expected to 

regulate emissions directly, or to substantially and 

predictably affect emissions, of greenhouse gases 

from motor vehicles, shall act jointly and 

consistently with other agencies to the extent 

possible and to consider the views of other agencies 

regarding such action. 85Under the procedures established by EPA, 

compliance with the CAFE standards is based on 

the rates of emission of CO2, CO, and hydrocarbons 

from covered vehicles, but primarily on the 

emission rates of CO2. In the measurement and 

calculation of a given vehicle model’s fuel economy 

for purposes of determining a manufacturer’s 

compliance with federal fuel economy standards, 

the role of CO2 is approximately 100 times greater 

than the combined role of the other two relevant 

carbon exhaust gases. Given that the amount of CO2, 

CO, and hydrocarbons emitted by a vehicle varies 

directly with the amount of fuel it consumes, EPA 

can reliably and accurately convert the amount of 

those gases emitted by that vehicle into the miles 

per gallon achieved by that vehicle. 86 49 U.S.C. 32904(c). 

balancing of the EPCA factors and aided 

by the 2007 reports of the United 

Nations Intergovernmental Panel on 

Climate Change 81 and other 

information, NHTSA has monetized the 

reductions in tailpipe emissions of CO2

that will result from the CAFE standards 

and is adopting CAFE standards for MY 

2011 at levels that reflect an estimated 

value of those reductions in CO2 as well 

as the value of other benefits of those 

standards. In setting these CAFE 

standards, NHTSA also considered 

environmental impacts under NEPA, 42 

U.S.C. 4321–4347. 

(v) Other Factors—Safety 

In addition, the agency historically 

has considered the potential for adverse 

safety consequences when deciding 

upon a maximum feasible level. This 

practice is recognized approvingly in 

case law.82

(b) Factors That Cannot be Considered 

EPCA provides that in determining 

the level at which it should set CAFE 

standards for a particular model year, 

NHTSA may not consider the ability of 

manufacturers to take advantage of 

several EPCA provisions that facilitate 

compliance with the CAFE standards 

and thereby reduce the costs of 

compliance.83 As noted below in 

Section XII, manufacturers can earn 

compliance credits by exceeding the 

CAFE standards and then use those 

credits to achieve compliance in years 

in which their measured average fuel 

economy falls below the standards. 

Manufacturers can also increase their 

CAFE levels through MY 2019 by 

producing alternative fuel vehicles. 

EPCA provides an incentive for 

producing these vehicles by specifying 

that their fuel economy is to be 

determined using a special calculation 

procedure that results in those vehicles 

being assigned a high fuel economy 

level. 

(c) Weighing and Balancing of Factors 

EPCA did not define the factors or 

specify the relative weight to be given 

the factors in weighing and balancing 

them. Instead, EPCA gave broad 

guidelines within which the agency is to 

exercise discretion in determining what 

level of stringency is the maximum 

feasible level of stringency. Thus, the 

agency has substantial discretion in 

defining and weighing the terms and 

accommodating conflicting priorities 

consistent with the purposes of EPCA. 

5. Consultation in Setting Standards 

EPCA provides that NHTSA is to 

consult with the Department of Energy 

(DOE) and Environmental Protection 

Agency prior to prescribing CAFE 

standards. It specifies further that 

NHTSA is to provide DOE with an 

opportunity to provide written 

comments on draft proposed and final 

CAFE standards.84

6. Test Procedures for Measuring Fuel 

Economy 

EPA’s fuel economy test procedures 

specify equations for calculating fuel 

economy. These equations are based on 

the carbon balance technique which 

allows fuel economy to be determined 

from measurement of exhaust 

emissions. As noted above, this 

technique relies upon the premise that 

the quantity of carbon in a vehicle’s 

exhaust gas is equal to the quantity of 

carbon consumed by the engine as fuel. 

After measuring the amount of CO2

emitted from the tailpipe of a test 

vehicle, as well as the amount of carbon 

in hydrocarbon (HC) and carbon 

monoxide (CO), EPA then uses the 

carbon content of the test fuel to 

calculate the amount of fuel that had to 

be consumed per mile in order for the 

vehicle to produce that amount of 

carbon containing emissions.85 Finally, 

EPA converts that fuel figure into a 

miles-per-gallon figure. 

7. Enforcement and Compliance 

Flexibility 

EPA is responsible for measuring 

automobile manufacturers’ CAFE so that 

NHTSA can determine compliance with 

the CAFE standards. In making these 

measurements for passenger cars, EPA is 

required by EPCA 86 to use the EPA test 

procedures in place as of 1975 (or 

procedures that give comparable 

results), which are the city and highway 

tests of today, with adjustments for 

procedural changes that have occurred 

since 1975. EPA uses similar procedures 

for light trucks, although, as noted 

above, EPCA does not require it to do 

so. 

When NHTSA finds that a 

manufacturer is not in compliance, it 

notifies the manufacturer. Surplus 

credits generated from the five previous 

years can be used to make up the deficit. 

The amount of credit earned is 

determined by multiplying the number 

of tenths of a mpg by which a 

manufacturer exceeds a standard for a 

particular category of automobiles by 

the total volume of automobiles of that 

category manufactured by the 

manufacturer for a given model year. If 

there are no (or not enough) credits 

available, then the manufacturer can 

either pay the fine, or submit a carry 

back plan to the agency. A carry back 

plan describes what the manufacturer 

plans to do in the following three model 

years to earn enough credits to make up 

for the deficit. NHTSA must examine 

and determine whether to approve the 

plan. 

In the event that a manufacturer does 

not comply with a CAFE standard, even 

after the consideration of credits, EPCA 

provides for the assessing of civil 

penalties, unless, as provided below, the 

manufacturer has earned credits for 

exceeding a standard in an earlier year 

or expects to earn credits in a later year. 

The Act specifies a precise formula for 

determining the amount of civil 

penalties for such a noncompliance. The 

penalty, as adjusted for inflation by law, 

is $5.50 for each tenth of a mpg that a 

manufacturer’s average fuel economy 

falls short of the standard for a given 

model year multiplied by the total 

volume of those vehicles in the affected 

fleet (i.e., import or domestic passenger 

car, or light truck), manufactured for 

that model year. The amount of the 

penalty may not be reduced except 

under the unusual or extreme 

circumstances specified in the statute. 

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87 49 U.S.C. 30120, Remedies for defects and 

noncompliance. 

88See 73 FR 24910 (May 2, 2008) for NHTSA’s 

most recent request for comments, which 

accompanied the NPRM. 

89 Id. 

90NHTSA grants confidentiality to 

manufacturers’ future specific product plans under 

49 CFR Part 512. Once NHTSA has granted a 

manufacturer’s claim of confidentiality, NHTSA 

may not release the covered information except in 

certain circumstances listed in § 512.23, none of 

which include increasing the ability of the public 

Continued 

Unlike the National Traffic and Motor 

Vehicle Safety Act, EPCA does not 

provide for recall and remedy in the 

event of a noncompliance. The presence 

of recall and remedy provisions 87 in the 

Safety Act and their absence in EPCA is 

believed to arise from the difference in 

the application of the safety standards 

and CAFE standards. A safety standard 

applies to individual vehicles; that is, 

each vehicle must possess the requisite 

equipment or feature which must 

provide the requisite type and level of 

performance. If a vehicle does not, it is 

noncompliant. Typically, a vehicle does 

not entirely lack an item or equipment 

or feature. Instead, the equipment or 

features fails to perform adequately. 

Recalling the vehicle to repair or replace 

the noncompliant equipment or feature 

can usually be readily accomplished. 

In contrast, a CAFE standard applies 

to a manufacturer’s entire fleet for a 

model year. It does not require that a 

particular individual vehicle be 

equipped with any particular equipment 

or feature or meet a particular level of 

fuel economy. It does require that the 

manufacturer’s fleet, as a whole, 

comply. Further, although under the 

attribute-based approach to setting 

CAFE standards fuel economy targets 

are established for individual vehicles 

based on their footprints, the vehicles 

are not required to comply with those 

targets. However, as a practical matter, 

if a manufacturer chooses to design 

some vehicles so that fall below their 

target levels of fuel economy, it will 

need to design other vehicles so that 

exceed their targets if the 

manufacturer’s overall fleet average is to 

meet the applicable standard. 

Thus, under EPCA, there is no such 

thing as a noncompliant vehicle, only a 

noncompliant fleet. No particular 

vehicle in a noncompliant fleet is any 

more, or less, noncompliant than any 

other vehicle in the fleet. 

III. The Anticipated Vehicles in the MY 

2011 Fleets and NHTSA’s Baseline 

Market Forecast 

NHTSA has a long-standing practice 

of analyzing regulatory options in fuel 

economy rulemakings based on the best 

available information, including 

information regarding the future vehicle 

market and future fuel economy 

technologies. The passenger cars and 

light trucks currently sold in the United 

States, and which are anticipated to be 

sold in MY 2011, are highly varied and 

satisfy a wide range of consumer needs. 

From the two-seater Mercedes Benz 

Smart (produced by Daimler) to the 

Ford F–150 pickup truck, from the 

Honda CR–V to the Chrysler Town and 

Country to the GMC Savana, American 

consumers have a great number of 

vehicle options to accommodate their 

needs and preferences. 

Automobile manufacturers generally 

attempt to plan their motor vehicle 

production several years in advance. 

When a new vehicle is introduced, it is 

the product of several years of design, 

testing, product-specific tooling 

investment, and regulatory certification. 

In order to minimize costs, 

manufacturers generally attempt to 

place large automotive parts supply 

contracts years in advance. 

Manufacturers must therefore attempt to 

predict the types, characteristics, and 

quantities of vehicles that consumers 

will wish to purchase a few years hence. 

These plans include what is currently 

known about the salability and 

marketability of these future vehicles, 

and hence consider the future state of 

prices facing the consumer, including 

that of gasoline. These plans also 

contain not only the specific vehicle 

models which manufacturers intend to 

build and their planned annual 

production, but also information about 

specific design features and 

configurations as well as the fuelefficient technologies they are planning 

to incorporate in these vehicles. 

Manufacturer’s plans rapidly become 

embodied in special tooling and 

production configurations in factories 

and advance orders for component 

parts. NHTSA requests, and 

manufacturers provide, product plan 

information to the agency during 

rulemaking. NHTSA begins its analysis 

with the submitted product plans and 

uses them to establish a baseline, which 

is used to analyze varying levels of 

future CAFE standards. 

In anticipation of the analysis to 

support today’s final rule, NHTSA 

issued a request in May 2008 that 

manufacturers provide the agency with 

updated product plans, as well as 

estimates of the availability, 

effectiveness, and cost of fuel-saving 

technologies.88 Considering its past 

experiences integrating manufacturers’ 

product plans, reviewing the content of 

those plans, and seeking clarification 

and appropriate correction of those 

plans, the agency provided 

manufacturers with updated tools to 

facilitate manufacturers’ quality control 

efforts. NHTSA also tripled the number 

of agency engineers assigned to 

reviewing manufacturers’ plans. 

A. Why does NHTSA establish a 

baseline market forecast? 

NHTSA begins its analysis by 

establishing the baseline market 

forecast. This forecast represents the 

fleet that the agency believes would 

exist in the absence of fuel economy 

standards for MY 2011. A forecast is 

necessary because the standards will 

apply to a future fleet which does not 

yet exist and therefore must be 

predicted in order to estimate the costs 

and benefits of CAFE standards, as well 

as regulatory alternatives as required by 

OMB and DOT. 

B. How does NHTSA develop the 

baseline market forecast? 

1. NHTSA First Asks Manufacturers for 

Updated Product Plan Data 

NHTSA relies on product plans from 

manufacturers to help the agency 

determine the composition of the future 

fleets. The product plan information is 

provided in response to NHTSA’s 

request for information from the 

manufacturers, and responds to very 

detailed questions about vehicle model 

characteristics that influence fuel 

economy.89 The baseline market 

forecast that NHTSA uses in its analysis 

is based significantly on this 

confidential product plan information. 

Individual manufacturers are better able 

than any other entity to anticipate what 

mix of products they are likely to sell 

in the future. In this rulemaking as in 

prior rulemakings, some commenters 

requested that NHTSA make product 

plan information public to allow 

members of the public to comment more 

fully on the baseline developed by the 

agency. For example, the Attorneys 

General commented that ‘‘the agency 

should provide sufficient summaries or 

aggregations of this information or make 

special arrangements so that interested 

parties such as the state Attorneys 

General can view this confidential 

information under a confidentiality 

agreement.’’ 

NHTSA cannot make public the entire 

contents of the product plans. The 

submitted product plans contain 

confidential business information, 

which the agency is prohibited by 

federal law from disclosing; 90 making 

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to comment on rulemakings employing the 

confidential information, unless the manufacturers 

consent to the disclosure. 

91Specifically, one manufacturer had submitted 

data with a structure that had inadvertently been 

misaligned, such that many vehicle models were 

incorrectly identified as using engines applicable to 

other vehicle models (e.g., a vehicle known to use 

an inline 4-cylinder engine might have been 

identified as using a V–8 engines). Another 

manufacturer had submitted vehicle dimensional 

estimates based on an incorrect SAE measurement 

procedure. 

this information publicly available 

would cause competitive harm to 

manufacturers. See 5 U.S.C. 552(b)(4); 

18 U.S.C. 1905; 49 U.S.C. 30167(a); 49 

CFR part 512; Critical Mass Energy 

Project v. Nuclear Regulatory Comm’n, 

975 F.2d 871 (D.C. Cir. 1992). In its 

publicly available rulemaking 

documents the agency does, however, 

provide aggregated information 

compiled from individual manufacturer 

submissions regarding its forecasts of 

the future vehicle market in such a way 

that confidential business information is 

not disclosed. This aggregated 

information, such as appears below and 

in the accompanying Regulatory Impact 

Analysis (RIA), includes vehicle fleet 

size and composition (passenger cars 

versus light trucks), overall fuel 

economy baseline and major technology 

applications and design trends. 

(a) Why does NHTSA use manufacturer 

product plans to develop the baseline? 

In order to analyze potential new 

CAFE standards in a way that tries to 

simulate how manufacturers could 

comply with them, NHTSA develops a 

forecast of the future vehicle market on 

a model-by-model, engine-by-engine, 

and transmission-by-transmission basis, 

such that each defined vehicle model 

refers to a separately-defined engine and 

a separately-defined transmission. For 

the 2011 model year covered by this 

final rule, the light vehicle (passenger 

car and light truck) market forecast 

included almost 1,400 vehicle models, 

400 specific engines, and 300 specific 

transmissions. NHTSA believes that this 

level of detail in the representation of 

the vehicle market is important both to 

an accurate analysis of manufacturerspecific costs and to the analysis of 

attribute-based CAFE standards. 

Because CAFE standards apply to the 

average fuel economy performance of 

each manufacturer’s fleets of cars and 

light trucks, the impact of potential 

standards on individual manufacturers 

is effectively estimated through analysis 

of manufacturers’ planned fleets. 

NHTSA has used this level of detail in 

CAFE analysis throughout the history of 

the program. Furthermore, because 

required CAFE levels under an attributebased CAFE standard depend on 

manufacturers’ fleet composition, the 

stringency of an attribute-based 

standard is effectively predicted by 

performing analysis at this level of 

detail. 

EPCA does not require NHTSA to use 

manufacturers’ product plans in order to 

develop a baseline for purposes of 

analyzing potential new CAFE 

standards. The agency could use 

exclusively non-confidential 

information to develop a market forecast 

at the same level of detail as mentioned 

above, and has done exactly so for 

purposes of analytical development and 

testing, and to represent manufacturers 

that have not provided product plans to 

NHTSA. However, as discussed above, 

the agency believes that one of the most 

valuable sources of information about 

future product mix projections is the 

product plan information provided by 

individual manufacturers, because 

individual manufacturers are in a 

unique position to anticipate what mix 

of products they are likely to sell in the 

future. 

Manufacturers generally support 

NHTSA’s use of product plan data in 

developing the baseline. Other 

commenters such as CFA and Public 

Citizen, in contrast, stated that the 

product plans relied upon in the NPRM 

are outdated because they were 

developed before EISA was enacted, and 

that the agency should develop its own 

projections of the vehicle fleets, which 

could be made public, instead of relying 

on confidential industry plans, which 

could bias the standards in favor of the 

industry. CFA suggested that NHTSA’s 

analysis was based on only ‘‘a very thin 

body of knowledge about the veracity, 

relevance and predictive value of auto 

manufacturer product plans, recent 

changes in fuel economy and the 

practices of automakers in adopting fuel 

economy technologies.’’ Public Citizen 

stated that because the product plans 

are confidential, ‘‘This significantly 

biases the standards in favor of industry 

by shutting the public out of the 

process,’’ and that ‘‘Consumers must 

essentially trust that NHTSA has set 

standards in their interest using 

information provided by industry.’’ 

Public Citizen argued that ‘‘In the past, 

* * * NHTSA has done its own 

research and evaluation of these factors 

which was more transparent.’’ 

NHTSA’s analysis of product plan 

data is much more rigorous than 

commenters suggest. NHTSA engineers 

carefully examine the information 

submitted by manufacturers, and upon 

discovering what appear to be errors or 

inconsistencies, request and receive 

manufacturers’ explanations and, as 

appropriate, corrections. For example, 

the agency’s analysis in preparation for 

the final rule revealed systematic errors 

in plans submitted by two major 

manufacturers, both of which 

resubmitted their plans with 

corrections.91 In addition, the agency 

found that two manufacturers 

inappropriately planned to have some 2- 

wheel drive sport-utility vehicles (2WD 

SUVs) classified as light trucks, even 

though the agency explained in the 

NPRM that, for enforcement purposes, it 

planned to classify such vehicles as 

passenger cars, and other manufacturers 

submitted product plans consistent with 

the agency’s intentions. As discussed 

below and in Section IX, NHTSA 

performed its analysis with these 

vehicles reassigned to the passenger car 

fleet. 

NHTSA also disagrees with Public 

Citizen’s suggestion that the agency’s 

use of product plans precludes public 

participation in the rulemaking process. 

As discussed, analysis of confidential 

product plans has long been a core 

feature of developing the CAFE 

standards, and the agency is fully 

transparent in providing aggregated 

information about the plans as well as 

detailed information about the agency’s 

technology and economic assumptions 

and the process the agency undertakes 

to evaluate and set the standards. 

NHTSA could potentially conduct 

rulemaking analysis as Public Citizen 

suggests using exclusively public 

information, (including commercially 

available information). Indeed, the 

agency has done exactly so for purposes 

of development and testing, and to 

develop forecasts of fleets likely to be 

produced by manufacturers that have 

not responded to the agency’s request 

for product plans. However, the agency 

currently believes that an analysis based 

exclusively on publicly- and 

commercially-available information 

would be less accurate—in terms of its 

representation of the future light vehicle 

market—than an analysis based in large 

measure on product plan data. Most 

publicly available information about 

vehicles and vehicle technologies 

concerns the current fleet, not potential 

future fleets. In many cases, 

manufacturers are prepared to provide 

far more detail in confidential 

submissions then they are prepared to 

provide in public. This detail may 

include the manufacturer’s expectation 

of sales for particular future models; 

which technologies are being applied to 

particular vehicles; and the 

manufacturer’s expectation of fuel 

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92Available on the Internet at http:// 

financialservices.house.gov/autostabilization.html 

(last accessed February 15, 2009). 

93Chrysler’s submission to the Treasury 

Department, p. 117. Available at http:// 

www.treasury.gov/initiatives/eesa/agreements/autoreports/ChryslerRestructuringPlan.pdf, (last 

accessed Feb. 19, 2009). 

94 GM’s submission to the Treasury Department, 

p. 21. Available at, http://www.treasury.gov/ 

initiatives/eesa/agreements/auto-reports/ 

GMRestructuringPlan.pdf (last accessed Feb. 19, 

2009). 

economy for future vehicles. This 

information is typically considered 

business confidential by the 

manufacturer, but is helpful in more 

accurately ascertaining both the baseline 

technology level and fuel economy of 

manufacturer’s future sales as well as 

the extent of opportunities for 

improving fuel economy. 

NHTSA notes that manufacturers’ 

public statements about future vehicles 

have been very optimistic recently with 

regard to fuel economy-enhancing 

technologies, and NHTSA takes these 

statements into account when 

evaluating the submitted product plans. 

When manufacturer statements about 

future vehicles differ substantially from 

the submitted product plans, NHTSA 

generally contacts the manufacturer to 

determine the reason for the 

discrepancy. However, manufacturers 

frequently make announcements 

regarding vehicles or technologies they 

hope to produce in the future. Often, 

they are conditional statements and 

plans, and whether they reach the point 

of commercialization depends greatly 

on how circumstances, including public 

acceptance, evolve. Thus, for purposes 

of analyzing the MY 2011 CAFE 

standards, the agency currently 

concludes that information 

manufacturers provide confidentially to 

NHTSA is more reliable than the 

information appearing in public sources 

such as press reports and speeches by 

manufacturers’ employees, especially 

given the short time period between the 

submission of this information in 2008 

and when manufacturers will begin 

building their MY 2011 vehicles. 

Nevertheless, EPCA does not require 

NHTSA to use manufacturers’ 

confidential business information when 

evaluating the maximum feasible levels 

for new CAFE standards. The agency 

will base its analysis for future 

rulemakings on information—public, 

commercially-available, or 

confidential—it considers most 

accurate. 

NHTSA recognizes that automobile 

manufacturers are facing a period of 

uncertainty with respect to demand for 

their products that is without parallel. 

Recent swings in prices for fuel have 

altered demand patterns, while 

commodity prices have impacted costs 

of production. Concurrently, turmoil in 

the credit markets and recent upswings 

in unemployment also affect the vehicle 

market. The short and long term 

implications of such volatility for future 

sales will not be known for some time. 

In light of such conditions, reliance on 

product plans in this rulemaking helps 

to align the analysis with the best 

available information. 

NHTSA further recognizes that, in 

connection with their recent requests for 

federal assistance, some manufacturers 

made statements in December 2008 

regarding future technologies and fuel 

economy levels, and that some of these 

statements indicated plans to achieve 

CAFE levels considerably higher than 

reflected in the product plans submitted 

to NHTSA in mid-2008.92 The 

information provided in these 

submissions to Congress reflects a level 

of detail much less than NHTSA 

typically receives in the confidential 

product plan submissions, so it is 

difficult for NHTSA to determine 

whether these manufacturer statements 

and submissions reflect the same 

underlying assumptions as 

manufacturers’ mid-2008 product plans. 

More recently, in mid-February, 

Chrysler and General Motors submitted 

restructuring plans to the U.S. 

Department of the Treasury to support 

those companies’ requests for federal 

loans. Like the information these 

companies provided in December, these 

plans do not contain complete and 

detailed forecasts of the volume and 

characteristics of specific vehicle 

models Chrysler and General Motors 

plan to produce. However, the 

restructuring plans do contain specific 

information regarding the CAFE levels 

that these manufacturers expect to 

achieve. 

Chrysler’s plan shows that, during 

MYs 2008–2015, Chrysler plans to 

exceed required CAFE levels in some 

model years and to apply credits it earns 

in doing so toward shortfalls in other 

model years.93 The charts in Chrysler’s 

plans specifically reference the ‘‘Dec 

2008 Draft Rule’’ (presumably, the final 

standards NHTSA submitted to OMB in 

November 2008), and indicate that 

Chrysler appears to believe that 

attribute-based CAFE standards for 

those model years will result in required 

CAFE levels for Chrysler similar to 

those originally estimated by NHTSA 

for MYs 2011–2015 based on the 

product plan information that Chrysler 

submitted to NHTSA in July 2008. 

GM’s plan states that GM ‘‘is 

committed to meeting or exceeding all 

Federal fuel economy standards in the 

2010–2015 model years’’, and shows the 

CAFE levels that GM plans to achieve in 

those model years, assuming ‘‘full usage 

of all credit flexibilities under the CAFE 

program.’’ 94 However, GM’s plan does 

not show the CAFE levels expected to 

be required of GM under new attributebased CAFE standards, and it is unclear 

from GM’s plan how specific changes 

(since July 2008) in the company’s plans 

relate to its planned CAFE levels. For 

example, while GM’s restructuring plan 

refers to plans to increase hybrid vehicle 

offerings, the plan does not include 

production forecasts needed to 

understand how those offerings affect 

GM’s planned CAFE levels. 

Considering the context for and 

generality of the Chrysler and GM 

restructuring plans, and the lack of such 

plans from other manufacturers, and 

notwithstanding the considerable 

uncertainties currently surrounding the 

future market for light vehicles, NHTSA 

believes that its market forecast for MY 

2011, as informed by product plans 

submitted to the agency in mid-2008, 

remains the most useful available point 

of reference for the establishment of MY 

2011 standards, and the evaluation of 

the costs and benefits of these new 

standards. 

(b) What product plan data did NHTSA 

use in the NPRM? 

For the NPRM, NHTSA received 

product plan information from Chrysler, 

Ford, GM, Honda, Nissan, Mitsubishi, 

Porsche and Toyota covering multiple 

model years. The agency did not receive 

any product plan information from 

BMW, Ferrari, Hyundai, Mercedes 

(Daimler) or VW. However, only 

Chrysler and Mitsubishi provided us 

with product plans that showed 

differing production quantities, vehicle 

introductions, vehicle redesign/refresh 

changes, without any carryover 

production quantities through MY 2015. 

For the other companies that provided 

data, the agency carried over production 

quantities for their vehicles, allowing 

for growth, starting with the year after 

their product plan data showed changes 

in production quantities or showed the 

introduction or redesign/refresh of 

vehicles. 

Product plan information was 

provided through MY 2013 by Ford and 

Toyota, thus the first year that the 

agency carried over production 

quantities for those companies was MY 

2014. Product plan information was 

provided through MY 2012 for GM and 

Nissan, thus the first year that the 

agency carried over production 

quantities for those companies was MY 

2013. Product plan information was 

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95Manufacturers must submit pre- and midmodel year CAFE reports to the agency as part of 

the CAFE compliance process under 49 CFR part 

537. 

96NHTSA recognizes that domestic vehicle sales 

are currently well below this rate. However, as 

discussed below, the agency considers this an 

aspect (like gasoline prices near $2 per gallon) of 

the current economy, and not an indicator of the 

longer-term prospect for light vehicle sales in the 

U.S. Just as the agency currently expects fuel prices 

to return to high levels, it expects vehicle sales to 

rise well above today’s rate. 

provided by Honda through MY 2008. 

Honda asked the agency to carry over 

those plans and also provided data for 

the last redesign of a vehicle and asked 

the agency to carry them forward. 

Product plan information was provided 

through MY 2008 for Porsche, thus the 

first year that the agency carried over 

production quantities for Porsche was 

MY 2009. 

Because Hyundai was one of the 

seven largest vehicle manufacturers, and 

thus factored explicitly into the 

optimization process, and NHTSA 

desired to conduct this process using 

the best and most complete forecast of 

the future vehicle market, NHTSA used 

Hyundai’s mid-year 2007 data contained 

in the agency’s CAFE database to 

establish the baseline models and 

production quantities for their 

vehicles.95 For the other manufacturers 

that did not submit product plans, 

NHTSA used the 2005 information from 

the database, the latest complete data set 

that NHTSA had available for use. 

As mentioned above, NHTSA 

received comments that the product 

plans it relied upon in the NPRM were 

out of date and not reflective of recent 

announcements from manufacturers 

regarding new products. CFA referred to 

NHTSA’s discussion in the NPRM of the 

relative completion of various 

manufacturers’ product plans to argue 

that the product plans were incomplete 

and inaccurate. Public Citizen argued 

that the product plans were out of date. 

The Attorneys General and NRDC 

argued that NHTSA should update the 

product plans, the baseline, and the 

technology inputs to the Volpe model in 

light of recent manufacturer statements 

about their intent to introduce advanced 

technologies, such as plug-in hybrid 

vehicles, in the near future. 

In response, as noted above, NHTSA 

published a request for comments 

seeking updated information from 

manufacturers regarding their future 

product plans in a companion notice to 

the NPRM. In examining the updated 

product plans received in response to 

the request for information, and as 

discussed more fully below, NHTSA has 

determined that the product plans for 

MY 2011 provided incorporate these 

announcements and reflect changes to 

planned product introduction by 

manufacturers in response to the recent 

market shift towards more fuel-efficient 

vehicles, particularly the shift towards 

increased production of smaller cars. 

(c) What product plan data did NHTSA 

receive for the final rule? 

For the final rule, NHTSA received 

product plan information from Chrysler, 

Ford (Ford’s product plans included 

separate plans for Jaguar and Land 

Rover vehicles, both of which are now 

owned by Tata Motors and are thus 

attributed to that company in the final 

rule), GM, Honda, Hyundai, Mitsubishi, 

Nissan, Porsche, Subaru, and Toyota, 

covering multiple model years. The 

agency did not receive product plan 

information from BMW, Daimler 

(Mercedes), Ferrari, Suzuki or VW. 

Chrysler, Ford, Hyundai and Mitsubishi 

provided us with product plans that 

showed changes in production 

quantities, vehicle introductions, and 

vehicle redesigns/refreshes changes, 

without any carryover production 

quantities through MY 2015. For the 

other companies that provided data, the 

agency was careful to carry over 

production quantities for their vehicles, 

allowing for growth, starting with the 

year after their product plan data 

showed changes in production 

quantities or showed the introduction or 

redesign/refresh of vehicles. 

Further, NHTSA used the pre-model 

year 2008 CAFE reports as the basis for 

the future MY 2011 product plans and 

filled in gaps in the data (e.g., engine 

specifications, wheelbase, track width, 

etc.) for those manufacturers with 

information gathered from the Web sites 

of the individual manufacturers and 

from general automotive Web sites such 

as Edmunds.com, Cars.com, and 

Wards.com. 

(d) How is the product plan data 

received for the final rule different from 

what the agency used in the NPRM 

analysis, and how does it impact the 

baseline? 

Informed by the overall fleet size and 

market share estimates applied by the 

agency (and discussed below), 

manufacturers’ plans changed 

considerably between 2007 and 2008. 

NHTSA’s forecast, based on the Energy 

Information Administration’s (EIA’s) 

Annual Energy Outlook (AEO) 2008, of 

the total number of light vehicles likely 

to be sold during MY 2011 through MY 

2015 dropped from 85 to 83 million 

vehicles—about 16.5 million vehicles 

annually.96 Also, due in part to the 

reclassification of roughly 1.4 million 

2WD SUVs, the share of MY 2011 

vehicles expected to be classified as 

light trucks fell from 49 percent in 

NHTSA’s 2007 market forecast to 42 

percent in the agency’s current forecast. 

The latter of the above changes is 

reflected in the baseline distribution of 

vehicle models with respect to fuel 

economy and footprint. Figures III–1 

and III–2 show passenger car and light 

truck 2011 models, respectively, in the 

2007 plans. Figures III–3 and III–4 show 

passenger car and light truck models, 

respectively, in the 2008 plans. A 

comparison of Figures III–1 and III–3 

shows that the number of passenger cars 

models with footprints between roughly 

41 and 52 square feet has increased 

considerably, and that the number of 

passenger car models with relatively 

high fuel economy levels (e.g., above 35 

mpg) has increased. Conversely, a 

comparison of Figures III–2 and III–3 

shows less pronounced differences 

between the 2007 and 2008 plans, 

although the number of small light truck 

models decreased (due to 

reclassification). 

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97As explained below, although NHTSA 

normalized each manufacturer’s overall market 

share to produce a realistically-sized fleet, the 

product mix for each manufacturer that submitted 

product plans was preserved. The agency has 

reviewed manufacturers’ product plans in detail, 

and understands that manufacturers do not sell the 

same mix of vehicles in every model year. 

98Chrysler, p. 135. 

99 GM, p. 21. 

NHTSA’s expectations regarding 

manufacturers’ market shares (the basis 

for which is discussed below) have also 

changed since 2007. These changes are 

reflected below in Table III–1, which 

shows the agency’s 2007 and 2008 sales 

forecasts for passenger cars and light 

trucks.97

Additionally, for some advanced 

technologies, the updated product plans 

submitted by manufacturers for the final 

rule include higher quantities in MY 

2011 and beyond than the older product 

plans used for the NPRM had indicated. 

These changes are consistent with most 

manufacturers’ indications that their 

product planning was informed by 

expectations that fuel prices 

considerably higher than those in EIA’s 

AEO 2008 reference case forecast would 

prevail during the first half of the next 

decade. Most recently, the restructuring 

plans submitted by General Motors and 

Chrysler offer additional information on 

changes to product plans, albeit at an 

aggregate level, that are deemed 

necessary to achieve ‘‘operational and 

functional viability.’’ 

Manufacturers’ most recently 

submitted detailed plans (i.e., those 

submitted to NHTSA in July 2008) show 

significant application of the following 

engine technologies in MY 2011 

(percent of the entire fleet having that 

technology is shown in the 

parentheses): Intake cam phasing (34 

percent), dual cam phasing (35 percent), 

stoichiometric gasoline direction 

injection (11 percent), and 

turbocharging and engine downsizing (6 

percent). Regarding transmission 

technologies, manufacturers’ plans 

show significant application of the 

following technologies by MY 2011: 

6-, 7-, or 8-speed automatic 

transmissions (27 percent), and strong 

hybrids (4 percent). Manufacturers’ 

plans also show significant application 

of electric power steering (3 percent) 

and integrated starter/generators (34 

percent) by MY 2011. 

Though not applicable to today’s 

rulemaking, and while updated product 

plans may reflect different rates of 

technology application, manufacturers’ 

July 2008 plans also indicated 

expectations that the use of some of 

these and other technologies would 

continue to increase after MY 2011. For 

example, manufacturers’ product plans 

indicated at the time that use of 

stoichiometric gasoline direction 

injection would increase from 11 

percent of the fleet in MY 2011 to 15 

percent of the fleet in MY 2015, and that 

use of turbocharging and engine 

downsizing would increase from 6 

percent of the fleet in MY 2011 to 13 

percent of the fleet in MY 2015. These 

plans further indicated that use of dual 

cam phasing, combustion restart, and 

integrated starter/generators would 

increase to 49 percent, 10 percent, and 

49 percent, respectively, by MY 2015. 

The restructuring plans Chrysler and 

GM submitted to the Department of the 

Treasury in February 2009 both indicate 

intentions to increase the rate of 

technology adoption and alter the mix 

towards higher numbers of flexible fuel, 

alternative fuel and electric vehicles. 

Chrysler’s restructuring plan shows 

plans to introduce three new electric or 

hybrid-electric vehicle models in MYs 

2010–2011, and an additional seven 

such models during MYs 2012–2015.98

As mentioned above, Chrysler’s 

restructuring plan is clearly informed by 

and responsive to NHTSA’s 2008 draft 

final standards for MYs 2011–2015. 

Though less clear in terms of specific 

requirements to the company, GM’s 

restructuring plan also appears to be 

responsive to those MYs 2011–2015 

standards. GM’s restructuring plan 

indicates that in MY 2012, the company 

plans greater deployment of 2-step 

variable valve timing, new 4-cylinder 

gasoline engines, dry dual clutch 

transmissions, ‘‘Gen 2’’ strong hybrids, 

extended range electric vehicles, and 

possibly compressed natural gas.99 The 

plan further indicates that in MY 2015, 

GM expects to introduce ‘‘Gen 3’’ 

hybrids, lean-burn homogeneous charge 

compression ignition (HCCI) gasoline 

engines, and fuel cell vehicles. 

Manufacturers’ July 2008 product 

plans also show increasing numbers of 

mid-size ladder-frame SUVs being 

planned for redesign as unibody SUVs/ 

crossover vehicles. Additionally, some 

ladder-frame SUVs and mid-size pickup 


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100See 49 U.S.C. 32905 and 32906. 

101 49 U.S.C. 32902(h). 

trucks are planned to be discontinued 

altogether and replaced with totally new 

products that have unibody 

construction. Some of the trend for midsize SUVs being replaced by unibody 

vehicles is already visible in the 

marketplace and reflected in NHTSA’s 

forecast of the MY 2011 light vehicle 

market. 

Concerning engine trends, the 

manufacturers’ plans show a significant 

amount of engine downsizing. This 

downsizing is of two major types: first, 

replacing existing engines with smaller 

displacement engines while keeping the 

same number of cylinders per engine; 

second, replacing existing engines with 

engines having a smaller number of 

cylinders (e.g., 6-cylinder engines 

instead of 8-cylinder engines and 4- 

cylinder engines instead of 6-cylinder 

engines). The plans indicate that for 

many of the engines being downsized, 

the replacement engines have some 

form of advanced valve actuation (e.g., 

variable valve lift) combined with other 

technologies, such as engine friction 

reduction or direct injection. When such 

changes occur the replacement engines 

appear to provide higher fuel economy, 

with maximum power and torque 

similar to the engines they are replacing. 

It is not clear from manufacturers’ 

product plans whether and, if so, how 

vehicle prices and other performance 

measures (e.g., launch, gradeability) will 

be affected. 

When engines are planned to be 

replaced with fewer-cylinder engines 

(e.g., smaller V6 engines instead of large 

V8 engines), the plans show some of 

these engines having some form of 

advanced valve actuation, combined 

with direct injection and turbocharging. 

Some of these engines also have 

combustion restart. These engines also 

provide maximum power and torque 

similar to the engines they are replacing 

while delivering higher fuel economy, 

although impacts on price and 

performance measures are also 

uncertain. 

For some selected technologies, Table 

III–2 compares MY 2011 penetration 

rates in manufacturers’ product plans 

from the 2007 plans to those from the 

2008 plans. This comparison reveals 

both increases and decreases in planned 

technology application for MY 2011, 

including a doubling in the planned 

production of hybrid electric vehicles 

(here, including only ‘‘strong’’ hybrids 

such as power-split hybrids and plug-in 

hybrids). Because this comparison is 

limited to MY 2011, it does not 

evidence manufacturers’ plans— 

discussed above—to redesign many 

vehicles in MY 2012 (and later years) 

and, in doing so, to increase further the 

use of some fuel-saving technologies. 

This also holds true for the GM and 

Chrysler restructuring plans, which 

describe limits to attaining anticipated 

MY 2011 targets, in particular for GM 

trucks in that year, but at the same time 

differ markedly in terms of the estimates 

of the total number of vehicles sold. 

Information on the impact of 

penetration rates is of course 

conditioned on sales volumes, which 

vary for MY 2011 from 11.1 million for 

Chrysler to 14.3 million for GM. While 

information regarding these later 

technology improvements was provided 

to NHTSA, it did not form the basis for 

the establishment of the MY 2011 CAFE 

standards. 

Manufacturers have also, in 2008, 

indicated plans to sell more dual-fuel or 

flexible-fuel vehicles (FFVs) than 

indicated in the plans they submitted to 

NHTSA in 2007. FFVs create a potential 

market for alternatives to petroleumbased gasoline and diesel fuel. For 

purposes of determining compliance 

with CAFE standards, the fuel economy 

of a FFV is, subject to limitations, 

adjusted upward to account for this 

potential.100 However, NHTSA is 

precluded from ‘‘taking credit’’ for the 

compliance flexibility by accounting for 

manufacturers’ ability to earn and use 

credits in determining what standards 

would be ‘‘maximum feasible.’’101 Some 

manufacturers plan to produce a 

considerably greater share of FFVs than 

can earn full credit under EPCA. The 

projected average FFV share of the 

market in MY 2011 is 14 percent for the 

NPRM and 17 percent for the final rule. 

Consistent with these expected trends 

toward wider application of fuel-saving 

technologies, the product plan data 

indicates that almost all manufacturers 

expect to produce a more efficient fleet 

than they had planned to produce in 

2007. However, because manufacturers’ 

product plans also reflect simultaneous 

changes in fleet mix and other vehicle 

characteristics, the relationship between 

increased technology utilization and 


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102Unlike the values shown in Table III–4a, the 

average fuel economy levels shown in GM’s 

restructuring plan reflect ‘‘full usage of all credit 

flexibilities under the CAFE program.’’ It is not 

clear how much of the difference between Table III– 

4a and GM’s February 2009 estimates is accounted 

for by such flexibilities. 

increased fuel economy cannot be 

isolated with any certainty. To do so 

would require an apples-to-apples 

‘‘counterfactual’’ fleet of vehicles that 

are, except for technology and fuel 

economy, identical—for example, in 

terms of fleet mix and vehicle 

performance and utility. As a result, 

NHTSA’s baseline market forecast 

shows industry-wide average fuel 

economy levels somewhat higher than 

shown in the NPRM. Average fuel 

economy for MY 2011 is 26.0 mpg in the 

NPRM baseline forecast, and 26.5 mpg 

in the final rule. 

These changes are shown in greater 

detail below in Table III–3a, which 

shows manufacturer-specific CAFE 

levels (not counting CAFE credits that 

some manufacturers expect to earn by 

producing flexible fuel vehicles) 

planned in 2007 for passenger cars and 

light trucks. Table III–3b shows the 

combined averages of these planned 

CAFE levels. Tables III–4a and III–4b 

show corresponding information from 

manufacturers’ 2008 plans. These tables 

demonstrate that, with very few 

exceptions, manufacturers are planning 

to increase overall average fuel economy 

beyond the levels shown in the plans 

they submitted in 2007. In addition, 

according to the restructuring plans 

submitted to the Treasury Department, 

GM states that it will reach average fleet 

fuel economy of 32.5 mpg for passenger 

vehicles and 23.6 mpg for trucks in MY 

2011, compared to the 30.3 and 21.4 

reported in Table III–4a, below.102 Also, 

Chrysler’s restructuring plan states that 

the company plans to accelerate its 

utilization of more fuel-efficient power 

trains, for example, to improve fuel 

efficiency on a remixed product line. In 

addition, Chrysler plans, according to 

the restructuring, to offer flexible fuel 

capability in half of its light trucks by 

2012. 


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103Notwithstanding the reassignment of some 

vehicles to the passenger car fleet, manufacturers’ 

July 2008 product plans also indicated shifts in the 

mix of passenger cars and light trucks, such that 

overall average curb weight increased despite these 

small decreases in average passenger car and 

average light truck curb weight. 

Tables III–5 through III–7 summarize 

other changes in manufacturers’ product 

plans between those submitted to 

NHTSA in 2007 (for the NPRM) and 

2008 (for the final rule). These tables 

present average vehicle footprint, curb 

weight, and power-to-weight ratios for 

each of the seven largest manufacturers, 

and for the overall industry. The tables 

do not identify manufacturers by name, 

and do not present them in the same 

sequence. 

Table III–5 shows that manufacturers’ 

latest plans reflect a very slight (less 

than 0.1 square feet) increase in overall 

average passenger vehicle size, and 

suggests that manufacturers currently 

plan to sell larger trucks than they 

reported previously. However, these 

planned increases are, in the aggregate, 

attributable to the reassignment of 

vehicles from the light truck to the 

passenger car fleet. The average planned 

footprint among all planned passenger 

cars and light trucks remained 

unchanged. 

Table III–6 shows that manufacturers’ 

latest plans reflect a small increase in 

overall average vehicle weight. 

However, for both the passenger car and 

light truck fleets, the reassignment of 

some light trucks to the passenger car 

fleet caused the average curb weight for 

both fleets to increase, even though 

doing so did not (and, of course, could 

not) change the overall average curb 

weight. Without these reassignments, 

the average curb weights of the 

passenger car and light truck fleets 

would have dropped by about 5 and 35 

pounds, respectively.103


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104See, e.g., UCS, p. 14. 

Table III–7 shows that manufacturers’ 

latest plans reflect a small increase 

(about 1.7 percent) in overall average 

performance, and suggests that increases 

will mostly occur in the light truck fleet. 

Considering that this 3.5 percent 

increase in light truck performance is 

accompanied by a 2.7 percent increase 

in light truck curb weight, this suggests 

that (1) the vehicles being reassigned to 

the passenger car fleet are among the 

less powerful (per pound) of the 

vehicles previously assigned to the light 

truck fleet and (2) manufacturers are 

planning to install somewhat more 

powerful engines in many light trucks 

than previously reported to NHTSA. 

This trend is detectable by analysis of 

the detailed product plans, and is 

appears to be corroborated by the 

reported change in intended product 

mix that GM and Chrysler state in their 

restructuring plans. 

These overall trends mask the fact 

that manufacturers’ plans did not all 

change in the same ways. In terms of 

planned average footprint, changes in 

manufacturers’ plans ranged from a 4 

percent decrease to a 5 percent increase. 

In terms of planned average curb weight 

and power-to-weight ratio, these ranges 

covered -4 percent to 3 percent and -5 

percent to 15 percent, respectively. 

NHTSA recognizes that some 

manufacturers’ plans to increase vehicle 

performance reflect an intention to 

apply some fuel-saving technologies in 

ways that do not hold performance and 

utility constant, and therefore do not 

achieve the same fuel economy 

increases that NHTSA would assume 

when estimating the effect of adding 

these technologies for the sole purpose 

of complying with CAFE standards. 

This continues what has long been 

standard practice in the industry. 

Vehicle performance, amenities, and 

utility have been generally increasing 

for more than a century, in response to 

consumer demand. Manufacturers have 

applied innumerable technological 

advances during that time, and although 

they have achieved significant fuel 

economy gains, they have not applied 

these technological advances for the 

sole purpose of increasing fuel 

economy. When applying a given 

technology to a given vehicle, a 

manufacturer does so in a way that 

balances multiple vehicle 

characteristics, including fuel economy. 

For example, while a manufacturer 

might make both a gasoline and diesel 

version of a given sedan, the diesel 

version might offer more weightincreasing amenities (e.g., luxury 

seating) and significantly better 

performance (e.g., torque). In this case, 

the diesel version would have greater 

value to the consumer, and would thus 

command a higher price. 

The Union of Concerned Scientists 

(UCS) and some other commenters 

suggested that manufacturers’ product 

plans, and NHTSA’s use of these plans, 

may have at least the appearance of 

wrongdoing.104 Such comments cite a 

‘‘lack of transparency’’ ultimately 

traceable to the fact that the submitted 

product plans contain confidential 

business information, which the agency 

is prohibited by federal law from 

disclosing, as discussed above. 

However, NHTSA believes these 

perceptions may also arise because UCS 

and others realize that manufacturers 

often use technology to increase 

performance (and other vehicle 

characteristics), not just to increase fuel 

economy, and thus may assign a fuel 

economy ‘‘effectiveness’’ to a 

technology in their product plans that is 

lower than if the technology was used 

solely to increase fuel economy. If so, 

NHTSA rejects the notion that for 

manufacturers to do so constitutes any 


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form of ‘‘wrongdoing.’’ Manufacturers 

compete in a marketplace that reflects 

the values that consumers place on 

vehicle amenities, performance, and 

utility, as well as fuel economy. 

When NHTSA estimates the cost and 

effect of adding technologies in 

response to CAFE standards, the agency 

is treating these technologies as being 

applied solely for that purpose; 

therefore, the agency’s analysis reflects 

an attempt to hold amenities, 

performance, and utility constant. Thus, 

NHTSA’s analysis estimates means by 

which manufacturers could comply 

with CAFE standards. Manufacturers, 

however, determine how they actually 

will comply. As an example, if a 

manufacturer plans to apply 

technologies in ways that increase 

vehicle performance in addition to 

increasing fuel economy, NHTSA would 

have to find a way of accounting for the 

value that those performance increases 

represent. While the manufacturers 

seeking federal funds have reported 

plans to alter their product mix in favor 

of smaller, more fuel-efficient vehicles, 

it is too soon to tell to what extent 

consumers will adapt to such a product 

mix for MY 2011 (which may, to a large 

extent, depend on fuel prices), or 

whether the rest of the industry will 

follow or instead decide to serve the 

market for larger performance vehicles 

left behind by GM and Chrysler. 

Expected model years in which each 

vehicle model will be redesigned or 

freshened constitute another important 

aspect of NHTSA’s market forecast. As 

discussed in Section IV, NHTSA’s 

analysis supporting today’s rulemaking 

times the addition of most technologies 

to coincide with either a vehicle 

redesign or a vehicle freshening. 

Product plans submitted to NHTSA 

preceding both the NPRM and the final 

rule contained manufacturers’ estimates 

of vehicle redesign and freshening 

schedules. However, as discussed in 

Section IV, NHTSA estimated that in the 

future, most vehicles would be 

redesigned on a five-year schedule, with 

vehicle freshening (i.e., refresh) 

occurring every two to three years after 

a redesign. After applying these 

estimates, the shares of manufacturers’ 

passenger car and light truck estimated 

to be redesigned in MY 2011 were as 

summarized below for the seven largest 

manufacturers. Table III–8 shows the 

percentages of each manufacturer’s 

fleets expected to be redesigned in MY 

2011 from the market forecast used by 

NHTSA in the analysis documented in 

the NPRM. To protect confidential 

information, manufacturers are not 

identified by name. Table III–9 presents 

corresponding estimates from the 

analysis supporting today’s final rule. 

To further protect confidential 

information, the numbering of 

individual manufacturers is different 

from that shown in Table III–8. 

We continue, therefore, to estimate 

that manufacturers’ redesigns will not 

be uniformly distributed across model 

years. This is in keeping with standard 

industry practices, and reflects what 

manufacturers actually do–NHTSA has 

observed that manufacturers in fact do 

redesign more vehicles in some years 

than in others. NHTSA staff have 

closely examined manufacturers’ 

planned redesign schedules, contacting 

some manufacturers for clarification of 

some plans, and confirmed that these 

plans remain unevenly distributed over 

time. For example, although Table 9 

shows that NHTSA expects Company 2 

to redesign 34 percent of its passenger 

car models in MY 2011, current 

information indicates that this company 

will then redesign only (a different) 10 

percent of its passenger cars in MY 

2012. Similarly, although Table 9 shows 

that NHTSA expects four of the largest 

seven light truck manufacturers to 

redesign virtually no light truck models 

in MY 2011, current information also 

indicates that these four manufacturers 

will redesign 21–49 percent of their 

light trucks in MY 2012. GM and 

Chrysler’s recent restructuring plans 

lend support to these observations. 

Chrysler described its planned entries of 

new vehicles (its ‘‘launch cadence’’) in 


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105Chrysler plan, p. 135. 

106Additionally, although the agency will 

reconsider this issue in future rulemakings, at this 

time the agency is not confident that it has the 

statutory authority to base its determination of the 

maximum feasible CAFE standard in a given model 

year on manufacturers’ ability to over-comply 

during prior model years in which more vehicles 

were redesigned. 

107NHTSA is aware that Resources for the Future 

(RFF) has drafted a report regarding its examination 

of consumer behavior modeling. Although a market 

share model, as currently envisioned by NHTSA, 

would also need to address manufacturer behavior 

(in particular, regarding pricing), NHTSA will 

consider RFF’s work in evaluating future changes 

to NHTSA’s analytical methods. NHTSA has met 

with EPA and RFF staff to discuss the status of 

RFF’s efforts, and will consider any results RFF is 

able to develop. 

108As a point of reference for analysis, we note 

that assuming that CAFE standards remain at 2010 

levels is different from assuming that manufacturer 

fuel economy levels remains at their 2010 levels. As 

a legal matter under EISA, after MY 2011, if NHTSA 

does not set standards for a model year, there are 

no standards for that model year. However, as a 

practical matter, it is reasonable to assume that 

manufacturers would proceed as if the previous 

year’s standard carried over, rather than changing 

their vehicles and allowing fuel economy to fall 

without limit. 

its plan, and there is clear phasing, with 

MY 2011 experiencing many new 

introductions and some later years 

having none.105

NHTSA understands that a 

manufacturer may choose to time the 

application of technologies to coincide 

with planned redesigns, and elect in one 

model year to apply more technology 

than needed to meet its required CAFE 

level in that year. However, NHTSA has 

decided not to attempt to represent this 

type of manufacturer response to the 

MY 2011 CAFE standards because it is 

not relevant for the current 

rulemaking.106 NHTSA will consider 

this issue further in future rulemaking 

analyses. 

2. Once NHTSA has the product plans, 

how does it develop the baseline? 

In all cases, manufacturers’ sales 

volumes were normalized to produce 

passenger car and light truck fleets 

which reflected each manufacturers’ MY 

2008 market shares within the aggregate 

vehicle sales volume forecast in EIA’s 

2008 Annual Energy Outlook. NHTSA 

does this in order to develop a market 

forecast that is realistic in terms of both 

its overall size as well as manufacturers’ 

relative market shares. The product mix 

for each manufacturer that submitted 

product plans was preserved and, in the 

case of those than did not submit plans, 

the product mix used was the same as 

indicated in their pre-model year 2008 

CAFE data. As was discussed earlier, 

the manufacturers themselves are 

uncertain about future aggregate sales 

volumes. Although the market is facing 

a downturn of unprecedented 

magnitude, NHTSA currently expects 

that pent-up demand (driven, for 

example, by the continued use and 

eventual scrappage of existing vehicles) 

and an eventual economic recovery will, 

over time, bring sales back to more 

historic levels. 

CBD commented that this method of 

establishing the baseline fleet ‘‘has 

illegally constrained [NHTSA’s] analysis 

by locking [NHTSA] into the 

assumption that a manufacturer’s fleet 

mix need not, and will not, change in 

response to’’ increasing consumer 

demand for vehicles with improved fuel 

economy. Whether NHTSA should 

incorporate market shifts in its 

modeling has been a theme in 

comments for the past several CAFE 

rulemakings. Comments with regard to 

market shift tend to address two 

different issues. First, commenters 

request that NHTSA assume a higher 

fuel economy baseline than 

manufacturer product plans indicate, 

due to market shifts occurring because 

consumers demand higher fuel economy 

even without CAFE standards. The 

Mercatus Center, for example, raised 

this point in comments to the NPRM. 

Second, commenters suggest that 

NHTSA should incorporate the market 

shifts that result due to CAFE 

regulation, as manufacturers adjust 

vehicle prices and fuel economy levels, 

and consumers respond to those 

changes. The Alliance recommended 

that NHTSA use NERA’s nested logit 

model, for example, since it attempts to 

account for ‘‘actual consumer demand 

behavior’’ to address this issue. 

NHTSA agrees in principle that some 

kind of ‘‘market shift’’ model could 

provide useful information regarding 

the possible effects of potential new 

CAFE standards, and has researched 

how to integrate such a model into its 

stringency analysis. NHTSA recognizes 

that the product plans on which the 

agency relies to determine CAFE 

stringency represent a snapshot, and are 

subject to change in response to 

consumer demand, whether driven by 

CAFE or by extrinsic factors. Although 

NHTSA has now spent several years 

considering how to incorporate market 

shifts into its analysis of potential CAFE 

standards, the agency has still not been 

able to develop credible coefficients 

specifying such a model, and we have 

therefore continued to refrain in the 

final rule from integrating a market 

share model into the Volpe model.107

However, manufacturer product plans 

for MY 2011 do already, at a minimum, 

reflect whatever market shifts the 

manufacturers believe will occur in the 

absence of regulations. Additionally, the 

agency conducts a separate analysis of 

potential changes in manufacturers’ 

overall sales volumes. NHTSA will 

continue to consider ways in which to 

incorporate market shift modeling into 

its analysis for future rulemakings. 

Recent upheavals in the economy, 

including historically quick run-ups in 

gasoline prices followed by as dramatic 

declines, greatly affect consumer 

demand for vehicles. Econometric 

models such as nested logit are 

necessarily calibrated on historic data 

and thus, while offering a consistent 

method for describing the future, are 

constrained to reflect behavior based on 

past reactions to events. The release of 

the restructuring plans for GM and 

Chrysler are cases in point. They show 

considerable alterations in product 

plans, including reduction of planned 

sales volumes and nameplates, along 

with introduction of new models and 

accelerated adoption of technology, that 

appear to reflect a break with historical 

trends. 

Thus, the baseline fleet for MY 2011, 

or the baseline market forecast, consists 

of the vehicles present in the 

normalized and completed product 

plans, before NHTSA applies 

technologies to them. Manufacturers 

typically provide product plans not only 

for the years covered by a CAFE 

rulemaking, but also for prior years—so, 

for purposes of this rulemaking, NHTSA 

has product plans from many 

manufacturers beginning with MY 2008. 

As discussed above, NHTSA uses the 

baseline market forecast as a way of 

gauging what manufacturer fuel 

economy levels would exist in the 

absence of new CAFE standards. In 

order to provide a point of reference for 

estimating the costs and benefits of new 

standards, NHTSA assumes that, 

without new standards, the fuel 

economy standards would remain at the 

level of the MY 2010 standards.108

However, the baseline market forecast, 

which again, is based on the product 

plans, does not show all manufacturers 

in compliance with the MY 2010 

standards. This results from 

manufacturers’ ability to use 

compliance flexibilities, like credits 

(AMFA and otherwise) and fines, to 

meet the standards, which NHTSA is 

statutorily prohibited from considering 

in setting the standards. 

In order to ensure that our analysis 

does not incorporate such flexibilities 

and thus result in double-counting of 

costs that were evaluated in the 

previous rulemaking, NHTSA must 

adjust the baseline market forecast 

upwards. For manufacturers whose 

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product plans show fuel economy levels 

below the MY 2010 standards, NHTSA 

adjusts them upwards by adding 

technology to the manufacturer’s fleet in 

order to get the manufacturer into 

compliance without use of credits or 

payment of fines. For manufacturers 

whose product plans meet or exceed the 

MY 2010 standards, NHTSA 

incorporates them as-is. NHTSA 

develops an adjusted baseline because 

the costs and benefits of reaching the 

MY 2010 standards were already 

accounted for in prior rulemakings, just 

as the costs and benefits of reaching the 

MY 2011 standards are accounted for in 

the current rulemaking. To avoid 

double-counting the costs to 

manufacturers or the benefits to society 

required to meet the MY 2010 

standards, NHTSA develops this 

adjusted baseline, which the agency 

then uses in analyzing the MY 2011 

standards. 

The Alliance commented that NHTSA 

should use an ‘‘actual’’ baseline instead 

of a ‘‘projected’’ baseline. The Alliance 

stated that ‘‘NHTSA assumes that 

manufacturers were going to increase 

fuel economy significantly in numerous 

ways apart from a congressional or 

agency mandate to do so,’’ and argued 

that ‘‘by failing to consider the price 

increases needed to reach its ‘projected 

baseline,’ NHTSA underestimates the 

increase in vehicle prices by about $260 

per vehicle for cars and $920 per vehicle 

for trucks on average.’’ 

As explained, NHTSA would be 

double-counting to incorporate the costs 

of meeting the MY 2010 standards in the 

cost/benefit analysis for the current 

rulemaking. NHTSA discusses these 

costs, however, in the FRIA in Chapter 

I. 

3. How does NHTSA’s market forecast 

reflect current market conditions? 

NHTSA’s market forecast for MY 

2011, which is based significantly on 

confidential product plans provided to 

the agency by vehicle manufacturers, 

reflects the agency’s best judgment at 

the time it was developed. 

Manufacturers submitted plans during 

the summer of 2008. In preceding 

months, the industry had begun to show 

signs of stress, and the agency believes 

manufacturers’ revised plans submitted 

after the NPRM were informed by this. 

NHTSA is well aware that market 

conditions have deteriorated since late 

summer, just as the agency is aware that 

gasoline prices have fallen considerably 

in recent months. 

The agency notes, as mentioned 

above, that manufacturers’ product 

plans were submitted along with 

manufacturers’ indications that these 

plans were generally informed by 

expectations that relatively high fuel 

prices would prevail in the future. 

Although NHTSA did not request that 

manufacturers provide comprehensive 

and detailed forecasts of the world 

economy, including markets for credit 

and petroleum, the agency believes that 

manufacturers anticipated that, at least 

from MY 2011 forward, the economic 

environment would look much less dire 

than more recent events would suggest. 

The agency believes these expectations 

were consistent with those embodied in 

the high price scenario in EIA’s AEO 

2008, upon which the agency has based 

the fuel prices and total light vehicle 

market size used in the analysis 

supporting today’s final rule. 

NHTSA is cautiously hopeful that 

market conditions will rebound, and our 

market forecast remains consistent with 

that expectation. The recent 

restructuring plans submitted by 

Chrysler and GM, while diverging in 

absolute terms with respect to sales 

volumes, also anticipate significant 

sales growth by the middle part of the 

decade. In any event, were NHTSA to 

adopt more pessimistic expectations, 

those expectations would need to be 

reflected in other economic forecasts— 

in particular of petroleum prices. Were 

NHTSA to apply economic estimates 

that assume credit markets remain very 

constricted during MY 2011, it should, 

for internal consistency, apply 

considerably reduced estimates of the 

overall number of light vehicles sold in 

the U.S., and potentially lower estimates 

of gasoline and diesel fuel prices during 

the lifetimes of the vehicles covered by 

the standards. 

NHTSA has concluded that the 

forecasts it has applied in its current 

rulemaking for MY 2011 reflect the best 

internally consistent information 

available. The agency will, of course, 

update these forecasts in future 

rulemakings, and will base its analysis 

in those rulemakings on information— 

public, commercially-available, or 

confidential—that it considers most 

indicative of the fleets that 

manufacturers are likely to produce in 

future model years 

IV. Fuel Economy-Improving 

Technologies 

As explained above, pursuant to the 

President’s January 26, 2009 

memorandum, this final rule establishes 

passenger car and light truck CAFE 

standards for one year, MY 2011. 

Although this final rule establishes 

standards for that year alone, the agency 

undertook a comprehensive analysis of 

fuel economy-improving technologies 

with a time horizon similar to the one 

considered in the 2002 National 

Academy of Sciences (NAS) CAFE 

report. Like NAS, the agency considered 

technologies that are readily available, 

well known and could be incorporated 

into vehicles once production decisions 

are made (these are referred to as 

‘‘production intent’’ technologies). 

Other technologies considered, called 

‘‘emerging’’, are beyond the research 

phase and under development, but are 

not widely used at this time. The agency 

did not consider technologies in the 

research stage because their costs and/ 

or performance are not presently well 

known. 

The agency has elected to include the 

full analysis in this final rule for several 

reasons. First, it supplements the 

analysis of fuel saving technology 

released by the 2002 NAS study. 

Second, it places in meaningful context 

the portion of the analysis that relates 

directly to MY 2011, showing which 

technologies are not available for that 

year and why. The agency typically 

evaluates technologies within a time 

context spanning more than a single 

model year, even if the rulemaking itself 

addresses only a single year as in the 

current rulemaking, because when 

manufacturers add technologies to 

vehicle models in order to meet CAFE 

standards, they tend to phase them in 

over several model years, consistent 

with vehicle redesign and refresh 

schedules, supplier contract procedures, 

the need for testing and validation of 

new technologies, and so forth. 

Consequently, although the final rule 

establishes standards for MY 2011 only, 

NHTSA believes that including the 

entire technology analysis will increase 

public understanding of the agency’s 

estimates for MY 2011 of technology 

costs, effectiveness, and availability, as 

well as manufacturer vehicle freshening 

and redesign cycles. 

With that in mind, the following 

section details the cost and effectiveness 

estimates completed for technologies in 

the production intent or emerging 

technology phase timeline. The 

estimates are drawn from an analysis 

conducted in the summer of 2008. It 

relied as much as possible on published 

studies and confidential product plan 

data submitted by manufacturers on July 

1, 2008 in response to the agency’s 

NPRM request for comments published 

May 2, 2008. The analysis was 

conducted by engineers from DOT and 

Ricardo, an international consulting 

firm that specializes in automotive 

engineering consulting (discussed 

below). The engineering team used all 

data available at that time, along with 

their expert opinion to derive cost and 

effectiveness estimates for technologies 

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109National Research Council, ‘‘Effectiveness and 

Impact of Corporate Average Fuel Economy (CAFE) 

Standards,’’ National Academy Press, Washington, 

DC (2002). Available at http://www.nap.edu/ 

openbook.php?isbn=0309076013 (last accessed 

October 11, 2008). 110EPA Staff Technical Report: Cost and 

Effectiveness Estimates of Technologies Used to 

Reduce Light-Duty Vehicle Carbon Dioxide 

Emissions, EPA 420–R–08–008, March 2008. 

111More information about Ricardo’s work is 

available at their Web site, http://www.ricardo.com 

(last accessed September 20, 2008). Its 2007 Annual 

Report provides a comprehensive view of some of 

its current work. See http://www.ricardo.com/ 

investors/download/annualreport2007.pdf (last 

accessed September 22, 2008). 

112Ricardo UK Ltd., ‘‘Understanding 

manufacturers’ responses to policy measures to 

incentivise fuel efficiency,’’ Oct. 5, 2007. Available 

at http://www.dft.gov.uk/consultations/closed/ 

co2emissions/ricardoreport.pdf (last accessed Oct. 

4, 2008). 

113A slightly updated (June 2008) version of 

Ricardo’s study for EPA is available on EPA’s Web 

site, at http://www.epa.gov/otaq/technology/ 

420r08004a.pdf (last accessed September 20, 2008). 

either in production or in the emerging 

stage of production for purposes of this 

rulemaking. 

The agency believes that the resulting 

estimates are the best available for MY 

2011, given the information that existed 

at the time. NHTSA recognizes, 

however, that the analysis of and public 

debate over the cost and effectiveness of 

the various fuel saving technologies is 

an ongoing one. It recognizes too that 

aspects of its technology analysis will 

likely require updating or otherwise 

merit revision for the next CAFE 

rulemaking. As time progresses, new 

research occurs, new studies become 

available and product plan information 

changes. As with all CAFE rulemakings 

and pursuant to the President’s 

memorandum, the agency will take a 

fresh look at all of its technology-related 

assumptions for the purpose of future 

rulemakings. 

A. NHTSA Analyzes What Technologies 

Can Be Applied Beyond Those in the 

Manufacturers’ Product Plans 

One of the key statutory factors that 

NHTSA must consider in setting 

maximum feasible CAFE standards for 

each model year is the availability and 

feasibility of fuel saving technologies. 

When manufacturers submit their 

product plans to NHTSA, they identify 

the technologies they are planning for 

each vehicle model in each model year. 

They also provide their assessments of 

the costs and effectiveness of those fuel 

saving technologies. The agency uses 

the manufacturers’ product plan data to 

ascertain the ‘‘baseline’’ capabilities and 

average fuel economy of each 

manufacturer. Given the agency’s need 

to consider economic practicability in 

determining how quickly additional fuel 

saving technologies can be added to the 

manufacturers’ vehicle planned fleets, 

the agency researches and develops, 

based on the best available information 

and data, its own list of technologies 

that it believes will be ready for 

implementation during the model years 

covered by the rulemaking. This 

includes developing estimates of the 

costs and effectiveness of each 

technology and lead time needs. The 

resultant technology assumptions form 

an input into the Volpe model. The 

model simulates how manufacturers can 

comply with a given CAFE level by 

adding technologies beyond those they 

planned in a systematic, efficient and 

reproducible manner. The following 

sections describe NHTSA’s fuel-saving 

technology assumptions and 

methodology for estimating them, and 

their applicability to MY 2011 vehicles. 

B. How NHTSA Decides Which 

Technologies to Include 

1. How NHTSA Did This Historically, 

and How for the NPRM 

In the agency’s last two CAFE 

rulemakings, which established light 

truck CAFE standards for MYs 2005– 

2007 and MYs 2008–2011, NHTSA 

relied on the 2002 National Academy of 

Sciences’ report, ‘‘Effectiveness and 

Impact of Corporate Average Fuel 

Economy Standards’’ 109 (‘‘the 2002 

NAS Report’’) for estimating potential 

fuel economy effectiveness values and 

associated retail costs of applying 

combinations of technologies in 10 

classes of production vehicles. The NAS 

study was commissioned by the agency, 

at the direction of Congress, in order to 

provide independent and peer reviewed 

estimates of cost and effectiveness 

numbers. The NAS list was determined 

by a panel of experts formed by the 

National Academy of Sciences, and was 

then peer-reviewed by individuals 

chosen for their diverse perspectives 

and technical expertise in accordance 

with procedures approved by the Report 

Review Committee of the National 

Research. 

In the NPRM for the MY 2011–2015 

CAFE standards, NHTSA explained that 

there has been substantial advancement 

in fuel-saving automotive technologies 

since the publication of the 2002 NAS 

Report. New technologies, i.e., ones that 

were not assessed in the NAS report, 

have appeared in the market place or are 

expected to appear in the timeframe of 

the proposed rulemaking. Also, new 

studies have been conducted and 

reports issued by several other 

organizations providing new or different 

information regarding the fuel economy 

technologies that will be available and 

their costs and effectiveness values. To 

aid the agency in assessing these 

developments, NHTSA contracted with 

the NAS to update the fuel economy 

section, Chapter 3, of the 2002 NAS 

Report. However, as NHTSA explained, 

the NAS update was not available in 

time for this rulemaking. 

Accordingly, NHTSA worked with 

EPA staff to update the technology 

assumptions, and used the results as a 

basis for its NPRM. EPA staff published 

a related report and submitted it to the 

NAS committee.110

2. NHTSA’s Contract with Ricardo for 

the Final Rule 

NHTSA specifically sought comment 

on the estimates, which it had 

developed jointly with EPA, of the 

availability, applicability, cost, and 

effectiveness of fuel-saving 

technologies, and the order in which the 

technologies were applied. See 73 FR 

24352, 24367. To aid the agency in 

analyzing those comments and 

increasing the accuracy, clarity and 

transparency of its technology 

assumptions and methodologies 

employed in developing them, it hired 

an international consulting firm, 

Ricardo, which specializes in 

automotive engineering consulting. 

Ricardo, which describes itself as an 

eco-innovation technology company, is 

a leading independent provider of 

technology, product innovation, 

engineering solutions, software and 

strategic consulting. Its skill base 

includes the state-of-the-art in low 

emissions and fuel-efficient powertrain 

and vehicle technology. Its customers 

include government agencies here and 

abroad and the world’s automotive, 

transport and new-energy industries.111

For example, it has provided technical 

consulting on low CO2 strategies to the 

UK Department for Transport (DfT).112

Additionally, in December 2007, 

Ricardo completed an important study 

for EPA titled ‘‘A Study of Potential 

Effectiveness of Carbon Dioxide 

Reducing Vehicle Technologies.’’ 113

Ricardo’s role was as a technical 

advisor to NHTSA staff. In this capacity, 

Ricardo helped NHTSA undertake a 

comprehensive review of the NPRM 

technology assumptions and all 

comments received on those 

assumptions, based on both old and 

new public and confidential 

manufacturer information. NHTSA and 

Ricardo staff reviewed and compared 

comments on the availability and 

applicability of technologies, and the 

logical progression between them. 

NHTSA also reviewed and compared 

the methodologies used for determining 

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114 In addition to the (simplified) decision trees, 

as published in this document, NHTSA also 

utilized ‘‘expanded’’ decision trees in the final rule 

analysis. Expanded decision trees graphically 

represent each unique path, considering the branch 

points available to the Volpe model, which can be 

utilized for applying fuel saving technologies. For 

instance, the engine decision tree shown in this 

document has 20 boxes representing engine 

technologies, whereas the expanded engine 

decision tree requires a total of 45 boxes to 

accurately represent all available application 

variants. Expanded decision trees presented a 

significant improvement, compared to the NPRM 

analysis, in the overall assessment and tracking of 

applied technologies since they allowed NHTSA 

staff to accurately view and assess both the 

incremental and the accumulated, or net cost and 

effectiveness at any stage of technology application 

in a decision tree. Because of the large format of the 

expanded decision trees, they could not be 

included in the Federal Register, so NHTSA refers 

the reader to Docket No. NHTSA–2008–0177. 

Expanded decision trees for the engine, 

electrification/transmission/hybridization, and the 

vehicle technologies (three separate decision trees) 

were developed for each of the 12 vehicle 

technology application classes (the vehicle 

subclasses discussed in Section IV.D.4) and the 

three expanded decision trees for the Large Car 

subclass have been placed in the docket as an 

example for the reader’s information. 

115We note that GM included lean burn HCCI in 

its restructuring plans submitted to Congress, but 

the restructuring plans were submitted too late for 

the agency to consider them in its technology 

analysis, among other reasons. GM Restructuring 

Plan, p. 22. 

the costs and effectiveness of the 

technologies as well as the specific 

estimates provided. Relying on the 

technical expertise of Ricardo and 

taking into consideration all the 

information available, NHTSA revised 

its estimates of the availability and 

applicability of many technologies, and 

revised its estimate of the order in 

which the technologies were applied 

and how they are differentiated by 

vehicle class, as well as the costs and 

effectiveness estimates and used the 

revised numbers in analyzing 

alternative levels of stringency. 

While NHTSA sought Ricardo’s 

expertise and relied significantly on 

their assistance as a neutral expert in 

developing its technical assumptions, it 

retained responsibility for the final 

estimates. The agency believes that the 

representation of technologies for MY 

2011—that is, estimates of the 

availability, applicability, cost, and 

effectiveness of fuel-saving 

technologies, and the order in which the 

technologies were applied—used in this 

rulemaking is more accurate than that 

used in the NPRM, and is the best 

available for purposes of this 

rulemaking. 

C. What Technology Assumptions has 

NHTSA Used for the Final Rule? 

1. How do NHTSA’s technology 

assumptions in the final rule differ from 

those used in the NPRM? 

This final rule uses the same basic 

framework as the NPRM. However, 

NHTSA made several changes to its 

technology assumptions based on 

comments and information received 

during the rulemaking. As in the NPRM 

and the MY 2008–2011 light truck rule, 

the agency relied on the Volpe model 

CAFE Compliance and Effects Modeling 

System which was developed by the 

Department of Transportation’s Volpe 

National Transportation Systems Center 

(Volpe Center) to apply technologies. 

The model, known as the Volpe model, 

is the primary tool the agency has used 

in conducting a ‘‘compliance analysis’’ 

of various CAFE stringencies. The Volpe 

model relied on the same types of 

technology related inputs as in previous 

rules, including market data files, 

technology cost and effectiveness 

estimates by vehicle classification, 

technology synergies, phase-in rates, 

learning curve adjustments, and 

technology decision trees. 

Regarding the decision trees, both the 

structure of the trees and ordering of the 

technologies were revised. The decision 

trees have been expanded so that 

NHTSA is better able to track the 

incremental and net/cumulative cost 

and effectiveness of each technology, 

which substantially improves the 

‘‘accounting’’ of costs and effectiveness 

for the final rule.114 The revised 

decision trees also have improved 

integration, accuracy, and technology 

representations. 

In revising the decision trees, NHTSA 

updated, combined, split and/or 

renamed technologies. Several 

technologies were added, while others 

were deleted. The three technologies 

that were deleted because they do not 

appear in either public or confidential 

data and are primarily in the research 

phase of development are: Camless 

Valve Actuation, Lean-Burn Gasoline 

Direct-Injection and Homogenous 

Charge Compression Ignition.115

NHTSA also added three advanced 

technologies based on confidential 

manufacturer submissions which 

showed these technologies as being 

emerging and currently under 

development. These technologies are: 

Combustion Restart, Exhaust Gas 

Recirculation Boost, and Plug-in 

Hybrids. 

The Volpe model was modified to 

allow a non-linear phase-in rate across 

the five model years, rather than a 

constant phase-in rate as was used in 

the NPRM and in previous rules. Most 

technology applications have tighter 

phase-in caps in the early years to 

provide for additional lead time. 

In the NPRM, NHTSA applied 

volume-based learning factors to 

technology costs for the first time. These 

learning factors were developed using 

the parameters of learning threshold, 

learning rate (decremented over two 

cycles), and the initial (unlearned) cost. 

In the NPRM, NHTSA applied a 

learning rate discount of 20 percent 

each time a technology was projected 

for use on 25,000 vehicles per 

manufacturer, which was the threshold 

volume for learning rate discounts. The 

discounts were only taken twice, at 

25,000 and 50,000 vehicles. A 

technology was viewed as being fully 

learned out at 100,000 units. 

The agency also reconsidered volumebased learning factors and made 

significant revisions. First, the volume 

learning is now applied on an industry 

basis as opposed to a manufacturer 

basis. This takes into account the fact 

that the automobile industry shares best 

practices and that manufacturers learn 

from that sharing to produce their 

vehicles at lower costs. For the final 

rule, the revised learning threshold is 

set to 300,000 vehicles per year by the 

automobile industry. This number was 

developed based on comments 

indicating that many of the publicly 

available technology cost estimates are 

based on production quantities of 

900,000 to 1.5 million vehicles by at 

least 3 manufacturers. The agency notes, 

however, that none of the technologies 

applied in MY 2011 receive volumebased learning, due to the time frame 

applicable. 

For the technologies applied in the 

final rule, a time-based learning factor 

was used in response to public 

comments from Ford and others. This 

learning factor was not applied in the 

NPRM. Time-based learning is applied 

to widely available, high volume, stable 

and mature technologies typically 

purchased under negotiated multi-year 

contractual agreement with suppliers. 

This type of an agreement is typical of 

most supplier-provided fuel saving 

technologies. With time-based learning, 

the initial cost of a technology is 

reduced by a fixed amount in its second 

and subsequent year of availability. A 

fixed rate 3 percent year-over-year cost 

reduction is applied up to a maximum 

of 12 percent cost reduction. 

In the NPRM NHTSA divided 

vehicles into ten subclasses based on 

technology applicability: four for cars 

and six for trucks. NHTSA assigned 

passenger cars into one of the following 

subclasses: Subcompact, Compact, 

Midsize, or Large Car. NHTSA assigned 

light trucks into one of the following 

subclasses: Minivan, Small SUV, 

Medium SUV, Large SUV, Small Pickup 

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116The market forecast is developed by NHTSA 

using the product plan information provided to the 

agency by individual vehicle manufacturers in 

response to NHTSA’s requests. The submitted 

product plans contain confidential business 

information (CBI), which the agency is prohibited 

by federal law from disclosing. 

Truck, or Large Pickup Truck. In its 

2008 NPRM for MY 2011–2015, NHTSA 

included some differentiation in cost 

and effectiveness numbers between the 

various classes to account for 

differences in technology costs and 

effectiveness that are observed when 

technologies are applied on to different 

classes and subclasses of vehicles. 

For the final rule, NHTSA, working 

with Ricardo, increased the accuracy of 

its technology assumptions by 

reexamining the subclasses developed 

for the purpose of modeling technology 

application. For passenger cars, NHTSA 

divided vehicles into eight subclasses 

based on technology applicability by 

creating a performance class under each 

of the four subclasses. For trucks, 

NHTSA established four subclasses, 

including a minivan subclass, and 

small, midsize and large SUV/Pickup/ 

Van subclasses. NHTSA also provided 

more differentiation in the costs and 

effectiveness values by vehicle subclass. 

The agency found it important to make 

that differentiation because the agency 

estimated that some technologies would 

have different implications for large 

vehicles than for smaller vehicles. 

In summary, the revisions to 

NHTSA’s methodology for technology 

application and cost and effectiveness 

estimates are designed to respond to 

comments, many of which focused on 

various inaccuracies and lack of clarity 

in the NPRM. NHTSA believes that the 

methodology for the final rule, as 

compared to the NPRM methodology, is 

much clearer, more accurate, and more 

representative of likely manufacturer 

behavior, although, of course, 

manufacturers are free to respond to the 

CAFE standards with whatever 

application of technology they choose. 

The revised technology related 

assumptions help substantially ensure 

the technological feasibility and 

economic practicability of the MY 2011 

CAFE standards promulgated in this 

final rule. 

2. How are the technologies applied in 

the model? 

For the final rule, as in the NPRM, 

NHTSA made significant use of the 

CAFE Volpe model as discussed above. 

The NPRM contained a detailed 

discussion of the Volpe model and 

specifically stated its two primary 

objectives as (1) identifying technologies 

that manufacturers could apply in order 

to comply with a specified CAFE 

standard, and (2) calculating the cost 

and effects of manufacturers’ technology 

applications. The NPRM also discussed 

other modeling systems and approaches 

that NHTSA considered to accomplish 

these same objectives, and also 

discusses why ultimately the agency 

chose to use the Volpe model (see 79 FR 

24352, 24391). However, having done so 

for this final rule does not limit the 

agency’s ability to use another approach 

for future CAFE rulemakings, and 

NHTSA will continue to consider other 

methods for estimating the costs and 

effects of adding technologies to 

manufacturers’ future fleets. 

The Volpe model relies on several 

inputs and data files to conduct the 

compliance analysis, and each of these 

are discussed in detail in the NPRM. 

Many of these inputs contain economic 

and environmental data required for the 

full CAFE analysis. However, for the 

purposes of applying technologies, the 

subject of this section, the Volpe model 

primarily uses three data files, one that 

contains data on the vehicles being 

manufactured, one that identifies the 

appropriate stage within the vehicle’s 

life-cycle for the technology to be 

applied, and one that contains data/ 

parameters regarding the available 

technologies the model can apply. 

These inputs are discussed below. 

The Volpe model begins with an 

‘‘initial state’’ of the domestic vehicle 

market, which in this case is the market 

for passenger cars and light trucks to be 

sold during the period covered by the 

final rule. The vehicle market is defined 

on a model, engine, and transmission 

basis, such that each defined vehicle 

model refers to a separately-defined 

engine and a separately-defined 

transmission. For the final rule, this 

represented roughly 5,500 cars and 

trucks, 700 engines, and 600 

transmissions. The information, which 

is stored in a file called the ‘‘vehicle 

market forecast,’’ is informed 

significantly by product plans provided 

to NHTSA by vehicle manufacturers.116

However, the Volpe model does not 

require that the market forecast be based 

on confidential product plans, and the 

model is often tested using input files 

developed using only publicly- and 

commercially-available information. 

Also, as discussed in Section III above, 

EPCA does not require NHTSA to use 

manufacturers’ confidential product 

plans as a basis for setting future CAFE 

standards, and the agency will continue 

to base its market forecasts on whatever 

it determines is the best available 

information, whether from public, 

commercially-available, or confidential 

sources. 

In addition to containing data about 

each vehicle, engine, and transmission, 

this file contains information for each 

technology under consideration as it 

pertains to the specific vehicle (whether 

the vehicle is equipped with it or not), 

the model year the vehicle is 

undergoing redesign, and information 

about the vehicle’s subclass for 

purposes of technology application. 

The market forecast file provides 

NHTSA the ability to identify, on a 

technology by technology basis, which 

technologies may already be present 

(manufactured) on a particular vehicle, 

engine, or transmission, or which 

technologies are not applicable (due to 

technical considerations) to a particular 

vehicle, engine, or transmission. These 

identifications are made on a model-bymodel, engine-by-engine, and 

transmission-by-transmission basis. For 

example, if Manufacturer X advises 

NHTSA that Vehicle Y will be 

manufactured with Technology Z, then 

for this vehicle Technology Z will be 

shown as used. Or alternatively, NHTSA 

might conclude based on its own 

assessment that for a given four cylinder 

engine, Manufacturer A cannot utilize a 

particular Technology C due to an 

engineering issue that prohibits it. In 

this case, NHTSA would, in the market 

forecast file, indicate that Technology C 

should not be applied to this particular 

engine (i.e., is unavailable). Since 

multiple vehicle models may be 

equipped with this engine, this may 

affect multiple models. In using this 

aspect of the market forecast file, 

NHTSA ensures the Volpe model only 

applies technologies in an appropriate 

manner, since before any application of 

a technology can occur, the model 

checks the market forecast to see if it is 

either already present or unavailable. 

Manufacturers typically plan vehicle 

changes to coincide with certain stages 

of a vehicle’s life cycle that are 

appropriate for the change, or in this 

case the technology being applied. For 

instance, some technologies (e.g., those 

that require significant revision) are 

nearly always applied only when the 

vehicle is expected to be redesigned. 

Other technologies can be applied only 

when the vehicle is expected to be 

refreshed or redesigned and some others 

can be applied at any time, regardless of 

whether a refresh or redesign event is 

conducted. Accordingly, the model will 

only apply a technology at the particular 

point deemed suitable. These 

constraints are intended to produce 

results consistent with manufacturers’ 

product planning practices. For each 

technology under consideration, 

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NHTSA stipulates whether it can be 

applied any time, at refresh/redesign, or 

only at redesign. The data forms another 

input to the Volpe model, as discussed 

in detail below, called the Technology 

Refresh and Redesign Application table 

(Table IV–6). Each manufacturer 

identifies its planned redesign model 

year for each of its vehicles, and this 

data is also stored in the market forecast 

file. Vehicle redesign/refresh 

assumptions are discussed in Section 

IV.C.9 below. 

As discussed in Section IV.C.4 on 

vehicle subclasses below, NHTSA 

assigns one of 12 subclasses to each 

vehicle manufactured in the rulemaking 

period. The vehicle subclass data is 

used for the purposes of technology 

application. Each vehicle’s class is 

stored in the market forecast file. When 

conducting a compliance analysis, if the 

Volpe model seeks to apply technology 

to a particular vehicle, it checks the 

market forecast to see if the technology 

is available and if the refresh/redesign 

criteria are met. If these conditions are 

satisfied, the model determines the 

vehicle’s subclass, which it then uses to 

reference another input called the 

technology input file. 

In the technology input file, NHTSA 

has developed a separate set of 

technology data variables for each of the 

twelve vehicle subclasses. Each set of 

variables is referred to as an ‘‘input 

sheet,’’ so for example, the subcompact 

input sheet holds the technology data 

that is appropriate for the subcompact 

subclass. Each input sheet contains a 

list of technologies available for 

members of the particular vehicle 

subclass. The following items are 

provided for each technology: a brief 

description, its abbreviation, the 

decision tree with which it is 

associated, the (first) year in which it is 

available, the upper and lower cost and 

effectiveness (fuel consumption 

reduction) estimates, the learning type 

and rate, the cost basis, its applicability, 

and the phase-in values. 

The input sheets are another method 

NHTSA uses to determine how to 

properly apply, or in some cases 

constrain, a technology’s application, as 

well as to establish the costs and fuel 

consumption changes that occur as it is 

applied. Examples of how technologies 

are applied (or constrained) include the 

‘‘Applicability’’ variable: if it is set to 

‘‘TRUE,’’ then the technology can be 

applied to all members of the vehicle 

subclass (a value of ‘‘FALSE’’ would 

prevent the Volpe model from applying 

the technology to any member). Another 

example would be the ‘‘Year Available’’ 

variable, which if set to ‘‘2012’’ means 

the model can apply it to MY 2012 and 

later members, but cannot apply the 

technology to MY 2011 models. The 

‘‘Learning Type’’ and ‘‘Learning Rate’’ 

define reductions in technology costs, if 

any are appropriate, that the Volpe 

model may apply under certain 

conditions, as discussed in the Learning 

Curve section below. ‘‘Phase-in Values’’ 

are intended to address the various 

constraints that limit a manufacturer’s 

ability to apply technologies within a 

short period of time. For phase-ins, once 

the model applies a given technology to 

a percentage of a given manufacturers’ 

fleet up to a specified phase-in cap, the 

model then ceases to apply it further 

instead applying other technologies. 

Phase-in caps are also discussed below 

in Section IV.C.10. 

Perhaps the most important data 

contained in the input sheets are the 

cost and effectiveness information 

associated with each technology. One 

important concept to understand about 

the cost and effectiveness values is that 

they are ‘‘incremental’’ in nature, 

meaning that the estimates are 

‘‘referenced’’ to some prior technology 

state in the decision tree in which the 

applied technology is represented, 

typically the preceding technology. 

Therefore, when considering values 

shown in the input sheet, the reader 

must understand that in all but a few 

cases they cannot fully deduce the 

accumulated or ‘‘NET’’ cost and 

effectiveness, referenced back to the 

base condition (i.e., start of the decision 

tree), without performing a more 

detailed analysis. The method for 

conducting this analysis, and a brief 

example of how it is done, is discussed 

in the Decision Tree section below. For 

the final rule, to help readers better 

understand Volpe model net or 

accumulated costs and fuel 

consumption reductions, NHTSA has 

published net values to key technology 

locations on the decision trees (e.g., to 

diesel engine conversion, or a strong 

hybrid). See the Tables showing 

Approximate Net Technology Costs and 

Approximate Net Technology 

Effectiveness, located in Section IV.E 

below. The tables have been produced 

for each of the four vehicle subclasses 

in the passenger car, performance 

passenger car, and light truck vehicle 

groups. 

The incremental costs of some 

technologies are dependent on certain 

factors specific to the vehicle to which 

they are applied. For instance, when the 

Material Substitution technology is 

applied, the cost of application is based 

on a cost per unit weight reduction, in 

dollars per pound, since the weight 

removed is a percentage of the curb 

weight of the vehicle (which differs 

from one vehicle to the next). Similarly, 

some engine technologies need to be 

calculated on a cost per cylinder basis, 

or a cost per configuration basis (i.e., a 

cost per bank basis, so that a 

V-configured engine would cost twice as 

much as an in-line, single bank engine). 

For each technology, the input sheet 

also contains a Cost Basis variable 

which indicates whether the costs need 

to be adjusted in this manner. This 

functionality, some of which is new for 

the final rule, allows NHTSA to estimate 

more accurately the costs of technology 

application, since in the NPRM the 

vehicles in a subclass were assumed to 

have common cylinder counts and 

configurations (thus the costs were 

underestimated for some vehicles and 

overestimated for others). 

Lastly for the technology input file, 

the term ‘‘synergy’’ as it applies to the 

Volpe modeling process refers to the 

condition that occurs when two or more 

technologies are applied to a vehicle 

and their effects interact with each 

other, resulting in a different net effect 

than the combination of the individual 

technologies. The term synergy usually 

connotes a positive interaction (e.g., 

1 + 1 is more than 2), but as used here 

it also includes negative interactions 

(e.g., 1 + 1 is less than 2). Synergies are 

discussed in greater detail below in 

Section IV.C.7, and the values for the 

synergy factors NHTSA used in the final 

rule are stored in the technology input 

file. 

In some cases more than one decision 

tree path can lead to a subsequently 

applied technology. For example, the 

power split hybrid technology can be 

reached from one of two prior 

transmission technologies (CVT or 

DCTAM). Accordingly the incremental 

cost and effectiveness for applying the 

technology may vary depending on the 

path and the modifications made in the 

prior technology. To ensure accurate 

tracking of net costs and effectiveness, 

the Volpe model utilizes path correction 

factors, as discussed further in the 

decision tree discussion below. This 

functionality is an improvement to the 

final rule, and the specific factors used 

are stored in the technology input 

sheets. A copy of the final rule input 

sheets, titled ‘‘2011–2015_LV_CAFE_

FinalRuleInputSheets20081019.pdf,’’ 

can be obtained from the final rule 

docket. 

One additional concept to understand 

about how the Volpe model functions is 

called an ‘‘engineering constraint,’’ a 

programmatic method of controlling 

technology application that is 

independent of those discussed above. 

NHTSA has determined that some 

technologies are only suitable or 

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unsuitable when certain vehicle, engine, 

or transmission conditions exist. For 

example, secondary axle disconnect is 

only suitable for 4WD vehicles, and 

cylinder deactivation is unsuitable for 

any engine with fewer than 6 cylinders, 

while material substitution is only 

available for vehicles with curb weights 

greater than 5,000 pounds. Additionally, 

in response to comments received, an 

engineering constraint was added for 

purposes of the final rule to prevent the 

cylinder deactivation technology from 

being applied to vehicles equipped with 

manual transmissions, due primarily to 

driveability and NVH concerns 

documented by the commenter. Where 

appropriate and required, NHTSA has 

utilized engineering constraints to 

ensure accurate application of the fuel 

saving technologies. 

3. Technology Application Decision 

Trees 

Several changes were made to the 

Volpe model between the analysis 

reported in the NPRM and the final rule. 

This section will discuss two of those 

changes: First, the updates to the set of 

technologies; and second, the updates to 

the logical sequence for progressing 

through these technologies, which 

NHTSA describes as ‘‘decision trees.’’ 

As discussed above, the set of 

technologies considered by the agency 

has evolved since the NPRM. The set of 

technologies now included in the Volpe 

model is shown below in Table IV–1, 

with abbreviations used by the model to 

refer to each technology in the interest 

of brevity. Section IV.D below explains 

each technology in much greater detail, 

including definitions and cost and 

effectiveness values. 

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As in the NPRM, each technology is 

assigned to one of the five following 

categories based on the system it affects 

or impacts: engine, transmission, 

electrification/accessory, hybrid or 

vehicle. Each of these categories has its 

own decision tree that the Volpe model 

uses to apply technologies sequentially 

during the compliance analysis. The 

decision trees were designed and 

configured to allow the Volpe model to 

apply technologies in a cost-effective, 

logical order that also considers ease of 

implementation. For example, effective 

software or control logic changes are 

implemented before replacing a 

component or system with a completely 

redesigned one, which is typically a 

much more expensive option. 

Each technology within the decision 

trees has an incremental cost and an 

incremental effectiveness estimate 

associated with it, and the estimates are 

specific to a particular vehicle subclass 

(see the tables provided below in 

Section IV.D). Each technology’s 


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incremental estimate takes into account 

its position in the decision tree path. If 

a technology is located further down the 

decision tree, the estimates for the costs 

and effectiveness values attributed to 

that technology are influenced by the 

incremental estimates of costs and 

effectiveness values for prior technology 

applications. In essence, this approach 

accounts for ‘‘in-path’’ effectiveness 

synergies and cost effects that occur 

between the technologies in the same 

path. When comparing cost and 

effectiveness estimates from various 

sources and those provided by 

commenters, it is vital that the estimates 

are evaluated in the proper context, 

especially as concerns their likely 

position in the decision trees and other 

technologies that may be present or 

missing. Not all estimates provided by 

commenters can be considered an 

‘‘apples-to-apples’’ comparison with 

those used by the Volpe model, since in 

some cases the order of application, or 

included technology content, is 

inconsistent with that assumed in the 

decision tree. 

For the final rule, significant revisions 

have been made to the sequence of 

technology applications within the 

decision trees, and in some cases the 

paths themselves have been modified 

and additional paths have been added. 

The additional paths allow for a more 

accurate application of technology, 

insofar as the model now considers the 

existing configuration of the vehicle 

when applying technology. In this 

analysis, single overhead camshaft 

(SOHC), dual overhead camshaft 

(DOHC) and overhead valve (OHV) 

configured engines now have separate 

paths that allow for unique pathdependent versions of certain engine 

technologies. Thus, the cylinder 

deactivation technology (DEAC) now 

consists of three unique versions that 

depend on whether the engine being 

evaluated is an SOHC, DOHC or OHV 

design; these technologies are 

designated by the abbreviations DEACS, 

DEACD and DEACO, respectively, to 

designate which engine path they are 

located on. Similarly the last letter for 

the Coupled Cam Phasing (CCP) and 

Discrete Variable Valve Lift (DVVL) 

abbreviations are used to identify which 

path the technology is applicable to. 

Use of separate valvetrain paths and 

unique path-dependent technology 

variations also ensures that the 

incremental cost and effectiveness 

estimates properly account for 

technology effects so as not to ‘‘doublecount.’’ For example, in the SOHC path, 

the incremental effectiveness estimate 

for DVVLS assumes that some pumping 

loss reductions have already been 

accomplished by the preceding 

technology, CCPS, which reduces or 

diminishes the effectiveness estimate for 

DVVLS because part of the efficiency 

gain associated with the reduction of the 

pumping loss mechanism has already 

occurred. Commenters pointed out 

several instances in the NPRM where 

double-counting appeared to have 

occurred, and the accounting approach 

used in the final rule resolves these 

concerns. 

In reviewing NPRM comments, 

NHTSA noted several questions 

regarding the retention of previously 

applied technologies when more 

advanced technologies (i.e., those 

further down the decision tree) were 

applied. In response, NHTSA has 

clarified the final rule discussions on 

this issue. In both the NPRM and final 

rule, as appropriate and feasible, 

previously-applied technologies are 

retained in combination with the new 

technology being applied, but this is not 

always the case. For instance, one 

exception to this would be the 

application of diesel technology, where 

the entire engine is assumed to be 

replaced, so gasoline engine 

technologies cannot carry over. This 

exception for diesels, along with a few 

other technologies, is documented 

below in the detailed discussion of 

changes to each decision tree and 

corresponding technologies. 

As the Volpe model steps through the 

decision trees and applies technologies, 

it accumulates total or ‘‘NET’’ cost and 

effectiveness values. Net costs are 

accumulated using an additive approach 

while net effectiveness estimates are 

accumulated multiplicatively. To help 

readers better understand the 

accumulation process, and in response 

to comments expressing confusion on 

this subject, the following examples 

demonstrate how the Volpe model 

calculates net values. 

Accumulation of net cost is explained 

first as this is the simpler process. This 

example uses the Electrification/ 

Accessory decision tree sequentially 

applying the EPS, IACC, MHEV, HVIA 

and ISG technologies to a subcompact 

vehicle using the cost and effectiveness 

estimates from its input sheet. As seen 

in Table IV–2 below, the input sheet 

cost estimates have a lower and upper 

value which may be the same or a 

different value (i.e., a single value or a 

range) as shown in columns two and 

three. The Volpe model first averages 

the values (column 4), and then sums 

the average values to calculate the net 

cost of applying each technology 

(column 5). Accordingly, the net cost to 

apply the MHEV technology for 

example would be ($112.50 + $192.00 + 

$372.00 = $676.50). Net costs are 

calculated in a similar manner for all 

the decision trees. 


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117A decrease in fuel consumption (FC) means 

the fuel economy (FE) will be increased since fuel 

consumption and economy are related by the 

equation FC = 1/FE. 

118The correction tables are used for path 

deviations within the same decision tree. However, 

there is one exception to this rule, specifically that 

the tables are used to keep the model from doublecounting cost and effectiveness estimates when 

both the CBRST and MHEV are applied to the same 

vehicle. Both technologies try to accomplish the 

same goal of reducing fuel consumption, by limiting 

idle time, but through different means. If either of 

these technologies exists on a vehicle and the Volpe 

model applies the other, the correction tables are 

used to remove the cost and effectiveness estimates 

for CBRST, thus ensuring that double-counting does 

not occur. 

The same decision tree, technologies, 

and vehicle are used for the example 

demonstrating the model’s net 

effectiveness calculation. Table IV–3 

below shows average incremental 

effectiveness estimates in column two; 

this value is calculated in the same 

manner as the cost estimates above 

(average of lower and upper value taken 

from the input sheet). To calculate the 

change in fuel consumption due to 

application of the EPS technology with 

incremental effectiveness of 1.5 percent 

(or 0.015 in decimal form, column 3), 

when applied multiplicatively, means 

that the vehicle’s current fuel 

consumption ‘X’ would be reduced by a 

factor of (1¥0.015) = 0.985,117 or 

mathematically 0.985*X. To represent 

the changed fuel consumption in the 

normal fashion (as a percentage change), 

this value is subtracted from 1 (or 

100%) to show the net effectiveness in 

column 5. 

As the IACC technology is applied, 

the vehicle’s fuel consumption is 

already reduced to 0.985 of its original 

value. Therefore the reduction for an 

additional incremental 1.5 percent 

results in a new fuel consumption value 

of 0.9702, or a net 2.98 percent 

effectiveness, as shown in the table. Net 

effectiveness is calculated in a similar 

manner for the all decision trees. It 

should be noted that all incremental 

effectiveness estimates were derived 

with this multiplicative approach in 

mind; calculating the net effectiveness 

using an additive approach will yield a 

different and incorrect net effectiveness. 

To improve the accuracy of 

accumulating net cost and effectiveness 

estimates for the final rule, ‘‘pathdependent corrections’’ were employed. 

The NPRM analysis had the potential to 

either overestimate or underestimate net 

cost and effectiveness depending on 

which decision tree path the Volpe 

model followed when applying the 

technologies. For example, if in the 

NPRM analysis a diesel technology was 

applied to a vehicle that followed the 

OHV path, the net cost and effectiveness 

could be different from the net estimates 

for a vehicle that followed the OHC path 

even though the intention was to have 

the same net cost and effectiveness. In 

order to correct this issue, the final rule 

analysis has added path-dependent 

correction tables to the input sheets. 

The model uses these tables to correct 

net cost and effectiveness estimate 

differences that occur when multiple 

paths lead into a single technology that 

is intended to have the same net cost 

and effectiveness no matter which path 

was followed.118 Path-dependent 

corrections were used when applying 

cylinder deactivation (on the DOHC 

path), turbocharging and downsizing, 

diesel and strong hybrids. This is 

essentially an accounting issue and the 

path-dependent corrections are meant to 

remedy the accuracy issues reported in 

the NPRM comment responses. 

The following paragraphs explain, in 

greater detail, the revisions to the 

decision trees and technologies from the 

NPRM to the final rule. Revisions were 

made in response to comments received 

and pursuant to NHTSA’s analysis, and 

were made to improve the accuracy of 

the Volpe compliance analysis, or to 

correct other concerns from the NPRM 

analysis. 

Engine Technology Decision Tree 

Figure IV–1 below shows the final 

rule decision tree for the engine 

technology category. For the final rule, 

NHTSA removed camless valve 

actuation (CVA), lean-burn GDI (LBDI), 

and homogenous charge compression 

ignition (HCCI) from the decision trees 

because these technologies were 

determined to be still in the research 

phase of development. NHTSA did not 

receive any new information or 

comments that suggested these 

technologies are under development, so 

NHTSA removed them from the 

decision trees. At the top of the engine 

decision tree Low Friction Lubricants 

(LUB) and Engine Friction Reduction 

(EFR) technologies are retained as 

utilized in the NPRM. 

As stated above, SOHC, DOHC and 

OHV engines have separate paths, 

whereas as the NPRM only made the 

distinction between OHC and OHV 

engines. The separation of SOHC and 

DOHC engines allowed the model to 

more accurately apply unique pathdependent valvetrain technologies 

including variations of Variable Valve 

Timing (VVT), Variable Valve Lift (VVL) 

and cylinder deactivation that are 

tailored to either SOHC or DOHC 

engines. This separation also allowed 

for a more accurate method of 

accounting for net cost and effectiveness 


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compared to the NPRM. For both the 

SOHC and DOHC paths, VVL 

technologies were moved upstream of 

cylinder deactivation in response to 

comments from the Alliance, additional 

confidential manufacturer comments 

and submitted product plan trends, and 

NHTSA’s analysis. Confidential 

comments stated that applying cylinder 

deactivation to an OHC engine is more 

complex and expensive than applying it 

to an OHV engine. The Alliance 

additionally stated that cylinder 

deactivation is very applicationdependent, and is more effective when 

applied to vehicles with high power-toweight ratios. Taking in account the 

application-specific nature of cylinder 

deactivation and the fact the VVL 

technologies are more suitable to a 

broader range of applications, NHTSA 

moved VVL technologies ‘‘upstream’’ of 

cylinder deactivation on the SOHC and 

DOHC to more accurately represent how 

a manufacturer might apply these 

technologies. 

BILLING CODE 4910–59–P 

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BILLING CODE 4910–59–C 

On the OHV path, the ordering of 

cylinder deactivation (DEACO) then 

Coupled Cam Phasing (CCPO), which is 

opposite the order of the SOHC and 

DOHC paths, was retained as defined in 

the NPRM. This ordering depicts most 

accurately how manufacturers would 

actually implement these technologies 

and was reflected in the submitted 

product plans for OHV engines, which 

are largely used on trucks with high 

power-to-weight ratios. After the 

application of CCPO on the OHV 

decision tree, the model chooses 

between Discrete Variable Valve Lift 

(DVVLO) and the conversion to a dual 

overhead camshaft engine (CDOHC). 

This conversion now includes Dual Cam 

Phasing (DCP) instead of Continuously 

Variable Valve Lift (CVVL) because it is 

assumed that DCP, with its higher 

application rates, would more likely be 


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applied than CVVL, with its lower 

application rates. 

At this stage, and similar to the 

NPRM, the decision tree paths all 

converge into Stoichiometric Gasoline 

Direct Injection (SGDI). All previously 

applied technologies are retained with 

the assumption that SGDI is applied in 

addition to the pre-existing engine 

technologies. After SGDI, a newly 

defined technology, Combustion Restart 

(CBRST), has been added. 

The ‘‘branch point’’ after CBRST has 

been limited to two paths instead of the 

three paths in NPRM. This is due to the 

removal of HCCI from the final rule 

decision trees. The final rule engine 

decision tree allowed the model to 

apply either Turbocharging and 

Downsizing (TRBDS) or the conversion 

to diesel (DSLC). TRBDS is considered 

to be a completely new engine that has 

been converted to DOHC, if not already 

converted, with only LUB, EFR, DCP, 

SGDI and CBRST applied. 

The conversion to diesel is also 

considered to be a completely new 

engine that replaces the gasoline engine 

(although it carries over the LUB and 

EFR technologies). If the model chooses 

to follow the TRBDS path, the next 

technology that can be applied is 

another newly-added technology, EGR 

Boost (EGRB). After EGRB, the model is 

allowed to then convert the engine to 

diesel (DSLT). It should be noted that 

the path-dependent variations of diesel, 

(DSLC) and (DSLT), result in the exact 

same technology. The net cost and 

effectiveness estimates are the same for 

both but DSLT’s incremental cost and 

effectiveness estimates are slightly 

lower to account for the TRBDS and 

EGRB technologies that have already 

been applied. 

Electrification/Accessory Technology 

Decision Tree 

This path, shown in Figure IV–2, was 

named simply ‘‘Accessory Technology’’ 

in the NPRM. Electric Power Steering 

(EPS) is now the first technology in this 

decision tree, since it is a primary 

enabler for both mild and strong 

hybrids. Improved Accessories (IACC) 

has been redefined to include only an 

intelligent cooling system and follows 

EPS (in the NPRM, IACC was the first 

technology in the tree). The 42-volt 

Electrical System (42V) technology has 

been removed because it is no longer 

viewed as the voltage of choice by 

manufactures and is being replaced by 

higher voltage systems. Micro-Hybrid 

(MHEV), which follows IACC, has been 

added as a 12-volt stop/start system to 

replace Integrated Starter/Generator 

with Idle-Off (ISGO), which was on the 

‘‘Transmission/Hybrid Technology’’ 

decision tree in the NPRM. Higher 

Voltage/Improved Alternator (HVIA), a 

higher efficiency alternator that can 

incorporate higher voltages (greater than 

42V) follows MHEV. Integrated Starter 

Generator Hybrid (ISG) replaced IMA/ 

ISAD/BSG Hybrid (which was also on 

the Transmission/Hybrid Technology 

decision tree in the NPRM) as a higher 

voltage hybrid system with limited 

regenerative capability. ISG takes into 

account all the previously applied 

Electrification/Accessory technologies 

and is the final step necessary in order 

to convert the vehicle to a (full) strong 

hybrid. All Electrification/Accessory 

technologies can be applied to both 

automatic and manual transmission 

vehicles. 

Transmission Technology Decision Tree 

This decision tree, shown in Figure 

IV–2, contains two paths: one for 

automatic transmissions and one for 

manual transmissions. On the automatic 

path, the Aggressive Shift Logic (ASL) 

and Early Torque Converter Lockup 

(TORQ) technologies from the NPRM 

have been combined into an Improved 

Auto Trans Controls/Externals (IATC) 

technology, as both these technologies 

typically include only software or 

calibration-related transmission 

modifications. This technology was 

moved to the top of the decision tree 

since it was deemed to be easier and 

less expensive to implement than a 

major redesign of the existing 

transmission. The 5-Speed Automatic 

Transmission (5SP) technology from the 

NPRM has been deleted due to several 

factors. First, the updated decision tree 

logic seeks to optimize the current 

hardware as an initial step, instead of 

applying an expensive redesign 

technology. Second, NHTSA 

determined an industry trend of 4-speed 

automatics going directly to 6-speed 

automatics, as reflected in the submitted 

product plans. And finally, confidential 

manufacturer comments indicated that 

in some cases 5-speed transmissions 

offered little or no fuel economy 

improvement over 4-speed 

transmissions (primarily due to higher 

internal mechanical and hydraulic 

losses, and increased rotating mass), 

making the technology less attractive 

from a cost and effectiveness 

perspective. In the final rule, both 4- 

speed and 5-speed automatic 

transmissions get the IATC technology 

applied first, before progressing through 

the rest of the transmission decision 

tree. 

After IATC the decision tree splits 

into a ‘‘Unibody only’’ and ‘‘Unibody or 

Ladder Frame’’ paths, which is identical 

to the NRPM version of the decision 

tree. Both of these paths represent a 

conversion to new and fully optimized 

designs. The Unibody only path 

contains the Continuously Variable 

Transmission (CVT) technology, while 

the Unibody or Ladder Frame path has 

the 6-Speed Automatic Transmission 

(6SP) technology being replaced by 6/7/ 

8-Speed Automatic Transmission with 

Improved Internals (NAUTO). The 

NAUTO technology represents a new 

generation of automatics with lower 

internal losses from gears and hydraulic 

systems. 

The NPRM technology ‘‘Automated 

Manual Transmission (AMT)’’ has been 

renamed Dual Clutch Transmission/ 

Automated Manual Transmission 

(DCTAM) to more accurately reflect the 

true intent of this technology to be a 

Dual Clutch Transmission (DCT). The 

NPRM’s use of the abbreviation ‘‘AMT’’ 

was confusing to many commenters, 

including the Alliance, BorgWarner, 

Chrysler, Ford and General Motors, and 

appeared to indicate that the NPRM 

analysis applied true automated manual 

transmissions, which exhibit a torque 

interrupt characteristic that many in the 

industry feel will not be customer 

acceptable. DCT does not have the 

torque interrupt concern. The 

technology DCTAM for the final rule 

assumes the use of a DCT type 

transmission only. 

The manual transmission path only 

has one technology application, like the 

NPRM. However, the technology being 

applied has been defined as conversion 

to a 6-Speed Manual with Improved 

Internals (6MAN) instead of a 

conversion to a 6/7/8-Speed Manual 

Transmission as defined in the NRPM. 

Extremely limited use of manual 

transmissions with more than 6 speeds 

is indicated in the updated product 

plans, so NHTSA believes this is a more 

accurate option for replacing a 4 or 5- 

speed manual transmission. 

Hybrid Technology Decision Tree 

The strong hybrid options, 2-Mode 

(2MHEV) and Power Split (PSHEV), are 

no longer sequential as defined in the 

NPRM’s Transmission/Hybrid decision 

tree. For the final rule, the model only 

applies strong hybrid technologies when 

both the Electrification/Accessory and 

Transmission (automatic transmissions 

only) technologies have been fully 

added to the vehicle, as seen in Figure 

IV–2. The final rule analysis and logic 

ensures that the model does not doublecount the cost and effectiveness 

estimates for previously applied 

technologies that are included (e.g., 

EPS) or replaced (e.g., transmission) by 

strong hybrid systems, which is 

responsive to General Motors’ comment 

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stating that the NPRM analysis had the 

potential to double-count effectiveness 

estimates when applying strong hybrids. 

For the final rule analysis, when the 

Volpe model applies strong hybrids it 

now takes into account that some of the 

fuel consumption reductions have 

already been accounted for when 

technologies like EPS or IACC have 

been previously applied. Once all the 

Electrification/Accessory and 

Transmission technologies have been 

applied, the model is allowed to choose 

between the application of 2MHEV, 

PSHEV and the newly added Plug-in 

Hybrid Vehicle (PHEV). The NPRM 

decision tree required the Volpe model 

to step through 2MHEV in order to 

apply PSHEV. This updated final rule 

decision tree is a more realistic 

representation of how manufacturers 

might apply strong hybrids, and allows 

the Volpe model to choose the strong 

hybrid that is most appropriate for each 

vehicle based on its vehicle subclass or 

the most cost-effective technology 

application. The PHEV technology was 

added to the decision tree in the final 

rule based upon information in the 

public domain and submitted product 

plans showing that limited quantities of 

these vehicles will be available from 

some manufacturers in this timeframe. 

Vehicle Technology Decision Tree 

Material Substitution (MS1), (MS2), 

and (MS5) are now located on dedicated 

material substitution path in the Vehicle 

Technology Decision Tree, shown in 

Figure IV–3. Low Rolling Resistance 

Tires (ROLL), Low Drag Brakes (LDB) 

and Secondary Axle Disconnect (SAX) 

now reside as a separate path, due to the 

relocation of material substitution 

technologies. Secondary Axle 

Disconnect has been redefined for the 

final rule to apply to 4WD vehicles only 

to more accurately reflect feasible 

applications of this technology. 

Aerodynamic Drag Reduction (AERO) 

remains a separate tree, and is now a 10 

percent reduction for both car and truck 

classes (excluding performance cars, 

which are exempt). 


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4. Division of Vehicles Into Subclasses 

Based on Technology Applicability, 

Cost and Effectiveness 

In assessing the feasibility of 

technologies under consideration, the 

agency evaluated whether each of these 

technologies could be implemented on 

all types and sizes of vehicles and 

whether some differentiation is 

necessary with respect to the potential 

to apply certain technologies to certain 

types and sizes of vehicles, and with 

respect to the cost incurred and fuel 

consumption achieved when doing so. 

The 2002 NAS Report differentiated 

technology application using ten vehicle 

classes (4 cars classes and 6 truck 

classes, including subcompact cars, 

compact cars, midsize cars, large cars, 

small SUVs, midsize SUVs, large SUVs, 

small pickups, large pickups, and 

minivans), but did not determine how 

cost and effectiveness values differ from 

‘‘class’’ to ‘‘class.’’ NAS’s purpose in 

separating vehicles into these ‘‘classes’’ 

was to create groups of ‘‘like’’ vehicles, 

i.e., vehicles similar in size, powertrain 

configuration, weight, and consumer 

use, and for which similar technologies 

are applicable. This vehicle 

differentiation is done solely for the 

purpose of applying technologies to 

vehicles and assessing their incremental 

costs and effectiveness, and should not 

be confused with, the regulatory 

classifications pursuant to 49 CFR part 

523 discussed in Chapter XI. 

The Volpe model, which NHTSA has 

used to perform analysis supporting 

today’s notice, divides the vehicle fleet 

into subclasses based on model inputs, 

and applies subclass-specific estimates, 

also from model inputs, of the 

applicability, cost, and effectiveness of 

each fuel-saving technology. Therefore, 

the model’s estimates of the cost to 

improve the fuel economy of each 

vehicle model depend upon the 

subclass to which the vehicle model is 

assigned. 

In its MY 2005–2007 and MY 2008– 

2011 light truck CAFE standards as well 

as NPRM, NHTSA performed analysis 

using the same vehicle classes defined 

by NAS in its 2002 Report. In its 2008 

NPRM for MY 2011–2015, NHTSA 

included some differentiation in cost 

and effectiveness numbers between the 

various classes to account for 

differences in technology costs and 

effectiveness that are observed when 

technologies are applied on to different 

classes and subclasses of vehicles. The 

agency found it important to make that 

differentiation because the agency 

estimated that, for example, engine 

turbocharging and downsizing would 

have different implications for large 

vehicles than for smaller vehicles. For 

the final rule, NHTSA, working with 

Ricardo, increased the accuracy of its 

technology assumptions by reexaming 

the subclasses developed for the 

purpose of modeling technology 

application and by providing more 

differentiation in the costs and 

effectiveness values by vehicle subclass. 

In the request for comments 

accompanying the NPRM, NHTSA 

asked manufacturers to identify the 

style of each vehicles model they submit 

in their product plans from eight 

possible groupings (convertible, coupe, 

hatchback, pickup, sedan, sport utility, 

van, or wagon) or sixteen possible 

market segments (cargo van, compact 

car, large car, large pickup, large station 

wagon, midsize car, midsize station 

wagon, mini-compact, minivan, 

passenger van, small pickup, small 

station wagon, special purpose, sport 

utility truck, subcompact car, and twoseat car). NHTSA also requested that 

manufacturers identify many specific 

characteristics relevant to each vehicle 

model, such as the number of cylinders 

of the vehicle’s engine and other engine, 

transmission and vehicle characteristics. 

This information was evaluated by 

NHTSA staff, entered in NHTSA’s 

market data file, and used by NHTSA to 

assess how to divide the vehicles into 

subclasses for purposes of 

differentiating the applicability, 

effectiveness, and cost of available 

technologies. 

In response to the NPRM, the Alliance 

commented that NHTSA’s classification 

approach is not robust enough. With 

regard to subclasses of cars, the Alliance 

stated that NHTSA did not distinguish 

high-performance and sports cars which 

cannot accommodate certain 

technologies without changing the 

purpose and configuration of the 

vehicle. With regard to subclasses of 

trucks, the Alliance argued that SUVs 

were not adequately distinguished by 

size. The Alliance further stated the 

classification used by Sierra Research in 


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its report to distinguish groups of like 

vehicles for technology application 

purposes was more realistic and 

representative of differences in market 

segments than NHTSA’s classification. 

The Alliance suggested that NHTSA 

consider the classes identified by Sierra 

Research in the final rule. 

NHTSA is not adopting Sierra’s 

approach to classification for the 

following reasons. First, Sierra’s 

classification scheme is too dependent 

on vehicle characteristics for which 

NHTSA often did not receive complete 

information from manufacturers. For 

example, although NHTSA requested 

that manufacturers provide estimates of 

the aerodynamic drag coefficient of each 

vehicle model planned for MY2011– 

2015, the agency received no estimates 

for many vehicles. NHTSA believes 

manufacturers are too far from 

production on many vehicles to 

confidently provide such estimates. 

Second, Sierra’s classification scheme 

is, for NHTSA’s purposes, excessively 

fine-grained. Sierra’s analysis relied on 

25 subclasses in total, 13 for cars and 12 

for trucks. While their report provided 

tables comparing their classes to those 

of NHTSA’s and cited product examples 

for each class, it did not provide a 

reason for why this detailed 

differentiation would significantly 

improve the outcome. NHTSA’s review 

of the Sierra report did not reveal many 

differences in technology-application 

between these subclasses. In addition, 

the agency does not believe that the 

effort required by the agency to create a 

more detailed yet more complex 

modeling structure based on 25 

subclasses would result in significant 

improvement in the accuracy of the 

results. Sierra may have found this 

additional differentiation important for 

the full vehicle simulation approach 

that the Alliance claimed should be 

used throughout NHTSA’s analysis. 

However, as discussed below, NHTSA 

has concluded that this approach is 

neither necessary nor practical for CAFE 

analysis. 

The agency agrees with the Alliance, 

however, that some refinement in the 

classification approach used by NHTSA 

in the NPRM is merited in order to 

ensure the practicability of technologies 

being added. The agency also believes 

that the limited differentiation in costs 

and effectiveness values by vehicle class 

needs to be expanded in order to better 

account for fuel savings and costs. 

For the final rule, NHTSA first 

reexamined the Volpe model technology 

output files from the NPRM to identify 

where and why technologies may have 

been inappropriately applied by the 

model. Where this reexamination 

revealed logical errors, the Volpe model 

was revised accordingly. However, the 

review revealed that most of the 

observed inaccuracies resulted from the 

manner in which vehicles were assigned 

to subclasses for the purpose of 

technology applications. NHTSA also 

reviewed the confidential vehicle level 

information received from 

manufacturers, how manufacturers 

classified their vehicles by style or 

market segment groupings requested by 

NHTSA and the specific engine, 

transmission and other vehicle 

characteristics identified by the 

manufacturers for each vehicle model. 

This conclusion was among those that 

led NHTSA to assign more staff to 

perform quality control when reviewing 

and integrating manufacturers’ product 

plans. 

In order to improve the accuracy of 

technology application modeling, 

NHTSA examined at the car and truck 

segments separately. First, for the car 

segment, NHTSA plotted the footprint 

distribution of vehicles in the product 

plans and divided that distribution into 

four equivalent footprint range 

segments. The footprint ranges were 

named Subcompact, Compact, Midsize, 

and Large classes in ascending order. 

Cars were then assigned to one of these 

classes based on their specific footprint 

size. Vehicles in each range were then 

manually reviewed by NHTSA staff to 

evaluate and confirm that they 

represented a fairly reasonable 

homogeneity of size, weight, 

powertrains, consumer use, etc. 

However, as the Alliance pointed out, 

some vehicles in each group were sports 

or high-performance models. Since 

different technologies and cost and 

effectiveness estimates are appropriate 

for these vehicles, NHTSA created a 

performance subclass within each car 

class to maximize the accuracy of 

technology application. To determine 

which cars would be assigned to the 

performance subclasses, NHTSA 

graphed (in ascending rank order) the 

power-to-weight ratio for each vehicle 

in a class. An example of the Compact 

subclass plot is shown below. The 

subpopulation was then manually 

reviewed by NHTSA staff to determine 

an appropriate transition point between 

‘‘performance’’ and ‘‘non-performance’’ 

models within each class. 


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A total of eight classes (including 

performance subclasses) were identified 

for the car segment: Subcompact, 

Subcompact Performance, Compact, 

Compact Performance, Midsize, Midsize 

Performance, Large, Large Performance. 

In total, the number of cars that were 

ultimately assigned to a performance 

subclass was less than 10 percent. The 

table below shows the difference in the 

classification between the NPRM and 

Final Rule and provides examples of the 

types of vehicles assigned to each. 

For light trucks, in reviewing the 

updated manufacturer product plans 

and in reconsidering how to divide 

trucks into classes and subclasses based 

on technology applicability, NHTSA 

found less of a distinction between 

SUVs and pickup trucks than appeared 

to exist in earlier rulemakings. 

Manufacturers appear to be planning 

fewer ladder-frame and more unibody 

pickups, and many pickups will share 

common powertrains with SUVs. 

Consequently, NHTSA condensed the 

classes available to trucks, such that 

SUVs and pickups are no longer 

divided. Recognizing structural 

differences between various types of 

‘‘Vans,’’ NHTSA revisited how it 

assigned the different types of ‘‘Vans.’’ 

Instead of merging minivans, cargo 

vans, utility and multi-passenger type 

vans under the same class, as it did for 

the NPRM and in previous rules, 

NHTSA formed a separate minivan 

class, because minivans (e.g., the Honda 

Odyssey) are expected to remain closer 

in terms of structural and other 

engineering characteristics than vans 

(e.g., Ford’s E–Series—also known as 

Econoline—vans) intended for more 

passengers and/or heavier cargo. 

The remaining vehicles (other vans, 

pickups, and SUVs) were then 

segregated into three footprint ranges 

and assigned a class of Small Truck/ 

SUV, Midsize Truck/SUV, and Large 

Truck/SUV based on their footprints. 

NHTSA staff then manually reviewed 

each population for inconsistent 

vehicles based on engine cylinder 

count, weight (curb and/or gross), or 

intended usage, since these are 

important considerations for technology 

application, and reassigned vehicles to 

classes as appropriate. This system 

produced four truck segment classes— 

minivans and small, medium, and large 

SUVs/Pickups/Vans. The table below 

shows the difference in the 

classification between the NPRM and 

Final Rule. 


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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14249 

119EPA Staff Technical Report: Cost and 

Effectiveness Estimates of Technologies Used to 

Reduce Light-Duty Vehicle Carbon Dioxide 

Emissions. EPA420–R–08–008, March 2008. 

120Martec, ‘‘Variable Costs of Fuel Economy 

Technologies,’’ June 1, 2008. 

Based on a close review of detailed 

output from the Volpe model, NHTSA 

has concluded that its revised 

classification for purposes of technology 

applicability substantially improves the 

overall accuracy of the results as 

compared to the system employed in the 

NPRM. The new method uses footprint 

as a first indicator for both the car and 

truck segments, and all are then 

manually reviewed for the types of 

technologies applicable to them and 

revised by NHTSA to ensure that they 

have been properly assigned. The 

addition of the performance subclasses 

in the car segment and the condensing 

of classes in the truck segment further 

refine the system. The new method 

increases the accuracy of technology 

application without overly complicating 

the Volpe modeling process, and the 

revisions address comments received in 

response to the NPRM. 

5. How did NHTSA develop technology 

cost and effectiveness estimates for the 

final rule? 

In the NPRM, NHTSA employed 

technology cost and effectiveness 

estimates developed in consultation 

with EPA. They represented NHTSA 

and EPA staff’s best assessment of the 

costs for each technology considered 

based on the available public and 

confidential information and data 

sources that the agencies had back in 

2007 when the rulemaking was 

initiated. EPA also published a report 

and submitted it to the NRC committee 

on fuel economy of light-duty 

vehicles.119

Public comments on the NPRM’s 

technology cost estimates generally fell 

into four categories: (1) That costs are 

underestimated because NHTSA did not 

account for all changes/costs required to 

apply a technology or because although 

NHTSA correctly identified all the 

changes required, it did not cost those 

changes appropriately; (2) that costs are 

underestimated because the Retail Price 

Equivalent (RPE) factors have been 

applied incorrectly to technologies; (3) 

that costs are either over- or 

underestimated because learning curves 

have been applied incorrectly to 

technologies; and (4) that cost 

assumptions are overly simplified as 

applied to the full range of fleet vehicles 

and do not properly account for the 

differences in cost impacts across 

vehicle and engine types (e.g., 

technologies applied to a sub-compact 

car will be unique to those same 

technologies applied to a large SUV). 

Many commenters also stated that they 

found it difficult to understand how 

NHTSA and EPA had derived the cost 

estimates. In addition to commenting on 

NHTSA’s methodology, many 

commenters, particularly 

manufacturers, also submitted their own 

cost estimates for each technology and 

requested that NHTSA consider them 

for the final rule. 

As explained above, NHTSA 

contracted with Ricardo to aid the 

agency in analyzing the comments on 

the technology assumptions used in the 

NPRM, and relied considerably on 

Ricardo’s expertise in developing the 

final technology cost and effectiveness 

estimates based on that analysis. For 

every technology included in NHTSA’s 

analysis of technology costs and 

effectiveness, Ricardo and NHTSA 

engineers reviewed the comments 

thoroughly and exercised their expertise 

in assessing the merits of the comments, 

and in resolving the differences and 

determining which estimates should be 

used for the final rule. 

For each technology, NHTSA relied 

on Ricardo’s experience with ‘‘bill of 

materials’’ (BOM) costing. Some 

commenters criticized NHTSA for not 

using a BOM as the basis for its cost 

analysis. The 2008 Martec report,120

which updated the Martec report on 

which the 2004 NESCCAF study was 

based, was submitted by auto industry 

commenters to NHTSA’s NPRM docket 

for the agency’s consideration. This 

report provides cost estimates 

developed on a ‘‘bill of materials’’ basis 

and methodology. NHTSA, with 

Ricardo’s assistance, reviewed the ‘‘bill 

of materials’’ methodology in the Martec 

report and found it to be, compared to 

the methodology used in the NPRM, a 

more defensible and transparent basis 

for evaluating the costs of applicable 

technologies. 

A bill of materials in a general sense 

is a list of components that make up a 

system—in this case, an item of fuel 

economy-improving technology. In 


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121NHTSA examined the use of the CPI 

multiplier instead of GDP for adjusting these dollar 

values, but found the difference to be exceedingly 

small—only $0.14 over $100. 122 2008 Martec report, at 13–20. 

order to determine what a system costs, 

one of the first steps is to determine its 

components and what they cost. In 

cases in which it was not practicable for 

the agency and Ricardo to estimate the 

cost of each component on a BOM basis 

because there was a shift to a more 

advanced technology and or because of 

difficulty in accounting for the sum of 

costs of all added components less the 

sum of costs of all deleted components 

(e.g., in the transition from a gas engine 

to a diesel engine), incremental costs 

were estimated to be those of the entire 

new technology platform (in this 

example, the diesel engine) less those of 

the entire old technology platform (in 

this example, the gas engine). This ‘‘net 

difference’’ process was only used 

where developing a ground-up 

description of all component changes 

necessitated by the incremental 

technology was deemed to be 

impracticable. 

With that framework in mind, Ricardo 

and NHTSA engineers proceeded with 

reviewing cost information for each 

major component of each technology. 

They compared the multiple sources 

available in the docket and assessed 

their validity. While NHTSA and 

Ricardo engineers relied considerably 

on the 2008 Martec Report for costing 

contents of some technologies, they did 

not do so for all. When relevant publicly 

available information and data sets, 

including the 2008 Martec report, were 

determined to be incomplete or nonexistent, NHTSA looked to prior 

published data, including the NPRM, or 

to values provided to NHTSA by 

commenters familiar with the material 

costs of the described technologies. 

Generally, whenever cost information 

for a technology component existed in 

a non-confidential and publicly 

available report submitted to the NPRM 

docket and that information agreed with 

Ricardo’s independent review of cost 

estimates based on Ricardo’s historical 

institutional knowledge, Ricardo and 

NHTSA cited that information. Ricardo 

and NHTSA were able to take that 

approach frequently, as is evident in the 

explanation of the cost figures of each 

technology. When that approach was 

not possible, but there was confidential 

manufacturer data that had been 

submitted to NHTSA in response to the 

NPRM, and those costs were consistent 

with Ricardo’s independently-reviewed 

cost estimates, NHTSA and Ricardo 

cited those data. When multiple 

confidential data sources differed 

greatly and conflicted with the Martec 

valuation or when the technical 

assumptions described by NHTSA for 

purposes of this rulemaking did not 

match exactly with the content costed 

by either Martec or other commenters, 

NHTSA and Ricardo engineers used 

component-level data to build up a 

partial cost, substituting Ricardo’s 

institutional knowledge for the 

remaining gaps in component level data. 

Occasionally, NHTSA and Ricardo 

found that some cost information 

submitted by the public was either not 

very clearly described or revealed a lack 

of knowledge on the part of the 

commenter about NHTSA’s 

methodology. In those cases, and in 

cases for which no cost data (either 

public or confidential) was available, 

NHTSA worked with Ricardo either to 

confirm the estimates it used in the 

NPRM, or to revise and update them. 

In several cases, values described in 

the NPRM were simply adjusted from 

2006 dollars to 2007 dollars, using a 

ratio of GDP values for the associated 

calendar years.121 In many instances, an 

RPE factor of 1.5 was determined to 

have been omitted from the cost 

estimates provided in the NPRM, so 

NHTSA applied the multiplier where 

necessary to calculate the price to the 

consumer. 

Finally, in response to comments 

stating that cost estimates for individual 

technologies should be varied, based on 

the type and size of vehicle to which 

they are applied, NHTSA worked with 

Ricardo to account for that. 

Additionally, application of some 

technologies might be more or less 

expensive, depending on content (e.g., 

with or without a noise attenuation 

package), for particular vehicles. In 

these cases, NHTSA and Ricardo 

described a range of costs for this 

technology, and referred to sources that 

indicate the appropriate boundaries of 

that range. 

The agency notes that several 

technologies considered in the final rule 

have been updated with substantially 

different cost estimates relative to those 

costs described in the NPRM. For 

example, RPE estimates for 

turbocharging and downsizing (TRBDS), 

diesel technologies (DSLT) and hybrid 

technologies (like ISG) are much higher 

than the costs cited in the NPRM for 

those technologies. This is due in large 

part to the updated cost estimates of the 

2008 Martec Report and others, 

referenced in the final rule, which 

reflect the dramatic rise of global costs 

for raw materials associated with the 

above technologies since the 2004 

Martec report and other prior referenced 

cost estimates were conducted. The 

NPRM costs were not updated to reflect 

that rise in commodities prices. As 

described in the 2008 Martec Report, 

advanced battery technologies with 

substantial copper, nickel or lithium 

content, and engine technologies 

employing high temperature steels or 

catalysts with considerable platinum 

group metals usage, have experienced 

tremendous inflation of raw material 

prices since the cost studies referenced 

in the NPRM were conducted. As of the 

time the sources were developed, prices 

of nickel, platinum, lithium, copper, 

dysprosium and rhodium had 

demonstrated cost inflation amounting 

to between 300 and 750 percent of 

global prices at the time of the original 

NESCCAF study 122 and this is reflected 

in the higher costs described in the 2008 

Martec report, and thus in the final rule. 

NHTSA is aware that commodity prices, 

like those for steel and platinum group 

metals described above, have dropped 

over the last several months. However, 

there is little information in the record 

to determine how prices of components 

used in MY 2011 could be impacted by 

the prices of metals and other 

commodities over the last few years. It 

is not clear whether the prices of 

components built and used in MY 2011 

are more likely to reflect the high price 

of commodities in the years prior to 

2008, the current low prices of 

commodities, the prices of commodities 

closer to MY 2011, or some mixture of 

these. The agency notes, though, as 

mentioned above, that manufacturers’ 

product plans were submitted along 

with manufacturers’ indications that 

these plans were generally informed by 

expectations that relatively high 

commodity prices would prevail in the 

future. Therefore, in the expectation that 

economic conditions will improve by 

MY 2011, the agency relies on the 

commodity prices reflected in, for 

example, the 2008 Martec report. 

However, the agency further notes that 

these decisions are limited to the MY 

2011 rulemaking. We intend to monitor 

commodity prices carefully and will 

adjust affected technology costs as 

appropriate in future rulemakings. 

Some commenters referenced the 

price differential between vehicles with 

advanced technologies and more 

standard versions as evidence of those 

advanced technologies’ costs, and 

argued that NHTSA should consider 

these price differentials in its cost 

estimation process. In response, NHTSA 

believes that the ‘‘bottom-up, material 

cost based’’ cost estimation 

methodology employed for the final rule 

is preferable to estimating costs based 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14251 

123EPA Staff Technical Report: Cost and 

Effectiveness Estimates of Technologies Used to 

Reduce Light-Duty Vehicle Carbon Dioxide 

Emissions. EPA420–R–08–008, March 2008. 

on manufacturer price differentials 

between versions of vehicle models. 

Wherever possible, technologies were 

costed based on the estimation of 

variable material cost impacts to vehicle 

manufacturers at a fixed point in time 

(in 2007 dollar terms) for a prescribed 

set of component changes anticipated to 

be required in implementing the 

technology on a particular platform 

(e.g., wastegate turbo, increased high 

nickel alloyed exhaust manifolds, air 

charge cooler, etc. for TRBDS). The 

content assumptions are modified or 

scaled to account for differences across 

the range of vehicle sizes and functional 

requirements and associated material 

cost impacts are adjusted to account for 

the revised content. The material cost 

impacts to the vehicle manufacturers are 

then summed and converted to retail 

price equivalent impacts by multiplying 

by 1.5 to account for fixed costs and 

other overheads incurred in the 

implementation of new vehicle 

technologies but not contained in the 

variable material price impacts to the 

manufacturers. 

In employing this methodology, 

NHTSA relied on information provided 

to NHTSA by the suppliers and vehicle 

manufacturers themselves. Though this 

estimation process relies on often 

confidential data and employs a 

simplifying assumption in relating all 

variable material costs to retail impacts 

through the use of a consistent 1.5 RPE, 

the methodology is preferable to a ‘‘topdown, retail price based’’ methodology 

as might be used by comparing retail 

price differences of vehicles with 

different technologies. The ‘‘bottom-up’’ 

approach offers the benefits of providing 

a consistent and reasonable assessment 

of true, total costs for all technologies 

independent of geographic, or strategic 

pricing policies by vehicle 

manufacturers that could result in 

selling products at sub-standard or even 

negative margins. For many vehicle 

manufacturers, contribution to corporate 

profit varies dramatically across vehicle 

segment. Given that vehicle pricing is 

often decoupled from true costs and will 

vary with sales cycle, product maturity, 

geography, vehicle class, and marque, a 

‘‘top-down’’ approach, while offering 

improved data transparency, is 

inherently limited in providing a 

consistent means of cost estimation. As 

such, NHTSA has adopted the described 

‘‘bottom-up’’ cost estimation approach 

and has attempted to mitigate 

transparency issues with a reliance on 

Martec 2008 (where in agreement with 

other provided cost data), because it 

provides a detailed description of the 

costed content. Fundamentally, NHTSA 

believes that a ‘‘bottom-up’’ cost 

estimation methodology with a common 

RPE adjustment factor offers an 

intuitive, consistent process across all 

technologies, whether mature or 

otherwise, that avoids the pitfalls of 

reliance on significantly more variable 

and volatile pricing policies. 

Regarding estimates for technology 

effectiveness, NHTSA, working with 

Ricardo, also reexamined its NPRM 

estimates and those in the EPA Staff 

Technical Report,123 which largely 

mirrored NHTSA’s NPRM estimates. We 

compared these estimates to estimates 

provided in comments, reports and 

confidential data received in response to 

our NPRM. Comments on the NPRM’s 

effectiveness estimates generally fell 

into three categories: (1) That NHTSA 

did not account sufficiently for fuel 

economy or performance impacts 

because it used the Volpe model 

approach rather than full vehicle 

simulation; (2) that the synergy values 

used did not properly account for 

technology interactions; and (3) that 

NHTSA made errors when using 

estimates provided by manufacturers. In 

addition to commenting on NHTSA’s 

methodology, many commenters, 

particularly manufacturers, also 

submitted their own fuel consumption 

reduction estimates for each technology 

and requested that NHTSA consider 

them for the final rule. NHTSA 

addresses comments relating to vehicle 

simulation in Section IV.C.8 and 

synergies in Section IV.C.7, but the 

section below describes NHTSA’s 

process for developing effectiveness 

estimates for the final rule, which 

addresses the comments regarding 

NHTSA’s use of estimates submitted by 

manufacturers. 

For each technology, NHTSA also 

relied on Ricardo’s experience with 

‘‘bill of materials’’ (BOM) technology 

descriptions. Some commenters argued 

that the same BOM used as the basis for 

the cost analysis could and should be 

used to define the technologies being 

studied for effectiveness. In fact, 

Ricardo’s methodology for cost and 

effectiveness estimates for this rule was 

to define a vehicle class-specific BOM 

or BOMs, depending upon the number 

of variants possible within a class and 

within a decision tree. These BOMs 

were defined for the baseline 

configuration for each class and then for 

each incremental step in the decision 

tree. Use of a consistently-defined BOM 

is very important to estimating the 

impacts of technologies accurately, as it 

helps to ensure that technologies are not 

applied to baseline vehicles that already 

contain the technology (with the 

exception of items that are not welldefined such as aerodynamic drag 

reduction, reduced rolling resistance 

tires, weight reduction, and engine 

friction reduction.) 

In defining these BOMs, Ricardo 

relied on its experience working with 

industry over many years and its recent 

experience preparing the December 

2007 study for EPA. Ricardo built on its 

vehicle simulation work for EPA to help 

NHTSA evaluate appropriate 

effectiveness values for individual fuelsaving technologies. In considering the 

comments, NHTSA and Ricardo 

evaluated the 10 ‘‘vehicle subclasses’’ 

used in the NPRM for applicability of 

technologies and determined that the 

cost and effectiveness estimates could 

be more accurate by revising the 

‘‘vehicle subclasses’’ as described above 

so that they better represented the 

parameters of the vehicles they 

included. This, in turn, enabled NHTSA 

and Ricardo to distinguish more clearly 

the differences in fuel consumption 

reduction occurring when a technology 

is added to different vehicles. 

Then, with the BOM framework 

applied to more precisely-defined 

vehicle subclasses, NHTSA and Ricardo 

engineers reviewed effectiveness 

information from multiple sources for 

each technology. Together, they 

compared the multiple sources available 

in the docket and assessed their 

validity, taking care to ensure that 

common BOM definitions and other 

vehicle attributes such as performance, 

refinement, and drivability were not 

compromised. 

Generally, whenever relevant 

effectiveness information for a 

technology component existed in a nonconfidential and publicly-available 

report submitted to the NPRM docket, 

and that information agreed with 

Ricardo’s independent review of 

estimates based on Ricardo’s historical 

institutional knowledge, NHTSA and 

Ricardo cited that information. NHTSA 

and Ricardo were able to take that 

approach frequently, as is evident in the 

explanation of the effectiveness for each 

technology. When that approach was 

not possible, but there was confidential 

manufacturer data that had been 

submitted to NHTSA in response to the 

NPRM, and those values were consistent 

with Ricardo’s independently-reviewed 

estimates, NHTSA and Ricardo cited 

those data. When multiple confidential 

data sources differed greatly or when 

the technical assumptions described by 

NHTSA for purposes of this rulemaking 

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124NHTSA treated car and truck volumes 

separately for determining those sales volumes. 

did not match the content included in 

Ricardo’s study for EPA or in other 

comments, NHTSA and Ricardo 

engineers relied on Ricardo’s experience 

and an understanding of the maximum 

theoretical losses that could be 

eliminated by particular technologies to 

build up an effectiveness estimate, 

substituting Ricardo’s institutional 

knowledge for the remaining gaps in 

data. 

Occasionally, NHTSA and Ricardo 

found that some fuel consumption 

reduction information submitted by the 

public was either not very clearly 

described or revealed a lack of 

knowledge on the part of the commenter 

about NHTSA’s methodology. In those 

cases, and in cases for which no 

effectiveness data (either public or 

confidential) was available, NHTSA 

worked with Ricardo either to confirm 

the estimates it used in the NPRM, or to 

revise and enhance them. In other cases, 

the commenters appeared unsure how 

to evaluate the data from the NPRM, and 

so NHTSA and Ricardo provided more 

detailed explanations on the process 

used or the components involved. 

In response to comments stating that 

estimates for individual technologies 

should be varied based on the type and 

size of vehicle to which they are 

applied, NHTSA worked with Ricardo 

to account for those differences mostly 

through the refined vehicle subclass 

definitions. However, even after making 

these adjustments, there are still some 

classes that require spanning different 

engine architectures and performance 

thresholds. Just as the application of 

some technologies might be more or less 

expensive, depending on content (e.g., 

with or without a noise attenuation 

package), particular vehicle 

technologies may have more or less 

impact between classes where 

maintaining equivalent performance led 

to a reduced effectiveness. In these 

cases, NHTSA and Ricardo described a 

range of effectiveness values for this 

technology, and referred to sources that 

indicate the appropriate boundaries of 

that range. 

With Ricardo’s assistance, the 

technology cost and effectiveness 

estimates for the final rule were 

developed consistently, using this 

systematic approach. While NHTSA still 

believes that the ideal estimates for the 

final rule would be those that have been 

through a peer-reviewed process such as 

that used for the 2002 NAS Report, and 

will continue to work with NAS, as 

required by EISA, to update the 

technology cost and effectiveness 

estimates for subsequent CAFE 

rulemakings, this approach, combined 

with the BOM methodology for cost and 

effectiveness, expanded number and 

types of vehicle subclasses and the 

changes to the synergistic effects 

described below, not only help to 

address the concerns raised by 

commenters, but also represent a 

considerable improvement in terms of 

accuracy and transparency over the 

approach used to develop the cost and 

effectiveness estimates in the NPRM. 

6. Learning Curves 

As explained in the NPRM, 

historically NHTSA did not explicitly 

account for the cost reductions a 

manufacturer might realize through 

learning achieved from experience in 

actually applying a technology. 

However, based on its work with EPA, 

in the NPRM NHTSA employed a 

learning factor for certain newer, 

emerging technologies. The ‘‘learning 

curve’’ describes the reduction in unit 

incremental production costs as a 

function of accumulated production 

volume and small redesigns that reduce 

costs. The NPRM implemented 

technology learning curves by using 

three parameters: (1) The initial 

production volume that must be reached 

before cost reductions begin to be 

realized (referred to as ‘‘threshold 

volume’’); (2) the percent reduction in 

average unit cost that results from each 

successive doubling of cumulative 

production volume (usually referred to 

as the ‘‘learning rate’’); and (3) the 

initial cost of the technology. The 

majority of technologies considered in 

the NPRM did not have learning cost 

reductions applied to them. 

NHTSA assumed that learning-based 

reductions in technology costs occur at 

the point that a manufacturer applies 

the given technology to the first 25,000 

cars or trucks, and are repeated a second 

time as it produces another 25,000 cars 

or trucks for the second learning step.124

NHTSA explained that the volumes 

chosen represented the agency’s best 

estimate for where learning would 

occur, and that they were better suited 

to NHTSA’s analysis than using a single 

number for the learning curve factor, 

because each manufacturer would 

implement technologies at its own pace 

in the rule, rather than assuming that all 

manufacturers implement identical 

technology at the same time. 

NHTSA further assumed that after 

having produced 25,000 cars or trucks 

with a specific part or system, sufficient 

learning will have taken place such that 

costs will be lower by 20 percent for 

some technologies and 10 percent for 

others. For those technologies, NHTSA 

additionally assumed that another cost 

reduction would be realized after 

another 25,000 units. If a technology 

was already in widespread use (e.g., on 

the order of several million units per 

year) or expected to be so by the MY 

2011–2012 time frame, NHTSA assumed 

that the technology was ‘‘learned out,’’ 

and that no more cost reductions were 

available for additional volume 

increases. If a technology was not 

estimated to be available until later in 

the rulemaking period at that time, like 

MY 2014–2015, NHTSA did not apply 

learning for those technologies until 

those model years. Most of the 

technologies for which learning was 

applied after MY 2014 were adopted 

from the 2004 NESCCAF study, which 

was completed by Martec. Whenever 

source data, like the 2004 NESCCAF 

study, indicated that manufacturer cost 

reduction from future learning would 

occur, NHTSA took that information 

into account. 

Comments received regarding 

NHTSA’s approach to technology cost 

reductions due to manufacturer learning 

generally disagreed with the agency’s 

method. The Alliance, AIAM, Honda, 

GM, and Chrysler all commented that 

NHTSA had substantially 

overestimated, and essentially ‘‘doublecounted,’’ learning effects by applying 

learning reductions to component costs, 

specifically Martec estimates, which 

were already at high volume. The 

Alliance submitted the 2008 Martec 

Report, which stated that NHTSA had 

‘‘misstated’’ Martec’s approach to cost 

reductions due to learning in the NPRM. 

As Martec explained, 

Martec did not ask suppliers to quote 

prices that would be valid for three years, 

and Martec did not receive cost reductions 

from suppliers for some components in years 

two and three. Rather, industry respondents 

were asked to establish mature component 

pricing on a forward basis given the 

following conditions: At least three (3) 

manufacturers demanding 500,000 units per 

year and at least three (3) globally-capable 

suppliers available to supply the needs of 

each manufacturer. 

In no case did Martec ask industry 

respondents to provide low volume, launch 

or transition costs for fuel consumption/CO2

reducing technologies. Martec specifically 

designed the economic parameters in order to 

capture the effects of learning which is a 

reality in the low margin, high capital cost, 

high volume, highly competitive global 

automotive industry. Applying additional 

reductions attributable to ‘‘learning’’ based 

on 25,000 unit improvements in cumulative 

volume after production launch (as described 

on pages 118–125 of the NHTSA NPRM) on 

top of Martec’s mature costs is an error. 

Martec’s costs are based on 1.5–2.0 

equivalent modules of powertrain capacity 

(500,000 units/year) so 25,000 unit 

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125BorgWarner manufacturers and supplies 

turbochargers, dual clutch transmissions, variable 

valve timing systems, diesel engine components 

(EGR and starting), aggressive shift logic and early 

torque convertor lockup systems. 

incremental changes in cumulative 

production, as defined by NHTSA, will have 

no effect on costs. 

The 2008 Martec Report also stated 

that current industry practice consists of 

using competitive bidding based on 

long-term, high-volume contracts that 

are negotiated before technology 

implementation decisions are made. 

Martec stated that this practice 

considers the effects of volume, 

learning, and capital depreciation. 

Martec also indicated that most of the 

technologies evaluated in the study are 

in high volume production in the global 

automotive industry today, and thus 

this forms a solid basis from which to 

estimate future costs. 

Honda also commented on NHTSA’s 

25,000 unit (per manufacturer per year) 

volume threshold stating that, in their 

experience, costs were only likely to 

decrease due to learning at volumes 

exceeding about 300,000 units per year 

per manufacturer. GM agreed, stating 

that suppliers do not respond to, change 

processes, or change contract terms for 

relatively small volume changes like 

NHTSA’s 25,000 unit increment, thus 

volume changes of this magnitude have 

no effect on component pricing. GM 

also commented that its learning cycles 

are based on time, not volume, and 

agreed with Martec’s assessment that 

contracts with suppliers typically 

specify volumes and costs over a period, 

which are usually equal to a product life 

cycle, a 4- to 5-year period. 

Ford commented that base costs in the 

automotive industry are determined by 

a target setting process, where 

manufacturers develop pricing with 

suppliers for a set period, and 

manufacturers receive cost reductions 

from the suppliers due to learning as 

time passes, apparently at a set amount 

year over year for several years. Ford 

also commented that NHTSA’s 

approach to learning curves had not 

accounted for current economic factors, 

like increases in commodity and energy 

prices, and cited the example of costs of 

batteries for hybrids and PHEVs which 

Ford stated ‘‘are not likely to depend 

solely on experience learned, but, to a 

large extent, on the additional energy 

and material costs they incur relative to 

the vehicles without the new 

technology.’’ Ford commented that 

NHTSA should account for these costs, 

and the factor of declining vehicle sales, 

in its learning curve approach. 

BorgWarner, a components supplier, 

commented that learning-related costs 

savings are valid for technologies that 

‘‘start at low volume’’ (commenter’s 

emphasis). BorgWarner argued, 

however, that NHTSA’s assumed 

learning curve would not apply to the 

technologies it supplies to 

manufacturers,125 since these 

components are well-developed and in 

high volume use already, and are thus 

already ‘‘learned out.’’ BorgWarner 

further commented that an increase in 

demand could in fact lead to higher 

prices if demand for raw materials 

exceeded supply. 

UCS, in contrast, commented that 

NHTSA had not accounted for enough 

cost reductions due to learning. UCS 

stated that NHTSA should have 

provided ‘‘source data’’ for 

manufacturer-specific learning curves, 

and argued that NHTSA’s approach was 

‘‘fundamentally flawed’’ for two 

primary reasons: First, because NHTSA 

had not considered the fact that 

manufacturers engage in joint ventures 

to develop new technologies, and 

second, because manufacturers may also 

learn from one another ‘‘through the 

standard practice of tearing down 

competitors’ products.’’ UCS argued that 

NHTSA’s learning-based cost reductions 

should account for these methods of 

learning. UCS further stated that 

NHTSA should not ‘‘treat[] car and 

truck sales volumes separately when 

estimating learning curves’’ because 

there may be much overlap in terms of 

technology application, especially for 

vehicles like crossovers which may be 

either cars or trucks. UCS concluded 

that NHTSA should use EPA’s suggested 

learning factor of 20 percent, citing 

EPA’s Staff Technical Report. 

Public Citizen agreed that NHTSA 

should account for economies of scale, 

but argued that NHTSA should not have 

relied on initial cost estimates from 

industry, which the commenter stated 

were ‘‘often overestimated.’’ Public 

Citizen cited a 1997 briefing paper by 

the Economic Policy Institute in support 

of this point, and argued that 

compliance cost estimates were often 

much lower than actual costs. Public 

Citizen concluded that NHTSA’s use of 

learning curve factors ‘‘impedes 

transparency’’ in NHTSA’s analysis. 

Agency response: Based on the 

comments received and on its work 

with Ricardo, NHTSA has revised its 

approach to accounting for technology 

cost reductions due to manufacturer 

learning. The method of learning used 

in the NPRM has been retained, but the 

threshold volume has been revised and 

is now calculated on an industry-wide 

production basis. However, learning of 

this type, which NHTSA now refers to 

as ‘‘volume-based’’ learning, is not 

applicable to any technologies for MY 

2011. Additionally, NHTSA has adopted 

a fixed rate, year-over-year (YOY) cost 

reduction for widely-available, highvolume, mature technologies, in 

response to comments from Ford and 

others. NHTSA refers to this type cost 

reduction as ‘‘time-based’’ learning. For 

each technology, if learning is 

applicable, only one type of learning 

would be applied, either volume-based 

or time-based (i.e., the types are 

independent of each other). These 

revisions are discussed below. 

For volume-based learning, NHTSA 

considered comments from UCS and 

decided to revise the method used to 

calculate the threshold volume from a 

per-manufacturer to an industry-wide 

production volume basis. NHTSA 

agreed with UCS’ comment that cars 

and trucks may share common 

components—this is true across many 

makes and models which share common 

engines, transmissions, accessory 

systems, and mild or strong hybrid 

systems, all of which can potentially 

utilize the technologies under 

consideration. These systems are often 

manufactured by suppliers who contract 

with multiple OEMs, all of whom 

benefit (in the form of cost reductions 

for the technology) from the supplier’s 

learning. The 2008 Martec Report and 

the BorgWarner comments additionally 

both indicated that when manufacturers 

demand components in high volumes, 

suppliers are able to pass on learningbased savings to all manufacturers with 

whom they contract. Thus, it made 

sense to NHTSA to revise its method of 

determining whether the threshold 

volume has been achieved from an 

annual per-manufacturer to an annual 

industry-wide production volume basis. 

NHTSA also changed the threshold 

volume for volume-based learning from 

25,000 to 300,000 units. The 2008 

Martec Report and comments from 

multiple manufacturers indicated that 

25,000 units was far too small a 

production volume to affect component 

costs. In response, NHTSA began with 

the Martec estimate that technologies 

were fully learned-out at 1.5 million 

units of production (which met the 

production needs of three 

manufacturers, according to that report). 

NHTSA then applied two cycles of 

learning in a reverse direction to 

determine what the proper threshold 

volume would be for these conditions. 

One cycle would be applied at 750,000 

units (1.5 million divided by 2, which 

would represent the second volume 

doubling) and one at 375,000 units 

(750,000 divided by 2, which would 

represent the first volume doubling). 

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126An industry volume of 900,000 would imply 

a threshold volume of 225,000 units according to 

NHTSA’s analysis. This is still nine times the value 

used at the NPRM. 

127Cost-down efforts are a common practice in 

competitive manufacturing environments like the 

automotive industry. 

NHTSA thus estimated that the Martec 

analysis would suggest a threshold 

volume of 375,000 units. However, the 

agency notes that Martec stated that it 

chose the 1.5 million units number 

specifically because Martec knew it was 

well beyond the point where learning is 

a factor, which means that 1.5 million 

was beyond the cusp of the learning 

threshold. NHTSA therefore concluded 

that 375,000 units should represent the 

upper bound for the threshold volume 

for Martec’s analysis. 

Having determined this, NHTSA 

sought to establish a lower bound for 

the threshold volume. The 2008 Martec 

report indicated that production 

efficiencies are maximized at 250,000– 

350,000 units (which averages to 

300,000 units), and that manufacturers 

consequently target this range when 

planning and developing manufacturing 

operations. Honda also cited this 

production volume. Thus, for three 

manufacturers, the annual volume 

requirement would be 900,000 units.126

NHTSA concluded this could also 

represent high volume where learned 

costs could be available, and considered 

it as a lower bound estimate. With the 

upper and lower values established, and 

given that Martec specifically indicated 

that 1.5 million did not represent the 

cusp of the learning threshold, NHTSA 

chose the mid-point of 1.2 million units 

as the best estimate of annual industry 

volumes where learned costs would be 

experienced. For proper forward 

learning, this would mean the first 

learning cycle would occur at 300,000 

and the second at 600,000. Accordingly 

NHTSA has established the threshold 

volume for the final rule at 300,000 

industry units per year. 

Having established the threshold 

volume, NHTSA next considered which 

technologies to apply volume learning 

to. Comments confirmed that NHTSA 

had been correct in the NPRM to assume 

that learning would be applicable to 

low-volume, emerging technologies that 

could benefit from economies of scale, 

so NHTSA consulted confidential 

product plans to determine the volumes 

of technologies to be applied by 

manufacturers during the rulemaking 

period. If the product plans indicated 

that the technologies would be in highvolume use (i.e., above 600,000 units 

produced annually for cars and trucks 

by all manufacturers) at the beginning of 

its first year of availability, then 

volume-based learning was not 

considered applicable, since at this 

volume the technology would be 

available at learned cost. If the volume 

was below 600,000 units annually, then 

NHTSA also looked at the Volpe 

model’s application of the technology. If 

the model applied more than 600,000 

units within the first year of availability, 

NHTSA did not apply volume-based 

learning. If neither manufacturers nor 

the model applied more than 600,000 

units within the first year, then volume 

learning was applied to the technology. 

Based on this analysis, NHTSA 

determined that volume-based learning 

would be applicable to three 

technologies for purposes of the final 

rule: integrated starter generator, 2- 

mode hybrid, and plug-in hybrid. For 

these three technologies, and where the 

agency’s initial cost estimates reflected 

full learning, NHTSA reverse-learned 

the cost by dividing the estimate by the 

learning rate twice to properly offset the 

learned cost estimate. NHTSA used a 20 

percent learning rate in the NPRM for 

these technologies, and concluded that 

that rate was still applicable for the final 

rule. This learning rate was validated 

using manufacturer-submitted current 

and forecast cost data for advancedbattery hybrid vehicle technology, and 

accepted industry forecasts for U.S. 

sales volumes of these same vehicles. 

This limited study indicated that cost 

efficiencies were approximately 20 

percent for a doubling of U.S. market 

annual sales of a particular advanced 

battery technology, and the learning rate 

was thus used as a proxy for other 

advanced vehicle technologies. 

Commenters also indicated that 

learning-related cost reductions could 

occur not only as a result of production 

volume changes, but also as a function 

of time. For example, Ford stated that 

technology cost reductions were 

negotiated as part of the contractual 

agreement to purchase components from 

suppliers, a target-setting process which 

Ford described as common in the 

automotive industry. In this 

arrangement suppliers agree to reduce 

costs on a fixed percentage year over 

year according to negotiated terms. GM 

described a cost reduction process that 

occurs over the course of a product life 

cycle, typically no less than 4–5 years, 

where costs are reduced as production 

experience increases. GM stated that its 

cost reductions included engineering, 

manufacturing, investment, and 

material costs, and were also defined 

through supplier contracts that 

anticipate volume and costs over the 

whole period. The components involved 

are assumed to be high volume, mature 

technologies being used in current 

vehicle production. These are the types 

of components that would typically be 

subject to ‘‘cost-down’’ 127 efforts that 

target savings through small, 

incremental design, manufacturing, 

assembly, and material changes on a 

recurring or periodic basis. 

In response to these comments, 

NHTSA has adopted this approach as an 

additional type of learning related cost 

reduction, referring to it as ‘‘time-based’’ 

learning. For purposes of the final rule, 

time-based learning is applied to highvolume, mature technologies likely to be 

purchased by OEMs on a long-term 

contractual basis. This would include 

most of the fuel-saving technologies 

under consideration, except those where 

volume-based learning is applied, or 

those where components might consist 

of commodity materials, such as oil or 

rubber, where pricing fluctuations 

prevent long-term or fixed value 

contracts. NHTSA has used a 3 percent 

reduction rate for time-based learning, 

based on confidential manufacturer 

information and NHTSA’s 

understanding of current industry 

practice. Thus, if time-based learning is 

deemed applicable, then in year two of 

a technology’s application, and in each 

subsequent year (if any), the initial cost 

is reduced by 3 percent. This approach 

is responsive to comments about 

compliance costs estimation, and 

improves the accuracy of projecting 

future costs compared to the NPRM. 

With regard to the comments from 

UCS, NHTSA recognizes that jointventure collaboration and competitor 

tear-downs are methods used by 

manufacturers for designing and 

developing new products and 

components, but notes that these 

methods are used prior to the 

manufacturing stage, and thus are not 

considered manufacturing costs. 

NHTSA has received no specific 

manufacturer learning curve-related 

data, and thus has no ‘‘source data’’ to 

disclose. NHTSA continues to use a 20 

percent learning factor for volume-based 

learning, which is consistent with EPA’s 

learning factor recommended by UCS 

for NHTSA’s use. 

With regard to the comments from 

Public Citizen, although NHTSA 

reviewed the paper cited by the 

commenter, the agency found its 

analysis largely irrelevant to NHTSA’s 

estimation of cost reduction factors due 

to automobile manufacturer learning, 

and thus declines to adopt its findings. 

Table IV–4 below shows the 

applicability and type of learning 

applied in the final rule. 

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128More specifically, the products of the 

differences between one and the technologyspecific levels of effectiveness in reducing fuel 

consumption. For example, not accounting for 

Continued 

BILLING CODE 4910–59–C 

7. Technology Synergies 

When two or more technologies are 

added to a particular vehicle model to 

improve its fuel efficiency, the resultant 

fuel consumption reduction may 

sometimes be higher or lower than the 

product of the individual effectiveness 

values for those items.128 This may 


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interactions, if technologies A and B are estimated 

to reduce fuel consumption by 10% (i.e., 0.1) and 

20% (i.e., 0.2) respectively, the ‘‘product of the 

individual effectiveness values’’ would be 1¥0.1 

times 1¥0.2, or 0.9 times 0.8, which equals 0.72, 

corresponding to a combined effectiveness of 28% 

rather than the 30% obtained by adding 10% to 

20%. The ‘‘synergy factors’’ discussed in this 

section further adjust these multiplicatively 

combined effectiveness values. 

129U.S. Department of Energy, Energy 

Information Administration, Transportation Sector 

Module of the National Energy Modeling System: 

Model Documentation 2007, May 2007, 

Washington, DC, DOE/EIAM070(2007), at 29–30. 

Available at http://tonto.eia.doe.gov/ftproot/ 

modeldoc/m070(2007).pdf (last accessed Oct. 24, 

2008). 

130EPA Staff Technical Report: Cost and 

Effectiveness Estimates of Technologies Used to 

Reduce Light-duty Vehicle Carbon Dioxide 

Emissions; EPA420–R–08–008, March 2008. 

occur because one or more technologies 

applied to the same vehicle partially 

address the same source or sources of 

engine, drivetrain or vehicle losses. 

Alternately, this effect may be seen 

when one technology shifts the engine 

operating points, and therefore increases 

or reduces the fuel consumption 

reduction achieved by another 

technology or set of technologies. The 

difference between the observed fuel 

consumption reduction associated with 

a set of technologies and the product of 

the individual effectiveness values in 

that set is referred to for purposes of this 

rulemaking as a ‘‘synergy.’’ Synergies 

may be positive (increased fuel 

consumption reduction compared to the 

product of the individual effects) or 

negative (decreased fuel consumption 

reduction). 

For the NPRM, the Volpe model was 

modified to estimate the interactions of 

technologies using estimates of 

incremental synergies associated with a 

number of technology pairs identified 

by NHTSA. The use of discrete 

technology pair incremental synergies is 

similar to that in DOE’s National Energy 

Modeling System (NEMS).129 Inputs to 

the Volpe model incorporate NEMSidentified pairs, as well as additional 

pairs for the final rule from the set of 

technologies considered in the Volpe 

model. However, to maintain an 

approach that was consistent with the 

technology sequencing developed by 

NHTSA, new incremental synergy 

estimates for all pairs were obtained 

from a first-order ‘‘lumped parameter’’ 

analysis tool created by EPA.130

The lumped parameter tool is a 

spreadsheet model that represents 

energy consumption in terms of average 

performance over the fuel economy test 

procedure, rather than explicitly 

analyzing specific drive cycles. The tool 

begins with an apportionment of fuel 

consumption across several loss 

mechanisms and accounts for the 

average extent to which different 

technologies affect these loss 

mechanisms using estimates of engine, 

drivetrain and vehicle characteristics 

that are averaged over the EPA fuel 

economy drive cycle. Results of this 

analysis were generally consistent with 

those of full-scale vehicle simulation 

modeling performed by Ricardo, Inc. 

However, regardless of a generally 

consistent set of results for the vehicle 

class and set of technologies studied, 

the lumped parameter tool is not a full 

vehicle simulation and cannot replicate 

the physics of such a simulation. 

Many comments were received that 

stated this and pointed to errors in the 

synergies listed in the NPRM being in 

some cases inaccurate or even 

directionally incorrect. NHTSA 

recognizes that the estimated synergies 

applied for the NPRM were not all 

correct, and has reevaluated all 

estimated synergies applied in the 

analysis supporting today’s final rule. In 

response to commenters calling for 

NHTSA to use full vehicle simulation, 

either in the first instance or as a check 

on the synergy factors that NHTSA 

developed, the agency has concluded 

that the vehicle simulation analyses 

conducted previously by Ricardo 

provide a sufficient point of reference, 

especially considering the time 

constraints for establishing the final 

rule. NHTSA did, however, improve the 

predictive capability of the lumped 

parameter tool. 

The lumped parameter tool was first 

updated with the new list of 

technologies and their associated 

effectiveness values. Second, NHTSA 

conducted a more rigorous qualitative 

analysis of the technologies for which a 

competition for losses would be 

expected, which led to a much larger 

list of synergy pairings than was present 

in the NRPM. The types of losses that 

were analyzed were tractive effort, 

transmission/drivetrain, engine 

mechanical friction, engine pumping, 

engine indicated (combustion) 

efficiency and accessory (see Table IV– 

5). As can be seen from Table IV–5, 

engine mechanical friction, pumping 

and accessory losses are improved by 

various technologies from engine, 

transmission, electrification and hybrid 

decision trees and must be accounted 

for within the model with a synergy 

value. The updated lumped parameter 

model was then re-run to develop new 

synergy estimates for the expanded list 

of pairings. That list is shown in Tables 

IV–6a–d. The agency notes that 

synergies that occur within a decision 

tree are already addressed within the 

incremental values assigned and 

therefore do not require a synergy pair 

to address. For example, all engine 

technologies take into account 

incremental synergy factors of preceding 

engine technologies, and all 

transmission technologies take into 

account incremental synergy factors of 

preceding transmission technologies. 

These factors are expressed in the fuel 

consumption improvement factors in 

the input files used by the Volpe model. 

For applying incremental synergy 

factors in separate path technologies, 

the Volpe model uses an input table (see 

Tables IV–6a–d) which lists technology 

pairings and incremental synergy factors 

associated with those pairings, most of 

which are between engine technologies 

and transmission/electrification/hybrid 

technologies. When a technology is 

applied to a vehicle by the Volpe model, 

all instances of that technology in the 

incremental synergy table which match 

technologies already applied to the 

vehicle (either pre-existing or 

previously applied by the Volpe model) 

are summed and applied to the fuel 

consumption improvement factor of the 

technology being applied. Synergies for 

the strong hybrid technology fuel 

consumption reductions are included in 

the incremental value for the specific 

hybrid technology block since the 

model applies technologies in the order 

of the most effectiveness for least cost 

and also applies all available 

electrification and transmission 

technologies before applying strong 

hybrid technologies. 

As another possible alternative to 

using synergy factors, NHTSA has also 

considered modifying the Volpe model 

to apply inputs—for each vehicle 

model—specifying the share of total fuel 

consumption attributable to each of 

several energy loss mechanisms. The 

agency has determined that this 

approach, discussed in greater detail 

below, cannot be implemented at this 

time because the requisite information 

is not available. 

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BILLING CODE 4910–59–C 8. How does NHTSA use full vehicle 

simulation? 

For regulatory purposes, the fuel 

economy of any given vehicle is 

determined by placing the vehicle on a 

chassis dynamometer (akin to a large 

treadmill that puts the vehicle’s wheels 

in contact with one or more rollers, 

rather than with a belt stretched 

between rollers) in a controlled 


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131Patton, K.J., et al., General Motors Corporation, 

‘‘Aggregating Technologies for Reduced Fuel 

Consumption: A Review of the Technical Content in 

the 2002 National Research Council Report on 

CAFE’’, 2002–01–0628, Society of Automotive 

Engineers, Inc., 2002. 132NRC (2002), op. cit., p. 151. 

environment, driving the vehicle over a 

specific driving cycle (in which driving 

speed is specified for each second of 

operation), measuring the amount of 

carbon dioxide emitted from the 

vehicle’s tailpipe, and calculating fuel 

consumption based on the density and 

carbon content of the fuel. 

One means of determining the 

effectiveness of a given technology as 

applied to a given vehicle model would 

be to measure the vehicle’s fuel 

economy on a chassis dynamometer, 

install the new technology, and then remeasure the vehicle’s fuel economy. 

However, most technologies cannot 

simply be ‘‘swapped out,’’ and even for 

those that can, simply doing so without 

additional engineering work may 

change other vehicle characteristics 

(e.g., ride, handling, performance, etc.), 

producing an ‘‘apples to oranges’’ 

comparison. 

Some technologies can also be more 

narrowly characterized through bench 

or engine dynamometer (i.e., in which 

the engine drives a generator that is, in 

turn, used to apply a controlled load to 

the engine) testing. For example, engine 

dynamometer testing could be used to 

evaluate the brake-specific fuel 

consumption (e.g., grams per kilowatthour) of a given engine before and after 

replacing the engine oil with a less 

viscous oil. However, such testing does 

not provide a direct measure of overall 

vehicle fuel economy or changes in 

overall vehicle fuel economy. 

For a vehicle that does not yet exist, 

as in NHTSA’s analysis of CAFE 

standards applicable to future model 

years, even physical testing can provide 

only an estimate of the vehicle’s 

eventual fuel economy. Among the 

alternatives to physical testing, 

automotive engineers involved in 

vehicle design make use of computerbased analysis tools, including a 

powerful class of tools commonly 

referred to as ‘‘full vehicle simulation.’’ 

Given highly detailed inputs regarding 

vehicle engineering characteristics, full 

vehicle simulation provides a means of 

estimating vehicle fuel consumption 

over a given drive cycle, based on the 

explicit representation of the physical 

laws governing vehicle propulsion and 

dynamics. Some vehicle simulation 

tools also incorporate combustion 

simulation tools that represent the 

combustion cycle in terms of governing 

physical and chemical processes. 

Although these tools are 

computationally intensive and required 

a great deal of input data, they provide 

engineers involved in vehicle 

development and design with an 

alternative that can be considerably 

faster and less expensive than physical 

experimentation and testing. 

Properly executed, methods such as 

physical testing and full vehicle 

simulation can provide reasonably 

(though not absolutely) certain estimates 

of the vehicle fuel economy of specific 

vehicles to be produced in the future. 

However, when analyzing potential 

CAFE standards, NHTSA is not actually 

designing specific vehicles. The agency 

is considering implications of new 

standards that will apply to the average 

performance of manufacturers’ entire 

production lines. For this type of 

analysis, precision in the estimation of 

the fuel economy of individual vehicle 

models is not essential; although it is 

important that the agency avoid 

systematic upward or downward bias, 

uncertainty at the level of individual 

models is mitigated by the fact that 

compliance with CAFE standards is 

based on average fleet performance. 

As discussed above, the Volpe Model, 

which the agency has used to perform 

the analysis supporting today’s final 

rule, applies an incrementally 

multiplicative approach to estimating 

the fuel savings achieved through the 

progressive addition of fuel-saving 

technologies. NAS’ use of the same 

approach in its 2002 report was, at the 

time and henceforth, criticized by a 

small number of observers as being 

prone to systematic overestimation of 

available fuel savings. This assertion 

was based on the fact that, among the 

technologies present on any given 

vehicle, more than one may address the 

same energy loss mechanism (notably, 

pumping losses on throttled engines). 

Once all energy losses of a given type 

are eliminated, even theoretical 

improvements attributable to that loss 

mechanism are no longer available. 

The most direct critique of NAS’ 

methods appeared in a 2002 SAE paper 

by four General Motors researchers 

(Patton, et al.), who compared some of 

NAS’ calculations to fuel consumption 

estimates obtained through vehicle 

testing and simulation, and concluded 

that, as increasing numbers of 

technologies were applied, NAS’ 

estimates became increasingly subject to 

overestimation of available fuel 

consumption reductions.131

In response to such concerns, which 

had also been raised as the NAS 

committee performed its analysis, the 

NAS report concluded that vehicle 

simulation performed for the committee 

indicated that the report’s incremental 

fuel savings estimates were ‘‘quite 

reasonable’’ for the less aggressive two 

of the three product development paths 

it evaluated. The report did, however, 

conclude that uncertainty increased 

with consideration of more 

technologies, especially under the more 

aggressive ‘‘path 3’’ evaluated by the 

committee. The report did not, however, 

mention any directional bias to this 

uncertainty.132

Notwithstanding this prior response 

to concerns about the possible 

overestimation of available fuel savings, 

and considering that analyses 

supporting the development of the 

NPRM, the Volpe model applies 

‘‘synergy factors’’ that adjust fuel 

savings calculations when some pairs of 

technologies are applied to the same 

vehicle, as discussed above in Section 

IV.C.7. These factors reduce uncertainty 

and the potential for positive or negative 

biases in the Volpe model’s estimates of 

the effects of technologies. 

As an alternative to estimating fuel 

consumption through incremental 

multiplication and the application of 

‘‘synergy’’ factors to address technology 

interactions, NHTSA considered basing 

its analysis of fuel economy standards 

on full vehicle simulation at every step. 

However, considering the nature of 

CAFE analysis (in particular, the 

analysis of fleets projected to be sold in 

the future by each manufacturer), as 

well as the quantity and availability of 

information required to perform vehicle 

simulation, the agency explained that it 

believed detailed simulation when 

analyzing the entire fleet of future 

vehicles is neither necessary nor 

feasible. Still, when estimating 

synergies between technologies, the 

agency did make use of vehicle 

simulation studies, as discussed above. 

The agency has also done so when reestimating synergies before performing 

the analysis supporting today’s final 

rule. 

NHTSA also considered estimating 

changes in fuel consumption by 

explicitly accounting for each of several 

energy loss mechanisms—that is, 

physical mechanisms to which the 

consumption of (chemical) energy in 

fuel may be attributed. This approach 

would be similar to that proposed in 

2002 by Patton et al. The agency invited 

comment on this approach, requested 

that manufacturers submit product 

plans disaggregating fuel consumption 

into each of nine loss mechanisms, and 

sought estimates of the extent to which 

fuel-saving technologies affect each of 

these loss mechanisms. 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14263 

133 GM comments at 2, Docket No. NHTSA–2008– 

0089–0162. 

134CARB comments at 5, Docket No. NHTSA– 

2008–0089–0173. In developing potential 

greenhouse gas (GHG) emissions standards for light 

vehicles, CARB made significant use of vehicle 

simulation results presented in ‘‘Reducing 

Greenhouse Gas Emissions from Light-Duty Motor 

Vehicles’’, which was published in 2004 by the 

Northeast States Center for a Clean Air Future 

(NESCCAF). As NHTSA discussed in the NPRM, 

CARB’s and NESCCAF’s approach, which 

effectively reduces each manufacturer’s fleet to five 

‘‘representative’’ vehicles and two average vehicle 

weights, is too limited for purposes of CAFE 

analysis. 

135California Air Resources Board, ‘‘Air 

Resources Board Staff Comments on Sierra and 

Martec NRC Presentations’’, p. 2. 

136Testimony of Kenneth Patton (GM); Testimony 

of Kevin McMahon (Martec); Plaintiffs’ Proposed 

Findings of Fact, June 15, 2007, pp. 103 –113. 

137Alliance of Automobile Manufacturers, 

‘‘Detailed Technical Comments on Ricardo ‘Study 

of Potential Effectiveness of Carbon Dioxide 

Reducing Vehicle Technologies’ Report’’, March 6, 

2008. 

138For the reader’s reference, Ricardo’s study for 

EPA was based on specific EPA-defined 

requirements, such as performing full vehicle 

simulations of 26 different technology packages on 

the EPA-specified 5 baseline vehicles. Thus, to the 

extent that Ricardo’s numbers do not reflect specific 

differences in technology effectiveness by vehicle 

model, in conducting the analysis for NHTSA’s 

final rule, NHTSA and Ricardo drew on Ricardo’s 

knowledge to develop incremental benefits based in 

part on Ricardo’s simulation work. Ricardo also 

noted differences between its report for EPA and 

the EPA Staff Technical Report in terms of the 

incremental benefits for individual technologies 

developed by EPA based on Ricardo’s simulation. 

139Attorneys General of the States of California, 

Arizona, Connecticut, Illinois, Maryland, 

Massachusetts, New Jersey, New Mexico, Oregon, 

and Vermont, the Executive Officer of the California 

Air Resources Board, the Commissioner of the New 

Jersey Department of Environmental Protection, the 

Secretary of the New Mexico Environment 

Department, the Secretary of the Commonwealth of 

Pennsylvania Department of Environmental 

Protection, and the Corporation Counsel of the City 

of New York, Supplemental Comments Regarding 

Alliance of Automobile Manufacturers Comments, 

Docket No. NHTSA–2008–0089–0495, October 8, 

2008, p. 3. 

140An engine map specifies the engine’s 

efficiency under many different operating 

conditions, each of which is defined in terms of 

rotational speed (i.e., revolutions per minute, or 

RPM) and load (i.e., torque). 

In response to the NPRM, the Alliance 

presented a detailed analysis by Sierra 

Research, which used a modified 

version of VEHSIM (a vehicle 

simulation tool) to estimate the fuel 

consumption resulting from the 

application of various vehicle 

technologies to 25 vehicle categories 

intended to represent the fleet. The 

Alliance commented that this 

simulation-based approach is more 

accurate than that applied by NHTSA, 

and indicated that Sierra’s ability to 

perform this analysis demonstrates that 

NHTSA should be able to do the same. 

General Motors also raised questions 

regarding the multiplicative approach to 

fuel consumption estimation NHTSA 

has implemented using the Volpe 

model. GM indicated that the Volpe 

model should be enhanced with 

modifications to ‘‘take into account the 

basic physics of vehicles.’’ 133 Although 

GM’s comments did not explicitly 

mention vehicle simulation, GM did 

express full support for the Alliance’s 

comments. 

The California Air Resources Board 

(CARB) presented comparisons of 

different simulation studies, 

commenting that these demonstrate that 

the VEHSIM model used by Sierra 

Research ‘‘cannot accurately simulate 

vehicles that use advanced technologies 

such as variable valve timing and lift 

and advanced transmissions.’’ 134 CARB 

also questioned Sierra Research’s 

simulation capabilities and suggested 

that, in support of actual product 

development, manufacturers neither 

contract with Sierra Research for such 

services nor make use of VEHSIM. 

CARB further commented that both AVL 

(which performed simulation studies for 

CARB’s evaluation of potential 

greenhouse gas standards) and Ricardo 

(which has recently performed 

simulation studies and related analysis 

for both EPA and NHTSA) provide such 

services to manufacturers.135

However, the Alliance and GM have 

criticized technical aspects of the AVL 

and Ricardo vehicle simulation studies 

mentioned by CARB. Regarding the AVL 

vehicle simulations CARB utilized, GM 

raised concerns that, among other 

things, some of AVL’s simulations 

assumed the use of premium-grade 

gasoline, and some effectively assume 

vehicle performance and utility would 

be compromised.136 Similarly, the 

Alliance raised concerns that some of 

the simulations performed by Ricardo 

for EPA assumed the use of premium 

fuel, and that many of the simulations 

assumed vehicle performance would be 

reduced.137 The Alliance also indicated 

that the five vehicles analyzed by 

Ricardo for EPA were not representative 

of all vehicles in the fleet, leading to 

overstatement of the degree of 

improvement potentially available to 

vehicles that already use technologies 

not present in the vehicles examined by 

EPA. The Alliance further argued that 

the report did not reveal sufficient detail 

regarding important simulation details 

(related, e.g., to cylinder deactivation), 

that it failed to account for some 

parasitic and accessory loads, and that 

EPA directed Ricardo to unrealistically 

assume universal improvements in 

aerodynamics, tire efficiency, and 

powertrain friction.138

Although submitted after the close of 

the comment period specified in the 

NPRM, comments by several state 

Attorneys General and other state and 

local official questioned the need and 

merits of full vehicle simulation within 

the context of CAFE analysis, stating 

that 

Computer simulation models such as 

VEHSIM are not practical except perhaps 

during vehicle development to determine the 

performance of specific vehicle models 

where all vehicle engineering parameters are 

known and can be accounted for in the 

inputs to the model. Such an exercise is 

extremely data intensive, and extending it to 

the entire fleet makes it subject to multiple 

errors unless the specific parameters for each 

vehicle model are known and accounted for 

in the model inputs.139

Considering the comments 

summarized above, the analyses to 

which they refer, and the nature of the 

analysis the agency performs when 

evaluating potential CAFE standards, 

NHTSA has concluded that full vehicle 

simulation, though useful to 

manufacturers’ own product 

development efforts, remains neither 

necessary nor feasible for the MY 2011 

CAFE analysis. NHTSA’s basis for this 

conclusion is as follows: 

Full vehicle simulation involves 

estimating the fuel consumption (and, 

typically, emissions) of a specific 

vehicle over a specific driving cycle. 

Many engineering characteristics of the 

vehicle must be specified, including, 

but not limited to weight, rolling 

resistance, tire radius, aerodynamic drag 

coefficient, frontal area, engine maps140

and detailed transmission 

characteristics (gear ratios, shift logic, 

etc.), other drivetrain characteristics, 

and accessory loads. Additional engine 

test data would also be required in order 

to update engine maps when evaluating 

the application of advanced engine 

technologies. Driving cycles—vehicle 

speeds over time—are specified on a 

second-by-second (or more finelygrained) basis. Using full vehicle 

simulation to estimate average fuel 

consumption under the test procedures 

relevant to CAFE involves many 

simulations to capture all the potential 

combinations of technologies that could 

be used. 

Given all of the requisite data 

representing a specific vehicle, full 

vehicle simulation can provide a 

powerful means of estimating vehicle 

performance while accounting for 

interactions between various vehicle 

components and systems. Full 

simulation can also provide a means of 

estimating vehicle performance under 

driving conditions not represented by 

the fuel economy test procedures. For 

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14264 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

141Fodale, F., Chrysler LLC, ‘‘Fuel Economy/ 

Fuels—Presented to NRC Committee on Fuel 

Economy of Light-Duty Vehicles’’, November 27, 

2007. 

142Patton, et al., present an energy balance 

calculation that disaggregates fuel consumption into 

six energy loss categories, indicating that ‘‘an 

accounting of the effects of individual technologies 

on energy losses within these categories provides a 

practical, physically-based means to evaluate and 

compare the fuel consumption effects of the various 

technologies.’’ (Patton, et al., (2002), op. cit., p. 11.) 

an engineer involved in the design of a 

specific vehicle or vehicle component or 

system, or a manufacturer making 

specific decisions regarding the fleet of 

vehicles it will produce, vehicle 

simulation can be a powerful tool. 

However, even the most detailed 

simulation involving full combustion 

cycle simulation is not the ‘‘gold 

standard’’ for product design. Chrysler, 

for example, has portrayed simulation 

as one of several tools in its CAFE 

planning process, which also involves 

physical testing (i.e., bench testing, 

chassis dynamometer testing) of actual 

components and assembled vehicles.141

In purpose and corresponding 

requirements, NHTSA’s evaluation of 

regulatory options is fundamentally 

different from the type of product 

planning and development that a 

manufacturer conducts. A manufacturer 

must make specific decisions regarding 

every component that will be installed 

in every vehicle it plans to produce, and 

it must ultimately decide how many of 

each vehicle it will produce. Although 

manufacturers have some ability to 

make ‘‘mid-course adjustments,’’ that 

ability is limited by a range of factors, 

such as contracts and tooling 

investments. By comparison, NHTSA 

attempts only to estimate how a given 

manufacturer might attempt to comply 

with a potential CAFE standard; given 

the range of options available to each 

manufacturer, NHTSA has little hope of 

predicting specifically what a given 

manufacturer will do. CAFE standards 

require average levels of performance, 

not specific technology outcomes. 

Therefore, while it is important that 

NHTSA avoid systematic bias when 

estimating the potential to increase the 

fuel economy of specific vehicle 

models, it is not important that the 

agency’s estimates precisely forecast 

results for every future vehicle. 

Furthermore, NHTSA evaluates the 

impact of CAFE standards on all 

manufacturers, based on a forecast of 

specific vehicle models each 

manufacturer will produce for sale in 

the U.S. in the future. An analysis for 

MY 2011 can involve thousands of 

unique vehicle models, hundreds of 

unique engines, and hundreds of unique 

transmissions. Model-by-model 

representation, as used in the analysis 

for this final rule, allows the agency to, 

among other things, account for 

technologies expected to be present on 

each vehicle under ‘‘business as usual’’ 

conditions, thereby avoiding errors 

regarding the potential to add further 

technologies. 

Because of the intense informational 

and computational requirements, 

industry-wide studies that rely on 

vehicle simulation reduce the fleet to a 

limited number of ‘‘representative’’ 

vehicles. This reduction limits the 

ability to account for technological and 

other heterogeneity of the fleet, virtually 

ensuring the overestimation of 

improvements available to some 

vehicles (e.g., vehicles that begin with a 

great deal of technology) and some 

manufacturers (e.g., manufacturers that 

sell many high-technology vehicles). 

AVL’s analysis for NESCCAF and 

Ricardo’s analysis for EPA, each of 

which considered only five vehicle 

models, are both, therefore, of severely 

limited use for the kind of fleetwide 

analysis used in this final rule, although 

both provide useful information 

regarding the range of fuel savings 

achieved by specific technologies and 

‘‘packages’’ of technologies. 

The analysis conducted by Sierra 

Research for the Alliance considers a 

significantly greater number (25) of 

‘‘representative’’ vehicles, drawing 

important distinctions between 

similarly-sized cars based on 

performance. Sierra was able to do so in 

part because it analyzed historical 

vehicles. For example, Sierra indicates 

that model year 1998 engines were used 

to supply VEHSIM with baseline, 

‘‘blended’’ engine maps applied 

universally (rather than specific maps 

for each manufacturer and vehicle 

model) for vehicle model years out to 

2020. Considering that, even without 

increases in CAFE standards, many 

vehicles produced for sale in the U.S. 

during the time period considered in a 

CAFE rulemaking are likely to have 

technologies such as VVLT and cylinder 

deactivation, NHTSA doubts ‘‘blended’’ 

1998 engines are as representative as 

implied by Sierra’s analysis. 

Although NHTSA could, in principle, 

integrate full vehicle simulation of every 

vehicle model into its analysis of the 

future fleet, the agency expects that 

manufacturers would be unable to 

provide much of the required 

information for future vehicles. Even if 

manufacturers were to provide such 

information, using full vehicle 

simulation to estimate the effect of 

further technological improvements to 

future vehicles would involve uncertain 

detailed estimates, such as valve timing, 

cylinder deactivation operating 

conditions, transmission shift points, 

and hybrid vehicle energy management 

strategies for each specific vehicle, 

engine, and transmission combination. 

Even setting aside the vast increases in 

computational demands that would 

accompany the use of full vehicle 

simulation in model-by-model analysis 

of the entire fleet, the agency remains 

convinced that the availability of 

underlying information and data would 

be too limited for this approach to be 

practical. 

As a third alternative, one that might 

be more explicitly ‘‘physics-based’’ than 

the use of synergy factors and vastly 

more practical than full vehicle 

simulation, NHTSA requested comment 

on the use of partitioned fuel 

consumption accounting. Aside from 

GM’s nonspecific recommendation that 

the Volpe model be modified to account 

for the ‘‘basic physics of vehicles,’’ 

NHTSA did not receive comments 

regarding the relative merits of 

partitioning fuel consumption into 

several energy loss mechanisms for 

purposes of estimating the effects of 

fuel-saving technologies, even though 

the concept is similar to that proposed 

by Patton, et al. in 2002.142 Some 

manufacturers provided some of the 

information that would have been 

necessary for the implementation of this 

approach. However, as a group, 

manufacturers that submitted product 

plan information to the agency provided 

far too little disaggregated fuel 

consumption information to support the 

development of this approach. Although 

NHTSA continues to believe that 

partitioning fuel consumption into 

various loss mechanisms could provide 

a practical and sound basis for future 

analysis, the information required to 

support this approach is not available at 

this time. 

In conclusion, NHTSA observes that 

with respect to the CAFE analysis 

prepared for this final rule, full vehicle 

simulation could theoretically be used 

at three different levels. First, full 

vehicle simulation could be used only 

to provide specific estimates, that, 

combined with other data (e.g., from 

bench testing) would provide a basis for 

estimates of the effectiveness of specific 

individual technologies. While NHTSA 

will continue considering this type of 

analysis, the agency anticipates that it 

will continue to be feasible and 

informative to make somewhat greater 

use of full vehicle simulation. Second, 

full vehicle simulation could be fully 

integrated into NHTSA’s model-bymodel analysis of the entire fleet to be 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14265 

143 68 FR 16874 (Apr. 7, 2003). 

144 71 FR 17582 (Apr. 6, 2006). 

145Sources included, but were not limited to 

manufacturers’ web sites, industry trade 

publications (e.g., Automotive News), and 

commercial data sources (e.g., Wards Automotive, 

etc.). 

projected to be produced in future 

model years. NHTSA expects, however, 

that this level of integration will remain 

infeasible considering the size and 

complexity of the fleet. Also, 

considering the forward-looking nature 

of NHTSA’s analysis, and the amount of 

information required to perform full 

vehicle simulation, NHTSA anticipates 

that this level of integration would 

involve misleadingly precise estimates 

of fuel consumption, even for MY 2011. 

Finally, full vehicle simulation can be 

used to develop less complex 

representations of interactions between 

technologies (such as was done using 

the lumped parameter model to develop 

the synergies for the final rule), and to 

perform reference points to which 

vehicle-specific estimates may be 

compared. NHTSA views this as a 

practical and productive potential use of 

full vehicle simulation, and will 

consider following this approach in the 

future. NHTSA has contracted with 

NAS to, among other things, evaluate 

the potential use of full vehicle 

simulation and other fuel consumption 

estimation methodologies. Nevertheless, 

in addition to considering further 

modifications to the Volpe model, 

NHTSA will continue to consider other 

methods for evaluating the cost and 

effect of adding technology to 

manufacturers’ fleets. 

9. Refresh and Redesign Schedule 

In addition to, and as discussed 

below, developing analytical methods 

that address limitations on overall rates 

at which new technologies can be 

expected to feasibly penetrate 

manufacturers’ fleets, the agency has 

also developed methods to address the 

feasible scheduling of changes to 

specific vehicle models. In the Volpe 

model, which the agency has used to 

support the current rulemaking, these 

scheduling-related methods were first 

applied in 2003, in response to concerns 

that an early version of the model would 

sometimes add and then subsequently 

remove some technologies.143 By 2006, 

these methods were integrated into a 

new version of the model, one which 

explicitly ‘‘carried forward’’ 

technologies added to one vehicle 

model to succeeding vehicle models in 

the next model year, and which timed 

the application of many technologies to 

coincide with the redesign or freshening 

of any given vehicle model.144

Even within the context of the phasein caps discussed below, NHTSA 

considers these model-by-model 

scheduling constraints necessary in 

order to produce an analysis that 

reasonably accounts for the need for a 

period of stability following the 

redesign of any given vehicle model. If 

engineering, tooling, testing, and other 

redesign-related resources were free, 

every vehicle model could be 

redesigned every year. In reality, 

however, every vehicle redesign 

consumes resources simply to address 

the redesign. Phase-in caps, which are 

applied at the level of manufacturer’s 

entire fleet, do not constrain the 

scheduling of changes to any particular 

vehicle model. Conversely, scheduling 

constraints to address vehicle 

freshening and redesign do not 

necessarily yield realistic overall 

penetration rates (e.g., for strong 

hybrids). 

In the automobile industry there are 

two terms that describe when changes to 

vehicles occur: redesign and refresh 

(i.e., freshening). Vehicle redesign 

usually encompasses changes to a 

vehicle’s appearance, shape, 

dimensions, and powertrain, and is 

traditionally associated with the 

introduction of ‘‘new’’ vehicles into the 

market, which is often characterized as 

the next generation of a vehicle. In 

contrast, vehicle refresh usually 

encompasses only changes to a vehicle’s 

appearance, and may include an 

upgraded powertrain. Refresh is 

traditionally associated with mid-cycle 

cosmetic changes to a vehicle, within its 

current generation, to make it appear 

‘‘fresh.’’ Vehicle refresh traditionally 

occurs no earlier than two years after a 

vehicle redesign or at least two years 

before a scheduled redesign. In the 

NPRM, NHTSA tied the application of 

the majority of the technologies to a 

vehicle’s refresh/redesign cycle, because 

their application was significant enough 

that it could involve substantial 

engineering, testing, and calibration 

work. 

NHTSA based the redesign and 

refresh schedules used in the NPRM as 

inputs to the Volpe model on a 

combination of manufacturers’ 

confidential product plans and 

NHTSA’s engineering judgment. In most 

instances, NHTSA reviewed 

manufacturers’ planned redesign and 

refresh schedules and used them in the 

same manner it did in past rulemakings. 

However, in NHTSA’s judgment, 

manufacturers’ planned redesign and 

refresh schedules for some vehicle 

models were unrealistically slow 

considering overall market trends. In 

these cases, the agency re-estimated 

redesign and refresh schedules more 

consistent with the agency’s 

expectations, as discussed below. Also, 

if companies did not provide product 

plan data, NHTSA used publicly 

available data about vehicle redesigns to 

project the redesign and refresh 

schedules for the vehicles produced by 

these companies.145

Unless a manufacturer submitted 

plans for a more rapid redesign and 

refresh schedule, NHTSA assumed that 

passenger cars would normally be 

redesigned every 5 years, based on the 

trend over the last 10–15 years showing 

that passenger cars are typically 

redesigned every 5 years. These trends 

were reflected in the manufacturer 

product plans that NHTSA used in the 

NPRM analysis, and were also 

confirmed by many automakers in 

meetings held with NHTSA to discuss 

various general issues regarding the 

rulemaking. 

NHTSA explained that it believes that 

the vehicle design process has 

progressed and improved rapidly over 

the last decade and that these 

improvements have made it possible for 

some manufacturers to shorten the 

design process for some vehicles in 

order to introduce vehicles more 

frequently in response to competitive 

market forces. Although manufacturers 

have likely already taken advantage of 

most available improvements, according 

to public and confidential data available 

to NHTSA, almost all passenger cars 

will be on a 5-year redesign cycle by the 

end of the decade, with the exception 

being some high performance vehicles 

and vehicles with specific market 

niches. 

NHTSA also stated in the NPRM that 

light trucks are currently redesigned 

every 5 to 7 years, with some vehicles 

(like full-size vans) having longer 

redesign periods. In the most 

competitive SUV and crossover vehicle 

segments, the redesign cycle currently 

averages slightly above 5 years. NHTSA 

explained that it is expected that the 

light truck redesign schedule will be 

shortened in the future due to 

competitive market forces Thus, for 

almost all light trucks scheduled for a 

redesign in model year 2014 and later, 

NHTSA projected a 5-year redesign 

cycle. Exceptions were made for high 

performance vehicles and other vehicles 

that traditionally had longer than 

average design cycles. For those 

vehicles, NHTSA attempted to preserve 

their historical redesign cycle rates. 

NHTSA discussed these assumptions 

with several manufacturers at the NPRM 

stage, before the current economic 

crisis. Two manufacturers indicated at 

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14266 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

146Zoia, D.E. 2008. Ford to cut cycle times to 

three years. Online at http://www.wardsauto.com. 

January 24. 

147 Id. 

148See NHTSA–2008–0089–0170.1, Attachment 

16, at 8 (393 of pdf). 

149See id., at 9 (394 of pdf). 

that time that their vehicle redesign 

cycles take at least five years for cars 

and 6 years and longer for trucks 

because they rely on those later years to 

earn a profit on the vehicles. They 

argued that they would not be able to 

sustain their business if forced by CAFE 

standards to a shorter redesign cycle. 

The agency recognizes that some 

manufacturers are severely stressed in 

the current economic environment, and 

that some manufacturers may be hoping 

to delay planned vehicle redesigns in 

order to conserve financial resources. 

However, consistent with its forecast of 

the overall size of the light vehicle 

market from MY 2011 on, the agency 

currently expects that the industry’s 

status will improve, and that 

manufacturers will typically redesign 

both car and truck models every 5 years 

in order to compete in that market. 

NHTSA received relatively few 

comments regarding its refresh/redesign 

schedule assumptions. UCS commented 

that redesign schedules should be 

shortened to 3 years, based on recent 

public statements by Ford that they 

intended to move to that cycle, and 

based on other recent manufacturer 

behavior. 

Although NHTSA agrees with UCS 

that remarks by one Ford official at a 

January 2008 conference suggest that 

that company was then hoping to 

accelerate its vehicle ‘‘cycle time’’ to 3 

years, the agency questions the context, 

intended meaning and scope, and 

representation of those remarks.146

Further, the agency notes that the article 

referenced by UCS also indicates that 

‘‘most manufacturers make changes to 

their vehicle lines every four years or 

more, depending on the segment of the 

market, with mid-cycle freshenings 

every two years or so.’’ 147 Although 

some manufacturers have, in their 

product plans, indicated that they plan 

to redesign some vehicle models more 

frequently than has been the industry 

norm, all manufacturers have also 

indicated that they expect to redesign 

some other vehicle models considerably 

less frequently. The CAR report 

submitted by the Alliance, prepared by 

the Center for Automotive Research and 

EDF, states that ‘‘For a given vehicle 

line, the time from conception to first 

production may span two and one-half 

to five years,’’ but that ‘‘The time from 

first production (‘‘Job #1’’) to the last 

vehicle off the line (‘‘Balance Out’’) may 

span from four to five years to eight to 

ten years or more, depending on the 

dynamics of the market segment.’’ The 

CAR report then states that ‘‘At the 

point of final production of the current 

vehicle line, a new model with the same 

badge and similar characteristics may be 

ready to take its place, continuing the 

cycle, or the old model may be dropped 

in favor of a different product.’’ 148

NHTSA believes that this description, 

which states that a vehicle model will 

be redesigned or dropped after 4–10 

years, is consistent with other 

characterizations of the redesign and 

freshening process, and supports its 5- 

year redesign assumption and its 2–3 

year refresh cycle assumptions.149 Thus, 

for purposes of the final rule, NHTSA is 

retaining the 5-year redesign/2–3 year 

refresh assumptions employed in the 

NPRM. However, NHTSA will continue 

to monitor manufacturing trends and 

will reconsider these assumptions in 

subsequent rulemakings if warranted. 

For purposes of the final rule, NHTSA 

has also considered confidential 

product plans where applicable and 

industry trends on refresh and redesign 

timing as discussed above, to apply 

specific technologies at redesign, 

refresh, or any model years as shown in 

Table IV–7 below. 

BILLING CODE 4910–59–P 

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BILLING CODE 4910–59–C 

As the table shows, most technologies 

are applied by the Volpe model when a 

specific vehicle is due for a redesign or 

refresh. However, for low friction 

lubricants, the model is not restricted to 

applying it during a refresh/redesign 

year and thus it was made available for 

application at any time. Low friction 

lubricants are very cost-effective, can 

apply to multiple vehicle models/ 

platforms and can be applied across 

multiple vehicle models/platforms in 

one year. Although they can also be 

applied during a refresh/redesign year, 

they are not restricted to that timeframe 

because their application is not viewed 

as necessitating a major engineering 

redesign and associated testing/ 

calibration. 

For several technologies estimated in 

the NPRM to be available for application 

during any model year, NHTSA now 

estimates that these technologies will be 

available only at refresh or redesign. 

Those technologies include aggressive 

shift logic, improved accessories, low 

rolling resistance tires and low drag 


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14268 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

150 68 FR 16874 (Apr. 7, 2003). 

151 Id., at 16885. 

152These caps constrain the extent to which 

additional technology is applied by the model, 

beyond the levels projected in each manufacturer’s 

baseline fleet. Also, because manufacturers’ fleets 

are comprised of vehicles, engines, and 

transmissions sold in discrete volumes, phase-in 

caps cannot be applied as precise limits. In some 

cases (when a phase-in cap is small or a 

manufacturer has a limited product line), doing so 

would prevent the technology from being applied 

at all. Therefore, the Volpe model enforces each 

phase-in cap constraint as soon as it has been 

exceeded by application of technologies to 

manufacturers. 

153 71 FR 17572, 17679 (Apr. 6, 2006). 

154 Id. at 17572. See also 2002 NAS Report, at 5. 

155 73 FR 24387–88 (May 2, 2008). 

brakes. Aggressive shift logic is now one 

of the technologies included under 

improved automatic transmission 

controls. This technology requires a 

recalibration specific to each vehicle, 

such that it can therefore be applied 

only at refresh or redesign model years. 

The ‘‘improved accessories’’ technology 

has been redefined to include intelligent 

engine cooling systems, which require a 

considerable change to the vehicle and 

engine cooling system; therefore, 

improved accessories also can be 

applied only at refresh or redesign 

model years. Also, NHTSA concurs with 

manufacturers’ confidential statements 

that indicating that low drag brakes and 

low rolling resistance tires can be 

applied only at refresh or redesign 

model years due to the need for vehicle 

testing and calibration (e.g., to ensure 

safe handling and braking) when these 

technologies are applied. 

10. Phase-In Caps 

In 2002, NHTSA proposed the first 

increases in CAFE standards in six years 

due to a previous statutorily-imposed 

prohibition on setting new standards. 

That proposal, for MY 2005–2007 light 

truck standards, relied, in part, on a 

precursor to the current Volpe model. 

This earlier model used a ‘‘technology 

application algorithm’’ to estimate the 

technologies that manufacturers could 

apply in order to comply with new 

CAFE standards. 

NHTSA received more than 65,000 

comments on that proposal. Among 

those were many manufacturer 

comments concerning lead time and the 

potential for rapid widespread use of 

new technologies. The agency noted 

that DaimlerChrysler and Ford ‘‘argued 

that the agency had underestimated the 

lead time necessary to incorporate fuel 

economy improvements in vehicles, as 

well as the difficulties of introducing 

new technologies across a high volume 

fleet.’’ Specific to Volpe’s technology 

application algorithm, the agency noted 

that General Motors took issue with the 

algorithm’s ‘‘application of technologies 

to all truck lines in a single model 

year.’’ 150

In response to those concerns, Volpe’s 

algorithm was modified ‘‘to recognize 

that capital costs require employment of 

technologies for several years, rather 

than in a single year.’’ 151 Those changes 

moderated the rates at which 

technologies were estimated to 

penetrate manufacturers’ fleets in 

response to the new (MY 2005–MY 

2007) CAFE standards. These changes 

produced more realistic estimates of the 

technologies manufacturers could apply 

in response to the new standards, and 

thereby produced more realistic 

estimates of the costs of those standards. 

Prior to the next rulemaking, the 

Volpe model underwent significant 

integration and improvement, including 

the accommodation of explicit ‘‘phasein caps’’ to constrain the rates at which 

each technology would be estimated to 

penetrate each manufacturer’s fleet in 

response to new CAFE standards.152 As 

documented in 2006, the agency’s final 

standards for light trucks sold in MY 

2008–MY 2011 were based on phase-in 

caps ranging from 17 percent to 25 

percent (corresponding to full 

penetration of the fleet within 4 to 6 

years) for most technologies, and from 3 

percent to 10 percent (full penetration 

within 10 to 33 years) for more 

advanced technologies such as hybrid 

electric vehicles.153 The agency based 

these rates on consideration of 

comments and on the 2002 NAS 

Committee’s findings that ‘‘widespread 

penetration of even existing 

technologies will probably require 4 to 

8 years’’ and that for emerging 

technologies ‘‘that require additional 

research and development, this time lag 

can be considerably longer’’.154

In its 2008 NPRM proposing new 

CAFE standards for passenger cars and 

light trucks sold during MY 2011–MY 

2015, NHTSA considered 

manufacturers’ planned product 

offerings and estimates of technology 

availability, cost, and effectiveness, as 

well as broader market conditions and 

technology developments. The agency 

concluded that many technologies could 

be deployed more rapidly than it had 

estimated during the prior 

rulemaking.155 For most engine 

technologies, the agency increased these 

caps from 17 percent to 20 percent, 

equivalent to reducing the estimated 

time for potential fleet penetration from 

6 years to 5 years. For stoichiometric 

gasoline direct injection (GDI) engines, 

the agency increased the phase-in cap 

from 3 percent to 20 percent, equivalent 

to estimating that such engines could 

potentially penetrate a given 

manufacturer’s fleet in 5 years rather 

than the previously-estimated 33 years. 

However, as in its earlier CAFE 

rulemakings, the agency continued to 

recognize that myriad constraints 

prohibit most technologies from being 

applied across an entire fleet of vehicles 

within a year, even if those technologies 

are available in the market. 

In addition to requesting further 

explanation of NHTSA’s use of phase-in 

caps, commenters addressing phase-in 

caps generally asserted one of three 

themes: (1) That hybrid phase-in caps 

were much lower than market trends or 

manufacturer announcements would 

otherwise suggest; (2) that the phase-in 

caps proposed in the NPRM were too 

high in the early years of the rulemaking 

and did not reflect the very small (from 

a manufacturing perspective) amount of 

lead-time between the final rule and the 

MY 2011 standards, and/or were too 

low in the later years of the rulemaking 

given the relatively-increased amount of 

lead-time for those model years; (3) that 

there are insufficient resources (either in 

terms of capital or engineering) to 

implement the number of technologies 

implied by the phase-in caps 

simultaneously. 

Agency response: NHTSA continues 

to recognize that many factors constrain 

the rates at which manufacturers will be 

able to feasibly add fuel-saving 

technologies to the fleets they will sell 

in the United States. For a given 

technology, examples of these factors 

may include, but would not be limited 

to the following: 

• Is the technology ready for 

commercial use? For example, can it 

operate safely and reliably under realworld driving conditions for several 

years and many miles? 

• If the technology requires special 

infrastructure (e.g., new electrical 

generation and charging facilities), how 

quickly will that be put in place? 

• How quickly can suppliers ramp up 

to produce the technology in mass 

quantities? For example, how quickly 

can they obtain the materials, tooling, 

and engineering resources they will 

need? 

• Are original equipment 

manufacturers (OEMs) ready to integrate 

the technology into vehicles? For 

example, how quickly can they obtain 

the necessary tooling (e.g., retool 

factories), engineering, and financial 

resources? 

• How long will it take to establish 

failure and warranty data, and to make 

sure dealers and maintenance and repair 

businesses have any new training and 

tooling required in order to work with 

the new technology? 

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• Will OEMs be able to reasonably 

recoup prior investments for tooling and 

other capital? 

• To what extent are suppliers and 

OEMs constrained by preexisting 

contracts? 

NHTSA cannot explicitly and 

quantitatively evaluate every one of 

these and other factors with respect to 

each manufacturer’s potential 

deployment of each technology 

available during the production intent 

or emerging technology framework. 

Attempting to do so would require an 

extraordinary effort by the agency, and 

would likely be subject to tremendous 

uncertainties. For example, in the 

current economic and market 

environment, the agency expects that it 

would be impossible to reliably predict 

specific characteristics of future supply 

chains. Therefore, the agency has 

concluded that it is appropriate to 

continue using phase-in caps to apply 

the agency’s best judgment of the extent 

to which such factors combine to 

constrain the rates at which 

technologies may feasibly be deployed. 

We note, however, that many of the 

assumptions about phase-in caps made 

in this final rule apply to years beyond 

MY 2011, because as the NAS 

Committee and commenters indicated, 

technologies are phased in over several 

years, so the agency evaluated the 

phasing-in of technologies over the fiveyear period proposed in the NPRM. 

NHTSA provides these assumptions 

both in response to comments and to 

provide context for the agency’s 

decisions regarding MY 2011 phase-in 

caps. We emphasize that all 

assumptions for years other than MY 

2011 will be reconsidered for future 

rulemakings and may be subject to 

change at that time. 

Considering the above-mentioned 

comments, NHTSA has concluded that 

the phase-in caps it applied during its 

analysis documented in the 2008 NPRM 

resulted in technology penetration rates 

that were unrealistically high in the 

earlier model years covered by its 

proposal, particularly for MY 2011. This 

was a significant basis for the proposed 

standards’ ‘‘front loading’’ about which 

manufacturers expressed serious 

concerns. In response, and based on this 

conclusion, the Volpe model was 

modified for purposes of the final rule 

analysis to use phase-in caps for each 

technology that vary from one year to 

the next, and that in many cases would 

have increased more rapidly in the later 

years of the agency’s analysis than in 

earlier years. In making these changes, 

particularly to the MY 2011 phase-in 

caps, the agency has been mindful of the 

need to provide manufacturers 

sufficient lead time to add technologies 

to their fleets. In the agency’s judgment, 

its revised approach more realistically 

represents manufacturers’ capabilities 

and therefore produces more realistic 

estimates of the costs of new CAFE 

standards. 

For some technologies, NHTSA also 

concluded that slower overall rates of 

fleet penetration are more likely than 

the rates shown in the NPRM. The 

agency estimates that cylinder 

deactivation, stoichiometric GDI, and 

turbocharging with downsizing would 

be able to potentially be added to 12– 

14 percent of the fleet per year on 

average, rather than the 20 percent 

phase-in caps used in the NPRM for 

these technologies. Considering 

manufacturers’ comments and some 

aspects of its reevaluation of the 

incremental benefits of available engine 

technologies, the agency has concluded 

that these technologies will, for some 

engines, require more significant 

hardware changes and certification 

burden than previously recognized, 

such that feasible deployment is likely 

to be somewhat slower than estimated 

in the NPRM. 

NHTSA has also concluded, 

considering the complexities involved 

in deploying strongly hybridized 

vehicles (i.e., power split, two mode, 

and plug-in hybrids), it is unrealistic to 

expect that, in response to new CAFE 

standards, manufacturers can produce 

more of such vehicles in MY 2011 than 

they are already planning. Therefore, 

NHTSA has set the MY 2011 phase-in 

cap for strong hybrids to zero in that 

model year. Based on new information 

regarding engineering resources entailed 

in developing new power split and twomode hybrid vehicles, the agency 

estimated in its analysis that these 

technologies could be added to up to 11 

percent and 8 percent, respectively, of a 

given manufacturer’s long run fleet, 

rather than the 15 percent the agency 

estimated for the NPRM. The agency 

also considered a less aggressive 1 

percent longer run phase-in cap for 

plug-in hybrids, in part because 

although the agency expects that plugin hybrids will rely on lithium-ion 

batteries, it is not clear whether and, if 

so, how the supply chain for large and 

robust lithium-ion batteries will 

develop. 

On the other hand, NHTSA has also 

concluded that some technologies can 

potentially be deployed more widely 

than estimated in the NPRM. For 

example, the agency estimates that 6/7/ 

8-speed transmissions, dual clutch or 

automated manual transmissions, 

secondary axle disconnect, and 

aerodynamic improvements can 

potentially (notwithstanding 

engineering constraints that, for 

example, preclude the application of 

aerodynamic improvements to some 

performance vehicles) be added at an 

average rate of 20 percent per year of a 

given manufacturer’s fleet rather than 

the 14–17 percent average annual phasein caps used in the NPRM for these 

technologies. In the agency’s judgment, 

increased phase-in caps are appropriate 

for these transmission technologies, in 

part because the agency’s review of 

confidential product plans which 

indicated a higher than anticipated 

application rate of these technologies 

than existed at the time of the NPRM. 

Additionally, several manufacturers 

indicated a high likelihood of 

significant usage of dual clutch 

transmissions across their fleet of 

vehicles. The secondary axle disconnect 

technology was redefined for the final 

rule to consist of a somewhat basic, 

existing technology applicable only to 4 

wheel-drive vehicles (a smaller 

population) rather than the NPRMdefined technology (which was 

applicable to both 4 and all wheel drive 

vehicles). The agency has also 

concluded that, because it has identified 

performance vehicles as such, and has 

estimated that aerodynamic 

improvements are not applicable to 

these vehicles, aerodynamic dynamic 

improvements can be applied more 

widely as long as they are applied 

consistent with vehicle redesign 

schedules. Furthermore, considering 

changes in manufacturers’ stated 

expectations regarding prospects for 

diesel engines, the agency estimates that 

diesel engines could be added to as 

much as 4 percent of a manufacturer’s 

light truck fleet each year on average, 

rather than the 3 percent estimated in 

the NPRM. These changes in NHTSA’s 

estimates stem from the agency’s 

reevaluation of the status of these 

technologies, as revealed by 

manufacturers’ plans and confidential 

statements, as well as other related 

comments submitted in response to the 

NPRM. 

Regarding comments that 

manufacturers’ public statements reflect 

the ability to deploy technology more 

rapidly than reflected in the phase-in 

caps NHTSA applied in the NPRM, 

NHTSA notes that it did consider such 

statements. Combined with other 

information, these led the agency to 

conclude that, as mentioned above, 

some technologies could, particularly in 

later years, be applied more widely than 

the agency had previously estimated. 

However, in their confidential 

statements to NHTSA, manufacturers 

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are typically more candid about 

factors—both positive and negative— 

that affects their ability to deploy new 

technologies than they are in public 

statements available to their 

competitors. Therefore, NHTSA places 

greater weight on manufacturers’ 

confidential statements, especially 

when they are consistent with 

statements made by other manufacturers 

and/or suppliers. NHTSA also observes 

that some organizations have exhibited 

a tendency to take manufacturers’ 

statements out of context, or overlook 

important caveats included in such 

statements, which are largely used for 

marketing purposes. 

Table IV–8 below outlines the phasein caps for each discrete technology for 

MY 2011. These phase-in caps, along 

with the expanded number and types of 

vehicle subclasses, address the concerns 

raised by commenters and represent a 

substantial improvement in terms of 

consideration of the factors affecting 

technology penetration rates over those 

used in the NPRM. Additional 

considerations regarding specific phasein caps, including nonlinear increases 

in these caps, are presented in the more 

detailed technology-by-technology 

analysis summarized below. 

For some of the technologies applied 

in the final rule, primarily the valvetrain 

and diesel engine technologies, NHTSA 

has utilized combined phase-ins caps 

since the technologies are effectively the 

same from the standpoints of 

engineering and implementation. The 

final rule represented diesel engines as 

two technologies that both result in the 

conversion of gasoline engine vehicles. 

The annual phase-in caps for these two 

technologies, which are both set to a 

maximum of 3 percent for passenger 

cars (4 percent for light trucks) have 

been combined so that the maximum 

total application of either or both 

technologies to any manufacturers’ 

passenger car fleet is limited to 3 

percent (not 6 percent). For example, if 

3 percent of a manufacturers’ passenger 

car fleet has received diesel following 

combustion restart in a given year, 

diesel following turbocharging and 

downsizing will not be applied because 

the phase-in cap for diesels would have 

been reached. These combined phase-in 

caps are discussed below where 

applicable to each technology. 

BILLING CODE 4910–59–P 


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156Sierra Research, ‘‘Attachment to Comment 

Regarding the NHTSA Proposal for Average Fuel 

Economy Standards Passenger Cars and light 

Trucks Model Years 2011–2015,’’ June 27, 2008. 

Available at Docket No. NHTSA–2008–0089– 

0179.1. 

157Martec, ‘‘Variable Costs of Fuel Economy 

Technologies,’’ June 1, 2008. Available at Docket 

No. NHTSA–2008–0089–0169.1. 

158EPA Staff Technical Report: Cost and 

Effectiveness Estimates of Technologies Used to 

Reduce Light-Duty Vehicle Carbon Dioxide 

Emissions. EPA420–R–08–008, March 2008. 

159The major suppliers that provided NHTSA 

with fuel economy cost and effectiveness estimates 

in response to our request for comments included 

Borg-Warner, Cummins, and Delphi, while BorgWarner, Bosch, Coring, Cummins, Delphi, and 

Siemens also provided NHTSA with fuel economy 

cost and effectiveness estimates during confidential 

meetings. 

160Manufacturers that provided NHTSA with fuel 

economy cost and effectiveness estimates in 

response to our request for comments include 

BMW, Chrysler, Daimler, Ford, GM, Honda, Nissan, 

and Toyota. 

BILLING CODE 4910–59–C 

D. Specific Technologies Considered for 

Application and NHTSA’s Estimates of 

Their Incremental Costs and 

Effectiveness 

1. What data sources did NHTSA 

evaluate? 

In developing the technology 

assumptions in the final rule, NHTSA, 

working with Ricardo, examined a wide 

range of data sources and comments. We 

reexamined the sources we relied on for 

the NPRM such as the 2002 NAS Report, 

the 2004 NESCCAF report developed for 

CARB by AVL and Martec, the 2006 

EEA report and the EPA certification 

data. We also considered more recent 

and updated sources of information and 

reports submitted to the NPRM docket, 

including the (1) Sierra Research report 

submitted by the Alliance as an 

attachment to its comments as another 

set of estimates for fuel economy cost 

and effectiveness,156 (2) CARB’s 

response to aspects of that report, which 

was filed as supplemental comment on 

October 14, 2008, (3) the 2008 Martec 

Report,157 which updated the Martec 

report on which the 2004 NESCCAF 

study was based, and the EPA Staff 

Technical Report,158 which largely 

mirrored NHTSA’s NPRM estimates. 

The agency also evaluated 

confidential data from a number of 

vehicle manufacturers and technology 

component suppliers.159 We note that 

vehicle manufacturers updated their 

product plans in response to NHTSA’s 

May 2008 Request for Comment.160

2. Individual technology descriptions 

and cost/effectiveness estimates 

(a) Gasoline Engine Technologies 

(i) Overview 

Most passenger cars and light trucks 

in the U.S. have gasoline-fueled spark 

ignition internal combustion engines. 

These engines move the vehicle by 

converting the chemical energy in 

gasoline fuel to useful mechanical work 

output as shaft torque and power 

delivered to the transmission and to the 

vehicle’s driving wheels. Vehicle fuel 

economy is directly proportional to the 

efficiency of the engine. Two common 

terms are used to define the efficiency 

of an engine are (1) Brake Specific Fuel 

Consumption (BSFC), which is the ratio 

of the mass of fuel used to the output 

mechanical energy; and (2) Brake 

Thermal Efficiency (BTE), which is the 

ratio of the fuel chemical energy, known 


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as calorific value, to the output 

mechanical energy. 

The efficiency of an automotive spark 

ignition engine varies considerably with 

the rotational speed and torque output 

demanded from the engine. The most 

efficient operating condition for most 

current engine designs occurs around 

medium speed (30–50 percent of the 

maximum allowable engine rpm) and 

typically between 70–85 percent of 

maximum torque output at that speed. 

At this operating condition, BTE is 

typically 33–36 percent. However, at 

lower engine speeds and torque outputs, 

at which the engine operates in most 

consumer vehicle use and on 

standardized drive cycles, BTE typically 

drops to 20–25 percent. 

Spark ignition engine efficiency can 

be improved by reducing the energy 

losses that occur between the point of 

combustion of the fuel in the cylinders 

to the point where that energy reaches 

the output crankshaft. Reduction in this 

energy loss results in a greater 

proportion of the chemical energy of the 

fuel being converted into useful work. 

For improving engine efficiency at 

lighter engine load demand points, 

which are most relevant for CAFE fuel 

economy, the technologies that can be 

added to a given engine may be 

characterized by which type of energy 

loss is reduced, as shown in Table IV– 

9 below. 

As Table IV–9 shows, the main types 

of energy losses that can be reduced in 

gasoline engines to improve fuel 

economy are exhaust energy losses, 

engine friction losses, and gas exchange 

losses. Converting the gasoline engine to 

a diesel engine can also reduce heat 

losses. 

Exhaust Energy Loss Reduction 

Exhaust energy includes the 

kinematic and thermal energy of the 

exhaust gases, as well as the wasted 

chemical energy of unburned fuel. 

These losses represent approximately 32 

percent of the initial fuel chemical 

energy and can be reduced in three 

ways: first, by recovering mechanical or 

electrical energy from the exhaust gases; 

second, by improving the hydrocarbon 

fuel conversion; and third, by improving 

the cycle thermodynamic efficiency. 

The thermodynamic efficiency can be 

improved by either increasing the 

engine’s compression ratio or by 

operating with a lean air/fuel ratio. The 

latter is not considered to be at the 

emerging technology point yet due to 

the non-availability of lean NOX

aftertreatment, as discussed below. 

However, the compression ratio may 

potentially be raised by 1 to 1.5 ratios 

using stoichiometric direct fuel 

injection. 

Engine Friction Loss Reduction 

Friction losses can represent a 

significant proportion of the global 

losses at low load. These losses are 

dissipated through the cooling system in 

the form of heat. Besides via direct 

reduction measures, friction can also be 

reduced through downsizing the engine 

by means of increasing the enginespecific power output. 

Gas Exchange Loss Reduction 

The energy expended while 

delivering the combustion air to the 

cylinders and expelling the combustion 

products is known as gas exchange loss, 

commonly referred to as pumping loss. 

The main source of pumping loss in a 

gasoline engine is the use of an inlet air 

throttle, which regulates engine output 

by controlling the pre-combustion 

cylinder air pressure, but is an 

inefficient way to achieve this pressure 

control. A more efficient way of 

controlling the cylinder air pressure is 

to modify the valve timing or lift. 

Another way to reduce the average 

pumping losses is to ‘‘downsize’’ the 


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161 Docket NHTSA–2008–0089–0191.1. 

162 Due to the advanced nature of many of the 

technologies discussed in the NPRM, and in an 

effort to find broad based rationale for the specific 

benefits of each technology type, reference data has 

been gathered that specifies fuel consumption 

benefits as measured on the NEDC test cycle. To 

make this conversion, data from the International 

Council on Clean Transportation (ICCT) showed 

excellent correlation between CAFE test cycle 

results and NEDC test cycle results. While there was 

an offset in the linear best fit, the slope was nearly 

equal to 1; therefore, for this report, any percentage 

improvement found on the NEDC cycle will be 

assumed to be equivalent to gains found on the 

CAFE test cycle. 

163Renault press release, ‘‘Renault Introduces The 

Ecological, Economical Logan ‘Renault Eco2’ 

Concept At The Michelin Organized Challenge 

Bibendum, November 14, 2007. Available at 

http://www. renault.com/renault_ com/en/images/

15181%2015181_DP_logan_eco2_Shanghai_14_

nov_DEF_DB_2_tcm1120-686305.pdf (last accessed 

October 27, 2008). 

engine, making it run at higher loads or 

higher pressures. 

As illustrated in Table IV–9, several 

different technologies target pumping 

loss reduction, but it is important to 

note that the fuel consumption 

reduction from these technologies is not 

necessarily cumulative. Once most of 

the pumping work has been eliminated, 

adding further technologies that also 

target reduced pumping loss will have 

little additional effectiveness. Thus, in 

the revised decision trees, the 

effectiveness value shown for additional 

technologies targeting pumping loss 

depends on the existing technology 

combination already present on the 

engine. 

(ii) Low Friction Lubricants (LUB) 

One of the most basic methods of 

reducing fuel consumption in gasoline 

engines is the use of lower viscosity 

engine lubricants. More advanced multiviscosity engine oils are available today 

with improved performance in a wider 

temperature band and with better 

lubricating properties. CAFE standards 

notwithstanding, the trend towards 

lower friction lubricants is widespread. 

Within the next several year, most 

vehicles are likely to use 5W–30 motor 

oil, and some will use even less viscous 

oils, such as 5W–20 or possibly even 

0W–20, to reduce cold start friction. 

The NPRM reflected NHTSA’s belief 

that manufacturer estimates are the most 

accurate, and it estimated that low 

friction lubricants could reduce fuel 

consumption by 0.5 percent for all 

vehicle types at an incremental cost of 

$3, which represented the mid-point of 

manufacturer estimates range, rounded 

up to the next dollar. For the final rule 

NHTSA used the $3 cost from the 

NPRM, updated it to 2007 dollars, and 

marked it up to a retail price equivalent 

(RPE) of $5. Several manufacturers 

commented confidentially that low 

friction lubricants could reduce fuel 

consumption by 0 to 1 percent, and the 

Alliance suggested 0.5 percent relative 

to the baseline fleet. These comments 

confirm NHTSA’s NPRM effectiveness 

estimate, so NHTSA has retained it for 

the final rule. 

Low friction lubricants may be 

applied to any class of vehicles. The 

phase-in for low friction lubricants is 

capped at 50 percent for MY 2011. 

Honda commented that low friction 

lubricants cannot be applied to engines 

that have not been developed 

specifically for them.161 NHTSA 

understands that in some cases there 

could be a need for design changes and 

durability verification to implement low 

friction lubricants in existing engines. 

However, aftermarket low friction 

lubricant products already exist, and 

have been approved for use in existing 

engines. 

(iii) Engine Friction Reduction (EFR) 

Besides low friction lubricants, 

manufacturers can also reduce friction 

and improve fuel economy by 

improving the design of engine 

components and subsystems. Examples 

include improvements in low-tension 

piston rings, roller cam followers, 

improved crankshaft design and 

bearings, material coatings, material 

substitution, more optimal thermal 

management, and piston and cylinder 

surface treatments. 

In the NPRM, based on confidential 

manufacturer data and the NAS, 

NESCCAF, and EEA reports, NHTSA 

estimated that friction reduction could 

incrementally reduce fuel consumption 

for all vehicles by 1 to 3 percent at a cost 

of $0 to $21 per cylinder resulting in 

cost estimates of $0–$84 for a 4- 

cylinder, $0–$126 for a V–6, and $0– 

$168 for a V–8. For the final rule, 

NHTSA assumed there would be some 

cost associated with reducing engine 

friction, since at a minimum 

engineering and validation testing is 

required, in addition to any new 

components required such as roller 

followers or improved bearings. 

Additionally some revised components, 

such as improved surface materials/ 

treatments, piston rings, etc., have costs 

that vary by component size which need 

to account for the full range of engines 

under consideration in the rulemaking, 

from small displacement gasoline to 

large displacement diesel engines. 

Considering the above, NHTSA relied 

on confidential manufacturer comments 

in response to the NPRM to determine 

a lower technology cost bound of $35 

for a 4-cylinder engine and an upper 

cost of $195 for a 6 cylinder engine. 

These costs were marked up by a 1.5 

RPE factor to arrive at per-cylinder costs 

of $13 to $49 which were used to 

establish costs based on cylinder count. 

Costs of $52 to $196 for a 4-cylinder 

engine, $78 to $294 for a 6-cylinder 

engine, and $104 to $392 for an 8- 

cylinder engine were used in the final 

rule. 

Confidential manufacturer comments 

submitted in response to the NPRM 

showed an effectiveness range of 0.3 to 

2 percent for engine friction reduction. 

Besides the comments received another 

effectiveness estimate, a November 2007 

press release from Renault, claimed a 

gain of 2 percent over the NEDC 

cycle 162 from engine friction 

reduction.163 Based on the available 

sources, NHTSA established the fuel 

consumption effectiveness estimate for 

the final rule as 1 to 2 percent. 

Engine friction-reducing technologies 

are available from model year 2011 and 

may be applied to all vehicle subclasses. 

No learning factors were applied to 

costs as the technology has a loosely 

defined BOM which may in part consist 

of materials (surface treatments, raw 

materials) that are commodity based. As 

was the case in the NPRM, an average 

of 20 percent year-over-year phase-in 

rate starting in 2011 was adopted. As 

confirmed by manufacturers’ comments, 

NHTSA has maintained the NPRM 

position that engine friction reduction 

may only be applied in conjunction 

with a refresh cycle. 

(iv) Variable Valve Timing (VVT) 

Variable valve timing (VVT) is a 

classification of valve-train designs that 

alter the timing of the intake valve, 

exhaust valve, or both, primarily to 

reduce pumping losses, increase 

specific power, and control the level of 

residual gases in the cylinder. VVT 

reduces pumping losses when the 

engine is lightly loaded by positioning 

the valve at the optimum position 

needed to sustain horsepower and 

torque. VVT can also improve thermal 

efficiency at higher engine speeds and 

loads. Additionally, VVT can be used to 

alter (and optimize) the effective 

compression ratio where it is 

advantageous for certain engine 

operating modes. 

VVT has now become a widely 

adopted technology: For the 2007 model 

year, over half of all new cars and light 

trucks have engines with some method 

of variable valve timing. Therefore, the 

degree of further improvement across 

the fleet is limited by the level of 

valvetrain technology already 

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164 Docket No. NHTSA–2008–0089–0202.1, at 4. 

165Although CCP appears only in the SOHC and 

OHV branches of the decision tree, it is noted that 

a single phaser with a secondary chain drive would 

allow CCP to be applied to DOHC engines. Since 

this would potentially be adopted on a limited 

number of DOHC engines NHTSA did not include 

it in that branch of the decision tree. 

166 It is also noted that coaxial camshaft 

developments would allow other VVT options to be 

applied to OHV engines. However, since they 

would potentially be adopted on a limited number 

of OHV engines NHTSA did not include them in 

the decision tree. 

167Robert Stein, Tachih Chou, and Jeffrey Lyjak, 

‘‘The Combustion System Of The Ford 5.4 L 3 Valve 

Engine,’’ Global Powertrain Congress 2003— 

Advanced Engine Design & Performance, Sep 2003, 

Volume 24. Available at http://www.gpc-icpem.org/ 

pages/publications.html (last accessed Nov. 8, 

2008). 

implemented on the vehicles. 

Comments from Ford received in 

response to the NPRM indicate that 

many of its new and upgraded engines 

during the specified time period will 

launch with or upgrade to advanced 

forms of VVT, which are discussed 

below.164 Information found in the 

submitted product plans is used to 

determine the degree to which VVT 

technologies have already been applied 

to particular vehicles to ensure the 

proper level of VVT technology, if any, 

is applied. There are three different 

implementation classifications of 

variable valve timing: ICP (Intake Cam 

Phasing), where a cam phaser is used to 

adjust the timing of the inlet valves 

only; CCP (Coupled Cam Phasing), 

where a cam phaser is used to adjust the 

timing of both the inlet and exhaust 

valves equally; and DCP (Dual Cam 

Phasing), where two cam phasers are 

used to control the inlet and exhaust 

valve timing independently. Each of 

these three implementations of VVT 

uses a cam phaser to adjust the camshaft 

angular position relative to the 

crankshaft position, referred to as 

‘‘camshaft phasing.’’ This phase 

adjustment results in changes to the 

pumping work required by the engine to 

accomplish the gas exchange process. 

The majority of current cam phaser 

applications use hydraulically actuated 

units, powered by engine oil pressure 

and managed by a solenoid that controls 

the oil pressure supplied to the phaser. 

Electrically actuated cam phasers are 

relatively new, but are now in volume 

production with Toyota, which suggests 

that technical issues have been resolved. 

Honda commented that VVT is not 

applicable on existing engine designs 

that do not already contain these 

technologies due to durability, noisevibration-harshness (NVH), thermal, 

packaging, and other constraints that 

require engine redesign. 

1. Intake Cam Phasing (ICP) 

Valvetrains with ICP can modify the 

timing of the inlet valves by phasing the 

intake camshaft while the exhaust valve 

timing remains fixed. This requires the 

addition of a cam phaser on each bank 

of intake valves on the engine. An inline 4-cylinder engine has one bank of 

intake valves, while V-configured 

engines have two banks of intake valves. 

In the NPRM, NHTSA and EPA 

estimated that ICP would cost $59 per 

cam phaser or $59 for an in-line 4 

cylinder engine and $119 for a V-type, 

for an overall cost estimate of $59 to 

$119, based on the NAS, NESCCAF, and 

EEA reports and confidential 

manufacturer data. NHTSA received 

several updated cost estimates 

confidentially from manufacturers for 

ICP costs in response to the NPRM that 

varied over a wide range from $35 to 

$300, and additionally looked to the 

2008 Martec report for costing guidance. 

According to the 2008 Martec report, 

content assumptions for ICP costing 

include the addition of a cam phaser 

and oil control valves at $25 and $10 

respectively, per bank, which agreed 

with confidential manufacturer data 

received in response to the NPRM. 

These figures were then adjusted to 

include an incremental camshaft sensor 

per bank at $4, and an additional $2 

increase to account for an ECU upgrade 

as shown by confidential data. Using a 

markup of 1.5 to yield a RPE value, the 

incremental cost for ICP in the final rule 

is estimated to be $61 per bank, 

resulting in a $61 charge for in-line 

engine configurations and $122 for Vengine configurations. 

For fuel economy effectiveness 

values, NHTSA tentatively concluded in 

the NPRM that the incremental gain in 

fuel consumption for ICP would be 1 to 

2 percent depending on engine 

configuration, in agreement with the 

NESCCAF study. Confidential 

manufacturer data submitted in 

response to the NPRM showed a larger 

effectiveness range of 1.0 to 3.4 percent, 

although the majority of those estimates 

fell at the lower end of that range. Based 

on the comments received, NHTSA 

retained the NPRM estimates of 1 to 2 

percent incremental improvement in 

fuel consumption due to ICP. 

ICP is applicable to all vehicle classes 

and can be applied at the refresh cycle. 

For the final rule, NHTSA has combined 

the phase-in caps for ICP, CCPS, CCPO 

and DCP and capped the joint 

penetration allowed at 15 percent in MY 

2011 with time-based learning applied. 

2. Coupled Cam Phasing (CCPS and 

CCPO) 

Valvetrains with coupled (or 

coordinated) cam phasing can modify 

the timing of both the inlet valves and 

the exhaust valves an equal amount by 

phasing the camshaft of a single 

overhead cam (SOHC) engine or an 

overhead valve (OHV) engine.165 For 

overhead cam engines, this requires the 

addition of a cam phaser on each bank 

of the engine. Thus, an in-line 4- 

cylinder engine has one cam phaser, 

while V-engines have two cam phasers. 

For overhead valve (OHV) engines, 

which have only one camshaft to 

actuate both inlet and exhaust valves, 

CCP is the only VVT implementation 

option available.166

In the NPRM, NHTSA explained that 

for an OHV engine, the same phaser 

added for ICP would be used for CCP 

control, so the cost for CCP should be 

identical to that for ICP. For an OHV, 

since only one phaser would be 

required since only camshaft exists, 

NHTSA estimated the cost for CCP at 

$59 regardless of engine configuration, 

using the logic provided for ICP. For 

purposes of the final rule, the logic for 

ICP also carries over to the cost 

estimates for CCP. Cost assumptions for 

CCP are the same as ICP resulting in 

RPE-adjusted costs of $61 for in-line 

SOHC or OHV engines and $122 for 

SOHC V-engine configurations, 

incremental to an engine without VVT. 

For fuel economy effectiveness, 

NHTSA estimated in the NPRM that the 

incremental gain in fuel consumption 

for CCP is 1 to 3 percent above that 

obtained by ICP, in agreement with the 

NESCCAF report and confidential 

manufacturer data. Confidential 

manufacturer data submitted in 

response to the NPRM also showed an 

effectiveness range of 1 to 3 percent for 

CCP, although Ford has publicly 

reported a 3.3 percent improvement for 

CCP when applied to its 5.4 liter 3-valve 

V8 engine (which has high EGR 

tolerance due to the valve-masking 

effect with the 3-valve design).167 Most 

engines are not as EGR-tolerant and so 

will not achieve as much effectiveness 

from CCP as the Ford engine. For 

purposes of the final rule, NHTSA 

essentially carried over the NPRM 

incremental effectiveness of applying 

the CCP technologies to be 1 to 3 

percent. CCP can be applied to any class 

of vehicles at refresh. For the final rule, 

NHTSA has combined the phase-in caps 

for ICP, CCPS, CCPO and DCP and 

capped the joint penetration at 15 

percent in MY 2011. Since these 

technologies are mature and in high 

volume, time-based learning factors are 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14275 

168Meyer, BMW, ‘‘Turbo-Charging BMW’s SprayGuided DI Combustion System—Benefits and 

Challenges,’’ Global Powertrain Congress, 

September, 2005, vol. 33. Available at http:// 

www.gpc-icpem.org/pages/publications.html (last 

accessed Nov. 8, 2008). 

169Ulrich Kramer and Patrick Phlips, ‘‘Phasing 

Strategy For An Engine With Twin Variable Cam 

Timing,’’ SAE Technical Paper 2002-01-1101, 2002. 

Available at http://www.sae.org/technical/papers/ 

2002-01-1101. (last accessed Nov. 9, 2008), 

170 Docket No. NHTSA–2008–0089–0179.1, p 59 

and Docket No. NHTSA–2008–0089–0046, p. 52. 

171Mark Sellnau and Eric Rask, ‘‘Two-Step 

Variable Valve Actuation For Fuel Economy, 

Emissions, and Performance, Delphi Research Labs, 

SAE 2003–01–0029. Available at http:// 

www.sae.org/technical/papers/2003-01-0029. (last 

accessed Nov. 9, 2008). 

applied. CCP can be applied to any class 

of vehicles. 

3. Dual Cam Phasing (DCP) 

The most flexible VVT design is dual 

(independent) cam phasing, where the 

intake and exhaust valve opening and 

closing events are controlled 

independently. This option allows the 

option of controlling valve overlap, 

which can be used as an internal EGR 

strategy. At low engine loads, DCP 

creates a reduction in pumping losses, 

resulting in improved fuel consumption. 

Additionally, increased internal EGR 

results in lower engine-out NOX

emissions and improved fuel 

consumption. This fuel economy 

improvement depends on the residual 

tolerance of the combustion system, as 

noted in the CCP section above. 

Additional improvements are observed 

at idle, where low valve overlap can 

result in improved combustion stability, 

potentially reducing idle fuel 

consumption. 

In the NPRM, NHTSA estimated costs 

for DCP by building upon the cost 

estimates for ICP, where an additional 

cam phaser is added to control each 

bank of exhaust valves less the cost of 

the EGR valve which can be deleted. 

This resulted in an NPRM cost range of 

$89 to $209. For purposes of the final 

rule, cost assumptions for DCP, which 

included inflation, were determined by 

essentially doubling the ICP hardware, 

yielding an incremental cost of $61 per 

engine cylinder bank, over ICP. This 

translates to a cost of $61 for in-line 

engines and $122 for V-engine 

configurations, incremental to ICP 

technology. 

For fuel economy effectiveness, 

NHTSA estimated in the NPRM that the 

incremental gain in fuel consumption 

for DCP is 1 to 3 percent, in agreement 

with the NESCCAF report and 

confidential manufacturer data. 

Confidential manufacturer data received 

in response to the NPRM showed an 

effectiveness range of 0.5 to 3.4 percent 

for DCP. Publicly available data from 

BMW168 and Ford 169 show an 

effectiveness of 5 percent for DCP over 

engines without VVT, agreeing with the 

upper bounds for ICP and DCP 

combined. For purposes of the final 

rule, NHTSA concluded that the 

effectiveness for DCP should be at the 

upper end of the CCP range due to the 

additional flexibility gained through 

independent control of intake and 

exhaust valve timing, and therefore 

estimated an incremental fuel 

consumption reduction of 2 to 3 percent 

for DCP incremental to the 1 to 2 

percent for ICP. 

There are no class-specific 

applications of this technology and DCP 

can be applied at the refresh cycle. For 

the final rule, NHTSA has combined the 

annual average phase-in caps for ICP, 

CCPS, CCPO and DCP and capped the 

joint penetration at 15 percent in MY 

2011. The DCP technology is assumed to 

be produced at high volume, thus timebased learning is applied. 

(v) Discrete Variable Valve Lift (DVVLS, 

DVVLD, DVVLO) 

DVVL systems allow the selection 

between two or three separate cam 

profiles by means of a hydraulically 

actuated mechanical system. By 

optimizing the cam profile for specific 

engine operating regions, the pumping 

losses can be reduced by reducing the 

amount of throttling required to produce 

the desired engine power output. This 

increases the efficiency of the engine. 

DVVL is normally applied together with 

VVT control. DVVL is also known as 

Cam Profile Switching (CPS). DVVL is a 

mature technology with low technical 

risk. 

In the NPRM, based on the NESCCAF 

report and confidential manufacturer 

data, NHTSA estimated the incremental 

cost for DVVL at $169 to $322 compared 

to VVT depending on engine size, 

which included $25 for controls and 

associated oil supply needs. In response 

to the NPRM, confidential manufacturer 

comments noted a cost range of $150 to 

$600 for DVVL on OHC engines. Sierra 

Research has noted costs ranging from 

$518 to $656 for DVVL including dual 

cam phasers on a mid-size car and $634 

to $802 on trucks.170 For purposes of the 

final rule, NHTSA has changed the 

order of the technologies in the decision 

trees which has changed how the DVVL 

costs are handled. 

For the overhead cam engines, SOHC 

and DOHC, the costs were derived by 

taking $30 per cylinder for lost motion 

devices, adding a $4 incremental cost 

for a camshaft position sensor upgrade 

and $10 for an oil control valve on each 

engine cylinder bank, as indicated by 

the 2008 Martec report. This assumes 

that one lost motion device is used to 

control either a single intake valve on an 

SOHC engine or a pair of intake valves 

on a DOHC engine, as was done in the 

NPRM. NHTSA’s independent review 

concurred with data in the 2008 Martec 

report because it contained the most 

complete published description of 

DVVL costs and it agreed with 

confidential manufacturer data received 

in response to the NPRM NHTSA 

adopted these cost estimates for the 

final rule, such that incremental costs 

for DVVLS and DVVLD, including a 1.5 

RPE markup, are $201 for an in-line 4- 

cylinder engine, $306 for V–6 engines, 

and $396 for V–8 engines. For overhead 

valve engines, OHV, the costs for V6 

and V8 engines do not include the lost 

motion devices and control hardware 

since DVVLO follows cylinder 

deactivation on the OHV decision tree 

path and employs similar lost motion 

devices. Rather, the DVVLO cost is for 

active engine mounts on V6 and V8 

OHV engines which was based on $50 

variable cost from Martec, adjusted to 

2007 dollars and marked up with a 1.5 

RPE factor to $76. For in-line 4-cylinder 

engines cylinder deactivation is not 

allowed so the cost for DVVLO is the 

same as for DVVLS and DVVLD at $201. 

For fuel economy effectiveness, in the 

NPRM NHTSA estimated that DVVL 

could incrementally reduce fuel 

consumption by 0.5 to 3 percent 

compared to VVT. Confidential 

manufacturer comments received in 

response to the NPRM indicated a 2 

percent effectiveness for DVVL, while 

the Alliance commented that a two-step 

system with dual cam phasing could 

reduce fuel consumption by 6.3 percent, 

with 1.3 percent attributable to DVVL. 

Publicly-available estimates suggest an 

improvement over the NEDC test cycle 

of 8 percent for DCP with 2 stage inlet 

DVVL applied to a 1.6 liter DOHC 4 

cylinder engine in a 1500 kg vehicle.171

With the DCP system expected to 

deliver 5 percent effectiveness, this 

suggests the DVVL system is giving 

approximately 3 percent. The comments 

received from manufacturers and 

publicly available data are in alignment 

with independent review suggesting a 

range of 1 to 3 percent for overhead cam 

engines with VVT. NHTSA has therefore 

estimated an incremental reduction in 

fuel consumption for DVVLS and 

DVVLD of 1 to 3 percent for purposes 

of the final rule. On OHV engines, 

DVVLO is applied following both VVT 

and cylinder deactivation, therefore the 

fuel consumption effectiveness has been 

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14276 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

172See Johannes Liebl, Manfred Kluting, Jurgen 

Poggel, and Stephen Missy, BMW, ‘‘The New BMW 

4–Cylinder Engine with Valvetronic Part 2: 

Thermodynamics and Functional Features,’’ MTZ 

Worldwide, July/Aug. 2001, pp 26–29. See also 

Meyer, BMW, ‘‘Turbo-Charging BMW’s SprayGuided DI Combustion System—Benefits and 

Challenges,’’ Global Powertrain Congress, Sept. 

2005, vol. 33. Available at http://www.gpcicpem.org/pages/publications.html (last accessed 

Nov. 8, 2008). See also Rainer Wurms, Philipp 

Lobbert, Stefan Dengler, Ralf Budack, and Axel 

Eiser, Audi, ‘‘How Much VVT Makes Sense?’’ Haus 

der Technik Conference on Variable Valve Control, 

Essen, Feb. 2007. 

reduced from 1 to 3 percent for OHC 

engines to 0.5 to 2.6 percent. 

This technology may be applied to 

any class of vehicles with any kind of 

engine at the redesign cycle. For the 

final rule, NHTSA has combined the 

phase-in caps for DVVLS, DVVLD, 

DVVLO and CVVL and capped the joint 

penetration allowed at 15 percent in MY 

2011 with time-based learning applied. 

Other technologies, such as 

continuously variable valve lift (CVVL), 

described below, will be implemented 

in place of DVVL in some applications 

where the fuel economy requirements 

dictate further optimization of the 

engine’s breathing characteristics to 

improve efficiency. 

(vi) Continuously Variable Valve Lift 

(CVVL) 

In CVVL systems, maximum valve lift 

is varied by means of a mechanical 

linkage, driven by an actuator controlled 

by the engine control unit. The valve 

opening and phasing vary as the 

maximum lift is changed; the relation 

depends on the geometry of the 

mechanical system. BMW has the most 

production experience with CVVL 

systems and has sold port-injected 

‘‘Valvetronic’’ engines since 2001. CVVL 

allows the airflow into the engine to be 

regulated by means of inlet valve 

opening reduction, which improves 

engine efficiency by reducing pumping 

losses from throttling the intake system 

further upstream as with a normally 

throttled engine. 

Variable valve lift gives a further 

reduction in pumping losses compared 

to that which can be obtained with cam 

phase control only, with CVVL 

providing greater effectiveness than 

DVVL, since it can be fully optimized 

for all engine speeds and loads, and is 

not limited to a two or three step 

compromise. There may also be a small 

reduction in valvetrain friction when 

operating at low valve lift. This results 

in improved low load fuel consumption 

for cam phase control with variable 

valve lift as compared to cam phase 

control only. Most of the fuel economy 

effectiveness is achieved with variable 

valve lift on the inlet valves only. 

It is generally more difficult to 

achieve good cylinder-to-cylinder 

airflow balance at low load with a CVVL 

valve-throttled engine due to the 

sensitivity of airflow to small 

differences in lift caused by 

manufacturing tolerances. BMW has 

reported mixture quality issues with 

CVVL and port fuel injection, requiring 

a compromise on pumping work 

reduction to ensure good mixture 

quality. In addition, a small amount of 

throttling is necessary with CVVL to 

maintain the vacuum required for power 

brake assist, unless a separate vacuum 

pump is used. BMW calibrations 

maintain a small amount of inlet 

manifold depression on their 

‘‘Valvetronic’’ engines to allow the 

brake servo to function, which reduces 

the efficiency gain from the system 

somewhat. Tumble air motion generated 

by the inlet port is not available in the 

cylinder at low valve lift, which has an 

effect on combustion characteristics. 

The high gas velocities at the valve seat 

generate high turbulence levels, but 

most of this has decayed by the time of 

ignition. This phenomenon could 

potentially lead to sub-optimal 

combustion characteristics, which 

would reduce the fuel consumption 

effectiveness of the technology. 

In the NPRM, NHTSA estimated the 

cost for CVVL of $254 to $508 compared 

to VVT, with cost estimates varying 

from $254 for a 4-cylinder engine, $466 

for a 6-cylinder engine, and $508 for an 

8-cylinder engine, based on confidential 

manufacturer data and the NESCCAF 

report, with more weight given to the 

manufacturer data. As for DVVL, for 

purposes of the final rule, NHTSA relied 

primarily on the 2008 Martec report, 

because it contained the most complete 

published description of CVVL costs 

and agreed with confidential 

manufacturer data received in response 

to the NPRM. The system consists of 1 

stepper motor per bank to control an 

eccentric shaft and the costs as 

described by Martec include dual cam 

phasing are $285 for an in-line 

4-cylinder engine, $450 for a V–6 

engine, and $550 for a V–8 engine. 

Applying a 1.5 RPE markup factor to 

these variable costs, and then deducting 

$122 for the incremental cost of both 

ICP and DCP per bank, the incremental 

RPE cost is $306 for a 4-cylinder engine, 

$432 for a 6-cylinder engine and $582 

for an 8-cylinder engine. 

For fuel economy effectiveness, in the 

NPRM NHTSA estimated that CVVL 

could incrementally reduce fuel 

consumption by 1.5 to 4 percent 

compared to VVT, based on confidential 

manufacturer data and the NESCCAF 

report. Confidential manufacturer 

comments received in response to the 

NPRM suggested a range of 3 to 7.4 

percent incremental fuel consumption 

savings. NHTSA also found several 

sources reporting a 5 percent additional 

fuel consumption effectiveness over the 

NEDC cycle when applying CVVL to an 

engine with dual cam phasers.172 For 

purposes of the final rule, NHTSA has 

estimated the reduction in fuel 

consumption for CVVL at 1.5 to 3.5 

percent over an engine with DCP. This 

estimate is lower than the effectiveness 

reported by BMW and allows the 

application of CVVL without the need 

for the high level of manufacturing 

complexity inherent in BMW’s 

‘‘Valvetronic’’ engines. 

There are no class specific 

applications of this technology, 

although it appears in only the DOHC 

portion of the decision tree. Due to the 

changes required to implement DVVL 

on an engine the Volpe model allows it 

to be applied at redesign model years 

only with time-based learning applied. 

For the final rule, NHTSA has combined 

the phase-in caps for DVVLS, DVVLD, 

DVVLO and CVVL and capped the joint 

penetration allowed at 20 percent per 

year on average (15 percent in year one). 

There is no technical reason this 

technology could not be applied to all 

DOHC engines, but due to engineering 

resource limitations it is unlikely that 

CVVL will be applied to all engines, and 

that other technologies such as DVVL 

will be used in some instances. 

(vii) Cylinder Deactivation (DEACS, 

DEACD, DEACO) 

In conventional spark-ignited engines, 

combustion occurs in all cylinders of 

the engine (i.e., the engine is ‘‘firing on 

all cylinders’’), and throttling the 

airflow controls the engine output, or 

load. This is an inefficient method of 

operating the engine at low loads as 

pumping losses result from throttling. 

Cylinder deactivation (DEAC) can 

improve engine efficiency by disabling 

or deactivating half of the cylinders 

when the load is less than half of the 

engine’s total torque capability, 

allowing the active cylinders to operate 

at roughly twice the load level, and 

thereby incur roughly half the pumping 

losses. 

Simplistically, cylinder deactivation 

control strategy relies on setting 

maximum and minimum manifold 

absolute pressures (which are directly 

proportional to load) within which it 

can deactivate the cylinders. The engine 

operating range over which cylinder 

deactivation may be enabled is 

restricted by other factors as well, with 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14277 

173 Docket No. NHTSA–2008–0089–0215.1. 

noise, vibration, and harshness (NVH) 

being the primary concern; these 

restrictions all reduce the fuel economy 

effectiveness achievable with cylinder 

deactivation. In general, DEAC has very 

high sensitivity of efficiency gain 

relative to vehicle application, 

according to comments from Ford, 

Chrysler, the Alliance, and in 

confidential comments submitted in 

response to the NPRM. 

Manufacturers have stated that use of 

DEAC on 4-cylinder engines would 

cause unacceptable NVH; therefore 

NHTSA has not applied cylinder 

deactivation to 4-cylinder engines. In 

addition, to address NVH issues for V6 

and V8 engines, active engine mounts 

are included in the content list. Noise 

quality from both intake and exhaust 

systems has been problematic on some 

vehicle applications, and in some cases, 

has resulted in active exhaust systems 

solutions with an ECU-controlled valve. 

The NPRM reported an incremental 

cost range for DEAC at $203 to $229, 

citing manufacturer data as the most 

credible, with the bill of materials 

including lost motion devices for each 

cylinder. The 2008 Martec report 

estimated the additional hardware 

necessary for cylinder deactivation 

ranging between $50 for the addition of 

two active engine mounts ($75 RPE 

using 1.5 RPE factor) where DVVL 

already exists. This value has been 

adopted by NHTSA in the final rule so 

DEACS and DEACD costs are $75. For 

OHV engines NHTSA estimates the 

costs for DEACO as being $306 for V6 

engines and $400 for V8 engines that are 

not already equipped with DVVL using 

assumptions for lost motion devices 

plus incremental costs for oil control 

valves and camshaft position sensors as 

noted in the DVVL section. 

For fuel economy effectiveness, in the 

NPRM NHTSA estimated that cylinder 

deactivation could reduce fuel 

consumption by 4.5 to 6 percent. As 

noted, DEAC has very high sensitivity of 

efficiency gain relative to vehicle 

application. Chrysler, for example, 

stated that the effectiveness could range 

from 3 to 10 percent on the same engine 

depending on the specific vehicle 

application.173 Confidential 

manufacturer comments received in 

response to the NPRM reported a range 

of 3 to 7.5 percent. For the final rule, the 

incremental fuel consumption 

effectiveness varies depending on which 

branch of the decision tree it is on: For 

DOHC engines which are already 

equipped with DCP and DVVLD there is 

little benefit that can be achieved since 

the pumping work has already been 

minimized and internal EGR rates are 

maximized, so the effectiveness ranges 

from 0 to 0.5 percent for DEACD; for 

SOHC engines which have CCP and 

DVVLS applied, NHTSA estimates a 2.5 

to 3 percent effectiveness for DEACS; 

and for OHV engines, which do not 

have VVT or VVL technologies, the 

effectiveness for DEACO ranges from 3.9 

to 5.5 percent. 

This technology may be applied only 

to V–6 and V–8 engines, as discussed 

above, and so does not apply to vehicle 

classes with I–4 engines. DEAC can be 

applied during a redesign or refresh 

model year with time-based learning. 

NHTSA proposed to raise the phase-in 

cap for this technology to 20 percent per 

year in the NPRM. For the final rule, 

NHTSA has combined the phase-in caps 

for DEACS, DEACD and DEACO and 

capped the joint penetration allowed at 

9 percent in MY 2011. 

(viii) Conversion to Double Overhead 

Camshaft Engine With Dual Cam 

Phasing (CDOHC) 

This technology was named ‘‘Multivalve Overhead Camshaft Engine’’ in the 

NPRM. Engines with overhead cams 

(OHC) and more than two valves per 

cylinder achieve increased airflow at 

high engine speeds and reductions of 

the valvetrain’s moving mass and enable 

central positioning of the spark plug. 

Such engines typically develop higher 

power at high engine speeds. In the 

NPRM, the model was generally not 

allowed to apply multivalve OHC 

technology to OHV engine, except 

where continuous variable valve timing 

and lift (CVVL) is applied to OHV 

engine. In that case, the model assumed 

conversion to a DOHC valvetrain, 

because a DOHC valvetrain is a 

prerequisite for the application of any 

advanced engine technology over and 

above CVVL. Since applying CVVL to an 

OHV engine is the last improvement 

that could be made, it was assumed that 

manufacturers would redesign that 

engine as a DOHC and include CVVL as 

part of that redesign. 

However, it appears likely that 

vehicles will still use overhead valve 

(OHV) engine with pushrods and one 

intake and one exhaust valve per 

cylinder into the next decade. For the 

final rule, NHTSA assumed that 

conversion of an OHV engine to a DOHC 

engine would more likely be 

accompanied by dual cam phasing 

(DCP) than by CVVL, since DCP 

application rates are higher than CVVL 

rates. 

For V8 engines, the incremental cost 

to redesign an OHV engine as a DOHC 

with DCP was estimated as $746 which 

includes $415 for the engine conversion 

to DOHC per the 2008 Martec report and 

a 1.5 RPE factor, plus $122 for an 

incremental cam phasing system 

(reflecting the doubling of cam shafts). 

For a V6 engine we estimated 75 percent 

of the V8 engine cost to convert to 

DOHC plus the same incremental 

coupled cam phasing cost to arrive at 

$590. For inline 4-cylinder engines, 50 

percent of the V8 engine conversion 

costs were assumed and one additional 

cam phasing system yielding an 

incremental cost including a 1.5 RPE 

factor of $373. 

For fuel economy effectiveness, 

NHTSA estimated in the NPRM that the 

incremental gain in fuel consumption 

for conversion of an OHV engine with 

cylinder deactivation and CCP to a 

DOHC engine with CVVL at 1 to 4 

percent, in agreement with the 

NESCCAF report and confidential 

manufacturer data. The fuel 

consumption benefit for converting an 

OHV engine to a DOHC engine with 

DCP is due largely to friction reduction 

according to a confidential 

manufacturer comment. For the final 

rule the upper bound stated in the 

NPRM was reduced because DCP will 

give less improvement than CVVL 

compared to an engine that already has 

cylinder deactivation and CCP applied. 

NHTSA estimates the incremental fuel 

consumption effectiveness at 1 to 2.6 

percent independent of the number of 

engine cylinders. 

There are no class-specific 

applications of this technology. In the 

NPRM, NHTSA proposed raising the 

phase-in cap to 20 percent per year, but 

has concluded for the final rule that a 

9 percent phase-in cap for MY 2011 is 

more consistent with manufacturers’ 

comments. No comments were received 

regarding phase-in rates of converting 

OHV engines to DOHC. The conversion 

from OHV to DOHC engine architecture 

with DCP is a major engine redesign that 

can be applied at redesign model years 

only with time-based learning applied. 

(ix) Stoichiometric Gasoline Direct 

Injection (SGDI) 

In gasoline direct injection (GDI) 

engines, fuel is injected into the 

cylinder rather than into the inlet 

manifold or inlet port. GDI allows for 

the compression ratio of the engine to be 

increased by up to 1.5 units higher than 

a port-injected engine at the same fuel 

octane level. As a result of the higher 

compression ratio, the thermodynamic 

efficiency is improved, which is the 

primary reason for the fuel economy 

effectiveness with stoichiometric DI 

systems. The compression ratio increase 

comes about as a result of the incylinder air charge cooling that occurs 

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14278 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

174SGDI was referred to as GDI or SIDI in the 

NPRM. 

175Paul Whitaker, Ricardo, Inc., ‘‘Gasoline Engine 

Performance and Emissions—Future Technologies 

and Optimization,’’ ERC Symposium, Low Emission 

Combustion Technologies for Future IC Engines, 

Madison, WI, June 8–9, 2005. Available at http:// 

www.erc.wisc.edu/symposiums/2005_Symposium/ 

June%208%20PM/Whitaker_Ricardo.pdf (last 

accessed Nov. 9, 2008). 

176Stefan Trampert, FEV Motorentechnik GmbH, 

‘‘Engine and Transmission Development Trends— 

Rising Fuel Cost Pushes Technology,’’ Symposium 

on International Automotive Technology, Pune, 

India, January 2007. 

as the fuel, which is sprayed directly 

into the combustion chamber, 

evaporates. 

Volumetric efficiency in naturallyaspirated GDI engines can also be 

improved by up to 2 percent, due to 

charge cooling, which improves the full 

load torque. The improved full load 

torque capability of GDI engines can 

have a secondary effect on fuel economy 

by enabling engine downsizing, thereby 

reducing fuel consumption. 

Two operating strategies can be used 

in gasoline DI engines, characterized by 

the mixture preparation strategy. One 

strategy is to use homogenous charge 

where fuel is injected during the intake 

stroke with a single injection. The aim 

is to produce a homogeneous air-fuelresidual mixture by the time of ignition. 

In this mode, a stoichiometric air/fuel 

ratio can be used and the exhaust 

aftertreatment system can be a relatively 

low cost, conventional three-way 

catalyst. Another strategy is to use 

stratified charge where fuel is injected 

late in the compression stroke with 

single or multiple injections. The aim 

here is to produce an overall lean, 

stratified mixture, with a rich area in the 

region of the spark plug to enable stable 

ignition. Multiple injections can be used 

per cycle to control the degree of 

stratification. Use of lean mixtures 

significantly improves efficiency by 

reducing pumping work, but requires a 

relatively high cost lean NOX trap in the 

exhaust aftertreatment system. 

For purposes of this rulemaking, only 

homogeneous charge stoichiometric DI 

systems were considered, due to the 

anticipated unavailability of low sulfur 

gasoline during the time period 

considered. This decision was 

supported by comments from Mercedes, 

which sells lean burn DI engines in 

other world markets, stating that lean 

burn DI engines cannot function in the 

absence of ultra-low sulfur gasoline. 

Lean NOX trap technologies require 

ultra-low sulfur gasoline to function at 

high conversion efficiency over the 

entire life cycle of a vehicle. 

Gasoline DI systems effectiveness 

from the increased efficiency of the 

thermodynamic cycle. The fuel 

consumption effectiveness from DI 

technology is therefore cumulative to 

technologies that target pumping losses, 

such as the VVT and VVLT 

technologies. The Sierra Research report 

stated that Sierra Research could not 

determine from the NPRM decision 

trees if VVLT technologies were 

retained when SGDI was applied. To 

clarify, as the model progresses through 

the decision trees, technologies 

preceding SGDI are retained in the 

cumulative effectiveness and cost. 

In the NPRM, NHTSA estimated the 

incremental fuel consumption 

effectiveness for naturally aspirated 

SGDI 174 to be 1 to 2 percent. The 

Alliance commented that it estimated 3 

percent gains in fuel efficiency, as well 

as a 7 percent improvement in torque, 

which can be used to mildly downsize 

the engine and give up to a 5.8 percent 

increase in efficiency. Other published 

literature reports a 3 percent 

effectiveness for SGDI,175 and another 

source reports a 5 percent improvement 

on the NEDC drive cycle.176

Confidential manufacturer data 

submitted in response to the NPRM 

reported an efficiency effectiveness 

range of 1 to 2 percent. For the final rule 

NHTSA has estimated, following 

independent review of all the sources 

referenced above, the incremental gain 

in fuel consumption for SGDI to be 

approximately 2 to 3 percent. 

Content assumptions for cost 

estimating of SGDI include no major 

changes to engine architecture 

compared to a port fuel injection engine, 

although cylinder head casting changes 

are required to incorporate the fuel 

injection system and the piston must 

change as well to suit the revised 

combustion chamber geometry. The fuel 

injection system utilizes an electricallydriven low pressure fuel pump to feed 

a high pressure mechanical pump, 

supplying fuel at pressures up to 200 

Bar. A common fuel rail supplies the 

injectors, which produce a highly 

atomized spray with a Sauter Mean 

Diameter (SMD) of 15–20 microns, 

which compares to approximately 50 

microns for a port injector. 

In the NPRM, NHTSA estimated the 

following incremental cost ranges for 

applying SGDI: $122 to $420 for an 

inline 4-cylinder engine, $204 to $525 

for a V6 engine, and $228 to $525 for a 

V8 engine. The Alliance commented 

that NHTSA had not accounted for the 

costs required to address NVH concerns 

associated with the implementation of 

SGDI. For purposes of the final rule, all 

costs have been based upon side mount 

DI technology as these costs were 

determined in the 2008 Martec Report to 

be lower than center mount DI systems. 

An applied RPE factor of 1.5 was used 

in all cases, and a NVH package was 

added to all engines in response to 

Alliance comments, providing 

incremental costs that ranged from $293 

to $440 for an I4 engine, to $384 to $558 

for a V6 engine and $512 to $744 for a 

V8 engine. 

Homogeneous, stoichiometric DI 

systems are regarded as mature 

technology with minimal technical risk 

and are expected to be increasingly 

incorporated into manufacturers’ 

product lineups. Time-based learning 

has been applied to this technology due 

to the fact that over 1.5 million vehicles 

containing this technology are now 

produced annually. Due to the changes 

to the cylinder head and combustion 

system and the control system 

development required to adopt SGDI 

technology, which are fairly extensive, 

SGDI can be applied only at redesign 

model years. There are no limitations on 

applying SGDI to any vehicle class. The 

phase-in cap for SGDI is applied at a 3 

percent rate for MY 2011 in order to 

account for the lead time required to 

incorporate SGDI engines. 

(x) Combustion Restart (CBRST) 

Combustion restart allows ‘‘start-stop’’ 

functionality of DI engines through the 

implementation of an upgraded starter 

with bi-directional rotation to allow 

precise crankshaft positioning prior to 

subsequent fuel injection and spark 

ignition, allowing engine restart. This 

method of implementing engine stop/ 

start functionality allows not only the 

fuel savings from not idling the engine, 

but also reduces fuel consumption as 

the engine speeds up to its operational 

speed. A Direct Injection (DI) fuel 

system is required for implementation 

of this technology. 

NHTSA has determined, upon 

independent review, combustion restart 

to be a high technical risk due to the 

following unresolved issues. First, very 

high or very low ambient air 

temperatures may limit the ability to 

start the engine in the described 

manner. Although the starter motor can 

provide fail-safe starting capability in 

these temperature limited areas, 

strategies must be developed to manage 

the transitions. Additionally, a fail-safe 

start strategy that recognizes failed 

attempts and responds quickly enough 

has yet to be demonstrated. The risk of 

missed start events is currently 

relatively high, which is unacceptable 

from a production implementation 

perspective. As a result, availability of 

this technology was assessed as beyond 

the emerging technology time frame for 

purposes of this MY 2011 rulemaking. 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14279 

177 Docket No. NHTSA–2008–0089–0179.1. 

178 Docket No. NHTSA–2008–0089–0173. 

179 Docket No. NHTSA–2008–0089–0173.4. 180 Docket No. NHTSA–2008–0089–0046, Docket 

No. NHTSA–2008–0089–0179.1. 181 David Woldring and Tilo Landenfeld of Bosch, 

and Mark J. Christie of Ricardo, ‘‘DI Boost: 

Application of a High Performance Gasoline Direct 

Injection Concept,’’ SAE 2007–01–1410. Available 

at http://www.sae.org/technical/papers/2007–01– 

1410 (last accessed Nov. 9, 2008). 182 Yves Boccadoro, Loı ̈c Kermanac’h, Laurent 

Siauve, and Jean-Michel Vincent, Renault 

Powertrain Division, ‘‘The New Renault TCE 1.2L 

Turbocharged Gasoline Engine,’’ 28th Vienna Motor 

Symposium, April 2007. 183Tobias Heiter, Matthias Philipp, Robert Bosch, 

‘‘Gasoline Direct Injection: Is There a Simplified, 

Continued 

(xi) Turbocharging and Downsizing 

(TRBDS) 

Forced induction in the form of 

turbocharging and supercharging has 

been used on internal combustion 

engines for many years. Their 

traditional role has been to provide 

enhanced performance for high-end or 

sports car applications. However, 

turbocharging and downsizing can also 

be used to improve fuel economy. There 

is a natural friction reduction with a 

boosted downsized engine, because 

engine friction torque is primarily a 

function of engine displacement. When 

comparing FMEP (Friction Mean 

Effective Pressure—friction torque 

normalized by displacement) there is 

very little difference between the full 

size naturally-aspirated engine and the 

boosted downsized engine despite the 

higher cylinder pressure associated with 

higher BMEP. Turbocharging and 

downsizing can also reduce pumping 

losses (PMEP), because a turbocharged 

downsized engine runs at higher BMEP 

(Brake Mean Effective Pressure) levels, 

and therefore higher manifold pressures, 

than a naturally aspirated engine. The 

upper limit of BMEP level that can be 

expected from a naturally aspirated 

engine is approximately 13.5 Bar, 

whereas a turbocharged engine can 

produce BMEP levels in excess of 20 

Bar. Engines that are not downsized and 

boosted use a throttle to regulate load, 

but this causes pumping losses as 

discussed previously. Thus, by using a 

small displacement engine with a 

turbocharger, the smaller engine works 

harder (higher cylinder load), which 

results in lower pumping loss since the 

throttle must be further open to produce 

the same road power output. 

Due to the incremental nature of the 

decision tree, engines having 

turbocharging and downsizing applied 

are assumed to have SGDI already 

applied. In boosted engines, SGDI 

allows improved scavenging of the 

cylinder, which reduces the internal 

exhaust gas residual level and the 

charge temperature. This in turn allows 

a higher compression ratio to be used 

for a given fuel octane rating and can 

therefore improve the fuel consumption 

of boosted SGDI engines. 

In most cases, a boosted downsized 

engine can replace a conventional 

naturally aspirated engine and achieve 

equivalent or greater (albeit at the 

expense of fuel economy) power and 

torque. However, there are some 

challenges associated with acceptance 

of a down sized boosted engine, 

including: 

• Achievement of ‘‘seamless’’ power 

delivery compared to the naturally 

aspirated engine (no perceptible turbo 

lag); 

• A complication in emissions 

regulatory compliance, because the 

addition of a turbocharger causes 

additional difficulty with catalyst light 

off due to the thermal inertia of the 

turbo itself; 

• Potential issue with customer 

acceptance of smaller-displacement 

engines, given a common perception 

that only larger-displacement engines 

can be high-powered; and 

• Additional base engine cost and 

vehicle integration costs. 

Manufacturers’ structural changes to 

the base engine are generally focused on 

increasing the structure’s capacity to 

tolerate higher cylinder pressures. 

NHTSA believes that it is reasonable to 

expect that the maximum cylinder 

pressure would increase by 25 to 30 

percent over those typical of a naturally 

aspirated engine. Another consideration 

is that higher pressures lead to higher 

thermal loads. 

One potential disadvantage of 

downsized and boosted engines is cost. 

Turbocharging systems can be 

expensive and are best combined with 

direct injection and other engine 

technologies. The Alliance expressed a 

related concern that the fuel economy 

effectiveness was based on the use of 

premium grade fuel in direct injection 

turbocharged engines, and argued that 

as the baseline vehicles were not fueled 

with premium gasoline, this gave the 

direct injection turbocharged engines an 

unrealistic advantage.177 However, 

CARB stated in its comments that 

premium fuel is not necessary for use 

with turbocharged downsized engines 

and that substantial effectiveness are 

still available with regular fuel.178 In 

fact, most turbocharged direct injection 

engines will have a compression ratio 

and calibration designed to give best 

performance on premium fuel, although 

they are safe to operate on regular fuel. 

On regular fuel, the knock sensor output 

is used to allow the ECU to keep the 

engine safe by controlling boost and 

ignition timing. Maximum torque is 

reduced on the lower octane fuel due to 

the ECU intervention strategy, but at 

part load, where knock is not an issue, 

the fuel economy will not be affected 

adversely relative to the estimated 

effectiveness. Additionally, the driver 

retains the choice of obtaining more 

performance by paying more for 

premium fuel and will still obtain stated 

fuel consumption effectiveness. 

Nevertheless, the case for using 

downsized boosted engines has 

strengthened with the wider 

introduction of direct injection gasoline 

engines. Downsized boosted engines 

with stoichiometric direct injection 

present minimal technical risk, although 

there have been only limited 

demonstrations of this technology 

achieving SULEV emission levels. 

In the NPRM, NHTSA estimated that 

downsized and turbocharged engines 

could incrementally reduce fuel 

consumption from 5 to 7.5 percent. 

CARB commented that Sierra Research 

in its presentation to the NAS 

committee on January 24, 2008, 

suggested there is no carbon dioxide 

reduction potential for turbocharging 

and downsizing, but argued that this is 

not supported by other vehicle 

simulation efforts nor by manufacturer 

plans to release systems such as the 

Ford EcoBoost.179 The Alliance and 

Sierra Research, in contrast, commented 

that turbocharged and downsized 

engines do not improve fuel economy 

unless they are also equipped with DI 

fuel systems and using premium fuel.180

NHTSA believes that turbocharging and 

downsizing, when combined with SGDI, 

offers benefits without the use of 

premium fuel as noted above. 

Confidential manufacturer data suggests 

an incremental range of fuel 

consumption reduction of 4.8 to 7.5 

percent for turbocharging and 

downsizing. Other publicly-available 

sources suggest a fuel consumption 

benefit of 8 to 13 percent compared to 

current-production naturally-aspirated 

engines without friction reduction or 

other fuel economy technologies: A joint 

technical paper by Bosch and Ricardo 

suggesting an EPA fuel economy gain of 

8 to 10 percent for downsizing from a 

5.7 liter port injection V8 to a 3.6 liter 

V6 with direct injection; 181 a Renault 

report suggesting a 11.9 percent NEDC 

fuel consumption gain for downsizing 

from a 1.4 liter port injection in-line 4- 

cylinder engine to a 1.0 liter in-line 4- 

cylinder engine with direct injection; 182

and a Robert Bosch paper suggesting a 

13 percent NEDC gain for downsizing to 

a turbocharged DI engine.183 These 

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14280 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

Cost-Optimal System Approach for an Attractive 

Future of Gasoline Engines?’’ AVL Engine & 

Environment Conference, September 2005. 

184NHTSA also examined the Jetta TDI as an 

example of a current vehicle model that comes in 

both diesel and gasoline-engine form, but in 

attempting to do an apples-to-apples comparison 

with the non-turbocharged/downsized version, the 

SE, found indications that VW appears to be 

keeping the cost of the TDI down by removing other 

content (e.g., the SE has a sunroof, which normally 

costs around $1,000, while the TDI does not). Thus, 

NHTSA did not find VW’s price differential for the 

two versions of the Jetta to be convincing evidence 

of the actual cost of turbocharging and downsizing 

an engine. 

reported fuel economy benefits show a 

wide range in large part due to the 

degree of vehicle attribute matching 

(such as acceleration performance) that 

was achieved. 

For purposes of the final rule, NHTSA 

estimated a net fuel consumption 

reduction of approximately 14 percent 

for a turbocharged downsized DOHC 

engine with direct injection and DCP 

over a baseline fixed-valve engine that 

does not incorporate friction reducing 

technologies. This equates to an 

incremental fuel consumption reduction 

of 2.1 to 5.2 percent for TRBDS, which 

is incremental to an engine with SGDI 

and previously applied technologies 

(e.g., VVT and VVL) as defined by the 

decision tree. This wide range is 

dependent upon the decision tree path 

that is followed or the configuration of 

the engine prior to conversion to 

TRBDS. The incremental fuel 

consumption benefit for TRBDS is 

estimated to range from 2.1 to 2.2 

percent for V6 and V8 engines and from 

4.5 to 5.2 percent for inline 4-cylinder 

engines. As explained, the incremental 

improvement from TRBDS must be 

added to the previous technology point 

on the decision tree. In the case of 

SOHC and OHV engines, for example, 

moving to the TRBDS technology also 

assumes implementation of DOHC 

engine architecture in addition to DCP 

and SGDI. 

In the NPRM, NHTSA estimated that 

the cost for a boosted/downsized engine 

system would be $690 for small cars, 

$810 for large trucks, and $120 for all 

other vehicle classes, based on the NAS 

report, the EEA report, and confidential 

manufacturer data, which assumed 

downsizing allowed the removal to two 

cylinders in most cases, except for small 

cars and large trucks. CARB questioned 

Martec’s cost estimates for 

turbocharging and downsizing, 

specifically the credit for downsizing a 

V6 engine to an in-line 4 cylinder 

dropped from their estimate used in the 

NESCCAF report of $700 to $310 and 

the use of more expensive hardware 

than some manufacturers use. In 

response, NHTSA’s independent review 

of the cost to downsize a V6 DOHC 

engine to a I4 DOHC engine closely 

aligned with the 2008 Martec credit of 

$310, while the report for NESCCAF 

was not specific with regard to the 

assumptions used to construct that 

estimate. Additionally, confidential 

manufacturer data submitted in 

response to the NPRM provided a range 

for TRBDS with SGDI of $600 to $1,400 

variable cost or $900 to $2,100 RPE 

assuming a 1.5 markup factor. When 

comparing the confidential 

manufacturer cost range and the 

incremental RPE cost estimates for the 

final rule, it is important to realize the 

incremental cost for TRBDS does not 

include SGDI since it is considered a 

separate technology.184

Some of the costs included in 

turbocharging and downsizing come 

from structural changes due to the 

higher cylinder pressures and increased 

cylinder temperatures, which also drive 

additional cooling requirements (e.g. 

water-cooled charge air cooler, 

circulation pump, and thermostats) and 

require improved exhaust valve 

materials. High austenitic stainless steel 

exhaust manifolds and upgraded main 

bearings are some of the other hardware 

upgrades required. For purposes of the 

final rule, NHTSA used cost data from 

the 2008 Martec report, but constructed 

a bill of materials consistent with the 

incremental TRBDS technology as 

shown in the decision trees and based 

on confidential manufacturer data. For 

the vehicle subclasses which have a 

baseline gasoline V8 engine, two 

turbochargers rated for 1050 °C at $250 

each were added, $270 was deducted for 

downsizing to a V6 from a V8 engine, 

$217 was added for engine upgrades to 

handle higher operating pressures and 

temperatures at, and a water-cooled 

charge air cooler was added at $280. 

The baseline SOHC engine was 

converted to a DOHC engine with 4 

valves per cylinder at a variable 

incremental cost of $92. The total 

variable costs summed to $819 and a 1.5 

RPE factor was applied to arrive at 

$1,229 incremental cost to 

turbocharging and downsizing. 

For the vehicle subclasses which have 

a baseline gasoline V6 engine, a twinscroll turbocharger rated for 1050 °C 

was added at a cost of $350, $310 was 

deducted for downsizing to an I4 from 

a V6 engine, $160 was added for engine 

upgrades to handle higher operating 

pressures and temperatures, and a 

water-cooled charge air cooler was 

added at $259. The baseline SOHC 

engine was converted to a DOHC engine 

with 4 valves per cylinder at a variable 

incremental cost of $87. The total 

variable costs summed to $548 and a 1.5 

RPE factor was applied to arrive at $822 

incremental cost to turbocharging and 

downsizing. 

For the vehicle subclasses which have 

a baseline gasoline I4 engine, a twinscroll turbocharger rated for 1050 °C 

was added at a cost of $350, $160 was 

added for engine upgrades to handle 

higher operating pressures and 

temperatures, and a water-cooled charge 

air cooler was added at $259. The 

baseline SOHC engine was converted to 

a DOHC engine with 4 valves per 

cylinder at a variable incremental cost 

of $46. The total variable costs summed 

to $815 and a 1.5 RPE factor was 

applied to arrive at $1,223 incremental 

cost for turbocharging and downsizing. 

In summary, for the final rule NHTSA 

estimated TRBDS to have an 

incremental RPE cost of $1,223 for 

vehicle classes with a baseline in-line 4- 

cylinder engine downsized to a smaller 

I–4 engine which are: Subcompact, 

Performance Subcompact, Compact and 

Midsize Car, and Small Truck. For 

vehicle classes with a baseline V6 

engine that was downsized to an I4 

engine the RPE cost is estimated at 

$822; these classes are the Performance 

Compact, Performance Midsize and 

Large Car, Minivan and Midsize Truck. 

The two vehicle classes with baseline 

V8 engines, Performance Large Car and 

Large Truck, were downsized to V6 

turbocharged engines at an incremental 

RPE cost of $1,229. 

Time-based learning has been applied 

to TRBDS because submitted product 

plan data indicated turbocharging and 

downsizing would already be at high 

volume in 2011. Due to the fact that a 

turbocharged and downsized engine is 

entirely different than the baseline 

engine it can be applied only at redesign 

model years. The phase-in cap for 

TRBDS is applied at a 9 percent rate for 

MY 2011 in order to account for the lead 

time required to incorporate TRBDS 

engines. 

(xii) Cooled Exhaust Gas Recirculation 

Boost (EGRB) 

EGR Boost is a combustion concept 

that involves utilizing EGR as a charge 

dilutant for controlling combustion 

temperatures. Fuel economy is therefore 

increased by operating the engine at or 

near the stoichiometric air/fuel ratio 

over the entire speed and load range and 

using higher exhaust gas residual levels 

at part load conditions. Further fuel 

economy increases can be achieved by 

increased compression ratio enabled by 

reduced knock sensitivity, which 

enables higher thermal efficiency from 

more advanced spark timing. Currently 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14281 

185Burning one gallon of diesel fuel produces 

about 11 percent more carbon dioxide than gasoline 

due to the higher density and carbon to hydrogen 

ratio. 

186Ricardo, ‘‘A Study of Potential Effectiveness of 

Carbon Dioxide Reducing Vehicle Technologies, 

Revised Final Report,’’ at 62. Available at http:// 

www.epa.gov/otaq/technology/420r08004a.pdf (last 

accessed Oct. 4, 2008). 

available turbo, charge air cooler, and 

EGR cooler technologies are sufficient to 

demonstrate the feasibility of this 

concept. 

However, this remains a technology 

with a number of issues that still need 

to be addressed and for which there is 

no production experience. EGR system 

fouling characteristics could be 

potentially worse than diesel EGR 

system fouling, due to the higher HC 

levels found in gasoline exhaust. 

Turbocharger compressor contamination 

may also be an issue for low pressure 

EGR systems. Additionally, transient 

controls of boost pressure, EGR rate, 

cam phasers and intake charge 

temperature to exploit the cooled EGR 

combustion concept fully will require 

development beyond what has already 

been accomplished by the automotive 

industry. These are all ‘‘implementation 

readiness’’ issues that must be resolved 

prior to putting EGR Boost into volume 

production. 

Because of these issues NHTSA did 

not consider EGR Boost in the NPRM, 

and consequently had no tentative 

conclusions with regard to its cost or 

fuel economy effectiveness. For 

purposes of the final rule, NHTSA 

found no evidence from commenters or 

elsewhere that these implementation 

readiness issues could be resolved prior 

to MY 2011. Therefore, in the final rule, 

the phase-in cap for MY 2011 is zero. 

(b) Diesel Engine Technologies 

Diesel engines, which currently make 

up about 0.27 percent of engines in the 

MY 2008 U.S. fleet, have several 

characteristics that give them superior 

fuel efficiency compared to 

conventional gasoline, spark-ignited 

engines. Pumping losses are much lower 

due to lack of (or greatly reduced) 

throttling. The diesel combustion cycle 

operates at a higher compression ratio, 

with a very lean air/fuel mixture, and 

turbocharged light-duty diesels typically 

achieve much higher torque levels at 

lower engine speeds than equivalentdisplacement naturally-aspirated 

gasoline engines. Additionally, diesel 

fuel has higher energy content per 

gallon.185

However, diesel engines, including 

those on the many diesel vehicles sold 

in Europe, have emissions 

characteristics that present challenges to 

meeting federal Tier 2 emissions 

standards. It is a significant systemsengineering challenge to maintain the 

fuel consumption advantage of the 

diesel engine while meeting U.S. 

emissions regulations, since fuel 

consumption is negatively impacted by 

emissions reduction strategies. Emission 

compliance strategies for diesel vehicles 

sold in the U.S. are expected to include 

a combination of combustion 

improvements and aftertreatment. These 

emission control strategies are currently 

widely used in Europe, but will have to 

be modified due to the fact that U.S. 

emission standards, especially for NOX, 

are much tighter than corresponding 

European standards. To achieve U.S. 

Tier 2 emissions limits, roughly 45 to 65 

percent more NOX reduction is required 

compared to the Euro VI standards. 

Additionally, as discussed below, there 

may be a fuel consumption penalty 

associated with diesel aftertreatment 

since extra fuel is needed for the 

aftertreatment, subsequently this extra 

fuel is not used in the combustion 

process of the engine that provides 

torque to propel the vehicle. 

Nevertheless, emissions control 

technologies do exist, and will enable 

diesel engines to make considerable 

headway in the U.S. fleet in coming 

years. Several key advances in diesel 

technology have made it possible to 

reduce emissions coming from the 

engine prior to aftertreatment. These 

technologies include improved fuel 

systems (higher pressures and more 

responsive injectors), advanced controls 

and sensors to optimize combustion and 

emissions performance, higher EGR 

levels and EGR cooling to reduce NOX, 

lower compression ratios, and advanced 

turbocharging systems. 

The fuel systems on advanced diesel 

engines are anticipated to be of a HighPressure Common Rail (HPCR) type 

with piezoelectric injectors that operate 

at pressures up to 1800 Bar or greater 

and provide fast response to allow 

multiple injections per cycle. The air 

systems will include a variable 

geometry turbocharger for 4-cylinder 

inline engines with charge-air cooling 

and high-pressure and low-pressure 

EGR loops with EGR coolers. For V–6 or 

V–8 engines the air systems will employ 

series sequential turbo-charging with 

one variable geometry turbocharger and 

one fixed geometry turbocharger. 

As suggested above, the traditional 3- 

way catalyst aftertreatment found on 

gasoline-powered vehicles is ineffective 

due to the lean-burn combustion of a 

diesel. All diesels will require a diesel 

particulate filter (DPF), a diesel 

oxidation catalyst (DOC), and a NOX

reduction strategy to comply with Tier 

2 emissions standards. The most 

common NOX reduction strategies 

include the use of lean NOX traps (LNT) 

or selective catalytic reduction (SCR), 

which are outlined below. 

(i) Diesel Engine With Lean NOX Trap 

(LNT) Catalyst After-Treatment 

A lean NOX trap operates, in 

principle, by storing NOX (NO and NO2) 

when the engine is running in its 

normal (lean) state. When the control 

system determines (via mathematical 

model or a NOX sensor) that the trap is 

saturated with NOX, it switches the 

engine into a rich operating mode or 

may in some cases inject fuel directly 

into the exhaust stream to produce 

excess hydrocarbons that act as a 

reducing agent to convert the stored 

NOX to N2 and water, thereby 

‘‘regenerating’’ the LNT and opening up 

more locations for NOX to be stored. 

LNTs are sensitive to sulfur deposits 

that can reduce catalytic performance, 

but periodically undergo a 

desulfurization engine-operating mode 

to clean it of sulfur buildup. 

The fuel consumption penalty 

associated with aftertreatment systems, 

including both DPF and LNT, is taken 

into account in the reported values. In 

the case of the DPF, extra fuel is needed 

to raise the temperature of the DPF 

above approximately 550°C to enable 

active regeneration. A similar process is 

needed to regenerate the LNT, but 

instead of being used to remove 

particulates and raise the temperature, 

the excess fuel is used to provide a fuelrich condition at the LNT to convert the 

trapped NOX on the LNT to nitrogen 

gas. The estimated fuel consumption 

penalty on the CAFE test cycle 

associated with the LNT aftertreatment 

system is 5 percent on the EPA city 

cycle and 3 percent on the highway 

cycle, as described in the report to the 

EPA.186

In order to maintain equivalent 

performance to comparable gasolineengine vehicles, an inline 4-cylinder (I– 

4) diesel engine with displacement 

varying around 2 liters to meet vehicle 

performance requirements was assumed 

for Subcompact, Performance 

Subcompact, Compact, and Midsize 

Passenger Car and Small Truck vehicle 

subclasses, and it was also assumed that 

these vehicles would utilize LNT 

aftertreatment systems. 

In the NPRM, NHTSA estimated that 

LNT-based diesels could incrementally 

reduce fuel consumption by 8 to 15 

percent at an incremental RPE cost of 

$1,500 to $1,600 compared to a direct 

injected turbocharged and downsized 

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14282 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

187The 26.7 percent fuel consumption reduction 

is a maximum estimate cited in a June 2008 Sierra 

Research report (Docket No. NHTSA–2008–089– 

0179.1) for a CAFE estimate in a midsize car, 

whereas an April 2008 Sierra report (Docket No. 

NHTSA–2008–089–0046) cites a maximum estimate 

of 22.4 percent for the same vehicle class; NHTSA 

was unable to discern why the estimates differed. 

188Martec, ‘‘Variable Costs of Fuel Economy 

Technologies,’’ June 1, 2008, at 13–20. Docket No. 

NHTSA–2008–0089–0169.1. 

189Ricardo, ‘‘A Study of Potential Effectiveness of 

Carbon Dioxide Reducing Vehicle Technologies, 

Revised Final Report,’’ at 62. Available at http:// 

www.epa.gov/otaq/technology/420r08004a.pdf (last 

accessed Oct. 4, 2008). 

190Timothy V. Johnson, ‘‘Diesel Emission Control 

in Review,’’ Society of Automotive Engineers 

Technical Series, 2008–01–0069, 2008. Available at 

http://www.sae.org/technical/papers/2008-01-0069 

(last accessed Nov. 9, 2008). 

191Ricardo, ‘‘A Study of Potential Effectiveness of 

Carbon Dioxide Reducing Vehicle Technologies, 

Revised Final Report,’’ Table 7–9 shows 

incremental fuel economy and CO2 benfits for 

Truck with technology package 11, p. 87. Available 

at http://www.epa.gov/otaq/technology/ 

420r08004a.pdf (last accessed Oct. 4, 2008). 

spark-ignition engine, in agreement with 

confidential manufacturer data. These 

costs were based on a ‘‘bottom up’’ cost 

analysis that was performed with EPA, 

which then subtracted the costs of all 

previous steps on the decision tree prior 

to diesel engines. 

Comments submitted in response to 

the NPRM including both 

manufacturers’ confidential data and 

non-confidential data sources for diesel 

engines was in the range of 16.7 percent 

to 26.7 187 percent fuel consumption 

benefit over a baseline gasoline engine 

at a variable cost of $2,000 to $11,200. 

Confidentially submitted diesel cost and 

effectiveness estimates generally did not 

differentiate between car and truck 

applications, engine size and 

aftertreatement systems leading to large 

ranges for both cost and effectiveness 

estimates. Additionally, most of the 

costs appeared to be stated as variable 

costs not RPE but this was not always 

completely discernible. 

For purposes of the final rule, NHTSA 

estimated the net fuel consumption 

benefit for an I–4 diesel engine with 

LNT aftertreatment to be approximately 

20 to 26 percent improvement over a 

baseline gasoline engine. This equates to 

a 5.3 to 7.7 percent improvement for 

DSLT, which is incremental to a 

turbocharged downsized gasoline 

engine (TRBDS) with EGRB, and a 15.0 

to 15.3 percent incremental 

improvement for DSLC, which is 

incremental to a gasoline engine with 

combustion restart (CBRST). The 2008 

Martec report was relied upon for cost 

estimates and the diesel cost was 

adjusted by removing the downsizing 

credit and applying a 1.5 RPE marked 

up factor to arrive at a cost of $4007 

compared to a baseline gasoline engine. 

This results in an incremental RPE cost 

of $1,567 to $1,858 for DSLT and $2,963 

to $3,254 for DSLC. NHTSA’s 

independent review concurred with all 

the costs in this bill-of-material-based 

cost analysis. 

A large part of the explanation for the 

cost increase since the NPRM is the 

dramatic increase in commodity costs 

for the aftertreatment systems, namely 

the platinum group metals. The updated 

cost estimates of Martec 2008 and others 

reflect the rise of global costs for raw 

materials since Martec 2004 and other 

prior referenced cost estimates were 

conducted. As described in Martec 

2008, engine technologies employing 

high temperature steels or catalysts with 

considerable platinum group metals 

usage have experienced tremendous 

inflation of raw material prices. These 

updated estimates account for current 

spot prices of platinum and rhodium 

which have demonstrated cost inflation 

amounting to between 300 and 750 

percent of global prices.188

(ii) Diesel Engine With Selective 

Catalytic Reduction (SCR) AfterTreatment 

An SCR aftertreatment system uses a 

reductant (typically, ammonia derived 

from urea) that is continuously injected 

into the exhaust stream ahead of the 

SCR catalyst. Ammonia combines with 

NOX in the SCR catalyst to form N2 and 

water. The hardware configuration for 

an SCR system is more complicated 

than that of an LNT, due to the onboard 

urea storage and delivery system (which 

requires a urea pump and injector into 

the exhaust stream). While a rich 

engine-operating mode is not required 

for NOX reduction, the urea is typically 

injected at a rate of 3 to 4 percent of the 

fuel consumed. Manufacturers 

designing SCR systems intend to align 

urea tank refills with standard 

maintenance practices such as oil 

changes. 

The fuel consumption penalty 

associated with the SCR aftertreatment 

system is taken into account in the 

values reported here. Similar to the LNT 

system, extra fuel is needed to warm up 

the SCR system to an effective operating 

temperature. The estimated fuel 

consumption penalty on the CAFE test 

cycle associated with the SCR 

aftertreatment system is 5 percent on the 

EPA city cycle and none on the highway 

cycle, as described in the report to the 

EPA.189 A recent report, however, 

suggests a fuel economy benefit 

associated with the use of a SCR system, 

based on the supposition that the engine 

calibration is shifted towards improved 

fuel consumption and more of the NOX

reduction is being handled by the SCR 

system.190 Nevertheless, since this 

benefit is not yet proven for highvolume production, it has not been 

applied for purposes of the final rule. 

In order to maintain equivalent 

performance to comparable gasolineengine vehicles, a V–6 diesel engine, 

with displacement varying around 3 

liters was assumed for Performance 

Compact, Performance Midsize, Large 

Passenger Car, Minivan, and Midsize 

Truck. A V–8 diesel engine, with 

displacement varying around 4.5 liters 

to meet vehicle performance 

requirements, was assumed for Large 

Truck and Performance Large Car 

vehicle classes. It was also assumed that 

these classes with V–6 and V–8 diesel 

engines utilize SCR aftertreatment 

systems instead of LNT. 

In the NPRM, NHTSA estimated 

incremental fuel consumption reduction 

for diesel engines with an SCR system 

to range from 11 to 20 percent at an 

incremental RPE cost of $2,051 to 

$2,411 compared to a direct injected 

turbocharged and downsized sparkignition engine. These costs were based 

on a ‘‘bottom up’’ cost analysis that was 

performed with EPA, which then 

subtracted the costs of all previous steps 

on the decision tree prior to diesel 

engines. 

As explained above for LNT, 

confidential manufacturer and nonconfidential comment data submitted in 

response to the NPRM for diesel engines 

was in the range of 16.7 percent to 26.7 

percent fuel consumption benefit over a 

baseline gasoline engine at variable cost 

of $2,000 to $11,200 with no detail 

about the aftertreatment, engine size or 

application. Additionally, Ricardo’s 

vehicle simulation work for EPA found 

an incremental fuel economy benefit of 

19 percent for a 4.8L diesel in a Large 

Truck.191 However, when the baseline 

4-speed automatic transmission shift 

and torque converter lockup scheduling 

was optimized for the diesel engine, an 

additional 5 percent fuel economy 

benefit was obtained to yield an 

incremental benefit for a diesel of 24 

percent. As noted in the report on page 

84, however, this does not represent an 

optimized result, as only the final 

packages complete with all technologies 

were optimized. Nevertheless, this is a 

reasonable estimate for diesel engine 

fuel economy benefit over a baseline 

gasoline engine with coordinated cam 

phasing (CCP). This estimate did not 

have the aftertreatment penalty, 

however, so applying the 5 percent 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14283 

192Martec, ‘‘Variable Costs of Fuel Economy 

Technologies,’’ June 1, 2008, at 13–20. Docket No. 

NHTSA–2008–0089–0169.1. 

193These cost estimates are taken from the April 

2008 Sierra Research report (Docket No. NHTSA– 

2008–089–0046). A June 2008 Sierra Research 

report (Docket No. NHTSA–2008–089–0179.1) 

contained lower estimates of $5,947 and $7,271 for 

the same vehicles; NHTSA was unable to discern 

the reason for the difference. 

194Timothy V. Johnson, ‘‘Diesel Emission Control 

in Review,’’ Diesel Engine-Efficiency and Emissions 

Research (DEER) Conference, Detroit, MI, August 

20–24, 2006. Available at http:// 

www1.eere.energy.gov/vehiclesandfuels/pdfs/ 

deer_2006/session2/2006_deer_johnson.pdf (last 

accessed Nov. 9, 2008). See also Tim Johnson, 

‘‘Diesel Engine Emissions and Their Control,’’ 

Platinum Metals Review, 52, at 23–37 (2008). 

Available at http:// 

www.platinummetalsreview.com/dynamic/article/ 

view/52-1-23-37 (last accessed Nov. 9, 2008) 

195 Id. 

196Confidential product plans indicate that future 

products manufactured within the rulemaking 

period may not go from 4- or 5-speed transmission, 

but will instead introduce 6- or 7-speed automatic 

transmissions as replacements. 

penalty associated with diesel oxidation 

catalyst, diesel particulate filter, and 

SCR aftertreatment brings the fuel 

economy benefit for diesel engine with 

aftertreatment down to 19 percent, 

which is equal to a 16 percent fuel 

consumption benefit. 

For purposes of the final rule, NHTSA 

estimated the net fuel consumption 

benefit for a V–6 diesel engine with SCR 

aftertreatment to be approximately 20 to 

26 percent improvement over a baseline 

gasoline engine. This equates to a 4.0 to 

7.7 percent improvement for DSLT, 

which is incremental to a turbocharged 

downsized gasoline engine (TRBDS) 

with EGRB, and a 9.9 to 13.1 percent 

incremental improvement for DSLC, 

which is incremental to a gasoline 

engine with combustion restart 

(CBRST.) The 2008 Martec report was 

relied upon for cost estimates and the 

diesel cost was adjusted by removing 

the downsizing credit and applying a 

1.5 RPE marked up factor to arrive at a 

cost of $5,603 compared to a baseline 

gasoline engine. This results in an 

incremental RPE cost of $3,110 to 

$3,495 for DSLT and $4,105 to $4,490 

for DSLC. NHTSA’s independent review 

concurred with all the costs in this billof-material-based cost analysis for V–6 

engines. 

NHTSA estimated the net fuel 

consumption benefit for a V–8 diesel 

engine with SCR aftertreatment to be 

approximately 19 to 25 percent 

improvement over a baseline gasoline 

engine. This equates to a 4.0 to 6.5 

percent improvement for DSLT, which 

is incremental to a turbocharged 

downsized gasoline engine (TRBDS) 

with EGRB, and a 10.0 to 12.0 percent 

incremental improvement for DSLC, 

which is incremental to CBRST. The 

2008 Martec report was relied upon for 

cost estimates and the diesel cost was 

adjusted by removing the downsizing 

credit and applying a 1.5 RPE marked 

up factor to arrive at a cost of $7,002 

compared to a baseline gasoline engine. 

This results in an incremental RPE cost 

of $3,723 to $4,215 for DSLT and $5,125 

to $5,617 for DSLC. NHTSA’s 

independent review concurred with all 

the costs in this bill-of-material-based 

cost analysis for V–8 engines. 

The diesel engine with SCR has an 

incremental cost that is significantly 

higher for the final rule than the NPRM. 

NHTSA believes the increase is 

explained by the improved accuracy of 

the final rule analysis which relied on 

the updated cost estimates from the 

2008 Martec Report as described 

previously 192. In addition, comments 

from the Alliance suggested that the 

incremental diesel cost for a midsize car 

was $6,198 and $7,581 193 for a pickup 

truck. 

The economic breakeven point for 

diesel engine aftertreatment options is 

based on public information194 and on 

recent discussions that NHTSA and EPA 

have had with auto manufacturers and 

aftertreatment device manufacturers. 

NHTSA explained in the NPRM that it 

had received strong indications that 

LNT systems would probably be used 

on smaller vehicles while the SCR 

systems would be used on larger 

vehicles and trucks. The economic 

break-even point between LNT and SCR 

is dependent on the quantity of catalyst 

used, the market price for the metals in 

those catalysts, and the cost of the urea 

injection system. The NPRM estimated 

that the breakeven point would occur 

around 3 liters engine displacement, 

based on discussions with auto 

manufacturers and aftertreatment device 

manufacturers. Thus, NHTSA 

tentatively concluded that it would be 

cheaper to manufacture diesel engines 

smaller than 3 liters with an LNT 

system, and that conversely, it would be 

cheaper to manufacturer diesel engines 

larger than 3.0 liters with a SCR system. 

No comments were submitted to 

NHTSA regarding the breakeven point 

between a LNT and SCR system. 

However, according to one source of 

recently published data the breakeven 

point occurs between 2.0 to 2.5L.195

Considering that continuing 

developments are being made in this 

area and the wide range of precious 

metal content required, NHTSA believes 

that an economic breakeven point of 2 

to 3 liters is reasonable and that other 

factors will strongly influence which 

system is chosen by any given vehicle 

manufacturer. 

Cummins commented that LNT 

systems should be considered for more 

than just the compact and subcompact 

vehicles, and stated that a number of 

large vehicles and trucks currently use 

LNT. Cummins argued that a LNT aftertreatment system can be a cost-effective 

technology on both small and larger 

engines. For the final rule, NHTSA 

assumed the use of a LNT aftertreatment system for three additional 

vehicle subclasses compared to the 

NPRM. However, following the rationale 

explained in the preceding paragraph, 

the SCR type after-treatment system is 

assumed for larger vehicle subclasses. 

As is the case with all technologies in 

the analysis, technology application 

assumptions are based on the general 

understanding of what a manufacturer 

could do in response to meeting 

emissions compliance but other 

manufacturer specific factors will 

dictate the actual technology 

applications. 

In the NPRM, NHTSA assumed a 3 

percent phase in rate per year for diesel 

technologies. For the final rule, 

passenger cars, as defined by the 

technology class, retained the 3 percent 

combined (for DSLT and DSLC) phasein cap for MY 2011. However, diesel 

technologies for truck technology 

classes were allowed to be applied at a 

4 percent combined (for DSLT and 

DSLC) phase-in cap for MY 2011 to 

account for the higher application rates 

observed in the submitted product plans 

and diesel’s favorable characteristics in 

truck applications. Volume-based 

learning was assumed for the NPRM, 

however, confidential product plans 

indicated that this technology would be 

in high-volume in the 2011 time frame, 

thus time-based learning was assumed 

for the final rule. For the final rule, 

diesel technologies can only be applied 

at redesign, which is consistent with the 

NPRM. 

(c) Transmission Technologies 

NHTSA has also reconsidered the way 

it applies transmission technologies in 

the Volpe model to obtain increased fuel 

savings. The revised decision tree for 

transmission technologies reflects the 

fact that baseline vehicles now include 

either 4- or 5-speed automatic 

transmissions, given that many 

manufacturers are already employing 5- 

speed automatic transmissions or are 

going directly to 6-speed automatics.196

The decision tree in the final rule also 

combines ‘‘aggressive shift logic’’ and 

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14284 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

197Although only modifications to the 

transmission calibration software are considered as 

part of this technology, very aggressive early torque 

converter lock up may require an adjustment to 

damper stiffness and hysteresis inside the torque 

converter. Internal transmission hardware changes 

associated with this technology are addressed in 

6/7/8–Speed Automatic Transmission with 

Improved Internals section. 

‘‘early torque converter lockup,’’ 

although the NPRM considered them 

separately, because NHTSA concluded 

upon further review that the two 

technologies could be optimized 

simultaneously due to the fact that 

adding both of them primarily required 

only minor modifications to the 

transmission or calibration software. 

Cost and effectiveness numbers have 

also been thoroughly reexamined, as 

have learning rates and phase-in caps, 

based on comments received. The 

section below describes each of the 

transmission technologies considered. 

(i) Improved Transmission Controls and 

Externals (IATC) 

During operation, an automatic 

transmission’s controller manages the 

operation of the transmission by 

scheduling the upshift or downshift, 

and locking or allowing the torque 

converter to slip based on a 

preprogrammed shift schedule. The 

shift schedule contains a number of 

lookup table functions, which define the 

shift points and torque converter lockup 

based on vehicle speed and throttle 

position, and other parameters such as 

temperature. Aggressive shift logic 

(ASL) can be employed in such a way 

as to maximize fuel efficiency by 

modifying the shift schedule to upshift 

earlier and inhibit downshifts under 

some conditions, which reduces engine 

pumping losses and engine friction as 

noted in the gas engine section. Early 

torque converter lockup 197 in 

conjunction with ASL can further 

improve fuel economy by locking the 

torque converter sooner, thus reducing 

inherent torque converter slippage or 

losses. As discussed above, the NPRM 

separated these two technologies, but 

they are combined for purposes of the 

final rule since the calibration software 

can be optimized for both functions 

simultaneously. 

Calibrating the transmission shift 

schedule to improve fuel consumption 

reduces the average engine speed and 

increases the average engine load, 

which can lead to a perceptible increase 

in engine harshness. The degree to 

which the engine harshness can be 

increased before it becomes noticeable 

to the driver is strongly influenced by 

characteristics of the vehicle, and 

although it is somewhat subjective, it 

always places a limit on how much fuel 

consumption can be improved by 

transmission control changes. The 

Alliance agreed in its comments that 

ASL can be used effectively to reduce 

throttling losses, but at the expense of 

noise-vibration-harshness (NVH) and 

drivability concerns. The Alliance also 

commented that losses in the torque 

converter typically make automatic 

transmissions less efficient than manual 

transmissions, and suggested that 

efficiency can be improved by 

mechanically ‘‘locking up’’ the torque 

converter earlier or replacing the torque 

converter with a friction clutch of the 

type used on a manual transmission. 

Simply replacing a torque converter 

with a friction clutch, however, ignores 

the torque multiplication that torque 

converters provide at vehicle launch. 

In the NPRM, NHTSA estimated that 

aggressive shift logic could 

incrementally reduce fuel consumption 

by 1 to 2 percent at an incremental cost 

of $38 and early torque converter lockup 

could incrementally reduce fuel 

consumption by 0.5 percent at a $30 

cost for the calibration effort. 

Confidential manufacturer comments 

suggested that less aggressive shift logic 

must be employed on vehicles with low 

acceleration reserve, but that a 1–3 

percent improvement in fuel economy 

was attainable on vehicles with 

adequate acceleration reserve. 

For the final rule, NHTSA combined 

aggressive shift logic and early torque 

converter lockup into the IATC 

technology with an effectiveness 

estimate of 1.5 to 2.5 percent in 

agreement with most confidential 

manufacturer estimates. As aggressive 

shift logic and early torque converter 

lockup are both achievable with a 

similar calibration effort, the 

incremental cost for improved 

automatic transmission controls used 

the higher value of $38, converted this 

value to 2007 dollars, and applied a 1.5 

RPE markup factor to arrive at an 

incremental cost estimate of $59 for the 

final rule. 

The IATC technology is considered to 

be available at the start of the 2011 

model year, and as was the case in the 

NPRM, NHTSA considers that it can be 

applied during a refresh model year 

since NVH concerns must be addressed. 

The technology is applicable to all 

vehicle subclasses and NHTSA 

determined IATC type technologies will 

be high volume within the 2011 time 

frame so time-based learning is 

assumed, with a phase-in cap for MY 

2011 of 33 percent. 

(ii) Automatic 6-, 7- and 8-Speed 

Transmissions (NAUTO) 

Having more ‘‘speeds’’ on a 

transmission (i.e., having more gear 

ratios on the transmission) gives three 

effects in terms of vehicle performance 

and fuel economy. First, more gear 

ratios allow deeper 1st and 2nd gear 

ratios for improved launch performance, 

or increased acceleration. Second, a 

wider ratio spread also offers the ability 

to reduce the steps between gear ratios, 

which allows the engine to operate 

closer to optimum speed and load 

efficiency region. And third, a reduction 

in gear ratio step size improves internal 

transmission losses by reducing the 

sliding speeds across the clutches, thus 

reducing the viscous drag loss generated 

between two surfaces rotating at 

different speeds. Bearing spin losses are 

also reduced as the differential speed 

across the two bearing surfaces is 

reduced. This allows the engine to 

operate at a reduced load level to 

improve fuel economy. 

Although the additional gear ratios 

improve shift feel, they also introduce 

more frequent shifting between gears, 

which can be perceived by consumers 

as bothersome. Additionally, package 

space limitations prevent 7- and 8-speed 

automatics from being applicable to 

front wheel drive vehicles. 

Comparison between NPRM and final 

rule cost and effectiveness estimates are 

somewhat complicated by the revisions 

in the decision trees and technology 

assumptions. In the NPRM, NHTSA 

estimated that 6-, 7- and 8-speed 

transmissions could incrementally 

reduce fuel consumption by 0.5 to 2.5 

percent at an incremental cost of $76 to 

$187, relative to a 5-speed automatic 

transmission, a technology not used in 

the final rule decision tree, and the 

incremental cost for a 4-speed to a 5- 

speed automatic transmission (again no 

longer considered in the final rule) was 

estimated to be $76 to $167. 

In response to NHTSA’s request for 

information, confidential manufacturer 

data projected that 6-speed 

transmissions could incrementally 

reduce fuel consumption by 0 to 5 

percent from a baseline 4-speed 

automatic transmission, while an 8- 

speed transmission could incrementally 

reduce fuel consumption by up to 6 

percent from a baseline 4-speed 

automatic transmission. The 2008 

Martec report estimated a cost of $323 

(RPE adjusted) for converting a 4-speed 

to a 6-speed transmission and a cost of 

$638 (RPE adjusted) for converting a 4- 

speed to an 8-speed transmission. GM 

has publicly claimed a fuel economy 

improvement of up to 4 percent for its 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14285 

198 General Motors, news release, ‘‘From Hybrids 

to Six-Speeds, Direct Injection And More, GM’s 

2008 Global Powertrain Lineup Provides More 

Miles with Less Fuel’’ (released Mar. 6, 2007). 

Available at http://www.gm.com/experience/

fuel_economy/news/2007/adv_engines/2008- 

powertrain-lineup-082707.jsp (last accessed Sept. 

18, 2008). 

199Page 17, ‘‘EPA Staff Technical Report: Cost 

and Effectiveness Estimates of Technologies Used to 

Reduce Light-duty Vehicle Carbon Dioxide 

Emissions’’ Environmental Protection Agency, 

EPA420–R–08–008, March 2008. 

200Chrysler blog, ‘‘Dual-Clutch Transmissions 

Explained’’ (released October 3, 2007) available at 

http://blog.chryslerllc.com/blog.do?p=entry&id=

113, last accessed September 18, 2008. 

new 6-speed automatic 

transmissions.198 The 2008 EPA Staff 

Technical Report found a 4.5 to 6.5 

percent fuel consumption improvement 

for a 6-speed over a 4-speed automatic 

transmission.199

For the final rule, NHTSA estimated 

that the conversion to a 6-, 7- and 8- 

speed transmission (NAUTO) from a 4 

or 5-speed automatic transmission with 

IATC would have an incremental fuel 

consumption benefit of 1.4 percent to 

3.4 percent, for all vehicle subclasses. 

The 2008 Martec report, which quoted 

high volume, fully learned costs, was 

relied on to develop the final rule cost 

estimates. Subcompact, Compact, 

Midsize, Large Car and Minivan 

subclasses, which are typically 

considered normal performance 

passenger cars, are assumed to utilize a 

6-speed automatic transmission only (as 

opposed to 7 or 8 speeds) resulting in 

an incremental RPE cost of $323 from 

Martec 2008. For Performance 

Subcompact, Performance Compact, 

Performance Midsize, Performance 

Large car and Small, Midsize and Large 

truck, where performance and or 

payload/towing may be a larger factor, 

NHTSA assumed that 6-, 7- or 8-speed 

transmissions are applicable thus the 

incremental RPE cost range of $323– 

$638 was established which used the 

Martec 2008 six speed cost and 8-speed 

costs for the estimates. 

This technology will be available from 

the start of the rulemaking period. 

Confidential manufacturer data 

indicates the widespread use of 6-speed 

or greater automatic transmissions and 

introductions into the fleet occur 

primarily at vehicle redesign cycles. 

This prompted NHTSA to set the phasein rate at 50 percent for MY 2011, but 

also to consider that the technology can 

only be applied at a redesign cycle, as 

opposed to the refresh cycle application 

of the NPRM. The technology is 

determined to be at high volume in the 

2011 timeframe, and since these are 

mature and stable technologies, timebased learning factors are applied. 

(iii) Dual Clutch Transmissions/ 

Automated Manual Transmissions 

(DCTAM) 

An automated manual transmission 

(AMT) is similar in architecture to a 

conventional manual transmission, but 

shifting and launch functions are 

performed through hydraulic or electric 

actuation. There are two basic types of 

AMTs, single-clutch and dual-clutch 

transmission (DCT), both of which were 

considered in the NPRM. Upon further 

consideration and in response to 

manufacturer comments to only include 

dual-clutch AMTs, single-clutch AMTs 

are not applied in the analysis for the 

final rule. 

Single clutch transmissions exhibit a 

torque interruption when changing 

gears because the clutch has to be 

disengaged. In a conventional manual 

transmission vehicle, the driver has 

initiated the gear change, and so expects 

to feel the resulting torque interruption. 

With an AMT, in contrast, a control 

system initiates the shift, which is 

unexpected and can be disconcerting to 

the driver. Comments from Ford in 

response to the NPRM indicated that the 

acceptability of this torque interruption 

among U.S. drivers is poor, although 

Ford also commented that DCTs do not 

have the risk of customer acceptance 

that AMTs do. BorgWarner, a DCT 

supplier, echoed these comments. DCTs 

do not display the torque interrupt 

characteristic due to their use of two 

clutch mechanisms which allow for 

uninterrupted power transmission. To 

assist with launch of a DCT equipped 

vehicle, the first gear ratio can be 

deepened to gain back some of the 

performance advantage an automatic 

transmission possesses due to the torque 

converter’s torque multiplication factor. 

There are two types of DCT systems, 

wet clutch and dry clutch, which are 

used for different types of vehicles. Wet 

clutch DCTs offer a higher torque 

capacity that comes from the use of a 

hydraulic system that cools the 

clutches, but that are less efficient than 

the dry clutch type due to the losses 

associated with hydraulic pumping. 

Additionally, wet DCTs have a higher 

cost due to the additional hydraulic 

hardware required. Wet clutch DCT 

systems have been available in the U.S. 

market on imported products since 

2005, and Chrysler has publicly stated 

that it will have a DCT transmission in 

its 2010 model year vehicle line-up.200

Consistent with manufacturers’ 

confidential comments and based on its 

own analysis, NHTSA determined that 

dry clutch DCTs are applicable to 

smaller front wheel drive cars, due to 

their lower vehicle weight and torque 

production, and wet clutch DCTs are 

more applicable to higher torque 

applications with higher power 

requirements. Therefore lower cost, 

higher efficiency dry clutch DCTs are 

specified for the Subcompact and 

Compact Car vehicle classes, while all 

other classes required wet clutch DCTs. 

In the NPRM, NHTSA estimated that 

the incremental cost for DCTs was $141, 

independent of vehicle class, which was 

the midpoint of the NESCCAF estimates 

and within the range provided 

confidential manufacturer data. CARB 

commented that NHTSA had incorrectly 

cited the cost of AMTs from the 

NESCCAF study in the NPRM, stating 

that AMTs had been determined to be 

cost neutral (zero cost) relative to 

baseline transmission, as opposed to a 

$0–$240 cost justification. Confidential 

manufacturer data suggest additional 

DCT costs from $80 to $740, with dry 

clutch DCT costs being approximately 

$100 less due to reduced hydraulic 

system content. The 2008 Martec study 

also reported variable costs for AMTs. 

In the NPRM, NHTSA cited the 

NESCCAF study as projecting that 

AMTs could incrementally reduce fuel 

consumption by 5 to 8 percent and 

confidential manufacturer data 

projected that AMTs could 

incrementally reduce fuel consumption 

by 2 to 5 percent. On the basis of these 

estimates, NHTSA concluded in the 

NPRM that AMTs could incrementally 

reduce fuel consumption by 4.5 to 7.5 

percent. Confidential manufacturer data 

received in response to the NPRM 

suggest a benefit of 2 to 12 percent for 

DCTs over a 6-speed planetary 

automatic, and one confidential 

manufacturer estimates a benefit of 1 to 

2 percent for a dry clutch DCT over a 

wet clutch DCT. The 2008 EPA Staff 

Technical Report also indicates a benefit 

of 9.5 to 14.5 percent for a DCT (wet or 

dry was not specified) over a 4-speed 

planetary automatic transmission. 

For the final rule, NHTSA estimated 

a 5.5 to 9.5 percent improvement in fuel 

consumption over a baseline 4/5-speed 

automatic transmission for a wet clutch 

DCT, which was assumed for all vehicle 

subclasses except Subcompact and 

Compact Car. This results in an 

incremental effectiveness estimate of 2.7 

to 4.1 percent over the NAUTO 

technology. For Subcompact and 

Compact Cars, which were assumed to 

use a dry clutch DCT, NHTSA estimated 

an 8 to 13 percent fuel consumption 

improvement over a baseline 4/5-speed 

automatic transmission, which equates 

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14286 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

201 ‘‘Transmission and Driveline—Major 

contributors to FUEL efficiency, safety, fun to drive 

and brand differentiation’’, Car Training Institute 

Symposium, May 6–7, 2008—Plenary Speech, 

Robert Lee, Vice President, Mircea Gradu, Director 

Transmission and Driveline, Chrysler LLC, USA. 

Available from the Car Training Institute, for 

contact information see http://www.car-traininginstitute.com/cti_en/html/kontakt.html (last 

accessed Nov. 9, 2008). 

202See http://car-reviews.automobile.com/news/ 

general-motors-to-kill-continually-variabletransmission/166/ (last accessed Oct. 23, 2008). 

203Since the decision trees are configured 

differently, the net cost to CVT in the NPRM 

included 5-speed automatic transmission 

technology costs that are not applied in the final 

rule. 

to a 5.5 to 7.5 percent incremental 

improvement over the NAUTO 

technology. 

The 2008 Martec report was utilized 

to develop the cost estimates for the 

final rule; it estimated an RPE cost of 

$450 for a dry clutch DCT, and $600 for 

a wet clutch DCT, both relative to a 

baseline 4/5-speed. In the transmission 

decision tree for the final rule, this 

yielded a dry clutch DCT incremental 

cost estimate of $68 for the Subcompact 

and Compact Cars relative to the 

NAUTO technology. For Midsize, Large 

Car and Minivan classes the wet clutch 

DCT incremental cost over NAUTO is 

$218, which reflects the lower, 6-speed 

only cost of the NAUTO technology 

applied to these vehicles. The average 

incremental cost for wet DCT for the 

four Performance classes and the Small, 

Midsize and Larger truck is $61, which 

is lower than the other vehicle 

subclasses due to the higher cost 

NAUTO technology (up to 8-speeds) 

that the DCTAM technology supersedes. 

NHTSA relied upon confidential 

manufacturer product plans showing 

DCT production will be readily 

available and at high volume by 2011. 

Therefore volume-based learning is not 

applicable, and since this is a mature 

and stable technology, time-based 

learning is applied. As production 

facility conversion or construction may 

be required to facilitate required 

capacity, NHTSA limited the 

production phase-in caps in MY 2011 to 

20 percent. As with other transmission 

technologies, application was allowed at 

redesign only due to the vehicle changes 

required to adapt a new type 

transmission. 

(iv) Continuously Variable Transmission 

(CVT) 

A continuously variable transmission 

(CVT) is unique in that it does not use 

gears to provide ratios for operation. 

Most CVTs use either a belt or chain on 

a system of two pulleys (the less 

common toroidal CVTs replace belts 

and pulleys with discs and rollers) that 

progressively vary the ratio, thus 

permitting an infinite number of 

effective gear ratios between a 

maximum and minimum value, and 

often a wider range of ratios than 

conventional automatic transmissions. 

This enables even finer optimization of 

the transmission ratio under different 

operating conditions and, therefore, 

some reduction of engine pumping and 

friction losses. In theory, the CVT has 

the ability to be the most fuel-efficient 

kind of transmission due to the infinite 

ability to optimize the ratio and operate 

the engine at its most efficient point. 

However, this effectiveness is reduced 

by the significant internal losses from 

high-pressure, high-flow-rate hydraulic 

pump, churning, friction loss, and 

bearing losses required to generate the 

high forces needed for traction.201

Some U.S. car manufacturers have 

abandoned CVT applications because 

they failed to deliver fuel economy 

improvements over automatic 

transmissions. GM abandoned the use of 

CVT before 2006.202 Ford offered a CVT 

in the Five Hundred and Freestyle from 

MYs 2005–2007 and discontinued it 

thereafter. However, Chrysler offers 

CVTs in the Dodge Caliber, the Jeep 

Compass, and the Jeep Patriot. Nissan 

was using CVTs in many vehicles, but 

appears to be restricting the use of this 

technology to passenger cars only. 

In the NPRM, NHTSA estimated a 

CVT effectiveness of approximately 6 

percent over a 4-speed automatic, which 

was above the NESCCAF value but in 

the range of NAS. For costs, NHTSA 

concluded in the NPRM that the 

adjusted costs presented in the 2002 

NESCCAF study represent the best 

available estimates, and thus estimated 

that CVTs could incrementally reduce 

fuel consumption by 3.5 percent when 

compared to a conventional 5-speed 

automatic transmission (which cost an 

incremental $76–$167), a technology 

which is considered a baseline 

transmission option on the final rule 

decision tree, at an incremental cost of 

$100 to $139. After reviewing 

confidential manufacturer data and the 

Martec report, for the final rule NHTSA 

is now estimating the incremental cost 

of CVTs to be $300 for all vehicle 

subclasses, except for large performance 

cars, midsize light trucks and large light 

trucks for which the technology is 

incompatible. 

Confidential manufacturer data in 

response to the NPRM suggested that 

the incremental effectiveness estimate 

from CVTs may be 2 to 8 percent over 

4-speed planetary transmissions in 

simulation (however one commenter 

reported a zero percent improvement in 

dynamometer testing) at a cost of $140 

to $800. Considering the NPRM 

conclusion and confidential data 

together with independent review, 

NHTSA has estimated the fuel 

consumption effectiveness for CVTs at 

2.2 to 4.5 percent over a 4/5-speed 

automatic transmission, which 

translates into a 0.7 to 2.0 incremental 

effectiveness improvement over the 

IATC technology. NHTSA estimated the 

CVT incremental cost to be $300 for the 

final rule, noting that the NPRM costs 

were incremental to a 5-speed 

technology that is no longer represented 

in the decision tree, hence the higher 

final rule cost.203

CVTs are currently available, but due 

to their limited torque-carrying 

capability, they are not applied to 

Performance Large cars and Midsize and 

Large trucks. There is limited 

production capability for CVTs, so the 

phase-in cap for MY 2011 is limited to 

5 percent to account for new plants and 

tooling to be prepared. CVTs can be 

introduced at product redesign intervals 

only based on confidential manufacturer 

data and consistent with the NPRM 

approach (since it requires vehicle 

attribute prove-out, test and certification 

prior to introduction). Confidential 

manufacturer data indicates that CVTs 

will be at high volumes by 2011, and 

this is a mature and stable technology, 

therefore NHTSA applied time-based 

learning factors. 

(v) 6-Speed Manual Transmissions 

(6MAN) 

Manual transmissions are entirely 

dependent upon driver input to change 

gear ratio: the driver selects when to 

perform the shift and which gear ratio 

to select. This is the most efficient 

transfer of energy of all transmission 

layouts, because it has the lowest 

internal gear losses, with a minimal 

hydraulic system, and the driver 

provides the energy to actuate the 

clutch. From a systems viewpoint, 

however, vehicles with manual 

transmissions have the drawback that 

the driver may not always select the 

optimum gear ratio for fuel economy. 

Nonetheless, increasing the number of 

available ratios in a manual 

transmission can improve fuel economy 

by allowing the driver to select a ratio 

that optimizes engine operation more 

often. Typically, this is achieved 

through adding overdrive ratios to 

reduce engine speed at cruising 

velocities (which saves fuel through 

reduced pumping losses) and pushing 

the torque required of the engine 

towards the optimum level. However, if 

the gear ratio steps are not properly 

designed, this may require the driver to 

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204Substituting fuel energy with electrical energy 

may not actually save total overall energy used, 

when considering the inefficiencies of creating the 

electricity at a power plant and storing it in a 

battery pack, but it does enable use of other primary 

energy sources, and reduces the vehicle’s fuel 

consumption. Plug-in hybrids are also receiving 

increasing attention because of their ability to use 

‘‘clean energy’’ from the electric grid, such as that 

solar or wind, which can reduce the overall 

greenhouse gas output. 

change gears more often in city driving 

resulting in customer dissatisfaction. 

Additionally, if gear ratios are selected 

to achieve improved launch 

performance instead of to improve fuel 

economy, then no fuel saving 

effectiveness is realized. 

NHTSA recognizes that while the 

manual transmission is very efficient, its 

effect on fuel consumption relies 

heavily upon driver input. In driving 

environments where little shifting is 

required, the manual transmission is the 

most efficient because it has the lowest 

internal losses of all transmissions. 

However, the manual transmission may 

have lower fuel efficiency on a drive 

cycle when drivers shift at nonoptimum points. 

In the NPRM, NHTSA estimated that 

a 6-speed manual transmission could 

incrementally reduce fuel consumption 

by 0.5 percent when compared to a 5- 

speed manual transmission, at an 

incremental cost of $107. Confidential 

manufacturer data received in response 

to the NPRM suggests that manual 

transmissions could incrementally 

reduce fuel consumption by 0 to 1 

percent over a base 5-speed manual 

transmission at an incremental cost of 

$40 to $900. Most confidential 

comments suggested that the 

incremental cost was within the lower 

quartile of the full range, thus $225 (the 

lower quartile upper-bound) was 

multiplied by the 1.5 RPE markup factor 

for a total of $338. Therefore, the final 

rule states that the incremental fuel 

consumption effectiveness for a 6-speed 

manual transmission over a 5-speed 

manual transmission is 0.5 percent at a 

RPE cost of $338. 

This technology is applicable to all 

vehicle classes considered and can be 

introduced at product redesign 

intervals, consistent with the NPRM and 

other final rule transmission 

technologies. Six-speed manuals are 

already in production at stable and 

mature high volumes so time-based 

learning is applied with a 33 percent 

phase-in rate for MY 2011. 

(d) Hybrid and Electrification/Accessory 

Technologies 

(i) Overview 

A hybrid describes a vehicle that 

combines two or more sources of 

energy, where one is a consumable 

energy source (like gasoline) and one is 

rechargeable (during operation, or by 

another energy source). Hybrids reduce 

fuel consumption through three major 

mechanisms: (1) By turning off the 

engine when it is not needed, such as 

when the vehicle is coasting or when 

stopped; (2) by recapturing lost braking 

energy and storing it for later use; and 

by (3) optimizing the operation of the 

internal combustion engine to operate at 

or near its most efficient point more of 

the time. A fourth mechanism to reduce 

fuel consumption, available only to 

plug-in hybrids, is by substituting the 

fuel energy with energy from another 

source, such as the electric grid. 

Engine start/stop is the most basic of 

hybrid functions, and as the name 

suggests, the engine is shut off when the 

vehicle is not moving or when it is 

coasting, and restarted when needed. 

This saves the fuel that would normally 

be utilized to spin the engine when it is 

not needed. Regenerative braking is 

another hybrid function which allows 

some of the vehicle’s kinetic energy to 

be recovered and later reused, as 

opposed to being wasted as heat in the 

brakes. The reused energy displaces 

some of the fuel that would normally be 

used to drive the vehicle, and thus 

results in reduced fuel consumption. 

Operating the engine at its most efficient 

operating region more of the time is 

made possible by adding electric motor 

power to the engine’s power so that the 

engine has a degree of independence 

from the power required to drive the 

vehicle. Fuel consumption is reduced 

by more efficient engine operation, the 

degree of which depends heavily on the 

amount of power the electric motor can 

provide. Hybrid vehicles with large 

electric motors and battery packs can 

take this to an extreme and drive the 

wheels with electric power only and the 

engine consuming no fuel. Plug-in 

hybrid vehicles can substitute fuel 

energy with electrical energy, further 

reducing the fuel consumption.204

Hybrid vehicles utilize some 

combination of the above mechanisms 

to reduce fuel consumption. The 

effectiveness of a hybrid, and generally 

the complexity and cost, depends on the 

utilization of the above mechanisms and 

how aggressively they are pursued. 

In addition to the purely hybrid 

technologies, which decrease the 

proportion of propulsion energy coming 

from the fuel by increasing the 

proportion of that energy coming from 

electricity, there are other steps that can 

be taken to improve the efficiency of 

auxiliary functions (e.g., power-assisted 

steering or air-conditioning) which also 

reduce fuel consumption. These steps, 

together with the hybrid technologies, 

are collectively referred to as ‘‘vehicle 

electrification’’ because they generally 

use electricity instead of engine power. 

Three ‘‘electrification’’ technologies are 

considered in this analysis along with 

the hybrid technologies: Electrical 

power steering (EPS), improved 

accessories (IACC), and high voltage or 

improved efficiency alternator (HVIA). 

(ii) Hybrid System Sizing and Cost 

Estimating Methodology 

Estimates of cost and effectiveness for 

hybrid and related electrical 

technologies have been adjusted from 

those described in the NPRM to address 

commenters’ concerns that NHTSA 

considered technologies not likely to be 

adopted by automakers (e.g., 42V 

electrical systems) or did not scale the 

costs for likely technologies across the 

range of vehicle subclasses considered. 

To address these concerns, the portfolio 

of vehicle electrification technologies 

has been refined based on commenter 

data as described below in the 

individual hybrid technologies sections. 

Ricardo and NHTSA have also 

developed a ‘‘ground-up’’ hybrid 

technology cost estimating methodology 

and, where possible, validated it to 

confidential manufacturer data. The 

hybrid technology cost method accounts 

for variation in component sizing across 

both the hybrid type and the vehicle 

platform. The method utilizes four 

pieces of data: (1) Key component sizes 

for a midsize car by hybrid system type; 

(2) normalized costs for each key 

component; (3) component scaling 

factors that are applied to each vehicle 

subclass by hybrid system type; and (4) 

vehicle characteristics for the subclasses 

which are used as the basis for the 

scaling factors. 

Component sizes were estimated for a 

midsize car using publicly available 

vehicle specification data and 

commenter data for each type of hybrid 

system as shown in Table IV–10. 

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205Anderman, Advanced Automotive Battery 

Conference, May 2008. Proceedings available for 

purchase at http://www.advancedautobat.com/ Proceedings/index.html (last accessed October 17, 

2008). 

In developing Table IV–10, NHTSA 

made several assumptions: 

(1) Hybrid controls hardware varies 

with the level of functionality offered by 

the hybrid technology. Assumed hybrid 

controls complexity for a 12V micro 

hybrid (MHEV) was 25 percent of a 

strong hybrid controls system and the 

complexity for an Integrated Starter 

Generator (ISG) was 50 percent. These 

ratios were estimates based on the 

directional need for increased 

functionality as system complexity 

increases. 

(2) In the time frame considered, Liion battery packs will have limited 

market penetration, with a majority of 

hybrid vehicles using NiMH batteries. 

One estimate from Anderman indicates 

that Li-ion market penetration will 

achieve 35 percent by 2015.205 For the 

purposes of this analysis, it was 

assumed that mild and strong hybrids 

will use NiMH batteries and plug-in 

hybrids will use Li-ion batteries. 

(3) The plug-in hybrid battery pack 

was sized for a mid-sized car by 

assuming: the vehicle has a 20 mile all 

electric range and consumes an average 

of 300 W-hr per mile; the battery pack 

can be discharged down to 50 percent 

depth of discharge; and the capacity of 

a new battery pack is 20 percent greater 

than at end of life (i.e., range on a new 

battery pack is 24 miles). 

(4) All hybrid systems included a DC/ 

DC converter which was sized to 

accommodate vehicle electrical loads 

appropriate for increased vehicle 

electrification in the time frame 

considered. 

(5) High voltage wiring scaled with 

hybrid vehicle functionality and could 

be represented as a fraction of strong 

hybrid wiring. These ratios were 

estimates based on the directional need 

for increased functionality as system 

complexity increases. 

(6) All hybrid systems included a 

supplemental heater to provide vehicle 

heating when the engine is stopped, 

however, only stronger hybrids 

included electric air conditioning to 

enable engine stop/start when vehicle 

air conditioning was requested by the 

operator. 

In the hybrid technology cost 

methodology developed for cost-scaling 

purposes, several strong hybrid systems 

replaced a conventional transmission 

with a hybrid-specific transmission, 

resulting in a cost offset for the removal 

of a portion of the clutches and gear sets 

within the transmission. The 

transmission cost in Table IV–11 below 

expresses hybrid transmission costs as a 

percentage of traditional automatic 

transmission cost, as described in the 

2008 Martec Report, at $850. The 

method assumed that the mechanical 

aspect of a power-split transmission 

with a reduced number of gear sets and 

clutches resulted in a cost savings of 50 

percent of a conventional transmission 

with torque converter. For a 2-mode 

hybrid, the mechanical aspects of the 

transmission are similar in complexity 

to a conventional transmission with a 

torque converter, thus no mechanical 

cost savings was appropriate. The plugin hybrid assumed a highly simplified 

transmission for electric motor drive, 

thus 25 percent of the base vehicle 

transmission cost was applied. 

Estimates for the cost basis of each 

key component are shown in Table IV– 

11 below along with the sources of those 

estimates. The cost basis estimates 

assume fully learned, high-volume 

(greater than 1.2 million units per 

annum) production. The costs shown 

are variable costs that are not RPE 

adjusted. 


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Component scaling factors were 

determined based on vehicle 

characteristics for each type of hybrid 

system as shown in Table IV–12 below. 


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NHTSA’s CAFE database was used to 

define the average vehicle 

characteristics for each vehicle subclass 

as shown in Table IV–13 below, and 

these attributes were used as the basis 

of the scaling factors. 

Table IV–14 shows the costs for the 

different types of hybrid systems on a 

midsize vehicle. The individual 

component costs were scaled from the 

normalized costs shown in Table IV–11 

according to the component size shown 

in Table IV–10 and adjusted to a low 

volume cost by backing out volumeVerDate Nov<24>2008 18:39 Mar 27, 2009 Jkt 217001 PO 00000 Frm 00096 Fmt 4701 Sfmt 4700 E:\FR\FM\30MRR2.SGM 30MRR2

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206High volume costs are multiplied by a factor 

of 1.56, which represents two cycles of 20 percent 

reverse learning, to determine the appropriate low 

volume, or unlearned costs. 

207 Docket No. NHTSA–2008–0089–0179.1, 

Attachment 2, at 53. 

208 Docket No. NHTSA–2008–0089–0179.1, 

Attachment 2, at 59. 

based learning reductions.206 These 

component costs were summed to get 

the total low volume cost for each 

hybrid type, and a 1.5 RPE adjustment 

was applied. The ISG technology 

replaces the MHEV technology on the 

Electrification/Accessory technology 

decision tree, therefore the MHEV 

technology costs must be subtracted to 

reflect true costs ($2,898¥$707 = $2,191 

in this example). 

Wherever possible, the results of the 

hybrid technology cost method were 

compared with values as previously 

described in the NPRM and the results 

generally matched prior estimates. 

Additionally, the results from the 

hybrid technology cost method were 

validated with public literature and 

confidential manufactures test data as 

allowed. Elements of the 2008 Martec 

report identified cost data and a detailed 

bill of materials for several comparable 

hybrid technologies (Micro-hybrid 

systems and Full Hybrid systems), and 

the hybrid technology cost model agreed 

well with this data. The scalable bill of 

material based methodology described 

above was determined to offer the best 

solution for estimating component sizes 

and costs across a range of hybrid 

systems and vehicle platforms and the 

validation of these cost outputs with 

other data sources suggests that this 

approach is a reasonable approach. 

(iii) Electrical Power Steering (EPS) 

Electrical Power Steering (EPS) is 

advantageous over conventional 

hydraulic power-assisted steering in 

that it only draws power when the 

vehicle is being steered, which is 

typically a small percentage of the time 

a vehicle is operating. In fact, on the 

EPA test cycle no steering is done, so 

the CAFE fuel consumption 

effectiveness comes about by 

eliminating the losses from driving the 

hydraulic steering pump at engine 

speed. EPS systems use either an 

electric motor driving a hydraulic pump 

(this is a subset of EPS systems known 

as electro-hydraulic power steering) or 

an electric motor directly assisting in 

turning the steering column. EPS is seen 

as an enabler for all vehicle 

hybridization technologies, since it 

provides power steering when the 

engine is off. This was a primary 

consideration in placing EPS at the top 

of the Electrification/Accessory decision 

tree. 

In the NPRM, NHTSA estimated the 

fuel consumption effectiveness for EPS 

at 1.5 to 2 percent at an incremental cost 

of $118 to $197, believing confidential 

manufacturer data most accurate. In 

response to the NPRM Sierra Research 

suggested EPS and high efficiency 

alternators combined is worth 1 to 1.8 

percent on the CAFE test cycle,207 and 

confidential manufacturer data 

indicated a 0.7 to 2.9 percent fuel 

consumption reduction. The cost range 

from confidential manufacturer data 

was $70 to $300. Sierra estimated EPS 

for cars at $82 and $150 for trucks.208

A market study by Frost & Sullivan 


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209Cost for EPS quoted at 48 Euros, at $1.35 per 

Euro exchange rate (Oct. 7, 2008) equates to $65, 

from Frost & Sullivan, Feb. 9, 2006 ‘‘Japanese 

Steering System Market Moves Into High Gear,’’ 

http://www.theautochannel.com/news/2006/02/09/ 

210036.html (last accessed Nov. 2, 2008). 

210Oil pump electrification comes with an 

additional potential technical and financial risk (to 

warranty and consumer), in that significant engine 

damage can occur should the system fail to provide 

engine lubrication, even on a momentary basis. 

211 Docket No. NHTSA–2008–0089–0193.1. 

indicated the cost of an EPS system at 

roughly $65 more than a conventional 

hydraulic (HPS) system.209 Because 

there is a wide range in the effectiveness 

for EPS depending on the vehicle size, 

NHTSA has increased the range from 

the NPRM to incorporate the lower 

ranges suggested by most manufacturers 

and estimates the fuel consumption 

effectiveness for EPS at 1 to 2 percent 

for the purpose of the final rule. The 

incremental costs are also estimated on 

range below the Sierra value for cars but 

above the Frost & Sullivan estimate at a 

piece cost range of $70 to $80 and 

included a 1.5 RPE uplift to $105 to 

$120 for the final rule. 

EPS is currently in volume 

production in small to mid-sized 

vehicles with a standard 12V electrical 

system; however, heavier vehicles may 

require a higher voltage system, which 

adds cost and complexity. The Chevy 

Tahoe Hybrid, for example, uses a 

higher voltage EPS system. For purposes 

of the final rule, NHTSA has applied 

EPS to all vehicle subclasses except for 

Large trucks. 

In the NPRM, NHTSA assumed a 25 

percent phase in rate of EPS 

technologies. For the purposes of the 

final rule, EPS phase-in caps were 

limited to 10 percent in MY 2011 to 

address confidential manufacturer 

concerns over lead time. In the NPRM, 

NHTSA assumed a volume-based 

learning effect for EPS. For the final 

rule, however, NHTSA applied timebased learning for EPS since NHTSA’s 

analysis indicated that this technology 

would be in high-volume use at the 

beginning of its first year of availability. 

NHTSA also assumed in the NPRM that 

EPS could be applied during refresh 

model years, which was consistent with 

information provided in confidential 

product plans, therefore for the purpose 

of the final rule, NHTSA again applied 

EPS at refresh timing. 

(iv) Improved Accessories (IACC) 

Improved accessories (IACC) was 

defined in the NPRM as improvements 

in accessories such as the alternator, 

coolant and oil pumps that are 

traditionally driven by the engine. 

Improving the efficiency or outright 

electrification of these accessories 

would provide opportunity to reduce 

the accessory loads on the engine. 

However, as the oil pump provides 

lubrication to the engine’s sliding 

surfaces such as bearings pistons, and 

camshafts and oil flow is always 

required when the engine is spinning, 

and it is only supplied when the engine 

is spinning, there is no efficiency to be 

gained by electrifying the oil pump.210

Electrical air conditioning (EAC) 

could reduce fuel consumption by 

allowing the engine to be shut off when 

it is not needed to drive the vehicle. For 

this reason EAC is often used on hybrid 

vehicles. In highway driving, however, 

there is little opportunity to shut the 

engine off; furthermore, EAC is less 

efficient when the engine is running 

because it requires mechanical energy 

from the engine to be converted to 

electrical energy and then back again to 

mechanical. Since air conditioning is 

not required on the EPA city or highway 

test cycles, there is no CAFE fuel 

consumption effectiveness from EAC. 

Therefore, EAC does not improve 

accessory efficiency apart from the 

hybrid technologies. For the purposes of 

the final rule, IACC refers strictly to 

improved engine cooling, since 

electrical lubrication and air 

conditioning are not effective standalone fuel saving technologies and 

improved alternator is considered as a 

separate technology given its 

importance to vehicle electrification. 

Improved engine cooling, or 

intelligent cooling, can save fuel 

through two mechanisms: By reducing 

engine friction as the engine warms up 

faster; and by operating an electric 

coolant pump at a lower speed than the 

engine would (i.e., independent of 

engine speed). Intelligent cooling can be 

applied to vehicles that do not typically 

carry heavy payloads. Larger vehicles 

with towing capacity present a 

challenge for electrical intelligent 

cooling systems, as these vehicles have 

high cooling fan loads. Therefore, 

NHTSA did not apply IACC to the Large 

Truck and SUV class. 

In the NPRM, NHTSA estimated the 

fuel consumption effectiveness for 

improved accessories at 1 to 2 percent 

at an incremental cost of $124 to $166 

based on the 2002 NAS Report and 

confidential manufacturer data. 

Confidential manufacturer data received 

in response to the NPRM and Sierra 

Research both suggested a range for fuel 

consumption effectiveness from 0.5 to 2 

percent. A comment from MEMA 

suggested that improved thermal control 

of the engine could produce between 4 

and 8 percent fuel economy 

improvement; 211 however, NHTSA’s 

independent review of intelligent 

cooling suggests this estimate is high 

and concurs with the estimates from 

NAS. Independent review found the 

cost for IACC at low volumes, assuming 

the base vehicle already has an electric 

fan, to be $180 to $220. These costs 

were adjusted to account for volumebased learning and then marked up to 

account for the 1.5 RPE factor. For the 

purposes of the final rule, NHTSA 

retained the fuel consumption 

effectiveness at 1 to 2 percent and 

estimated the incremental costs to be 

$173 to $211. 

MEMA also suggested that NHTSA 

consider solar glass technology to 

reduce cabin thermal loading; however, 

air conditioning technologies were not 

considered as part of this technology. 

In the NPRM, NHTSA proposed a 25 

percent phase-in cap for Improved 

Accessories. To address manufacturer 

concerns over lead time in the early 

years, the IACC phase-in cap was 

limited to 10 percent for MY 2011 for 

the final rule. In the NPRM, NHTSA 

assumed for improved accessories a 

volume-based learning curve. For the 

final rule, however, NHTSA applied 

time-based learning for IACC since 

NHTSA’s analysis indicated that this 

technology would be in high-volume 

use at the beginning of its first year of 

availability. NHTSA assumed in the 

NPRM that improved accessories could 

be applied during any model year. For 

the purpose of the final rule, NHTSA 

applied intelligent cooling at refresh 

model years due to the significant 

changes required to the vehicle cooling 

system that necessitate recertification 

testing. 

(v) 12V Micro Hybrid (MHEV) 

12V Micro-Hybrid (MHEV) systems 

are the most basic of hybrid systems and 

offer mainly idle-stop capability. Their 

low cost and easy adaptability to 

existing powertrains and platforms can 

make them attractive for some 

applications. The conventional beltdriven alternator is replaced with a beltdriven, enhanced power starteralternator and a redesigned front-end 

accessory drive system that facilitates 

bi-directional torque application. Also, 

during idle-stop, some functions such as 

power steering and automatic 

transmission hydraulic pressure are lost 

with conventional arrangements; so 

electric power steering and an auxiliary 

transmission pump are needed. These 

components are similar to those that 

would be used in other hybrid designs. 

Also included in this technology is the 

Smart Starter Motor. This system is 

comprised of an enhanced starter motor, 

along with some electronic control that 

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212 Docket Nos. NHTSA–2008–0089–0173 and 

–0144.1, respectively. 

213Citroen uses a 2kW system for a 1.4L diesel 

engine, and Valeo has a 1.6kW system applicable 

for engines up to 2L in displacement. The midsize 

vehicle class has an average engine size of 2.9L, and 

thus a 3kW starter is appropriate. 

monitors the accelerator, brake, clutch 

positions, and the battery voltage as 

well as low-noise gears to provide fast 

and quiet engine starts. Despite its 

extended capabilities, the starter is 

compact and thus relatively easy to 

integrate in the vehicle. 

12V micro hybrid was added to the 

technology list to address concerns from 

CARB and Delphi that the hybrid 

classifications used in the NPRM did 

not adequately represent these 

technologies.212

The effectiveness estimates by 

NHTSA for this technology are based on 

confidential manufacturer data and 

independent source data. For the 

vehicles equipped with (baseline) inline 

4, those with smaller displacements, the 

effectiveness is between 1 and 2.9 

percent, and for those equipped with V– 

6 or V–8, the effectiveness is between 

3.4 and 4 percent. The 1 to 2.9 percent 

incremental fuel consumption savings 

applies to the Sub-Compact Car, 

Performance Sub-Compact Car, Compact 

Car, Midsized Car, and Small Truck/ 

SUV variants. The 3.4 to 4 percent 

incremental fuel consumption applies to 

the remaining classes with the 

exception of Large Truck/SUV where 

MHEV is not applied due to payload 

and towing requirements for this class. 

Confidential manufacturer comments 

submitted in response to the NPRM 

indicated a $200 to $1000 cost for the 

MHEV. The 12V micro-hybrid does not 

have a high voltage battery, and thus 

does not have a high-voltage wire cost. 

The 12V micro-hybrid system for the 

midsize vehicle has a 3kW electric 

motor. This agrees well with two 

commercially available systems used on 

smaller engines.213 The value used for 

the DC/DC converter represents the cost 

for a 12V power conditioning circuit to 

allow uninterrupted power to the radio 

and a limited number of other 

accessories when the engine starter is 

engaged. The sizing for the rest of the 

components is shown in Table IV–9. 

The MHEV technology, which will be 

available from the 2011 model year, is 

projected to be in high volume use at 

the beginning of its first year of 

availability according to NHTSA’s 

analysis, therefore volume based 

learning reductions (two cycles at 20 

percent) were applied to ‘‘learn’’ the 

hybrid method costs and time based 

learning factors were applied 

throughout the remaining years. For the 

final rule, NHTSA established 

incremental costs ranging from $372 to 

$549 with the highest cost applying to 

the Performance Large Car class. 

The 12V micro hybrid technology is 

applicable across all the vehicle 

segments except for the Large Truck/ 

SUV class. Although this technology 

was not specifically stated in the NPRM, 

a phase-in cap of 3 percent for MY 2011 

was assumed for hybrid technologies. 

For the final rule, this figure was 

retained since it is generally supportable 

within the industry as expressed at the 

SAE HEV Symposium in San Diego in 

Feb 2008. 

The NPRM proposed that all of the 

hybrid technologies could be introduced 

during the redesign model year only. 

This view is consistent with 

manufacturer’s views, therefore, for this 

rule making, NHTSA has assumed that 

12V micro hybrids can only be 

introduced at the redesign model years. 

(vi) High Voltage/Improved Alternator 

(HVIA) 

In the NPRM, a 42V accessory 

technology was identified in the 

decision tree for Other Technologies. 

Several confidential manufacturer 

comments received by NHTSA related 

to 42V technology, and indicated that 

the effectiveness of 42V system were not 

realized when electrical conversion 

efficiencies were considered, and the 

cost of transitioning the industry from a 

12V to 42V system made the technology 

unreasonable for deployment in the 

emerging technology time frame. As a 

result of these comments, NHTSA 

revised the technology from 42V 

technology to High Voltage/Improved 

Alternator (HVIA). 

The ‘‘High Voltage/Improved 

Efficiency Alternator’’ technology block 

represents technologies associated with 

increased alternator efficiency. As most 

alternators in production vehicles today 

are optimized for cost and the process 

for increasing the efficiency of an 

alternator is well understood by the 

industry, this technology is applicable 

to all vehicle subclasses except Midsize 

and Large Truck and SUV where it is 

not considered applicable due to the 

high utility of these classes. 

The NPRM identified fuel economy 

effectiveness that were based on 42V 

accessory systems, and are not directly 

applicable for this current technology 

definition. Confidential manufacturer 

data indicates that a midsized car with 

an improved efficiency alternator 

provided 0.2 to 0.9 percent fuel 

consumption effectiveness over the 

CAFE drive cycles, and a pickup truck 

provided 0.6 percent fuel consumption 

effectiveness over the same cycles. As 

this technology can be applied over a 

range of vehicles, NHTSA believes the 

fuel consumption effectiveness for 

larger vehicles will be biased 

downward. For purposes of this final 

rule, NHTSA estimates the fuel 

consumption effectiveness for High 

Voltage/Improved Efficiency 

Alternator’’ technology at 0.2 to 0.9 

percent. 

The NPRM identified several sources 

for high voltage/improved efficiency 

alternators incremental costs, but 

focused this technology on 42V systems, 

thus making some of these references 

not representative of the current 

technology description. The NPRM 

‘‘Engine accessory improvement’’ 

technology discussion, however, did 

quote the NESCCAF study that 

indicated a $56 cost for a high efficiency 

generator. An independent confidential 

study estimated that the incremental 

cost increase for a high efficiency 

generator at high volume was similar to 

the NESCCAF quoted cost, thus NHTSA 

concludes that the NESCCAF study cost 

of $56 is still a representative cost for 

this technology. At a 1.5 RPE value, this 

cost equates to $84. 

As the definition of the technology 

has been revised from the NPRM, phasein rates identified in the NPRM are not 

applicable. NHTSA believes the High 

voltage/Improved Efficiency Alternator 

technology represents an adjustment to 

the alternator manufacturing industry 

infrastructure, so for purposes of this 

final rule, phase-in caps for this 

technology were estimated at 10 percent 

for MY 2011. 

Also, as the definition of the 

technology has been revised from the 

NPRM, learning curve assumptions from 

the NPRM are not applicable. The high 

voltage/improved alternator technology 

costs were based on high volume 

estimates, thus, for purposes of the final 

rule, NHTSA assumed time-based 

learning (3 percent YOY) for High 

Voltage Systems/Improved Alternator 

technology. For purposes of the final 

rule, NHTSA assumed the technology 

can be introduced during refresh or 

redesign model changes only. 

(vii) Integrated Starter Generator (ISG) 

The next hybrid technology that is 

considered is the Integrated Starter 

Generator (ISG) technology. There are 2 

types of integrated starter generator 

hybrids that are considered: the belt 

mounted type and the crank mounted 

type. 

A Belt Mounted Integrated Starter 

Generator (BISG) system is similar to a 

micro-hybrid system, except that here it 

is defined as a system with a 110 to 

144V battery pack which thus can 

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214A clutch between the engine and the electric 

motor would enable pure electric drive, but the 

Porsche Cayenne is the only example of such a 

system that is planned in the rulemaking time 

frame. Because of limited expected volumes of this 

type of system, and in the interest of reducing 

complexity, that variant is not included here. 

perform some regenerative braking, 

whereas the 12V micro-hybrid system 

cannot. The larger electric machine and 

battery enables additional hybrid 

functions of regenerative braking and a 

very limited degree of operating the 

engine independently of vehicle load. 

While having a larger electric machine 

and more battery capacity than a MHEV, 

this system has a smaller electric 

machine than stronger hybrid systems 

because of the limited torque capacity of 

the belt driven design. 

BISG systems replace the 

conventional belt-driven alternator with 

a belt-driven, enhanced power starteralternator and a redesigned front-end 

accessory drive system that facilitates 

bi-directional torque application 

utilizing a common electric machine. 

Also, during idle-stop, some functions 

such as power steering and automatic 

transmission hydraulic pressure are lost 

with conventional arrangements; so 

electric power steering and an auxiliary 

transmission pump need to be added. 

These components are similar to those 

that would be used in other hybrid 

designs. 

A Crank Mounted Integrated Starter 

Generator (CISG) hybrid system, also 

called an Integrated Motor Assist (IMA) 

system, utilizes a thin axial electric 

motor (100–144V) bolted to the engine’s 

crankshaft. The electric machine acts as 

both a motor for helping to launch the 

vehicle and a generator for recovering 

energy while slowing down. It also acts 

as the starter for the engine and is a 

higher efficiency generator. An example 

of this type of a system is found in the 

Honda Civic Hybrid. For purposes of the 

final rule, NHTSA assumed the electric 

machine is rigidly fixed to the engine 

crankshaft, thus making electric-only 

drive not practical.214

The fuel consumption effectiveness of 

the ISG systems are greater than those 

of micro-hybrids, because they are able 

to perform the additional hybrid 

function of regenerative braking and 

able to utilize the engine more 

efficiently because some transient 

power demands from the driver can be 

separated from the engine operation. 

Their transient performance can be 

better as well, because the larger electric 

machine can provide torque boost. The 

ISG systems are more expensive than 

the micro hybrids, but have lower cost 

than the strong hybrids described below 

because the electrical component sizes 

(batteries, electric machines, power 

electronics, etc.) are sized in between 

the micro-hybrid and the strong hybrid 

components. The engineering effort 

required to adapt conventional 

powertrains to these configurations is 

also in between that required for microhybrid and strong hybrid configurations. 

Packaging is a greater concern due to the 

fact that the engine-motor-transmission 

assembly is physically longer, and the 

battery pack, high voltage cabling and 

power electronics are larger. 

The hybrid decision tree was 

modified to address several 

manufacturer comments and comments 

from CARB and Delphi asking for more 

appropriate separation of hybrid 

technology classifications (i.e., 12V 

versus higher voltage Integrated Starter 

Generators, etc.). The inclusion of the 

ISG technology in the final rule is in 

response to these comments and those 

from subject matter experts. 

The NPRM had proposed a fuel 

consumption savings of between 5 and 

10 percent for ISG systems, and between 

3.5 and 8.5 percent for the Honda IMA 

system, both of which fall in the ISG 

category described above. Confidential 

manufacturer comments submitted in 

response to the NPRM indicated an 

incremental 3.8 to 7.4 percent fuel 

consumption effectiveness and a $1,500 

to $2,400 cost as compared to the 

baseline vehicle. 

The incremental fuel consumption 

savings for the Compact Car variant for 

ISG over a 12V Micro-hybrid with start/ 

stop was calculated using published 

data and confidential manufacturer 

data, while published Honda Civic 

Hybrid data was used to calculate the 

fuel consumption gains due to the 

hybrid system. For the final rule, gains 

for the other technologies also included 

on this vehicle were subtracted out to 

give an incremental effectiveness of 5.7 

to 6.5 percent for ISG. Data for these 

individual gains was taken from 

confidential manufacturer data. The 5.7 

to 6.5 percent incremental fuel 

consumption savings was carried over 

from the Compact Car to all other 

vehicle subclasses. A 2 percent 

incremental effectiveness was 

subtracted from the Performance 

subclasses to allow for the improved 

baseline performance 

The NPRM proposed a cost of $1,636 

to $2,274 for these systems. For the final 

rule, NHTSA determined the cost for the 

ISG system using system sizing data for 

different available ISG hybrids. The 

2006 Honda Civic has a Crank Mounted 

ISG and uses a 0.87 kW-hr battery pack. 

In light of the potential growth of 

vehicle electrification, a 1 kW-hr pack 

size was chosen for both the belt and 

crank mounted ISG systems. The crank 

mounted ISG was sized as 11kW 

continuous (15kW peak). This is an 

average of the 10kW system on the 2003 

Honda Civic and the 12kW system on 

the 2005 Honda Accord. The 2006 Civic 

has a 15kW system. The belt mounted 

ISG has a slightly smaller electric 

machine (7.5kW continuous and 10kW 

peak) due to power transmission 

limitations of the belt. 

For the final rule, the hybrid 

technology cost method projected costs 

ranging from $2,475 to $3,290 for the 

Sub-Compact car class through the 

Midsize Truck classes as compared to 

the conventional baseline vehicle and 

the incremental costs of $1,713 to 

$2,457 were calculated by backing out 

the prior hybrid technology costs. The 

ISG technology is projected to be in low 

volume use at the beginning of the 

rulemaking period therefore low volume 

costs are used and volume-based 

learning factors are applied. 

Integrated starter generator systems 

are applicable to all vehicle subclasses 

except Large Truck. In the NPRM, a 

phase-in cap of 3 percent was assumed 

for both the ‘‘ISG with idle off’’ and 

‘‘IMA’’ technologies. For the final rule, 

NHTSA has retained the phase-in cap of 

3 percent for MY 2011. These values are 

generally supportable within the 

industry as expressed at the SAE HEV 

Symposium in San Diego in February 

2008. 

The NPRM proposed that all of the 

hybrid technologies could be introduced 

during the redesign model year only. 

This view is consistent with 

manufacturer’s views as well, because 

all of the hybrid technologies under 

consideration require redesign of the 

powertrain (ranging from engine 

accessory drive to transmission 

redesign) and vehicle redesign to 

package the hybrid components (from 

high voltage cabling to the addition of 

large battery packs). Given this, for 

purposes of the final rule, they can only 

be introduced in redesign model years. 

(viii) Power Split Hybrid 

The Power Split hybrid (PSHEV) is 

described as a full or a strong hybrid 

since it has the ability to move the 

vehicle on electric power only. It 

replaces the vehicle’s transmission with 

a single planetary gear and a motor/ 

generator. A second, more powerful 

motor/generator is directly connected to 

the vehicle’s final drive. The planetary 

gear splits the engine’s torque between 

the first motor/generator and the final 

drive. The first motor/generator uses 

power from the engine to either charge 

the battery or supply power to the 

wheels. The speed of the first motor/ 

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215NHTSA notes that the fuel consumption 

effectiveness of PHEVs is heavily dependent on the 

all-electric range, and hence the battery capacity. 

However, the fuel consumption effectiveness from 

a PHEV is currently difficult to quantify objectively 

because there is no standardized fuel economy test 

procedure yet for a PHEV. 

generator determines the relative speed 

of the engine to the wheels. In this way, 

the planetary gear allows the engine to 

operate independently of vehicle speed, 

much like a CVT. The Toyota Prius and 

the Ford Hybrid Escape are two 

examples of power split hybrid vehicles. 

In addition to providing the functions 

of idle engine stop and subsequent 

restart, regenerative braking, this hybrid 

system allows for pure EV operation. 

The two motor/generators are bigger and 

more powerful than those in an ISG 

hybrid, allowing the engine to be run in 

efficient operating zones more often. For 

these reasons, the power split system 

provides very good fuel consumption in 

city driving. During highway cycles, the 

hybrid functions of regenerative 

braking, engine start/stop and optimal 

engine operation cannot be applied as 

often as in city driving, and so the 

effectiveness in fuel consumption are 

less. Additionally, it is less efficient at 

highway speeds due to the fact that the 

first motor/generator must be spinning 

at a relatively high speed and therefore 

incurs losses. 

The battery pack for PSHEV is 

assumed to be 300V NiMH for the time 

period considered in this rulemaking, as 

is used in current PSHEV systems today. 

Their reliability is proven (having been 

in hybrids for over 10 years) and their 

cost is lower than Li Ion, so it is likely 

that the battery technology used in 

HEVs will continue to be NiMH for the 

near future for hybrids that do not 

require high energy storage capability 

like a plug-in hybrid does. 

The Power Split hybrid also reduces 

the cost of the transmission, replacing a 

conventional multi-speed unit with a 

single planetary gear. The electric 

components are bigger than those in an 

ISG configuration so the costs are 

correspondingly higher. 

However, the Power Split system is 

not planned for use on full-size trucks 

and SUVs due to its limited ability to 

efficiently provide the torque needed by 

these vehicles. The drive torque is 

limited to the first motor/generator’s 

capacity to resist the torque of the 

engine. It is anticipated that Large 

Trucks would use the 2-mode hybrid 

system. 

In the NPRM, a phase-in rate of 3 

percent was assumed for the power split 

technology. Although this system has 

been engineered for some vehicles by a 

couple of manufacturers, the required 

engineering resources both at OEMs and 

Tier 1 suppliers are high and most 

importantly, require long product 

development lead times. Thus NHTSA 

believes it would be extremely difficult 

for manufacturers to implement in 

levels greater than that of the submitted 

product plans for MY 2011. For the final 

rule, NHTSA limited the volumes of 

power split hybrids to zero percent in 

MY 2011. Power split hybrid cost and 

effectiveness estimates will not be 

discussed here, given that the 

technology is not applied in MY 2011 

beyond product plan levels in NHTSA’s 

analysis, and NHTSA will consider 

them further in its future rulemaking 

actions. 

The NPRM proposed that all of the 

hybrid technologies could be introduced 

during the redesign model year only, 

consistent with manufacturer’s views. 

Given this, for this final rule NHTSA 

has retained the redesign application 

timing. 

(ix) 2-Mode Hybrid 

The 2-mode hybrid (2MHEV) is 

another strong hybrid system that has 

all-electric drive capability. The 2MHEV 

uses an adaptation of a conventional 

stepped-ratio automatic transmission by 

replacing some of the transmission 

clutches with two electric motors, 

which makes the transmission act like a 

CVT. Like the Power Split hybrid, these 

motors control the ratio of engine speed 

to vehicle speed. But unlike the Power 

Split system, clutches allow the motors 

to be bypassed, which improves both 

the transmission’s torque capacity and 

efficiency for improved fuel economy at 

highway speeds. This type of system is 

used in the Chevy Tahoe Hybrid. 

In addition to providing the hybrid 

functions of engine stop and subsequent 

restart and regenerative braking, the 

2MHEV allows for pure EV operation. 

The two motor/generators are bigger and 

more powerful than those in an ISG 

hybrid, allowing the engine to be run in 

efficient operating zones more often. For 

these reasons, the 2-mode system also 

provides very good fuel economy in city 

driving. The primary motor/generator is 

comparable in size to that in the PSHEV 

system, but the secondary motor/ 

generator is larger. The 2-mode system 

cost is greater than that for the power 

split system due to the additional 

transmission complexity and secondary 

motor sizing. 

The battery pack for 2MHEV is 

assumed to be 300V NiMH for the time 

period considered in this rulemaking, as 

is used in current 2MHEV systems 

today. Their reliability is proven (having 

been in hybrids for over 10 years) and 

their cost is lower than Li Ion, so it is 

likely that the batteries will continue to 

be NiMH for the near future for hybrids 

that do not require high energy storage 

capability like a plug-in hybrid does. 

Given the relatively large size of the 

2 mode powertrain, this technology was 

assumed to be applicable to the Small 

through Large Truck/SUV classes. In the 

NPRM, a phase-in rate of 3 percent was 

assumed for 2 mode hybrids. The 2- 

modes have recently been introduced in 

the marketplace on a few vehicle 

platforms. The engineering resources 

that are needed both at the OEMs and 

Tier 1s to develop this across many 

more platforms are considerable, as 

discussed above for power split hybrids. 

For purposes of the final rule, the phasein rate has been set to zero percent in 

MY 2011. 2 mode hybrid cost and 

effectiveness estimates will not be 

discussed here, given that the 

technology is not applied in MY 2011 

beyond product plan levels in NHTSA’s 

analysis, and NHTSA will consider 

them further in its future rulemaking 

actions. 

The NPRM proposed that all of the 

hybrid technologies could be introduced 

during the redesign model year only, 

consistent with manufacturer’s views. 

Given this, for this final rule NHTSA 

has retained the redesign application 

timing. 

(x) Plug-In Hybrid 

Plug-In Hybrid Electric Vehicles 

(PHEV) are very similar to other strong 

hybrid electric vehicles, but with 

significant functional differences. The 

key distinguishing feature is the ability 

to charge the battery pack from an 

outside source of electricity (usually the 

electric grid). A PHEV would have a 

larger battery pack with greater energy 

capacity, and an ability to be discharged 

further (referred to as ‘‘depth of 

discharge’’).215 No major manufacturer 

currently has a PHEV in production, 

although both GM and Toyota have 

publicly announced that they will 

launch plug-in hybrids in limited 

volumes by 2010. 

PHEVs offer a significant opportunity 

to displace petroleum-derived fuels 

with electricity from the electrical grid. 

The reduction in petroleum use 

depends on the electric-drive range 

capability and the vehicle usage (i.e., 

trip distance between recharging, 

ambient temperature, etc.). PHEVs can 

have a wide variation in the All Electric 

Range (AER) that they offer. Some 

PHEVs are of the ‘‘blended’’ type where 

the engine is on during most of the 

vehicle operation, but the proportion of 

electric energy that is used to propel the 

vehicle is significantly higher than that 

used in a PSHEV or 2MHEV. 

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PHEVs were not projected to be in 

volume use in the NPRM, but due to 

confidential manufacturer product 

plans, PHEVs do, in fact, appear in 

limited volumes in the final rule 

analysis, and therefore low volume, 

unlearned costs are assumed. However, 

the manufacturer-stated production 

volumes of PHEVs are very low, so the 

phase-in cap for MY 2011 is zero—given 

the considerable engineering hurdles, 

the low availability of Li-Ion batteries in 

the MY 2011 time frame and the reasons 

discussed above for power split and 2 

mode hybrids, NHTSA did not believe 

that PHEVs could be applied to more 

MY 2011 vehicles beyond what was 

indicated in the product plans. 

Additionally, plug-in hybrid cost and 

effectiveness estimates will not be 

discussed here, given that the 

technology is not applied in MY 2011 

beyond product plan levels in NHTSA’s 

analysis, and NHTSA will consider 

them further in its future rulemaking 

actions. The NPRM proposed that all of 

the hybrid technologies could be 

introduced during the redesign model 

year only, consistent with 

manufacturer’s views. Given this, for 

this final rule NHTSA has allowed 

application of PHEVs in redesign model 

years only. 

(e) Vehicle Technologies 

(i) Material Substitution (MS1, MS2, 

MS5) 

The term ‘‘material substitution’’ 

encompasses a variety of techniques 

with a variety of costs and lead times. 

These techniques may include using 

lighter-weight and/or higher-strength 

materials, redesigning components, and 

size matching of components. Lighterweight materials involve using lowerdensity materials in vehicle 

components, such as replacing steel 

parts with aluminum or plastic. The use 

of higher-strength materials involves the 

substitution of one material for another 

that possesses higher strength and less 

weight. An example would be using 

high strength alloy steel versus cold 

rolled steel. Component redesign is an 

ongoing process to reduce costs and/or 

weight of components, while improving 

performance and reliability. The 

Aluminum Association commented that 

lightweight structures are a significant 

enabler for the new powertrain 

technologies. Smaller and less 

expensive powertrains are required and 

the combination of reduced power and 

weight reduction positively reinforce 

and result in optimal fuel economy 

performance. An example would be a 

subsystem replacing multiple 

components and mounting hardware. 

However, the cost of reducing weight 

is difficult to determine and depends 

upon the methods used. For example, a 

change in design that reduces weight on 

a new model may or may not save 

money. On the other hand, material 

substitution can result in an increase in 

price per application of the technology 

if more expensive materials are used. As 

discussed further below in Section VIII, 

for purposes of this final rule, NHTSA 

has considered only vehicles weighing 

greater than 5,000 lbs (curb weight) for 

weight reduction through materials 

substitution. A typical BOM for Material 

Substitution would include primarily 

substitution of high strength steels for 

heavier steels or other structural, 

materials on a vehicle. This BOM was 

established for each class but was not 

adjusted for each class due to the fact 

that the vehicle technology of Material 

Substitution is already scaled by it being 

based on percent of curb weight at or 

over 5,000 lbs. 

In the NPRM, NHTSA estimated fuel 

economy effectiveness of a 2 percent 

incremental reduction in fuel 

consumption per each 3 percent 

reduction in vehicle weight. Nissan 

commented that NHTSA’s modeling of 

material substitution application was 

overly optimistic, but did not elaborate 

further. Confidential manufacturer 

comments in response to the NPRM did 

not provide standardized effectiveness 

estimates, but ranged from 3.3 to 3.9 

percent mpg improvement for a 10 

percent reduction in mass, to 0.20 to 

0.75 percent per 1 percent weight 

reduction, to 1 percent reduction on the 

FTP city cycle per 100 lbs reduced, with 

a maximum possible weight reduction 

of 5 percent. 

Bearing in mind that NHTSA only 

assumes material substitution for 

vehicles at or above 5,000 lbs curb 

weight and based on manufacturer 

comments which together suggest an 

incremental improvement in fuel 

consumption of approximately 0.60 

percent to 0.9 percent per 3 percent 

reduction in material weight, NHTSA 

has estimated an incremental 

improvement in fuel consumption of 1 

percent (corresponding to a 3 percent 

reduction in vehicle weight, or roughly 

0.35 percent fuel consumption per 1 

percent reduction in vehicle weight). 

This estimate is consistent with the 

majority of the manufacturer comments. 

As for costs, in the NPRM NHTSA 

estimated incremental costs of $0.75 to 

$1.25 per pound reduced through 

material substitution. The costs for 

material substitution were not clearly 

commented on in the confidential 

manufacturer responses. Confidential 

manufacturer estimates ranged from $50 

to $511 for 1 percent reduction, 

although in most cases the cost 

estimates were not for the entire range 

of substitution (1–5 percent) and did not 

provide any additional clarification on 

how they specifically applied to the 

material substitution technology. 

Consequently, for purposes of the final 

rule NHTSA retained the existing NPRM 

cost estimates with adjustments to 2007 

dollar levels resulting in an incremental 

$1 to $2 per pound of substituted 

material, which applies to the MS1 and 

MS2 technology, and $2 to $4 per 

pound for the MS5 technology. Costs for 

material substitution are not adjusted by 

vehicle subclass, as the technology costs 

are based on a percentage of the vehicle 

weight (per pound) and limited to 

Medium and Large Truck/SUV Van 

subclasses above 5,000 lbs curb weight. 

The agency notes that comments from 

the Alliance and the Aluminum 

Association associated engine 

downsizing with weight reduction/ 

material substitution and quoted 

effectiveness for this action as well. 

NHTSA considers engine downsizing 

separately from typical material 

substitution efforts, and consequently 

did not include those cost and fuel 

economy effectiveness for this 

technology. 

In the NPRM, NHTSA assumed a 17 

percent phase-in rate for material 

substitution. NHTSA received only one 

confidential manufacturer comment 

regarding material substitution phase-in 

percentage, suggesting 17 to 30 percent, 

but the agency notes that it generally 

received comments suggesting a nonlinear phase-in rate for this technology, 

that would start at a rate lower than the 

current NPRM value and increase over 

time. In response to these comments, 

NHTSA revised the MY 2011 phase-in 

percentage to 5 percent to account for 

lead time limitations. 

For material substitution 

technologies, neither volume-based cost 

reductions nor time-based cost 

reductions are applied. This technology 

does not employ a particular list of 

components to employ credible cost 

reduction. 

In the NPRM, NHTSA assumed that 

material substitution (1 percent) could 

be applied during a redesign model year 

only. For this final rule, based on 

confidential manufacturer comments, 

NHTSA estimated that material 

substitution (1 percent) could be 

applied during either a refresh or a 

redesign model year, due to minimal 

design changes with minimal 

component or vehicle-level testing 

required. However, NHTSA retained the 

assumption that material substitution (2 

percent and 5 percent) could be applied 

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during redesign model year only, as in 

the NPRM, because the agency neither 

received comments to contradict this 

assumption nor found other data to 

substantiate a change. The technology 

title was changed from Material 

Substitution (3 percent) to Material 

Substitution (5 percent) to more 

accurately represent the cumulative 

amount for the technology. 

(ii) Low Drag Brakes (LDB) 

Low drag brakes reduce the sliding 

friction of disc brake pads on rotors 

when the brakes are not engaged 

because the brake pads are pulled away 

from the rotating rotor. A typical BOM 

for Low Drag Brakes would typically 

include changes in brake caliper speed 

by changing the brake control system, 

springs, etc. on a vehicles brake system. 

This BOM was established for each class 

and was not adjusted for each class due 

to the fact that the vehicle technology 

BOM would not change by class across 

vehicle classes. Confidential 

manufacturer comments in response to 

the NPRM indicated that most passenger 

cars have already adopted this 

technology, but that ladder frame trucks 

have not yet adopted this technology. 

Consequently, in the final rule this 

technology was assumed to be 

applicable only to the Large 

Performance Passenger Car and Medium 

and Large Truck classes. 

In the NPRM, NHTSA assumed an 

incremental improvement in fuel 

consumption of 1 to 2 percent for low 

drag brakes. Confidential manufacturer 

comments submitted in response to the 

NPRM indicated an effective range of 

0.5–1.0 percent for this technology and 

this range was applied in the final rule. 

As for costs, NHTSA assumed in the 

NPRM incremental costs of $85 to $90 

for the addition of low drag brakes. For 

the final rule, NHTSA took the average 

and adjusted it to 2007 dollars to 

establish an $89 final rule cost. 

The NPRM assumed an annual 

average phase-in rate for low drag 

brakes of 25 percent. For the final rule, 

the MY 2011 phase-in cap is 20 percent. 

No learning curve was applied in the 

NPRM, but for the final rule, low drag 

brakes were considered a high volume, 

mature and stable technology, and thus 

time-based learning was applied. Low 

drag brakes are assumed in the final rule 

to be applicable at refresh cycle only. 

(iii) Low Rolling Resistance Tires 

(ROLL) 

Tire rolling resistance is the frictional 

loss associated mainly with the energy 

dissipated in the deformation of the 

tires under load—and thus, influence 

fuel economy. Other tire design 

characteristics (e.g., materials, 

construction, and tread design) 

influence durability, traction control 

(both wet and dry grip), vehicle 

handling, and ride comfort in addition 

to rolling resistance. A typical low 

rolling resistance tires BOM would 

include: tire inflation pressure, material 

change, and constructions with less 

hysteresis, geometry changes (e.g., 

reduced aspect ratios), reduction in 

sidewall and tread deflection, potential 

spring and shock tuning. Low rolling 

resistance tires are applicable to all 

classes of vehicles, except for ladder 

frame light trucks and performance 

vehicles. NHTSA assumed that this 

technology should not be applied to 

vehicles in the Large truck class due to 

the increased traction and handling 

requirements for off-road and braking 

performance at payload and towing 

limits which cannot be met with low 

resistance tire designs. Likewise, this 

technology was not applied to vehicles 

in the Performance Car classes due to 

increased traction requirements for 

braking and handling which cannot be 

met with low roll resistance tire designs. 

Confidential manufacturer comments 

received regarding applicability of this 

technology to particular vehicle classes 

confirmed NHTSA’s assumption. 

In the NPRM, NHTSA assumed an 

incremental reduction in fuel 

consumption of 1 to 2 percent for 

application of low rolling resistance 

tires. Confidential manufacturer 

comments varied widely and addressed 

the conflicting objectives of increasing 

safety by increasing rolling resistance 

for better tire traction, and improving 

fuel economy with lower rolling 

resistance tires that provide reduced 

traction. Confidential manufacturer 

comments suggested fuel consumption 

effectiveness of negative impact to a 

positive 0.1 percent per year over the 

next five years from 2008, while other 

confidential manufacturer comments 

indicate that the percentage 

effectiveness of low rolling resistance 

tires would increase each year, although 

it would apply differently for 

performance classes. Confidential 

manufacturer comments also indicated 

that some manufacturers have already 

applied this technology and 

consequently would receive no further 

effectiveness from this technology. The 

2002 NAS Report indicated that an 

assumed 10 percent rolling resistance 

reduction would provide an increase in 

fuel economy of 1 to 2 percent. NHTSA 

believes the NAS effectiveness is still 

valid and used 1 to 2 percent 

incremental reduction in fuel 

consumption for application of low 

rolling resistance tires in the final rule. 

NHTSA estimated the incremental 

cost of four low rolling resistance tires 

to be $6 per vehicle in the NPRM, 

independent of vehicle class, although 

not applicable to large trucks. NHTSA 

received few specific comments on the 

costs of applying low rolling resistance 

tires however confidential manufacturer 

comments that were received provided 

widely ranging and higher costs. 

NHTSA increased the range from the 

NPRM cost estimates to $6 to $9 per 

vehicle in the final rule. 

In the NPRM, NHTSA assumed an 

annual phase-in rate of 25 percent for 

low rolling resistance tires. Confidential 

manufacturer comments on the phase-in 

rate for low rolling resistance tires 

varied, with some suggesting that many 

vehicle classes already had high phasein rates planned or accomplished. As 

discussed above, the comments also 

suggested a non-linear phase-in plan 

over the 5-year period. Confidential 

manufacturer data was in the 25–30 

percent range. Based on confidential 

manufacturer comments received and 

NHTSA’s analysis, the final rule 

includes a phase-in cap for low rolling 

resistance tires with a phase-in rate of 

20 percent for MY 2011. 

For low rolling resistant tire 

technology, neither volume-based cost 

reductions nor time-based cost 

reductions are applied. This technology 

is presumed to be significantly 

dependent on commodity raw material 

prices and to be priced independent of 

particular design or manufacturing 

savings. 

In the NPRM, NHTSA assumed that 

low rolling resistance tires could be 

applied during any model year. 

However, based on confidential 

manufacturer comments NHTSA 

recognizes that there are some vehicle 

attribute impacts which may result from 

application of low rolling resistance 

tires, such as changes to vehicle 

dynamics and braking. Vehicle 

validation testing for safety and vehicle 

attribute prove-out is not usually 

planned for every model year, so 

NHTSA assumed that this technology 

can be applied during a redesign or 

refresh model year for purposes of the 

final rule. 

(iv) Front or Secondary Axle Disconnect 

for Four-Wheel Drive Systems (SAX) 

To provide shift-on-the-fly 

capabilities, reduce wear and tear on 

secondary axles, and improve 

performance and fuel economy, many 

part-time four-wheel drive (4WD) 

systems use some type of axle 

disconnect. Axle disconnects are 

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typically used on 4WD vehicles with 

two-wheel drive (2WD) operating 

modes. When shifting from 2WD to 

4WD ‘‘on the fly’’ (while moving), the 

front axle disconnect couples the front 

driveshaft to the front differential side 

gear only when the transfer case’s 

synchronizing mechanism has spun the 

front driveshaft, transfer case chain or 

gear set and differential carrier up to the 

same speed as the rear driveshaft. 4WD 

systems that have axle disconnect 

typically do not have either manual- or 

automatic-locking hubs. For example, to 

isolate the front wheels from the rest of 

the front driveline, front axle 

disconnects use a sliding sleeve to 

connect or disconnect an axle shaft from 

the front differential side gear. The 

effectiveness to fuel efficiency is created 

by reducing inertial, chain, bearing and 

gear losses (parasitic losses). 

Full time 4WD or all-wheel-drive 

(AWD) systems used for on-road 

performance and safety do not use axle 

disconnect systems due to the need for 

instantaneous activation of torque to 

wheels, and the agency is not aware of 

any manufacturer or suppliers who are 

developing a system to allow secondary 

axle disconnect suitable for use on AWD 

systems at this time. Secondary axle 

disconnect technology is primarily 

found on solid axle 4WD systems and 

not on the transaxle and/or independent 

axle systems typically found in AWD 

vehicles; thus, the application of this 

technology to AWD systems has not 

been considered for purposes of this 

rulemaking. The technology will be 

evaluated in future rulemakings. 

Vehicle technology BOM information 

was not adjusted by vehicle classes due 

to the fact that the vehicle technology is 

limited to transfer case and front axle 

design changes. Scaling of components 

might be impacted but the components 

themselves will be the same. This is 

consistent with NHTSA’s assumptions 

in the NPRM, and is supported by 

comments from confidential supplier 

and manufacturers. Secondary Axle 

Disconnect BOM typically involves a 

transfer case which includes electronic 

solenoid with clutch system to 

disconnect front drive and using axle 

mounted vacuum or electric disconnect 

that still allows driveshaft rotation 

without connection to wheel ends. 

In the NPRM, NHTSA employed 

‘‘unibody’’ and ‘‘ladder frame’’ terms to 

differentiate application of this 

technology, and had suggested 

‘‘unibody’’ AWD systems could apply 

this same technology. In actuality, most 

4WD vehicles are ‘‘ladder frame’’ 

technology and AWD are ‘‘unibody’’ 

designs (which for the reasons stated 

above will not be considered for this 

technology). Ladder frame technology is 

typically associated with greater 

payload, towing, and off-road capability, 

whereas unibody designs are typically 

used in smaller, usually front-wheel 

drive vehicles, and are typically not 

associated with higher payload, towing, 

and off-road use. For the final rule, 

NHTSA removed these vehicle design 

criteria since it is not a requirement to 

incorporate axle disconnect technology, 

only a historical design point and 

vehicle manufacturers should not be 

limited to a specific vehicle or chassis 

configuration to apply this technology. 

Therefore, this technology is applicable 

to 4WD vehicles in all vehicle classes 

(independent of chassis or frame 

design). 

In the NPRM, NHTSA estimated an 

incremental reduction in fuel 

consumption of 1 to 1.5 percent for axle 

disconnect. Confidential manufacturer 

comments suggested an incremental 

effectiveness of 1 to 1.5 percent. 

Supported by this confidential 

manufacturer data, NHTSA maintained 

an incremental effectiveness of 1 to 1.5 

percent for axle disconnect for the final 

rule. 

As for costs, the NPRM estimated the 

incremental cost for adding axle 

disconnect technology at $114 for 4WD 

systems and the $676 estimate was for 

the AWD systems which are not applied 

in the final rule. NHTSA received no 

specific comments on costs for this 

technology and found no additional 

sources to support a change from this 

value for the 4WD value of $114, so for 

purposes of the final rule, NHTSA 

revised the $114 figure to 2007 dollars 

to establish a $117 final rule cost. 

In the NPRM, NHTSA assumed a 

phase-in cap of 17 percent for secondary 

axle disconnect for each model year 

covered by the rulemaking. No specific 

comments were received regarding the 

phase-in rate for this technology, but as 

discussed above, manufacturers 

generally argued for a non-linear phasein plan over the 5-year period covered 

by the rulemaking. Based on general 

comments received and NHTSA’s 

analysis, the final rule includes a phasein rate for secondary axle disconnect of 

17 percent in MY 2011. 

In the NPRM, NHTSA assumed a 

volume-based learning curve factor of 

20 percent for secondary axle 

disconnect. For the final rule, secondary 

axle disconnect learning was 

established as time-based due to 

confidential manufacturer data 

demonstrating that this is a mature 

technology, such that additional 

volumes will provide no additional 

advantage for incorporation by 

manufacturers. 

In the NPRM, NHTSA assumed that 

secondary axle disconnect could be 

applied to a vehicle either during 

refresh or redesign model years. NHTSA 

received no comments and found no 

sources to disagree with this 

assumption, and since testing to 

validate the functional requirements 

and vehicle attribute prove-out testing is 

usually not planned for every model 

year, NHTSA has retained this 

assumption for the final rule. 

(v) Aerodynamic Drag Reduction 

(AERO) 

Several factors affect a vehicle’s 

aerodynamic drag and the resulting 

power required to move it through the 

air. While these values change with air 

density and the square and cube of 

vehicle speed, respectively, the overall 

drag effect is determined by the product 

of its frontal area and drag coefficient. 

Reductions in these quantities can 

therefore reduce fuel consumption. 

While frontal areas tend to be relatively 

similar within a vehicle class (mostly 

due to market-competitive size 

requirements), significant variations in 

drag coefficient can be observed. 

Significant fleet aerodynamic drag 

reductions may require incorporation 

into a manufacturer’s new model phasein schedules depending on the mix of 

vehicle classes distributed across the 

manufacturer’s lineup. However, 

shorter-term aerodynamic reductions, 

with less of a fuel economy 

effectiveness, may be achieved through 

the use of revised exterior components 

(typically at a model refresh in midcycle) and add-on devices that are in 

general circulation today. The latter list 

would include revised front and rear 

fascias, modified front air dams and rear 

valances, addition of rear deck lips and 

underbody panels, and more efficient 

exterior mirrors. 

Vehicle technology BOM information 

was not adjusted by vehicle classes due 

to the fact that Aero Drag Reductions are 

already scaled based on percent overall 

vehicle coefficient of drag CdA. Aero 

Drag Reduction BOM could include (but 

would not be limited to) the following 

components or subsystems: Underbody 

covers, front lower air dams, overall 

front fascia changes, headlights, hood, 

fenders, grill, windshield angle, A– 

Pillar angle, door seal gaps, roof (which 

would both be high impact and very 

high cost), side view mirrors, door 

handles (low impact), ride height, rear 

deck lip, wheels, wheel covers, and 

optimizing the cooling flow path. 

In the NPRM, NHTSA estimated an 

incremental aerodynamic drag 

reduction of 20 percent for cars, and 10 

percent for trucks. Confidential 

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216Sue Elliott-Sink, ‘‘Improving Aerodynamics to 

Boost Fuel Economy,’’ May 2, 2006. Available at 

http://www.edmunds.com/advice/fueleconomy/ 

articles/106954/article.html (last accessed Oct. 5, 

2008). 

217 2008 Martec Report, at 25. NHTSA also 

assumed that the cost of fuel pulsation dampening 

technology noted in the Martec report grouped with 

the underbody cover and acoustic covers does not 

significantly impact the $40 cost as fuel pulsation 

dampening technology is very low in cost relative 

to the other actions. Therefore NHTSA did not 

modify the $40 estimate. 

manufacturer comments received 

indicated that the 20 percent reduction 

for cars in the NPRM may have been 

overly optimistic, as significant changes 

in aero drag have already been applied 

to those vehicle classes. However, 

confidential manufacturer comments 

agreed with the 10 percent aerodynamic 

drag reduction for trucks, since there are 

still significant opportunities to improve 

aero drag in trucks designed for truckrelated utility. The Sierra Research 

study submitted by the Alliance 

concluded that a 10 percent incremental 

aerodynamic drag reduction for midsize cars gives a 1.5 percent 

improvement in vehicle fuel economy. 

Thus, for purposes of the final rule, 

NHTSA has estimated that a fleet 

average of 10 percent total aerodynamic 

drag reduction is attainable (with a 

caveat for ‘‘high-performance’’ vehicles 

described below), which equates to 

incremental reductions in fuel 

consumption of 2 percent and 3 percent 

for cars and trucks, respectively. These 

numbers are in agreement with 

publicly-available technical 

literature 216 and are supported by 

confidential manufacturer information. 

Performance car classes are excluded 

from this technology improvement 

because they have largely applied this 

technology already. 

As for costs, in the NPRM NHTSA 

assumed an incremental cost of $0 to 

$75 for aero drag reduction on both cars 

and trucks. After reviewing the 2008 

Martec Report, however, NHTSA 

concluded that a lower-bound cost of $0 

was not supportable. NHTSA replaced 

the lower-bound cost with $40 (nonRPE) based on the assumptions that the 

underbody cover and acoustic covers 

described in the Martec report 

approximates the cost for one large 

underbody cover as might be required 

for minimal aero drag reduction 

actions.217 The upper limit was 

determined by updating the NPRM 

upper cost to 2007 dollars and applying 

an RPE uplift thereby establishing the 

incremental cost, independent of 

vehicle class, to range from $60 to $116 

(RPE) for the final rule 

In the NPRM, NHTSA assumed a 17 

percent phase-in rate for aero drag 

reduction for each model year covered 

by the rulemaking. No specific 

comments were received regarding the 

phase-in rate for this technology, but as 

discussed above, manufacturers 

generally argued for a non-linear phasein plan over a 5-year period. Based on 

comments received and NHTSA’s 

analysis, the final rule includes a phasein rate for aero drag reduction of 17 

percent for MY 2011. Neither volumebased cost reductions nor time-based 

cost reductions are applied. In the 

NPRM, NHTSA assumed that aero drag 

reduction could be applied in either a 

refresh or a redesign model year and 

that assumption has been retained for 

the final rule. 

(f) Technologies Considered But Not 

Included in the Final Rule Analysis 

Although discussed and considered as 

potentially viable in the NPRM, NHTSA 

has determined that three technologies 

will be unavailable in the time frame 

considered. These technologies have 

been identified as either pre-emerging or 

not technologically feasible. Preemerging technologies are those that are 

still in the research phase at this time, 

and which are not expected to be under 

development for production vehicles for 

several years. In another case, the 

technology depends on a fuel that is not 

readily available. Thus, for the reasons 

discussed below, these technologies 

were not considered in NHTSA’s 

analysis for the final rule. The 

technologies are camless valve actuation 

(CVA), lean burn gasoline direct 

injection (LBDI), homogeneous charge 

compression ignition (HCCI), and 

electric assist turbocharging. Although 

not applied in this rulemaking, NHTSA 

will continue to monitor the industry 

and system suppliers for progress on 

these technologies, and should they 

become available, consider them for use 

in any future rulemaking activity. 

(i) Camless Valve Actuation 

Camless valve actuation relies on 

electromechanical actuators instead of 

camshafts to open and close the 

cylinder valves. When 

electromechanical actuators are used to 

replace cams and coupled with sensors 

and microprocessor controls, valve 

timing and lift can be optimized over all 

conditions. An engine valvetrain that 

operates independently of any 

mechanical means provides the ultimate 

in flexibility for intake and exhaust 

timing and lift optimization. With it 

comes infinite valve overlap variability, 

the rapid response required to change 

between operating modes (such as HCCI 

and GDI), intake valve throttling, 

cylinder deactivation, and elimination 

of the camshafts (reduced friction). This 

level of control can enable even further 

incremental reductions in fuel 

consumption. 

As noted in the NPRM, this 

technology has been under research for 

many decades and although some 

progress is being made, NHTSA has 

found no evidence to support that the 

technology can be successfully 

implemented, costed, or have defined 

fuel consumption effectiveness at this 

time. 

(ii) Lean-Burn Gasoline Direct Injection 

Technology 

One way to improve an engine’s 

thermodynamic efficiency dramatically 

is by operating at a lean air-fuel mixture 

(excess air). Fuel system improvements, 

changes in combustion chamber design 

and repositioning of the injectors have 

allowed for better air/fuel mixing and 

combustion efficiency. There is 

currently a shift from wall-guided 

injection to spray guided injection, 

which improves injection precision and 

targeting towards the spark plug, 

increasing lean combustion stability. 

Combined with advances in NOX aftertreatment, lean-burn GDI engines may 

eventually be a possibility in North 

America. 

However, as noted in the NPRM, a key 

technical requirement for lean-burn GDI 

engines to meet EPA’s Tier 2 NOX

emissions levels is the availability of 

low-sulfur gasoline, which is projected 

to be unavailable during the time frame 

considered. Therefore the technology 

was not applied in the final rule 

(iii) Homogeneous Charge Compression 

Ignition 

Homogeneous charge compression 

ignition (HCCI), also referred to as 

controlled auto ignition (CAI), is an 

alternate engine operating mode that 

does not rely on a spark event to initiate 

combustion. The principles are more 

closely aligned with a diesel 

combustion cycle, in which the 

compressed charge exceeds a 

temperature and pressure necessary for 

spontaneous ignition. The resulting 

burn is much shorter in duration with 

higher thermal efficiency. Shorter 

combustion times and higher EGR 

tolerance permit very high compression 

ratios (which also increase 

thermodynamic efficiency), and 

additionally, pumping losses are 

reduced because the engine can run 

unthrottled. 

NHTSA noted in the NPRM that 

several manufacturers had made public 

statements about the viability of 

incorporating HCCI into production 

vehicles over the next 10 years. Upon 

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218NHTSA–2008–0089–0169.1, at 41. 

further review of confidential product 

plan information, and reviewing 

comments received in response to the 

NPRM, NHTSA has determined the 

technology will not be available within 

the time frame considered. 

Consequently, the technology was not 

applied in the final rule. 

(iv) Electric Assist Turbocharging 

The Alliance commented that global 

development of electric assist 

turbocharging has not demonstrated the 

fuel efficiency effectiveness of a 12V 

EAT up to 2kW power levels since the 

2004 NESCCAF study, and stated that it 

saw remote probability of its application 

over the next decade.218 While hybrid 

vehicles lower the incremental 

hardware requirements for highervoltage, higher-power EAT systems, 

NHTSA believes that significant 

development work is required to 

demonstrate effective systems and that 

implementation in significant volumes 

will not occur in the time frame 

considered. Thus, this technology was 

not included on the decision trees. 

E. Cost and Effectiveness Tables 

The tables representing the Volpe 

model input files for incremental 

technology costs by vehicle subclass are 

presented below. The tables have been 

divided into passenger cars, 

performance passenger cars, and light 

trucks to make them easier to read. 

BILLING CODE 4910–59–P 

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The tables representing the Volpe 

model input files for incremental 

technology effectiveness values by 

vehicle subclass are presented below. 

The tables have been divided into 

passenger cars, performance passenger 

cars, and light trucks to make them 

easier to read. 


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BILLING CODE 4910–59–C 

The tables representing the Volpe 

model input files for approximate net 

(accumulated) technology costs by 

vehicle subclass are presented below. 

The tables have been divided into 

passenger cars, performance passenger 

cars, and light trucks to make them 

easier to read. 


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The tables representing the Volpe 

model input files for approximate net 

(accumulated) technology effectiveness 

values by vehicle subclass are presented 

below. The tables have been divided 

into passenger cars, performance 

passenger cars, and light trucks to make 

them easier to read. 


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V. Economic Assumptions Used in 

NHTSA’s Analysis 

A. Introduction: How NHTSA Uses the 

Economic Assumptions in Its Analysis 

NHTSA’s analysis of alternative CAFE 

standards for model year 2011 passenger 

cars and light trucks relies on a range of 

market information, estimates of the 

cost and effectiveness of technologies to 

increase fuel economy, forecasts of 

critical economic variables, and 

estimates of the values of important 

behavioral parameters. This section 

describes the sources NHTSA has relied 

upon to obtain this information, as well 

as how the agency developed the 

specific parameter values used in the 

analysis. Like the product plan 

information it obtains from vehicle 

manufacturers, these economic 

variables, forecasts, and parameter 

values play important roles in 

determining the level of CAFE 

standards, although some variables have 

larger impacts on the final standards 

than others. 

As discussed above, the Volpe model 

uses the estimates of the costs and 

effectiveness of individual technologies 

to simulate the improvements that 

manufacturers could elect to make to 

the fuel economy of their individual 

vehicle models in order to comply with 

higher CAFE standards at the lowest 

cost, and to estimate each 

manufacturer’s total costs for meeting 

new standards. To calculate the 

reductions in fuel use over the lifetime 

of each car and light truck model from 

the resulting increases in fuel economy, 

the model then combines those 

increases with estimates of the fraction 

of cars and light trucks that remain in 

service at different ages, the number of 

miles they are driven at each age, and 

the size of the fuel economy rebound 

effect. Forecasts of future fuel prices are 

then applied to these fuel savings to 

estimate their economic value during 

each year the vehicles affected by the 

higher CAFE standards are projected to 

remain in service. The Volpe model also 

uses estimates of the fractions of fuel 


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savings that will reduce U.S. imports of 

crude petroleum and refined fuel to 

estimate the reduction in economic 

externalities that result from U.S. 

imports. 

Using emission rates per mile driven 

by different types of vehicles or per 

gallon of fuel consumed, together with 

estimates of emissions that occur within 

the U.S. in the process of refining and 

distributing fuel, the Volpe model 

calculates changes in emissions of 

regulated (or criteria) air pollutants and 

carbon dioxide (CO2), the main 

greenhouse gas emitted during fuel 

production and vehicle use. These are 

combined with estimates of the 

economic damages to human health and 

property caused by regulated air 

pollutants, and by projected future 

changes in the global climate resulting 

from increases in CO2 emissions, to 

estimate the benefits from the resulting 

reductions in emissions. Finally, the 

model calculates benefits to vehicle 

owners from having to refuel less 

frequently based on the estimated 

values of vehicle occupants’ time, the 

decline in vehicle operating costs due to 

lower fuel consumption, and the 

increase in mobility afforded by added 

rebound-effect driving. 

As the following discussion makes 

clear, the costs and effectiveness of fuel 

economy technologies, forecasts of 

future gasoline prices, and the discount 

rate applied to future benefits have the 

largest influence over the level of the 

standards. In contrast, estimates of the 

value of economic externalities 

generated by U.S. petroleum imports, 

the fuel economy rebound effect, the 

gap between test and on-road fuel 

economy, and the economic values of 

reducing emissions of greenhouse gases 

and regulated air pollutants each have 

more modest effects on determining the 

final CAFE standards. NHTSA has 

analyzed the sensitivity of the final 

standards and their resulting benefits to 

plausible variation in the most 

important of these inputs, both by 

varying their values individually and 

conducting a Monte Carlo-type analysis 

of joint variation in their probably 

values. NHTSA recognizes that there 

may be other reasonable assumptions 

that the agency could have made. 

However, for purposes of the MY 2011 

rulemaking, NHTSA continues to 

believe that the assumptions made are 

the most appropriate based on the 

information available. The agency will, 

however, review these assumptions in 

future rulemakings, especially in light of 

comments received and accounting for 

changing circumstances, both 

domestically and globally, and consider 

whether other assumptions would be 

more reasonable under the 

circumstances at that time. 

For the reader’s reference, Table V–1 

below summarizes the values of many of 

the variables NHTSA uses to estimate 

the costs, fuel savings, and resulting 

economic benefits from increases in car 

and light truck CAFE standards. 

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219 Derived from NHTSA’s $33 per metric ton 

estimate of the global value of reducing CO2

emissions. 

220See Docket No. NHTSA–2007–27453, Item 4. 

221 Vyas, Anant, Dan Santini, and Roy Cuenca, 

Comparison of Indirect Cost Multipliers for Vehicle 

Manufacturing, Center for Transportation Research, 

Argonne National Laboratory, April 2000. Available 

at http://www.transportation.anl.gov/pdfs/TA/ 

57.pdf (last accessed August 14, 2008). 

BILLING CODE 4910–59–C 

B. What economic assumptions does 

NHTSA use in its analysis? 

1. Determining Retail Price Equivalent 

NHTSA explained in the NPRM that 

the technology cost estimates used in 

the agency’s analysis are intended to 

represent manufacturers’ direct costs for 

high-volume production of vehicles 

with these technologies and sufficient 

experience with their application so that 

all cost reductions due to ‘‘learning 

curve’’ effects were fully realized. 

However, NHTSA recognized that 

manufacturers may also incur additional 

corporate overhead, marketing, or 

distribution and selling expenses as a 

consequence of their efforts to improve 

the fuel economy of individual vehicle 

models and their overall product lines. 

In order to account for these 

additional costs, NHTSA applied an 

indirect cost multiplier in the NPRM of 

1.5 to the estimate of the vehicle 

manufacturers’ direct costs for 

producing or acquiring each fuel 

economy-improving technology. 

Historically, NHTSA used an almost 

identical multiplier, 1.51, for the 

markup from variable costs or direct 

manufacturing costs to consumer costs. 

The markup takes into account fixed 

costs, burden, manufacturer’s profit, and 

dealers’ profit. NHTSA’s methodology 

for determining this markup was peerreviewed in 2006.220

NHTSA stated in the NPRM that the 

estimate of 1.5 was confirmed by 

Argonne National Laboratory in a recent 

review of vehicle manufacturers’ 

indirect costs. The Argonne study was 

specifically intended to improve the 

accuracy of future cost estimates for 

production of vehicles that achieve high 

fuel economy by employing many of the 

same advanced technologies considered 

in NHTSA’s analysis.221 Thus, NHTSA 

stated in the NPRM that it believed that 


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222NESCAUM stated that NESCCAF, or Northeast 

States Center for a Clean Air Future, is an affiliate 

organization of NESCAUM. 

223NESCAUM gave a specific example with 

regard to the cost of a turbocharger, as follows: 

NHTSA states the NESCCAF turbocharger cost is 

$600. In this case, NHTSA applied a 1.5 RPE factor 

to manufacturer costs presented in Appendix C of 

the NESCCAF report to arrive at the $600 cost. This 

is different from the cost that NESCCAF developed. 

Conversely, on page 24369 of the Federal Register 

notice, NHTSA accurately states the NESCCAF 

cylinder deactivation costs ranged from $161 to 

$210. This cost accurately reflects manufacturer 

costs presented in Appendix C of the NESCCAF 

report, multiplied by the 1.4 retail price equivalent 

used by NESCCAF. 

224The Alliance cited the Sierra Research report 

as stating that ‘‘* * * the 1.5 multiplier clearly 

does not apply to changes in engines, 

transmissions, or bodies in cases where the vehicle 

manufacturer designs and produces its own 

engines, transmissions, and bodies.’’ Sierra 

Research report at 61. 

applying a multiplier of 1.5 to direct 

manufacturing costs to reflect 

manufacturers’ increased indirect costs 

for deploying advanced fuel economy 

technologies is appropriate for use in 

the analysis for this rulemaking. NHTSA 

describes this multiplier in Section IV 

above as the Retail Price Equivalent 

factor, or RPE factor. 

Some commenters argued that 

NHTSA’s mark-up factor of 1.5 was too 

high. NESCAUM commented that 

NHTSA had relied on the 2004 

NESCCAF study as one source for its 

technology estimates, but appeared to 

have incorrectly reported information 

from that study with regard to the markup factor.222 NESCAUM stated that in 

the report, entitled ‘‘Reducing 

Greenhouse Gas Emissions from LightDuty Motor Vehicles,’’ NESCCAF only 

used a 1.4 RPE, but ‘‘NHTSA applies a 

1.5 retail price equivalent (RPE) factor to 

the manufacturer costs presented in 

Appendix C of the NESCCAF report, 

and at other times uses a 1.4 RPE—and 

presents both costs as NESCCAF costs.’’ 

NESCAUM argued that ‘‘The reporting 

of costs using the 1.5 multiplier as 

NESCCAF costs is incorrect and leads to 

uncertainty as to how the costs were 

developed.’’ 223 NESCAUM stated that 

‘‘All reported costs and benefits, 

attributed to NESCCAF by NHTSA, 

[should] be reviewed carefully for errors 

and amended accordingly.’’ CARB also 

stated that there was ‘‘inconsistency 

* * * in the treatment of NESCCAF 

costs,’’ because NHTSA sometimes used 

a 1.5 markup and sometimes 1.4, and 

argued that ‘‘These errors in citing the 

NESCCAF report raise doubts about 

whether RPE costs from other sources 

are cited accurately.’’ 

CARB further commented that 

NHTSA had inconsistently added costs 

for the engineering effort required to 

add some technologies to vehicles, 

when those costs should have been 

covered by the RPE markup. CARB cited 

NHTSA’s language in the NPRM that 

‘‘manufacturers’ actual costs for 

applying these technologies to specific 

vehicle models are likely to include 

additional outlays for accompanying 

design or engineering changes to each 

model, development and testing of 

prototype versions, recalibrating engine 

operating parameters, and integrating 

the technology with other attributes of 

the vehicle.’’ (Emphasis added) CARB 

argued that adding additional costs for 

engineering effort to any technology 

amounted to double-counting. CARB 

also commented that NHTSA’s 

methodology for determining the 

indirect cost markup was unsound, 

because ‘‘the cost to incorporate a 

technology is the same regardless of 

vehicle production,’’ and because 

‘‘manufacturers are moving toward 

global vehicle architectures in an effort 

to spread development costs across the 

largest volume of vehicles possible, thus 

reducing engineering costs.’’ CARB 

argued that ‘‘The engineering cost 

methodology cited in the NPRM 

conflicts with this trend as well.’’ 

Other commenters argued that 

NHTSA’s mark-up factor of 1.5 was too 

low. The Alliance commented that the 

RPE mark-up factor of 1.5 used by 

NHTSA is ‘‘far too low,’’ and cited the 

Sierra Research report and a study by 

Wynn V. Bussman, submitted as an 

attachment by the Alliance, as 

concluding that ‘‘the best estimate for 

RPE is more on the order of 2.0.’’ The 

Alliance argued that NHTSA’s citation 

of the Argonne study as support for an 

RPE of 1.5 was incorrect and out of 

context, stating that ‘‘As both Bussman 

and Sierra noted, the Argonne National 

Laboratory recommended use of 2.0 as 

the RPE factor.’’ The Alliance stated that 

the Argonne study had simply used a 

1.5 RPE for outsourced components, 

because ‘‘Manufacturers that outsource 

components do not bear warranty and 

other costs under typical contractual 

arrangements.’’ The Alliance argued that 

‘‘A 1.5 RPE * * * is simply 

unrepresentative for components that 

are developed in house by the original 

equipment manufacturers (‘‘OEMs’’).’’ 

The Alliance further argued that ‘‘Use of 

a 1.5 RPE for all purposes also glosses 

over the fact that outsourced 

components can nevertheless require 

significant integration expenditures 

from manufacturers putting together and 

selling entire vehicles.’’ 224 Chrysler 

concurred separately with the Alliance 

that ‘‘NHTSA’s use of an RPE of 1.5 

does not adequately account for the full 

cost of implementing new 

technologies,’’ and stated that an RPE of 

2.0 ‘‘is the appropriate factor to use for 

new technologies.’’ 

The Alliance also commented that 

Bussman had ‘‘considered the literature 

on RPE factors extensively,’’ and 

‘‘concluded that studies that advised 

RPEs of approximately 1.5 were filled 

with errors and that when these errors 

were corrected, these studies also 

supported the conclusion that the 

proper RPE is 2.0.’’ The Alliance 

concluded by arguing that the Sierra 

Research report had found that ‘‘some 

recent analyses of RPE are based on 

unrepresentative and unsustainable 

profit levels by manufacturers,’’ and that 

‘‘If realistic long-term profit rates are 

used, then the RPE increases from 2.0 to 

a range of 2.09 to 2.15.’’ 

NADA did not expressly agree or 

disagree with a mark-up factor of 1.5, 

but commented that since the NPRM 

states that the 1.5 multiplier includes 

‘‘dealer profit’’ among other related 

additional costs, NHTSA ‘‘should 

review whether its estimates include all 

dealer costs-of-sales when calculating 

‘dealer profit’ and the extent to which 

it has properly accounted for the finance 

costs consumers typically pay when 

purchasing new automobiles.’’ 

Agency response: NHTSA notes that 

the analysis for this final rule relies on 

entirely new cost estimates for fuel 

economy technologies developed by the 

agency in response to comments and in 

coordination with an international 

engineering consulting firm, Ricardo, 

Inc., based on a bill of materials 

approach as described in Section IV of 

this notice and not based on the 2004 

NESCCAF study, so the issue of 

apparent inconsistency in the RPE factor 

applied to those estimates noted by 

NESCAUM and CARB is no longer 

relevant. The agency also notes that 

both the production and application of 

fuel economy-improving technologies 

include separate engineering cost 

components. Developing these 

technologies and readying them for 

high-volume production entails 

significant initial investments in 

product design and engineering, while 

as the NPRM pointed out, applying 

individual technologies to specific 

vehicle models can entail significant 

additional costs for accompanying 

engineering changes to its existing drive 

train, development and testing of 

prototype versions, recalibrating engine 

operating parameters, and integrating 

the technology with other attributes of 

the vehicle. While design and 

engineering costs for developing fuel 

economy-improving technologies are 

included in the production cost 

estimates for individual technologies, 

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14312 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

additional engineering costs incurred by 

manufacturers in applying them to 

specific vehicle models are included in 

NHTSA’s estimate of the RPE factor. 

Finally, the agency notes that its 

estimate of the RPE factor includes highvolume production and application of 

fuel economy technologies, because it 

assumes that initial design and 

engineering costs to develop and begin 

production of these technologies will be 

recovered over large production 

volumes. Thus, NHTSA believes that 

CARB’s concerns about potential 

double-counting of engineering costs for 

developing and applying fuel economy 

technologies reflect a failure to 

recognize that engineering costs arise in 

both their development and application. 

The agency also believes that CARB’s 

concern about whether NHTSA’s RPE 

factor assumes the spreading of initial 

design and engineering costs for 

developing these technologies over 

insufficiently high production volumes 

is unfounded. 

In response to the concerns expressed 

by the Alliance and others that 

NHTSA’s RPE factor is too low, the 

agency notes that the RPE factor of 2.0 

reported in the Argonne and Sierra 

Research studies includes various 

categories of production overhead costs 

(for product development and 

engineering, depreciation and 

amortization of production facilities, 

and warranty) that are included in 

NHTSA’s estimates of production costs 

for fuel economy technologies. When 

applied to technology production costs 

defined to include these components, 

the agency’s RPE factor of 1.5 is thus 

consistent with full recovery of these 

cost components. This conclusion is 

independent of whether overhead costs 

for developing and producing fuel 

economy technologies are initially 

borne by equipment suppliers or by 

vehicle manufacturers themselves. 

Consequently, NHTSA has continued to 

employ an RPE factor of 1.5 in its 

analysis for this final rule. 

2. Potential Opportunity Costs of 

Improved Fuel Economy 

In the NPRM, NHTSA discussed the 

issue of whether achieving the fuel 

economy improvements required by 

alternative CAFE standards would 

require manufacturers to compromise 

the performance, carrying capacity, 

safety, or comfort of some vehicle 

models. If so, the resulting reduction in 

the value of those models to potential 

buyers would represent an additional 

cost of achieving the improvements in 

fuel economy required by stricter CAFE 

standards. While exact dollar values of 

these attributes to consumers are 

difficult to infer from vehicle purchase 

prices, changing vehicle attributes can 

affect the utility that vehicles provide to 

their owners, and thus their value to 

potential buyers. This is not to suggest 

that buyers typically attach low values 

to fuel economy; rather, it recognizes 

that buyers value many different 

attributes, so that requiring 

manufacturers to make tradeoffs among 

them may alter the overall value of 

certain vehicle models to individual 

buyers. 

NHTSA has approached this potential 

problem by developing tentative cost 

estimates for fuel economy-improving 

technologies that include any additional 

production costs necessary to maintain 

the product plan levels of performance, 

comfort, capacity, and safety of the 

models on which they are used. In 

doing so, NHTSA primarily followed 

the precedent established by the 2002 

NAS Report, although the NPRM 

updated its assumptions as necessary 

for purposes of the current rulemaking. 

The NAS Report estimated ‘‘constant 

performance and utility’’ costs for fuel 

economy technologies, and NHTSA 

used those as the basis for its further 

efforts to develop the initial technology 

costs employed in analyzing 

manufacturers’ costs for complying with 

alternative CAFE standards. 

NHTSA acknowledged the difficulty 

of estimating technology costs that 

include costs for the accompanying 

changes in vehicle design that are 

necessary to maintain performance, 

capacity, and utility. However, as 

NHTSA stated in the NPRM, the agency 

believes that the tentative cost estimates 

for fuel economy-improving 

technologies should be generally 

sufficient to prevent significant 

reductions in consumer welfare 

provided by vehicle models to which 

manufacturers apply those technologies. 

Nonetheless, the NPRM sought 

comment on alternative ways to address 

these issues. 

NHTSA did not receive comments 

that explicitly addressed NHTSA’s 

question of whether there are better 

ways for the agency to estimate 

technology costs that capture changes in 

vehicle design so that fuel economy can 

be improved while maintaining 

performance, capacity, and utility. Some 

comments, however, expressed concern 

that the proposed CAFE standards, and 

more stringent CAFE standards 

generally, would prevent manufacturers 

from maintaining intended levels of 

performance, comfort, capacity, and/or 

safety of at least some of their vehicle 

models. 

For example, the American Farm 

Bureau Federation commented that the 

proposed standards would result in 

‘‘more expensive trucks that lack the 

power needed to perform the tasks 

required’’ of them by farmers, and that 

‘‘trucks laden with expensive untested 

technologies may prove undependable 

and costly to repair.’’ AFBF stated that 

farmers need trucks that can haul and 

tow heavy loads and trailers, which 

requires ‘‘heavy frames, strong engines, 

and adequate horsepower and torque.’’ 

AFBF argued that the proposal would 

cause manufacturers either to downsize 

and reduce power in their vehicles, or 

to sell fewer powerful trucks and 

increase their cost, all of which would 

create hardship for farmers who need 

such trucks for their livelihoods. 

NADA similarly suggested in its 

comments that the proposed standards 

could constrain the ability of light truck 

manufacturers to meet ‘‘market needs’’ 

for towing and hauling capability, as 

well as space and power. NADA also 

stated that manufacturers of small highperformance (i.e., sports) cars might be 

forced by the stringency of the proposed 

standards to exit the market or reduce 

product offerings. 

BMW expressed concern that the 

proposed footprint-based standards will 

‘‘provide a disincentive to install safety 

devices on vehicles,’’ since ‘‘In general, 

safety devices add mass,’’ and 

‘‘additional mass will lead to higher fuel 

consumption.’’ Thus, BMW argued, all 

manufacturers will think twice before 

adding safety equipment to a vehicle, in 

order not to hurt their chances of 

meeting the CAFE standards. Along 

those lines, BMW argued that its 

vehicles were ‘‘high feature-density 

vehicles,’’ which it defined as ‘‘those 

that include extraordinary safety, 

comfort, and convenience features like 

electronic/advanced stability, braking, 

suspension, steering, lighting, and 

security controls.’’ BMW stated that 

these vehicles ‘‘have a high mass per 

footprint density,’’ and suggested that 

the proposed footprint-based standards 

provide manufacturers with a 

disincentive to continue offering this 

type of vehicle. 

Agency response: The agency did not 

include a reduction in performance as 

one of the countermeasures that the 

manufacturers could take to meet the 

final rule for two main reasons. First, 

the agency believes that manufacturers 

could meet the standards adopted in 

this final rule at the estimated 

compliance costs without noticeably 

affecting vehicle performance or utility. 

As noted previously, NHTSA’s cost 

estimates for individual fuel economyimproving technologies are intended to 

include any additional production costs 

necessary to maintain the performance, 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14313 

225 71 FR 77871 (Dec. 27, 2006). 

226 David L. Greene et al., ‘‘Analysis of In-Use 

Fuel Economy Shortfall Based on Voluntarily 

Reported MPG Estimates,’’ 2005. Available at 

Docket No. NHTSA–2008–0089–0173.11. 

227Sierra Research report, at 96–97. Available at 

Docket No. NHTSA–2008–0089–0179.1, 

Attachment 2. 

comfort, capacity, and safety of the 

models on which they are used. The 

agency has reviewed its cost estimates 

for individual fuel economy 

technologies in detail, and is confident 

that they include sufficient allowances 

to prevent significant reductions in 

these critical attributes, and this in the 

utility that vehicle models to which 

manufacturers apply those technologies 

will provide to potential buyers. 

Second, NHTSA believes that the 

commenters’ concerns about potential 

opportunity costs for reduced vehicle 

performance and utility are largely 

unfounded. Manufacturers are 

technically capable of producing 

vehicles with reduced performance, as 

evidenced by the fact that most 

manufacturers offer otherwise-similar 

vehicle models that feature a range of 

engine sizes, and thus different levels of 

power and performance. Although some 

manufacturers offer versions of the same 

vehicle model with a smaller engine in 

Europe than is sold in the United States, 

their decisions not to market these 

vehicles domestically demonstrates that 

they do not believe that they can 

produce and sell such vehicles to U.S. 

buyers in sufficient quantities to be 

profitable at this time. This is 

presumably because in order to sell 

vehicles that do not meet U.S. buyers’ 

preferences for power and performance, 

manufacturers would be required to 

discount their prices sufficiently to 

compensate for their lower levels of 

these attributes. 

While it may be true that a 

manufacturer could produce lowerperformance versions of its vehicle 

models at reduced costs compared to a 

higher-performance version of that same 

model, this does not make performance 

reduction a zero or negative cost 

compliance option. Manufacturers 

apparently estimate that the reduction 

in the values of lower-performing 

versions to their potential buyers 

exceeds their savings in manufacturing 

costs to produce them, since otherwise 

they would already produce and offer 

lower-performance versions of their 

existing models for sale. The net cost of 

reducing performance, which is 

measured by the difference between the 

reduced value of lower-performance 

models to buyers and manufacturers’ 

cost savings for producing them, 

represents a cost of employing 

performance reduction as a compliance 

strategy. 

Both manufacturers and NHTSA 

experience difficulty in determining 

how much value consumers place on 

performance, as well as in determining 

whether this value would remain stable 

over time. While NHTSA recognizes 

that there may be specific situations 

where performance reduction may be a 

cost-effective compliance strategy for 

certain manufacturers, the agency 

believes that the net cost of reducing 

performance must generally be 

comparable to or higher than that of 

technological approaches to fuel 

economy improvement. Thus the 

outcome of this rulemaking process is 

not significantly affected by omission of 

performance reduction as an explicit 

compliance strategy. 

In response to BMW’s comment that 

footprint-based standards may 

discourage manufacturers from offering 

safety and other features that increase 

vehicle weight, NHTSA notes that 

increased vehicle weight due to safety 

and other features will make it more 

difficult for manufacturers to comply 

with any CAFE standard—whether 

attribute-based or uniform—and not just 

with footprint-based standards. Further, 

NHTSA believes that manufacturers will 

continue to include features whose 

value to potential buyers exceeds 

manufacturers’ costs for supplying 

them. Those costs will include any 

outlays for additional fuel economy 

technologies that are necessary to 

compensate for the fuel economy 

penalties imposed by features that add 

weight, and thus enable manufacturers 

to comply with higher CAFE standards. 

NHTSA notes, however, that buyers 

generally appear to value such features 

highly, as evidenced by the prices of car 

and light truck models on which they 

are featured, as well as by prices that 

manufacturers generally charge when 

they offer such features as options. Any 

increase in costs to achieve CAFE 

compliance that BMW or other 

manufacturers might experience as a 

result of providing these features likely 

should not, therefore, affect significantly 

the extent to which they are included as 

standard features or offered as optional 

features and purchased by vehicle 

buyers. 

3. The On-Road Fuel Economy ‘Gap’ 

NHTSA explained in the NPRM that 

actual fuel economy levels achieved by 

passenger cars and light trucks in onroad driving fall somewhat short of their 

levels measured under the laboratorylike test conditions that EPA uses to 

establish its published fuel economy 

ratings. In analyzing the fuel savings 

from alternative CAFE standards for 

previous light truck rulemakings, 

NHTSA adjusted the actual fuel 

economy performance of each light 

truck model downward by 15 percent 

from its rated value to reflect the 

expected size of this on-road fuel 

economy ‘‘gap.’’ 

However, in December 2006, EPA 

adopted changes to its regulations on 

fuel economy labeling which were 

intended to bring vehicles’ rated fuel 

economy levels closer to their actual onroad fuel economy levels.225 In its Final 

Rule, EPA estimated that actual on-road 

fuel economy for light-duty vehicles 

averages 20 percent lower than 

published fuel economy levels. For 

example, if the overall EPA fuel 

economy rating of a light truck is 20 

mpg, the on-road fuel economy actually 

achieved by a typical driver of that 

vehicle is expected to be 16 mpg (20 

mpg x 0.8). In the NPRM, NHTSA 

employed EPA’s revised estimate of this 

on-road fuel economy gap in its analysis 

of the fuel savings resulting from the 

proposed and alternative CAFE 

standards. 

NHTSA received no explicit 

comments regarding the on-road fuel 

economy gap. CARB submitted a report 

by Greene et al. that addressed in-use 

fuel economy, but was completed prior 

to EPA’s changes to its labeling 

regulations, and CARB did not indicate 

in its comments how this report was 

relevant to the CAFE rulemaking.226 The 

report by Sierra Research included by 

the Alliance did not comment 

specifically on NHTSA’s use of EPA’s 

estimate of the on-road fuel economy 

gap, but employed different ‘‘adjustment 

factors’’ ‘‘to translate CAFE to customer 

service fuel economy,’’ using a factor of 

0.85 to ‘‘adjust[] the ‘composite’ CAFE 

value to what consumers are expected to 

achieve in customer service when the 

‘city’ mpg is discounted by 10% and the 

‘highway’ mpg is discounted by 22%.’’ 

Sierra Research also used a 0.82 

adjustment factor for hybrid vehicles. 

However, these estimates were 

presented as part of Sierra’s analysis 

with no explanation of how they were 

derived, nor why they differed from 

EPA’s estimate of 20 percent (which was 

available at the time when Sierra 

developed its report).227 Moreover, 

neither Sierra nor the Alliance 

suggested that NHTSA use these 

numbers instead of EPA’s for analyzing 

fuel savings. 

Because no substantive comments 

were received on this issue, and because 

no new information on the magnitude of 

the on-road fuel economy gap has come 

to NHTSA’s attention since the NPRM 

was published, NHTSA has continued 

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228U.S. Department of Energy, Energy 

Information Administration, Annual Energy 

Outlook 2008, Early Release, Reference Case Table 

12. Available at http://www.eia.doe.gov/oiaf/aeo/ 

pdf/aeotab_12.pdf (last accessed October 10, 2008). 

EIA released the full AEO 2008 in June 2008, which 

NHTSA stated in the NPRM it would use in the 

final rule. EIA explained upon releasing the full 

AEO 2008 that it had been updated from the Early 

Release to reflect EIA’s expectations of the effect of 

EISA, which was enacted after the Early Release 

was made public. The full AEO 2008 is available 

at http://www.eia.doe.gov/oiaf/aeo/pdf/ 

0383(2008).pdf (last accessed October 10, 2008). 

229The agency defines the maximum lifetime of 

vehicles as the highest age at which more than 2 

percent of those originally produced during a model 

year remain in service. For recent model years, this 

age has typically been 25 years for passenger cars 

and 36 years for light trucks. 

230 In AEO 2008, EIA explains the High Price Case 

as follows: 

The high price case assumes that non-OPEC 

conventional oil resources are less plentiful, and 

the overall costs of extraction are higher, than 

assumed in the reference case. The high price case 

also assumes that OPEC will choose to allow a 

decline in its market share to 38 percent of total 

world liquids production. 

EIA also explains the Low Price Case as follows: 

The low price case assumes that non-OPEC 

conventional oil resources are more plentiful, and 

the overall costs of extraction are lower, than in the 

reference case, and that OPEC will choose to 

increase its market share to 45 percent. 

AEO 2008, at 51. As the reader can see, there is 

nothing probabilistic about either the Low or High 

Price Case vis-a`-vis the Reference Case. 

231EIA, Annual Energy Outlook 2007, High Price 

Case, Table 12, available at 

http://www.eia.doe.gov/oiaf/aeo/pdf/ 

aeohptab_12.pdf (last accessed October 10, 2008); 

and Annual Energy Outlook 2007, Low Price Case, 

Table 12, available at http://www.eia.doe.gov/oiaf/ 

aeo/pdf/aeolptab_12.pdf (last accessed October 10, 

2008). 

to use the EPA estimate of a 20 percent 

on-road fuel economy gap for purposes 

of this final rule. 

4. Fuel Prices and the Value of Saving 

Fuel 

NHTSA explained in the NPRM that 

projected future fuel prices are a critical 

input into the economic analysis of 

alternative CAFE standards, because 

they determine the value of fuel savings 

both to new vehicle buyers and to 

society. NHTSA relied on the most 

recent fuel price projections from the 

U.S. Energy Information 

Administration’s (EIA) Annual Energy 

Outlook (AEO) in analyzing the 

proposed standards. Specifically, the 

agency used the AEO 2008 Early Release 

forecasts of inflation-adjusted (constantdollar) retail gasoline and diesel fuel 

prices, which NHTSA stated represent 

the most up-to-date estimate of the most 

likely course of future prices for 

petroleum products.228 Federal 

government agencies generally use EIA’s 

projections in their assessments of 

future energy-related policies. 

The retail fuel price forecasts 

presented in AEO 2008 span the period 

from 2008 through 2030. Measured in 

constant 2006 dollars, the Reference 

Case forecast of retail gasoline prices 

during calendar year 2020 in the Early 

Release was $2.36 per gallon, rising 

gradually to $2.51 by the year 2030 

(these values include federal, state, and 

local taxes). However, NHTSA 

explained in the NPRM that valuing fuel 

savings over the 36-year maximum 

lifetime of light trucks assumed in this 

analysis required fuel price forecasts 

that extended through 2050, the last 

year during which a significant number 

of MY 2015 vehicles would remain in 

service.229 To obtain fuel price forecasts 

for the years 2031 through 2050, 

NHTSA assumed that retail fuel prices 

would remain constant (in 2006 dollars) 

from 2031 through 2050. 

NHTSA stated that the value to buyers 

of passenger cars and light trucks of fuel 

savings resulting from improved fuel 

economy is determined by the retail 

price of fuel, which includes federal, 

state, and any local taxes imposed on 

fuel sales. Total taxes on gasoline 

averaged $0.47 per gallon during 2006, 

while those levied on diesel averaged 

$0.53. These figures include federal 

taxes plus the sales-weighted average of 

state fuel taxes. Because fuel taxes 

represent transfers of resources from 

fuel buyers to government agencies, 

however, rather than real resources that 

are consumed in the process of 

supplying or using fuel, NHTSA 

explained that their value must be 

deducted from retail fuel prices to 

determine the value of fuel savings 

resulting from more stringent CAFE 

standards to the U.S. economy. 

In estimating the economy-wide or 

‘‘social’’ value of fuel savings due to 

increasing CAFE levels, NHTSA 

assumed that current fuel taxes would 

remain constant in real or inflationadjusted terms over the lifetimes of the 

vehicles being regulated. In effect, this 

assumed that the average value per 

gallon of taxes on gasoline and diesel 

fuel levied by all levels of government 

would rise at the rate of inflation over 

that period. This value was deducted 

from each future year’s forecast of retail 

gasoline and diesel prices reported in 

the AEO 2008 Early Release to 

determine the social value of each 

gallon of fuel saved during that year as 

a result of improved fuel economy. 

Subtracting fuel taxes resulted in a 

projected value for saving gasoline of 

$1.83 per gallon during 2020, rising to 

$2.02 per gallon by the year 2030. 

In conducting the preliminary 

uncertainty analysis of benefits and 

costs from alternative CAFE standards, 

as required by OMB, NHTSA also 

considered higher and lower forecasts of 

future fuel prices. The results of the 

sensitivity runs were made available in 

the PRIA. EIA includes a ‘‘High Price 

Case’’ and a ‘‘Low Price Case’’ in each 

annual edition of its AEO, which reflect 

uncertainties regarding future 

conditions in the world petroleum 

market and the U.S. fuel refining and 

distribution system. However, EIA does 

not attach specific probabilities to either 

its Reference Case forecast or these 

alternative cases; instead, the High Price 

and Low Price cases are intended to 

illustrate the range of uncertainty that 

exists.230

The AEO 2008 Early Release included 

only a Reference Case forecast of fuel 

prices and did not include the High and 

Low Price Cases, so NHTSA estimated 

high and low fuel prices corresponding 

to the AEO 2008 Reference Case forecast 

by assuming that high and low price 

forecasts would bear the same 

relationship to the Reference Case 

forecast as the High and Low Price cases 

in AEO 2007.231 These alternative 

scenarios projected retail gasoline prices 

that range from a low of $1.94 per gallon 

to a high of $3.26 per gallon during 

2020, and from $2.03 to $3.70 per gallon 

during 2030. In conjunction with 

NHTSA’s assumption that fuel taxes 

would remain constant in real or 

inflation-adjusted terms over this 

period, these forecasts implied social 

values of fuel savings ranging from 

$1.47 to $2.79 per gallon during 2020, 

and from $1.56 to $3.23 per gallon in 

2030. 

NHTSA explained that EIA is widely 

recognized as an impartial and 

authoritative source of analysis and 

forecasts of U.S. energy production, 

consumption, and prices. EIA has 

published annual forecasts of energy 

prices and consumption levels for the 

U.S. economy since 1982 in its Annual 

Energy Outlooks. These forecasts have 

been widely relied upon by federal 

agencies for use in regulatory analysis 

and for other purposes. Since 1994, 

EIA’s annual forecasts have been based 

upon that agency’s National Energy 

Modeling System (NEMS), which 

includes detailed representation of 

supply pathways, sources of demand, 

and their interaction to determine prices 

for different forms of energy. 

From 1982 through 1993, EIA’s 

forecasts of world oil prices—the 

primary determinant of prices for 

gasoline, diesel, and other 

transportation fuels derived from 

petroleum—consistently overestimated 

actual prices during future years, often 

very significantly. Of the total of 119 

forecasts of future world oil prices for 

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232See http://www.eia.doe.gov/oiaf/archive/ 

aeo07/pdf/forecast.pdf, Table 19, at 106. 

233Representative Markey authored this 

comment, which was signed by himself and 44 

other Members of Congress. In this section, when 

the term ‘‘Members of Congress’’ is used, this is the 

comment to which the agency refers. Besides the 

comments received from several Representatives 

and Senators regarding the fuel prices employed in 

NHTSA’s analysis for the NPRM, Representative 

Markey and Senator Cantwell additionally 

submitted bills in the House and Senate to require 

NHTSA to use fuel prices at least as high as EIA’s 

High Price Case in setting CAFE standards. 

Representative Markey introduced H.R. 6643 on 

July 29, 2008, and Senator Cantwell introduced S. 

3403 on July 31, 2008. 

the years 1985 through 2005 that EIA 

reported in its 1982–1993 editions of the 

AEO, 109 overestimated the subsequent 

actual values for those years, on average 

exceeding their corresponding actual 

values by 75 percent. 

Since that time, however, EIA’s 

forecasts of future world oil prices show 

a more mixed record for accuracy. The 

1994–2005 editions of the AEO reported 

91 separate forecasts of world oil prices 

for the years 1995–2005, of which 33 

subsequently proved too high, while the 

remaining 58 underestimated actual 

prices. The average absolute (i.e., 

regardless of its direction) error of these 

forecasts has been 21 percent, but overand underestimates have tended to 

offset one another, so that on average 

EIA’s more recent forecasts have 

underestimated actual world oil prices 

by 7 percent. Although both its 

overestimates and underestimates of 

future world oil prices for recent years 

have often been large, the most recent 

editions of the AEO have significantly 

underestimated petroleum prices during 

those years for which actual prices are 

now available. 

However, NHTSA explained that it 

did not regard EIA’s recent tendency to 

underestimate future prices for 

petroleum and refined products or the 

high level of current fuel prices as 

adequate justification to employ 

forecasts that differed from the 

Reference Case forecast presented in the 

Revised Early Release. NHTSA stated 

that this was particularly the case 

because this forecast was revised 

upward significantly since the initial 

release of AEO 2008, which in turn 

represented a major upward revision 

from EIA’s fuel price forecast reported 

in AEO 2007. NHTSA also noted that 

retail gasoline prices across the U.S. had 

averaged $2.94 per gallon (expressed in 

2005 dollars) for the first three months 

of 2008, slightly below EIA’s revised 

forecast that gasoline prices will average 

$2.98 per gallon (also in 2005 dollars) 

throughout 2008. 

NHTSA also considered that 

comparing different forecasts of world 

oil prices showed that the Reference 

Case forecast in AEO 2007 was actually 

the highest of all six publicly-available 

forecasts of world oil prices over the 

2010–2030 time period.232 NHTSA 

stated that because world petroleum 

prices are the primary determinant of 

retail prices for refined petroleum 

products such as transportation fuels, 

this suggested that the Reference Case 

forecast of U.S. fuel prices reported in 

AEO 2007 was likely to be the highest 

of those projected by major forecasting 

services. Further, as indicated above, 

EIA’s most recent fuel price forecasts 

had been revised significantly upward 

from those projected in AEO 2007. 

NHTSA received several thousand 

comments regarding its fuel price 

assumptions, mostly from individuals 

stating that current pump prices were 

much higher than EIA’s Reference Case 

forecasts for future prices, and arguing 

that NHTSA should use higher fuel 

price assumptions for setting more 

stringent standards in the final rule. 

Summaries of the comments are 

presented below, grouped according to 

the following categories: (1) Fuel prices 

have the largest effect on CAFE 

stringency of any of NHTSA’s economic 

assumptions; (2) EIA’s Reference Case is 

too low compared to current gas prices; 

(3) current gas prices reflect a 

fundamental change in market 

conditions that will affect future prices; 

(4) why NHTSA is incorrect in its 

representation of the Reference Case as 

the ‘‘most likely course’’ of future oil 

prices; (5) NHTSA’s sensitivity analysis 

in the PRIA indicates that higher fuel 

price assumptions will lead to more 

stringent standards; (6) EIA’s tendency 

to underestimate in its fuel price 

forecasts; (7) EIA’s recent changes to its 

Short-Term Energy Outlook; (8) recent 

public statements on NHTSA’s fuel 

price assumptions; (9) comments in 

favor of or neutral with regard to 

NHTSA’s use of the Reference Case for 

its fuel price assumptions; (10) what 

fuel price assumptions NHTSA should 

use in setting the standards in the final 

rule; and (11) whether NHTSA should 

hold public hearings regarding its fuel 

price assumptions. 

(1) Fuel Prices Have the Largest Effect 

on CAFE Stringency of any of NHTSA’s 

Economic Assumptions 

Several commenters addressed the 

impact that fuel price assumptions have 

on NHTSA’s analysis of the appropriate 

stringency of CAFE standards. The 

Members of Congress233 stated that fuel 

prices have the largest effect of ‘‘all the 

factors that could be considered on how 

high standards could be raised,’’ and 

that therefore ‘‘NHTSA’s reliance on 

these highly unrealistic projections have 

the effect of artificially lowering the 

calculated ‘maximum feasible’ fuel 

economy standards that NHTSA is 

directed by law to promulgate.’’ CFA 

commented that the underestimation of 

fuel prices affected every part of 

NHTSA’s analysis, while CBD stated 

that ‘‘The use of an inappropriate 

gasoline price projection greatly skews 

the results,’’ and argued that ‘‘NHTSA 

has failed to analyze a gas price that 

even approaches today’s prices, even in 

the sensitivity analysis.’’ EDF argued 

that because ‘‘Underestimating future 

gasoline prices would lead NHTSA to 

undervalue the benefits to the U.S. and 

consumers from stronger fuel economy 

standards and set inefficiently low 

standards,’’ NHTSA should ‘‘perform 

extensive sensitivity analyses using 

higher gas price assumptions, including 

but not limited to the EIA ‘high price’ 

projections.’’ 

(2) EIA’s Reference Case Is Too Low 

Compared to Current Gas Prices 

Many commenters, including CBD, 

EDF, NRDC, Sierra Club et al., UCS, 

CFA, the Attorneys General, NACAA, 

NESCAUM, the mayor of the City of Key 

West, 45 Members of Congress, and 

several thousand individual 

commenters, stated that NHTSA’s fuel 

price assumptions based on EIA’s 

Reference Case were unreasonably low 

given current gasoline prices. CBD, for 

example, commented that NHTSA’s use 

of the Reference Case fuel price 

estimates was ‘‘impossible to justify’’ 

given current fuel prices and the fact 

that ‘‘there is every indication that the 

price of oil will continue to increase 

over the short term.’’ UCS argued that 

although NHTSA ‘‘point[ed] to recent 

increased fuel prices in AEO 2008 to 

justify use of AEO Reference Case data,’’ 

the Reference Case projection ‘‘still falls 

well below current gasoline prices.’’ The 

Attorneys General commented that 

EIA’s Reference Case forecast indicated 

future fuel prices much lower than 

current pump prices, and argued that 

‘‘Unless NHTSA can provide publiclyavailable, mainstream documentation 

supporting an almost fifty percent drop 

from current prices, it must 

substantially re-calibrate those 

estimates.’’ CFA and the Attorneys 

General further argued that even EIA’s 

High Price Case was too low given 

current gasoline prices. 

UCS also submitted nearly 7,000 form 

letters from individual citizens, which 

generally stated that gas prices in their 

home areas are currently significantly 

higher than NHTSA’s fuel price 

assumptions for the proposed standards. 

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234Energy Information Administration (2008) 

International Energy Outlook 2008: Complete 

Highlights. June 25. 

The individual citizens commented that 

NHTSA should ‘‘correct’’ its fuel price 

assumptions for the final rule, so as not 

to ‘‘allow automakers to shave three to 

four miles per gallon off of their CAFE 

requirements,’’ and so as to achieve ‘‘a 

fleet average of approximately 40 miles 

per gallon by 2020,’’ which the letters 

stated ‘‘is both feasible and cost 

effective using technology already 

available.’’ Sierra Club submitted over 

3,000 form letters from individual 

citizens commenting similarly that 

NHTSA must use ‘‘realistic’’ fuel prices 

for setting the standards in the final 

rule, given pump prices at that time of 

approximately $4 per gallon. 

(3) Current Gas Prices Reflect a 

Fundamental Change in Market 

Conditions That Will Affect Future 

Prices 

A number of commenters argued that 

changed oil market conditions both 

make EIA’s Reference Case out-of-date 

and will continue to impact future fuel 

prices. Public Citizen stated that ‘‘Gas 

prices have been rising steadily since 

2004,’’ but that ‘‘the price increases in 

the last six to 12 months have been 

especially dramatic, rising by over a 

third in the past six months, and by 

nearly 170 percent in five years.’’ 

NESCAUM commented that current fuel 

prices are due principally to ‘‘high 

global demand in a supply constricted 

market.’’ NESCAUM further argued that 

‘‘There is little expectation that the gap 

between supply and demand will be 

narrowed in the foreseeable future,’’ so 

‘‘the price of gasoline should remain 

* * * well above the mid-$2.00 range.’’ 

CFA argued that ‘‘geopolitical factors’’ 

are responsible for gasoline prices 

setting ‘‘record after record,’’ and stated 

that the proposed standards ‘‘do not 

reflect the fundamental reality of this 

crisis’’ because NHTSA’s ‘‘analysis [is 

not based] on a value of gasoline savings 

that is consistent with the real world.’’ 

ACEEE argued that the ‘‘adherence [to 

the Reference Case forecast] is not 

justified, given recent changes in the oil 

market.’’ However, ACEEE also argued 

that the High Price Case does not 

‘‘necessarily capture fully current 

understanding of how high fuel prices 

are likely to be in the coming decades.’’ 

CARB stated that NHTSA’s use of 

EIA’s Reference Case ‘‘border[s] on the 

absurd given recent fuel price hikes, 

[and] recent assessments that the price 

hikes are structural.’’ CARB cited and 

attached to its comments an ‘‘Economic 

Letter’’ by the Federal Reserve Bank of 

Dallas from May 2008, which stated that 

factors such as changes in global oil 

supply and demand, the weakening of 

the dollar, and the fact that much global 

oil production takes place in 

‘‘politically unstable regions * * * 

suggest the days of relatively cheap oil 

are over and the global economy faces 

a future of high energy prices.’’ 

NRDC stated that other analysts such 

as Goldman Sachs and Citigroup predict 

higher gasoline prices at least through 

2011, due to lack of ‘‘spare capacity’’ in 

either OPEC or non-OPEC supply. 

NRDC also cited EIA’s June 25, 2008 

International Energy Outlook (IEO), 

which has a similar reference case to 

AEO 2008, and which NRDC quoted as 

stating that given ‘‘current market 

conditions, it appears that world oil 

prices are on a path that more closely 

resembles the projection in the high 

price case than in the reference 

case.’’ 234

(4) Why NHTSA Is Incorrect in Its 

Representation of the Reference Case as 

the ‘‘Most Likely Course’’ of Future Oil 

Prices 

UCS stated that NHTSA was incorrect 

to assume that EIA’s Reference Case 

‘‘represent[s] the EIA’s most up-to-date 

estimate of the most likely course of 

future prices for petroleum products,’’ 

arguing that EIA itself does not refer to 

the Reference Case projection as the 

‘‘most likely course,’’ but states that the 

Reference Case merely ‘‘assumes that 

current policies affecting the energy 

sector remain unchanged throughout the 

projection period.’’ 

(5) NHTSA’s Sensitivity Analysis in the 

PRIA Indicates That Higher Fuel Price 

Assumptions Will Lead to More 

Stringent Standards 

A number of commenters, including 

NACAA, Public Citizen, UCS, Sierra 

Club et al. and ACEEE, cited NHTSA’s 

sensitivity analysis using the EIA High 

Price case as evidence that, as the 

Members of Congress stated, 

‘‘demonstrates that the technology is 

available to cost-effectively achieve a 

much higher fleet wide fuel economy of 

nearly 35 mpg in 2015.’’ CFA also stated 

that the High Price Case, which NHTSA 

ran as a sensitivity analysis using 

approximately $3.40 per gallon in 2008 

dollars for 2015, was a ‘‘more realistic 

fuel price scenario, one that is not 

terribly high.’’ 

(6) EIA’s Tendency to Underestimate in 

Its Fuel Price Forecasts 

Several commenters, including UCS, 

CFA, NRDC, CARB, and the Attorneys 

General argued that EIA estimates were 

unreliable because EIA had 

underestimated in recent years. CARB 

cited NHTSA’s statement on page 24406 

of the NPRM (73 FR 24406, May 2, 

2008) noting ‘‘EIA’s own recent 

tendency to underestimate,’’ as CARB 

put it, as indication that NHTSA’s use 

of EIA’s Reference Case ‘‘border[s] on 

the absurd.’’ CFA argued that ‘‘EIA’s 

projections of gasoline prices have been 

consistently low and NHTSA was not 

obligated to use those projections.’’ 

NRDC analyzed EIA’s forecasting 

accuracy in greater detail, concluding 

that ‘‘The past five versions of the AEO 

have all underestimated actual gasoline 

prices,’’ in both the Reference and High 

Case scenarios, and providing a table 

comparing EIA Reference and High Case 

projections from one year prior to the 

actual average recorded price in 2003– 

2008, which showed actual prices as 

consistently higher than EIA 

projections. 

(7) EIA’s Recent Changes to Its ShortTerm Energy Outlook 

Several commenters stated that recent 

EIA upward revisions to its Short-Term 

Energy Outlook fuel price forecasts 

indicate that the longer-term Reference 

Case forecasts are also in need of 

upward revision. CARB, for example, 

argued that recent EIA upward revisions 

to its short-term fuel price forecasts 

provide further evidence that ‘‘the 

assumptions underlying the EIA longterm gasoline projections have 

significantly changed since EIA last 

made those long-term projections.’’ CFA 

similarly argued that EIA needed to 

adjust its long-term projections upward 

given recent increases in short-term 

projections, and stated that 

extrapolating EIA’s short-term 

projections linearly results in a gasoline 

price in 2015 of $5.50 per gallon in 2008 

dollars, which might not itself be 

reliable for purposes of setting CAFE 

standards, but is high enough to 

indicate that ‘‘EIA’s high price scenario 

seems much more appropriate as the 

basis for NHTSA’s economic analysis.’’ 

NRDC and the Attorneys General made 

similar arguments. The Attorneys 

General suggested that consequently, 

NHTSA should attempt to ‘‘obtain from 

EIA a truly current projection for 

gasoline prices over the relevant period’’ 

for use in the final rule. 

(8) Recent Public Statements on 

NHTSA’s Fuel Price Assumptions 

Several commenters, including the 

Members of Congress, Public Citizen, 

UCS, NRDC, Sierra Club et al., and the 

Attorneys General cited testimony by 

EIA Administrator Guy Caruso on June 

11, 2008, before the House Select 

Committee on Energy Independence and 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14317 

235UCS stated that this quote was taken from 

‘‘Global Warming Hearing on the Future of Oil,’’ 

June 11, 2008, which it stated was available online 

at http://speaker.house.gov/blog. 

236Sierra Club cited David Shepardson, ‘‘Gas 

prices may spur revision of mpg plan,’’ Detroit 

News Washington, Saturday, May 17, 2008, for this 

quote from Secretary Peters. 

237Wisconsin DNR cited the source of the ‘‘high 

price fuel scenario’’ as ‘‘DOE–EIA Report #0484 

(2008),’’ which is EIA’s International Energy 

Outlook (IEO) for 2008. NHTSA assumes that the 

commenter intended to cite this source, and not 

AEO 2008. However, EIA describes the forecasts of 

world oil prices—a primary determinant of U.S. 

fuel prices—reported in IEO 2008 as ‘‘* * * 

consistent with those in the Annual Energy Outlook 

2008,’’ and cites AEO2008 as the source for those 

oil price projections. See U.S. Energy Information 

Administration, International Energy Outlook 2008, 

Chapter 2, ‘‘Liquid Fuels,’’ Figure 30 and 

accompanying text. Available at http:// 

www.eia.doe.gov/oiaf/ieo/liquid_fuels.html (last 

accessed October 4, 2008). 

Global Warming, as evidence that, as the 

Attorneys General argued, ‘‘Even EIA 

agrees that NHTSA should have not 

used its reference case for the analysis 

in this rulemaking, but instead should 

have used EIA’s high price case.’’ 

Administrator Caruso testified, in 

response to a question regarding 

whether NHTSA should use EIA’s High 

Price Case scenario to set CAFE 

standards, that ‘‘We’re on the higher 

price path right now. If you were to ask 

me today what I would use, I would use 

the higher price.’’ 235

The Members of Congress and Sierra 

Club et al., also cited then-DOT 

Secretary Peters’ May 17, 2008 

statement that ‘‘As we look toward the 

finalization of the rule and look again 

what the average fuel costs are then, I 

think we’re going to make more progress 

on the miles per gallon at a lower 

overall cost.’’ 236 The commenters 

argued that this statement indicated an 

expectation that fuel prices used in the 

final rule would be higher than those 

used in the NPRM. 

(9) Comments in Favor of or Neutral 

With Regard to NHTSA’s Use of the 

Reference Case for Its Fuel Price 

Assumptions 

NADA was the only commenter 

arguing directly in favor of NHTSA 

continuing ‘‘to rely on the most recent 

reference case fuel price projections of 

the U.S. Energy Information 

Administration’s (EIA).’’ NADA 

recognized that EIA has over- and 

under-estimated fuel prices in the past, 

but argued that ‘‘Despite the inherent 

volatility or uncertainty of fuel prices, 

EIA and NHTSA would be remiss if they 

were to arbitrarily abandon the best 

models and data available or to use 

‘high’ or ‘low’ price case projections that 

are inherently not probabilistic.’’ NADA 

further commented that ‘‘the use of a 

high price case to justify unduly costly 

CAFE standards could lead to decreased 

new motor vehicle sales and a 

commensurate lower than projected rate 

of fuel energy savings and greenhouse 

gas reduction benefits.’’ 

The Alliance did not argue that 

NHTSA should use any particular fuel 

price in its economic assumptions, but 

commented that NHTSA should not 

conclude that ‘‘recent increases in 

gasoline prices nationwide’’ would 

justify more stringent CAFE standards. 

The Alliance cited the Sierra Research 

and NERA reports, which it said 

performed sensitivity analyses using all 

of EIA’s price scenarios (Low, 

Reference, and High), and ‘‘did not find 

that use of the ‘high’ case significantly 

altered its conclusions about the 

feasibility of imposing much higher 

costs on manufacturers.’’ Given that 

Sierra and NERA both concluded that 

the proposed standards were already too 

stringent, this result is hardly 

surprising. 

(10) What Fuel Price Assumptions 

NHTSA Should Use in Setting the 

Standards in the Final Rule 

Many commenters, including UCS, 

CARB, ACEEE, Sierra Club et al., the 

Attorneys General, and the Members of 

Congress stated that NHTSA should set 

standards in the final rule using fuel 

price assumptions equivalent to at least 

EIA’s High Price Case. Wisconsin DNR 

suggested that NHTSA use the ‘‘high 

price fuel scenario’’ in EIA’s 

International Energy Outlook (2008) for 

a ‘‘suitable higher estimate from a 

recognized federal agency.’’ 237

Several commenters calling for ‘‘at 

least’’ the High Price Case also 

suggested other preferred alternatives. 

CARB suggested that NHTSA delay the 

final rule until ‘‘recent volatility has 

stabilized and EIA can provide its final 

2008 estimates in February 2009.’’ The 

Attorneys General suggested NHTSA 

obtain ‘‘relevant, up-to-date data 

directly’’ from EIA ‘‘specifically for the 

docket in this rulemaking,’’ or ‘‘wait for 

EIA’s public, final 2008 estimates, 

which are scheduled to be released in 

December.’’ ACEEE commented that 

NHTSA should ‘‘Work with EIA to 

produce an up-to-date fuel price 

projection for purposes of the final rule. 

* * *’’ Sierra Club et al., stated that 

NHTSA should also ‘‘examine other fuel 

price estimates, such as the oil futures 

market price predictions which project 

prices for a barrel of oil through 2016.’’ 

Other commenters suggested that 

NHTSA develop estimates based on 

current pump-price equivalents for its 

fuel price assumptions. Public Citizen 

commented that NHTSA should ‘‘base 

its final rulemaking on a more realistic 

estimate of future fuel price based on 

the high estimate and an at-the-pump 

price that pushes the standard in the 

direction of real-world gas prices.’’ 

NESCAUM urged NHTSA ‘‘to reevaluate 

the effect of a wider range of gasoline 

prices to the $4.00 per gallon level and 

above,’’ stating that it would raise 

standards. EDF stated that NHTSA must 

set standards that ‘‘reflect real world gas 

prices.’’ CBD stated that ‘‘Today’s gas 

price must form the starting point for 

the analysis, and calculations must be 

performed that consider the 

overwhelmingly likely scenario that gas 

prices will be significantly higher than 

the projections used in the NPRM.’’ 

NRDC stated that because both the 

Reference and High Case scenarios are 

too low, ‘‘NHTSA should develop a 

plausible and realistic projection of 

future oil prices for use in determining 

maximum feasible fuel economy 

levels.’’ 

(11) Whether NHTSA Should Hold 

Public Hearings Regarding Its Fuel Price 

Assumptions 

Several commenters called for 

NHTSA to hold hearings regarding the 

appropriate stringency of CAFE 

standards, specifically in light of fuel 

prices. CFA, in requesting hearings, 

commented that EIA’s Reference Case 

resulted in fuel prices that are too low, 

and ‘‘have consistently been used [in 

recent CAFE rulemakings] to undercut 

the use of existing technology to meet 

the statutory goals. CFA stated that ‘‘The 

use of more realistic fuel prices make 

more technology cost-justified and will 

result in higher standards.’’ 

Environment America, National 

Wildlife Federation, NRDC, Pew 

Environment Group, Sierra Club, and 

UCS also submitted a joint comment 

requesting public hearings and citing 

NHTSA’s fuel price assumptions. Like 

CFA, the commenters stated that using 

the EIA Reference Case ‘‘vastly 

undercuts the potential for higher fuel 

economy’’ and that ‘‘If NHTSA used 

more realistic gas prices, we could be on 

a path to achieving higher fuel economy 

that is both technologically achievable 

and cost effective.’’ 

Agency response: NHTSA has 

carefully considered available evidence, 

recent trends in petroleum and fuel 

prices, and the comments it received on 

the NPRM analysis. After doing so, 

NHTSA has decided to use EIA’s High 

Price Case forecast in its final rule 

analysis and to determine the MY 2011 

CAFE standards. As NHTSA recognized 

in the NPRM, commenters are correct 

that projected future fuel prices have the 

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14318 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

238Energy Information Administration, World 

Crude Oil Prices, data for week ended 1/2/2009, 

available at http://tonto.eia.doe.gov/dnav/pet/ 

pet_pri_wco_k_w.htm (last accessed February 12, 

2009). 

239AEO 2008 states as follows with regard to 

factors which EIA accounts for in developing the 

Reference Case: 

As noted in AEO2007, energy markets are 

changing in response to readily observable factors, 

which include, among others: Higher energy prices; 

the growing influence of developing countries on 

worldwide energy requirements; recently enacted 

legislation and regulations in the United States; 

changing public perceptions on issues related to 

emissions of air pollutants and greenhouse gases 

and the use of alternative fuels; and the economic 

viability of various energy technologies. 

240AEO 2008 Overview, at http:// 

www.eia.doe.gov/oiaf/aeo/overview.html (last 

accessed October 10, 2008). 

241Energy Information Administration (2008) 

International Energy Outlook 2008: Complete 

Highlights. June 25. 

largest effect of all the economic 

assumptions that NHTSA employs in 

determining benefits both to new 

vehicle buyers and to society, and thus 

on CAFE stringency. This is why it is 

vital that NHTSA base its fuel price 

assumptions on what it believes to be 

the most accurate forecast available that 

covers the expected lifetimes of MY 

2011 passenger cars and light trucks, 

which can extend up to 25–35 years 

from the date they are produced. The 

long time horizon of NHTSA’s analysis 

also makes it critical that the agency not 

rely excessively on current price levels 

as an indicator of the prices that are 

likely to prevail over an extended future 

period. Instead, NHTSA relies largely on 

EIA’s professional expertise and 

extensive experience in developing 

forecasts of future trends in energy 

prices, as do most other federal 

agencies. 

In addition, NHTSA notes that several 

manufacturers employed fuel prices 

consistent with or exceeding the AEO 

2008 High Price Case for the time period 

covered by the rulemaking in their 

revised product plan estimates of fuel 

economy and sales for individual 

models. If the agency employs fuel price 

forecasts that differ from those used by 

manufacturers, it may incorrectly 

attribute the fuel savings resulting from 

increased market demand for fuel 

economy to higher CAFE standards, or 

conversely, underestimate the fuel 

savings resulting from increased 

standards by attributing too much of the 

increase in fuel economy to higher 

market demand. Given manufacturers’ 

assumptions about fuel prices, the 

agency’s estimates of fuel savings and 

economic benefits resulting from the 

standards adopted in this final rule are 

conservative, because they are likely to 

underestimate fuel savings attributable 

to the increase in fuel economy above 

its market-determined level that CAFE 

standards will require. 

Although some commenters suggested 

that NHTSA develop its own fuel price 

forecasts based on then-current pump 

prices, NHTSA does not believe that it 

has the independent capability to 

provide a more reliable prediction of 

future fuel prices, or that it would have 

the credibility of EIA’s forecasts. If 

NHTSA had assumed that that fuel 

prices would remain at their mid-2008 

peak levels throughout the lifetimes of 

MY 2011 cars and light trucks, the 

agency would have overvalued the 

benefits attributed to fuel savings, and 

thus likely have established excessively 

stringent MY 2011 standards. While 

petroleum prices were rising at the time 

the NPRM was published, eventually 

reaching nearly $140 per barrel, since 

then global average prices for crude oil 

have declined to levels as low as $35 

per barrel.238 The recent extreme 

volatility in petroleum and fuel prices 

illustrates the danger in relying on 

current prices as an indicator of their 

likely future levels, and gives NHTSA 

greater confidence in relying on EIA’s 

forecasts of future movements in fuel 

prices in response to changes in demand 

and supply conditions in the 

marketplace. 

While NHTSA also agrees with the 

commenters that the sensitivity analysis 

demonstrates that higher CAFE 

standards could be established if higher 

fuel price assumptions were employed, 

the agency cannot simply choose to 

employ higher fuel price assumptions 

because it wishes to raise CAFE levels. 

Doing so would be inconsistent with the 

agency’s approach of using what it 

concludes is the most reliable estimate 

of the benefits from conserving fuel 

when establishing fuel economy 

standards. NHTSA recognizes that 

predicting future oil prices is difficult, 

particularly during periods when world 

economic conditions are as volatile as 

they are today. Nevertheless, NHTSA 

continues to believe that EIA’s fuel price 

forecasts as reported in its AEO 

represent the most reliable estimates of 

future fuel prices, and thus of the 

benefits from reducing fuel 

consumption through higher CAFE 

standards. While NHTSA recognizes 

that other forecasts exist, the agency 

believes the EIA forecasts are preferable 

for its purposes, since they are the 

product of an impartial government 

agency with considerable and longstanding expertise in this field. Any 

simple extrapolation of current or recent 

retail fuel prices, which commenters 

recognize have shown extreme volatility 

in recent months, is likely to provide a 

considerably less reliable forecast of 

future prices than the current AEO. 

Each time EIA issues a new AEO, it 

considers recent and likely future 

developments in the world oil market, 

the effect of the current geopolitical 

situation on oil supply and prices, and 

conditions in the domestic fuel supply 

industry that affect pump prices.239

For example, the Overview section to 

AEO 2008 states that because EISA was 

passed between the Early Release and 

the time of publication for AEO 2008, 

EIA updated the Reference Case to 

reflect the impact it expected EISA to 

have on fuel prices. EIA also updated its 

projections for the AEO 2008 Reference 

Case ‘‘to better reflect trends that are 

expected to persist in the economy and 

in energy markets,’’ including a lower 

projection for U.S. economic growth (a 

key determinant of U.S. energy 

demand), higher price projections for 

crude oil and refined petroleum 

products, slower projected growth in 

energy demand, higher forecasts of 

domestic oil production (particularly in 

the near term), and slower projected 

growth in U.S. oil imports.240 Thus 

NHTSA is confident that EIA is aware 

of and has accounted reasonably for 

current political and economic 

conditions that are likely to affect future 

trends in fuel supply, demand, and 

retail prices. 

Although a majority of commenters 

asserted that EIA’s Reference Case 

forecast is likely to underestimate future 

fuel prices significantly, and that 

NHTSA’s reliance on the Reference Case 

resulted in insufficiently stringent 

proposed CAFE standards, they did so 

in an environment when retail fuel 

prices were at or above $4.00 per gallon. 

Many commenters stated that at a 

minimum, NHTSA should use EIA’s 

High Price Case as the source for its fuel 

price forecasts, primarily because those 

appeared to be more consistent with 

then-current fuel prices. As one 

illustration, NRDC cited EIA’s own 

International Energy Outlook 2008, 

published the same month as the AEO 

2008, which stated that given ‘‘* * * 

current market conditions, it appears 

that world oil prices are on a path that 

more closely resembles the projection in 

the high price case than in the reference 

case.’’ 241 Commenters also cited EIA 

Administrator Caruso’s June 2008 

statement that ‘‘We’re on the higher 

price path right now. If you were to ask 

me today what I would use, I would use 

the higher price.’’ NHTSA also notes 

that several manufacturers in their 

confidential product plan submissions 

indicated that they had based their 

product plans on gas price estimates 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14319 

242AEO 2008, at 199. Available at http:// 

www.eia.doe.gov/oiaf/aeo/pdf/0383(2008).pdf (last 

accessed October 10, 2008). 

243 Id. 

244 Id. 

245 Id., at 5. 

246These include EIA, Short-Term Energy 

Outlook, various issues, available at http:// 

www.eia.doe.gov/emeu/steo/pub/contents.html (last 

accessed November 13, 2008); International Energy 

Agency, World Energy Outlook 2008, summary 

available at http://www.iea.org/Textbase/npsum/ 

WEO2008SUM.pdf (last accessed November 13, 

2008); AJM Petroleum Consultants, The AJM Price 

Forecast, available at http:// 

www.ajmpetroleumconsultants.com/ 

index.php?page=price-forecast (last accessed 

Novemebr 13, 2008); PetroStrategies, Inc, Survey of 

Oil Price Forecasts, available at http:// 

www.petrostrategies.org/Graphs/ 

Oil_Price_Forecasts.htm (last accessed November 

13, 2008); International Monetary Fund, World 

Economic Outlook, October 2008, Chapter 3: Is 

Inflation Back? Commodity Prices and Inflation, 

available at http://www.imf.org/external/pubs/ft/ 

weo/2008/02/pdf/c3.pdf (last accessed November 

13, 2008); and Federal Reserve Bank of Dallas 

Economic Letter, Volume 3, No. 5, May 2008, 

available at http://www.dallasfed.org/research/ 

eclett/2008/el0805.html (last accessed November 

13, 2008). 

247 In the AEO High Price Case, prices for 

imported petroleum are projected to average about 

$75 per barrel over the next 10 years, while U.S. 

retail gasoline prices are forecast to average $2.90 

per gallon over that same period; see AEO 2008, 

High Price Case Table 12, available at http:// 

www.eia.doe.gov/oiaf/aeo/excel/aeohptab_12.xls 

(last accessed October 19, 2008). 

248The fuel price forecasts reported in EIA’s AEO 

2008 Revised Early Release and Final Release 

reflect the estimates effects of various provisions of 

EISA—including the requirement to achieve a 

combined CAFE level of 35 mpg by model year 

2020—on the demand for and supply of gasoline 

and other transportation fuels. Thus the fuel price 

forecasts reported in these versions of AEO 2008 

may already account for the reduction in fuel 

demand expected to result from the CAFE standards 

adopted in this Final Rule, whereas the agency’s 

analysis of their effects would ideally use fuel price 

forecasts that do not assume the adoption of higher 

CAFE standards for model years 2011–20. However, 

the agency notes that the difference between the 

Reference Case forecasts of retail gasoline prices for 

2011–30 between EIA’s Early Release of AEO 2008, 

which did not incorporate the effects of EISA, and 

its subsequent Revised Early Release, which did 

reflect EISA, averaged only $0.0004 (i.e., less than 

one-half cent) per gallon over the period 2011–30. 

This suggests that accounting for the effect of EISA 

would have had only a minimal effect on the fuel 

price forecasts used in this analysis. 

that were either between EIA’s 

Reference and High Price Cases, or 

above even the High Price Case. 

The AEO High Price Case is best 

understood in the context of its 

relationship to the Reference Case. EIA 

described the Reference Case as follows 

in AEO 2008: 

The reference case represents EIA’s current 

judgment regarding exploration and 

development costs and accessibility of oil 

resources in non-OPEC countries. It also 

assumes that OPEC producers will choose to 

maintain their share of the market and will 

schedule investments in incremental 

production capacity so that OPEC’s 

conventional oil production will represent 

about 40 percent of the world’s total liquids 

production.242

In contrast, EIA describes its Low Price 

case in the following terms: 

The low price case assumes that OPEC 

countries will increase their conventional oil 

production to obtain approximately a 44- 

percent share of total world liquids 

production, and that conventional oil 

resources in non-OPEC countries will be 

more accessible and/or less costly to produce 

(as a result of technology advances, more 

attractive fiscal regimes, or both) than in the 

reference case. With these assumptions, nonOPEC conventional oil production is higher 

in the low price case than in the reference 

case.243

Finally, EIA describes its High Price 

case as follows: 

The high price case assumes that OPEC 

countries will continue to hold their 

production at approximately the current rate, 

sacrificing market share as global liquids 

production increases. It also assumes that oil 

resources in non-OPEC countries will be less 

accessible and/or more costly to produce 

than assumed in the reference case.244

As these descriptions emphasize, 

EIA’s Low and High Price Cases are 

based on specific assumptions about the 

possible behavior of oil-producing 

countries and future developments 

affecting global demand for petroleum 

energy, and how these might differ from 

the behavior assumed in constructing its 

Reference Case. However, this 

distinction does not necessarily imply 

that EIA expects either its Low Price or 

High Price Case forecast to be more 

accurate than its Reference Case 

forecast, since EIA offers no assessment 

of which set of assumptions underlying 

its Low Price, Reference, and High Price 

cases it believes is most reliable. 

EIA did recognize that world oil 

prices at the time the final version of 

AEO 2008 were above even those 

forecast in its High Price Case. However, 

it attributed this situation to short-term 

developments, most or all of which 

were likely to prove transitory, as 

evidenced by its statement in the 

Overview to AEO 2008: 

As a result of recent strong economic 

growth worldwide, transitory shortages of 

experienced personnel, equipment, and 

construction materials in the oil industry, 

and political instability in some major 

producing regions, oil prices currently are 

above EIA’s estimate of the long-run 

equilibrium price.245

This observation is consistent with 

EIA’s statement in IEO 2008 that current 

market conditions appeared to place 

world oil prices on a path closer to the 

High Price Case than the Reference 

Case. While EIA clearly expects prices 

to remain high in the near term, this 

does not necessarily imply that it 

expects its High Price Case forecast to be 

more reliable over the extended time 

horizon spanned by AEO 2008. 

NHTSA has seriously considered the 

comments it received on the fuel price 

forecasts used in the NPRM analysis, 

and paid close attention to recent 

developments in the world oil market 

and in U.S. retail fuel prices. The 

agency has also reviewed forecasts of 

world oil prices and U.S. fuel prices 

available from sources other than EIA, 

as well as the views expressed by 

petroleum market experts, professional 

publications, and press reports.246 The 

agency notes that although both the 

views of experts and projections of 

petroleum prices differ widely, the 

emerging consensus appears to be that 

world petroleum and U.S. retail fuel 

prices are likely to remain at levels that 

are more consistent with those forecast 

in the AEO 2008 High Price Case than 

with the Reference Case forecasts over 

the foreseeable future.247

Over the period from 2011, when the 

standards adopted in this final rule 

would take effect, and 2030, the outer 

time horizon of the AEO 2008 forecasts, 

retail gasoline prices in the AEO 2008 

High Price case are projected to rise 

steadily from $2.95 to $3.62 per gallon, 

averaging $3.28 per gallon (all prices 

expressed in 2007 dollars). For the years 

2031 and beyond, the agency’s analysis 

assumes that retail fuel prices will 

remain at their forecast values for the 

year 2030, or $3.62 per gallon. These 

prices are significantly higher than the 

AEO 2008 Revised Early Release 

Reference Case forecast used in the 

agency’s NPRM analysis, which 

averaged $2.34 per gallon (in 2006 

dollars) over that same period.248 After 

deducting state and federal fuel taxes, 

this revised forecast results in an 

average value of $3.08 per gallon of fuel 

saved over the lifetimes of 2011 

passenger cars and light trucks. Because 

of the uncertainty surrounding future 

gasoline prices, the agency also 

conducted sensitivity analyses using 

EIA’s Reference and Low Price case 

forecasts of retail fuel prices. 

NHTSA is aware that EIA recently 

released a preliminary version of its 

Annual Energy Outlook 2009, which 

appears to confirm then-EIA 

Administrator Caruso’s testimony before 

the House Select Committee in June 

2008 that the future path of gasoline 

prices likely more closely resembles the 

AEO 2008 High Price Case than the 

2008 Reference Case. However, the 

agency has elected not to use this 

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249U.S. Energy Information Administration, 

Annual Energy Outlook 2009 Early Release, 

available at http://www.eia.doe.gov/oiaf/aeo/ 

index.html (last accessed February 12, 2009). 

newly-available forecast of fuel prices in 

this final rule, in part because it did not 

have adequate time to replicate the 

entire analysis reported in this rule 

using revised forecasts of fuel prices.249

Moreover, the forecast of gasoline prices 

from AEO 2009 Early Release averages 

$3.45 over the period from 2009–30, 

only slightly higher than the comparable 

figure for the AEO 2008 High Price 

forecast the agency relied upon in 

preparing this analysis. Thus 

incorporating EIA’s newest forecast 

would be unlikely to have an effect on 

the fuel economy standards adopted in 

this rule. The agency will continue to 

monitor fuel price forecasts available 

from all sources and other forecasts, and 

consider their implications for its choice 

among alternative price scenarios 

developed by EIA. 

5. Consumer Valuation of Fuel Economy 

and Payback Period 

In the NPRM, NHTSA explained that 

in estimating the value of fuel economy 

improvements that would result from 

alternative CAFE standards to potential 

vehicle buyers, NHTSA assumed that 

buyers value the resulting fuel savings 

over only part of the expected lifetime 

of the vehicles they purchase. 

Specifically, we assume that buyers 

value fuel savings over the first five 

years of a new vehicle’s lifetime, and 

that buyers behave as if they do not 

discount the value of these future fuel 

savings. NHTSA chose the five-year 

figure because it represents the current 

average term of consumer loans to 

finance the purchase of new vehicles. 

NHTSA recognized that the period over 

which individual buyers finance new 

vehicle purchases may not correspond 

to the time horizons they apply in 

valuing fuel savings from higher fuel 

economy, but NHTSA expressed its 

belief that five years represents a 

reasonable estimate of the average 

period over which buyers who finance 

their purchases of new vehicles 

receive—and thus are compelled to 

recognize—the monetary value of future 

fuel savings resulting from higher fuel 

economy. 

NHTSA explained that the value of 

fuel savings over the first five years of 

a vehicle model’s lifetime that would 

result under each alternative fuel 

economy standard is calculated using 

the projections of retail fuel prices 

described in the section above. The 

value of fuel savings is then deducted 

from the technology costs incurred by 

the vehicle’s manufacturer to produce 

the improvement in that model’s fuel 

economy estimated for each alternative 

standard, to determine the increase in 

the ‘‘effective price’’ to buyers of that 

vehicle model. The Volpe model uses 

these estimates of effective costs for 

increasing the fuel economy of each 

vehicle model to identify the order in 

which manufacturers would be likely to 

select models for the application of fuel 

economy-improving technologies in 

order to comply with stricter standards. 

The average value of the resulting 

increase in effective cost from each 

manufacturer’s simulated compliance 

strategy is also used to estimate the 

impact of alternative standards on 

manufacturers’ total sales for future 

model years. 

However, NHTSA stated that it is 

important to recognize that the agency 

estimates the aggregate value to the U.S. 

economy of fuel savings resulting from 

alternative standards—or their ‘‘social’’ 

value—over the entire expected 

lifetimes of vehicles manufactured 

under those standards, rather than over 

this shorter ‘‘payback period’’ that 

NHTSA assumes for vehicle buyers. 

This point is discussed in the section 

below titled ‘‘Vehicle survival and use 

assumptions.’’ NHTSA noted that as 

indicated previously, the maximum 

vehicle lifetimes used to analyze the 

effects of alternative fuel economy 

standards are estimated to be 25 years 

for passenger cars and 36 years for light 

trucks. 

NADA and Sierra Research agreed 

with the agency’s assumption of a 5-year 

payback period for consumer valuation 

of fuel economy. NADA commented 

that NHTSA’s assumption of a 5 year 

payback period for consumer valuation 

of fuel economy was reasonable. NADA 

argued that ‘‘Even at high fuel prices, 

consumers who view fuel economy as 

an important purchase criteria are hard 

pressed to make the case for buying a 

more fuel efficient new vehicle if the 

up-front capital costs associated with 

doing so cannot be recouped in short 

order.’’ Thus, NADA concluded, 

‘‘NHTSA should assume that most 

prospective purchasers will not invest 

in fuel economy improvements that do 

not exhibit a payback of five years or 

sooner.’’ NADA also added that factors 

other than the value of fuel savings 

should also be taken into account in 

calculating the length of the payback 

period; specifically, it stated that ‘‘for 

purposes of calculating payback, realworld purchaser finance costs, 

opportunity costs, and additional 

maintenance costs all should be 

accounted for.’’ 

The Sierra Research report submitted 

by the Alliance as Attachment 2 to its 

comments ‘‘considered fuel cost savings 

over ‘payback’ periods of 5 and 20 

years,’’ but stated parenthetically that 

‘‘It is more likely that average 

consumers would consider the savings 

during the period of time they expect to 

own the vehicle, likely closer to the 

five-year period.’’ 

Other commenters disagreed with the 

agency’s assumption of a 5-year payback 

period for consumer valuation of fuel 

economy. Mr. Delucchi stated simply 

that NHTSA ‘‘should not do a ‘payback’ 

analysis with a zero discount rate and 

a 5-year payback period, because there 

is no economic theory or consumer 

behavioral evidence to support this.’’ 

However, he offered no additional 

suggestions as to what NHTSA should 

use instead. Similarly, as part of its 

discussion on fuel price estimates, the 

Sierra Club commented that NHTSA 

had ‘‘arbitrarily restricted’’ the 

consumer payback period to 5 years, but 

offered no further comments or 

explanation of this point. 

CFA commented that ‘‘the five year 

payback constraint plays a critical role 

in ordering the technologies that are 

included in the fleet to comply with 

various levels of the standard,’’ and 

argued that while NHTSA should 

perhaps not have included a payback 

period at all, if it intended to do so, it 

should justify the 5-year payback period 

better and consider a longer payback 

period. CFA commented that ‘‘it is not 

clear that one must assume a payback 

for any component of a vehicle 

purchase. But if one does, the logical 

connection is between the period of 

ownership and the payback, not the 

loan period.’’ CFA further commented 

that NHTSA failed to recognize the 

extent to which ‘‘consumers and the 

market appreciate fuel economy,’’ 

arguing that ‘‘even if one looks at the 

ownership period, most alternative 

investment opportunities available to 

consumers do not yield a five year 

payback period; hybrids, many of which 

have payback periods of ten years or 

more, are flying off auto dealer lots. 

Increasing the payback period by one 

year raises the value of the fuel savings 

substantially, by 20 percent.’’ 

Ford commented that NHTSA should 

not have used the increase in the 

‘‘effective price’’ to buyers to determine 

consumer valuation of fuel economy, for 

two reasons. First, Ford argued that 

while NHTSA ‘‘implicitly assumed that 

the technology costs incurred by the 

manufactures can be fully passed on to 

buyers,’’ this is not true ‘‘in the 

competitive environment of the U.S. 

automotive market.’’ Second, Ford 

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250 Vehicles are defined to be of age 1 during the 

calendar year corresponding to the model year in 

which they are produced. Thus, for example, model 

year 2000 vehicles are considered to be of age 1 

during calendar year 2000, age 2 during calendar 

year 2001, and to reach their maximum age of 26 

years during calendar year 2025. NHTSA considers 

the maximum lifetime of vehicles to be the age after 

which less than 2 percent of the vehicles originally 

produced during a model year remain in service. 

Applying these conventions to vehicle registration 

data indicates that passenger cars have a maximum 

age of 26 years, while light trucks have a maximum 

lifetime of 36 years. See Lu, S., NHTSA, Regulatory 

Analysis and Evaluation Division, ‘‘Vehicle 

Survivability and Travel Mileage Schedules,’’ DOT 

HS 809 952 (January 2006), at 8–11. Available at 

http://www-nrd.nhtsa.dot.gov/pdf/nrd-30/NCSA/ 

Rpts/2006/809952.pdf (last accessed August 21, 

2008). 

251U.S. Energy Information Administration, 

Annual Energy Outlook 200, Reference Case Table 

43. Available at (last accessed October 4, 2008). 

252See Lu, supra note 250, at 8–11. 

253For a description of the NHTS, see http:// 

nhts.ornl.gov/quickStart.shtml (last accessed 

August 21, 2008). 

commented that the estimates of 

‘‘effective price’’ depend on fuel price 

assumptions, such that ‘‘a higher 

gasoline price assumption will lower 

the effective price estimates, holding 

everything else constant.’’ Ford cited the 

June 26, 2008 analysis by Sierra 

Research that ‘‘estimates that a 

consumer would not break even over a 

20 year period unless gas prices are 

sustained at $4.47 a gallon. Sierra also 

concluded that by using a more 

conservative payback period of 5 years 

the estimated breakeven gas price would 

have to be $6.59.’’ 

Ford argued that NHTSA should 

instead use ‘‘hedonic pricing technique 

in estimating the consumer valuation of 

fuel economy,’’ which ‘‘determines the 

price of a vehicle by the characteristics 

of the car such as towing, cargo volume, 

performance etc.’’ Ford also argued that 

NHTSA should not use ‘‘effective price’’ 

as a way of identifying in which order 

manufacturers would apply 

technologies, because ‘‘It is quite 

unlikely that manufacturers are using 

this metric for selecting models, since 

most manufacturers do not assume the 

technology costs can be fully passed on 

to the buyers.’’ 

Agency response: NHTSA notes that 

the payback period and the effective 

cost calculation affect only the order in 

which manufacturers are assumed to 

apply technologies in order to improve 

the fuel economy of specific vehicles, 

and thus have no effect on the final 

CAFE standards. Thus the assumptions 

about the length of the payback period 

and discount rate that affect these 

calculations, while subject to some 

uncertainty, are not a critical 

determinant of CAFE standards 

themselves. Instead, their main role is to 

estimate the increase in the value to 

potential buyers of the increases in fuel 

economy of specific vehicle models, and 

to provide some indication of the extent 

to which manufacturers are likely to be 

able to recoup their costs for complying 

with higher CAFE standards through 

increases in those vehicles’ sales prices. 

The agency also reiterates that it 

estimates the social benefits of fuel 

savings resulting from alternative 

standards over the entire expected 

lifetimes of cars and light trucks subject 

to higher CAFE standards, rather than 

over the payback period assumed for 

vehicle buyers. Although many 

commenters mistakenly believe that the 

payback period has an important effect 

on the stringency of the fuel economy 

standards and therefore were suggesting 

different periods, no commenter 

provided any data to support a different 

number of years for payback. Thus 

NHTSA has continued to employ the 

same assumptions used in the NPRM in 

developing the CAFE standards adopted 

in this final rule. 

6. Vehicle Survival and Use 

Assumptions 

NHTSA stated in the NPRM that its 

preliminary analysis of fuel savings and 

related benefits from adopting 

alternative standards for MY 2011–2015 

passenger cars and light trucks was 

based on estimates of the resulting 

changes in fuel use over their entire 

lifetimes in the U.S. vehicle fleet. 

NHTSA’s first step in estimating 

lifetime fuel consumption by vehicles 

produced during a model year is to 

calculate the number of vehicles that are 

expected to remain in service during 

each future year after they are produced 

and sold.250 This number is calculated 

by multiplying the number of vehicles 

originally produced during a model year 

by the proportion expected to remain in 

service at the age they will have reached 

during each subsequent year, often 

referred to as a ‘‘survival rate.’’ 

NHTSA explained that for the number 

of passenger cars and light trucks that 

will be produced during future years, it 

relies on projections reported by the EIA 

in its AEO Reference Case forecast.251

For age-specific survival rates for cars 

and light trucks, NHTSA uses updated 

values estimated from yearly 

registration data for vehicles produced 

during recent model years, to ensure 

that forecasts of the number of vehicles 

in use reflect recent increases in the 

durability and expected life spans of 

cars and light trucks.252 These updated 

survival rates suggest that the typical 

expected lifetimes of recent-model 

passenger cars and light trucks are 13.8 

and 14.5 years, respectively. 

NHTSA’s next step in estimating fuel 

use was to calculate the total number of 

miles that the cars and light trucks 

produced in each model year affected by 

the proposed CAFE standards will be 

driven during each year of their 

lifetimes. To estimate total miles driven, 

the number of cars and light trucks 

projected to remain in use during each 

future year (calculated as described 

above) was multiplied by the average 

number of miles that they are expected 

to be driven at the age they will have 

reached in that year. 

The agency initially estimated the 

average number of miles driven 

annually by cars and light trucks of each 

age using data from the Federal 

Highway Administration’s 2001 

National Household Transportation 

Survey (NHTS).253 The agency then 

adjusted the NHTS estimates of annual 

vehicle use to account for the effect of 

differences in fuel cost per mile driven 

between the date the NHTS was 

conducted and the future years when 

MY 2011 cars and light trucks would be 

in use. This adjustment is intended to 

account for the ‘‘rebound effect’’ on 

vehicle use caused by changes in fuel 

cost per mile (see Section V.B.8. below). 

Fuel cost per mile driven is measured 

by the retail price of fuel per gallon 

forecast for a future calendar year, 

divided by the estimated on-road fuel 

economy in miles per gallon achieved 

by vehicles of each model year that 

remain in service during that future 

year. The agency made this adjustment 

by applying its estimate of the rebound 

effect to the difference in fuel cost per 

mile driven between 2001, when the 

NHTS was conducted, and the projected 

average fuel cost per mile over the 

lifetimes of MY 2011 cars and light 

trucks. 

Finally, NHTSA estimated fuel 

consumption during each calendar year 

of model year 2011 vehicles’ lifetimes 

by dividing the total number of miles 

that that model year’s surviving vehicles 

are driven by the fuel economy that they 

are expected to achieve under each 

alternative CAFE standard. Lifetime fuel 

consumption by MY 2011 cars or light 

trucks is the sum of the fuel use by the 

vehicles produced during that model 

year that are projected to remain in use 

during each year of their expected 

lifetimes. In turn, the savings in lifetime 

fuel use by MY 2011 cars or light trucks 

that would result from each alternative 

CAFE standard would be the difference 

between its lifetime fuel use at the fuel 

economy level they are projected to 

attain under the Baseline (No Action) 

alternative, and their lifetime fuel use at 

the higher fuel economy level they are 

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14322 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

254As described in the preceding section, 

increases in fuel economy required by CAFE 

standards are assumed to increase lifetime usage of 

cars and light trucks due to the fuel economy 

rebound effect. Because a vehicle’s fuel economy is 

determined when it is produced, however, the 

resulting changes in its average annual use at each 

age and its expected lifetime mileage are also 

determined when it is produced. While the fuel 

economy rebound effect thus contributes to 

differences in annual and lifetime vehicle use 

between the Baseline alternative and Optimized 

CAFE standards, it is not a source of continuing 

growth in average annual miles per vehicle or in 

total annual VMT over the future. 

255Calculated from data reported in FHWA, 

Highway Statistics, Summary to 1995, Table VM– 

201a, available at 

http://www.fhwa.dot.gov/ohim/summary95/ 

vm201a.xlw (last accessed August 20, 2008), and 

Highway Statistics Publications, Annual Editions 

1996–2005, Table VM–1, available at http:// 

www.fhwa.dot.gov/policy/ohpi/hss/hsspubs.cfm 

(last accessed October 4, 2008); follow links to 

individual annual editions, select Section V: 

Roadway Extent Characteristics, and Performance, 

scroll down to section entitled ‘‘Traffic and Travel 

Data,’’ and select link to Table VM–1. 

256An increase in the fraction of new passenger 

cars remaining in service beyond age 10 accounted 

for approximately one-tenth of total growth in the 

U.S. automobile fleet from 1985 to 2005, while the 

remaining 90 percent was accounted for by growth 

in sales of new automobiles. The fraction of new 

automobiles remaining in service to various ages 

was computed from R.L. Polk vehicle registration 

data for 1997 through 2005 by the agency’s Center 

for Statistical Analysis. 

257 Id. 

258 Id. 

259See the Lu study, supra note 250. 

projected to achieve under that 

alternative standard. 

As an illustration of this procedure, 

the revised estimates of new vehicle 

sales used in the final rule analysis 

project that 6.85 million light trucks 

will be produced during 2011, and 

NHTSA’s updated survival rates showed 

that slightly more than half of these— 

50.1 percent, or 3.43 million—are 

projected to remain in service during 

the year 2025, when they will have 

reached an age of 14 years. At that age, 

the estimates of vehicle use employed in 

this final rule analysis indicate that light 

trucks achieving the fuel economy level 

required under the Baseline alternative 

would be driven an average of 9,385 

miles, assuming that the AEO 2008 High 

fuel price forecast proves to be correct. 

Thus surviving model year 2011 light 

trucks are projected to be driven a total 

of 32.20 billion miles (= 3.43 million 

surviving vehicles × 9,385 miles per 

vehicle) during 2025. Summing the 

results of similar calculations for each 

year of their 36-year maximum lifetime, 

the 6.85 million light trucks originally 

produced during MY 2011 would be 

driven a total of 1,185 billion miles 

under the Baseline alternative. 

Under the Baseline alternative, MY 

2011 light trucks are projected to 

achieve a test fuel economy level of 23.0 

mpg, which corresponds to actual onroad fuel economy of 18.4 mpg (= mpg 

× 80 percent). Thus, their lifetime fuel 

use under the Baseline alternative is 

projected to be 64.4 billion gallons 

(1,185 billion miles divided by 18.4 

miles per gallon). Under the Optimized 

CAFE standard for MY 2011, light 

trucks are projected to achieve a test 

fuel economy of 25.0 mpg, which 

corresponds to an actual on-road mpg of 

20.0. After adjusting their average 

annual mileage to reflect the increase in 

usage that results from the rebound 

effect of improved fuel economy, MY 

2011 light trucks are projected to be 

driven a total of 1,187 billion miles over 

their expected lifetimes. Thus their 

lifetime fuel consumption under the 

Optimized CAFE standard is projected 

to amount to 59.4 billion gallons (1,187 

billion miles divided by 20.0 miles per 

gallon), a reduction of 5.0 billion gallons 

from the 64.4 billion gallons they would 

consume under the Baseline alternative. 

NHTSA received no specific 

comments regarding the assumptions 

about vehicle survival and use 

described in the NPRM. The exact 

figures for annual vehicle use that are 

employed in the agency’s analysis 

supporting the final rule are updated to 

reflect differences in estimated fuel 

economy levels under alternative CAFE 

standards, but are otherwise unchanged 

from those used in the NPRM. 

7. Growth in Total Vehicle Use 

In the NPRM, NHTSA also explained 

its assumptions for potential future 

growth in average annual vehicle use. 

By assuming that the average number of 

miles driven by cars and light trucks at 

each age—and thus their lifetime total 

mileage—will remain constant over the 

future, NHTSA effectively assumes that 

future growth in total vehicle-miles 

driven stems only from increases in the 

number of vehicles in use, rather than 

from continuing increases in the average 

number of miles that cars and light 

trucks are driven each year.254

Similarly, because the survival rates 

used to estimate the number of cars and 

light trucks remaining in service to 

various ages are assumed to remain 

fixed for future model years, growth in 

the total number of cars and light trucks 

in use is effectively assumed to result 

only from increasing sales of new 

vehicles. In order to determine the 

validity of these assumptions, the 

agency conducted a detailed analysis of 

the causes of recent growth in total car 

and light truck use. 

From 1985 through 2005, the total 

number of miles driven (usually referred 

to as vehicle-miles traveled, or VMT) by 

passenger cars increased 35 percent, 

equivalent to a compound annual 

growth rate of 1.5 percent.255 During 

that time the total number of passenger 

cars registered in the U.S. grew by about 

0.3 percent annually, almost exclusively 

as a result of increasing sales of new 

cars.256 Thus, growth in the average 

number of miles that passenger cars are 

driven each year accounted for the 

remaining 1.2 percent (= 1.5 percent— 

0.3 percent) annual growth in total 

passenger car use.257

The NPRM explained, however, that 

over this same period, total VMT by 

light trucks increased much faster, 

growing at an annual rate of 5.1 percent. 

In contrast to the causes of growth in 

passenger car use, nearly all growth in 

light truck use over these two decades 

was attributable to rapid increases in the 

number of light trucks in use. FHWA 

data show that growth in total miles 

driven by ‘‘Two-axle, four-tire trucks,’’ a 

category that includes most or all light 

trucks subject to CAFE standards, 

averaged 5.1 percent annually from 

1985 through 2005. However, the 

number of miles that light trucks are 

driven each year averaged 11,114 during 

2005, almost unchanged from the 

average figure of 11,016 miles during 

1985.258 This means that virtually all of 

the growth in total light truck VMT over 

this period resulted from growth in the 

number of these vehicles in service, 

rather than from growth in their average 

annual use. In turn, growth in the size 

of the nation’s light truck fleet has 

resulted almost exclusively from rising 

production and sales of new light 

trucks, since the fraction of new light 

trucks remaining in service to various 

ages has remained stable or declined 

very slightly over the past two 

decades.259

On the basis of this analysis, NHTSA 

tentatively concluded in the NPRM that 

its projections of future growth in light 

truck VMT account fully for the primary 

cause of its recent growth, which has 

been the rapid increase in sales of new 

light trucks during recent model years. 

However, the assumption that average 

annual use of passenger cars will remain 

fixed over the future seemed to ignore 

an important source of recent growth in 

their total use, the gradual increase in 

the average number of miles they are 

driven. NHTSA explained that to the 

extent that this factor continued to 

represent a significant source of growth 

in future passenger car use, the agency’s 

analysis would be likely to 

underestimate the reductions in fuel use 

and related environmental impacts 

resulting from more stringent CAFE 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14323 

260NHTSA explained that assuming that average 

annual miles driven per passenger car will continue 

to increase over the future would increase the 

agency’s estimates of total lifetime mileage for MY 

2011 passenger cars. Their estimated lifetime fuel 

use would also increase under each alternative 

standard considered in the NPRM, but in inverse 

relation to their fuel economy. Thus, NHTSA 

explained, lifetime fuel use would increase by more 

under the No Increase alternative than under any 

of the alternatives that would increase passenger car 

CAFE standards, and by progressively less for the 

alternatives that impose stricter standards. NHTSA 

stated that taking account of this factor would thus 

increase the agency’s estimates of fuel savings for 

those alternatives, just as omitting it would cause 

the agency’s analysis to underestimate those fuel 

savings. 

261Fuel cost per mile is equal to the price of fuel 

in dollars per gallon divided by fuel economy in 

miles per gallon, so fuel cost per mile declines 

when a vehicle’s fuel economy increases. 

262Most studies estimate that the long-run 

rebound effect is significantly larger than the 

immediate response to increased fuel efficiency, 

since over a longer period drivers have more 

opportunities to adjust their vehicle use to changes 

in fuel costs. This long-run effect is more 

appropriate for evaluating the fuel savings likely to 

result from stricter CAFE standards, since the 

increases in fuel economy they require would 

reduce fuel costs over the entire lifetimes of 

vehicles they affect. These lifetimes can extend up 

to 25 years for passenger cars, and up to 36 years 

for light trucks. 

standards for passenger cars.260 NHTSA 

stated that it planned to account 

explicitly for potential future growth in 

average annual use of both cars and 

light trucks in the analysis for the final 

rule. NHTSA received no specific 

comments to the NPRM about vehicle 

survival and use. 

In its analysis for this final rule, the 

agency has used estimates of the annual 

number of miles driven by MY 2011 

passenger cars and light trucks at each 

age of their expected lifetimes that 

reflect the previously-discussed 

adjustment for increased use due to the 

fuel economy rebound effect. Similarly, 

these estimates also reflect the effect on 

vehicle use of differences in fuel prices 

between the year 2001, when the 

National Household Travel Survey 

(NHTS), the agency’s original source for 

its estimates of annual vehicle use by 

age, was conducted, and the AEO 2008 

forecast of fuel prices for the period 

when these vehicles will be in use. As 

discussed briefly in the preceding 

section and in more detail in the 

following section, changes in fuel prices 

are also assumed to cause a rebound 

effect in vehicle use, because—like 

increases in fuel economy—variation in 

retail fuel prices directly affects 

vehicles’ fuel cost per mile driven. 

Because future fuel prices are projected 

to be significantly higher than the $1.80 

(2007 dollars) average that prevailed at 

the time the NHTS was conducted, this 

adjustment reduces projected average 

vehicle use during future years, thus 

partly offsetting the effect of higher fuel 

economy. 

Finally, the agency’s estimates of 

vehicle use assume that the average 

number of miles driven by passenger 

cars will continue to rise by 1 percent 

annually, slightly below its 1.2 percent 

average annual growth rate over the past 

two decades. This growth is assumed to 

be independent of the changes in 

passenger car use that are projected to 

result from increased fuel economy and 

higher fuel prices through the rebound 

effect. Because average annual use of 

light trucks has not increased 

significantly over the past two decades, 

no future change in light truck use is 

assumed to occur independently of 

those attributable to higher fuel prices 

and improved fuel economy through the 

rebound effect. 

NHTSA received no specific 

comments regarding the assumptions 

about growth in total vehicle use 

presented in the NPRM. The 

assumptions employed in the agency’s 

analysis supporting the final rule 

remain unchanged from those used in 

the NPRM. 

8. Accounting for the Rebound Effect of 

Higher Fuel Economy 

As discussed in the NPRM, the 

rebound effect refers to the tendency of 

vehicle use to increase in response to 

higher fuel economy. The rebound effect 

occurs because an increase in a vehicle’s 

fuel economy reduces its fuel cost for 

each mile driven (typically the largest 

single component of the cost of 

operating a vehicle), and vehicle owners 

take advantage of this reduced cost by 

driving more. Even with higher fuel 

economy, this additional driving uses 

some fuel, so the rebound effect reduces 

the fuel savings that would otherwise 

result when fuel economy standards 

require manufacturers to increase fuel 

economy. The rebound effect is usually 

expressed as the percentage by which 

annual vehicle use increases when the 

cost of driving each mile declines, due 

either to an increase in fuel economy or 

a reduction in the retail price of fuel. 

The rebound effect is an important 

parameter in NHTSA’s evaluation of 

alternative CAFE standards for future 

model years, because it affects the actual 

fuel savings that are likely to result from 

adopting stricter standards. The 

rebound effect can be measured by 

estimating the elasticity of vehicle use 

with respect either to fuel economy 

itself, or to fuel cost per mile driven.261

When expressed as a positive 

percentage, either of these parameters 

gives the fraction of fuel savings that 

would be expected to result from 

increased fuel economy, but is offset by 

the added fuel use that occurs when 

vehicles with higher fuel economy are 

driven more. 

In the NPRM, NHTSA summarized 

existing research on the rebound effect 

in order to explain its rationale for 

choosing the estimate of 15 percent it 

employed in analyzing alternative MY 

2011–2015 fuel economy standards; the 

following paragraphs repeat NHTSA’s 

summary for the reader’s benefit. 

Research on the magnitude of the 

rebound effect in light-duty vehicle use 

dates to the early 1980s, and almost 

unanimously concludes that a 

statistically-significant rebound effect 

occurs when vehicle fuel efficiency 

improves.262 The most common 

approach to estimating its magnitude 

has been to analyze household survey 

data on vehicle use, fuel consumption, 

fuel prices (often obtained from external 

sources), and other determinants of 

household travel demand to isolate the 

response of vehicle use to higher fuel 

economy. Other studies have relied on 

econometric analysis of annual U.S. 

data on vehicle use, fuel economy, fuel 

prices, and other variables to identify 

the response of total or average vehicle 

use to changes in fuel economy. Two 

recent studies analyzed yearly variation 

in vehicle ownership and use, fuel 

prices, and fuel economy among 

individual states over an extended time 

period in order to measure the response 

of vehicle use to changing fuel 

economy. Most studies measure the 

influence of fuel economy on vehicle 

use indirectly through its effect on fuel 

cost per mile driven, although a few 

attempt to measure the direct effect of 

fuel economy on vehicle use. 

An important distinction among 

studies of the rebound effect is whether 

they assume that the effect is constant, 

or varies over time in response to 

prevailing fuel prices, fuel economy 

levels, personal income, and household 

vehicle ownership. This distinction is 

important because studies that allow the 

rebound effect to vary in response to 

changes in these factors are likely to 

provide more reliable forecasts of its 

future value. 

In order to arrive at a preliminary 

estimate of the rebound effect for use in 

assessing the fuel savings, emissions 

reductions, and other impacts of the 

alternative standards, NHTSA reviewed 

22 studies of the rebound effect 

conducted from 1983 through 2007. 

NHTSA then conducted a detailed 

analysis of the 66 separate estimates of 

the long-run rebound effect reported in 

these studies, which is summarized in 

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263Some studies did not separately present the 

overall rebound effect, so NHTSA derived estimates 

of the overall rebound effect when the studies 

reported more detailed results. For example, when 

studies estimated different rebound effects for 

households owning different numbers of vehicles, 

but did not report an overall rebound effect, 

NHTSA computed a weighted average of the 

reported values using the distribution of 

households among vehicle ownership categories. 

Table V–2 below.263 As the table 

indicates, historical estimates of the 

long-run rebound effect range from as 

low as 7 percent to as high as 75 

percent, with a mean of 23 percent. A 

higher rebound effect means that more 

of the savings in fuel use expected to 

result from higher fuel economy will be 

offset by additional driving, so that less 

fuel savings will actually result. 

Limiting the sample of rebound effect 

estimates to the 50 estimates reported in 

the 17 published studies yields the same 

range but a slightly higher mean (24 

percent), while focusing on the authors’ 

preferred estimates from published 

these studies narrows this range and 

lowers its average slightly. In all three 

cases, the median estimate of the 

rebound effect, which is less likely to be 

influenced by unusually small and large 

estimates, is 22 percent. As Table V–2 

indicates, approximately two-thirds of 

all estimates reviewed, all published 

estimates, and authors’ preferred 

estimates fall in the range of 10 to 30 

percent. 

BILLING CODE 4910–59–P 

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BILLING CODE 4910–59–C 

The type of data used and authors’ 

assumptions about whether the rebound 

effect varies over time have important 

effects on its estimated magnitude, 

although the reasons for these patterns 

are difficult to identify. As the table 

shows, the 34 estimates derived from 

analysis of U.S. annual time-series data 

produce a median estimate of 14 percent 

for the long-run rebound effect, while 

the median of the 23 estimates based on 

household survey data is more than 

twice as large (31 percent). The 37 

estimates from studies that assume a 

constant rebound effect produce a 

median of 20 percent, while the 29 

estimates from studies allowing the 

rebound to vary have a slightly higher 

median value (23 percent). 

In selecting a value for the rebound 

effect to use in analyzing alternative fuel 

economy standards for this rulemaking, 

NHTSA attached greater significance to 


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264As an illustration, Small and Van Dender 

(2005) allow the rebound effect to vary over time 

in response to changes in real per capita income as 

well as in response to average fuel cost per mile 

driven. While their estimate for the entire interval 

(1966–2001) that they analyze is 22 percent, 

updating this estimate using 2007 values of these 

variables reduces the rebound effect to about 10 

percent. Similarly, updating Greene’s 1992 original 

estimate of a 15 percent rebound effect to reflect 

2007 fuel prices and average fuel economy reduces 

it to approximately 7 percent. See David L. Greene, 

‘‘Vehicle Use and Fuel Economy: How Big is the 

Rebound Effect?’’ The Energy Journal, 13:1 (1992), 

at 117–143. 

In contrast, the distribution of households among 

vehicle ownership categories in the data samples 

used by Hensher et al. (1990) and Greene et al. 

(1999) are nearly identical to the most recent 

estimates for the U.S., so updating their original 

estimates to current U.S. conditions changes them 

very little. See David A. Hensher, Frank W. 

Milthorpe, and Nariida C. Smith, ‘‘The Demand for 

Vehicle Use in the Urban Household Sector: Theory 

and Empirical Evidence,’’ Journal of Transport 

Economics and Policy, 24:2 (1990), at 119–137; see 

also David L. Greene, James R. Kahn, and Robert C. 

Gibson, ‘‘Fuel Economy Rebound Effect for 

Household Vehicles,’’ The Energy Journal, 20:3 

(1999), at 1–21. 

265 David L. Greene, et al., ‘‘Fuel Economy 

Rebound Effect for U.S. Household Vehicles,’’ The 

Energy Journal, Vol. 20, No. 3, 1999. 

studies that allow the rebound effect to 

vary in response to changes in the 

factors that affect its magnitude. The 

agency’s view is that updating their 

estimates to reflect current economic 

conditions provides a more reliable 

indication of its likely magnitude over 

the lifetimes of vehicles that will be 

affected by those standards. As Table V– 

2 reports, recalculating these 29 original 

estimates using 2006 values for retail 

fuel prices, average fuel economy, 

personal income, and household vehicle 

ownership reduces their median 

estimate to 16 percent.264 Considering 

the empirical evidence on the rebound 

effect as a whole, but according greater 

importance to the updated estimates 

from studies allowing the rebound effect 

to vary, NHTSA selected a rebound 

effect of 15 percent in the NPRM to 

evaluate the fuel savings and other 

effects of the alternative fuel economy 

standards. However, NHTSA stated that 

it did not believe that evidence of the 

rebound effect’s dependence on fuel 

prices or household income is 

sufficiently convincing to justify 

allowing its future value to vary in 

response to forecast changes in these 

variables. A range extending from 10 

percent to at least 20 percent, and 

perhaps as high as 25 percent, appeared 

to NHTSA to be appropriate for the 

required analysis of the uncertainty 

surrounding these estimates. While the 

agency selected 15 percent, it also 

conducted analyses using rebound 

effects of 10 and 20 percent. The results 

of these sensitivity analyses are shown 

in the FEIS at Section 3.4.4.2. 

The only commenter suggesting that 

NHTSA use a larger rebound effect than 

15 percent was the Alliance, which 

based its comments on analyses it 

commissioned from Sierra Research and 

NERA Economic Consulting, Inc. Sierra 

Research cited a 1999 paper by David 

Greene, et al., at ORNL as evidence that 

the long-run rebound effect should be 

20 percent,265 and stated further that 

NHTSA used a rebound effect of 20 

percent in its April 2003 final rule 

setting fuel economy standards for MY 

2005–2007 light trucks. Sierra Research 

assumed a 17 percent rebound effect in 

its analysis for the Alliance ‘‘to be 

conservative.’’ NERA’s report argued 

that NHTSA should use a rebound effect 

of 20 percent, because 15 percent gave 

‘‘disproportionate weight’’ to the Small 

and Van Dender study, which NERA 

called ‘‘a single study with empirical 

limitations.’’ NERA stated that its 

analysis ‘‘corrected’’ the Small and Van 

Dender model, the primary correction 

apparently being to ‘‘properly account 

for differences in the cost of living 

across states,’’ with respect to income 

and fuel prices. NERA consequently 

used a 24 percent rebound effect for its 

report. 

Other commenters, including CARB, 

UCS, EDF, Public Citizen, CFA, and 

Mark Delucchi, argued that NHTSA 

should use a lower rebound effect than 

15 percent, generally because Small and 

Van Dender’s recent study found a 

lower rebound effect. CARB, for 

example, commented that while it is 

true that the consensus estimate of past 

studies is that the rebound effect should 

be 15 percent, Small and Van Dender 

had found a long-run rebound effect of 

4.9 percent for the 1997–2001 period in 

California due to higher incomes, and 

that it would decline even further by 

2020. Thus, CARB argued, NHTSA 

should accept ‘‘two critical findings’’ of 

the Small and Van Dender study, 

specifically that (1) the future value of 

the rebound effect would decline as 

household real income increases; and 

that (2) as fuel prices increase, people 

spend a larger share of their income on 

fuel purchases, thus becoming more 

sensitive to fuel prices. CARB stated 

that NHTSA should use a rebound effect 

of no higher than 10 percent, and 

conduct a sensitivity analysis using a 

rebound effect of 5 percent. 

UCS similarly commented that if 

NHTSA intends to ‘‘attach greater 

significance’’ to the Small and Van 

Dender study, as NHTSA stated in the 

NPRM, then it must accept Small and 

Van Dender’s conclusion ‘‘that the 

rebound effect in the U.S. is small and 

has been getting smaller.’’ Thus, UCS 

argued, NHTSA should employ a 

rebound effect of no greater than 10 

percent, and only if NHTSA used higher 

fuel prices in the final rule. UCS 

implied, however, that NHTSA should 

apply no rebound effect at all unless it 

used higher fuel prices in the final rule, 

citing a 2005 final report by Small and 

Van Dender to CARB as stating that 

‘‘* * * [the authors] cannot prove that 

there is any rebound effect resulting 

from stricter fuel efficiency regulations 

* * *.’’ Mr. Delucchi also commented 

that NHTSA should use a lower 

rebound effect because the agency 

should ‘‘give more weight to Small and 

Van Dender,’’ although he did not 

explain how the agency should give this 

additional weight. Mr. Delucchi also 

stated that a recent study by Hughes et 

al. ‘‘found a very low short-run price 

elasticity of demand for gasoline.’’ 

EDF and Public Citizen focused on 

other findings in the Small and Van 

Dender study to argue for a lower 

rebound effect. EDF commented that 

NHTSA should not have selected a 15 

percent rebound effect based on existing 

rebound effect literature, because when 

Small and Van Dender reviewed the 

literature, the authors suggested ‘‘that 

many prior studies have overestimated 

the rebound effect because of some 

model specification problems, such as 

not allowing for the fact that fuel 

efficiency is endogenous, i.e., driving 

more efficient cars might encourage 

more driving, but long commutes might 

encourage purchase of more fuel 

efficient vehicles.’’ EDF argued that 

because Small and Van Dender’s study 

did not have these biases, NHTSA 

should use a 10 percent rebound effect, 

‘‘to be consistent with the latest findings 

and to reflect current conditions of 

income, urbanization and fuel costs.’’ 

EDF also suggested that the rebound 

effect may be zero, citing Greene’s 2005 

testimony before the House of 

Representatives Science Committee that 

‘‘the rebound effect could be reduced to 

negligible if we ‘[take] into account the 

fact that increased fuel economy will 

increase the price of vehicles together 

with the likelihood that governments 

will respond to losses in highway 

revenues by raising motor fuel taxes.’ ’’ 

Public Citizen focused on Small and 

Van Dender’s finding that ‘‘most 

empirical measurements of the rebound 

effect rely heavily on variations in the 

fuel price,’’ stating that this ‘‘again 

raises the question of whether NHTSA’s 

assumptions about the rebound effect 

are colored by the estimates of future 

fuel prices.’’ 

CFA commented that NHTSA should 

use a rebound effect of no higher than 

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266Federal Highway Administration data show 

that fuel tax revenues declined in only 5 of the 50 

states between 2000 and 2006, and that none of 

these states raised gasoline taxes over that same 

period; see FHWA, Highway Statistics 2006, Table 

MF–205, available at http://www.fhwa.dot.gov/ 

policy/ohim/hs06/pdf/mf205.pdf (last accessed 

November 13, 2008), Table MF–1 available at 

http://www.fhwa.dot.gov/policy/ohim/hs06/xls/ 

mf1.xls (last accessed November 13, 2008), and 

Highway Statistics 2000, Table MF–1 available at 

http://www.fhwa.dot.gov/ohim/hs00/xls/mf1.xls 

(last accessed November 13, 2008). 

5 percent, citing a recent analysis by the 

Congressional Budget Office that rising 

real incomes have made consumers 

much less responsive to short-run 

changes in gasoline prices. CFA thus 

argued that since gasoline is more 

expensive now, NHTSA was incorrect to 

assume ‘‘that consumers irrationally 

burn up their fuel savings on increased 

driving, rather than use it to buy other 

goods and services and applied this 

‘rebound’ effect to analyses where it 

should not play a role.’’ CFA also 

argued that NHTSA should have 

identified and provided more 

information about the conclusions in 

each of the studies it reviewed in 

developing its number for the rebound 

effect. 

Agency response: NHTSA has 

updated the 29 estimates from studies 

that allowed the rebound effect to vary 

to reflect 2008 fuel prices, fuel 

economy, vehicle ownership levels, and 

household income. The resulting 

updated estimates are significantly 

higher than those reported in the NPRM, 

primarily because of the large increase 

in fuel prices since 2006 (the date to 

which the estimates reported in the 

NPRM were updated). The updated 

2008 estimates of the fuel economy 

rebound effect range from 8 percent to 

46 percent, with a median value of 19 

percent. Using the average retail 

gasoline price forecast for 2011–30 from 

the AEO 2008 High Price case, the 

projected estimates of the rebound effect 

for those years would range from 7 

percent to 46 percent, with a median 

value of 19 percent. 

NHTSA also notes that the forecast of 

fuel prices used to develop its adopted 

CAFE standards for MY 2011 projects 

that retail gasoline prices will continue 

to rise by somewhat more than 1 percent 

annually over the lifetimes of vehicles 

affected by those standards. At the same 

time, real household incomes are 

projected to grow by about 2 percent 

annually over this same period. Given 

the relative sensitivity of the Small and 

Van Dender rebound effect estimate to 

changes in fuel prices and income, these 

forecasts suggest that future growth in 

fuel prices is likely to offset a significant 

fraction of the projected decline in the 

rebound effect that would result from 

income growth. 

In response to the comment by EDF 

citing Greene’s statement that the 

rebound effect could be negligible over 

the foreseeable future, NHTSA notes 

that increases in the purchase price or 

ownership cost of vehicles may not 

significantly affect the marginal cost of 

additional vehicle use, since the 

depreciation and financing components 

of vehicle ownership costs vary only 

minimally with vehicle use. In addition, 

the agency notes that Greene’s assertion 

that governments are likely to respond 

to losses in fuel tax revenues by raising 

fuel tax rates (thus increasing retail fuel 

prices) is highly speculative, and there 

is limited evidence that this has actually 

occurred in response to recent declines 

in state fuel tax revenues.266

In light of these results, NHTSA has 

elected to continue to use a 15 percent 

rebound effect in its analysis of fuel 

savings and other benefits from higher 

CAFE standards for this final rule. 

Recognizing the uncertainty 

surrounding this estimate, the agency 

has analyzed the sensitivity of its 

benefits estimates to a range of values 

for the rebound effect from 10 percent 

to 20 percent. In its future CAFE 

rulemaking activities, NHTSA will 

review all new available data and 

consider whether and to what extent 

any assumptions regarding the rebound 

effect merit revising based on that data. 

9. Benefits From Increased Vehicle Use 

The NPRM explained that NHTSA 

also values the additional benefits that 

derive from increased vehicle use due to 

the rebound effect. This additional 

mobility provides drivers and their 

passengers better access to social and 

economic opportunities away from 

home, because they are able to make 

longer or more frequent trips. The 

amount by which the total benefits from 

this additional travel exceed its costs 

(for fuel and other operating expenses) 

measures the net benefits that drivers 

receive from the additional travel, 

usually referred to as increased 

consumer surplus. NHTSA’s analysis 

estimates the economic value of this 

increased consumer surplus using the 

conventional approximation, which is 

one half of the product of the decline in 

vehicle operating costs per mile and the 

resulting increase in the annual number 

of miles driven. The NPRM noted that 

the magnitude of these benefits 

represents a small fraction of the total 

benefits from the alternative fuel 

economy standards considered. 

In its comment on the NPRM, NERA 

speculated that NHTSA ‘‘may have 

miscalculated the ‘consumer surplus’ 

associated with the additional driving 

due to the rebound effect.’’ NERA stated 

that NHTSA 

* * * describes its calculation in terms of 

the conventional triangle under the demand 

curve but above the price paid. However, it 

appears that instead NHTSA estimated the 

total area under the demand curve for the 

extra VMT traveled. That is appropriate if 

NHTSA’s estimates of net savings in fuel 

expenditures include additional 

expenditures on the additional fuel 

consumed as a result of the rebound effect. 

NHTSA notes in response to NERA’s 

comment that its estimates of net 

savings in fuel expenditures do reflect 

the costs for additional fuel consumed 

as a result of increased rebound-effect 

driving. Thus the agency has correctly 

calculated the increase in consumer 

surplus associated with the additional 

driving due to the rebound effect. Since 

it received no other comments on the 

estimates of benefits from increased 

vehicle use presented in the NPRM, 

NHTSA has calculated these benefits 

using the same procedure in its analysis 

supporting this final rule. 

10. Added Costs From Congestion, 

Crashes, and Noise 

NHTSA also factors in the additional 

costs from increased traffic congestion, 

motor vehicle accidents, and highway 

noise that result from additional vehicle 

use associated with the rebound effect. 

Increased vehicle use can contribute to 

traffic congestion and delays by 

increasing traffic volumes on facilities 

that are already heavily traveled, which 

may cost drivers more in terms of 

increased travel time and operating 

expenses. Increased vehicle use can also 

increase the external costs associated 

with traffic accidents; although drivers 

may consider the costs they (and their 

passengers) might face from the 

possibility of being involved in a traffic 

accident when they decide to make 

additional trips, it is very unlikely that 

they account for the potential ‘‘external’’ 

costs that any accident imposes on the 

occupants of other vehicles or on 

pedestrians. 

Finally, increased vehicle use can also 

contribute to traffic noise, which causes 

inconvenience, irritation, and 

potentially even discomfort to 

occupants of other vehicles, to 

pedestrians and other bystanders, and to 

residents or occupants of surrounding 

property. Since drivers are unlikely to 

consider the effect their vehicle’s noise 

has on others, noise represents another 

externality that NHTSA attempts to 

account for. Any increase in these 

externality costs, however, is dependent 

on the traffic conditions under which 

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14328 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

267These estimates were developed by FHWA for 

use in its 1997 Federal Highway Cost Allocation 

Study. See http://www.fhwa.dot.gov/policy/hcas/ 

final/index.htm (last accessed October 5, 2008). 

268 Id., at Tables V–22, V–23, and V–24 (last 

accessed October 5, 2008). 

269NERA appears to suggest that time spent in 

service stations while filling up includes the fact 

that ‘‘stops at service stations often serve multiple 

purposes, not just refueling.’’ NERA then appears to 

suggest that people feel similarly about time spent 

in traffic congestion. 

270NERA suggested using a rebound elasticity of 

¥0.2 instead of ¥0.15, which it claimed would 

increase the costs from congestion, crashes, and 

noise by about one third. 

additional rebound-effect driving takes 

place. 

In the NPRM, NHTSA relied on 

estimates developed by the Federal 

Highway Administration (FHWA) of the 

increased external costs of congestion, 

accidents (property damage and 

injuries), and noise costs caused by 

added driving due to the rebound 

effect.267 These estimates are intended 

to measure the increases in costs due to 

these externalities caused by 

automobiles and light trucks that are 

borne by persons other than their 

drivers, or ‘‘marginal’’ external costs. 

Updated to 2007 dollars, FHWA’s 

‘‘Middle’’ estimates for marginal 

congestion, accident, and noise costs 

caused by automobile use amount to 5.4 

cents, 2.3 cents, and 0.1 cents per 

vehicle-mile (or 7.8 cents per vehiclemile in total), while costs for light 

trucks are 4.8 cents, 2.6 cents, and 0.1 

cents per vehicle-mile (7.5 cents per 

vehicle-mile in total).268 These costs are 

multiplied by the annual increases in 

automobile and light truck use from the 

rebound effect to yield the estimated 

increases in congestion, accident, and 

noise externality costs during each 

future year. 

NHTSA received comments from the 

Alliance and from the Mercatus Center 

on the increased costs from congestion, 

crashes, and noise due to the rebound 

effect. The Alliance submitted an 

analysis by NERA Economic Consulting 

that argued that NHTSA had 

underestimated the increased costs from 

congestion, crashes, and noise. The 

NERA analysis disagreed with NHTSA’s 

method for updating the FHWA 

estimates, arguing that it was unclear 

exactly how NHTSA had updated the 

FHWA values to 2006 dollars. The 

NERA analysis also argued that FHWA’s 

estimate was ‘‘based on a value of 

$12.38 per vehicle hour (in 1994 

dollars),’’ while NHTSA used a value of 

$24 per vehicle hour ‘‘to value time 

savings it estimates would result from 

fewer fill-ups as a result of higher MPG 

and increased range for a tank of fuel.’’ 

Thus, the NERA analysis concluded that 

NHTSA had overvalued the time 

savings, which NERA seemed to 

attribute to its belief that NHTSA does 

not value time spent in traffic 

congestion ‘‘at least as highly as time 

spent in service stations while filling 

up.’’ 269 Thus, the NERA analysis argued 

that congestion costs per mile would 

increase by about 68 percent if NHTSA 

had updated FHWA’s estimates in a 

‘‘consistent’’ manner with ‘‘NHTSA’s 

valuation of time savings for vehicle 

occupants in another part of its 

analysis.’’ 

The NERA analysis also argued that 

the baseline 1997 congestion values 

‘‘should be adjusted upward even more 

to reflect increasing levels of congestion 

between then and now and the further 

increases likely’’ within the lifetimes of 

the vehicles, the basis for NHTSA’s cost 

analysis. The analysis stated that this 

was because ‘‘With higher baseline 

congestion, the marginal impact of 

additional VMT will increase because 

congestion, like other queuing 

phenomena, increases at an increasing 

rate as capacity utilization grows.’’ 

NERA also argued more generally that 

increased costs from congestion, 

crashes, and noise are proportional to 

the rebound effect, which means that a 

higher rebound effect would result in 

higher costs.270

The NERA analysis did not cover 

NHTSA’s estimates of accident and 

noise costs per mile, but cited the same 

RFF study referred to in the NPRM to 

say that it ‘‘estimated a value per mile 

roughly 20 percent higher ($0.030 vs. 

$0.025) than NHTSA’s.’’ 

The Mercatus Center focused only on 

congestion costs, and commented that 

NHTSA should consider ‘‘The 

possibility that the cost of increased 

congestion, a product of the ‘rebound 

effect,’ does not take into account likely 

increasing marginal costs as considered 

in NHTSA’s model.’’ The commenter 

stated that NHTSA’s estimates 

‘‘implicitly assume[] a constant 

marginal cost of congestion across all 

possible total quantities of vehicle miles 

driven for each vehicle category.’’ 

However, it cited the FHWA study as 

stating that congestion cost impacts are 

‘‘extremely sensitive’’ to peak versus offpeak traffic periods. Thus, the 

commenter argued, if the costs can vary 

within a day (as during peak and offpeak periods), they must certainly vary 

across years, if the total amount of 

traffic varies across years as well. In 

essence, if VMT increases, total 

congestion and the marginal cost of 

congestion must also increase, all other 

things held constant. 

However, if all other things are not 

held constant, e.g., if new roads are built 

to handle increasing traffic, the 

commenter argued that ‘‘total 

congestion does not necessarily increase 

with increases in total vehicle miles 

driven.’’ The commenter argued that 

NHTSA should include an estimate of 

the costs of building additional roads or 

altering existing ones to mitigate 

congestion due to the rebound effect. 

That estimate should include 

accounting for ‘‘the increasing difficulty 

of building a new road in an urbanized 

area,’’ which the commenter stated is 

‘‘probably one of the best examples of 

an activity that has rapidly increasing 

marginal costs,’’ as well as the 

environmental costs of building new 

roads, i.e., costs due to sprawl. The 

commenter asserted that ‘‘It is 

incumbent upon NHTSA and the 

Environmental Protection Agency to 

produce an inclusive estimate of the 

costs of the rebound effect—one that 

either includes both increasing marginal 

cost of congestion and the cost of the 

new roads that will lead to increased 

congestion.’’ 

The Mercatus Center also pointed out 

an apparent inconsistency in the NPRM 

in the reporting of FHWA’s estimates of 

passenger car versus light truck costs for 

increased congestion, crashes, and 

noise. 

For this final rule, NHTSA has 

corrected the inconsistency in the 

NPRM’s reporting of external costs from 

additional automobile and light truck 

use noted by the Mercatus Center. 

NHTSA notes that congestion cost 

associated with additional travel may be 

particularly high if it occurs during peak 

travel periods and on facilities that are 

already heavily utilized. However, the 

FHWA estimates of increased 

congestion costs from added vehicle use 

assume that the increase in travel is 

distributed over the hours of the day 

and among specific routes in proportion 

to the existing temporal and geographic 

distributions of total VMT. Thus while 

some of the additional travel may 

impose significant costs for additional 

congestion and delays, much of it is 

likely to occur at times and locations 

where excess roadway capacity is 

available and congestion costs imposed 

by added vehicle use are minimal. 

NHTSA believes it is reasonable to 

assume that additional vehicle use due 

to the fuel economy rebound effect will 

be distributed over the day and among 

locations in much the same way as 

current travel is distributed. As a 

consequence, the FHWA estimates of 

congestion costs from increased vehicle 

use are likely to provide more accurate 

estimates of the increased congestion 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14329 

271See, e.g., Bohi, Douglas R. and W. David 

Montgomery (1982). Oil Prices, Energy Security, 

and Import Policy, Washington, DC, Resources for 

the Future, Johns Hopkins University Press; Bohi, 

D.R. and M.A. Toman (1993). ‘‘Energy and Security: 

Externalities and Policies,’’ Energy Policy 21: 1093– 

1109; and Toman, M.A. (1993). ‘‘The Economics of 

Energy Security: Theory, Evidence, Policy,’’ in A.V. 

Kneese and J.L. Sweeney, eds. (1993). Handbook of 

Natural Resource and Energy Economics, Vol. III, 

Amsterdam, pp. 1167–1218. 

272For example, if the U.S imports 10 million 

barrels of petroleum per day at a world oil price of 

$20 per barrel, its total daily import bill is $200 

million. If increasing imports to 11 million barrels 

per day causes the world oil price to rise to $21 per 

barrel, the daily U.S. import bill rises to $231 

million. The resulting increase of $31 million per 

day is attributable to increasing daily imports by 

only 1 million barrels. This means that the 

incremental cost of importing each additional barrel 

is $31, or $10 more than the newly-increased world 

price of $21 per barrel. This additional $10 per 

barrel represents a cost imposed on all other 

purchasers in the global petroleum market by U.S. 

buyers, in excess of the price they pay to obtain 

those additional imports. 

273For a summary of this issue, see Leiby, Paul 

N., Donald W. Jones, T. Randall Curlee, and Russell 

Lee, Oil Imports: An Assessment of Benefits and 

Costs, ORNL–6851, Oak Ridge National Laboratory, 

November 1, 1997, at 17. Available at http:// 

pzl1.ed.ornl.gov/ORNL6851.pdf (last accessed 

August 26, 2008). 

274 Id., at 18–19. 

costs caused by added rebound-effect 

driving than are the estimates submitted 

by commenters, which apply to peak 

travel periods and locations that 

experience high traffic volumes. Thus in 

the analysis supporting the final rule, 

NHTSA has continued to rely upon the 

FHWA values to estimate the increase in 

congestion costs likely to result from 

added rebound-effect driving. 

11. Petroleum Consumption and Import 

Externalities 

The NPRM also discussed the fact that 

U.S. consumption and imports of 

petroleum products also impose costs 

on the domestic economy that are not 

reflected in the market price for crude 

petroleum, or in the prices paid by 

consumers of petroleum products such 

as gasoline. In economics literature on 

this subject, these costs include (1) 

higher prices for petroleum products 

resulting from the effect of U.S. oil 

import demand on the world oil price; 

(2) the risk of disruptions to the U.S. 

economy caused by sudden reductions 

in the supply of imported oil to the U.S.; 

and (3) expenses for maintaining a U.S. 

military presence to secure imported oil 

supplies from unstable regions, and for 

maintaining the Strategic Petroleum 

Reserve (SPR) to cushion against 

resulting price increases.271 Higher U.S. 

imports of crude oil or refined 

petroleum products increase the 

magnitude of these external economic 

costs, thus increasing the true economic 

cost of supplying transportation fuels 

above the resource costs of producing 

them. Conversely, reducing U.S. imports 

of crude petroleum or refined fuels or 

reducing fuel consumption can reduce 

these external costs. Any reduction in 

their total value that results from 

improved passenger car and light truck 

fuel economy represents an economic 

benefit of setting more stringent CAFE 

standards, in addition to the value of 

fuel savings and emissions reductions 

themselves. 

NHTSA explained that increased U.S. 

oil imports can impose higher costs on 

all purchasers of petroleum products, 

because the U.S. is a sufficiently large 

purchaser of foreign oil supplies that 

changes in U.S. demand can affect the 

world price. The effect of U.S. 

petroleum imports on world oil prices is 

determined by the degree of OPEC 

monopoly power over global oil 

supplies, and the degree of monopsony 

power over world oil demand exerted 

by the U.S. The combination of these 

two factors means that increases in 

domestic demand for petroleum 

products that are met through higher oil 

imports can cause the price of oil in the 

world market to rise, which imposes 

economic costs on all other purchasers 

in the global petroleum market in excess 

of the higher prices paid by U.S. 

consumers.272 Conversely, reducing 

U.S. oil imports can lower the world 

petroleum price, and thus generate 

benefits to other oil purchasers by 

reducing these ‘‘monopsony costs.’’ 

NHTSA stated that although the 

degree of current OPEC monopoly 

power is subject to debate, the 

consensus appears to be that OPEC 

remains able to exercise some degree of 

control over the response of world oil 

supplies to variation in world oil price 

so that the world oil market does not 

behave completely competitively.273

The extent of U.S. monopsony power is 

determined by a complex set of factors, 

including the relative importance of 

U.S. imports in the world oil market, 

and the sensitivity of petroleum supply, 

and demand to its world price among 

other participants in the international 

oil market. Most evidence appears to 

suggest that variation in U.S. demand 

for imported petroleum continues to 

exert some influence on world oil 

prices, although this influence appears 

to be limited.274

The second component of external 

economic costs imposed by U.S. 

petroleum imports that NHTSA 

considered arises partly because an 

increase in oil prices triggered by a 

disruption in the supply of imported oil 

reduces the level of output that the U.S. 

economy can produce. The reduction in 

potential U.S. economic output depends 

on the extent and duration of the 

increases in petroleum product prices 

that result from a disruption in the 

supply of imported oil, as well as on 

whether and how rapidly these prices 

return to pre-disruption levels. Even if 

prices for imported oil return 

completely to their original level, 

however, economic output will be at 

least temporarily reduced from the level 

that would have been possible without 

a disruption in oil supplies. 

Because supply disruptions and 

resulting price increases tend to occur 

suddenly rather than gradually, they can 

also impose costs on businesses and 

households for adjusting their use of 

petroleum products more rapidly than if 

the same price increase had occurred 

gradually over time. These adjustments 

impose costs because they temporarily 

reduce economic output even below the 

level that would ultimately be reached 

once the U.S. economy completely 

adapted to higher petroleum prices. The 

additional costs to businesses and 

households reflect their inability to 

adjust prices, output levels, and their 

use of energy and other resources 

quickly and smoothly in response to 

rapid changes in prices for petroleum 

products. 

Since future disruptions in foreign oil 

supplies are an uncertain prospect, each 

of these disruption costs must be 

adjusted by the probability that the 

supply of imported oil to the U.S. will 

actually be disrupted. The ‘‘expected 

value’’ of these costs—the product of the 

probability that an oil import disruption 

will occur and the costs of reduced 

economic output and abrupt adjustment 

to sharply higher petroleum prices—is 

the appropriate measure of their 

magnitude. Any reduction in these 

expected disruption costs resulting from 

a measure that lowers U.S. oil imports 

represents an additional economic 

benefit beyond the direct value of 

savings from reduced purchases of 

petroleum products. 

While the vulnerability of the U.S. 

economy to oil price shocks is widely 

thought to depend on total petroleum 

consumption rather than on the level of 

oil imports, variation in imports is still 

likely to have some effect on the 

magnitude of price increases resulting 

from a disruption of import supply. In 

addition, changing the quantity of 

petroleum imported into the U.S. may 

also affect the probability that such a 

disruption will occur. If either the size 

of the likely price increase or the 

probability that U.S. oil supplies will be 

disrupted is affected by oil imports, the 

expected value of the costs from a 

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14330 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

275 Id. 

276Leiby, Paul N., ‘‘Estimating the Energy 

Security Benefits of Reduced U.S. Oil Imports: Final 

Report,’’ Oak Ridge National Laboratory, ORNL/ 

TM–2007/028, Revised March 14, 2008. Available 

at http://pzl1.ed.ornl.gov/energysecurity.html (click 

on link below ‘‘Oil Imports Costs and Benefits’’) 

(last accessed August 26, 2008). 

277 72 FR 23899 (May 1, 2007). 

278Peer Review Report Summary: Estimating the 

Energy Security Benefits of Reduced U.S. Oil 

Imports, ICF, Inc., September 2007. 

supply disruption will also depend on 

the level of imports. 

NHTSA explained that businesses and 

households use a variety of market 

mechanisms, including oil futures 

markets, energy conservation measures, 

and technologies that permit rapid fuel 

switching to ‘‘insure’’ against higher 

petroleum prices and reduce their costs 

for adjusting to sudden price increases. 

While the availability of these market 

mechanisms has likely reduced the 

potential costs of disruptions to the 

supply of imported oil, consumers of 

petroleum products are unlikely to take 

account of costs they impose on others, 

so those costs are probably not reflected 

in the price of imported oil. Thus, 

changes in oil import levels probably 

continue to affect the expected cost to 

the U.S. economy from potential oil 

supply disruptions, although this 

component of oil import costs is likely 

to be significantly smaller than 

estimated by studies conducted in the 

wake of the oil supply disruptions 

during the 1970s. 

The third component that NHTSA 

identified of the external economic costs 

of importing oil into the U.S. includes 

government outlays for maintaining a 

military presence to secure the supply 

of oil imports from potentially unstable 

regions of the world and to protect 

against their interruption. Some analysts 

also include outlays for maintaining the 

U.S. Strategic Petroleum Reserve (SPR), 

which is intended to cushion the U.S. 

economy against the consequences of 

disruption in the supply of imported oil, 

as additional costs of protecting the U.S. 

economy from oil supply disruptions. 

NHTSA expressed its belief that while 

costs for U.S. military security may vary 

over time in response to long-term 

changes in the actual level of oil imports 

into the U.S., these costs are unlikely to 

decline in response to any reduction in 

U.S. oil imports resulting from raising 

future CAFE standards for passenger 

cars and light trucks. U.S. military 

activities in regions that represent vital 

sources of oil imports also serve a 

broader range of security and foreign 

policy objectives than simply protecting 

oil supplies, and as a consequence are 

unlikely to vary significantly in 

response to changes in the level of oil 

imports prompted by higher standards. 

Similarly, NHTSA stated that while 

the optimal size of the SPR from the 

standpoint of its potential influence on 

domestic oil prices during a supply 

disruption may be related to the level of 

U.S. oil consumption and imports, its 

actual size has not appeared to vary in 

response to recent changes in oil 

imports. Thus while the budgetary costs 

for maintaining the SPR are similar to 

other external costs in that they are not 

likely to be reflected in the market price 

for imported oil, these costs do not 

appear to have varied in response to 

changes in oil import levels. 

In analyzing benefits from its recent 

actions to increase light truck CAFE 

standards for model years 2005–2007 

and 2008–2011, NHTSA relied on a 

1997 study by Oak Ridge National 

Laboratory (ORNL) to estimate the value 

of reduced economic externalities from 

petroleum consumption and imports.275

More recently, ORNL updated its 

estimates of the value of these 

externalities, using the analytic 

framework developed in its original 

1997 study in conjunction with recent 

estimates of the variables and 

parameters that determine their 

value.276 These include world oil prices, 

current and anticipated future levels of 

OPEC petroleum production, U.S. oil 

import levels, the estimated 

responsiveness of oil supplies and 

demands to prices in different regions of 

the world, and the likelihood of oil 

supply disruptions. ORNL prepared its 

updated estimates of oil import 

externalities for use by EPA in 

evaluating the benefits of reductions in 

U.S. oil consumption and imports 

expected to result from its Renewable 

Fuel Standard Rule of 2007 (RFS).277

The updated ORNL study was 

subjected to a detailed peer review by 

experts nominated by EPA, and its 

estimates of the value of oil import 

externalities were subsequently revised 

to reflect their comments and 

recommendations.278 Specifically, 

reviewers recommended that ORNL 

increase its estimates of the sensitivity 

of oil supply by non-OPEC producers 

and oil demand by nations other than 

the U.S. to changes in the world oil 

price, as well as reduce its estimate of 

the sensitivity of U.S. GDP to potential 

sudden increases in world oil prices. 

After making the revisions 

recommended by peer reviewers, 

ORNL’s updated estimates of the 

monopsony cost associated with U.S. oil 

imports ranged from $2.77 to $13.11 per 

barrel, with a most likely estimate of 

$7.41 per barrel (in 2005 dollars). These 

estimates imply that each gallon of fuel 

saved as a result of adopting higher 

CAFE standards will reduce the 

monopsony costs of U.S. oil imports by 

$0.066 to $0.312, with the most likely 

value $0.176 per gallon saved. ORNL’s 

updated and revised estimates of the 

increase in the expected costs associated 

with oil supply disruptions to the U.S. 

and the resulting rapid increase in 

prices for petroleum products amount to 

$2.10 to $7.40 per barrel, with a likely 

estimate of $4.59 per barrel (again in 

2005 dollars). According to these 

estimates, each gallon of fuel saved will 

reduce the expected cost disruption to 

the U.S. economy by $0.050 to $0.176 

per gallon, with the most likely value 

$0.109 per gallon. 

NHTSA stated that when updated to 

2006 dollars, the updated and revised 

ORNL estimates suggest that the 

combined reduction in monopsony 

costs and expected costs to the U.S. 

economy from oil supply disruptions 

resulting from lower fuel consumption 

total $0.120 to $0.504 per gallon, with 

a most likely estimate of $0.295 per 

gallon. This represents the additional 

economic benefit likely to result from 

each gallon of fuel saved by higher 

CAFE standards, beyond the savings in 

resource costs for producing and 

distributing each gallon of fuel saved. 

NHTSA explained that it employed this 

most likely estimate in its analysis of 

the benefits from fuel savings projected 

to result from alternative CAFE 

standards for MYs 2011–2015. NHTSA 

also analyzed the effect on these 

benefits estimates from variation in this 

value over the range from $0.120 to 

$0.504 per gallon of fuel saved. 

NHTSA’s analysis of benefits from 

alternative CAFE standards for the 

NPRM did not include cost savings from 

either reduced outlays for U.S. military 

operations or maintaining a smaller SPR 

among the external benefits of reducing 

gasoline consumption and petroleum 

imports by means of tightening future 

standards. NHTSA stated that this view 

concurs with both the original ORNL 

study of economic costs from U.S. oil 

imports and its recent update, which 

conclude that savings in government 

outlays for these purposes are unlikely 

to result from reductions in 

consumption of petroleum products and 

oil imports on the scale of those likely 

to result from reductions in 

consumption of petroleum products and 

oil imports on the scale of those likely 

to result from the alternative increases 

in CAFE standards considered for MYs 

2011–2015. 

All commenters addressing the issue 

of military costs argued that NHTSA 

should use a value higher than zero. Mr. 

Delucchi, CARB, and the Attorneys 

General all cited Mr. Delucchi’s 2008 

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279Mark A. Delucchi and James J. Murphy, ‘‘U.S. 

military expenditures to protect the use of Persian 

Gulf oil for motor vehicles,’’ 36 Energy Policy 2253 

(2008). Available at Docket No. NHTSA–2008– 

0089–0173.14. 

280Citing CBD v. NHTSA, 508 F.3d 508, 533–35. 281CFA comments at 48, citing Delucchi at 2262. 

282 Jaffe, Amy Myers (2004). United States and 

the Middle East: Policies and Dilemmas. Analysis 

commissioned by the National Commission on 

Energy Policy. 

283 International Center for Technology 

Assessment (2005). ‘‘Gasoline Cost Externalities: 

Security and Protection Services.’’ NRDC stated that 

it adjusted the estimates found in the study from 

2005 values of 13 to 23 cents into 2008 values using 

http://data.bls.gov/cgi-bin/cpicalc.pl. 

peer-reviewed article in Energy 

Policy 279 to argue that military costs 

should be higher than zero. CARB 

commented that the study ‘‘undermines 

the 15-year-old logic from a 

Congressional Research Study, which 

NHTSA appears to adopt here (page 

24411), which concluded we have so 

many other security interests in the 

Middle East that sharply reducing oil 

imports, therefore, would not affect our 

military expense there.’’ CARB argued 

that ‘‘to the contrary, the Energy Policy 

study authors conclude ‘spending on 

defense of the Persian Gulf is in fact 

related to U.S. interests in the region, 

which are mainly, but not entirely, oil 

interests.’ ’’ CARB cited the study as 

stating that the ‘‘best estimate of this 

relationship translates to $0.03–$0.15 

per gallon * * *’’ The Attorneys 

General also cited the Energy Policy 

article as assigning ‘‘values to the 

military savings attributable to 

decreased oil imports,’’ and referenced 

the same per-gallon conclusion. 

The Attorneys General also argued 

that given that ‘‘one of the primary 

purposes of EISA is to achieve energy 

security,’’ and given that the ‘‘impact of 

higher CAFE standards on energy 

security is not zero,’’ it was 

‘‘astounding’’ that ‘‘NHTSA assigned a 

value of zero to the government outlay 

aspect of energy security (increased 

military spending and purchases for the 

Strategic Petroleum Reserve).’’ 

(Emphasis in original.) The Attorneys 

General compared NHTSA’s decision 

not to monetize military security costs 

in the NPRM to NHTSA’s decision not 

to monetize benefits from reducing CO2

emissions in the April 2006 light truck 

CAFE rule, and argued that the Ninth 

Circuit’s decision in CBD supports their 

position that ‘‘Uncertainty about a 

benefit’s value is not a valid reason to 

assign that value at zero.’’ 280 The 

Attorneys General also argued that just 

as increases in CAFE standards cannot 

eliminate global warming, but are part 

of the overall global warming solution, 

increases in CAFE standards similarly 

‘‘will not’’ in and of itself, eliminate 

these energy security costs,’’ but are ‘‘a 

necessary piece of the puzzle in 

assessing all of the costs and benefits of 

a CAFE standard.’’ 

CFA cited the same Delucchi article to 

comment that ‘‘A zero for the military 

and strategic value of oil reduction is 

simply wrong.’’ CFA argued that ‘‘There 

is a substantial policy and academic 

literature that believes oil has a military 

value,’’ and that ‘‘The fact the statute 

had energy independence and security 

in its title should have alerted NHTSA 

to the likelihood that Congress 

considers the military and strategic 

value of oil important.’’ CFA provided 

a fairly long excerpt from the Delucchi 

article to argue that there may be large 

unquantifiable costs beyond specific 

expenditures on the military with regard 

to the ‘‘entire relevant military or 

‘security’ cost of using oil,’’ including 

reduced flexibility in the conduct of U.S. 

foreign policy, strains on international 

relations due to the activities of the U.S. 

military and even due to competition for oil, 

anti-American sentiment due to the presence 

of the U.S. military in the Middle East, 

political destabilization of the Middle East, 

and the nonfinancial human-suffering cost of 

war and political instability related to U.S. 

demand for oil.281

CFA concluded that ‘‘NHTSA should 

have quantified what it could in the 

framework of the model,’’ and ‘‘To the 

extent that there is a large and 

significant unquantifiable value, it 

should have oriented its considerations 

toward greater energy conservation.’’ 

CFA suggested a value of $0.30 for 

military costs, apparently on the basis of 

this argument. 

Public Citizen also commented that 

NHTSA’s value for military security 

costs should be higher than zero. Public 

Citizen stated that NHTSA’s rationale 

for assigning a zero value was similar to 

its logic in assigning a value of zero to 

reducing CO2 emissions in the 2006 

light truck CAFE final rule, and argued 

that the Ninth Circuit had ‘‘rejected this 

justification in Center for Biological 

Diversity v. NHTSA, finding that 

uncertainty about how to assign a value 

was not a justification for setting the 

value at zero.’’ NRDC and the Sierra 

Club et al. also made this point in their 

comments. 

NRDC stated that ‘‘the undisputed fact 

that there are currently military 

expenditures associated with the 

protection of access to oil supplies 

implies that there must be a positive 

military cost associated with each gallon 

of gasoline consumed.’’ NRDC argued 

that ‘‘Since it can be assumed that the 

United States would expend little or no 

military resources to secure access to a 

non-strategic commodity, there must 

exist a positive benefit in moving the 

consumption to the point where oil is 

no longer a strategic commodity.’’ NRDC 

described this value as ‘‘the country’s 

opportunity to decrease military 

expenditure or respond more flexibly to 

supply threats, and must have a positive 

magnitude.’’ NRDC suggested several 

‘‘aggregate expenditure estimates 

[produced] through rigorous, datadriven analysis’’ for NHTSA to consider, 

including the estimate of $0.03 to $0.17 

from the Delucchi article, a 2004 

analysis for the National Commission on 

Energy Policy estimating a ‘‘peacetime 

per gallon’’ cost of $0.23 to $0.28, 282

and estimates of $0.14 to $0.26 per 

gallon based on a 2005 study by the 

International Center for Technology 

Assessment.283 NRDC stated, however, 

that because ‘‘current expenditures may 

pale in comparison to the total future 

financial cost of military actions,’’ ‘‘this 

presents a strong rationale for using pergallon cost estimates near the upper 

bound of the determined range.’’ NRDC 

argued that ‘‘The initial [literature] 

review herein suggests that the per 

gallon marginal benefit of reducing oil 

consumption may be as high as 28 cents 

per gallon of gasoline.’’ 

The Sierra Club et al. commented that 

NHTSA must ‘‘provide an accurate 

dollar value for’’ ‘‘the national security 

costs of oil,’’ by ‘‘considering the 

relevant research.’’ Sierra Club argued 

that the national security costs of oil are 

twofold, coming from both climate 

change and oil dependence. Regarding 

the national security costs expected 

from climate change, Sierra Club 

commented that a recent ‘‘report from 

the National Intelligence Council * * * 

found that climate change poses a 

serious national security threat to our 

country,’’ in the form of ‘‘humanitarian 

disasters, economic migration, and food 

and water shortages’’ due to climate 

change contributing to ‘‘political 

instability, disputes over resources, and 

mass migrations’’ in many ‘‘at-risk 

regions’’ of the world, that will have 

economic impacts in the United States. 

Regarding the national security costs of 

oil dependence, Sierra Club cited the 

2005 ICTA report mentioned by NRDC 

as an example of the ‘‘numerous studies 

* * * [that] document these costs.’’ 

Although UCS offered no discussion 

of military costs in its primary comment 

document, it submitted as an 

attachment a report suggesting that 

NHTSA use a value of $0.35 per gallon 

(in 2006 dollars) for ‘‘improved oil 

security.’’ The report cited ‘‘A recent 

study from Oak Ridge National 

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284The report noted that it had updated this value 

from 2004 dollars to 2006 dollars. 

285 Douglas R. Bohi and Michael A. Toman, 

Economics of Energy Security, Kluwer Academic 

Publishers, 1996. 

286See Mark A. Delucchi and James J. Murphy, 

U.S. Military Expenditures to Protect the Use of 

Persian Gulf Oil Imports, 36 Energy Policy 2253 

(2008) (assigning a cost of between $0.03 and $0.15 

per gallon). Available at Docket No. NHTSA–2008– 

0089–0173.14. 

287 Id., at 2260. 288 Id., at 2261–2262. 

Laboratory [which] assesses these 

energy security benefits of reduced oil 

consumption at $14.51 per barrel, or 

$0.35 per gallon.’’ 284 The report stated 

that ‘‘This is a conservative assessment, 

as it excludes all military program costs, 

as well as the ‘difficult-to-quantify 

foreign policy impact of oil import 

reliance.’ (Leiby 2007)’’ 

NHTSA received no comments on the 

estimates of monopsony costs or 

potential costs from oil supply 

disruptions. Thus it has continued to 

employ the estimates of these costs 

reported in the updated ORNL study in 

establishing final CAFE standards and 

evaluating their benefits. The agency 

notes, however, that the monopsony 

cost varies directly with world oil 

prices, and that the forecast of world oil 

prices used in this analysis differs 

significantly from that assumed in the 

ORNL study. Thus NHTSA has adjusted 

the updated ORNL estimate of the 

monopsony cost to reflect the AEO 2008 

High Price Case forecast of world oil 

prices, which averages $88 per barrel (in 

2007 dollars) over the period from 

2011–30. Expressed in 2007 dollars, 

NHTSA’s revised estimates of the 

reductions in monopsony costs and 

expected costs from oil supply 

disruptions are $0.266 and $0.116 per 

gallon of fuel saved. 

NHTSA disagrees with commenters 

who asserted that fuel savings resulting 

from higher CAFE standards are likely 

to result directly in reductions in U.S. 

military expenses to protect the supply 

of petroleum imports, particularly from 

the Persian Gulf region. NHTSA agrees 

that by reducing fuel consumption and 

U.S. petroleum imports from politically 

unstable regions, higher CAFE standards 

might reduce the military and political 

risks posed by U.S. military 

deployments in these regions. However, 

the agency does not believe there is 

convincing evidence at this time that 

reducing these risks would necessarily 

reduce U.S. military activities or 

expenditures in the Persian Gulf or 

elsewhere. None of the commenters 

presented any evidence that reductions 

in U.S. military spending would occur 

in response to fuel savings and 

reductions in U.S. petroleum imports, 

nor do any of the references included in 

their comments provide such evidence. 

In particular, NHTSA does not agree 

with Public Citizen’s analogy between 

energy security and ‘‘global warming 

costs.’’ Although the economic 

valuation of climate-related benefits 

from reducing carbon dioxide emissions 

is uncertain, there is nevertheless a 

direct causal link between changes in 

U.S. oil consumption and changes in 

U.S. carbon dioxide emissions. In 

contrast, no such causal linkage—either 

scientific or empirical—exists between 

changes in U.S. oil consumption or 

imports and changes in U.S. military 

expenditures in the Persian Gulf, or 

elsewhere in the world. The agency 

notes that one particularly 

comprehensive and authoritative 

treatment of the potential security 

benefits from reducing U.S. energy 

consumption reaches exactly this same 

conclusion.285

Although one recent economic 

analysis cited widely by commenters 

did estimate the value of U.S. military 

spending attributable to securing oil 

imports from the Persian Gulf region, 

this study does not estimate the extent 

to which U.S. military spending is likely 

to vary in response to changes in U.S. 

imports of Persian Gulf oil. Nor does it 

estimate the potential savings in U.S. 

military outlays that might result from 

reductions in U.S. oil imports of the 

magnitude likely to result from higher 

CAFE standards.286

The study argues that its purpose is to 

develop ‘‘the military cost of highway 

transportation.’’ The authors attempt to 

do this in four steps: 

• Estimate the amount spent annually 

to defend all U.S. interests in the 

Persian Gulf; 

• Deduct the cost of defending U.S. 

interests other than oil in the Persian 

Gulf; 

• Deduct the cost of defending against 

the possibility of a worldwide recession 

due to the effects of an oil price shock 

or supply interruption originating in the 

Persian Gulf on other countries; and 

• Deduct the cost of defending the 

use of oil in sectors of the U.S. economy 

other than highway transportation. 

This analysis yields an estimate of the 

annual ‘‘military cost of oil use by motor 

vehicles’’ in the United States ranging 

from $5.8 billion to $25.4 billion in 

2004. The authors then divide these 

figures by 2004 U.S. gasoline and diesel 

consumption by on-road motor vehicles 

to arrive at an average ‘‘military cost of 

highway transportation’’ ranging from 

$0.03 to $0.15 per gallon of fuel.287

However, the authors do not argue 

that U.S. military spending would be 

reduced by this—or any other—amount 

as a consequence of incremental 

reductions in domestic consumption of 

transportation fuels. Instead, they 

describe their estimate in the following 

terms: ‘‘The bottom line of our analysis 

is that if all motor vehicles in the U.S. 

(light-duty and heavy-duty) did not use 

oil, Congress might reduce defense 

spending by $6–$25 billion annually in 

the long run. This amounts to about 

$0.03–$0.15 per gallon ($0.01–$0.04 per 

liter) of all gasoline and diesel motor 

fuel in 2004.’’ (p. 2260; emphasis 

added.) 

Thus the values they report are clearly 

intended as estimates of the total and 

average per-gallon costs of U.S. military 

activities in the Persian Gulf that might 

reasonably be related to petroleum 

consumption by U.S. motor vehicles, 

and not as estimates of the extent to 

which those costs might be reduced as 

a consequence of lower fuel 

consumption by U.S. motor vehicles. 

Nothing in their analysis suggests that 

this average value bears any necessary 

relationship to the savings in military 

outlays that might results from modest 

reductions in U.S. petroleum 

consumption or imports. Although the 

authors speculate that the proportional 

reduction in these outlays might be 

larger than any proportional reduction 

in U.S. petroleum imports from the 

Persian Gulf region, they provide no 

support for this hypothesis.288

Nor does this study attempt to 

demonstrate any causal or empirical 

linkage between domestic consumption 

of transportation fuels and the level of 

U.S. military activities or spending in 

the Persian Gulf (or elsewhere), as 

would be required to support any 

argument that military outlays would 

actually be reduced in response to lower 

U.S. fuel consumption and petroleum 

imports. As the authors clearly 

acknowledge, achieving any reduction 

in U.S. military spending that might be 

facilitated by lower U.S. oil imports 

would require specific actions by 

Congress, and would not result 

automatically or necessarily. However 

carefully their analysis of military 

spending might be done, defining some 

fraction of U.S. military expenditures as 

being allocated to the defense of oil 

interests in the Persian Gulf, and then 

dividing the resulting figure by some 

quantity of petroleum use does not 

demonstrate any causal linkage between 

changes in the numerator (military 

spending) and incremental changes in 

the denominator (petroleum 

consumption) of this calculation. 

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289Criteria pollutants regulated by EPA include 

ozone, particulate matter, carbon monoxide, 

nitrogen oxides, sulfur dioxide, and lead. For more 

information, see http://www.epa.gov/air/urbanair/ 

(last accessed October 5, 2008). 

290That is, emissions per gallon of fuel refined. 

291That is, emissions per mile driven. 

292U.S. EPA, MOBILE6 Vehicle Emission 

Modeling Software, available at http:// 

www.epa.gov/otaq/m6.htm#m60 (last accessed 

October 5, 2008). 

The analysis described above is 

irrelevant to NHTSA’s analysis of fuel 

economy standards, because NHTSA’s 

cost-benefit analysis is properly 

concerned with comparing two 

alternative states of the world: (1) The 

world as we expect it to exist over the 

next few years, in the absence of any 

new CAFE standards, compared with (2) 

an alternative world that is identical in 

every respect except that new CAFE 

standards are in place. NHTSA should, 

therefore, consider how U.S. defense 

expenditures might vary between these 

two states of the world. The relevant 

question for a cost-benefit analysis is: 

How much would U.S. military 

expenditures change if U.S. passengercar and light-truck fuel consumption is 

several percent lower in the next decade 

than it otherwise would have been? 

Neither the Congress nor the 

Executive Branch has ever attempted to 

calibrate U.S. military expenditures, 

force levels, or deployments to any oil 

market variable, or to some calculation 

of the projected economic consequences 

of hostilities in the Persian Gulf. 

Instead, changes in U.S. force levels, 

deployments, and thus military 

spending in that region have been 

largely governed by political events, 

emerging threats, and other military and 

political considerations, rather than by 

shifts in U.S. oil consumption or 

imports. NHTSA thus concludes that 

the levels of U.S. military activity and 

expenditures are likely to remain 

unaffected by even relatively large 

changes in light duty vehicle fuel 

consumption. 

Nevertheless, the agency conducted a 

sensitivity analysis of the potential 

effect of assuming that some reduction 

in military spending would result from 

fuel savings and reduced petroleum 

imports in order to investigate its 

impacts on the standards and fuel 

savings. Assuming that the preceding 

estimate of total U.S. military costs for 

securing Persian Gulf oil supplies is 

correct, and that approximately half of 

these expenses could be reduced in 

proportion to a reduction in U.S. oil 

imports from the region, the estimated 

savings would range from $0.02 to $0.08 

(in 2007 dollars) for each gallon of fuel 

savings that was reflected in lower U.S. 

imports of petroleum from the Persian 

Gulf. If the Persian Gulf region is 

assumed to be the marginal source of 

supply for U.S. imports of crude 

petroleum and refined products, then 

each gallon of fuel saved might reduce 

U.S. military outlays by $0.05 per 

gallon, the midpoint of this range. 

NHTSA employs this estimate in its 

sensitivity analysis. 

While NHTSA believes that military 

expenditures appropriated by the U.S. 

Congress are not directly related to 

changes in domestic petroleum 

consumption, the agency recognizes that 

reductions in petroleum consumption 

may provide other benefits that are more 

difficult to quantify, by reducing some 

constraints on U.S. diplomatic and 

military action. U.S. foreign policy 

decisions consider a wide range of U.S. 

interests, including the maintenance of 

secure petroleum supplies. Reduced 

consumption of petroleum might allow 

the U.S. to more vigorously pursue other 

foreign policy interests, by reducing 

concerns about the implications of 

pursuing these other interests for the 

availability and continuity of petroleum 

imports. 

The agency recognizes, however, that 

both the effect of reducing U.S. 

petroleum imports on the flexibility of 

its foreign policy initiatives and the 

economic value of such additional 

flexibility are highly uncertain. 

Reducing petroleum consumption is 

likely to have unpredictable effects on 

both military actions and diplomatic 

initiatives, and even if the U.S. 

government planned and signaled its 

foreign policy intentions under various 

levels of petroleum consumption in 

advance, NHTSA is unaware of any 

accepted methods for establishing the 

economic value of increased freedom in 

designing military or diplomatic 

actions. And because the nation’s 

foreign policy intentions are not 

communicated in advance, the agency 

would need to develop a procedure for 

anticipating how military and 

diplomatic actions would respond to 

future changes in petroleum 

consumption. Nevertheless, in its future 

rulemaking activities, NHTSA will 

investigate whether practical methods 

for predicting and valuing in economic 

terms any increased flexibility in U.S. 

foreign policy that is likely to result 

from reduced petroleum imports exist or 

can be developed. 

12. Air Pollutant Emissions 

(a) Impacts on Criteria Pollutant 

Emissions 

Criteria air pollutants are common 

pollutants that EPA regulates under the 

Clean Air Act, by establishing 

permissible concentrations on the basis 

of human health-related or sciencebased criteria.289 NHTSA explained in 

the NPRM that while reductions in 

domestic fuel refining and distribution 

that result from lower fuel consumption 

will reduce U.S. emissions of criteria air 

pollutants, additional vehicle use 

associated with the rebound effect from 

higher fuel economy will in turn 

increase emissions of those pollutants. 

Thus, the net effect of stricter CAFE 

standards on emissions of each criteria 

pollutant depends on the relative 

magnitudes of its reduced emissions in 

fuel refining and distribution, and 

increases in its emissions from vehicle 

use. Because the relationship between 

emissions rates in fuel refining 290 and 

in vehicle use 291 is different for each 

criteria pollutant, the net effect of fuel 

savings from the proposed standards on 

total emissions of each pollutant is 

likely to differ. Criteria air pollutants 

emitted by vehicles and during fuel 

production include carbon monoxide 

(CO), hydrocarbon compounds (usually 

referred to as ‘‘volatile organic 

compounds’’ or VOCs), nitrogen oxides 

(NOX), fine particulate matter (PM2.5) 

and sulfur oxides (SOX). 

For additional vehicle use due to the 

rebound effect, NHTSA estimates the 

increase in emissions of these pollutants 

by multiplying the increase in total 

miles driven by vehicles of each model 

year and age by age-specific emission 

rates per vehicle-mile for each pollutant. 

NHTSA developed these emission rates 

using EPA’s MOBILE6.2 motor vehicle 

emissions factor model.292 Emissions of 

these pollutants also occur during crude 

oil extraction and transportation, fuel 

refining, and fuel storage and 

distribution. The reduction in total 

emissions from each of these sources 

thus depends on the extent to which 

fuel savings result in lower imports of 

refined fuel, or in reduced domestic fuel 

refining. To a lesser extent, they also 

depend on whether any reduction in 

domestic gasoline refining is translated 

into reduced imports of crude oil or 

reduced domestic extraction of 

petroleum. 

Based on an analysis of changes in 

U.S. gasoline imports and domestic 

gasoline consumption forecast in AEO’s 

2008 Early Release, NHTSA tentatively 

estimated in the NPRM that 50 percent 

of fuel savings resulting from higher 

CAFE standards would result in 

reduced imports of refined gasoline, 

while the remaining 50 percent would 

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293Estimates of the response of gasoline imports 

and domestic refining to fuel savings from stricter 

standards are variable and highly uncertain, but 

NHTSA’s preliminary analysis as of the time the 

NPRM was published indicated that under any 

reasonable assumption about these responses, the 

magnitude of the net change in criteria pollutant 

emissions (accounting for both the rebound effect 

and changes in refining emissions) is extremely low 

relative to their current total. 

294Argonne National Laboratories, The 

Greenhouse Gas and Regulated Emissions from 

Transportation (GREET) Model, Version 1.8. 

Available at http://www.transportation.anl.gov/ 

software/GREET/index.html (last accessed October 

5, 2008). 

295Emissions that occur during vehicle refueling 

at service stations (primarily evaporative emissions 

of VOCs) are already accounted for in the ‘‘tailpipe’’ 

emission factors used to estimate the emissions 

generated by increased car and light truck use. 

GREET estimates emissions in each phase of 

gasoline production and distribution in mass per 

unit of gasoline energy content; these factors are 

then converted to mass per gallon of gasoline using 

the average energy content of gasoline. 

296As NHTSA stated in the NPRM, in effect, this 

assumes that the distances crude oil travels to U.S. 

refineries are approximately the same whether the 

oil travels from domestic oilfields or import 

terminals, and that the distances that gasoline 

travels from refineries to retail stations are 

approximately the same as those from import 

terminals to retail stations. 

297These costs result primarily from damages to 

human health. 

reduce domestic fuel refining.293 The 

reduction in domestic refining was 

assumed to leave its sources of crude 

petroleum unchanged from the mix of 

90 percent imports and 10 percent 

domestic production projected by AEO. 

For fuel refining and distribution, 

NHTSA proposed to estimate criteria 

pollutant emission reductions using 

emission rates from Argonne National 

Laboratories’ Greenhouse Gases and 

Regulated Emissions in Transportation 

(GREET) model.294 The GREET model 

provides separate estimates of air 

pollutant emissions that occur in four 

phases of fuel production and 

distribution: Crude oil extraction, crude 

oil transportation and storage, fuel 

refining, and fuel distribution and 

storage.295 NHTSA tentatively assumed, 

for purposes of the NPRM analysis, that 

reductions in imports of refined fuel 

would reduce criteria pollutant 

emissions during fuel storage and 

distribution only. Reductions in 

domestic fuel refining using imported 

crude oil as a feedstock were tentatively 

assumed to reduce emissions during 

crude oil transportation and storage, as 

well as during gasoline refining, 

distribution, and storage, because less of 

each of these activities would be 

occurring. Similarly, reduced domestic 

fuel refining using domestically 

produced crude oil was tentatively 

assumed to reduce emissions during 

phases of gasoline production and 

distribution.296

The net changes in emissions of each 

criteria pollutant were calculated by 

adding the increases in their emissions 

that result from increased vehicle use 

and the reductions that result from 

lower domestic fuel refining and 

distribution. The net change in 

emissions of each criteria pollutant was 

converted to an economic value using 

estimates of the economic damage costs 

per ton emitted 297 developed by EPA 

and submitted to OMB for review. For 

certain criteria pollutants, EPA 

estimates different per-ton costs for 

emissions from vehicle use than for 

emissions of the same pollutant during 

fuel production, reflecting differences in 

their typical geographic distributions, 

contributions to ambient pollution 

levels, and resulting population 

exposure. 

NHTSA received comments on this 

issue from the Alliance, NADA, the Air 

Improvement Resources Committee of 

the Alamo Area Council of 

Governments, and an individual, Mr. 

Mark Delucchi. Mr. Delucchi 

commented that NHTSA should clarify 

what kinds of damages are included in 

the per-ton damage cost estimates for 

criteria pollutants and CO2. He 

suggested that if NHTSA’s estimates are 

based on EPA’s damage estimates, then 

they do not include health damages, 

visibility, crop damages, materials 

damages, and natural-ecosystem 

damages. Mr. Delucchi argued that 

NHTSA should include estimates for 

these additional categories of damage 

due to pollutants, and that the agency 

‘‘can find peer-reviewed estimates of 

damages in most of these categories on 

[his] faculty web page.’’ 

The Air Improvement Resources 

Committee of the Alamo Area Council 

of Governments (Texas) did not 

comment specifically on NHTSA’s 

estimates for criteria pollutants, but 

simply expressed its support for the 

proposed standards due to the fact that 

they would ‘‘create net reductions in 

oxides of nitrogen over the lifetimes of 

Model Years 2011–2015 vehicles, and 

the San Antonio region is NOX limited, 

meaning reducing NOX emissions in the 

region will have a greater impact on 

ozone levels than would comparable 

volatile organic compound (VOC) 

reductions.’’ The AIRC stated that 

‘‘Although the proposed rulemaking 

would create a net increase in VOCs, the 

NOX increase is of greater benefit for 

ozone formation in our region,’’ and 

therefore the AIRC supported the 

proposed standards. 

The Alliance commented more 

specifically on NHTSA’s estimates for 

criteria pollutants, arguing that 

NHTSA’s estimates of reductions in 

ozone precursors were overstated for 

two main reasons: First, because 

‘‘NHTSA did not properly take into 

account the new source review 

standards [under the Clean Air Act], and 

otherwise assumed away federal (and 

state) laws that would have the effect of 

requiring offsets from the upstream 

refineries that NHTSA attempts to claim 

credit for;’’ and second, because ‘‘there 

is no indication that NHTSA has * * * 

considered the fleet turnover effect,’’ 

‘‘meaning that the significant costs 

NHTSA will add to the price of new 

vehicles will delay the transition the 

market would naturally make to more 

fuel efficient and cleaner vehicles.’’ 

NADA also argued that the ‘‘Criteria 

pollutant reduction benefits associated 

with the proposed CAFE standards are 

overstated as the negative impact of 

inhibited fleet turnover was not 

accounted for.’’ 

As support for its comment that 

NHTSA had overlooked federal and 

state laws that would impact upstream 

criteria pollutant emissions, the 

Alliance cited both the Sierra Research 

and the NERA Reports it included as 

attachments to its comments. Sierra 

Research commented that ‘‘Most 

upstream emissions associated with the 

use of gasoline * * * in areas with air 

pollution problems’’ are already subject 

to air pollution control regulations, such 

that ‘‘changes in fuel type or the volume 

of fuel produced are governed by * * * 

offset requirements and credit 

provisions.’’ Sierra Research argued that 

the GREET model used by NHTSA 

ignores the impacts of these regulations, 

by assuming that reductions in gasoline 

consumption translate directly into 

reductions in pollutant emissions. 

However, Sierra argued, in tightly 

regulated areas of the country, the air 

pollution control system will be much 

more complicated than that, such that 

any ‘‘give’’ in one part of the pollution 

control system will simply be absorbed 

by another part, and there will be no net 

reduction in emissions for that area. 

Sierra also argued that the GREET 

model does not properly account for 

‘‘marketing’’ (i.e., from gasoline station) 

emissions, which have been reduced in 

recent years due to proliferating vapor 

recovery system regulations at the state 

and local levels. 

The NERA Report first argued that 

NHTSA had overestimated the amount 

of criteria pollutant emissions that 

would be reduced. It echoed Sierra 

Research’s comment about New Source 

Review standards impacting criteria 

pollutant emissions, but argued further 

that their analysis of total emissions 

estimates for refineries in the National 

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298NHTSA notes that the Alliance also included 

a Sierra Research report previously submitted to 

EPA in connection with California’s waiver 

application regarding the fleet-turnover effect with 

respect to California’s proposed GHG emissions 

standards, as Attachment 14 to the Alliance’s 

comments. NHTSA has not summarized the 

findings of that report in detail because it believes 

that the purpose for which the Alliance submitted 

the report is already captured by the NERA Report 

comments, and because the fleet-turnover effect due 

to California’s proposed standards would have no 

direct impact on NHTSA’s decision for the final 

rule. 

299Emissions from ocean tankers while in port 

areas, as well as pipeline or truck emissions 

occurring during transportation of crude petroleum 

from import terminals to U.S. refineries, do occur 

within the U.S., and reductions in these emissions 

should be included when estimating changes in 

domestic emissions. However, it is not possible to 

separate these emissions from those that occur in 

foreign ports or on the open oceans, so NHTSA’s 

analysis does not include reductions in them. As a 

consequence, the analysis may underestimate 

reductions in upstream emissions occurring within 

the U.S. 

300For a detailed description of the Acid Rain 

program, see http://www.epa.gov/airmarkt/ 

progsregs/arp/basic.html#princips (last accessed 

October 6, 2008). 

301Estimated from EPA, NOX Budget Trading 

Program (SIP Call) 2003 Progress Report, Appendix 

A, http://www.epa.gov/airmarkets/cmprpt/nox03/ 

NBP2003AppendixA.xls, and National Air Quality 

Continued 

Emission Inventory database for 2002 

suggested that NHTSA had substantially 

overestimated NOX and PM2.5

emissions, by ‘‘more than two and three 

times * * *, respectively.’’ NERA 

compared NEI database refinery 

emissions estimates for 2002 to 

‘‘estimates of refining emissions based 

on NHTSA’s emission factors for 

refineries and U.S. production of 

gasoline and diesel fuels in that same 

year (EPA 2002),’’ assuming that 

NHTSA’s estimates should be smaller, 

since ‘‘refineries produce other products 

besides gasoline and diesel fuel.’’ 

However, NERA found that ‘‘estimates 

based on NHTSA’s rates for only two 

refinery products (gasoline and diesel 

fuel) are larger than the NEI estimates 

for all refinery operations.’’ NERA thus 

concluded that NHTSA had 

overestimated the benefits associated 

with reducing criteria pollutant 

emissions, because it had overestimated 

the amount of criteria pollutant 

emissions that would be reduced. NERA 

also stated that to the extent that fuel 

consumption was reduced in the longrun, refineries would be subject to more 

stringent emissions standards anyway, 

or fuel imports would be reduced, 

which would have no impact on U.S. 

emissions, although NERA did not 

attempt to quantify those effects. 

The NERA Report next argued that 

NHTSA had used ‘‘ad hoc’’ estimates of 

the value per ton of criteria pollutants 

based on recommendations from EPA’s 

OTAQ, which were unverifiable. NERA 

implied that NHTSA should instead use 

‘‘values based on published EPA 

estimates,’’ which it found included in 

a 2006 report by OMB to Congress. 

NERA stated that ‘‘OMB’s values are 

slightly higher than NHTSA’s for VOCs, 

but substantially lower for PM2.5 and 

SOX.’’ 

The NERA Report finally argued that 

‘‘increasing quality-adjusted new 

vehicle prices will lead to an increase in 

the average age of the vehicle fleet, 

[which] will increase emissions both 

because older vehicles faced less 

stringent emission standards when sold 

and because the effectiveness of controls 

(especially those for NOX) declines as 

the vehicle ages.’’ NERA did not, 

however, attempt to quantify these 

emissions impacts. The Alliance in its 

comments emphasized this point about 

the fleet turnover effect, stating that it 

‘‘shows that most criteria pollutant and 

air toxic levels will worsen for decades 

in consequence of NHTSA’s proposed 

standards, as consumers delay 

purchasing new, more fuel-efficient 

vehicles in the current marketplace 

prior to an expensive new government 

mandate.’’ The Alliance argued that 

EPCA and principles of administrative 

law require NHTSA to consider this 

effect.298

Agency response: In response to Mr. 

Delucchi’s comment, NHTSA is 

confident that the damage cost estimates 

it used in the NPRM to value reductions 

in criteria air pollutants and their 

chemical precursors include the full 

range of human health impacts known 

to be associated with exposure to each 

of these pollutants that current scientific 

and economic knowledge allows to be 

quantified and valued in economic 

terms. Differences between these 

damage costs and the estimates by OMB 

cited by commenters reflect the fact that 

the estimates provided to NHTSA by 

EPA apply specifically to emissions by 

motor vehicles, and include separate 

costs for emissions from stationary 

sources such as petroleum refineries 

where such differences are appropriate. 

The estimates provided by EPA also 

reflect more up-to-date knowledge about 

the human health impacts of exposure 

to criteria air pollutants and the 

economic costs associated with those 

impacts than do the estimates reported 

by OMB. Thus in the analysis it 

conducted for this final rule, NHTSA 

has continued to use the damage cost 

estimates supplied by EPA to determine 

the economic costs or benefits from 

changes in emissions of criteria air 

pollutants that result from higher CAFE 

standards. 

In response to comments provided by 

NERA on behalf of the Alliance, NHTSA 

acknowledges that it may have 

overestimated reductions in upstream 

emissions of some criteria air pollutants 

(particularly PM and NOX) resulting 

from fuel savings in the analysis it 

conducted for the NPRM. NHTSA has 

taken two steps to remedy this possible 

overestimation. First, the agency used 

updated emission factors supplied by 

EPA for vehicles used to transport crude 

petroleum and refined fuel, including 

ocean tankers, railroad locomotives, 

barges, and heavy-duty trucks, to 

recalculate the emissions factors for 

each stage of fuel production and 

distribution in Argonne’s GREET model. 

These updated emission factors reflect 

the effects of recent and pending EPA 

regulations on vehicle emissions and 

fuel composition, and result in 

significant reductions in the upstream 

emission rates for fuel production and 

distribution estimated using GREET. 

These lower upstream emission rates 

reduce NHTSA’s estimates of emissions 

during fuel production and distribution 

under both Baseline and alternative 

CAFE standards, and by doing so also 

lower the reductions in upstream 

emissions projected to result from any 

increase in CAFE standards from their 

Baseline levels. 

In addition, NHTSA notes that the 

estimates of reductions in upstream 

emissions it reported in the NPRM 

incorrectly included reductions in 

ocean tanker emissions for 

transportation of crude petroleum from 

overseas to ports or offshore oil 

terminals in the U.S. Since most of these 

emissions probably occur outside of the 

U.S., they should not be included in 

NHTSA’s estimates of upstream 

emissions reductions, since those are 

intended to represent changes in 

domestic emissions of criteria air 

pollutants.299 NHTSA has revised its 

analysis for this final rule to exclude 

reductions in ocean tanker emissions. 

In response to comments by Sierra 

Research and NERA submitted by the 

Alliance, NHTSA notes that there are 

currently two cap-and-trade programs 

governing emissions of criteria 

pollutants by large stationary sources. 

The Acid Rain Program seeks to limit 

NOX and SO2 emissions, but applies 

only to electric generating facilities.300

The NOX Budget Trading Program is 

also primarily intended to reduce 

electric utility emissions, but does 

include some other large industrial 

sources such as refineries; however, as 

of 2003, refineries participating in the 

program accounted for less than 5 

percent of total NOX emissions by U.S. 

refineries.301 In addition, some 

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and Emissions Trends Report 2003, Table A–4, 

http://www.epa.gov/air/airtrends/aqtrnd03/pdfs/ 

a4.pdf. 

302The Clean Air Interstate Rule also requires 

reductions in SO2 emissions and establishes an 

emissions trading program to achieve them, but 

only electric generating facilities are included in the 

rule’s SO2 emissions trading program; see EPA, 

Clean Air Interstate Rule: Basic Information, http:// 

www.epa.gov/cair/basic.html#timeline (last 

accessed October 6, 2008) and http://www.epa.gov/ 

cair/pdfs/cair_final_fact.pdf (last accessed October 

6, 2008). Although the rule was held to exceed the 

scope of EPA’s delegated authority under the CAA, 

North Carolina v. EPA, 531 F.3d 896 (2008), the 

Court remanded the rule to EPA and so it remains 

in force. Order of December 23, 2008 in No. 05– 

1244. 

303This conclusion is based on unpublished 

econometric analysis of the effects of new vehicle 

prices and other variables on retirement rates for 

used vehicles conducted by the Volpe Center. This 

analysis concluded that retirement rates for 10–15 

year old vehicles are most sensitive to changes in 

new vehicle prices. 

304NHTSA explained that this assumption results 

in a slight overestimate of carbon dioxide 

emissions, since a small fraction of the carbon 

content of gasoline is emitted in the forms of carbon 

monoxide and unburned hydrocarbons. However, 

the magnitude of this overestimate is likely to be 

extremely small. This approach is consistent with 

the recommendation of the Intergovernmental Panel 

on Climate Change for ‘‘Tier 1’’ national greenhouse 

gas emissions inventories. Cf. Intergovernmental 

Panel on Climate Change, 2006 Guidelines for 

National Greenhouse Gas Inventories, Volume 2, 

Energy, Chapter 3, ‘‘Mobile Combustion,’’ at 3.16. 

See http://www.ipcc-nggip.iges.or.jp/public/2006gl/ 

pdf/2_Volume2/V2_3_Ch3_Mobile_Combustion.pdf 

(last accessed October 6, 2008). 

305NHTSA did not, for purposes of the NPRM, 

attempt to estimate changes in upstream emissions 

of GHGs other than CO2. This was because carbon 

dioxide from final combustion itself accounts for 

nearly 97 percent of the total CO2-equivalent 

emissions from petroleum production and use, even 

with other GHGs that result from those activities 

(principally methane and nitrous oxide) weighed by 

their higher global warming potentials (GWPs) 

relative to CO2. Calculated from EPA’s Inventory of 

U.S. Greenhouse Gas Emissions and Sinks 1990– 

2006, Tables 3–3, 3–39, and 3–41, EPA 430–R–08– 

05, April 15, 2008. Available at http://www.epa.gov/ 

climatechange/emissions/downloads/08_CR.pdf 

(last accessed August 15, 2008). 

refineries could be included among the 

sources of NOX emissions that will be 

controlled under EPA’s Clean Air 

Interstate Rule, which is scheduled to 

take effect beginning in 2009. However, 

refinery NOX emissions could only be 

affected in states that specifically elect 

to include sources other than electric 

generating facilities in their plans to 

comply with the rule, and EPA has 

indicated that it expects states to 

achieve the emissions reductions 

required by the Clean Air Interstate Rule 

primarily from the electric power 

industry.302 Thus, the agency continues 

to assume that the reduction in 

domestic gasoline refining estimated to 

result from the adopted CAFE standard 

will be reflected in reduced refinery 

emissions of criteria pollutants. 

NHTSA also notes in response to 

comments by Sierra Research and NERA 

submitted by the Alliance that 

emissions occurring during refueling at 

retail stations are included in the 

emissions factors estimated using EPA’s 

MOBILE emission factor model, which 

also accounts for expected future 

reductions in these emissions. Thus, 

NHTSA believes that reductions in 

refueling emissions were correctly 

estimated in its NPRM analysis, and has 

not revised its procedures for doing so. 

Finally, in response to comments by 

the Alliance and NERA, NHTSA 

acknowledges that the effect of higher 

prices for new vehicles on the retention 

and use of older vehicles is potentially 

significant, depending on the magnitude 

of expected price increases. As 

indicated in the discussion of the 

appropriate discount rate to use in 

analyzing the impacts of alternative 

CAFE standards (see Section V.B.14 

below), however, NHTSA believes that 

manufacturers are likely to experience 

difficulty raising prices for new cars and 

light trucks sufficiently to recover all 

their costs for complying with higher 

CAFE standards. Based on a detailed 

econometric analysis of the effects of 

new vehicle prices and other variables 

on retirement rates for used vehicles 

very similar to the analysis conducted 

by NERA for the Alliance, NHTSA 

concludes that price increases for MY 

2011 cars and light trucks likely to 

result from higher CAFE standards are 

unlikely to cause significant or lasting 

changes in retirement rates for older 

vehicles. NHTSA also notes that the 

vehicles whose retirement rates would 

be most affected by increases in prices 

for MY 2011 passenger cars and light 

trucks are those that will be 10–15 years 

of age at the time when 2011 vehicles 

are offered for sale.303 These include 

cars and light trucks produced during 

model years 2001 through 2005, and 

NHTSA’s analysis of their emission 

rates at those ages predicted using EPA’s 

MOBILE6.2 motor vehicle emission 

factor model suggests that they will not 

be dramatically higher than emission 

rates for comparable new 2011 models. 

Thus the effect on total motor vehicle 

emissions of criteria air pollutants 

resulting from any reduction in new 

vehicle sales and accompanying 

increase in use of older vehicles caused 

by increased prices for new 2011 cars 

and light trucks is likely to be modest. 

In its future CAFE rulemaking 

activities, NHTSA will coordinate with 

EPA to develop updated estimates for 

the economic benefits that are likely to 

result from reducing motor vehicle 

emissions of criteria air pollutants and 

the resulting atmospheric 

concentrations of these pollutants. EPA 

maintains an on-going research program 

to document, estimate, and value the 

reduction in threats to human health 

that occur in response to declines in 

atmospheric pollutant levels and 

population exposure to harmful 

concentrations of these pollutants. At 

the same time, the agency will 

incorporate recent improvements in 

EPA’s motor vehicle emission factor 

models to increase the accuracy of its 

estimates of changes in criteria pollutant 

emissions resulting from increased fuel 

economy. Similarly, the agency will also 

support any efforts by EPA to develop 

comparable estimates of the economic 

value of reduced threats to human 

health that result from lower emissions 

of hazardous air pollutants by motor 

vehicles, while continuing to improve 

its methods for estimating reductions in 

emissions of these pollutants that result 

from increased fuel efficiency. 

(b) Reductions in CO2 Emissions 

In the NPRM, NHTSA also discussed 

the fact that fuel savings from stricter 

CAFE standards result in lower 

emissions of carbon dioxide (CO2), the 

main greenhouse gas emitted as a result 

of refining, distributing, and using 

transportation fuels. Lower fuel 

consumption reduces CO2 emissions 

directly, because the primary source of 

transportation-related CO2 emissions is 

fuel combustion in internal combustion 

engines. NHTSA tentatively estimated 

reductions in carbon dioxide emissions 

resulting from fuel savings by assuming 

that the entire carbon content of 

gasoline, diesel, and other fuels is 

converted to carbon dioxide during the 

combustion process.304

Reduced fuel consumption also 

reduces carbon dioxide emissions that 

result from the use of carbon-based 

energy sources during fuel production 

and distribution.305 For purposes of the 

NPRM, NHTSA estimated the 

reductions in CO2 emissions during 

each phase of fuel production and 

distribution using CO2 emission rates 

obtained from the GREET model 

discussed above, using the previous 

assumptions about how fuel savings are 

reflected in reductions in each phase. 

The total reduction in CO2 emissions 

from the improvement in fuel economy 

under each alternative CAFE standard is 

the sum of the reductions in emissions 

from reduced fuel use and from lower 

fuel production and distribution. 

NHTSA stated in the NPRM that it 

had not attempted to estimate changes 

in emissions of other GHGs, in 

particular methane, nitrous oxide, and 

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306This was because methane and nitrous oxide 

account for less than 3 percent of the tailpipe GHG 

emissions from passenger cars and light trucks, 

while CO2 emissions account for the remaining 97 

percent. Of the total (including non-tailpipe) GHG 

emissions from passenger cars and light trucks, 

tailpipe CO2 represents about 93.1 percent, tailpipe 

methane and nitrous oxide represent about 2.4 

percent, and hydrofluorocarbons (from air 

conditioner leaks) represent about 4.5 percent. 

Calculated from EPA’s Inventory of U.S. 

Greenhouse Gas Emissions and Sinks 1990–2006, 

Table 215, EPA 430–R–08–05, April 15, 2008. 

Available at http://www.epa.gov/climatechange/ 

emissions/downloads/08_CR.pdf (last accessed 

August 15, 2008). 

307The Alliance cited Center for Auto Safety v. 

Peck, 751 F.2d 1336, 1367, 1368 (D.C. Cir. 1985) 

(Scalia, J.) (upholding agency decision predicated 

upon weighing of non-monetized and monetized 

benefits against monetized costs). 

308The FEIS is available at Docket No. NHTSA– 

2008–0060–0605. 

309Expressed in CO2-equivalent terms using 

global warming potentials estimated by IPCC, the 

reductions in methane and nitrous oxide emissions 

represent only about 3% of the estimated reduction 

in CO2 itself. NHTSA views its estimates of nonCO2 GHGs as less reliable than those of CO2 itself 

partly because the vehicle emission factors for 

methane and nitrous oxide obtained from 

documentation for EPA’s MOVES motor vehicle 

emission factor model assume little or no change 

over future model years or with vehicle age, in 

contrast to the pronounced declines projected for 

emissions of criteria air pollutants and CO2. 

Similarly, the emission factors for non-CO2 GHGs 

during gasoline and diesel production and 

distribution that are utilized in Argonne’s GREET 

model are assumed to be fixed over the period 

spanned by NHTSA’s analysis, again in contrast to 

those for criteria air pollutants and CO2. 

hydrofluorocarbons,306 and invited 

comment on the importance and 

potential implications of doing so under 

NEPA. 

NHTSA received two comments on 

this issue. The Alliance commented that 

NHTSA’s decision not to address other 

GHGs was within the agency’s 

discretion for two reasons. First, 

because as the Alliance stated that 

NHTSA suggested in the NPRM, 

‘‘analyzing the emissions of GHGs other 

than CO2 simply does not have a large 

effect on any analysis of potential GHG 

benefits as connected to CAFE standard 

setting,’’ which the Alliance argued 

CARB also implicitly agreed with by 

denominating other GHGs in CO2- 

equivalents. The Alliance stated that 

even though other GHGs have higher 

global warming potentials than CO2, 

‘‘even factoring GWP into the analysis 

still leaves the other GHGs with little 

significance to any consideration of the 

benefits of more-stringent CAFE 

standards.’’ The Alliance further argued 

that the Ninth Circuit decision only 

concerned NHTSA’s valuation of CO2, 

so that NHTSA had no obligation under 

case law to monetize the effects of other 

GHGs as long as it evaluates them 

qualitatively.307

CBD, in contrast, agreed with NHTSA 

that other GHGs make up only a small 

portion of the total GHGs emitted from 

automobiles. However, CBD argued that 

these other GHG emissions ‘‘* * * 

nonetheless represent large amounts of 

greenhouse gases and must be included 

in both the economic and 

environmental analyses.’’ CBD gave the 

example that ‘‘* * * nitrous oxide 

emissions with greenhouse gas impacts 

equivalent to 29 million metric tons of 

CO2 are far from insignificant.’’ NHTSA 

also notes that EPA’s TSD on reducing 

GHG emissions, which was submitted as 

an attachment to EDF’s comments, 

considers GHGs generally rather than 

focusing on CO2. 

In response to the comment from 

CBD, NHTSA has prepared detailed 

estimates of changes in emissions of 

certain non-CO2 GHGs, including 

methane and nitrous oxide, that would 

result from alternative CAFE standards 

for 2011–15 passenger cars and light 

trucks. These estimates are reported in 

the Final Environmental Impact 

Statement accompanying this rule.308

Because the estimated reductions in 

emissions of these non-CO2 GHGs 

represent a small fraction of reductions 

in CO2 emissions, however, and because 

they are less reliable than the estimates 

of reductions in CO2 itself, NHTSA has 

not included the economic value of 

reductions in non-CO2 GHGs in its 

estimates of economic benefits from 

higher CAFE standards.309

(c) Economic Value of Reductions in 

CO2 Emissions 

Emissions of carbon dioxide and other 

greenhouse gases (GHGs) occur 

throughout the process of producing 

and distributing transportation fuels, as 

well as from fuel combustion itself. By 

reducing the volume of fuel consumed 

by passenger cars and light trucks, 

higher CAFE standards will thus reduce 

GHG emissions generated by fuel use, as 

well as throughout the fuel supply 

cycle. Lowering these emissions is 

likely to slow the projected pace and 

reduce the ultimate extent of future 

changes in the global climate, thus 

reducing future economic damages that 

changes in the global climate are 

otherwise expected to cause. Further, by 

reducing the probability that climate 

changes with potentially catastrophic 

economic or environmental impacts will 

occur, lowering GHG emissions may 

also result in economic benefits that 

exceed the resulting reduction in the 

expected future economic costs caused 

by gradual changes in the earth’s 

climatic systems. 

Quantifying and monetizing benefits 

from reducing GHG emissions is thus an 

important step in estimating the total 

economic benefits likely to result from 

establishing higher CAFE standards. 

Since direct estimates of the economic 

benefits from reducing GHG emissions 

are generally not reported in published 

literature on the impacts of climate 

change, these benefits are typically 

assumed to be the ‘‘mirror image’’ of the 

estimated incremental costs resulting 

from an increase in those emissions. 

That is, the benefits from reducing 

emissions are usually measured by the 

savings in estimated economic damages 

that an equivalent increase in emissions 

would otherwise have caused. 

Researchers usually estimate the 

economic costs of increased GHG 

emissions in several steps. The first is 

to project future changes in the global 

climate and the resulting economic 

damages that are expected to result 

under a baseline projection of net global 

GHG emissions. These projections are 

usually developed using models that 

relate concentrations of GHGs in the 

earth’s atmosphere to changes in 

summary measures of the global climate 

such as temperature and sea levels, and 

in turn estimate the reductions in global 

economic output that are expected to 

result from changes in climate. Since 

the effects of GHG emissions on the 

global climate occur decades or even 

centuries later, and there is considerable 

inertia in the earth’s climate systems, 

changes in the global climate and the 

resulting economic impacts must be 

estimated over a comparably long future 

period. 

Next, this same process is used to 

project future climate changes and 

resulting economic damages under the 

assumption that GHG emissions 

increase by some increment during a 

stated future year. The increase in 

projected global economic damages 

resulting from the assumed increase in 

future GHG emissions, which also 

occurs over a prolonged period 

extending into the distant future, 

represents the added economic costs 

resulting from the assumed increase in 

emissions. Discounted to its current 

value as of the year when the increase 

in emissions are expected to occur and 

expressed per unit of GHG emissions 

(usually per ton of carbon emissions, 

with non-CO2 GHGs converted to their 

equivalents in terms of carbon 

emissions), the resulting value 

represents the global economic cost of 

increasing GHG emissions by one unit— 

usually a metric ton of carbon—in a 

stated future year. This value is often 

referred to in published research and 

debates over climate policy as the Social 

Cost of Carbon (SCC), and applies 

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310Carbon itself accounts for 12/44, or about 27 

percent, of the mass of carbon dioxide (12/44 is the 

ratio of the molecular weight of carbon to that of 

carbon dioxide). Thus, each ton of carbon emitted 

is associated with 44/12, or 3.67, tons of carbon 

dioxide emissions. Estimates of the SCC are 

typically reported in dollars per ton of carbon, and 

must be divided by 3.67 to determine their 

equivalent value per ton of carbon dioxide 

emissions. 

311For a discussion of these factors, see Yohe, 

G.W., R.D. Lasco, Q.K. Ahmad, N.W. Arnell, S.J. 

Cohen, C. Hope, A.C. Janetos, and R.T. Perez, 

‘‘Perspectives on climate change and 

sustainability,’’ 2007, in Climate Change 2007: 

Impacts, Adaptation and Vulnerability, 

Contribution of Working Group II to the Fourth 

Assessment Report of the Intergovernmental Panel 

on Climate Change, M.L. Parry, O.F. Canziani, L.P. 

Palutikof, P.J. van der Linden and C.E. Hanson, 

eds., Cambridge University Press, 2007, at 821–824. 

Available at http://www.ipcc.ch/ipccreports/ar4- 

wg2.htm (last accessed March 23, 2009). 

312Climate Change 2007: Impacts, Adaptation 

and Vulnerability, Contribution of Working Group 

II to the Fourth Assessment Report of the 

Intergovernmental Panel on Climate Change, at 17. 

Available at http://www.ipcc.ch/ipccreports/ar4- 

wg2.htm (last accessed March 23, 2009). 

313 Id., at 17, 65, 813, and 822. 

314Tol, Richard S.J., ‘‘The marginal damage costs 

of carbon dioxide emissions: an assessment of the 

specifically to increased emissions 

during that year. 

This process involves multiple 

sources of uncertainty, including those 

in scientific knowledge about the effects 

of varying levels of GHG emissions on 

the magnitude and timing of changes in 

the functioning of regional and global 

climatic and ecological systems. In 

addition, significant uncertainty 

surrounds the anticipated extent, 

geographic distribution, and timing of 

the resulting impacts on the economies 

of nations located in different regions of 

the globe. Because the climatic and 

economic impacts of GHG emissions are 

projected to occur over the distant 

future, uncertainty about the correct rate 

at which to discount these future 

impacts also significantly affects the 

estimated economic benefits of reducing 

GHG emissions. 

Researchers have not yet been able to 

quantify many of the potentially 

significant effects of GHG emissions and 

their continued accumulation in the 

earth’s atmosphere on the global 

climate. Nor have they developed 

complete models to represent the 

anticipated impacts of changes in the 

global climate on economic resources 

and the productivity with which they 

are used to generate economic output. 

As a consequence, the estimates of 

economic damages resulting from 

increased GHG emissions that are 

generated using integrated models of 

climate and economic activity exclude 

some potentially significant sources of 

costs that are likely to result from 

increased emissions. As a result, 

estimates of economic benefits derived 

from these models’ estimates of the 

likely future climate-related economic 

damages caused by increased GHG 

emissions may underestimate the true 

economic value of reducing emissions, 

although the extent to which they are 

likely to do so remains unknown. 

In the NPRM, NHTSA explained how 

it accounted for the economic benefits 

of reducing CO2 emissions in this 

rulemaking, both in developing the 

proposed CAFE standards and in 

assessing the economic benefits of each 

alternative that was considered. The 

agency noted that the Ninth Circuit 

found in CBD v. NHTSA that NHTSA 

had been arbitrary and capricious in 

deciding not to monetize the benefit of 

reducing CO2 emissions, stating that the 

agency had not substantiated the 

conclusion in its April 2006 final rule 

that the appropriate course was not to 

monetize (i.e., quantify the value of) 

carbon emissions reduction at all. 

NHTSA’s discussion in the NPRM of 

how it estimated the economic value of 

reductions in CO2 emissions received a 

great deal of attention from commenters, 

so for the reader’s benefit, it is largely 

reproduced below. 

To that end, NHTSA reviewed 

published estimates of the ‘‘social cost 

of carbon’’ (SCC) emissions. As noted 

above, the SCC refers to the marginal 

cost of additional damages caused by 

the increase in expected climate impacts 

resulting from the emission of each 

additional metric ton of carbon, which 

is emitted in the form of CO2.310 It is 

typically estimated as the net present 

value of the impact over some extended 

time period (100 years or longer) of one 

additional ton of carbon emitted into the 

atmosphere. Because atmospheric 

concentrations of greenhouse gases are 

increasing over time, and the potential 

damages from global climate are 

believed to increase with higher 

atmospheric GHG concentrations, the 

economic damages resulting from an 

additional ton of CO2 emissions are 

expected to increase over time. Thus, 

estimates of the SCC are typically 

reported for a specific year, and these 

estimates are generally larger for 

emissions in more distant future years. 

NHTSA found substantial variation 

among different authors’ estimates of 

the SCC, much of which can be traced 

to differences in their underlying 

assumptions about several variables. 

These variables include the sensitivity 

of global temperatures and other climate 

attributes to increasing atmospheric 

concentrations of GHGs, discount rates 

applied to future economic damages 

from climate change, whether damages 

sustained by developing regions of the 

world should be weighted more heavily 

than damages to developed nations, 

how long climate changes persist once 

they occur, and the economic valuation 

of specific climate impacts.311

NHTSA explained that, taken as a 

whole, recent estimates of the SCC may 

underestimate the true damage costs of 

carbon emissions because they often 

exclude damages caused by extreme 

weather events or climate response 

scenarios with low probabilities but 

potentially extreme impacts, and may 

underestimate the climate impacts and 

damages that could result from multiple 

stresses on the global climatic system. 

At the same time, however, many 

studies do not consider potentially 

beneficial impacts of climate change, 

and do not adequately account for how 

future technological innovations, 

development patterns, and adaptations 

could reduce potential impacts from 

climate change or the economic 

damages they cause. 

Given the uncertainty surrounding 

estimates of the SCC, NHTSA suggested 

that the use of any single study may not 

be advisable, since its estimate of the 

SCC will depend on many assumptions 

made by its authors. NHTSA cited the 

Working Group II’s contribution to the 

Fourth Assessment Report of the United 

Nations Intergovernmental Panel on 

Climate Change (IPCC) as noting that: 

The large ranges of SCC are due in large 

part to differences in assumptions regarding 

climate sensitivity, response lags, the 

treatment of risk and equity, economic and 

non-economic impacts, the inclusion of 

potentially catastrophic losses, and discount 

rates.312

Although the IPCC is considered 

authoritative on the topic of the SCC, it 

did not recommend a single estimate. 

However, the IPCC did cite the Tol 

(2005) study on four separate occasions 

as the only available survey of the peerreviewed literature that has itself been 

subjected to peer review.313 Tol 

developed a probability function using 

the SCC estimates of the peer-reviewed 

literature, which ranged from less than 

zero to over $200 per metric ton of 

carbon. In an effort to resolve some of 

the uncertainty in reported estimates of 

climate damage costs from carbon 

emissions, Tol (2005) reviewed and 

summarized 103 estimates of the SCC 

from 28 published studies. He 

concluded that when only peerreviewed studies published in 

recognized journals are considered, 

‘‘* * * climate change impacts may be 

very uncertain but it is unlikely that the 

marginal damage costs of carbon 

dioxide emissions exceed $50 per 

[metric] ton carbon,’’ 314 which is about 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14339 

uncertainties,’’ Energy Policy 33 (2005), 2064–2074, 

at 2072. 

315The reduction in payments from U.S. oil 

purchasers to domestic petroleum producers is not 

included as a benefit, however, since it represents 

a transfer that occurs entirely within the U.S. 

economy. 

316 $43 per ton of carbon emissions was reported 

by Tol (at 2070) as the mean of the ‘‘best’’ estimates 

reported in peer-reviewed studies (at the time). It 

thus differs from the mean of all estimates reported 

in the peer-reviewed studies surveyed by Tol. The 

$43 per ton value was also attributed to Tol by IPCC 

Working Group II (2007), at 822. 

317For purposes of comparison, NHTSA noted 

that in the rulemaking to establish CAFE standards 

for MY 2008–11 light trucks, NRDC recommended 

a value of $10-$25 per ton of CO2 emissions 

reduced by fuel savings, and both EDF and UCS 

recommended a value of $50 per ton of carbon, 

which is equivalent to about $14 per ton of CO2

emissions. 

$14 per metric ton of CO2. In the NPRM, 

NHTSA assumed that the summary SCC 

estimates reported by Tol were 

denominated in U.S. dollars of the year 

of his article’s publication, 2005. 

NHTSA stated that because of the 

number of assumptions required by 

each study, the wide range of 

uncertainty surrounding these 

assumptions, and their critical influence 

on the resulting estimates of climate 

damage costs, some studies have 

undoubtedly produced estimates of the 

SCC that are unrealistically high, while 

others are likely to have estimated 

values that are improbably low. Using a 

value for the SCC that reflects the 

central tendency of estimates drawn 

from many studies reduces the chances 

of relying on a single estimate that 

subsequently proves to be biased. 

It is important to note that the 

published estimates of the SCC almost 

invariably include the value of 

worldwide damages from potential 

climate impacts caused by carbon 

dioxide emissions, and are not confined 

to damages likely to be suffered within 

the U.S. In contrast, the other estimates 

of costs and benefits of raising fuel 

economy standards included in this 

proposal include only the economic 

values of impacts that occur within the 

U.S. For example, the economic value of 

reducing criteria air pollutant emissions 

from overseas oil refineries is not 

counted as a benefit resulting from this 

rule, because any reduction in damages 

to health and property caused by 

overseas emissions are unlikely to be 

experienced within the U.S. 

In contrast, the reduced value of 

transfer payments from U.S. oil 

purchasers to foreign oil suppliers that 

results when lower U.S. oil demand 

reduces the world price of petroleum 

(the reduced ‘‘monopsony effect’’) is 

counted as a benefit of reducing fuel 

use. 315 The agency states that if its 

analysis were conducted from a 

worldwide rather than a U.S. 

perspective, however, the benefit from 

reducing air pollution overseas would 

be included, while reduced payments 

from U.S. oil consumers to foreign 

suppliers would not. 

In the NPRM, NHTSA tentatively 

concluded that in the interest of 

analytical consistency, i.e., in order to 

be consistent with the agency’s use of 

exclusively domestic costs and benefits 

in prior CAFE rulemakings, the 

appropriate value to be placed on 

climate damages caused by carbon 

emissions should be the one that reflects 

the change in damages to the U.S. alone. 

Accordingly, NHTSA noted that the 

value for the benefits of reducing CO2

emissions might be restricted to the 

fraction of those benefits that are likely 

to be experienced within the U.S. 

Although no estimates are currently 

available for the benefits to the U.S. 

itself that are likely to result from 

reducing CO2 emissions, NHTSA 

explained that it expected that if such 

values were developed, the agency 

would employ those, rather than global 

benefit estimates, in its analysis. 

NHTSA also stated that it anticipated 

that if such values were developed, they 

would be lower than comparable global 

values, since the U.S. is likely to sustain 

only a fraction of total global damages 

resulting from climate change. 

In the meantime, NHTSA explained 

that it elected to use the mean value of 

peer-reviewed estimated global value 

reported by Tol (2005), which was $43 

per metric ton of carbon, as an upper 

bound on the global benefits resulting 

from reducing each metric ton of U.S. 

emissions.316 This value corresponds to 

approximately $12 per metric ton of CO2

when expressed in 2006 dollars. The 

Tol (2005) study is cited repeatedly as 

an authoritative survey in various IPCC 

reports, which are widely accepted as 

representing the general consensus in 

the scientific community on climate 

change science. 

Since Tol’s estimate includes the 

worldwide costs of potential damages 

from carbon dioxide emissions, NHTSA 

elected to employ it as an upper bound 

on the estimate value of the reduction 

in U.S. domestic damage costs that is 

likely to result from lower CO2

emissions.317 NHTSA noted that Tol 

had a more recent (2007) and inclusive 

survey published online with peerreview comments. NHTSA stated that it 

had elected not to rely on this study, but 

that it would consider doing so in its 

analysis for the final rule if the survey 

had been published, and would also 

consider any other newly-published 

evidence. 

NHTSA noted that the IPCC Working 

Group II Fourth Assessment Report 

(2007, at 822) further suggests that the 

SCC is growing at an annual rate of 2.4 

percent, based on estimated increases in 

damages from future emissions reported 

in published studies. NHTSA also 

elected to apply this growth rate to Tol’s 

original 2005 estimate. Thus, by 2011, 

NHTSA estimated that the upper bound 

on the benefits of reducing CO2

emissions will have reached about $14 

per metric ton of CO2, and will continue 

to increase by 2.4 percent annually 

thereafter. 

In setting a lower bound, the agency 

agreed with the IPCC Working Group II 

report (2007) that ‘‘significant warming 

across the globe and the locations of 

significant observed changes in many 

systems consistent with warming is very 

unlikely to be due solely to natural 

variability of temperatures or natural 

variability of the systems.’’ (p. 9) 

Although this finding suggests that the 

global value of economic benefits from 

reducing carbon dioxide emissions is 

unlikely to be zero, NHTSA stated that 

it does not necessarily rule out low or 

zero values for the benefit to the U.S. 

itself from reducing emissions. 

In some of the analysis it performed 

to develop the CAFE standards, NHTSA 

employed a point estimate for the value 

of reducing CO2 emissions. For this 

estimate, the agency used the midpoint 

of the range from $0 to $14, or $7.00, per 

metric ton of CO2 as the initial value for 

the year 2011, and assumed that this 

value would grow at 2.4 percent 

annually thereafter. This estimate was 

employed for the analyses conducted 

using the Volpe model to support 

development of the proposed standards. 

The agency also conducted sensitivity 

analyses of the benefits from reducing 

CO2 emissions using both the upper 

($14/metric ton) and lower ($0/metric 

ton) bounds of this range. 

NHTSA sought comment on its 

tentative conclusion for the value of the 

SCC, the use of a domestic versus a 

global value for the economic benefit of 

reducing CO2 emissions, the rate at 

which the value of the SCC grows over 

time, the desirability of and procedures 

for incorporating benefits from reducing 

emissions of GHGs other than CO2, and 

any other aspects of developing a 

reliable SCC value for purposes of 

establishing CAFE standards. 

NHTSA received many comments on 

its assumptions in the NPRM about the 

SCC. The comment summaries are 

presented below and grouped by topic: 

(1) NHTSA’s proposal of a single 

value for the SCC; 

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318 73 FR 24414 (May 2, 2008). 

(2) NHTSA’s proposal of $7 as the 

value for the SCC; 

(3) NHTSA’s proposal of $0 as the 

lower bound estimate for the domestic 

U.S. value for the SCC; 

(4) NHTSA’s proposal of $14 as the 

upper bound estimate for the domestic 

U.S. value for the SCC; 

(5) other values that NHTSA could 

have proposed for the SCC; 

(6) NHTSA’s use of a domestic versus 

a global value for the economic benefit 

of reducing CO2 emissions; 

(7) the rate at which the SCC grows 

over time; 

(8) the discount rate that should be 

used for SCC estimates; and 

(9) other issues raised by commenters. 

(1) NHTSA’s Proposal of a Single Value 

for the SCC 

NHTSA received a comment on its 

proposal of a single value for the SCC 

from Prof. Gary Yohe, an economist who 

has considered the SCC extensively and 

whom NHTSA cited in the NPRM. Prof. 

Yohe commented that the NPRM had 

stated that ‘‘Using a value for the SCC 

that reflects the central tendency of 

estimates drawn from many studies 

reduces the chances of relying on a 

single estimate that subsequently proves 

to be biased.’’ 318 Prof. Yohe argued that 

proposing a single value for the SCC 

inherently creates bias, because ‘‘Any 

value is based on presumptions about 

pure rate of time preference, risk and/ 

or inequity aversion, and climate 

sensitivity.’’ 

(2) NHTSA’s Proposal of $7 as the Value 

for the SCC 

NHTSA received comments from 3 

individuals, CARB, the Attorneys 

General, 10 U.S. Senators, 10 

environmental and consumer groups, 

and the Alliance. Prof. Tol, whose 2005 

paper provided the basis for NHTSA’s 

proposal of an SCC number, commented 

that contrary to NHTSA’s belief that the 

dollars used in Tol (2005) were 2005 

dollars, they were in fact 1995 dollars. 

Prof. Tol also commented that NHTSA 

should ‘‘alert the reader’’ that although 

Tol (2007) was only ‘‘conditionally 

accepted,’’ as NHTSA had noted in the 

NPRM, the newer study ‘‘finds larger 

estimates than the 2005 paper.’’ Sierra 

Club et al., in its comments, also stated 

that Prof. Tol had commented on the 

NPRM, arguing that using 1995 instead 

of 2005 dollars ‘‘would make his 1995 

value of $14 closer to a 2005 value of 

$19.26.’’ 

Several commenters disputed 

NHTSA’s proposal of $7 as the midpoint 

between $0 and $14. UCS argued that 

proposing $7 puts as much weight on $0 

as on $14, even though failing to assign 

a value was declared by the Ninth 

Circuit to be arbitrary and capricious. 

CBD commented that ‘‘NHTSA’s 

methodology for the selection of an 

estimate of the value of reducing 

greenhouse gas emissions is arbitrary 

and designed to minimize the estimate.’’ 

CBD argued that ‘‘* * * simply splitting 

the difference between two points is not 

a defensible methodology, particularly 

when the low point of the range is not 

part of a valid range but simply an 

arbitrary selection of zero as an 

endpoint.’’ 

EDF also commented NHTSA’s 

decision to propose $7 because it is the 

midpoint between $0 and $14 also 

‘‘lacks a reasoned basis,’’ for which 

‘‘NHTSA fails to provide any 

justification.’’ 

The Sierra Club et al. commented that 

NHTSA is wrong to place ‘‘equal 

weighting and probability’’ on $0 and 

$14 and pick the median, and that $7 is 

‘‘far below current carbon estimates,’’ 

citing the 2006 Stern Review which 

found an SCC of ‘‘on the order of’’ $85/ 

tonne CO2. The Sierra Club argued that 

this shows how ‘‘misguided and 

unrealistic NHTSA’s carbon pricing 

really is.’’ 

The Attorneys General commented 

that NHTSA’s decision to simply halve 

Tol’s estimate was ‘‘not a reasoned 

judgment.’’ 

Public Citizen argued that there is no 

justification for using the midpoint, and 

that NHTSA should instead ‘‘weight the 

credibility of each estimate,’’ by making 

‘‘apples to apples’’ comparisons 

between the studies by ‘‘looking at 

studies based on their assumptions.’’ 

Public Citizen argued that this will help 

NHTSA avoid skewing the result of 

averaging estimates from multiple 

studies. NRDC similarly argued that 

proposing $7 as ‘‘a simple average of its 

proposed upper and lower bounds 

* * * assumes a normal distribution of 

damages, which is decidedly not the 

distribution of social cost of carbon 

estimates.’’ NRDC further argued that 

‘‘* * * most social cost of carbon 

estimates are biased downwards, for the 

simple reason that almost all models 

assume perfect substitutability between 

normal consumption goods and 

environmental goods.’’ NRDC cited 2007 

research by Sterner and Persson 

disaggregating ‘‘goods’’ into 

‘‘environmental goods’’ and 

‘‘consumption goods,’’ which found that 

the price of an environmental good like 

carbon reductions increased at a faster 

rate as damage progressed than 

consumption goods would increase. 

Accordingly, NRDC argued, ‘‘NHTSA’s 

social cost of carbon is much too low.’’ 

Prof. Hanemann also commented that 

NHTSA did not justify its decision to 

pick the midpoint (between $0 and $14) 

and then project it to 2011, although he 

focused more particularly on NHTSA’s 

not having applied ‘‘the escalation 

factor of a 2.4 percent increase in real 

terms beginning in 2005.’’ 

The Alliance commented that 

proposing $7 as the midpoint between 

$0 and $14 is incorrect. The Alliance 

argued that NHTSA must try harder to 

estimate the purely domestic effects of 

CO2 emissions reductions, and stated 

that NERA had found that the U.S. 

portion of world gross product ‘‘is a 

much better means of allocating the 

United States’ share of any benefits in 

reduced CO2 emissions’’ than picking 

the midpoint of a range of global SCC 

estimates. NERA assumed that the U.S. 

portion is 20 percent, which ‘‘reduces 

NHTSA’s estimate of CO2 benefits with 

the ‘optimized standard’ for MY2015 

from $869 million to $348 million.’’ 

NERA also argued that this was 

conservative, since the U.S., as a 

developed country, should be better 

able to adapt to negative global warming 

consequences. 

Several commenters also criticized 

Tol (2005) as being out of date. Prof. 

Hanemann made this point, and 

commented that ‘‘more recent analyses 

show higher damage estimates.’’ The 

Attorneys General similarly commented 

that ‘‘It seems likely that there are better 

estimates’’ than Tol’s, ‘‘Since [that] 

article is now three years old, and it 

itself explains in detail the many 

deficiencies in the economic literature 

at that time.’’ The Attorneys General 

stated that ‘‘NHTSA should consult 

with EPA on this issue, and conduct a 

review of the current scientific and 

economics literature.’’ 

Several commenters simply argued 

that $7/ton is too low a value for the 

SCC. CARB argued that ‘‘NHTSA’s 

assumed social cost of carbon in the 

future is also unreasonably low, and if 

set at defensible levels that also 

properly value cumulative impacts, 

could affect the stringency of the 

standards.’’ Carin Skoog, an individual, 

similarly commented that ‘‘The arbitrary 

decision to use $7/ton underestimates 

the economic, social, and environmental 

consequences of the impacts of global 

warming.’’ ACEEE similarly commented 

that NHTSA’s use of $7/ton is both 

‘‘inconsistent with current estimates’’ 

and ‘‘fails to take into account the 

potentially high probability of a 

catastrophic climate change situation.’’ 

The 10 U.S. Senators who commented 

stated that NHTSA’s value of $7 per ton 

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is ‘‘underestimated,’’ and ‘‘likely to be 

found arbitrary and capricious.’’ 

(3) NHTSA’s Proposal of $0 as the 

Lower Bound Estimate for the Domestic 

U.S. Value for the SCC 

No commenters supported NHTSA’s 

use of $0/ton as the lower bound 

estimate for the U.S. domestic SCC. 

Several commenters, including UCS, 

EDF, and Prof. Hanemann cited the 

IPCC Fourth Assessment Report as 

evidence that, as Prof. Hanemann stated, 

‘‘there is no credible evidence of any 

significant net benefit to the U.S. from 

the climate change scenarios developed 

for the Fourth IPCC Report.’’ The U.S. 

Senators who commented also stated 

that in citing the IPCC as not precluding 

low or zero values to the U.S., NHTSA 

had ‘‘fail[ed] to recognize that IPCC was 

looking at global estimates which are 

not disaggregated.’’ 

Commenters also mentioned other 

reports as providing evidence that there 

would be some net adverse impact on 

the U.S. from climate change, and thus 

a lower bound value of $0 was 

untenable. Prof. Hanemann cited the 

recent USCCSP report ‘‘conclusively 

eliminates the notion that climate 

change is likely to have no net adverse 

impact on the United States.’’ 

UCS argued that proposing $0 as the 

lower bound ‘‘implies the possibility 

that climate change won’t have any 

negative consequences,’’ which ‘‘stands 

in stark contrast to recent government 

study findings on U.S. climate change 

effects and findings from * * * the 

Academies of Science for the G8+5.’’ 

EDF commented that ‘‘A recent 

review of economic studies on the 

predicted impacts of climate change on 

different economic sectors in the U.S. by 

the Center for Integrative Environmental 

Research at the University of Maryland, 

‘The US Economic Impacts of Climate 

Change and the Costs of Inaction: A 

Review and Assessment,’ also 

demonstrates the range and scope of 

adverse impacts that climate change 

will have on different sectors and 

regions of the U.S. economy.’’ EDF 

stated that ‘‘The study concluded that 

‘Scientific evidence is mounting that 

climate change will directly or 

indirectly affect all economic sectors 

and regions of the country, though not 

all equally. Although there may be 

temporary benefits from a changing 

climate, the costs of climate change 

rapidly exceed benefits and place major 

strains on public sector budgets, 

personal income and job security.’ ’’ 

Sierra Club et al. commented that 

‘‘several government reports [that] have 

clearly stated that CO2 emissions do 

have a significant impact on our 

economy.’’ NHTSA’s conclusion that ‘‘it 

does not necessarily rule out low or zero 

carbon values for the benefit to the U.S. 

itself from reducing emissions’’ is 

arbitrary given agency’s admission that 

‘‘the global value of economic benefits 

from reducing carbon dioxide emissions 

is unlikely to be zero.’’ 

NRDC cited a U.S. government report 

that ‘‘documents that many of the 

projected impacts have already begun,’’ 

as well as the Stern Review which 

‘‘estimated that impacts could result in 

a loss of 5–20 percent of world GDP by 

2100,’’ and its own May 2008 report 

which ‘‘found U.S. damages from four 

impacts alone would cost 1.8 percent of 

GDP by 2100.’’ 

Several commenters instead raised 

objections to studies that may show a 

positive net benefit to the U.S. from 

climate change, such that a domestic 

SCC value could be $0. CBD stated that 

NHTSA offered ‘‘absolutely no evidence 

to support’’ proposing $0 as the lower 

bound, and argued that ‘‘only one study 

surveyed in Tol (2005) included central 

estimates below $0.00; and that was a 

non-peer-reviewed article, also authored 

by Tol.’’ CBD further argued that Tol 

(2005) never found, nor included as a 

consideration in developing SCC 

estimates, as NHTSA suggested in the 

NPRM, that any studies failed ‘‘to 

consider potentially beneficial impacts 

of climate change,’’ or to account 

adequately ‘‘for how future 

development patterns and adaptations 

could reduce potential impacts from 

climate change or the economic 

damages they cause.’’ 

Prof. Hanemann also argued that 

studies suggesting any possible positive 

net benefit to U.S. from global warming 

‘‘have serious flaws and cannot 

withstand serious scrutiny,’’ and 

concluded that a value of $0 per ton is 

‘‘wildly unrealistic’’ ‘‘even [for] a 

sensitivity analysis.’’ 

NRDC commented that ‘‘NHTSA’s 

lower bound seems to be based upon the 

fact that some estimates exist that are 

zero and even negative.’’ However, 

NRDC argued that ‘‘These lower bound 

estimates are likely based on outdated 

science.’’ NRDC ‘‘urge[d] NHTSA to do 

a rigorous re-examination of Tol’s work, 

eliminating outdated zero estimates and 

adjusting for fat tailed upper 

distributions.’’ 

Several commenters also focused on 

the CBD decision to argue that NHTSA 

may not use $0 as the lower bound 

estimate, because as UCS stated, ‘‘the 

Ninth Circuit found a value of $0 to be 

arbitrary and capricious.’’ EDF also 

commented that NHTSA’s decision to 

pick $0 as the lower bound ‘‘lacks a 

reasoned basis,’’ given the Ninth Circuit 

decision. Sierra Club et al. and the U.S. 

Senators similarly commented that $0 as 

the lower bound is contrary to CBD. The 

comment by the U.S. Senators stated 

that ‘‘* * * we can only conclude that 

the purpose of this ‘low bound’ estimate 

is to cut the more accurate value in half 

in an arbitrary manner. We recommend 

NHTSA remove or justify this low 

bound estimate in its final CAFE 

regulation.’’ 

(4) NHTSA’s Proposal of $14 as the 

Upper Bound Estimate for the Domestic 

U.S. Value for the SCC 

No commenters supported NHTSA’s 

proposal of $14/ton, based on Tol 

(2005), as the upper bound estimate for 

the domestic U.S. value for the SCC. 

ACEEE argued that ‘‘NHTSA’s decision 

to use Tol’s estimate of $14 as the upper 

bound based on the argument that this 

value includes the worldwide costs CO2

is flawed,’’ although the commenter did 

not explain why. 

Some commenters argued that 

NHTSA should not have picked the 

median from Tol (2005) as its upper 

bound estimate. 

The U.S. Senators who commented 

stated that NHTSA is wrong to use $14 

as the upper bound because Tol’s 

median is an average of multiple 

estimates, and averages should be used 

as averages and not as maximums. The 

Senators stated further that ‘‘NHTSA 

selected the lower of Tol’s two estimates 

without explanation.’’ The U.S. Senators 

also commented that Tol (2007) updates 

the previous study and finds a median 

of over $19/ton. NRDC also cited Tol 

(2007) as reflecting an increase in the 

median from $14 to $20 dollars per ton 

of CO2. 

Sierra Club et al. commented that $14 

is an incorrect ‘‘maximum,’’ because the 

maximum that Tol ‘‘states that the 

maximum carbon value is in the range 

of $55–$95 per metric ton CO2.’’ The 

commenter further argued that if 

NHTSA could justify $0 as the lower 

bound, ‘‘then it should not be able to 

rule out the high value of $95 per ton 

CO2 in the study, and the average value 

would be much higher.’’ 

NRDC commented that NHTSA 

should not have used Tol’s median 

value of $14 as its upper bound for two 

reasons. First, a median value is not 

properly reflective of climate change 

damage estimate distributions, which 

are ‘‘asymmetric’’ with ‘‘fat’’ upper tails. 

And second, because of the unique 

aspects of climate change damage 

estimates, such as ‘‘nonlinearities, 

abrupt change, and thresholds,’’ ‘‘a full 

probability density function should be 

estimated, using the full range of all 

[SCC] estimates from the studies, not 

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climatechange/downloads/s2191_EPA_Analysis.pdf 

(last accessed March 23, 2009). 

simply a collection of their ‘bestguesses.’ ’’ [Emphasis in original.] NRDC 

argued that research has shown that 

‘‘When the same traditional social cost 

of carbon analyses are rerun 

incorporating the potential for nonlinear 

change, the resulting policy conclusions 

are changed considerably to greater 

mitigation,’’ and that ‘‘Another recent 

study has shown that incorporating the 

potential for low-probability, highdamage events can increase the social 

cost of carbon by a factor of 20.’’ 

NRDC also cited Prof. Weitzman to 

argue that the complications of climate 

change damage estimates require any 

analysis to weigh more heavily the ‘‘low 

probability/high catastrophic risks,’’ 

because these will otherwise be 

insufficiently accounted for. In 

discussing the uncertainties associated 

with climate change, NRDC cited 

Weitzman as stating that 

The result of this immense cascading of 

huge uncertainties is a ‘‘reduced form’’ of 

truly stupendous uncertainty about the 

aggregate-utility impacts of catastrophic 

climate change, which mathematically is 

represented by a very-spread-out very-fattailed PDF [probability density function] of 

what might be called (present discounted) 

‘‘welfare sensitivity’’ * * * [T]he value of 

‘‘welfare sensitivity’’ is effectively bounded 

only by some very big number representing 

something like the value of statistical 

civilization as we know it or maybe even the 

value of statistical life on earth as we know 

it. 

Thus, NRDC argued, using an upper 

bound of $14 cannot possibly account 

for the uncertainties and risk of climate 

change. Like Sierra Club et al., NRDC 

further argued that ‘‘* * * for 

consistency with the rationale used for 

proposing the lower bound, NHTSA’s 

upper bound should be based upon 

some function of the highest estimates 

in the Tol 2005 study (the very highest 

was $1,666).’’ 

Some commenters argued that 

NHTSA had overlooked particular 

aspects of the Tol (2005) study, and thus 

arrived at $14 incorrectly. 

CBD argued that NHTSA overlooked 

key aspects of the Tol (2005) analysis in 

proposing $14 per ton, including the 

fact that Tol included significantly 

higher estimates in his analysis. EDF 

similarly commented that NHTSA had 

failed to ‘‘discuss the significant gaps in 

the existing research reviewed in [Tol 

(2005)] and focuse[d] on a specific 

estimate of the SCC that is biased 

toward lower value estimates.’’ EDF 

stated that NHTSA’s decision to use 

only peer-reviewed studies from Tol 

(2005) introduced particular bias, 

because those studies ‘‘systematically 

used higher discount rates * * * which 

may have biased their results 

downward’’ compared to averaging all 

the studies together. 

Some commenters argued that Tol 

(2005) was flawed to the point that it 

could not provide a reliable basis for 

NHTSA to use its median estimate as 

the upper bound. 

CBD commented that ‘‘the studies 

cited in the Tol (2005) survey dated 

back as much as 18 years, to 1991, and 

25 of the 28 studies cited were 

published more than five years ago,’’ so 

given that climate change science is 

progressing very rapidly, these studies 

are probably outdated. 

EDF also argued that ‘‘Most of the 28 

studies surveyed by Tol’’ are outdated 

and ‘‘consider only a limited number of 

potential impacts from climate change,’’ 

as Tol recognizes by cautioning that the 

estimates analyzed ‘‘may understate the 

true cost of climate change.’’ EDF stated 

that the IPCC’s ‘‘most recent 

compilation of SCC research’’ agrees. 

EDF also commented that Tol’s metaanalysis ‘‘compares studies with widely 

different methodologies and 

assumptions,’’ particularly discount 

rates, which EDF stated NHTSA should 

have controlled for because it ‘‘can have 

a considerable impact on SCC 

estimates.’’ 

NRDC criticized Tol (2005) 

extensively in its comments. NRDC 

stated that Tol’s estimate was based on 

studies which exclude (1) ‘‘non-market 

costs, such as damage to and loss of 

entire ecosystems and species;’’ and (2) 

‘‘studies of national security costs 

caused by conflicts over stressed 

resources and increased migration from 

heavily impacted areas,’’ which 

‘‘describe global warming as a ‘threat 

multiplier.’ ’’ NRDC recognized that Tol 

acknowledged that ‘‘costs such as those 

described above are poorly accounted 

for in current social cost of carbon 

estimates,’’ but insisted that NHTSA 

must nonetheless account for them. 

NRDC also argued that Tol’s estimate 

is based on outdated studies, because 

‘‘there are smaller natural sinks for 

carbon than Tol assumed, higher 

emissions than he assumed, a higher 

temperature response to emissions than 

he assumed, and faster changes in 

observed impacts than he assumed.’’ 

NRDC commented that recent events 

like Hurricane Katrina are evidence that 

the U.S. cannot adapt to climate changerelated disasters as fast as previously 

thought. NRDC further commented that 

it was unclear whether Tol’s estimate 

‘‘included any valuation for lost lives,’’ 

suggesting that including this valuation 

could raise SCC considerably, and 

arguing that EPA accounts for it in 

Clean Air Act rulemakings. 

(5) Other Values That NHTSA Could 

Have Chosen for the SCC 

Many commenters suggested other 

SCC values that they thought NHTSA 

should use instead of a value based on 

Tol (2005). 

Several commenters mentioned SCC 

values produced by EPA. In March 

2008, EPA produced an analysis for the 

Senate Committee on Environment and 

Public Works for S. 2191, ‘‘America’s 

Climate Security Act,’’ also known as 

the Lieberman-Warner bill.319 Public 

Citizen commented that NHTSA’s upper 

bound estimate should be at least as 

high as EPA’s estimates for the 

Lieberman-Warner bill, which Public 

Citizen said ‘‘are more recent than the 

Tol estimate cited in NHTSA’s notice.’’ 

Public Citizen commented that EPA 

‘‘estimated the value of CO2 in 2015 

between $22 and $40 per metric ton of 

CO2, and cited two other analyses with 

higher estimates of $48 and $50 per 

metric ton CO2.’’ Sierra Club et al. also 

commented that NHTSA must use a 

higher SCC value, and stated that 

‘‘EPA’s recent analysis of America’s 

Climate Security Act of 2007 noted that 

the value of a ton of CO2 could be as 

high as $22–$40.28.’’ An individual, 

Carin Skoog, also commented that ‘‘The 

US EPA recently suggested the value of 

a ton of CO2 could be as high as $22– 

35.’’ ACEEE appeared to refer obliquely 

to the EPA estimates, recommending 

that NHTSA use a higher CO2 estimate. 

ACEEE argued that ‘‘legislative efforts to 

implement a carbon regime in which the 

projected market cost of CO2 is expected 

to lie between $20 and $30— 

significantly higher than the average 

damage cost assumed by NHTSA— 

serves as evidence that the U.S. is now 

beginning to contemplate the high risk 

of rising greenhouse gas emissions.’’ 

NRDC commented that NHTSA cited 

‘‘compliance cost estimates provided by 

NRDC and others in the 2006 light truck 

rulemaking’’ in describing its proposal 

of the upper bound estimate. NRDC 

argued that NHTSA should instead 

consider damage costs and not rely on 

compliance cost estimates. NRDC stated 

that ‘‘If NHTSA were to consider 

compliance costs it must consider 

current analyses, such as EPA’s analysis 

of S. 2191, which finds that CO2

allowances would cost 19 to 67 (2005) 

dollars per ton of CO2-equivalent in 

2012 rising at 5 percent per year real 

(the range for EPA’s Core Scenario is 

$19 to $35 in 2012, rising at 5 percent 

per year real).’’ 

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320Available at Docket No. NHTSA–2008–0089– 

0456.2. 

321EPA’s ANPRM was signed July 11, 2008, after 

NHTSA’s NPRM was published. See 73 FR 44353 

(July 30, 2008). 

322NADA cited the ‘‘Statement of Daniel P. 

Beard, Chief Administrative Officer, U.S. House of 

Representatives, Concerning the Purchase of Carbon 

Continued 

EPA also recently released a 

‘‘Technical Support Document on the 

Benefits of Reducing GHG 

Emissions,’’ 320 (TSD) to accompany an 

Advance Notice of Proposed 

Rulemaking (ANPRM) on regulating 

GHG emissions under the Clean Air 

Act.321 EDF commented in its original 

comments that ‘‘The higher SCC 

estimates contained in EPA’s draft 

ANPR, and EPA’s accompanying 

discussion of the remaining omissions 

and weaknesses in state-of-the-art SCC 

research, further demonstrates that 

NHTSA’s estimates are underestimating 

the benefits of reducing carbon dioxide 

emissions, and therefore setting CAFE 

standards below optimal levels.’’ After 

the TSD was released, EDF submitted it 

to NHTSA’s NPRM docket, and 

submitted late additional comments 

arguing that NHTSA must ‘‘adjust its 

final rulemaking action in accordance 

with EPA’s assessment and findings,’’ 

because ‘‘EPA’s assessment is far more 

rigorous than NHTSA’s proposal, and 

EPA’s determinations are supported by 

a considerable and well-reasoned 

volume of information.’’ EDF stated that 

EPA did its own meta-analysis 

‘‘building on’’ Tol (2005) and (2007), but 

including ‘‘only recent peer reviewed 

studies that met a range of quality 

criteria in its evaluation.’’ EDF further 

stated that EPA arrived at an estimate of 

$40/tCO2 (using a 3 percent discount 

rate), or $60/tCO2 (using a 2 percent 

discount rate). EDF commented that 

EPA concluded that estimates ‘‘likely 

underestimate costs of carbon dioxide 

emissions,’’ because they do not account 

for all the climate change impacts 

identified by the IPCC, like ‘‘non-market 

damages, the effects of climate 

variability, risks of potential extreme 

weather, socially contingent events 

[(such as violent conflict)], and potential 

long-term catastrophic events.’’ 

The U.S. Senators who commented 

argued that NHTSA’s use of $14/ton 

based on Tol (2005) as the ‘‘high bound’’ 

estimate was incorrect because EPA had 

been working since 2007 ‘‘to develop 

more accurate, ‘state-of-the-art’ 

estimates of the benefits of reducing 

greenhouse gas pollution.’’ The Senators 

stated that ‘‘Although EPA’s estimates 

have not been finalized, the Agency 

used $40 per ton as the value of 

reducing carbon dioxide emissions.’’ 

The Senators further stated that 

‘‘NHTSA’s draft rule inexplicably makes 

no mention of EPA’s extensive research 

and analysis in this area.’’ 

Other commenters argued that 

NHTSA should have used or considered 

the value at which CO2 allowances are 

currently trading in the EU regulatory 

system. UCS stated that using $14 as the 

upper end is ‘‘unacceptably low,’’ given 

that ‘‘The European Climate Exchange, 

which provides a futures market value 

for global warming pollution in 

Europe’s carbon constrained market, 

indicates 2011 contracts for carbon 

dioxide at approximately $45 (U.S.) per 

metric ton—well above the figure cited 

by NHTSA.’’ UCS argued that ‘‘This 

value represents a predicted marginal 

abatement cost (the cost of avoiding 

global warming pollution), and is likely 

a conservative estimate of the benefit of 

reducing global warming since the cost 

of avoiding climate change is lower than 

the cost of fixing the damage after it 

occurs.’’ UCS further argued that this 

number is also ‘‘generally consistent 

with other recent allowance price 

estimates, such as the EPA’s assessment 

of GHG allowance prices under 

Lieberman-Warner: $22–$40 in 2015 

and $28–$51 in 2020 (EPA figures are in 

2005 dollars per ton of CO2- 

equivalent.)’’ 

Sierra Club et al., Public Citizen, and 

CARB all also commented that NHTSA’s 

value for the SCC is too low, and that 

NHTSA should instead use a CO2

damage value based on the market value 

in the European Trading System, either 

the current value (which Public Citizen 

stated was ‘‘recently * * * around Ö30 

per allowance (one metric ton CO2

equivalent),’’ and CARB stated was 

‘‘currently trading around $42 per ton’’), 

or some future value. Sierra Club et al. 

argued that ‘‘the futures market value 

for a metric ton of CO2 in 2011 is 

already up to $45,’’ while CARB went 

on to argue that ‘‘* * * Germany 

Deutsche Bank [is] forecasting EUA 

prices of $60 for 2008 and EUA prices 

as high as $100 by 2020 [citation 

removed].’’ 

Other commenters suggested other 

SCC values different from any discussed 

so far. For example, Prof. Hanemann 

argued that, based on his own research, 

NHTSA use a value of ‘‘about $25 per 

metric ton [of CO2] in 2005$,’’ and 

should apply a real growth rate of 2.4 

percent per year to determine the value 

of reducing emissions in future years. 

CARB, in contrast, commented that 

‘‘NHTSA should also consider using 

substantially higher estimates.’’ CARB 

stated that ‘‘the International Energy 

Agency (IEA) recently estimated that to 

limit global CO2 emissions by the 50 

percent GHG reduction that the IPCC 

concluded is needed to keep global 

temperatures from rising more than two 

degrees Celsius by 2050, CO2 offset 

prices will need to rise to up to $200 per 

ton * * *.’’ CARB further argued that 

‘‘* * * even this higher market price for 

carbon may not incorporate the true cost 

of all natural resources damages, an 

externality.’’ 

Mr. Montgomery commented that 

NHTSA should use an SCC value of $0, 

because he argued that ‘‘If a 

comprehensive cap on [CO2] emissions 

is put in place, as many commentators 

and policymakers predict, then the 

choice of policy instrument will have no 

effect on the overall level of emissions,’’ 

such that ‘‘Tightening a CAFE standard 

will only result in greater mitigation in 

emissions from [motor vehicles] and 

less mitigation in parts of the economy 

where decisions are made in response to 

carbon prices without specific 

regulatory mandates.’’ Thus, Mr. 

Montgomery concluded that ‘‘the 

damages from global warming will be 

the same no matter what the level of the 

CAFE standard, so that the SCC used 

should be zero.’’ 

Mr. Montgomery also commented that 

an SCC based on Tol’s estimates will be 

too high if the ‘‘global policy objective 

toward greenhouse gas emissions * * * 

is a lower concentration than that on 

which the Tol estimates are based.’’ Mr. 

Montgomery argued that ‘‘Marginal 

damages depend on the level of GHG 

concentrations at which they are 

measured,’’ so that ‘‘If the goal for global 

concentrations is set at a high level (e.g., 

750 ppm) then damages from an 

additional ton of CO2 (due to higher 

concentrations during the period of its 

residence in the atmosphere) will be 

higher than if the goal is set at a low 

level (350 ppm) at which point most of 

the damaging consequences have been 

eliminated.’’ 

Ford redacted much of its discussion 

of the SCC based on confidentiality 

concerns, but seemed to argue generally 

that reducing CO2 emissions from motor 

vehicles is expensive compared to 

reducing emissions in other sectors, and 

commented that ‘‘All sectors must 

contribute’’ to reducing emissions. Ford 

‘‘recommended that NHTSA consider 

using CO2 mitigation cost in their 

analysis in lieu of emission damage 

cost.’’ 

NADA commented that ‘‘NHTSA 

should consider incorporating into its 

analysis the $2.97 per metric ton 

recently paid by the U.S. House of 

Representatives for carbon offsets.’’ 322

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14344 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

Offsets,’’ which does not list the specific price paid 

for the offsets described. Available at http:// 

cao.house.gov/press/cao-20080205.shtml (last 

accessed March 23, 2009). 

323Mark A. Delucchi, Summary of the NonMonetary Externalities of Motor Vehicle Use, UCD- 

–ITS–RR–96–3 (9) rev.1, Institute of Transportation 

Studies, University of California, Davis, originally 

published September 1998, revised October 2004. 

Available at http://www.its.ucdavis.edu/ 

publications/2004/UCD-ITS-RR-96-03(09)_rev1.pdf 

(last accessed March 23, 2009). 

The Alliance was the only commenter 

to suggest that NHTSA not quantify the 

SCC at all. The Alliance argued that 

‘‘* * * given the fact that no published 

studies of which we are aware address 

the SCC apportionment issue, NHTSA 

would be well within its rights to decide 

that SCC will be considered purely in a 

qualitative balancing fashion and not 

quantified.’’ The Alliance cited 

Transmission Access Policy Study 

Group v. FERC, 225 F.3d 667, 736 (D.C. 

Cir. 2000) (‘‘Given that FERC’s 

comparison of the frozen efficiency case 

to its base case yielded little difference, 

the agency had no reason to conduct 

further analysis. By rigorously 

examining the frozen efficiency case, 

even though it believed the case to be 

unreasonable, FERC ensured that its 

decision was ‘fully informed’ and ‘wellconsidered.’ ’’). 

(6) NHTSA’s Use of a Domestic Versus 

a Global Value for the Economic Benefit 

of Reducing CO2 Emissions 

NHTSA received a number of 

comments on its tentative decision to 

employ a domestic value for the SCC 

instead of a global value. Several 

commenters supported a domestic 

value, while other commenters 

supported a global value. 

The Alliance argued that NHTSA 

must consider only domestic impacts 

both because of EPCA, which refers to 

‘‘the need of the United States to 

conserve energy,’’ and because of the 

‘‘extraterritoriality’’ or ‘‘Aramco canon,’’ 

see EEOC v. Arabian American Oil Co., 

499 U.S. 244, 260 (1991) (‘‘It is a 

longstanding principle of American law 

‘that legislation of Congress, unless a 

contrary intent appears, is meant to 

apply only within the territorial 

jurisdiction of the United States.’) 

(quoting Foley Bros. v. Filardo, 336 U.S. 

281, 285 (1949)). The Alliance further 

argued that because NHTSA must 

consider only domestic impacts, it must 

‘‘develop some mechanism for scaling 

down the global SCC estimates 

produced in the published literature,’’ 

besides NHTSA’s proposal which just 

took the midpoint between $0 and $14 

as the domestic SCC value. The Alliance 

argued that it would be inappropriate to 

use land mass to determine the 

domestic portion, since so much of the 

land mass on the planet is uninhabited; 

and also argued that it would be 

inappropriate to use population, since 

‘‘not all human beings live in areas that 

are expected to be equally impacted by 

climate change.’’ As discussed above, 

the Alliance cited to the NERA Report 

that it included with its comments as 

having found that an SCC value based 

on the U.S. share of world gross product 

was more appropriate. 

NADA similarly commented that 

‘‘NHTSA should account only for any 

domestic impacts of reducing the social 

costs of motor vehicle CO2, given that 

EPCA focuses on U.S. energy security 

and all other costs and benefits 

evaluated with respect to the proposed 

CAFE standards are domestic only.’’ 

Mr. Delucchi agreed with NHTSA’s 

discussion that ‘‘consistency requires’’ 

that only U.S. domestic ‘‘global 

warming damages’’ be considered if 

NHTSA also accounts for the 

monopsony effect in the reduced value 

of transfer payments from U.S. oil 

purchasers to foreign oil suppliers. Mr. 

Delucchi suggested that NHTSA use a 

procedure described in his previous 

research to estimate the fraction of 

global damages from climate change that 

would be borne within the U.S., and 

apply this fraction to the estimated 

global SCC to determine the value of 

U.S. domestic benefits from reducing 

emissions. This procedure adjusts the 

fraction of global GDP accounted for by 

the U.S. by the relative sensitivity of the 

U.S. to climate damages compared to 

the remainder of the world, which 

Delucchi measures by the ratio of U.S. 

dollar damages from climate change per 

dollar of U.S. GDP to global economic 

damages from climate change per dollar 

of global GDP. Using this method, he 

estimates that U.S. damages from 

climate change are likely to represent 0– 

14 percent of total global damages, and 

thus that the value to the U.S. of 

reducing carbon emissions is equal to 

that same percentage of the estimated 

global value of the SCC.323

Mr. Montgomery argued that a 

domestic SCC value was appropriate, 

commenting that ‘‘U.S. policy should be 

based on marginal damages to the U.S. 

from CO2 emissions in the U.S., as 

stated in relevant OMB circulars on 

cost-benefit analysis and suggested in 

the draft.’’ Mr. Montgomery further 

stated that ‘‘The consensus appears to 

be that richer countries are less 

vulnerable than poorer, and that 

temperature increases will be least in 

temperate regions like the U.S.’’ Thus, 

Mr. Montgomery argued that a 

conservative estimate of U.S. damages 

would be a calculation ‘‘based on the 

ration of U.S. GDP to world GDP.’’ 

Other commenters argued that 

NHTSA should use a global SCC value. 

NRDC commented that because ‘‘Carbon 

dioxide is a global pollutant, and much 

of the damages other countries will 

experience are a result of U.S. 

emissions,’’ and because ‘‘emissions in 

other countries will cause damages in 

the U.S.,’’ that ‘‘It is fundamentally 

inconsistent with the global circulation 

of these pollutants to arbitrarily limit 

assessment of the benefits of reducing 

U.S. emissions to those accruing in our 

own territory.’’ NRDC also commented 

that national security studies show that 

the global social costs of carbon will 

‘‘spill over’’ to the U.S. and other 

wealthy countries. EDF also commented 

that NHTSA should use a global SCC 

number rather than a domestic one, 

because ‘‘Climate change is clearly a 

global issue,’’ so EDF ‘‘recommend[s] 

that benefits of reducing CO2

concentrations should reflect benefits to 

society as a whole.’’ 

EDF and the U.S. Senators 

commented that use of a global SCC 

value would be consistent with OMB 

guidance that international impacts of 

regulations may be considered if 

appropriate. The Senators also 

commented that the U.S. must consider 

the global climate change effects of its 

regulations because it ratified the 

United Nations Framework Convention 

on Climate Change in 1992. If every 

nation considers only domestic effects 

of climate change, the Senators argued, 

emissions reduction policies will fall 

‘‘far short of the socially optimized 

level.’’ 

CBD similarly commented that 

NHTSA should use a global value for 

CO2, arguing that using $7 ‘‘fails to 

incorporate the full economic costs of 

global climate change, values that are 

difficult to monetize, and costs to the 

world outside the boundaries of the 

United States.’’ CBD stated that ‘‘In 

general, the estimate of the social costs 

of climate change fails to incorporate 

the loss of biodiversity, complex and 

large-scale ecosystem services, and the 

disproportionate impacts of global 

climate change on the developing 

world.’’ CBD also stated that NHTSA’s 

use of $0 as the lower bound estimate 

is ‘‘[p]resumably * * * meant to imply 

that the United States might benefit 

economically by letting other countries 

bear the costs of unabated American 

greenhouse gas emissions. Setting aside 

the tremendous ethical implications of 

such a position, NHTSA provides 

absolutely no evidence to support the 

claim.’’ 

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324CBD, 508 F.3d 508, 535. 

In its late comments accompanying its 

submission of EPA’s TSD, EDF argued 

that EPA’s TSD concluded that a global 

number is correct, for several reasons. 

Because GHGs are global pollutants and 

affect everyone, using ‘‘domestic only’’ 

estimates would ‘‘omit potential 

impacts on the United States (e.g., 

economic or national security impacts) 

resulting from climate change impacts 

in other countries.’’ Consequently, a 

global number must be used to avoid 

missing any benefits and to maximize 

global net benefits (i.e., ‘‘countries 

would need to mitigate up to the point 

where their domestic marginal cost 

equals the global marginal benefit.’’ EDF 

stated that EPA’s TSD cites Nordhaus 

(2006), and says that ‘‘Net present value 

estimates of global marginal benefits 

internalize the global and 

intergenerational externalities of 

reducing a unit of emissions and can 

therefore help guide policies towards an 

efficient level of provision of the public 

good.’’ 

(7) The Rate at Which the SCC Grows 

Over Time 

Several commenters cited the IPCC 

Fourth Assessment Report with regard 

to the rate at which the SCC should 

increase over time. CBD commented 

that as part of the Fourth Assessment 

Report, the IPCC ‘‘* * * states that ‘It is 

virtually certain that the real social cost 

of carbon and other greenhouse gases 

will increase over time; it is very likely 

that the rate of increase will be 2% to 

4% per year.’ ’’ The U.S. Senators 

commented that the 2.4 percent per year 

increase that NHTSA used in the NPRM 

is incorrect, because ‘‘the IPCC report 

states that ‘it is very likely that the rate 

of increase will be 2% to 4% per year.’ ’’ 

EDF stated that IPCC’s 

recommendation of a 2.4 percent growth 

rate was meant to be used in 

combination with a low, 

intergenerational discount rate. EDF 

further argued that after the Fourth 

Assessment Report was released, one of 

the lead authors recommended using a 

growth rate of 3 percent, but that ‘‘The 

OMB equivalent guidance for the UK 

* * * recommend using a 2 percent 

yearly increase.’’ EDF thus concluded 

that the 2.4 percent growth rate could be 

used, but only with a maximum 3 

percent discount rate, and argued that a 

range of growth rates should be run in 

the sensitivity analysis ‘‘because of 

considerable uncertainty.’’ 

(8) The Discount Rate That Should Be 

Used for SCC Estimates 

Commenters urged NHTSA to 

consider a low or even negative 

discount rate in choosing an estimate for 

the SCC. CBD, for example, stated that 

Stern found that ‘‘ ‘If consumption falls 

along a path, the discount rate can be 

negative. If inequality rises over time, 

this would work to reduce the discount 

rate, for the social welfare functions 

typically used. If uncertainty rises as 

outcomes further into the future are 

contemplated, this would work to 

reduce the discount rate, with the 

welfare functions typically used.’ ’’ CBD 

then argued that ‘‘A negative discount 

rate would dramatically increase the 

cost of climate change in the costbenefit analyses in the proposed rule.’’ 

NRDC commented that NHTSA 

should use a discount rate of no more 

than 3 percent for the entire rulemaking, 

and returned to this argument in its SCC 

discussion, criticizing Tol’s estimate for 

relying ‘‘primarily upon estimates that 

did not use current accepted climate 

change discounting procedures of a 

declining discount rate over time.’’ 

In its initial comments, EDF stated 

that NHTSA should only consider 

recent studies that use a 3 percent 

discount rate for estimating SCC. In its 

late comments, EDF stated that EPA’s 

TSD concluded that ‘‘a low discount 

rate is most appropriate for SCC 

estimation,’’ for several reasons. First, 

because OMB Circular A–4 allows 

agencies to use a lower discount rate 

when there are inter-generational 

benefits associated with a rulemaking. 

Second, because ‘‘In this intergenerational context, a three percent 

discount rate is consistent with 

observed interest rates from long-term 

intra-generational investments (net of 

risk premiums) as well as interest rates 

relevant for monetary estimates of the 

impacts of climate change that are 

primarily consumption effects.’’ Third, 

because EPA had found that the 

scientific literature supports the use of 

a discount rate of 3 percent or lower, as 

being ‘‘* * * more consistent with 

conditions associated with long-run 

uncertainty in economic growth and 

interest rates, intergenerational 

considerations, and the risk of high 

impact climate damages (which could 

reduce or reverse economic growth).’’ 

(9) Other Issues Raised by Commenters 

The remaining issues raised by 

commenters with regard to NHTSA’s 

proposal regarding the value for the SCC 

were as follows: 

Public Citizen commented that 

NHTSA should also have considered 

‘‘the costs of inaction on reducing 

greenhouse gas emissions and the 

resultant consequences of global 

warming,’’ including other 

environmental and health consequences 

such as those analyzed in NHTSA’s 

DEIS. Public Citizen cited EPA’s denial 

of California’s waiver request and ‘‘a 

recent report from the University of 

Maryland’’ as evidence of some of these 

costs, and argued that NHTSA needed to 

estimate ‘‘the costs of inaction’’ in 

making its final decision. 

NRDC commented that emissions 

reductions may be ‘‘greater than what 

CAFE accomplishes,’’ such that the U.S. 

would ‘‘get * * * a larger social cost of 

carbon benefits stream,’’ if the U.S. 

actions in ‘‘taking a lead in reducing 

emissions * * * [helps to] induce other 

countries, especially China and India, to 

also reduce.’’ NRDC also argued that 

‘‘Carbon dioxide has a very slow decay 

rate in the atmosphere, lasting hundreds 

of years into the future,’’ which means 

that ‘‘the social costs of carbon extend 

well past the life time of the vehicle.’’ 

Thus, ‘‘Any sensible benefits stream 

would extend them at least several 

decades past the lifetime of a vehicle.’’ 

In its original comments, EDF argued 

that NHTSA should have considered 

using a risk-management framework in 

developing an SCC estimate, because 

cost-benefit analysis ‘‘cannot capture 

the range of uncertainty and risk that 

characterizes climate change.’’ EDF 

cited Prof. Weitzman’s work as 

highlighting ‘‘that the expected damages 

of climate change may be dominated by 

the existence of consequences which 

have very low probability but very high 

damages (such as double-digit increases 

in mean global temperature), or a ‘fat 

tail’ in the distribution of possible 

outcomes.’’ In its late comments, EDF 

added that EPA’s TSD also suggested 

that a risk assessment framework may 

be more appropriate than cost-benefit 

analysis ‘‘in light of the ethical 

implications of climate change and the 

difficulty in valuing catastrophic risks 

to future generations.’’ The TSD went on 

to say that ‘‘Economics alone cannot 

answer the questions, policy, legal, 

ethical considerations are relevant too, 

and many cannot be quantified. When 

there is much uncertainty, economics 

recommends a risk management 

framework for guiding policy.’’ 

Agency response: In determining its 

responses to the public comments on 

the value of reducing CO2 emissions, the 

agency was mindful that the 9th Circuit 

remanded rulemaking to NHTSA ‘‘for it 

to include a monetized value for this 

benefit [the reduced risk of global 

warming as a result of reducing CO2

emissions] in its analysis of the proper 

CAFE standards.’’ 324 (Emphasis added.) 

NHTSA understands this directive to 

require the agency to include within its 

modeling, with at least some level of 

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14346 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

325Richard S.J. Tol (2008), The social cost of 

carbon: Trends, outliers, and catastrophes, 

Economics—the Open-Access, Open-Assessment E– 

Journal, 2 (25), 1–24. 

specificity, actual values for the SCC. 

Further, as in the case of other public 

comments, the agency is required by the 

Administrative Procedure Act to 

respond to the relevant and significant 

public comments, including those 

central to the agency’s decision on 

standards under EPCA, in a manner 

reflecting consideration of the relevant 

factors. 

As noted above, in the NPRM, we 

tentatively selected the mean value 

($14) in Tol (2005) as a global value, and 

announced plans to attempt to develop 

and possibly use a domestic value for 

the final rule. For most of the analysis 

it performed to develop the proposed 

standards using the Volpe CAFE model, 

NHTSA used a single estimate for a 

domestic value of reducing CO2

emissions. The agency thus elected to 

use the midpoint of the range from $0 

to $14 (or $7.00) per metric ton of CO2

as the initial value for the year 2011, 

and assumed that this value would grow 

at 2.4 percent annually thereafter. This 

estimate was employed for the analyses 

conducted using the Volpe CAFE model 

to support development of the proposed 

standards. The agency also conducted 

sensitivity analyses of the benefits from 

reducing CO2 emissions using both the 

upper ($14 per metric ton, since the 

domestic value could not exceed the 

global one) and lower ($0 per metric 

ton) bounds of this range. 

After considering comments on the 

approach it employed in the NPRM and 

more recent estimates of the SCC, 

NHTSA has decided to employ a range 

of estimates for the value of reducing 

GHG emissions in the analysis it 

performed to support this Final Rule for 

MY 2011 as discussed in further detail 

below. To do so, the agency identified 

a range of estimates from current peerreviewed estimates of the value of the 

SCC, and then tested the sensitivity of 

alternative CAFE standards to this range 

of uncertainty while holding the other 

economic parameters used in its 

analysis fixed at their estimated values. 

The range of estimates, which the 

agency believes fairly represents the 

uncertainty surrounding the value of the 

SCC, consists of a domestic value ($2) 

at the lower end, a global value ($33) 

equal to the mean value in Tol (2008) 

and a global value ($80) one standard 

deviation above the mean value. 

NHTSA believes that, based on 

currently available information and 

analysis, $2 is a reasonable domestic 

value and $33 is a reasonable global 

value, but notes the uncertainty 

regarding both values. The agency tested 

the sensitivity of alternative CAFE 

standards to this range of uncertainty 

while holding the other economic 

parameters used in its analysis fixed at 

their estimated values. 

On the basis of this analysis, the 

agency has concluded that its adopted 

standards for MY 2011 are not sensitive 

to the alternative estimates of the value 

of reducing CO2 emissions, so although 

it has selected global and domestic 

values for the SCC for use in analyzing 

the effects of different SCC values on the 

standards in this one-year rulemaking, 

NHTSA believes that is not necessary 

for purposes of this rulemaking to make 

definitive, long term choices about the 

most appropriate global or domestic 

value or to choose between using a 

global versus domestic value. This 

approach is sufficient for this 

rulemaking and will allow efforts to 

make more specific choices to be 

deferred until additional scientific and 

economic evidence can be accumulated, 

and the participation of other federal 

agencies in those efforts can enable the 

development of a consistent estimate for 

use in those agencies’ respective 

regulatory and policy-making activities, 

including the next CAFE rulemaking. 

The agency is well aware that 

scientific and economic knowledge 

about the contribution of GHG 

emissions to changes in the future 

global climate and the potential 

resulting damages to the world economy 

continues to evolve rapidly. Thus, any 

value placed in this rulemaking on 

reducing CO2 emissions is subject to 

likely change. NHTSA recognizes the 

importance of continuing to monitor 

current research on the potential 

economic damages resulting from 

climate change, and of periodically 

updating estimates of the value of 

reducing CO2 emissions to reflect 

continuing advances in scientific and 

economic knowledge about the nature 

and extent of climate change and the 

threat it poses to world economic 

development. NHTSA recognizes the 

interest and expertise of other federal 

agencies, particularly EPA and DOE, in 

the issue of valuing the reductions in 

climate damages that are likely to result 

from those agencies’ own efforts to 

reduce GHG emissions. NHTSA will 

continue to work closely with those and 

other federal agencies in the 

development and review of the 

economic values of reducing GHG 

emissions that it plans to employ in its 

next CAFE rulemaking. 

Global Value of Reducing CO2

Emissions 

To develop a range of estimates that 

accurately reflects the uncertainty 

surrounding the value of reducing 

emissions, NHTSA relied on Tol’s 

(2008) expanded and updated survey of 

211 estimates of the global SCC, which 

was published after the agency 

completed the analysis it conducted to 

develop its proposed CAFE 

standards.325 Tol’s 2008 survey 

encompasses a larger number of 

estimates for the global value of 

reducing carbon emissions than its 

previously-published counterpart, Tol 

(2005), and continues to represent the 

only recent, publicly-available 

compendium of peer-reviewed estimates 

of the SCC that has itself been peerreviewed and published. The wide 

range of estimates it includes reflects 

their authors’ varying assumptions 

about critical parameters that affect the 

SCC, including the sensitivity of the 

global climate system to increasing 

atmospheric concentrations of CO2 and 

other GHGs, the extent of economic 

damages likely to result from climate 

change, the rate at which to discount 

future damages, the relative valuation of 

climate damages likely to be sustained 

by nations with different income levels, 

and the degree of collective aversion to 

the risk of extreme climate change and 

the resulting potential for equally 

extreme economic damages. NHTSA 

believes that Tol’s updated survey 

provides a reliable and consistent 

current basis for establishing a range of 

plausible values for reducing CO2

emissions from fuel production and use. 

Tol’s updated survey includes 125 

estimates of the SCC published in peerreviewed journals through the year 

2006. Each of these represents an 

independent estimate of the world-wide 

value of increased economic damages 

from global climate change that would 

be likely to result from a small increase 

in carbon emissions, and by 

implication, the global value of the 

reduction in future economic damages 

from climate change that would result 

from an incremental decline in GHG 

emissions. Tol reports that the mean 

value of these estimates is $71 per ton 

of carbon emissions, and that the 

standard deviation of this estimate—a 

measure of how much a typical estimate 

differs from their average value—is $98 

per ton; the fact that this latter measure 

is significantly larger than the mean 

value indicates the broad range spanned 

by the estimates. 

NHTSA staff confirmed in 

conversations with the author that these 

values apply to carbon emissions 

occurring during the mid-1990s time 

frame, and are expressed in 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14347 

326Tol (2008), Table 1, p. 16. 

327As noted in an earlier footnote, carbon itself 

accounts for 12/44, or about 27 percent, of the mass 

of carbon dioxide (12/44 is the ratio of the 

molecular weight of carbon to that of carbon 

dioxide). Thus, each ton of carbon emitted is 

associated with 44/12, or 3.67, tons of carbon 

dioxide emissions. Estimates of the SCC are 

typically reported in dollars per ton of carbon, and 

must be divided by 3.67 to determine their 

equivalent value per ton of carbon dioxide 

emissions. 

328Stern, N.H., S.Peters, V.Bakhshi, A.Bowen, 

C.Cameron, S.Catovsky, D.Crane, S.Cruickshank, 

S.Dietz, N.Edmonson, S.-L.Garbett, L.Hamid, 

G.Hoffman, D.Ingram, B.Jones, N.Patmore, 

H.Radcliffe, R.Sathiyarajah, M.Stock, C.Taylor, 

T.Vernon, H.Wanjie, and D.Zenghelis (2006), Stern 

Review: The Economics of Climate Change 

Cambridge University Press, Cambridge, England. 

329See Hope, Chris, and David Newbery, 

‘‘Calculating the Social Cost of Carbon,’’ 

unpublished paper, Cambridge University, May 

2006, p. 15. 330U.S. EPA, Technical Support Document on 

Benefits of Reducing GHG Emissions, EPA–HQ– 

OAR–2008–318–0078.pdf, June 12, 2008. 331Equity weighting assigns higher weights per 

dollar of economic damage from climate change 

that are expected to be borne by lower-income 

regions of the globe, in an attempt to make the 

welfare changes corresponding to those damages 

more comparable to the damages expected to be 

sustained by higher-income world regions. 

332These values are reported in EPA, Table 1. p. 

12. Using the original estimates included in Tol’s 

2008 survey, which were supplied to NHTSA by the 

author, the agency calculates these values at $38 per 

ton and $62 per ton for 3% and 2% discount rates, 

slightly below the estimates reported by EPA. These 

differences may be attributable to the two agencies’ 

use of different measures of inflation to update the 

original estimates from mid-1990s to 2007 price 

levels (NHTSA employs the Implicit Price Deflator 

for U.S. GDP, generally considered to be an accurate 

index of economy-wide price inflation). 

333Tol (2008), Table A1. 

334 Department of Energy, 10 CFR Part 431, 

Energy Conservation Program for Commercial and 

Industrial Equipment: Packaged Terminal Air 

Conditioner and Packaged Terminal Heat Pump 

Energy Conservation Standards: Final Rule, Federal 

Register, October 7, 2008, pp. 58813–58814. 

335Again using the original estimates from Tol’s 

2008 survey supplied by the author, NHTSA 

estimates that excluding the 18 pre-1995 estimates 

from the 125 used to develop the $33 per ton mean 

estimate would increase it to $36 per ton, while 

excluding the 40 estimates that employ equity 

Continued 

approximately 1995 dollars.326 The $71 

mean value of the social cost of 

increased carbon emissions reported by 

Tol corresponds to a global value of $19 

per metric ton of CO2 emissions reduced 

or avoided when expressed in 1995 

dollars, while the $98 standard 

deviation for carbon emissions 

corresponds to $27 per ton of CO2.327

Adjusted to reflect increases since the 

mid-1990s in the marginal damage costs 

of emissions at now-higher atmospheric 

concentrations of GHGs, and expressed 

in 2007 dollars, Tol’s mean value 

corresponds to a global damage cost of 

$33 per ton of CO2 emitted during the 

year 2007, with a standard deviation of 

nearly $47 per ton. Thus, the value that 

is one standard deviation above the $33 

figure is $80 per ton of CO2. 

Many commenters noted that some 

recent estimates of the SCC are 

significantly higher that those reported 

by Tol (2005), and suggested that 

NHTSA employ these higher estimates 

of the SCC to determine the value of 

reducing CO2 emissions. Specifically, 

commenters highlighted the widelycited Stern Review’s estimate that the 

current SCC is likely to be in excess of 

$300 per metric ton of carbon, or 

approximately $80 per ton of CO2.328

Some commenters argued that Stern’s 

estimate should be given substantial 

weight in determining the value of 

reducing CO2 emissions used to develop 

the agency’s final CAFE standards. 

Although Stern’s estimate is reported in 

Tol’s 2008 survey, it is not included in 

the estimates that form the basis for 

NHTSA’s revised range of values, 

because Stern’s study has not yet been 

subjected to formal peer review. 

NHTSA notes that the Stern Report’s 

estimate of the SCC employs a low value 

for the discount rate it applies to future 

economic damages from climate change, 

and that this assumption is largely 

responsible for its high estimate of the 

SCC. Hope and Newbury demonstrate 

that substituting a more conventional 

discount rate would reduce Stern’s 

estimate of the benefits from reducing 

emissions to the range of $20–25 per ton 

of CO2, which is well within the range 

of other estimates summarized in Tol’s 

2008 survey, and significantly below the 

$33 equivalent of the mean of peerreviewed estimates Tol reports.329

Other commenters noted that EPA has 

recently developed preliminary 

estimates of the value of reducing CO2

emissions, and recommended that 

NHTSA employ these values in its 

analysis of alternative CAFE standards. 

EPA’s estimates are reported in that 

agency’s Technical Support Document 

on Benefits of Reducing GHG Emissions 

(GHG Benefits TSD) accompanying its 

Advance Notice of Proposed 

Rulemaking on motor vehicle CO2

emissions.330 In that document, EPA 

derives estimates of the SCC using the 

subset of estimates included in Tol’s 

2008 survey drawn from peer-reviewed 

studies published after 1995 that do not 

employ so-called equity weighting.331

Updated from their original mid-1990s 

values to reflect increases in the 

marginal damage costs of emissions at 

growing atmospheric concentrations of 

CO2 and expressed in 2006 dollars, EPA 

reports average values of $40 per ton of 

CO2 for studies using a 3 percent 

discount rate, and $68 per ton for 

studies using a 2 percent discount 

rate.332 (The discount rates employed in 

developing the 125 peer-reviewed 

estimates surveyed by Tol ranged from 

1 to 10 percent.333) 

NHTSA recognizes that in a recent 

rulemaking, DOE used a range of values 

from $0 to $20 (in 2007 dollars) per ton 

to estimate the benefits of reductions in 

CO2 emissions resulting from new 

energy conservation standards for 

commercial air conditioning 

equipment.334 DOE derived the upper 

bound of this range from the mean of 

published estimates of the SCC reported 

in the same earlier survey by Tol (2005) 

that NHTSA relied upon for the value it 

used to analyze the CAFE standards 

proposed in the NPRM, and the lower 

bound from the assumption that 

reducing CO2 emissions would produce 

no economic benefit. However, NHTSA 

believes that the estimates of the mean 

and standard deviation derived from 

Tol’s more recent (2008) and 

comprehensive survey of published 

estimates of the SCC provides a more 

up-to-date range of values for reductions 

in CO2 emissions resulting from higher 

CAFE standards, primarily because 

Tol’s 2008 survey includes a larger 

number of estimates of the SCC, as well 

as more recently-published estimates. 

The agency is aware that rapid 

advances in modeling climate change 

and its potential economic damages 

have occurred over the past decade, and 

that the choice of discount rates has an 

important influence on estimates of the 

SCC. In its next CAFE rulemaking, 

NHTSA will be working closely with 

EPA and other federal agencies to 

review the arguments for more selective 

use of published estimates of the SCC 

advocated by the EPA. However, based 

on the information gathered and 

analysis performed by the agency 

through last fall, and in view of the fact 

that this is a one model year rulemaking 

and the agency will review matters in 

considerable detail for the post MY 2011 

proposal to be issued later this year, 

NHTSA is not now taking that step. 

Thus, for the purposes of this final rule, 

NHTSA has elected to use all 125 SCC 

estimates from peer-reviewed studies 

reported by Tol, instead of the more 

limited subset of these estimates relied 

upon by EPA. Including the full array of 

studies provides a reasonable basis for 

valuing reductions in CO2 emissions. 

Specifically, NHTSA believes that there 

is still value at this time in considering 

pre-1995 studies and those that employ 

equity weighting (which account for 58 

of the 125 peer-reviewed estimates 

included in Tol’s survey), particularly 

recognizing that those studies have been 

published in peer-reviewed journals.335

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weighting would reduce the mean estimate to $23 

per ton. Excluding both pre-1995 estimates and 

those that employ equity weighting would 

eliminate a total of 58 of the 125 peer-reviewed 

estimates, and reduce their mean value to $20 per 

ton. 

336Climate economic studies report estimates of 

the SCC for specific future years, often in the form 

of a value for some stated base year and an estimate 

of the annual rate at which it will grow, as total 

atmospheric concentrations of GHGs are assumed to 

increase. These studies use some assumed rate to 

discount economic damages that are projected to 

occur over a very long span of future years to their 

present values as of the future year when emissions 

increases are assumed to occur. These estimates of 

the SCC during specific future years are used to 

value the reductions in GHG emissions that would 

result each year over the lifetimes of vehicles 

affected by CAFE standards; for example, higher 

CAFE standards for model year 2011 cars and light 

trucks would reduce GHG emissions each year from 

2011 through approximately 2047, and the value of 

reducing those emissions by one ton will rise each 

year over that span. The estimated economic values 

of the reductions in GHG emissions during each of 

those future years must in turn be discounted to 

their present values as of today, so that they can be 

compared with the present values of other benefits 

and with vehicle manufacturers’ costs for meeting 

higher CAFE standards. The rate used to perform 

this latter discounting must be selected by NHTSA, 

and the choice of its value is discussed in detail in 

Section V.B.14. 

337Under the conventional assumption that 

successive increases in consumption produce 

progressively smaller improvements in economic 

welfare, the welfare level associated with the mean 

of a range of possible consumption levels is higher 

than the mean of the welfare levels associated with 

each possible level of consumption. Moreover, the 

difference between these welfare levels increases as 

the span of possible consumption levels is 

broadened, as would occur if increased GHG 

emissions have the potential to cause drastic 

climate changes and result in similarly drastic 

economic damages. In this situation, the true 

economic costs of increased emissions include not 

only the resulting increase in the probabilistic 

expected value of climate-related economic 

damages, but also the compensation that those 

suffering these damages would require in order to 

willingly accept the increased risk of catastrophic 

damages, even if that risk is extremely small. 

Conversely, the value of reducing GHG emissions 

should include not only the resulting reduction in 

the expected value of future climate-related 

economic damages, but also the added amount 

people would be willing to pay for the associated 

reduction in the risk that such catastrophic damage 

might occur. 

338Tol estimates that including an appropriate 

risk premium would increase the mean estimate of 

the SCC included in his more recent survey by 15– 

27%; see Tol (2008), Table 2. 

339Hope, Chris, and David Newbery (2006), 

Calculating the social cost of carbon, University of 

Cambridge, May 2, 2006. 

For the purpose of this rulemaking, 

NHTSA has also elected not to base its 

estimates of the value of reducing CO2

emissions solely on estimates that 

utilize a single discount rate. NHTSA 

acknowledges that the varying discount 

rates employed by different researchers 

are an important source of the 

significant differences in their resulting 

estimates of the SCC. However, the 

agency believes that the appropriate rate 

at which to discount economic damages 

occurring in the distant future is an 

economic parameter whose correct 

value for the purpose of analyzing 

future climate change and the resulting 

economic damages is subject to 

significant uncertainty, analogous to 

that surrounding other critical scientific 

and economic parameters in climate 

analysis. In the agency’s view, it is 

reasonable to consider estimates based 

on different discount rates at the present 

time instead of attempting to resolve 

this uncertainty in the time left to 

complete this one-year rulemaking by 

limiting the sample of estimates to those 

that employ the single discount rate it 

regards as most appropriate. In its next 

CAFE rulemaking, NHTSA will work 

with EPA, DOE and other federal 

agencies to consider anew the issue of 

whether to rely exclusively on values of 

the SCC that are developed using 

discount rates that are consistent with 

the rate the agency uses to discount the 

value of reductions in future GHG 

emissions reductions to their present 

values.336

As some commenters pointed out, 

another approach NHTSA could rely on 

to estimate the value of reducing GHG 

emissions would be to use actual or 

projected prices for CO2 emission 

permits in nations that have adopted or 

proposed GHG emission cap and trade 

systems. In theory, permit prices would 

reflect the incremental costs for 

achieving the last emissions reductions 

necessary to comply with the overall 

emissions cap. If this cap were based on 

an estimate of the level of global 

emissions required to prevent an 

unacceptable degree of climate change, 

permit prices could provide an estimate 

of the benefits of reducing GHG 

emissions to a level that forestalls 

unacceptable climate change. A related 

approach would be to use estimates of 

the cost of reducing emissions from 

specific sources other than passenger 

cars or light trucks to estimate the value 

of reducing CO2 emissions via higher 

CAFE standards, under the reasoning 

that requiring higher fuel economy for 

cars and light trucks would allow these 

costs to be avoided or saved. 

NHTSA considered the use of CO2

permit prices to measure the benefits 

from reducing emissions via higher 

CAFE standards, but did not select this 

approach primarily because of the 

current difficulty in deciding what is 

considered an ‘‘acceptable’’ degree of 

climate change. The answer to that 

question cannot be provided by 

environmental, technological or 

economic analyses alone or even in 

combination; answering that question 

also involves policy judgment. The 

agency also notes that there would also 

be considerable scientific uncertainty in 

determining the level of emissions 

reduction that would be necessary to 

limit climate change to any degree that 

was deemed acceptable, even if 

agreement on the latter could be 

achieved. Since permit prices would 

depend on the level of emission 

reduction that is required, they are 

likely to reflect this uncertainty. 

Additionally, as a general matter, permit 

prices reflect avoided costs of emission 

reductions and there is no direct or 

necessary relationship between avoided 

costs and benefits. 

Finally, still other commenters urged 

the agency to take into account the 

economic value of any reduction in the 

risk of catastrophic climate events 

resulting from lower GHG emissions 

when estimating the benefits from 

reducing emissions. Most of the 

estimates of the SCC that are included 

in Tol’s updated review treat the risks 

and potential damages from catastrophic 

events using conventional probabilistic 

methods to compute the ‘‘expected’’ 

value of a wide range of potential 

changes in climate and associated 

economic damages. However, few 

studies of the SCC attempt to include 

explicit premiums that measure the 

population’s aversion to accepting the 

risks of catastrophic climate damages.337

Further, most published studies of 

climate damages report insufficiently 

detailed results to allow the calculation 

of appropriate risk premiums. 

NHTSA acknowledges that including 

an appropriate premium to reflect the 

value of reducing the risks of 

catastrophic climate events could 

significantly increase its estimate of the 

value of reducing CO2 emissions, but it 

has not attempted to do so at this 

time.338 (For discussion of NHTSA’s 

consideration of abrupt climate change, 

see § 3.4.3.2.4 of the FEIS.) However, the 

agency is aware of recent research 

suggesting that including an appropriate 

risk premium can significantly increase 

estimates of the SCC, and by implication 

increase the estimated value of reducing 

CO2 emissions.339 In working with EPA, 

DOE and other federal agencies in the 

development of revised estimates of the 

benefits from reducing CO2 emissions 

that could be used in the next CAFE 

rulemaking, NHTSA will carefully 

consider any new research that 

explicitly estimates risk premiums, and 

evaluate their applicability to the issue 

of estimating economic benefits from 

reductions in CO2 emissions resulting 

from future CAFE standards. The agency 

will also work with those agencies and 

departments in exploring the possibility 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14349 

340U.S. EPA, Technical Support Document on 

Benefits of Reducing GHG Emissions, June 12, 2008. 

341These values are reported in EPA, Table 1. p. 

12. 

342Mark A. Delucchi, Summary of the NonMonetary Externalities of Motor Vehicle Use, UCD– 

ITS–RR–96–3 (9) rev. 1, Institute of Transportation 

Studies, University of California, Davis, originally 

published September 1998, revised October 2004, 

pp. 49–51. Available at http://www.its.ucdavis.edu/ 

publications/2004/UCD-ITS-RR-96-03(09)_rev1.pdf 

(last accessed March 23, 2009). 

of calculating an appropriate risk 

premium using results reported in 

published studies of the SCC together 

with any necessary assumptions about 

the underlying economic behavior, such 

as the response of welfare to successive 

increases in consumption levels. 

Domestic Value of Reducing CO2

Emissions 

The agency was able to develop a 

domestic value by using the mean 

estimate of the global value of reduced 

economic damages from climate change 

resulting from reducing CO2 emissions 

as a starting point; estimating the 

fraction of the reduction in global 

damages that is likely to be experienced 

within the U.S.; and applying this 

fraction to the mean estimate of global 

benefits from reducing emissions to 

obtain an estimate of the U.S. domestic 

benefits from lower GHG emissions. 

The agency constructed an estimate of 

the U.S. domestic benefits from 

reducing CO2 emissions using estimates 

of U.S. domestic and global benefits 

from reducing greenhouse gas emissions 

developed by EPA and reported in that 

agency’s Technical Support Document 

accompanying its advance notice of 

proposed rulemaking on motor vehicle 

CO2 emissions.340 Specifically, NHTSA 

calculated the ratio of domestic to global 

values of reducing CO2 emissions 

estimated by EPA using the Climate 

Framework for Uncertainty, Negotiation, 

and Distribution (FUND) integrated 

assessment model. 

EPA’s central estimates of domestic 

and global values for reducing GHG 

emissions during 2007 using the FUND 

model using a 3 percent discount rate 

were $1 and $17 per metric ton (in 

2006$), which suggests that benefits to 

the U.S. from reducing CO2 emissions 

are likely to represent about 6 percent 

of their global total. The comparable 

figures derived using a 2 percent 

discount rate are $4 and $88 for 2007, 

suggesting that U.S. domestic benefits 

from reductions in CO2 emissions 

would amount to less than 5 percent of 

their global total. EPA’s results also 

suggest that these fractions are likely to 

remain roughly constant over future 

decades.341 Applying the 5–6 percent 

figure to the $33 per metric ton mean 

estimate of the global value of reducing 

CO2 emissions derived previously yields 

an estimate of approximately $2 per 

metric ton for the domestic benefit from 

reducing U.S. CO2 emissions in 2007. 

NHTSA also constructed a second 

estimate of the fraction of global 

economic damages from climate change 

likely to be borne by the U.S., using the 

procedure described by Delucchi in his 

comments on the NPRM.342 Delucchi 

noted that the fraction of global damages 

from climate change borne within the 

U.S. can be estimated by adjusting the 

U.S. share of world economic output, 

measured by the ratio of U.S. GDP to 

gross world product, by the relative 

sensitivity of U.S. and world economic 

output to damages resulting from 

climate change. Using data on the U.S. 

share of world economic output (which 

ranges from 20–28 percent) and 

published estimates of the relative 

sensitivity of the U.S. economy to 

climate damages compared to the world 

economy as a whole, Delucchi estimated 

that the U.S. fraction of global economic 

damages from climate change is likely to 

range from 0–14 percent. Applying the 

midpoint of this range (7 percent) to the 

$33 per ton mean estimate of the global 

value of reducing CO2 emissions also 

yields an estimate of approximately $2 

per metric ton for the domestic benefit 

from reducing U.S. CO2 emissions in 

2007. 

Choosing Between a Global Value and a 

Domestic Value, and Estimating the 

Global Values 

As the IPCC has noted, CO2 and other 

GHGs are chemically stable, and thus 

remain in the atmosphere for periods of 

a decade to centuries or even longer, 

becoming well-mixed throughout the 

earth’s atmosphere. As a consequence, 

emissions of these gases have extremely 

long-term effects on the global climate. 

Further, emissions from any particular 

geographic area (for example, the U.S.) 

are expected to contribute to changes in 

the global climate that will affect many 

other countries around the world. 

Similarly, emissions occurring in other 

countries will contribute to changes in 

the earth’s future climate that are 

expected to affect the well-being of the 

U.S. The long-lived nature of 

atmospheric GHGs means that 

emissions of these gases from any 

location or source can affect the global 

climate over a prolonged period, and 

can thus result in economic damages to 

many other nations as well as over 

subsequent generations. 

In view of the global effects of GHG 

emissions, reducing those emissions to 

an economically efficient level, i.e., one 

that maximizes the difference between 

the total benefits from limiting the 

extent of climate change and the total 

costs of achieving the reduction in 

emissions necessary to do so, would 

require each individual nation to limit 

its own domestic emissions to the point 

where its domestic costs for further 

reducing emissions within its borders 

equal the global value of reduced 

economic damages that result from 

limiting climate change. NHTSA 

believes that this argument has 

considerable merit from the standpoint 

of economic theory. 

If individual nations were instead to 

consider only the domestic benefits they 

receive from limiting the pace or extent 

of climate change, each nation would 

reduce emissions only to the point 

where its costs for achieving further 

reductions equal the benefits to its 

domestic economy from limiting the 

impacts of climate change. As a result, 

the combined global reduction in 

emissions resulting from individual 

nations’ comparisons of their domestic 

benefits from limiting climate change to 

their domestic costs for reducing 

emissions might be inadequate to slow 

or limit climate change. 

At the same time, however, the 

agency must also consider the 

economic, environmental and other 

effects on the U.S. that a choice of a 

global value in this rulemaking might 

have, given the current stage of ongoing 

domestic legislative activity and 

negotiations regarding effective 

international cooperation and 

coordination. NHTSA notes that there 

might be risks to nations that 

unilaterally attempt to reduce their 

emissions by adopting policies or 

regulations whose domestic marginal 

costs equal the global marginal benefits 

from reducing the threat of climate 

change. Such actions could induce 

economic activity within their borders— 

particularly production by emissionsintensive industries—to shift to nations 

that adopt less stringent regulations or 

lower economic penalties on emissions 

within their respective borders. Such a 

shift would cause emissions abroad to 

increase, offsetting at least some of the 

benefits of domestic emissions 

reductions. 

The agency recognizes that the 

arguments for using global versus 

domestic values of reducing GHG 

emissions are complex, and cannot be 

resolved satisfactorily by the unilateral 

actions of any single federal agency. 

Instead, resolution of whether to use a 

domestic or global value for reducing 

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14350 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

343A two-standard deviation range around the 

agency’s $33 per ton central estimate would extend 

from minus $59 to $126 per ton of CO2 emissions. 

The agency notes that the lower end of this range 

implies economic benefits of $59 for each 

additional ton of CO2 emissions during 2007, while 

its upper end significantly exceeds all but two of 

the 125 peer-reviewed estimates included in Tol’s 

2008 survey. 

344A value one standard deviation below the $33 

mean would be ¥$14 per ton, which implies 

economic benefits of $14 for each additional ton of 

emissions. Because of this implication, NHTSA 

regards the $2 per ton estimate of the domestic 

value of reducing emissions as a more plausible 

lower bound on the value of reducing emissions 

than the $¥14 per ton figure. 

345Tol reports that the 90% confidence limit of 

the distribution of peer-reviewed values is $170 per 

ton, while adding one standard deviation to his 

reported mean yields a value of $169; see Tol 

(2008), Table 1. 

346 Yohe et al. (2007), p. 13 reports that ‘‘* * * 

it is very likely that the rate of increase [in the 

social cost of carbon] will be 2% to 4% per year.’’ 

However, p. 822 states that ‘‘* * * the SCC will 

increase over time; current knowledge suggests a 

2.4% per year rate of growth.’’ 

347Hope, C.W. (2006), The Marginal Impact of 

CO2 from PAGE2002: An Integrated Assessment 

Model Incorporating the IPCC’s Five Reasons for 

Concern, Integrated Assessment Journal, 6, (1), 19– 

56; and Hope, Chris, and David Newbery (2006), 

Calculating the social cost of carbon, University of 

Cambridge, May 2, 2006. 

348 In all analyses that employ its estimated value 

of the global benefits from reducing CO2 emissions, 

NHTSA reduces the value of the savings in 

monopsony costs from lower U.S. petroleum 

consumption and imports to zero. This is consistent 

with the fact that when viewed from the same 

global perspective that justifies the use of a global 

value for reducing emissions, these monopsony 

payments represent a transfer of economic 

resources from consumers of petroleum products to 

petroleum producers, rather than an actual savings 

in economic resources, and thus do not constitute 

a real economic benefit. 

emissions, and developing reliable 

estimates of those values, as relevant, 

will require active participation by all 

federal agencies whose regulatory and 

policy-making activities will be affected 

by this decision, as well as leadership 

from the Administration. In reaching 

such a consensus, participants will need 

to assess not only the economic 

arguments favoring global versus 

domestic values of reducing emissions, 

but also the prospects for effective 

international cooperation to reduce 

global GHG emissions, the likelihood 

that leadership by the U.S. in seeking 

emissions reductions would spur 

international efforts to reduce 

emissions, and the precedents 

established by federal agencies that have 

previously evaluated benefits from 

regulations that lower GHG emissions. 

They will also need to consider 

arguments that U.S. citizens may attach 

some value to reductions in the threat 

of climate impacts occurring in other 

regions of the globe, and that reducing 

the impacts of climate change on other 

nations may have important ‘‘spillover’’ 

benefits to the U.S. itself. A position has 

not been adopted by the relevant 

entities. 

In these circumstances, NHTSA 

decided to take a pragmatic approach to 

estimating the value of reducing GHG 

emissions for the immediate and limited 

purpose of this rulemaking. As noted 

above, we used the mean value in Tol 

(2008). To develop a reasonable upperbound estimate of that value for 

purposes of this rule, the agency used a 

value one standard deviation above the 

$33 mean value.343 As also noted above, 

the standard deviation of peer-reviewed 

estimates from Tol’s 2008 survey is $47 

per ton when expressed in comparable 

terms, which yields an upper-bound 

estimate of $80 per ton (equal to $33 

plus $47) of CO2 emissions avoided.344

Because the $80 per ton value is higher 

than those corresponding to nearly 90% 

of the 125 peer-reviewed estimates of 

the SCC included in the survey, the 

agency views it as a reasonable upper 

bound on the likely global value of 

reducing CO2 emissions.345 For the 

purposes of this rulemaking, NHTSA 

believes that the range extending from 

the $2 per ton estimate of the domestic 

value of reducing CO2 emissions to the 

$80 per ton estimate of the global value 

is sufficiently broad to illustrate the 

sensitivity of alternative MY 2011 CAFE 

standards and the resulting fuel savings 

and emissions reductions to plausible 

differences in the SCC. 

Rate of Growth of SCC 

The marginal cost per ton of 

additional CO2 emissions is generally 

expected to rise over time, because the 

increased pace and degree of climate 

change—and thus the resulting 

economic damages—caused by 

additional emissions are both expected 

to rise in proportion to the existing 

concentration of CO2 in the earth’s 

atmosphere. The IPCC Fourth 

Assessment Report variously reported 

that the climate-related economic 

damages resulting from an additional 

ton of carbon emissions are likely to 

grow at a rate of 2.4 percent annually, 

and at a rate of 2–4 percent annually.346

Virtually all commenters who addressed 

this issue indicated that the IPCC 

intended the 2.4 percent growth rate it 

reported for the SCC in one passage to 

instead read ‘‘2–4 percent,’’ and many 

urged NHTSA to apply a 3 percent or 

higher growth rate to determine the 

future value of the SCC. 

NHTSA staff reviewed the underlying 

references from which the disputed 

figure was derived, and those sources 

clearly report the growth rate implied by 

their estimates of the future value of the 

SCC for different future years as 2.4 

percent, instead of the 2–4 percent 

asserted by commenters.347 Although 

most studies that estimate economic 

damages caused by increased GHG 

emissions in future years produce an 

implied growth rate in the SCC, neither 

the rate itself nor the information 

necessary to derive its implied value is 

commonly reported. NHTSA has been 

unable to locate other published 

research that reports the likely future 

rate of growth in damage costs from CO2

emissions or the information required to 

derive it. NHTSA understands that other 

researchers may be using alternative 

growth rates. The agency may revise the 

estimated rate of growth it uses in its 

future analyses based on emerging 

estimates in the literature and on 

interagency coordination with the EPA, 

DOE and other federal agencies. 

For the purposes of this rulemaking, 

NHTSA used the 2.4 percent annual 

growth rate to calculate the future 

increases in its estimates of both the 

domestic ($2/metric ton in 2007) and 

global ($33/metric ton and $80/metric 

ton in 2007) values of reducing CO2

emissions. Over the lifetimes of cars and 

light trucks subject to the CAFE 

standards it is establishing for model 

year 2011, these values average nearly 

$4, $61, and $157 per ton of CO2

emissions, approximately twice their 

estimated values during 2007. The 

agency is unaware of the basis for EDF’s 

assertion that the 2.4 percent growth 

rate is to be used only in conjunction 

with an intergenerational discount rate 

with a maximum of 3 percent. Although 

the agency’s analysis did follow EDF’s 

suggestion in any case, NHTSA selected 

the growth rate in the future value of 

reducing CO2 emissions and the 

discount rate applied to these benefits 

for separate reasons, as discussed in 

detail previously. 

Insensitivity of MY 2011 Standards to 

Different Values of SCC 

NHTSA examined the sensitivity of 

alternative CAFE standards for MY 2011 

to the choice among three different 

estimates of the value of reducing CO2

emissions from fuel production and use: 

(1) The mean estimate of the global 

value of reducing emissions derived as 

discussed previously from Tol’s 2008 

survey—$33 per ton; (2) a value one 

standard deviation above this mean 

estimate—$80 per ton; and (3) the 

estimate of the value of U.S. domestic 

benefits from lower emissions derived 

as discussed above—$2 per ton.348

The agency tested the sensitivity of its 

‘‘optimized’’ CAFE standards for MY 

2011 passenger cars and light trucks to 

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349As noted above earlier in the discussion of 

SCC, NHTSA plans to review this practice in the 

next CAFE rulemaking. 

350See Department of Transportation, Guidance 

Memorandum, ‘‘The Value of Saving Travel Time: 

Departmental Guidance for Conducting Economic 

Evaluations,’’ Apr. 9, 1997. Available at http:// 

ostpxweb.dot.gov/policy/Data/VOT97guid.pdf (last 

accessed August 20, 2008); update available at 

http://ostpxweb.dot.gov/policy/Data/ 

VOTrevision1_2-11-03.pdf (last accessed August 20, 

2008). 

351The average hourly wage rate during 2006 was 

estimated to be approximately $25.00 per hour. For 

urban travel, the DOT guidance recommends that 

personal travel (which accounts for 94.4 percent of 

urban automobile travel) be valued at 50 percent of 

the hourly wage rate, while business travel (5.6 

percent of urban auto travel) should be valued at 

100 percent of the hourly wage rate. For intercity 

travel, personal travel (which represents 87 percent 

of intercity automobile travel) is valued at 70 

percent of the wage rate, while business travel (the 

remaining 13 percent) is valued at 100 percent of 

the wage rate. The resulting average values of travel 

time are $13.20 for urban travel and $18.48 for 

intercity travel. Multiplying these by average 

vehicle occupancy (1.6) produces estimates of 

$21.12 and $29.56 for the value of time per vehiclehour in urban and rural travel. Using the fractions 

of urban and rural travel reported above, the 

weighted average of these values is $23.91 per hour. 

Departmental Guidance for Valuation of Travel 

Time in Economic Analysis, 1997. Available at 

http://ostpxweb.dot.gov/policy/Data/ 

VOT97guid.pdf (last accessed Nov. 2, 2008). 

the choice among those three alternative 

values for reducing CO2 emissions. The 

agency’s analysis revealed that the 

optimized CAFE standards for MY 2011 

cars and light trucks were unaffected by 

the choice among those values for 

reducing CO2 emissions from fuel 

production and use. The detailed results 

of this analysis are reported in the 

agency’s previously-released Final 

Environmental Impact Statement for MY 

2011–15 CAFE standards. 

There are several reasons for the 

insensitivity of the MY 2011 standards 

to the different values of the SCC. First, 

not more than 15 percent of all models 

are being redesigned for MY 2011, thus 

limiting the changes that can be made. 

Second, in any year, the value of 

gasoline has a far greater effect on the 

potential level of the CAFE standards 

than the SCC. Third, in the analyses that 

employ the $33 or $80 per ton global 

values of the benefits from reducing CO2

emissions, NHTSA reduces the savings 

in monopsony costs from lower U.S. 

petroleum consumption and imports to 

zero.349 This is done in order to be 

consistent with the fact that monopsony 

payments are a transfer rather than a 

real economic benefit when viewed 

from the same global perspective. This 

reduction partly offsets the effect of the 

higher CO2 value on the optimized 

CAFE standards and resulting benefits. 

It does not do so completely, however, 

because the value of reducing CO2

emissions continues to grow at the 

assumed 2.4 percent rate over the period 

spanned by the analysis, nearly 

doubling over the lifetimes of MY 2011 

vehicles. 

Decision Regarding the Value of SCC 

Given the insensitivity of the 

potential standards to the various values 

of SCC used in the above analysis, 

NHTSA concludes that it is unnecessary 

for the agency to select a single estimate 

of the value of reducing CO2 emissions 

for inclusion in its analysis as part of 

this rulemaking. For that reason and in 

view of the significance that announcing 

the selection of either a domestic or 

global value in this rulemaking might 

have in the context of ongoing 

legislative activities and international 

negotiations, we are deferring the choice 

between a domestic SCC and a global 

SCC and, for the appropriate choice, the 

monetized value for the benefit of 

reduction, until the next CAFE 

rulemaking. This will provide the time 

necessary for more refined analysis and 

for the various affected federal agencies 

to work together and identify a 

consistent value for use in their 

respective regulatory and policy-making 

activities. NHTSA expects to participate 

actively in the process of developing an 

appropriate range of estimates for that 

value. By the time we issue a proposal 

this summer for MY 2012 and beyond, 

we anticipate those activities and efforts 

will have progressed sufficiently to 

enable the federal agencies to make an 

informed choice that we can use as a 

basis for that rulemaking. NHTSA 

expects that the economic value of 

reducing CO2 emissions will play an 

important role in developing and 

analyzing standards in the next CAFE 

rulemaking which, unlike this 

rulemaking, we expect to be a five-year 

rulemaking. 

13. The Value of Increased Driving 

Range 

NHTSA also considered the fact that 

improving vehicles’ fuel economy may 

increase their driving range before they 

require refueling. By reducing the 

frequency with which drivers typically 

refuel their vehicles, and by extending 

the upper limit of the range they can 

travel before requiring refueling, 

improving fuel economy provides some 

additional benefits to drivers. 

Alternatively, if manufacturers respond 

to improved fuel economy by reducing 

the size of fuel tanks to maintain a 

constant driving range, the resulting 

savings in manufacturing costs will 

presumably be reflected in lower 

vehicle sales prices. 

NHTSA stated in the NPRM that no 

direct estimates of the value of extended 

vehicle range are readily available, so 

NHTSA’s analysis calculates the 

reduction in the annual number of 

refueling cycles that results from 

improved fuel economy, and applies 

DOT-recommended values of travel time 

savings to convert the resulting time 

savings to their economic value.350 The 

NPRM provided the following 

illustration of how the value of 

extended refueling range is estimated: A 

typical small light truck model has an 

average fuel tank size of approximately 

20 gallons. Assuming that drivers 

typically refuel when their tanks are 20 

percent full (i.e., 4 gallons in reserve), 

increasing this model’s actual on-road 

fuel economy from 24 to 25 mpg would 

extend its driving range from 384 miles 

(16 gallons × 24 mpg = 384 miles) to 400 

miles (16 gallons × 25 mpg = 400 miles). 

Assuming that the truck is driven 

12,000 miles per year, this reduces the 

number of times it needs to be refueled 

from 31.3 (12,000 miles per year ÷ 384 

miles per refueling) to 30.0 (12,000 

miles per year ÷ 400 miles per 

refueling), or by 1.3 refuelings per year. 

Weighted by the nationwide mix of 

urban (about 2/3) and rural (about 1/3) 

driving and average vehicle occupancy 

for all driving trips (1.6 persons), the 

DOT-recommended value of travel time 

per vehicle-hour is slightly below 

$24.00 (in 2006 dollars).351 Assuming 

that locating a station and filling up 

requires ten minutes, the annual value 

of time saved as a result of less frequent 

refueling amounts to $5.20 (calculated 

as 1.3 refuelings/year × 10/60 hours/ 

refueling × $24.00/hour). This 

calculation is repeated for each future 

calendar year that vehicles affected by 

the alternative CAFE standards 

evaluated in this rule would remain in 

service. Like fuel savings and other 

benefits, however, the total value of this 

benefit for vehicles produced during a 

model year declines over their expected 

lifetime, because a smaller number of 

those vehicles remain in service each 

year, and those remaining in service are 

driven fewer miles. 

NHTSA received comments only from 

the Alliance regarding the benefits that 

drivers receive from increased driving 

range. The Alliance stated that ‘‘NHTSA 

incorrectly assumes that its new fuel 

economy standards will improve 

vehicle range and thus reduce the 

number of times a vehicle owner would 

have to refill the tank (creating 

consumer benefits).’’ The Alliance 

comments focused on two points: first, 

that analysis by Sierra Research 

demonstrates ‘‘the complete absence of 

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352Office of Management and Budget, Circular A– 

4, ‘‘Regulatory Analysis,’’ September 17, 2003, at 

33. Available at http://www.whitehouse.gov/omb/ 

circulars/a004/a-4.pdf (last accessed November 13, 

2008). 

353See NPRM discussion at 73 FR 24415–16 (May 

2, 2008). 

any relationship between fuel economy 

and range in the light truck fleet,’’ and 

second, that manufacturers ‘‘design fuelstorage capacity to achieve the basic 

range requirements consumers 

demand,’’ and will reduce the space 

necessary for fuel tanks in order to 

devote it to other uses (such as 

increasing cargo space) if fuel economy 

levels rise. The Alliance argued that 

NHTSA’s assumption that raising fuel 

economy levels will improve vehicle 

range and thus result in more miles 

driven (i.e., the rebound effect) are ‘‘not 

supported by existing data’’ and 

contradicted by the Sierra Research 

analysis. For example, Sierra Research 

found that the driving range for the 

Chevrolet Suburban has decreased from 

588 to 527 miles as its fuel economy has 

improved from 1992 to 1999, because 

the gas tank capacity was decreased in 

the new body from 42 gallons to 31 

gallons. 

Agency response: In response to the 

Alliance’s comments, NHTSA notes that 

the most likely explanation for the 

absence of a relationship between fuel 

economy and refueling range is that 

manufacturers adjust fuel tank size to 

achieve some target level of refueling 

range. If by doing so, manufacturers are 

able to reduce the space occupied by 

fuel tanks and devote it to increased 

passenger or cargo carrying capacity, as 

the Alliance asserts, this presumably 

reflects manufacturers’ view that those 

attributes are more valuable to vehicle 

owners than increased refueling range, 

or that the resulting savings in vehicle 

production costs are more valuable to 

buyers than extended refueling range. If 

manufacturers respond in either of these 

ways, they apparently estimate that the 

resulting increase in the vehicle’s utility 

to potential buyers is more valuable 

than the increase in refueling range that 

would result from holding tank size 

fixed. Thus, NHTSA’s estimate of the 

value of increased refueling range is 

likely to underestimate the true benefits 

from the resulting changes in vehicle 

attributes or prices. As a consequence, 

the agency has chosen not to modify the 

procedure it uses to estimate the 

economic value of this benefit. 

14. Discounting Future Benefits and 

Costs 

The discount rate applied to future 

benefits and costs of reduced fuel 

consumption has a significant effect on 

the stringency of the final standards. 

Discounting converts the economic 

values of benefits and costs that are 

expected to occur in the future to their 

equivalent values today (or present 

values), to account for the reduction in 

their value when they are deferred until 

some later date rather than received 

immediately. Discounting reflects the 

fact that most people view economic 

outcomes that are not expected to occur 

until some future date as less valuable 

than equivalent outcomes that occur 

sooner. Discounting is particularly 

important to enable consistent 

comparison of economic costs and 

benefits that are expected to occur in the 

future to those occurring in the present, 

or when the future time profiles of 

benefits and costs are not expected to be 

similar. The discount rate expresses the 

percent decline in the value of future 

benefits or costs—as viewed from 

today’s perspective—for each year they 

are deferred into the future. 

In the NPRM, NHTSA proposed to use 

a rate of 7 percent per year to discount 

the value of future fuel savings and 

other benefits when analyzing the 

potential impacts of alternative CAFE 

standards. NHTSA relied primarily on 

the 7 percent discount rate for two 

reasons. First, OMB guidance states that 

7 percent reflects the economy-wide 

opportunity cost of capital, and that it 

‘‘is the appropriate discount rate 

whenever the main effect of a regulation 

is to displace or alter the use of capital 

in the private sector.’’ 352 NHTSA 

believes that much of the cost of CAFE 

compliance to manufacturers is likely to 

come at the expense of other 

investments the auto manufacturers 

might otherwise make, for example, in 

research and development of new 

technologies. Second, NHTSA’s analysis 

in the NPRM determined that 7 percent 

is a reasonable estimate of the interest 

rate that vehicle buyers who finance 

their purchases are currently willing to 

pay to defer the added costs of 

purchasing vehicles with higher fuel 

economy.353

However, the agency also performed 

an analysis of benefits from alternative 

increases in CAFE standards using a 3 

percent discount rate, and sought 

comment on whether the final rule 

standards should be set using a 3 

percent rate instead of a 7 percent rate. 

OMB guidance also states that when a 

regulation primarily and directly affects 

private consumption (e.g., through 

higher consumer prices for goods and 

services), instead of primarily affecting 

the allocation of capital, a lower 

discount rate may be more appropriate. 

OMB argues that the consumption rate 

of time preference would be the most 

appropriate discount rate in this 

situation, since it reflects the rate at 

which consumers discount future 

consumption to determine its value at 

the present time. One measure of the 

consumption rate of time preference is 

the rate at which savers are willing to 

defer consumption into the future when 

there is no risk that the borrower will 

fail to repay them, and a readily 

available source of this measure is the 

real rate of return on long-term 

government debt. After adjusting to 

remove the effect of inflation, OMB 

reports that this rate has averaged about 

3 percent over the past 30 years. 

The NPRM analyzed and sought 

comment on both the 7 percent and 3 

percent discount rates because in the 

context of CAFE standards for motor 

vehicles, the appropriate discount rate 

depends on one’s view of how the costs 

of complying with more stringent 

standards are ultimately distributed 

between vehicle manufacturers and 

consumers. Compared to the proposed 

standards set with the 7 percent 

discount rate, NHTSA determined that 

using a 3 percent discount rate would 

raise the combined passenger car and 

light truck standards by about 2 mpg in 

MY 2015 (to 33.6 mpg from 31.6 mpg), 

and would reduce lifetime CO2

emissions of the vehicles affected by the 

proposed standards for MY 2011–15 by 

an additional 29 percent (to 672 mmt, 

instead of 521 mmt). However, NHTSA 

estimated that complying with the 

higher standards would cost an 

additional 89 percent more in 

technology outlays over the five model 

years ($85 billion versus of $45 billion). 

Commenters Calling for NHTSA To Use 

a Lower Discount Rate 

Several commenters, including 

environmental and consumer groups, 

state agencies and Attorneys General, 

and three individuals, called for lower 

discount rates than 7 percent. The 

commenters’ argument for lower 

discount rates is essentially two-fold. 

First, commenters argued that the 

proposed CAFE standards actually affect 

private consumption and not capital 

investments, so consistency with OMB 

guidance requires NHTSA to use a 

discount rate lower than 7 percent. 

Second, commenters argued that 

because reducing CO2 emissions and 

thus the pace or degree of climate 

change is an important component of 

the benefits from higher CAFE 

standards, the fact that these benefits are 

likely to occur in the distant future— 

and thus to be experienced by future 

generations—requires NHTSA to apply 

a lower ‘‘intergenerational’’ discount 

rate. Commenters were unclear about 

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354EPA’s ANPRM is available at 73 FR 44354 

(July 30, 2008). EDF also cited OMB Circular A–4 

and EPA ‘‘Guidelines for Preparing Economic 

Analyses,’’ EPA 240–R–00–003 (2000), available at 

http://yosemite.epa.gov/EE/epa/eed.nsf/pages/ 

Guidelines.html (last accessed August 6, 2008). 

355EDF cited Kenneth J. Arrow et al., Is there a 

Role for Benefit-Cost Analysis in Environmental, 

Health, and Safety Regulation?, 272 Science 173, 

221–222 (April 12, 1996). 

whether this lower discount rate should 

also be applied to the other components 

of benefits resulting from higher CAFE 

standards, which are expected to occur 

within 25–35 years. 

UCS, EDF, NRDC, CARB, and the 

Attorneys General commented that 

NHTSA should use a discount rate of 3 

percent or less for setting the CAFE 

standards. Some commenters, like UCS, 

based their comments on OMB Circular 

A–4. UCS commented that although 

manufacturers will absorb some of the 

costs of the standards by reallocating 

capital from other potential uses, ‘‘the 

amounts involved will be markedly 

smaller than the benefits realized by 

private consumers,’’ specifically, the 

benefits due to reduced ‘‘private 

consumption of vehicle fuels.’’ Thus, 

UCS argued, the standards ‘‘primarily 

and directly affect private 

consumption’’ much more than the 

allocation of capital, so a discount rate 

of 3 percent should be used. CARB 

similarly stated that the fuel economy 

standards will affect private 

consumption over the long-term, so 

OMB guidance indicates that 3 percent 

is a more appropriate discount rate. EDF 

also drew on OMB guidance, but 

emphasized the increased costs to 

consumers of more-expensive passenger 

cars and light trucks as justification for 

using a 3 percent discount rate, rather 

than the benefits from reduced fuel 

consumption. Comments from the 

Attorneys General included both points 

in favor of a 3 percent discount rate 

according to OMB guidance—that 

consumers would face higher vehicle 

costs, but also gain benefits like reduced 

fuel consumption, a better environment, 

and a more secure energy future. 

Other comments made in favor of a 3 

percent discount rate focused on the 

‘‘intergenerational benefits’’ of reducing 

climate change by raising fuel economy 

standards. OMB Circular A–4 suggests 

that it may be appropriate to use a lower 

discount rate than those used for intragenerational analysis when comparing 

costs and benefits that are likely to be 

experienced by different generations. 

Specifically, Circular A–4 notes that 

‘‘Special ethical considerations arise 

when comparing benefits and costs 

across generations. Although most 

people demonstrate time preference in 

their own consumption behavior, it may 

not be appropriate for society to 

demonstrate a similar preference when 

deciding between the well-being of 

current and future generations.’’ (p. 35) 

On this basis, OMB advises that ‘‘If your 

rule will have important 

intergenerational benefits or costs you 

might consider a further sensitivity 

analysis using a lower but positive 

discount rate in addition to calculating 

net benefits using discount rates of 3 

and 7 percent.’’ (p. 36) 

EDF commented that ‘‘The benefits 

from mitigating climate change will 

occur over decades or even centuries; as 

a result, CAFE’s implications for carbon 

dioxide emissions should trigger EPA 

and OMB guidelines for estimating costs 

or benefits that affect multiple 

generations.’’ EDF cited EPA’s draft 

ANPRM on greenhouse gas regulation 

under the Clean Air Act as stating that 

‘‘[w]hen there are important benefits or 

costs that affect multiple generations of 

the population, EPA and the Office of 

Management and Budget (OMB) allow 

for low but positive discount rates (e.g. 

0.5–3 percent noted by US EPA, 1–3 

percent by OMB). Rates of three percent 

or lower are consistent with long-run 

uncertainty in economic growth and 

interest rates, considerations of issues 

associated with the transfer of wealth 

between generations, and the risk of 

high impact climate damages.’’ 354 EDF 

also stated that using a discount rate of 

3 percent or lower ‘‘is also in full 

agreement with the guidance with the 

blue ribbon panel of economists, 

including a Nobel laureate, who 

recommended that the rate at which 

future benefits and costs should be 

discounted to present values will 

generally not equal the rate of return on 

private investment.’’ 355 Thus, EDF 

argued that NHTSA should use a 3 

percent discount rate, with a sensitivity 

analysis using 0.5 and 1 percent. 

NRDC offered a similar comment, 

arguing that this is a multi-generational 

rulemaking because it impacts climate 

change, and that therefore an 

‘‘intergenerational discount rate’’ must 

be used of not more than 3 percent. 

NRDC argued that ‘‘The discount rate is 

often the single most important 

parameter in benefit cost analyses of 

environmental regulations, due to the 

fact that high discount rates 

disadvantage projects whose benefits 

accrue in the future but whose costs are 

borne up front.’’ NRDC’s comment 

included four reasons why the 

intergenerational discount rate must be 

3 percent or less. First, NRDC argued 

that a ‘‘social’’ discount rate must be 

used when there are ‘‘social (i.e., nonprivate) costs and benefits.’’ The CAFE 

standards will reduce fuel consumption, 

which means that society will 

experience the benefits of reduced 

global warming and other air pollution. 

Second, NRDC stated that the proper 

rate is the ‘‘net national welfare’’ or 

NNW, which represents ‘‘the real rate of 

growth in the economy, which takes 

GDP and subtracts from it depreciation 

of natural and man made capital, 

pollution abatement expenses, and 

negative externalities, and then adds to 

it the value of non-market goods, such 

as household labor.’’ NRDC asserted that 

this rate is likely to range from 0 to 1 

percent. Third, NRDC argued that 

because CAFE standards are 

‘‘precautionary’’ in nature and ‘‘reduce 

the likelihood of potentially 

catastrophic climate change or serious 

military security costs,’’ society may be 

willing to pay more to avoid these 

extreme risks, such that a negative 

social discount rate may be appropriate. 

And finally, NRDC argued that ‘‘the use 

of a declining discount rate is the newly 

supported method for climate 

damages.’’ For these reasons, NRDC 

argued that NHTSA should use a 

discount rate no higher than 3 percent 

for setting CAFE standards, and should 

conduct a sensitivity analysis using 

lower rates. 

An individual commenter, Mark Eads, 

also stated that the choices made 

primarily involve long-term intergenerational environmental benefits and 

costs rather than intra-generational 

benefits and costs. Mr. Eads presented 

his summary and comparison of a 

number of scholarly papers considering 

discount rate over the past several years, 

and suggested that NHTSA apply a 

declining discount rate that begins at 2.6 

percent in year one and declines to 0.6 

percent in year 300. 

UCS, EDF, NRDC, CARB, the 

Attorneys General, and Mr. Eads did not 

address the issue of whether a lower 

intergenerational discount rate should 

also be applied to the other components 

of benefits resulting from higher CAFE 

standards, which are likely to be 

experienced by current generations. 

Other commenters urged NHTSA to 

use discount rates besides 7 or 3 

percent. CBD commented that both 7 

percent and 3 percent are too high, 

arguing that they ‘‘artificially reduce’’ 

the value of future benefits from 

improved fuel efficiency, and that using 

a lower discount rate will result in 

higher standards. Although CBD did not 

specify what discount rate would be 

preferable, other than to recommend a 

lower one, CBD appeared to approve of 

Stern’s use of a discount rate below 1 

percent. CFA and NESCAUM, in 

contrast, both supported NHTSA’s use 

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14354 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

356EPA calculated the value of a statistical life 

year for the Tier 2 benefits analysis by amortizing 

the $5.9 million mean value of a statistical life 

(VSL) estimate over the 35 years of life expectancy 

associated with subjects in the labor market studies, 

discounting it at 5 percent to get $360,000 per lifeyear saved in 1999 dollars. See 68 FR 6698, 6784, 

fn. 107 (Feb. 10, 2000). 

357The agency has reviewed the study relied 

upon by the Attorneys General in its comment 

recommending a 5.4 percent discount rate, and 

notes that the estimates of vehicle buyers’ implicit 

discount rates it reports average 10.2 percent before 

adjusting for inflation, rather than the 9 percent 

reported by the Attorneys General. Adjusting this 

average rate to remove the effects of actual inflation 

over the most recent decade produced a value of 7.5 

percent, rather than the 5.4 percent reported in the 

recent comment by the Attorneys General. 

of a 5 percent discount rate. CFA argued 

that NHTSA should have ‘‘picked the 

middle road’’ between 3 percent and 7 

percent, to avoid ‘‘emphasizing the 

importance of economic factors and 

capital goods at the expense of the need 

to conserve energy,’’ and used 3 and 7 

percent for sensitivity analyses. 

NESCAUM argued that a 7 percent 

discount rate ‘‘inappropriately devalues 

the technologies designed to achieve 

increased fuel economy,’’ and stated 

that EPA had used a 5 percent discount 

rate in its 2000 rulemaking on Tier 2 

emissions standards.356

Professor Michael Hanemann 

commented that NHTSA’s decision to 

use a discount rate of 7 percent was 

‘‘utterly unfounded in the climate 

change context,’’ and that NHTSA 

should use a discount rate of no higher 

than 4 percent, although even 4 percent 

had been criticized in recent articles on 

climate change economics. Thus, Prof. 

Hanemann argued, NHTSA should use 

a discount rate of no higher than 4 

percent, and conduct sensitivity 

analyses with lower numbers, like 2 

percent. The Attorneys General 

commented that NHTSA should take 

account of Professor Hanemann’s 

suggestion of 4 percent as an example of 

‘‘the discount rates that scholars and 

economists are using to evaluate the 

costs and benefits related to global 

warming.’’ 

Professor Gary Yohe commented that 

the appropriate discount rate for 

benefits from public investments in an 

economy where returns to private 

capital investment are taxed should be 

lower than the rate of return on private 

capital, in order to reflect the fact that 

public investment can increase returns 

to private investment by reducing 

distortions caused by the corporate 

profits tax. Although they are not 

specifically public investments, Prof. 

Yohe noted that investments that reduce 

GHG emissions by improving vehicle 

fuel economy are likely to increase 

returns to a broad range of private 

investments, including investments in 

mechanisms that facilitate adaptation to 

climate change. Although he did not 

recommend a specific discount rate, 

Prof. Yohe clearly suggested that the 

appropriate rate should be below 7 

percent. He also noted that OMB’s 

definition and 3 percent estimate of the 

social rate of time preference did not 

correspond to the conventional 

definition of that concept, which is a 

constant-utility rather than a constantconsumption discount rate. 

Commenters Calling for NHTSA To Use 

a 7 Percent or Higher Discount Rate 

Other commenters, including 

manufacturers and dealers, as well as 

one individual, called for NHTSA to use 

a discount rate of 7 percent or higher. 

AIAM commented simply that it 

‘‘support[s] the discount rates used by 

NHTSA as reasonable for analytical 

purposes.’’ David Montgomery of CRA 

International also commented that 

NHTSA’s use of a 7 percent discount 

rate was reasonable, arguing that ‘‘the 

correct discount rate to use [for CAFE 

purposes] is the marginal social return 

on investment, which measures what 

society would have earned on other 

investment foregone in order to make 

the investment in more costly motor 

vehicles with higher fuel economy.’’ Mr. 

Montgomery stated that ‘‘The chosen 

7% real discount is a reasonable, and 

probably conservative, estimate of the 

long run, real, pre-tax return on 

investment in the U.S.’’ 

Ford commented that the discount 

rate ‘‘should represent society’s 

opportunity cost of money, which 

should be close to a ‘risk-free’ rate such 

as that of the U.S. Treasury.’’ However, 

Ford then argued that the short-term 

costs to invest in technology are very 

high for domestic manufacturers, and 

that manufacturers must ‘‘borrow the 

necessary capital for such investment.’’ 

Thus, Ford stated, it did not support the 

use of a 3 percent discount rate, 

although it did not recommend an 

alternative discount rate. 

NADA commented that NHTSA 

should use a discount rate of at least 7 

percent or higher to estimate the future 

costs and benefits of the proposed 

standards. NADA stated that ‘‘financing 

rates on motor vehicle loans are 

indicative of appropriate discount rates 

since they reflect the real-world 

opportunity costs faced by consumers 

when buying vehicles’’ with higher fuel 

economy, but argued that NHTSA had 

not ‘‘generated accurate historical loan 

rates, let alone justified projections for 

what those rates will be in MY 2015.’’ 

NADA further stated that a too-low 

discount rate ‘‘will result in overly 

costly CAFE standards, decreased new 

motor vehicle sales, and lower than 

projected fuel savings and greenhouse 

gas reduction benefits.’’ 

The Alliance commented that NHTSA 

should use a discount rate closer to 12 

percent, although it urged NHTSA to 

rely on a ‘‘nested logit’’ model 

developed by NERA for ‘‘modeling 

consumer behavior instead of the ad hoc 

analysis NHTSA performs of private 

benefits without attempting to explain 

whether there is a market failure.’’ The 

Alliance argued that OMB Circular A– 

4 allows the use of a higher discount 

rate than 7 percent in certain cases if 

appropriate, and that ‘‘other prominent 

studies relevant to this issue have 

settled on much higher interest rates 

than seven percent,’’ including the 

Congressional Budget Office, which 

‘‘discounts consumers’ fuel savings at a 

rate of 12 percent per year,’’ and Sierra 

Research’s study submitted by the 

Alliance in support of its comments, 

which used a rate of 12.4 percent. A 

discount rate of 12 percent makes sense, 

the Alliance argued, because 

‘‘Consumers can be expected to 

discount the value of future fuel savings 

at a rate at least as high as their cost of 

borrowing funds,’’ so they ‘‘would be 

unwilling to spend an extra dollar on 

fuel economy improvements that would 

lower their fuel costs by ten cents per 

year because the cost savings would be 

less than the annual interest on that 

dollar.’’ 

Responding to the Alliance’s assertion 

that rates as high as 12 percent might be 

appropriate for discounting future 

benefits from fuel savings, the Attorneys 

General noted in a supplemental 

comment that a more recent study of 

vehicle buyer’s tradeoffs between higher 

purchase prices and savings in 

operating expenses than that relied 

upon by NERA estimates that buyers 

discount future fuel savings using 

nominal rates that average 9 percent. 

After adjusting it to remove the effect of 

expected future inflation, the Attorneys 

General estimated that the 

corresponding real discount rate was 5.4 

percent, and urged NHTSA to use this 

rate in its analysis of future benefits 

from fuel savings and other 

consequences of higher CAFE 

standards.357

Agency response: In response to the 

extensive comments it received to the 

NPRM and the DEIS on this issue, 

NHTSA has carefully reviewed 

published research and OMB guidance 

on appropriate discount rates, including 

discount rates that should be applied to 

benefits that are expected to occur in the 

distant future and thus be experienced 

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358White House Office of Management and 

Budget, Circular A–4, September 17, 2003, pp. 35– 

36. 

359Richard S.J. Tol, The social cost of carbon: 

trends, outliers, and catastrophes, Economics 

Discussion Papers, July 23, 2008. 

360EPA notes that ‘‘In this inter-generational 

context, a three percent discount rate is consistent 

with observed interest rates from long-term intragenerational investments (net of risk premiums) as 

well as interest rates relevant for monetary 

estimates of the impacts of climate change that are 

primarily consumption effects.’’ See U.S. EPA, 

Technical Support Document on Benefits of 

Reducing GHG Emissions, June 12, 2008, p. 9. 361See Tol (2008), p. 3. 362NHTSA acknowledges that using different 

rates to discount the distant and nearer-term future 

benefits from higher CAFE standards presents a 

potential problem of time inconsistency, which 

arises from the much greater uncertainty that 

surrounds long-term future rates of growth in 

investment, economic output, and consumption 

than is associated with near-term estimates of these 

variables. However, the agency believes that this 

problem is less serious than those that would result 

from using a single rate to discount benefits that 

occur over the next 25–35 year sand those that are 

likely to occur over a 100–200 year time frame. 

mainly by future generations, and 

discount rates that buyers of new 

vehicles apply to savings in fuel costs 

from higher fuel economy. For purposes 

of this final rule, the agency has elected 

to apply separate discount rates to the 

benefits resulting from reduced CO2

emissions, which are expected to reduce 

the rate or intensity of climate change 

that will occur in the distant future, and 

the economic value of fuel savings and 

other benefits resulting from lower fuel 

consumption, which will be 

experienced over the limited lifetimes of 

newly purchased vehicles. Specifically, 

NHTSA has decided to discount future 

benefits from reducing CO2 emissions 

using a 3 percent rate, but to discount 

all other benefits resulting from higher 

CAFE standards for MY 2011 cars and 

light trucks at 7 percent. 

As some commenters pointed out, 

OMB guidance on discounting permits 

the use of lower rates to discount 

benefits that are expected to occur in the 

distant future, and will thus be 

experienced by future generations.358

The main rationale for doing so is that 

although most individuals demonstrate 

a strong preference for current 

consumption over consumption they 

expect to occur later within their own 

lifetimes, it may not be appropriate for 

society to exercise a similarly strong 

preference for consumption by current 

generations over consumption 

opportunities for future generations, 

particularly when it is contemplating 

actions that affect the relative income 

levels of current and future generations. 

In addition, while market interest rates 

provide useful guidance about the rates 

that should be used to discount future 

benefits that will be experienced by 

current generations, no comparable 

market rates are available to guide the 

choice of rates for discounting benefits 

that will be received by future 

generations. 

For this final rule, NHTSA has elected 

to use a rate of 3 percent to discount the 

future economic benefits from reduced 

emissions of CO2 that are projected to 

result from decreased fuel production 

and consumption. These benefits, which 

include reductions in the expected 

future economic damages caused by 

increased global temperatures, a rise in 

sea levels, and other projected impacts 

of climate change, are anticipated to 

extend over a period from 

approximately fifty to two hundred or 

more years after the impact of this rule 

on emissions by MY 2011 cars and light 

trucks occurs, and will thus be 

experienced primarily by generations 

that are not now living. As indicated 

previously, studies of the economic cost 

of GHG emissions select a rate to 

discount economic damages from 

increased emissions. These damages are 

typically projected to occur over an 

extended time span beginning many 

years after the future date when 

emissions increase, and the chosen rate 

is used to discount these distant future 

damages to their present values as of the 

date when the increased emissions that 

cause them were assumed to occur. 

This procedure yields estimates of the 

damage costs from increased GHG 

emissions during specific future years, 

which NHTSA uses to value the 

reductions in emissions that would 

occur each year over the lifetimes of 

vehicles affected by higher CAFE 

standards. For example, higher CAFE 

standards for MY 2011 cars and light 

trucks would reduce GHG emissions 

each year from 2011 through 

approximately 2047, and the estimated 

value of avoiding each ton of emissions 

rises each year over that span. In turn, 

the estimated economic values of the 

reductions in GHG emissions during 

each of those future years must be 

discounted to their present values as of 

today, so that they can be compared 

with the present values of other benefits 

from higher CAFE standards, and with 

vehicle manufacturers’ costs for meeting 

higher CAFE standards. 

The 3 percent rate is consistent with 

OMB guidance on appropriate discount 

rates for benefits experienced by future 

generations, as well as with those used 

to develop many of the estimates of the 

economic costs of future climate change 

that form the basis for NHTSA’s 

estimate of economic value of reducing 

CO2 emissions.359 Of the 125 peerreviewed estimates of the social cost of 

carbon included in Tol’s 2008 survey, 

which provides the basis for NHTSA’s 

estimated value of reducing CO2

emissions, 83 used assumptions that 

imply discount rates of 3 percent or 

higher. 

Moreover, the 3 percent rate is 

consistent with widely-used estimates 

in economic analysis of climate change 

of the appropriate rate of time 

preference for current versus distant 

future consumption, expected future 

growth in real incomes, and the rate at 

which the additional utility provided by 

increased consumption declines as 

income increases.360 The Ramsey 

discounting rule is widely employed in 

studies of potential economic damages 

from climate changes in the distant 

future. The Ramsey rule states that ¥r 

= d + hg, where r is the consumption 

discount rate, d is the pure rate of time 

preference (or the marginal rate of 

substitution between current and future 

consumption under the assumption that 

they are initially equal), g is the 

expected (percentage) rate of growth in 

future consumption, and h is the 

elasticity of the marginal utility of 

consumption with respect to changes in 

the level of consumption itself. 

Commonly used values of these 

parameters in climate studies are d = ¥1 

percent per year, h = ¥1, and g = 2 

percent per year, which yield a value for 

r of 3 percent per year.361

The remaining future benefits and 

costs anticipated to result from higher 

fuel economy are projected to occur 

within the lifetimes of vehicles affected 

by the CAFE standards for MY 2011, 

which extend up to a maximum of 35 

years from the dates those vehicles that 

are produced and sold. Because the 

vehicles originally produced during this 

model year will gradually be retired 

from service as they age, and those that 

remain in service will be driven 

progressively less, most of these benefits 

will occur over the period from 2011 

through approximately 2025. Thus, a 

conventional or ‘‘intra-generational’’ 

discount rate is appropriate to use in 

discounting these benefits and costs to 

their present value when analyzing the 

economic impacts of establishing higher 

CAFE standards.362

The correct discount rate to apply to 

these nearer-term benefits and costs 

depends partly on how costs to vehicle 

manufacturers for improving fuel 

economy to comply with higher CAFE 

standards will ultimately be distributed. 

If manufacturers are unable to recover 

their costs for increasing fuel economy 

in the form of higher selling prices for 

new vehicles, those outlays will 

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363White House Office of Management and 

Budget, Circular A–4, September 17, 2003, p. 33. 

364See Dreyfus, Mark K. and W. Kip Viscusi. 

1995. ‘‘Rates of Time Preference and Consumer 

Valuations of Automobile Safety and Fuel 

Efficiency.’’ Journal of Law and Economics. 38: 79– 

98; and the adjustment of discount rates reported 

in that source discussed in NERA, ‘‘Discount Rates 

for Private Costs,’’ pp. 4–5, attachment to Alliance 

of Automobile Manufacturers comment on NPRM, 

Docket Item NHTSA–2008–0089–50. 

365See Verboven, Frank, ‘‘Implicit Interest Rates 

in Consumer Durables Purchasing Decisions— 

Evidence for Automobiles,’’ p. 22, attachment to 

California Department of Justice, comment on 

NPRM, Docket Item NHTSA–2008–0089–0495. 

366Whether they will be willing to do so, 

however, depends partly on how the combined 

value of the economic and environmental 

externalities used to determine CAFE standards 

compares to current fuel taxes. It also depends on 

whether new vehicle buyers take account of the 

value of fuel savings resulting from higher fuel 

economy over the entire expected lifetimes of the 

vehicles they purchase, or over only some part of 

that lifetime (such as the period they expect to own 

new vehicles). 

displace or alter other productive 

investments that manufacturers could 

make, and the appropriate discount rate 

is their opportunity cost of capital 

investment. In contrast, if manufacturers 

are able to raise selling prices for new 

vehicles sufficiently to recover all their 

costs for improving fuel economy, those 

costs will ultimately affect private 

consumption decisions rather than 

capital investment opportunities. Under 

this second assumption, economic 

theory and OMB guidance suggest that 

a consumption discount rate, which 

reflects the time preferences of 

consumers rather than those of lenders 

or investors, is appropriate for 

discounting future benefits. Since the 

time preferences of savers and investors 

are probably similar, financial 

intermediation would be expected to 

equalize investment and consumption 

discount rates. In the presence of 

corporate income taxation, however, 

consumption discount rates are 

generally thought to be lower than the 

opportunity cost of investment capital. 

Finally, if competitive conditions in the 

new vehicle market manufacturers and 

potential buyers’ valuation of higher 

fuel economy permit manufacturers to 

recover only part of their costs for 

meeting higher CAFE standards through 

higher prices for new vehicles, a rate 

between an investment discount rate 

and the lower consumption discount 

rate may be appropriate, with the exact 

rate depending on the distribution of 

compliance costs between vehicle 

manufacturers and buyers. 

OMB estimates that the real before-tax 

rate of return on private capital 

investment in the U.S. economy 

averages approximately 7 percent per 

year, and generally recommends this 

figure for use as a real discount rate in 

cases where the primary effect of a 

regulation is to displace private capital 

investment.363 However, this figure 

represents an economy-wide average 

estimate of the return on private 

investment, which incorporates no risk 

premium other than that associated with 

uncertainty about future growth in total 

economic output. As a consequence, it 

may understate the opportunity cost of 

capital for corporations facing firm- or 

market-specific risks on future 

investment returns. In addition, 

domestic motor vehicle manufacturers 

currently have little or no accumulated 

earnings available to re-invest, and may 

be required to enter private capital 

markets to finance the investments 

necessary to allow them to comply with 

higher CAFE standards. 

OMB guidance estimates that an 

appropriate current value for the 

consumer rate of time preference—and 

thus the discount rate that should be 

used if the costs of complying with a 

regulation are borne by consumers—is 

approximately 3 percent. However, this 

estimate is derived from rates of return 

demanded by consumers on highly 

liquid investments, and is intended to 

apply to situations where there is little 

or no risk that consumers will actually 

realize the future benefits resulting from 

a proposed regulation. In the case of 

CAFE standards, buyers face 

considerable uncertainty about future 

fuel prices, and thus about the value of 

fuel savings resulting from higher fuel 

economy. Uncertainty about their future 

levels of vehicle use and the actual 

lifetimes of new vehicles also contribute 

to buyers’ uncertainty about the value of 

future fuel savings that is likely to result 

from purchasing a vehicle with higher 

fuel economy. In addition, buyers’ 

initial investments in higher fuel 

economy are illiquid, and the extent to 

which they will be able recover the 

remaining value of an initial investment 

in a new vehicle that achieves higher 

fuel economy in the used vehicle market 

is uncertain. Finally, unlike most of the 

regulations that OMB Circular A–4 is 

intended to address, most (75–80 

percent) of the benefits from higher 

CAFE standards accrue directly to the 

parties they affect—vehicle buyers— 

rather than to society at large. Taken 

together, these circumstances may make 

the use of a riskless consumption 

discount rate, which is intended for use 

in discounting the economy-wide effects 

of a proposed regulation on 

consumption, inappropriate for 

discounting the future benefits that 

result from requiring higher fuel 

economy. 

Empirical studies of the discount rates 

that new vehicle buyers reveal by 

trading off the higher purchase prices 

for more fuel-efficient vehicles against 

future savings in fuel costs resulting 

from higher fuel economy, which 

capture the effects of these 

uncertainties, conclude that buyers 

apply real discount rates well above the 

3 percent rate recommended by OMB 

for riskless situations. Dreyfus and 

Viscusi estimate that, when adjusted to 

reflect differences between the current 

interest rate environment and rates at 

the time the data for their study were 

drawn, U.S. buyers apply real discount 

rates in the range of 12 percent when 

weighing expected future fuel savings 

against higher purchase prices.364

Verboven estimates that European 

buyers’ nominal discount rates for fuel 

savings resulting from buying more fuelefficient new vehicle models range from 

5 to 13 percent, with an average 

estimate of slightly above 10 percent. 

Verboven’s estimate corresponds to a 

real discount rate of approximately 7 

percent when adjusted to reflect current 

and recent U.S. inflation rates.365 These 

studies may provide more reliable 

estimates of the appropriate 

consumption rate for discounting 

benefits from higher fuel economy than 

the 3 percent figure recommended in 

OMB guidance. 

Uncertainty about future 

developments in the international oil 

market, the U.S. economy, and the U.S. 

market for new cars and light trucks 

make it extremely difficult to anticipate 

the extent to which vehicle 

manufacturers will be able to recover 

costs for complying with higher CAFE 

standards in the form of higher selling 

prices for new vehicles. If new vehicle 

buyers expect fuel prices to remain 

higher than those used by NHTSA to 

establish CAFE standards for MY 2011, 

they may be willing to pay the higher 

prices necessary for manufacturers to 

recover their costs for complying with 

those standards.366 However, potential 

buyers who expect future fuel prices to 

be lower than the forecast NHTSA relies 

upon are likely to resist manufacturers’ 

efforts to raise new vehicle prices 

sufficiently to recover all of their CAFE 

compliance costs, since those buyers’ 

assessment of the value of higher fuel 

economy will be lower than that 

reflected in the CAFE standards NHTSA 

establishes. 

From the manufacturer perspective, 

the current financial condition of some 

car and light truck producers suggests 

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that they are likely to find it difficult to 

absorb the full cost of complying with 

higher CAFE standards. Because CAFE 

standards apply to all manufacturers, 

establishing higher standards may 

provide a ready opportunity for all 

producers to raise car and light truck 

prices. However, this opportunity may 

be restricted if producers that face very 

low incremental costs for complying 

with higher CAFE standards because of 

higher fuel economy levels in their 

planned model offerings compete 

aggressively with others that face 

significant costs for increasing fuel 

economy levels in their product plans to 

comply with higher CAFE standards. 

After considering the comments 

received and various arguments about 

the ultimate incidence of manufacturers’ 

costs for complying with higher CAFE 

standards, NHTSA has concluded that 

the costs for complying with higher MY 

2011 CAFE standards are likely to be 

shared by manufacturers and purchasers 

of new vehicles, but that the exact 

distribution fraction of these costs 

between manufacturers and buyers is 

extremely difficult to anticipate. 

Generally, NHTSA believes that 

manufacturers are likely to be able to 

raise prices only to the extent justified 

by potential buyers’ assessments of the 

value of future fuel savings that will 

result from higher fuel economy, but the 

agency recognizes that buyers’ 

valuations of fuel savings are inherently 

uncertain, and undoubtedly vary widely 

among individual buyers. As a 

consequence, price increases for new 

cars and light trucks are likely to allow 

manufacturers to recoup some fraction 

of their costs for complying with higher 

CAFE standards, while the remainder of 

those costs are likely to displace other 

investment opportunities that would 

otherwise be available to them. 

Regardless of the ultimate incidence 

of costs for complying with higher 

CAFE standards, however, both 

manufacturers’ opportunity costs for 

capital investment and empirical 

estimates of the discount rates that 

buyers of new vehicles apply to future 

fuel savings suggest that a rate in the 

range of 7 percent is an appropriate rate 

for discounting the nearer-term benefits 

from increased fuel economy that will 

occur over the lifetimes of MY 2011 cars 

and light trucks. Thus for purposes of 

establishing the CAFE standards 

adopted in this final rule and estimating 

their economic benefits, NHTSA has 

continued to employ a 7 percent rate to 

discount future benefits from higher 

CAFE standards other than those 

resulting from reduced CO2 emissions. 

Recognizing the uncertainty 

surrounding this assumption, NHTSA 

has also tested the sensitivity of the 

level of the optimized CAFE standards 

and their resulting economic benefits to 

the use of a 3 percent discount rate for 

all categories of benefits. 

NHTSA will consider whether to 

revise the discount rates used in this 

analysis when it analyzes the 

consequences of future CAFE standards. 

At that time, the agency will consider 

whether to apply a lower discount rate 

than 3 percent to the benefits from 

reducing future emissions of CO2 and 

other greenhouse gases, as well as 

whether to use a rate different from 7 

percent to discount the nearer-term 

benefits from raising CAFE standards. In 

making these decisions, the agency will 

consider guidance on discounting future 

benefits—particularly those from 

reducing the threat of climate-related 

economic damages—issued by OMB, 

EPA, and other government agencies, 

and will also consider the discount rates 

used by other federal agencies in similar 

regulatory proceedings. NHTSA will 

also consider recent research on 

appropriate rates for discounting future 

benefits from reducing the threat of 

climate-related economic damages, as 

well as on the discount rates that buyers 

of new vehicles apply to the fuel savings 

they obtain from purchasing models 

with higher fuel economy, since such 

research is particularly relevant to its 

choice of discount rates. Beyond these 

things, the agency will also review the 

discount rate issue for future 

rulemakings in light of the changing 

economic situation, in terms of 

manufacturers’ capabilities and 

consumers’ preferences as fuel prices 

fluctuate and concern for the effects of 

climate change increases. 

15. Accounting for Uncertainty in 

Benefits and Costs 

NHTSA explained in the NPRM that 

in analyzing the uncertainty 

surrounding its estimates of benefits and 

costs from alternative CAFE standards, 

NHTSA considered alternative estimates 

of those assumptions and parameters 

likely to have the largest effect. NHTSA 

stated that these include the projected 

costs of fuel economy-improving 

technologies and their expected 

effectiveness in reducing vehicle fuel 

consumption, forecasts of future fuel 

prices, the magnitude of the rebound 

effect, the reduction in external 

economic costs resulting from lower 

U.S. oil imports, the value to the U.S. 

economy of reducing carbon dioxide 

emissions, and the discount rate applied 

to future benefits and costs. The range 

for each of these variables employed in 

the agency’s uncertainty analysis is 

presented in the section of the NPRM 

discussing each variable. 

NHTSA explained that the 

uncertainty analysis was conducted by 

assuming independent normal 

probability distributions for each of 

these variables, using the low and high 

estimates for each variable as the values 

below which 5 percent and 95 percent 

of observed values are believed to fall. 

Each trial of the uncertainty analysis 

employed a set of values randomly 

drawn from each of these probability 

distributions, assuming that the value of 

each variable is independent of the 

others. Benefits and costs of each 

alternative standard were estimated 

using each combination of variables. A 

total of 1,000 trials were used to 

establish the likely probability 

distributions of estimated benefits and 

costs for each alternative standard. 

NHTSA received only one comment 

on its methodology for accounting for 

uncertainty in benefits and costs. The 

Alliance commented that the results 

presented by NHTSA of its sensitivity 

analysis indicated increasing levels of 

certainty in the ability of the proposed 

standards to create net benefits— 

specifically, NHTSA concluded that 

there was at least a 99.3 percent 

certainty that changes made to MY 2011 

vehicles to achieve the higher CAFE 

standards would produce a net benefit; 

at least a 99.6 percent certainty for MY 

2012 vehicles; and 100 percent certainty 

for MY 2014–15 vehicles. The Alliance 

argued that ‘‘Traditional discounting 

analysis indicates that the effects of 

policy changes are more uncertain at 

points far into the future,’’ and that 

‘‘NHTSA should recognize that its 

predictive abilities in the area of 

automotive technology dim the farther it 

attempts to peer out into the future.’’ 

The Alliance commented that NHTSA 

should ‘‘reevaluate its statistical model 

in this light.’’ 

Agency response: NHTSA agrees that 

uncertainty regarding both costs and 

benefits from fuel enhancing 

technologies increases at points farther 

into the future. The Alliance comment 

seems to suggest the application of an 

increasingly wide spread of high and 

low value parameters for technology 

costs and effectiveness rates for each 

successive model year. However, 

recognizing this increasing uncertainty 

could either increase or decrease the 

probability that increases in CAFE 

standards will produce net benefits. The 

agency has no basis for determining 

whether this increased uncertainty 

would be likely to result in a higher 

probability of net benefits or a higher 

probability of net costs. A variety of 

factors such as unforeseen technology 

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breakthroughs or fluctuations in energy 

and materials prices could influence 

benefits and costs in the distant future, 

and we see little merit in adding 

additional assumptions about 

conditions distant in time without a 

reasonably solid basis for selecting such 

assumptions. 

We could simply increase the range 

symmetrically by some arbitrary factor, 

but, assuming the same normal 

distribution that is employed for most of 

the variables in our uncertainty 

analysis, increasing the range of both 

costs and benefits proportionally would 

be unlikely to significantly impact the 

conclusions of the uncertainty analysis. 

Thus, the agency would not increase 

this range of uncertainty by 

progressively more for successive model 

years, were this a multi-year 

rulemaking. As it is not, the issue of 

changing levels of uncertainty over time 

is largely academic for purposes of this 

rulemaking. 

VI. How NHTSA Sets the CAFE 

Standards 

A. Which attributes does NHTSA use to 

determine the standards? 

NHTSA explained in the NPRM that 

it had taken a fresh look for purposes of 

this rulemaking at the question of which 

attribute or attributes would be most 

appropriate for setting CAFE standards. 

NHTSA preliminarily concluded that a 

footprint-based function would be the 

most effective and efficient for both 

passenger car and light truck standards. 

NHTSA explained that unlike a weightbased function, a footprint-based 

function helps achieve greater fuel 

economy/emissions reductions without 

having a potentially negative impact on 

safety and is more difficult to modify 

than other attributes because it cannot 

be easily altered outside the design 

cycle in order to move a vehicle to a 

point at which it is subject to a lower 

fuel economy target. NHTSA also 

discussed other attributes on which 

functions could be based, including 

curb weight, engine displacement, 

interior volume, passenger capacity, and 

towing or cargo-hauling capability, but 

tentatively rejected those other 

attributes as being generally easier to 

game than footprint. NHTSA 

nevertheless sought comment on 

whether the proposed standard should 

be based on vehicle footprint alone, or 

whether other attributes such as the 

ones described above should be 

considered. NHTSA requested that if 

any commenters advocated one or more 

additional attributes, that they supply a 

specific, objective measure for each 

attribute that is accepted within the 

industry and that can be applied to the 

full range of light-duty vehicles covered 

by this rulemaking. NHTSA noted that 

in addition to being able to be 

objectively measured on all light-duty 

vehicles, any attribute-based system 

needs to (1) minimize the potential for 

gaming (artificial manipulation of the 

attribute(s) to achieve a more favorable 

fuel economy target), (2) have an 

observable relationship to fuel economy, 

and (3) avoid adverse safety 

consequences and undue relative 

burden on full-line manufacturers. 

The agency received many comments 

on its choice of attribute. The 

Aluminum Association, Honda, IIHS, 

and UCS supported NHTSA’s proposal 

of attribute-based standards depending 

upon footprint alone. Honda cited the 

use of footprint as a means of 

maintaining consumer choice and 

maintaining an incentive to make use of 

lightweight materials. The Aluminum 

Association indicated that footprintbased standards would assure stability 

between model years. UCS claimed that 

footprint compared favorably to other 

attributes. Honda, the Aluminum 

Association, and IIHS all argued that 

footprint-based standards would 

provide incentives well-aligned with 

highway safety objectives. Honda 

commented that incentives provided by 

a footprint-based system are such that 

footprint-based standards would be, 

from a public policy perspective, 

preferable to weight-based standards, 

even though fuel economy is more 

strongly related to weight. 

On the other hand, some 

organizations questioned the agency’s 

proposal to continue basing light truck 

CAFE standards on footprint and to 

adopt new footprint-based standards for 

passenger cars. Subaru (a subsidiary of 

Fuji Heavy Industries) and BMW 

expressed concern that footprint-based 

standards discourage the introduction of 

new ‘‘small vehicle concepts’’ 

encouraged by weight-based standards 

under development in Europe and 

Japan. Porsche suggested that rapid 

changes in the light vehicle fleet call 

into question the use of footprint as the 

basis for CAFE standards. Porsche also 

argued that footprint is not an ideal 

attribute for passenger car standards 

because passenger cars are less prone to 

rollover than light trucks and the 

steepness of the curves NHTSA 

proposed for passenger cars would 

provide an incentive for gaming. Ferrari 

also expressed concern regarding the 

potential to increase footprint by 

mounting larger wheels, but did not 

compare this risk to the risk of, for 

example, increasing vehicle weight 

under a weight-based standard. Wenzel 

and Ross questioned the agency’s 

judgment regarding the safety benefits of 

discouraging manufacturers from 

responding to CAFE standards by 

selling smaller vehicles. Cummins 

argued that other attributes, in 

particular weight, would provide a 

better engineering relationship to fuel 

economy, but acknowledged that 

NHTSA proposed to rely on footprint as 

a means to best ‘‘balance public policy 

concerns.’’ 

GM expressed general support for 

footprint-based standards, but also 

proposed that the agency adopt a twoattribute system that would adjust 

targets applicable to vehicles capable of 

towing heavy loads. The Alliance, 

which also supported this concept, 

indicated that such vehicles ‘‘generally 

achieve about five percent lower fuel 

economy than similar vehicles not 

designed for such duty cycles.’’ Other 

commenters supporting adjustments for 

‘‘tow-capable’’ vehicles included 

Chrysler, Cummins, Ford, NADA, RVIA, 

and several members of Congress. RVIA 

suggested that without such an 

adjustment, RV owners will ‘‘have no 

choice but to attempt to pull travel 

trailers with undersize vehicles,’’ 

thereby compromising highway safety. 

Honda and Toyota both opposed the 

concept based on concerns that such 

adjustments would compromise 

progress toward EISA’s requirement that 

NHTSA ensure the new vehicle fleet 

reaches an average of at least 35 mpg by 

MY 2020. 

Similarly, the Alliance, Chrysler, and 

NADA proposed that the agency adjust 

targets for ‘‘off-road capable’’ vehicles 

including, but not limited to vehicles 

with four-wheel drive. The Alliance and 

Chrysler proposed downward 

adjustments of 10 percent and 1 mpg, 

respectively, based on past performance 

of such vehicles. Toyota expressed 

concern regarding the competitive 

effects of such an adjustment. 

In addition to these two-attribute 

proposals, the agency also received a 

proposal from Porsche for a threeattribute concept under which vehicle 

targets would depend on footprint, 

weight, and maximum torque. Subaru 

and Volkswagen expressed support for 

this concept. Porsche and Subaru 

argued that this three-attribute concept 

would provide a better statistical 

relationship to fuel economy and would 

help to reduce the steepness of the 

curves NHTSA proposed for passenger 

cars. Volkswagen indicated that the 

concept would be less burdensome for 

manufacturers with fleet mix 

‘‘challenged by’’ a footprint-based 

system. Ferrari also commented that, 

considering the characteristics and fuel 

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367 In any event, the agency doubts that RV 

owners would, as asserted by RVIA, be likely to 

violate guidelines and laws concerning towing 

capacity. 

368 49 U.S.C. 32902(a)(3)(A). 

369 e is the irrational number for which the slope 

of the function y = number x is equal to 1 when x 

is equal to zero. The first 8 digits of e are 2.7182818. 

economy of performance vehicles, the 

agency should adopt a two- or threeattribute system that also incorporates 

curb weight, maximum power, 

maximum torque, and/or engine 

displacement. 

Conversely, some organizations 

expressed strong opposition regarding 

standards that would rely on more than 

one attribute. UCS questioned whether 

any dual-attribute approach could 

‘‘deliver the benefits’’ of a system based 

on footprint alone. Honda argued that 

NHTSA should ‘‘automatically reject’’ 

the inclusion of any additional attribute 

that could decrease overall fuel savings 

achieved by CAFE standards. Similarly, 

as mentioned above, Toyota expressed 

concern that inclusion of additional 

attributes could compromise progress 

toward EISA’s requirements. 

Agency response: Having considered 

the comments submitted to the agency 

on what attribute(s) should be included 

in attribute-based CAFE standards for 

passenger cars and light trucks, NHTSA 

is promulgating MY 2011 standards that 

depend on vehicle footprint. 

As discussed in Section VIII, in the 

agency’s judgment, from the standpoint 

of highway safety, it is important that 

the agency promulgate CAFE standards 

that do not encourage manufacturers to 

respond by selling vehicles that are in 

any way less safe. While the agency’s 

research also indicates that reductions 

in vehicle mass tend to compromise 

highway safety, footprint-based 

standards provide an incentive to use 

advanced lightweight materials and 

structures that would be discouraged by 

weight-based standards. 

Further, although NHTSA recognizes 

that weight is better correlated with fuel 

economy than is footprint, the agency 

continues to believe that there is less 

risk of ‘‘gaming’’ by increasing footprint 

under footprint-based CAFE standards 

than by increasing vehicle mass under 

weight-based CAFE standards. The 

agency also agrees with concerns raised 

by some commenters that there would 

be greater potential for gaming under 

multi-attribute CAFE standards, such as 

standards under which targets would 

also depend on attributes such as 

weight, torque, power, towing 

capability, and/or off-road capability. 

Standards that incorporate such 

attributes in conjunction with footprint 

would not only be significantly more 

complex, but by providing degrees of 

freedom with respect to more easilyadjusted attributes, they would make it 

less certain that the future fleet would 

actually achieve the average fuel 

economy levels projected by the agency. 

Although NHTSA recognizes that any 

change in the structure of the CAFE 

standards changes the relative challenge 

posed by those standards to each 

manufacturer, the agency notes that 

compliance with CAFE standards is 

determined based on average 

performance, such that no specific 

vehicle model need necessarily achieve 

its fuel economy target. NHTSA 

disagrees, therefore, that RV owners will 

be forced to use ‘‘undersize’’ vehicles as 

suggested by RVIA; rather, the agency 

expects that manufacturers will 

continue to provide a range of vehicles 

with capabilities sought by vehicle 

buyers.367

Furthermore, changes—discussed 

below—to NHTSA’s procedure for 

determining the shape and stringency of 

CAFE standards for MY 2011 more fully 

incorporate the capabilities of highperformance vehicles, tow-capable 

vehicles, and off-road-capable vehicles. 

In developing the CAFE standards 

promulgated today, the agency has 

included all vehicles produced by all 

manufacturers, including the highperformance vehicles produced by 

companies such as Ferrari and Porsche. 

Also, as discussed in Section IV, for 

purposes of analyzing potential fuel 

economy improvements to specific 

vehicle models, the agency has 

developed estimates specific to 

performance vehicles of the availability, 

cost, and effectiveness of different fuelsaving technologies. The final passenger 

car standards thus give appropriate 

weight to the capabilities of these 

vehicles. 

Also, as discussed below and in 

sections III and XI, the agency is 

tightening its definition of 

‘‘nonpassenger automobile’’ such that 

many vehicles will be newly classified 

as passenger cars. Most of these changes 

involve two-wheel drive vehicles with 

relatively modest towing capacity, such 

that vehicles with off-road capabilities 

and/or more substantial towing capacity 

comprise an even greater share of the 

vehicles that will still be classified as 

light trucks. Therefore, NHTSA has 

established final light truck CAFE 

standards that appropriately account for 

the capabilities of such vehicles. 

B. Which mathematical function does 

NHTSA use to set the standards? 

As discussed above, Congress also 

recently mandated that NHTSA set 

attribute-based fuel economy standards 

‘‘and express each standard in the form 

of a mathematical function.’’ 368 As 

proposed in the NPRM, NHTSA is 

finalizing CAFE standards that use a 

continuous, constrained logistic 

function for expressing the MY 2011 

passenger car and light truck standards, 

which takes the form of an S-curve, and 

is defined according to the following 

formula: 

TARGET

a ba

e

e

FOOTPRINT c /d

FOOTPRINT c /d

=

+ − ⎛

⎝

⎜ ⎞

⎠

⎟ +

−

−

1

1 11

1

( )

( )

Here, TARGET is the fuel economy 

target (in mpg) applicable to vehicles of 

a given footprint (FOOTPRINT, in 

square feet), b and a are the function’s 

lower and upper asymptotes (also in 

mpg), e is approximately equal to 

2.718,369 c is the footprint (in square 

feet) at which the inverse of the fuel 

economy target falls halfway between 

the inverses of the lower and upper 

asymptotes, and d is a parameter (in 

square feet) that determines how 

gradually the fuel economy target 

transitions from the upper toward the 

lower asymptote as the footprint 

increases. Figure VI–1 below shows an 

example of a logistic target function, 

where b = 20 mpg, a = 30 mpg, c = 40 

square feet, and d = 5 square feet: 


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NHTSA is not required to use a 

constrained logistic function and, as 

discussed below, the agency may 

consider defining future CAFE 

standards in terms of a different 

mathematical function. 

Continuous function: 

NHTSA explained in the NPRM that 

it examined the relative merits of both 

step functions and continuous functions 

in its rulemaking for MY 2008–2011 

light trucks, and described the agency’s 

rationale for choosing a continuous 

function for the CAFE program. A step 

function, in the CAFE context, would 

separate the vehicle models along the 

spectrum of attribute magnitudes into 

discrete groups, and each group would 

be assigned a single fuel economy target, 

so that the average of the groups would 

be the average fleet fuel economy. A 

continuous function, in contrast, would 

assign each vehicle model (and indeed, 

any potential vehicle model at any point 

along the spectrum) its own unique fuel 

economy target, based on its particular 

attribute magnitude. Thus, two vehicle 

models built by different manufacturers 

could have the same fuel economy 

target, but only if they had identical 

magnitudes of the relevant attribute. In 

other words, a continuous function is a 

mathematical function that defines 

attribute-based targets across the entire 

range of possible attribute values. These 

targets are then applied through a 

harmonically-weighted formula to 

derive regulatory obligations for fleet 

averages. 

NHTSA decided against a step 

function for several reasons. First, there 

would be a strong incentive for 

manufacturers to game the system at the 

‘‘edges’’ of the steps, by increasing the 

magnitude of a vehicle model’s attribute 

only slightly in order to receive the 

lower target of the next step. A 

continuous function tends to reduce this 

incentive because on an uninterrupted 

spectrum, the vehicle model’s 

magnitude of the attribute must be 

increased much more in order to gain a 

significantly lower fuel economy 

target—i.e., the necessary change in the 

vehicle model must be greater in order 

to receive the same level of benefit. 

Second, the continuous function 

minimizes the incentive to downsize a 

vehicle, since any downsizing would 

result in higher (or the same, at the 

upper end of the curve) targets being 

applicable. And finally, the continuous 

function provides manufacturers with 

greater regulatory certainty, since under 

a step function, the boundaries of 

categories (i.e., the size of the steps) 

could be redefined in future 

rulemakings. Thus, NHTSA tentatively 

concluded that a continuous function 

was the best choice for setting CAFE 

standards. 


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370See 71 FR 17600–17607 (Apr. 6, 2007) for a 

fuller discussion of the agency’s analysis in that 

rule. 

371The statutory section states as follows: 

(3) Authority of the Secretary.—The Secretary 

shall— 

(A) prescribe by regulation separate average fuel 

economy standards for passenger and nonpassenger automobiles based on 1 or more vehicle 

attributes related to fuel economy and express each 

standard in the form of a mathematical function 

* * *. 

NHTSA received only three 

comments regarding its use of the 

continuous function. Ferrari commented 

that it supports ‘‘the choice to use a 

continuous function instead of a step 

function, because for each vehicle 

model is associated the corresponding 

fuel economy target, regardless of 

whether the attribute is the footprint 

alone or another one or a combination 

of two or more.’’ 

Fuji/Subaru commented that ‘‘In 

general, Subaru conceptually supports 

the NHTSA proposal to carryover the 

attribute and continuous logistic 

function structure from the prior 2008– 

2011 light truck fuel economy 

rulemaking.’’ 

IIHS commented that it ‘‘strongly 

supports the extension of an attributebased system to cars and the agency’s 

proposal to index fuel economy to a 

continuous function.’’ IIHS stated that a 

step function gives manufacturers an 

incentive ‘‘to redesign vehicles with 

minimally larger footprints to achieve 

lower fuel economy targets or to 

downsize vehicles to achieve weight 

reductions within footprint categories.’’ 

This incentive exists, IIHS argued, 

because of the fact that ‘‘By minimally 

boosting the footprint of a vehicle near 

an upper boundary, an automaker can 

gain a large benefit in meeting fuel 

economy targets,’’ and that ‘‘By the 

same token, an automaker can 

significantly decrease a vehicle’s size 

and weight as long as the changes do 

not place the vehicle below the lower 

boundary of its current step,’’ which 

IIHS argued presented significant safety 

concerns. IIHS further stated that the 

continuous function presented an added 

benefit over a step function insofar as 

‘‘car buyers would be more likely to 

notice design changes incorporated to 

achieve a substantial CAFE benefit in a 

continuous function system.’’ 

Agency response: Notwithstanding 

concerns regarding the steepness of an 

attribute-based function—concerns that 

are addressed below in Section VI.E— 

these comments support the agency’s 

decision to promulgate a final rule that 

uses a continuous function to specify 

fuel economy targets that depend on a 

vehicle attribute. 

Constrained Logistic Function 

NHTSA explained in the NPRM that 

there are a variety of mathematical 

forms available to estimate the 

relationship between an attribute and 

fuel economy that could be used as a 

continuous function, including simple 

linear (straight-line) functions, quadratic 

(U-shaped) functions, exponential 

(curves that continuously become 

steeper or shallower) functions, and 

unconstrained logistic (S-shaped) 

functions. NHTSA examined these 

alternative mathematical forms in the 

MY 2008–2011 light truck CAFE 

rulemaking,370 but concluded that none 

of those functional forms as presented 

would be appropriate for the CAFE 

program because they tended toward 

excessively high stringency levels at the 

smaller end of the footprint range, 

excessively low stringency levels at the 

larger end of the footprint range, or 

both. Too-high stringency levels for 

smaller vehicles could potentially result 

in target values beyond the 

technological capabilities of 

manufacturers, while too-low levels for 

larger vehicles would reduce fuel 

savings below that of the optimized 

fleet. NHTSA determined that a 

constrained logistic function, shaped 

like an S-curve with plateaus at the top 

and bottom rather than increasing/ 

decreasing to infinity, provided a 

relatively good fit to the data points 

without creating problems associated 

with some or all of the other forms. The 

constrained logistic function also 

limited the potential for the curve to be 

disproportionately influenced by outlier 

vehicles. 

NHTSA defined the constrained 

logistic functions for the CAFE 

standards using four parameters. Two 

parameters, a and b, established the 

function’s upper and lower bounds 

(asymptotes), respectively. A third 

parameter, c, specified the footprint at 

which the function was halfway 

between the upper and lower bounds. 

The last parameter, d, established the 

rate or ‘‘steepness’’ of the function’s 

transition between the upper (at low 

footprint) and lower (at high footprint) 

boundaries. The resulting curve was an 

elongated reverse ‘‘S’’ shape, with fuel 

economy targets decreasing as footprint 

increased. The definitions of the 

constrained logistic functions and 

NHTSA’s process for fitting the curves 

is described in much more detail in 

Section VI.E below. 

NHTSA tentatively concluded in the 

NPRM that a constrained logistic 

function was appropriate for setting 

CAFE standards for both passenger cars 

and light trucks, but sought comment on 

whether another mathematical function 

might result in improved standards 

consistent with EPCA and EISA. 

Although NHTSA received a number 

of comments requesting alternative 

standards for certain manufacturers, 

which are discussed in Section VI.D, 

only Ferrari commented specifically 

regarding the constrained logistic 

function. Ferrari stated that it agreed 

with NHTSA ‘‘about the use of a 

constrained logistic function to avoid a 

too high standard for smaller vehicles, 

and too low for larger vehicles, being 

the attribute the footprint.’’ Ferrari 

further stated that ‘‘the almost flattened 

tails of the curve (i.e., asymptotes) are 

helpful to avoid either vehicle 

downsizing or over sizing which could 

produce negative effects for safety and 

vehicle compatibility in case of 

accidents.’’ 

Agency response: As a potential 

alternative to the constrained logistic 

function, NHTSA did also present 

information regarding a constrained 

linear function. As shown in the NPRM, 

a constrained linear function has the 

potential to avoid creating a localized 

region (in terms of vehicle footprint) 

over which the slope of the function is 

relatively steep. However, NHTSA did 

not receive comments on this option, 

and the agency remains concerned 

about possible unintended 

consequences of the ‘‘corners’’ in such 

a function. Therefore, the agency is 

promulgating standards for MY 2011 

that, as proposed in the NPRM, use a 

constrained logistic function to specify 

attribute-based fuel economy targets. 

The agency still believes a linear 

function constrained by upper (on a 

gpm basis) and possibly lower limits 

may merit reconsideration in future 

CAFE rulemakings. 

C. What other types of standards did 

commenters propose? 

In the NPRM, NHTSA explained that 

it is obligated under 49 U.S.C. 

32902(a)(3)(A), recently added by 

Congress, to set attribute-based fuel 

economy standards for passenger cars 

and light trucks.371 NHTSA stated that 

it welcomed Congress’ affirmation 

through EISA of the value of setting 

attribute-based fuel economy standards, 

because the agency believes that an 

attribute-based structure is preferable to 

a single-industry-wide average standard 

in the context of CAFE for several 

reasons. First, attribute-based standards 

increase fuel savings and reduce 

emissions when compared to an 

equivalent industry-wide standard 

under which each manufacturer is 

subject to the same numerical 

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372The 2002 NAS Report described at length and 

quantified the potential safety problem with average 

fuel economy standards that specify a single 

numerical requirement for the entire industry. See 

NAS Report at 5, finding 12. 

373 Id. at 4–5, finding 10. 

374The Alliance comment on this issue simply 

stated that ‘‘For some manufacturers, whose model 

proliferation may not correlate well with footprintbased CAFE standards, the burden of required fuel 

economy increases is particularly high,’’ and 

suggested that ‘‘NHTSA should consider the 

appropriateness of implementing an alternative fuel 

economy standard option’’ for those manufacturers, 

but left it to the individual manufacturers to 

comment further. 

requirement. Under such a single 

industry-wide average standard, there 

are always some manufacturers that are 

not required to make any improvements 

for the given year because they already 

exceed the standard. Under an attributebased system, in contrast, every 

manufacturer is more likely to be 

required to continue improving each 

year. Because each manufacturer 

produces a different mix of vehicles, 

attribute-based standards are 

individualized for each manufacturer’s 

different product mix. All 

manufacturers must ensure that they 

have used available technologies to 

enhance the fuel economy levels of the 

vehicles they sell. Therefore, fuel 

savings and CO2 emissions reductions 

will always be higher under an 

attribute-based system than under a 

comparable industry-wide standard. 

Second, attribute-based standards 

eliminate the incentive for 

manufacturers to respond to CAFE 

standards in ways harmful to safety.372

Because each vehicle model has its own 

target (based on the attribute chosen), 

attribute-based standards provide no 

incentive to build smaller vehicles 

simply to meet a fleet-wide average, 

because the smaller vehicles will be 

subject to more stringent fuel economy 

targets. 

Third, attribute-based standards 

provide a more equitable regulatory 

framework for different vehicle 

manufacturers.373 A single industrywide average standard imposes 

disproportionate cost burdens and 

compliance difficulties on the 

manufacturers that need to change their 

product plans and no obligation on 

those manufacturers that have no need 

to change their plans. Attribute-based 

standards spread the regulatory cost 

burden for fuel economy more broadly 

across all of the vehicle manufacturers 

within the industry. 

And fourth, attribute-based standards 

respect economic conditions and 

consumer choice, instead of having the 

government mandate a certain fleet mix. 

Manufacturers are required to invest in 

technologies that improve the fuel 

economy of the vehicles they sell, 

regardless of size. 

All commenters recognized that 

NHTSA must set attribute-based 

standards per Congress’ mandate in 

EISA, but several commenters, mostly 

small and limited-line manufacturers, 

requested that NHTSA develop some 

kind of alternative standard besides the 

attribute-based passenger car and light 

truck standards proposed in the 

NPRM.374 These manufacturers 

generally argued that the proposed 

passenger car standards were set 

without regard to 15 percent of the 

passenger car market and were 

disproportionately burdensome to them 

(NHTSA notes, however, that full-line 

manufacturers argued to the contrary 

that the proposed standards were 

disproportionately burdensome to 

them). Most requested that the agency 

set an alternative standard that required 

them to raise their CAFE levels by a 

certain set percentage each year, rather 

than at the rate required by the 

proposed standards. Commenters 

generally reasoned that these alternative 

standards would improve fuel savings, 

because otherwise small and limitedline manufacturers will be unable to 

meet the proposed standards and will 

just pay fines. 

Several manufacturers suggested 

alternative standards that increase at set 

percentages each year. BMW suggested, 

and Mitsubishi supported, an 

alternative passenger car standard 

allowing manufacturers for which the 

ratio of the fleet standard to the 

manufacturer’s average footprint is 

higher than average to have the option 

of using a flat standard. This flat 

standard would increase at 4.5 percent 

per year, which was the same 

annualized increase as NHTSA’s 

proposed passenger car standards. BMW 

argued that the suggested approach 

would be consistent with EISA because 

it would be derived from the attributebased standards. 

Ferrari also suggested that small 

manufacturers (which it argued should 

be re-defined as either producing less 

than 5,000 vehicles annually for sale in 

the U.S. or selling less than 15,000 

vehicles annually in the U.S.) should be 

provided an option to improve their fuel 

economy by a certain percentage each 

year. Ferrari did not suggest a particular 

percentage by which standards should 

increase. At the very least, Ferrari 

argued that small manufacturers should 

be given more lead-time than full-line 

manufacturers for making CAFE 

improvements. 

Volkswagen also commented that 

NHTSA should consider a percent 

increase option for the manufacturers 

(like Volkswagen) with fleets that 

‘‘exhibit an unbalanced correlation to 

the footprint attribute,’’ a concept which 

Volkswagen suggested could be applied 

to both passenger cars and light trucks. 

If NHTSA declined to adopt such a 

suggestion, Volkswagen requested that 

manufacturers be allowed to comply 

with the industry average target for each 

model year. 

Ford also argued in favor of passenger 

car and light truck standards that 

increase at a set percentage each year, 

specifically at 3.8 percent per year, 

which Ford estimated would achieve 

similar CAFE levels by MY 2015. Ford’s 

comment was based on its construction 

of the EISA requirement that standards 

‘‘increase ratably’’ between MY 2011 

and MY 2020, and was discussed in the 

section above addressing other 

comments made regarding that 

requirement. 

Fuji/Subaru suggested that smallervolume manufacturers should have the 

option of either meeting the average on 

the proposed passenger car curve for the 

fleet as a whole, or paying civil 

penalties based on the target assigned 

through the proposed passenger car 

curve. These alternative options would 

be available in the early years of the 

rulemaking for manufacturers not able 

to meet rapidly-increasing standards. 

Fuji/Subaru argued that smaller 

manufacturers could not feasibly meet 

the proposed standards and that an 

alternative option would be consistent 

with EISA, because the fleet average 

would be derived from the attributebased standards. 

Similar to Fuji/Subaru, Porsche 

argued that smaller limited-line 

manufacturers should be allowed the 

option to meet a fleet average equivalent 

to the midpoint of the compliance curve 

for the overall fleet in a given model 

year, ‘‘rather than being forced to leave 

the market, restrict product or pay 

exorbitant civil penalties.’’ Porsche 

argued that such a CAFE obligation 

would be ‘‘challenging but achievable,’’ 

and given the rate of increase in 

passenger car CAFE standards between 

2007 and 2011, would be preferable to 

paying ‘‘skyrocketing civil penalties.’’ 

Porsche additionally argued that EPCA/ 

EISA prohibits NHTSA from excluding 

manufacturers in setting the CAFE 

standards, because NHTSA must 

‘‘prescribe by regulation average fuel 

economy standards for automobiles 

manufactured by a manufacturer in that 

model year’’ according to 49 U.S.C. 

§ 32902(a). Porsche argued that NHTSA 

cannot set standards without reference 

to a manufacturer’s fleet, and then 

subject that manufacturer to 

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enforcement penalties under those 

standards. 

Mercedes Benz also argued that 

‘‘manufacturers not included in the 

analysis’’ for passenger car standards, 

i.e., limited-line manufacturers, should 

be allowed either to meet the average 

fuel economy specified for the vehicle 

fleet, or ‘‘to improve their fleet fuel 

economy by a percentage equal to the 

percentage improvement NHTSA 

estimates for the fleet as a whole.’’ 

Mercedes Benz suggested that NHTSA 

could require manufacturers to comply 

with the higher of the two options. The 

commenter further argued that such an 

approach would be legal under EPCA/ 

EISA because it ‘‘would be based on the 

attribute based continuous function 

curve,’’ and would be fairer because the 

proposed attribute-based standards did 

not take into account what the fleet as 

a whole could achieve in terms of fuel 

economy. 

Agency response: NHTSA disagrees 

that it has the authority to set such 

suggested standards for any 

manufacturers under EPCA and EISA 

for purposes of this rulemaking. An 

average standard that is ‘‘based on’’ an 

attribute-based standard is not itself 

attribute-based, as required by EISA. 

Many of the manufacturers arguing for 

an alternative standard were concerned 

that the agency had excluded them from 

consideration in developing the 

proposed standards. In response, the 

agency included all manufacturers 

subject to the standards (excluding lowvolume manufacturers), to ensure that 

the curves reflected the capabilities of 

the entire fleet, and not just the seven 

largest manufacturers. NHTSA believes 

that this addresses many of the 

commenters’ concerns. 

D. How does NHTSA fit the curve and 

estimate the stringency that maximizes 

net benefits to society? 

In the NPRM, NHTSA proposed 

attribute-based passenger car and light 

truck CAFE standards under which each 

vehicle model has a fuel economy target 

that is based on the vehicle model’s 

footprint, and the CAFE levels required 

of each manufacturer’s passenger car 

and light truck fleets are determined by 

calculating the sales-weighted harmonic 

averages of those targets. NHTSA 

proposed the following mathematical 

function relating fuel economy targets to 

footprint: 

T x

f x ( ) ( ) = 1

where 

f x A BA

e

e

x C /D

x C /D ( )

( )

( ) =+ − ⎛

⎝

⎜ ⎞

⎠

⎟ +

−

−

1 11

1

and 

T(x) = fuel economy target (mpg) 

x = footprint (square feet) 

A = highest mpg value of fuel economy target 

B = lowest mpg value of fuel economy target 

C = coefficient (in square feet) determining 

horizontal midpoint of f(x) 

D = coefficient (in square feet) determining 

width of transition between A and B. 

In the NPRM, NHTSA determined the 

curves relating footprint to fuel 

economy for a given model year and 

vehicle type (passenger car or light 

truck) for which the harmonic average 

of the functional values are the 

manufacturers’ fuel economy targets, 

using the following five-step process. (In 

the discussion below, we shall refer to 

these ten curves—one for each model 

year and vehicle type—as the ‘‘fuel 

economy curves.’’) 

In Step 1, NHTSA determined the 

‘‘manufacturer-optimized’’ fuel 

economies for each vehicle in the 

product plans, submitted to NHTSA 

prior to the NPRM, of the seven largest 

manufacturers (Chrysler, Ford, General 

Motors, Honda, Hyundai, Nissan, 

Toyota). The ‘‘manufacturer-optimized’’ 

fuel economies were obtained by 

applying fuel economy technologies to a 

given manufacturer’s fleet of a given 

vehicle type (cars or trucks) and model 

year, until the incremental benefits are 

equal to the incremental costs. The 

resulting fuel economies were 

‘‘manufacturer-optimized’’ in the sense 

that they maximize societal net benefits 

at the level of the manufacturer, model 

year, and vehicle type. This approach 

was used to push each manufacturer’s 

fleet to a point of equal effort. NHTSA 

restricted data to the seven largest 

manufacturers because those 

manufacturers accounted for most of the 

market and because a number of other 

manufacturers did not submit product 

plan data and/or had histories of paying 

civil penalties rather than complying 

with CAFE standards. 

In Step 2, NHTSA determined initial 

values for parameters A and B (values 

revised in steps 4 and 5, described 

below) for each vehicle class (passenger 

car and light truck) and model year as 

follows. For passenger cars (and light 

trucks, respectively) in a given model 

year, NHTSA set the initial value of the 

parameter A to be the harmonic average 

fuel economy among the vehicles of the 

given model year and vehicle type 

(produced by the seven largest 

manufacturers) comprising the lower 

third (respectively, eleventh) percentile 

of footprint values. NHTSA set the 

initial value of B to be the harmonic 

average fuel economy among the 

vehicles of the given model year and 

vehicle type (produced by the seven 

largest manufacturers) comprising the 

upper fourth (respectively, sixth) 

percentile of footprint values. NHTSA 

set A and B in this manner, rather than 

fitting them, for example, through 

regression, in order to ensure that the 

upper and lower fuel economy values 

reflect the smallest and largest models 

in the fleet. NHTSA chose the percentile 

values it used by examining the fuel 

economies of the largest and smallest 

car and truck models, and determining 

its best assessment of appropriate 

cohorts, acknowledging that there are no 

canonical choices for the cohorts. 

In Step 3, NHTSA determined initial 

values for parameters C and D for each 

vehicle type and model year as follows. 

(Their values were revised for MYs 

2012–2014 in Step 5.) For a given model 

year and vehicle type, NHTSA set the 

initial values of C and D to be the values 

for which the average (equivalently, 

sum) of the absolute values of the 

differences between the manufactureroptimized fuel consumptions for the 

given model year and vehicle type and 

the values obtained by applying the 

function f(x) (defined above) to the 

corresponding vehicle footprints is 

minimal, where the values of A and B 


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375This procedure uniformly shifts the upward 

and downward (depending on whether t is positive 

or negative), but on the same gallon per mile basis corresponding to the harmonic averaging of fuel 

economy values. 

are taken from those determined in Step 

2 and where e denotes the base of the 

natural logarithm (which is 

approximately equal to 2.71828). That 

is, NHTSA determined C and D by 

minimizing the average absolute 

residual, commonly known as the MAD 

(Mean Absolute Deviation) approach, of 

the corresponding constrained logistic 

curve. NHTSA fit the curve in fuel 

consumption space rather than fuel 

economy space because the 

manufacturer targets are in terms of the 

harmonic average fuel economy, and so 

it is more important that the curve fit 

the fuel consumption data well than 

that it fit the fuel economy data well. 

NHTSA also explained in the NPRM 

that it chose to use MAD in this Step 

instead of minimizing the sum of the 

square errors (‘‘least squares,’’ another 

common approach in curve fitting) in 

order to lessen the influence of outliers. 

NHTSA believed that it was more 

appropriate to use unweighted data in 

fitting the curve rather than weighting 

the data by sales because of large 

variations in model sales. 

In Step 4, NHTSA determined for 

each model year and vehicle class the 

integer value of t that maximized the 

societal net benefits (considering the 

seven largest manufacturers) achieved 

by a fuel economy standard under 

which fuel consumption targets were 

defined by the function 

g x A BA

e

e

t

x C /D

x C /D () . =+ − ⎛

⎝

⎜ ⎞

⎠

⎟ + =

−

−

1 11

1

0 0001

( )

( )

using the values of A and B determined 

in Step 2, and the values of C and D 

determined in Step 3.375 NHTSA reset 

the values of 1/A and 1/B to be 1/A + 

0.0001t and 1/B + 0.0001t, respectively. 

(These were not the final values of A 

and B for model years 2012–2014, 

which were further adjusted in Step 5.) 

That is, NHTSA initially set the 

stringency of the curves to maximize 

societal net benefits. 

In Step 5, NHTSA adjusted the values 

of A, B, C, and D for passenger cars and 

light trucks in MYs 2012–2014 as 

follows. NHTSA replaced the values of 

A, B, C, D for passenger cars 

(respectively, light trucks) in MYs 2012– 

2014 with the values obtained by 

making even annual steps between the 

values obtained for MYs 2011 and 2015 

under Step 4. For A and B, these steps 

were made evenly on a gallon per mile 

basis. For C and D, these steps were 

made evenly on a square foot basis. 

Having done so, NHTSA then repeated 

Step 4 beginning with these adjusted 

coefficients. 

NHTSA explained in the NPRM that 

it performed Step 5 because the MY 

2011 car curve crossed the MY 2012 car 

curve and the MY 2011 truck curve 

crossed the MY 2012 truck curve. This 

is undesirable because it implies that 

the fuel economy target for a MY 2012 

car in a certain range of footprint values 

is lower than that for a MY 2011 car of 

the same size (and likewise with trucks). 

We note that no further curve crossings 

occurred. That is, the passenger car 

(respectively, light truck) curves for 

MYs 2011–2015 that resulted upon the 

completion of Step 5 were mutually 

non-intersecting. 

NHTSA thus set the fuel economy 

curve for a given model year and vehicle 

type to be 

T x

f x

A BA

e

e

x C /D

x C /D

( ) ( ) = =

+ − ⎛

⎝

⎜ ⎞

⎠

⎟ +

−

−

1 1

1 11

1

( )

( )

where A, B, C, and D assume the final 

values determined in Steps 1–5. (Recall 

that the function f(x) above is in fuel 

consumption space, not fuel economy 

space.) The values of A, B, C, and D in 

the NPRM for each vehicle type and 

model year were as follows. 

NHTSA noted in the NPRM that a 

manufacturer’s CAFE standard may 

decrease in a given year, compared to 

the prior year, even though the 

passenger car (respectively, light truck) 

fuel economy curves increase in 

functional values with increasing model 

year. A manufacturer’s standard may 

decrease as a result of increasing the 


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376However, Ferrari and Maserati are not 

expected to manufacturer light trucks for sale in the 

United States in MY 2011. 

footprints of the vehicles it produces in 

the later of the two years by a 

sufficiently large amount. (In the NPRM, 

NHTSA referred to the decrease in 

vehicle or manufacturer fuel economy 

targets from one year to the next as 

‘‘backsliding.’’) However, as explained 

in the NPRM, NHTSA believes it is 

unlikely that any manufacturer would 

take such a step in the final rule time 

frame, given what appears to be a 

growing consumer preference for 

smaller, higher-fuel economy vehicles. 

NHTSA noted in the NPRM that the 

curves obtained for passenger cars might 

be undesirably steep near the inflection 

point, where small changes in footprint 

can lead to not so small changes in 

target fuel economy. NHTSA requested 

particular comment on this issue and a 

number of other issues, including the 

determination of cohorts used to set 

values for the asymptotes A and B, the 

manner in which C and D are 

determined, the treatment of outliers, 

and curve crossing. 

NHTSA received several comments 

concerning the manner in which it fit 

the fuel economy curves. 

Comments Regarding the Fact That the 

Car and Truck Curves Are Set 

Independently 

Three commenters (Honda, Wenzel 

and Ross, and Public Citizen) stated it 

would or might be better if rather than 

setting the car and truck curves 

independently, the car and truck fuel 

consumption data were pooled and a 

single curve fit to the pooled data. 

Honda commented that this would 

result in standards that treat cars and 

trucks more equally and could fix the 

steepness problem with the car curve. 

Wenzel and Ross argued that setting the 

same standards for passenger cars and 

light trucks would lead to 

manufacturers producing relatively 

fewer pickups and truck-based SUVs, 

compared to cars and crossover SUVs, 

and this would result in fewer deaths 

and injuries resulting from crashes of 

incompatibly-sized vehicles and greater 

fuel savings. Public Citizen simply 

stated that NHTSA failed to set ‘‘one 

continuous standard for passenger cars 

and light trucks.’’ 

Agency response: In the NPRM, 

NHTSA did examine the standards that 

would result from pooling the data in 

this manner. However, NHTSA is 

required by statute to set separate 

average fuel economy standards for cars 

and trucks, and upon further reflection 

we believe this requirement extends to 

how the agency develops the curves. 

Pooling data for both fleets would mean 

applying to passenger cars a standard 

based, in part, on the technological 

capabilities of light trucks, and vice 

versa. NHTSA is promulgating final 

standards for MY 2011 that, as 

proposed, base the curve applied to 

each fleet only on the capabilities of 

vehicles that would be covered the 

curve. 

Comments Concerning the 

Manufacturers Whose Data to Which the 

Curves Were Fit 

BMW, Mercedes, Mitsubishi, Porsche, 

Subaru, and the Alliance commented 

that the fuel economy curves should be 

fit to data from all manufacturers to 

which the fuel economy standards 

apply, and not just to data from the 

seven largest manufacturers. Some 

commenters (BMW, Mercedes, 

Mitsubishi, Porsche) argued that 

limiting to data from the seven largest 

manufacturers results in 

disproportionate burdens to other 

manufacturers subject to the standards. 

Mitsubishi stated that all manufacturers 

need to be included in setting the 

standards in order for the standards to 

comprehensively reflect the 

technological and economic feasibility 

for the U.S. auto industry. 

Agency response: Upon further 

consideration, NHTSA agrees with the 

commenters and has revised its 

methodology to include all 

manufacturers to which the MY 2011 

standards apply: BMW, Chrysler, 

Daimler, Ferrari, Ford, General Motors, 

Honda, Hyundai, Maserati, Mitsubishi, 

Nissan, Porsche, Subaru, Suzuki, Tata, 

Toyota, Volkswagen. That is, NHTSA 

has revised Step 1 above to include the 

vehicles of the given model year and 

vehicle type for all 17 of these 

manufacturers.376

In developing the standards 

promulgated today, NHTSA included all 

manufacturers both in the curve fitting 

process and in the process by which the 

agency determined the final stringency 

of the standards. In addition, NHTSA 

has used the manufacturers’ updated 

product plan submissions in Step 1 for 

the final rule, as opposed to the 2007 

product plans used in the NPRM. 

Comments Concerning the Steepness of 

the Car Curve 

Several commenters (Chrysler, Honda, 

Nissan, Ferrari, Porsche, Subaru, 

Toyota, Volkswagen, the Union of 

Concerned Scientists, AIAM, ACEEE) 

expressed concern that the car curve 

was too steep and that this could lead 

to manufacturers to artificially increase 

the footprint of car models they produce 

near the point of inflection in order to 

reduce their fuel economy targets. In 

addition, Volkswagen and AIAM 

commented that the steepness of the car 

curve could pose inequitable burdens to 

manufacturers. ACEEE stated that the 

steepness of the car curve could lead to 

gaming of the classification of vehicles 

as passenger cars or light trucks. 

Chrysler argued that the steepness 

problem could become more serious in 

the face of changing consumer 

preferences. 

Conversely, the Alliance expressed 

concern that flattening the curves might 

unjustifiably lower the fuel economy 

targets for the smallest vehicles and 

raise the targets for the largest vehicles. 

ACEEE suggested that the steepness of 

the car curve is explained largely by the 

fact that larger cars have more 

horsepower on average than smaller 

cars, over and above what is needed for 

comparable performance. ACEEE argued 

that excessive horsepower has adverse 

effects on safety and that NHTSA 

should consider ways to discourage the 

continued growth in horsepower in the 

U.S. car market. 

Commenters suggested a number of 

potential solutions to flatten the car 

curve. Honda suggested pooling the car 

and truck data when fitting the curves. 

Nissan suggested increasing D by a 

factor between 0.6 and 0.9. Ferrari 

suggested employing additional 

attributes besides footprint to set the 

curves. AIAM suggested using a variant 

of ‘‘shadow size’’ instead of footprint, 

changing the methodology used to 

determine the value of the parameter D, 

adding data from more companies, 

using additional attributes, or adding an 

alternative compliance option. ACEEE 

suggested revisiting the idea of 

normalizing car footprint to reduce the 

steepness of the car curve. Toyota 

suggested determining the value of the 

parameter D before determining the 

values of A and B. Chrysler suggested 

reducing the value of A or increasing 

the value of D. 

Agency response: NHTSA is 

incorporating AIAM’s suggestion to 

include data from more manufacturers, 

as discussed in the section ‘‘Comments 

concerning the manufacturers whose 

data to which the curves were fit’’ 

above. NHTSA reviewed the methods it 

presented in the NPRM for flattening the 

curve and the commenters’ response to 

these methods. NHTSA has 

substantially revised its approach to 

mitigating the curve steepness issue, 

and believes that this revised approach 

provides a more rational solution than 

those presented either by NHTSA in the 

NPRM or by commenters in response to 

the NPRM. 

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377 71 FR 17600–06 (Apr. 6, 2006). 

Specifically, for the final rule, NHTSA 

has revised Step 1 as follows: First, 

rather than limiting this Step solely to 

the seven largest manufacturers, NHTSA 

included all manufacturers. Second, 

rather than identifying CAFE levels that 

maximized net societal benefits 

attributable (separately) to each 

individual manufacturer, the agency 

identified CAFE levels that cause each 

manufacturer to exhaust available 

technologies. In doing so, the agency 

has focused this Step on the engineering 

aspects of available technologies, 

essentially setting aside economic 

considerations at this point. 

The agency believes that using this 

technology exhaustion approach and 

pooling product plan data from all 

model years better equalizes the effort, 

or fuel saving potential, for each 

manufacturer’s fleet and provides a 

better estimation of the statistical 

relationship between vehicle size and 

fuel economy. 

As mentioned above, NHTSA’s NPRM 

discussed a constrained linear function 

as a possible alternative to the 

constrained logistic function used in 

today’s final rule. Although the agency 

has concluded that, for this rulemaking, 

the risks of unintended consequences 

near the ‘‘kinks’’ in a constrained linear 

function outweigh that function’s lesser 

tendency toward steepness, the agency 

believes that this function may warrant 

further consideration in future CAFE 

rulemakings. 

Comments Concerning the 

Determination of the Asymptotes (A and 

B) 

Chrysler, GM, Honda, and Toyota 

expressed a variety of concerns about 

the manner in which the values of the 

parameters A and B were determined. 

GM commented that the values of A 

and B in the NPRM could discourage the 

production of larger vehicles. In 

addition, GM argued that the cohort 

used to determine the value of A for cars 

did not contain sufficiently many 

domestic cars to provide a value for A 

that reflects small cars as a whole (both 

foreign and domestic). GM suggested 

increasing A by 10 percent and 

decreasing B by 5 percent. 

Chrysler suggested reducing the value 

of A in a manner that reflects lower 

consumer tolerance for fuel economy 

technologies on the least expensive 

vehicles. 

Honda and Toyota argued that A and 

B should not be set as the average fuel 

economies of cohort sets of vehicles, but 

rather be determined in a metricoptimizing way similar to the 

determination of C and D. Both 

manufacturers suggested setting D first 

through some means, followed by 

determining A, B, and C by optimizing 

a curve-fitting metric. Toyota suggested 

this would help with the steepness 

problem for cars. In addition, Toyota 

stated that the process used to select the 

cohorts in the NPRM appeared to lack 

a clear technical or empirical basis. 

Agency response: NHTSA continues 

to believe that the values of A and B 

should be set as the average values of 

cohorts, rather than to optimize a curvefitting metric. NHTSA believes that it is 

more important that the largest and 

smallest target values for the fuel 

economies of individual vehicle models 

reflect the smallest and largest vehicles 

in the fleet, and do so in a manner that 

is relatively stable, than that their values 

freely optimize a curve-fitting metric. 

The analysis presented in NHTSA’s 

2006 final rule establishing standards 

for MY 2008–2011 light trucks 

demonstrated that freely fitting all four 

constants of the logistic curve produces 

unstable and potentially extreme 

functional limits.377 As the agency 

explained in that notice, such results 

can produce impossibly stringent 

standards for manufacturers that only 

produce small vehicles, and/or unduly 

low targets for large vehicles. These 

problems led the agency to conclude 

then, as it concludes today, that the 

limits of the logistic curve must be 

constrained, and that the constraints 

should be based on the potential 

performance of identified cohorts of 

vehicles with the smallest and largest 

footprints. 

Given a cohort setting approach, 

NHTSA agrees with GM’s comment to 

enlarge the cohort used to determine the 

value of A for cars to include more 

domestic small cars. NHTSA enlarged 

this cohort to comprise the lower tenth 

percentile of footprints (based now on 

the data from the seventeen 

manufacturers to which the standards 

apply). In addition, upon reviewing the 

updated product plans from the 

seventeen manufacturers, all of whose 

product plans we now use to determine 

cohorts, NHTSA has slightly changed 

the percentiles used to determine the 

remaining cohorts as follows: the 

percentile used to determine the value 

of A for light trucks was changed to 10 

from 11, while that used to determine B 

for passenger cars (respectively, light 

trucks) was changed from 4 

(respectively, 6) to 9 (respectively, 6). 

Again, the agency recognizes that there 

are no canonical choices for the 

percentiles used to determine the 

cohorts. The cohorts NHTSA has set for 

the final rule reflect the agency’s best 

assessment of the passenger car and 

light truck fleets. Also, because the 

agency is now pooling data from five 

model years when fitting the fuel 

economy curves for MY 2011, as 

described below in ‘‘Comments 

concerning curve crossing,’’ these 

percentiles are applied to the pooled 

model year data, rather than to each 

model year’s dataset. 

That is, for the final rule, NHTSA has 

revised Step 2 as follows. For passenger 

cars (respectively, light trucks), NHTSA 

set the initial value of the parameter A 

to be the harmonic average fuel 

economy among the vehicles of the 

given vehicle type (produced by the 

seventeen manufacturers used in Step 1) 

comprising the lower tenth 

(respectively, tenth) percentile of 

footprint values. NHTSA set the initial 

value of B to be the harmonic average 

fuel economy among the vehicles of the 

given vehicle type (produced by the 

seventeen manufacturers) comprising 

the upper ninth (respectively, sixth) 

percentile of footprint values. (As with 

the NPRM, these harmonic averages 

constitute the initial values of A and B, 

which will later be revised in Step 4.) 

Note that the revised Step 2 fits only 

two values for A (one for cars and one 

for trucks), and likewise two values for 

B, whereas the version of Step 2 applied 

in the NPRM fitted 10 values for each 

(one for each vehicle type and model 

year). 

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Comments Concerning the Curve-Fitting 

Metric and Treatment of Outliers 

Honda expressed concern about 

NHTSA’s use of unweighted data (i.e., 

data not weighted by sales) in the curvefitting metric, stating that vehicle 

models that are similar to a number of 

other vehicle models would have an 

undue influence on the curve under an 

unweighted curve-fitting metric. 

Subaru suggested that the initial 

curves should be fit to each 

manufacturer separately and then the 

results pooled in some fashion. 

Commenters expressed differing 

views regarding how outliers should be 

treated. Public Citizen stated that 

removing outliers has the effect of 

reducing the stringency of the 

standards, and so all outliers should be 

included when fitting the curve. 

Conversely, Honda stated that outliers 

should be eliminated, presumably 

because of a concern that they have an 

undue influence on the standards. 

Agency response: NHTSA further 

considered the potential to exclude 

outliers from the curve fitting and/or 

stringency determination processes. 

However, even considering all related 

comments, the agency has been unable 

to arrive at a definition of ‘‘outlier’’ as 

it would apply to these processes. Even 

after the maximal application of 

technology (described above) to 

manufacturers’ fleets, some vehicle 

models have fuel economy values well 

below or well above those of other 

vehicle models with similar footprint. 

However, these vehicles contain 

information about the capability of some 

types of vehicles. Similarly, some 

vehicles with considerable quantities of 

technology do not achieve unusually 

high fuel economy values. Therefore, 

NHTSA finds that neither performancenor technology-based outliers can be 

definitively, objectively identified. 

Furthermore, because NHTSA is using 

the minimization of mean absolute 

deviation (MAD) for curve fitting in this 

final rule, outliers have far less 

influence on the solution than they 

would had the agency relied on 

conventional least-square regression. 

NHTSA has also continued to use an 

unweighted curve-fitting metric, rather 

than weighting the data by sales. Each 

vehicle model provides an equal 

amount of information concerning the 

underlying relationship between 

footprint and fuel economy. As 

explained in the NPRM, sales-weighted 

regression would give some vehicle 

models vastly more emphasis than other 

vehicle models. On the other hand, 

Honda expressed concern that, under 

unweighted regression, vehicle models 

that have been disaggregated into 

multiple virtually identical ‘‘models.’’ 

To address this concern, the agency has 

attempted to identify such models (e.g., 

vehicle models that appear to differ only 

in trim level), and to consolidate them 

into single entries. Even so, the 

potential distortions by such 

disaggregation are far smaller than the 

potential distortions associated with 

sales-weighted analysis. 

In response to Subaru’s suggestion, 

NHTSA believes that there is an 

insufficient amount of data at the 

manufacturer level (particularly in light 

of NHTSA’s decision to use data from 

all manufacturers, including a number 

of smaller manufacturers) to generate 

reliable curves at an individualmanufacturer level. 

As explained above, NHTSA has 

concluded, based on further analysis 

and taking into account all related 

comments, that unweighted MAD 

provides a better approach for setting 

the MY 2011 standards. However we 

note that because we pool the model 

year data when fitting the curve in the 

final rule, for reasons described in 

‘‘Comments concerning curve crossing’’ 

below, unweighted MAD will be 

applied to the pooled model year data 

for a given vehicle class. 

That is, for the final rule, NHTSA has 

revised Step 3 as follows: NHTSA 

determined values for parameters C and 

D for each vehicle type as follows. For 

a given vehicle type, NHTSA set the 

initial values of C and D to be the values 

for which the average (equivalently, 

sum) of the absolute values of the 

differences between the optimized fuel 

consumption from Step 1 for the given 

vehicle type (all model years) and the 

values obtained by applying the 

following function 

f x A BA

e

e

x C /D

x C /D ( )

( )

( ) =+ − ⎛

⎝

⎜ ⎞

⎠

⎟ +

−

−

1 11

1

to the corresponding vehicle footprints 

is minimal, where the values of A and 

B are taken from those determined in 

Step 2 and where e denotes the base of 

the natural logarithm (which is 

approximately equal to 2.71828). That 

is, NHTSA determined C and D by 

minimizing the average absolute 

residual of the pooled MY 2011–2015 

data under the corresponding 

constrained logistic curve. Note that the 

revised Step 3 fits only two values for 

C (one for cars and one for trucks), and 

likewise two values for D, whereas the 

version of Step 3 applied in the NPRM 

fitted 10 values for each (one for each 

vehicle type and model year). We also 

note that because Step 5 has been 

eliminated in this final rule, for reasons 

described in ‘‘Comments concerning 

curve crossing’’ below, the values of C 

and D determined in Step 3 are the final 

values of these parameters. 

For passenger cars, this procedure 

yielded a curve with the following 

coefficients: A = 37.82 mpg, B = 27.70 

mpg, C = 51.41 square feet, D = 1.91 

square feet. This curve, shown below on 

a fuel consumption (i.e., gpm) basis, 

produced an average absolute difference 

of 18 percent. 


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Each data point in this graph 

represents a car model in the updated 

(May 2008) product plans, and the fuel 

consumption values for these data 

points reflect the ‘‘technology 

exhaustion’’ fuel consumption (i.e., the 

lowest fuel consumption achievable 

using technologies known about today). 

The curve in this graph is the 

constrained logistic curve defined by 

the parameters determined in Step 3. 

Step 4 has not yet been applied. Note 

that the corresponding chart in the 

NPRM (Figure V–7 in the NPRM) 

presented five curves, instead of one, 

since Steps 2 and 3 in the NPRM fit five 

car curves (one for each model year) 

instead of one. The sole curve in the 

above chart reflects the underlying 

relationship between the footprint of 

cars and the fuel economy achievable in 

them using technologies we know of 

today. 

For light trucks, the same procedure 

yielded a curve with the following 

coefficients: A = 36.43 mpg, B = 26.43 

mpg, C = 56.41 square feet, and D = 4.28 

square feet. This curve, shown below on 

a fuel consumption (i.e., gpm) basis, 

produced an average absolute difference 

of 14 percent. 


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Comments Concerning Curve-Crossing 

NHTSA received comments on both 

sides of the curve-crossing issue. While 

Nissan shared NHTSA’s concern about 

curve crossing, Toyota commented that 

curve crossing did not necessarily pose 

a problem because it believed that 

manufacturers were not likely to reduce 

a vehicle’s fuel economy in a year in 

which its target fuel economy declined 

from the previous year. Additionally, 

Toyota argued that NHTSA’s means of 

addressing curve crossing lacked an 

empirical basis and clear objective 

factors. 

Nissan and Toyota proposed different 

solutions to address the curve crossing 

issue: Nissan suggested increasing D by 

a factor between 0.6 and 0.9. Although 

it did not feel that curve crossing was 

necessarily problematic, Toyota 

presented an alternative methodology 

for addressing the curve crossing issue 

by smoothing the rate of increase 

between model years. 

Agency response: NHTSA agrees with 

Nissan that curve crossing is 

problematic, since it makes little sense 

for a vehicle’s fuel economy target to 

decrease from one model year to the 

next. However, NHTSA disagrees with 

the solutions proposed to address curve 

crossing for the following reasons. 

Nissan’s suggestion to increase D by a 

factor between 0.6 and 0.9 appears to 

have no rational basis for choosing such 

a factor. Toyota’s proposed alternative 

methodology, on the other hand, is 

designed to produce standards that align 

with historic planning cycles and 

allocation of engineering resources. 

While it is desirable for the fuel 

economy standards to be consistent 

with historic planning cycles and 

resource allocation, NHTSA believes 

that it is more important that the 

standards are the maximum feasible, 

and artificially ‘‘smoothing’’ the rate of 

increase could not guarantee that 

standards are the maximum feasible in 

each model year. 

Given that NHTSA is now applying 

maximized fuel economies in Step 1, 

NHTSA has concluded that it is 

beneficial to include data from all 

model years (for the given vehicle type) 

in fitting the curve, as the underlying 

relationship between fuel economy and 

footprint should not change from one 

year to the next. (However, the 

relationship can change as new 

technologies develop to improve fuel 

economy.) That is, we now determine A 

and B using pooled model year data in 

Step 2, and fit C and D using pooled 

model year data in Step 3. As a 

consequence of eliminating Step 5, the 

values of C and D for cars (and likewise 

trucks) agree in each model year. (Step 

4 remains unchanged in this final rule.) 

The inclusion of data from all model 

years eliminates the possibility of curve 

crossing, and so NHTSA is eliminating 

Step 5 in this final rule. 

With regard to Toyota’s comment, the 

agency believes that the revised 

approach to curve fitting significantly 

improves the objectivity of the process 

for determining maximum feasible 

standards. 

The parameter values in this final rule 

are as follows. 


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378 In principle, if all manufacturers freely traded 

fuel economy credits among themselves, fleetwide 

estimates of compliance costs and benefits would 

approximate the sum of individual manufacturer 

costs and benefits. However, major manufacturers 

have repeatedly indicated that they do not intend 

to trade credits, and statutory language prohibits 

NHTSA from considering the benefits of trading in 

setting standards. 

379Attorneys General of the States of California, 

Arizona, Connecticut, Illinois, Maryland, 

Massachusetts, New Jersey, New Mexico, Oregon, 

and Vermont, the Executive Officer of the California 

Air Resources Board, the Commissioner of the New 

Jersey Department of Environmental Protection, the 

Secretary of the New Mexico Environment 

Department, the Secretary of the Commonwealth of 

Pennsylvania Department of Environmental 

Protection, and the Corporation Counsel of the City 

of New York, Supplemental Comments Regarding 

Alliance of Automobile Manufacturers Comments, 

Docket No. NHTSA–2008–0089–0495, October 8, 

2008, p. 3. 

E. Why has NHTSA used the Volpe 

model to support its analysis? 

In developing today’s final CAFE 

standards, NHTSA has made significant 

use of results produced by the CAFE 

Compliance and Effects Model 

(commonly referred to as the Volpe 

model), which DOT’s Volpe National 

Transportation Systems Center 

developed specifically to support 

NHTSA’s CAFE rulemakings. 

As discussed above, the agency uses 

the Volpe model to estimate the extent 

to which manufacturers could attempt 

to comply with a given CAFE standard 

by adding technology to fleets that the 

agency anticipates they will produce in 

future model years. This exercise 

constitutes a simulation of 

manufacturers’ decisions regarding 

compliance with CAFE standards. 

The model also calculates the costs, 

effects, and benefits of technologies it 

estimates could be added in response to 

a given CAFE standard. It calculates 

costs by applying the cost estimation 

techniques discussed above in Section 

IV and by accounting for the number of 

affected vehicles. It accounts for effects 

such as changes in vehicle travel, 

changes in fuel consumption, and 

changes in greenhouse gas and criteria 

pollutant emissions. It does so by 

applying the fuel consumption 

estimation techniques also discussed in 

Section IV, and the vehicle survival and 

mileage accumulation forecasts, the 

rebound effect estimate and the fuel 

properties and emission factors 

discussed in discussed in Section V. 

Considering changes in travel demand 

and fuel consumption, the model 

estimates the monetized value of 

accompanying benefits to society, as 

discussed in Section V. The model 

calculates both the current (i.e., 

undiscounted) and present (i.e., 

discounted) value of these benefits. 

The Volpe model has other 

capabilities that facilitate the 

development of a CAFE standard. It can 

be used to fit a mathematical function 

forming the basis for an attribute-based 

CAFE standard, following the steps 

described below. It can also be used to 

evaluate many (e.g., 200 per model year) 

potential levels of stringency 

sequentially, and identify the stringency 

at which specific criteria are met. For 

example, it can identify the stringency 

at which net benefits to society are 

maximized, the stringency at which a 

specified total cost is reached, or the 

stringency at which a given average 

required fuel economy level is attained. 

The model can also be used to perform 

uncertainty analysis (i.e., Monte Carlo 

simulation), in which input estimates 

are varied randomly according to 

specified probability distributions, such 

that the uncertainty of key measures 

(e.g., fuel consumption, costs, benefits) 

can be evaluated. 

Nothing in EPCA requires NHTSA to 

use the Volpe model. In principle, 

NHTSA could perform all of these tasks 

through other means. For example, in 

developing the MY 2011 standards 

promulgated today, the agency did not 

use the Volpe model’s curve fitting 

routines, because they could not be 

modified in time to implement the 

changes discussed below to this aspect 

of the agency’s analysis. In general, 

though, these model capabilities greatly 

increase the agency’s ability to rapidly, 

systematically, and reproducibly 

conduct key analyses relevant to the 

formulation and evaluation of new 

CAFE standards. 

NHTSA received comments from the 

Alliance and CARB encouraging 

NHTSA to examine the usefulness of 

other models. Examples of other models 

and analyses that NHTSA and Volpe 

Center staff have considered for the final 

rule include DOE’s NEMS, Oak Ridge 

National Laboratory’s (ORNL) 

Transitional Alternative Fuels and 

Vehicles (TAFV) model, Sierra 

Research’s VEHSIM model and the 

California Air Resources Board’s (CARB) 

analysis supporting California’s adopted 

greenhouse gas emissions standards for 

light vehicles. 

DOE’s NEMS represents the light-duty 

fleet in terms of five car 

‘‘manufacturers’’ and four truck 

‘‘manufacturers,’’ twelve vehicle market 

classes (e.g., ‘‘standard pickup’’), and 

sixteen powertrain/fuel combinations 

(e.g., methanol fuel-cell vehicle). 

Therefore, as currently structured, 

NEMS is unable to estimate 

manufacturer-specific implications of 

attribute-based CAFE standards. The 

analysis of manufacturer-specific 

implications is useful in setting the 

standard, because any given standard 

will have differential impacts on 

individual manufacturers, depending on 

the composition of their vehicle fleets. 

In order to balance national-level costs 

and benefits, assessment of individual 

manufacturer’s costs and compliance 

strategies is appropriate.378

TAFV accounts for many powertrain/ 

fuel combinations, having been 

originally designed to aid understanding 

of possible transitions to alternative 

fueled vehicles, but it also represents 

the light duty fleet as four aggregated 

(i.e., industry-wide) categories of 

vehicles: Small cars, large cars, small 

light trucks, and large light trucks. Thus, 

again, as currently structured, TAFV is 

unable to estimate manufacturerspecific implications of attribute-based 

CAFE standards. 

Sierra Research’s vehicle simulation 

model, VEHSIM, which was originally 

developed by General Motors, calculates 

the fuel economy for a specified vehicle 

design over a specified driving cycle. 

Despite theoretical advantages in terms 

of explicit representation of physical 

phenomena underlying fuel 

consumption, VEHSIM has significant 

shortcomings as a tool for model-bymodel evaluation of the entire future 

light vehicle fleet. Although submitted 

after the close of the comment period 

specified in the NPRM, comments by 

several state Attorneys General and 

other state and local official questioned 

the need and merits of full vehicle 

simulation within the context of CAFE 

analysis, stating that 

Computer simulation models such as 

VEHSIM are not practical except perhaps 

during vehicle development to determine the 

performance of specific vehicle models 

where all vehicle engineering parameters are 

known and can be accounted for in the 

inputs to the model. Such an exercise is 

extremely data intensive, and extending it to 

the entire fleet makes it subject to multiple 

errors unless the specific parameters for each 

vehicle model are known and accounted for 

in the model inputs.379

Nevertheless, the Volpe model could, 

in principle, be modified to use 

VEHSIM or any other vehicle simulation 

tool to estimate fuel consumption. 

However, in practice, NHTSA and 

Volpe Center staff are skeptical that 

doing so will be either feasible or 

meaningful as long as CAFE analysis 

continues to be informed by forecasts of 

the future vehicle market—forecasts 

that, though detailed, will not 

foreseeably contain the extensive 

information needed to perform full 

vehicle simulation. The information 

required for full vehicle simulation is 

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380By definition, the ‘‘maximum technology’’ 

scenario far exceeds the maximum feasible CAFE 

standard. 

not only exponentially greater than 

NHTSA currently requests of 

manufacturers, but for future vehicles, 

the information may not yet exist, as 

manufacturers may not have completed 

the design of future vehicles. See 

Section IV.C.8 for a fuller discussion of 

full vehicle simulation in the context of 

CAFE. 

CARB’s analysis of light vehicle GHG 

emissions standards uses two levels of 

accounting. First, based on a report 

prepared for NESCCAF, CARB 

represents the light-duty fleet in terms 

of five ‘‘representative’’ vehicles, each 

with engineering properties estimated 

by CARB to meaningfully typify the 

engineering characteristics of a given 

type of vehicle (e.g., small cars). NHTSA 

is concerned that such a limited a 

number of such vehicles does not 

reasonably represent the engineering 

properties of individual vehicle models 

that vary widely both among 

manufacturers and within 

manufacturers’ individual fleets. This 

concern was reflected in comments by 

the Alliance. For each of these five 

vehicles, NESCCAF’s report contains 

the results of full vehicle simulation 

given several pre-specified technology 

‘‘packages.’’ Second, to evaluate 

manufacturer-specific regulatory costs, 

CARB represents each manufacturer’s 

fleet as two average test weights, one for 

each of California’s two proposed 

regulatory classes. Even for a flat 

standard such as that considered by 

California, NHTSA is concerned that 

this level of aggregation would hinder 

reasonable estimation of compliance 

costs faced by individual manufacturers. 

Further, use of CARB’s methods would 

not enable NHTSA to estimate 

manufacturer-specific implications of 

the attribute-based CAFE standards. 

Under an attribute-based standard, the 

CAFE level required of a given 

manufacturer depends on the specific 

mix of vehicles sold by that 

manufacturer, not the average properties 

of that manufacturers’ fleet. As noted 

above, it is useful to estimate national 

level costs and benefits of a standard 

applied at the level of individual 

manufacturer’s fleets by assessing 

individual manufacturer’s costs and 

compliance strategies. 

On the other hand, NHTSA recognizes 

that a more aggregated representation of 

the fleet—such as CARB’s five-vehicle 

approach—may be the only way that 

full vehicle simulation could be 

integrated into CAFE analysis. Although 

NHTSA has not yet been able to conduct 

an analysis with the advantages of both 

detailed representation of 

manufacturers’ fleets and full 

integration of full vehicle simulation, 

the agency cannot rule out the 

possibility of such an analysis in the 

future. 

Although the Volpe model has 

limitations, having considered other 

tools and analytical approaches, NHTSA 

concludes that for this final rule, the 

Volpe model is a sound and reliable tool 

for the development and evaluation of 

potential CAFE standards. However, the 

agency will continue to consider other 

methods for evaluating potential CAFE 

standards in the future as well as to 

examine ways to improve the Volpe 

model. 

NHTSA notes that some commenters 

questioned the transparency of the 

Volpe model, which Public Citizen and 

the Center for Biological Diversity (CBD) 

referred to as a ‘‘black box.’’ In response 

to these comments, the agency notes 

that model documentation, which is 

publicly available in the rulemaking 

docket, explains how the model is 

installed, how the model inputs (all of 

which, except for manufacturers’ 

confidential product plans, are available 

to the public) and outputs are 

structured, and how the model is used. 

The model can be used on any 

Windows-based personal computer with 

Microsoft Office 2003 and the Microsoft 

.NET framework installed (the latter 

available without charge from 

Microsoft). The executable version of 

the model is available upon request, and 

has been provided to manufacturers, 

consulting firms, academic institutions, 

governmental and nongovernmental 

organizations, research institutes, 

foreign government officials, and a 

variety of other organizations. The 

current version of the model was 

developed using Microsoft Development 

Environment 2003, and every line of 

computer code (primarily in C#.NET) 

has been made available to individuals 

who have requested the code. With the 

code, anyone is capable of running the 

model using market forecast data that 

they obtain or estimate on their own. 

Given the comprehensive disclosure of 

information about the Volpe model and 

the fact that many entities and 

individuals have made use of it, the 

characterization of the Volpe model as 

a ‘‘black box’’ is not accurate. 

Although NHTSA currently uses the 

Volpe model as a tool to inform its 

consideration of potential CAFE 

standards, contrary to the assertions of 

some commenters, the Volpe model 

does not determine the CAFE standards 

NHTSA proposes or promulgates as 

final regulations. The results it produces 

are completely dependent on inputs 

selected by NHTSA, based on the best 

available information and data available 

in the agency’s estimation at the time 

standards are set. In addition to 

identifying the input assumptions 

underlying its decisions, NHTSA 

provides the rationale and justification 

for selecting those inputs as described 

in Sections III through V of this notice. 

NHTSA also determines whether to use 

the model to estimate at what stringency 

net benefits are maximized, or to 

estimate other stringency levels, such as 

the point where total costs equal total 

benefits. NHTSA also determines 

whether to use the model to evaluate the 

costs and effects of stringencies that fall 

outside of the scope of maximum 

feasible. For example, the standards for 

the ‘‘Technology Exhaustion’’ 

Alternative examined by NHTSA and 

discussed later in this section, were 

estimated outside the model, which was 

subsequently used to estimate 

corresponding costs and effects.380

Finally, NHTSA is guided by the 

statutory requirements of EPCA as 

amended by EISA in the ultimate 

selection of a CAFE standard. 

NHTSA does not agree with Public 

Citizen that the agency ‘‘does not 

establish what is technologically 

feasible and economically practicable 

based on an independent assessment of 

the current vehicle fleet and the 

available technology to improve the 

fleet, but rather accepts industry inputs, 

which are run through the black box of 

the Volpe model and a variety of 

‘optimization’ factors, which are tied to 

maximizing industry-wide benefits.’’ 

The manufacturers’ plans are only the 

starting point for the agency’s 

determination of how much technology 

can and should be required consistent 

with the statutory factors, and the Volpe 

model is often tested using inputs 

developed without reliance on 

manufacturers’ product plans. NHTSA 

considers the results of analyses 

conducted by the Volpe model and 

analyses conducted outside of the Volpe 

model, including analysis of the impacts 

of carbon dioxide and criteria pollutant 

emissions, analysis of technologies that 

may be available in the long term and 

whether NHTSA could expedite their 

entry into the market through these 

standards, and analysis of the extent to 

which changes in vehicle prices and 

fuel economy might affect vehicle 

production and sales. Using all of this 

information—not solely that from the 

Volpe model—the agency considers the 

governing statutory factors, along with 

environmental issues and other relevant 

societal issues such as safety, and 

promulgates the maximum feasible 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14373 

381 In the FEIS, NHTSA refers to this alternative 

as the ‘‘No Action’’ alternative. CEQ regulations 

require agencies to consider a no action alternative 

as part of their NEPA analysis. See 40 CFR 1502.2(e) 

and 1502.14(d). 

standards based on its best judgment on 

how to balance these factors. 

This is why the agency considered 

seven regulatory alternatives, only one 

of which maximizes net benefits based 

on the agency’s determinations and 

assumptions. The others assess 

alternative standards that in many cases 

exceed the point at which net benefits 

are maximized. These comprehensive 

analyses, which also included scenarios 

with different economic input 

assumptions as presented in the FEIS 

and FRIA, are intended to inform and 

contribute to the agency’s consideration 

of the ‘‘need of the United States to 

conserve energy,’’ as well as the other 

statutory factors. 49 U.S.C. 32902(f). 

Additionally, the agency’s analysis 

considers the need of the nation to 

conserve energy by accounting for 

economic externalities of petroleum 

consumption and monetizing the 

economic costs of incremental CO2

emissions in the social cost of carbon. 

As mentioned above, NHTSA will 

continue to consider other methods for 

determining future CAFE standards in 

future rulemakings. 

VII. Determining the Appropriate Level 

of the Standards 

A. Analyzing the Preferred Alternative 

As discussed above, EPCA requires 

the agency to determine what level of 

CAFE stringency would be ‘‘maximum 

feasible’’ for each model year by 

considering the four factors of 

technological feasibility, economic 

practicability, the effect of other motor 

vehicle standards of the Government on 

fuel economy, and the need of the 

United States to conserve energy. NEPA 

directs that environmental 

considerations be integrated into that 

process. To accomplish that purpose, 

NEPA requires an agency to compare 

the potential environmental impacts of 

its proposed action to those of a 

reasonable range of alternatives. NHTSA 

compared and analyzed these impacts 

in the DEIS and the FEIS. The proposed 

standards for passenger cars and light 

trucks were set at the point where 

societal net benefits were maximized in 

the agency’s analysis. NHTSA referred 

to those standards as the ‘‘Optimized’’ 

Alternative in the NPRM, DEIS, and 

FEIS. In the DEIS and the FEIS, the 

agency identified the Optimized 

Alternative (maximizing societal net 

benefits) as NHTSA’s Preferred 

Alternative. The agency carefully 

considered and analyzed each of the 

individual economic assumptions to 

determine which assumptions most 

accurately represent future economic 

conditions. For a discussion of the 

economic assumptions relied on by the 

agency in this final rule, see Section V 

above. The economic assumptions used 

by the agency in this final rule 

correspond to the ‘‘Mid-2 Scenario’’ set 

of assumptions identified in the FEIS. 

See FEIS § 2.2. The Optimized 

Alternative utilizing the Mid-2 Scenario 

economic assumptions, which were 

prompted in part by public comments, 

is squarely within the spectrum of 

alternatives set forth in the DEIS and the 

FEIS, and all relevant environmental 

impacts associated with the Optimized 

Alternative have been presented in the 

DEIS and FEIS, and considered by 

NHTSA. 

B. Alternative Levels of Stringency 

Considered for Establishment as the 

Maximum Feasible Level of Average 

Fuel Economy 

NHTSA recognizes that alternative 

stringencies are possible, depending on 

how the agency balances the four factors 

underlying the selection of maximum 

feasible level of average fuel economy 

and the attendant environmental 

concerns. To aid it in determining the 

maximum feasible level, NHTSA chose 

six alternative regulatory actions. Each 

alternative reflects a balancing of the 

four factors that differs from the 

balancing on which the agency’s 

Preferred Alternative is based. In CBD v. 

NHTSA, the Ninth Circuit recognized 

that EPCA gives ‘‘NHTSA discretion to 

decide how to balance the statutory 

factors—as long as NHTSA’s balancing 

does not undermine the fundamental 

purpose of EPCA: energy conservation.’’ 

538 F.3d 1172, 1195 (9th Cir. 2008). The 

Court also raised the possibility that 

NHTSA’s current balancing of the 

statutory factors might be different from 

the agency’s balancing in the past, given 

the greater importance today of the need 

to conserve energy and the more 

advanced understanding of climate 

change. Id. at 1197–98. In the 

rulemaking for MY 2012 and beyond, 

NHTSA will carefully re-evaluate the 

facts relevant to assessing the need to 

conserve energy, including the latest 

developments in the understanding of 

climate change and its effects, and will 

balance the factors accordingly. 

CEQ regulations state that 

consideration of alternatives is the 

‘‘heart’’ of an EIS. 40 CFR 1502.14. 

However, under CEQ regulations, 

NHTSA is not required to include every 

conceivable ‘‘alternative’’ in an EIS. 

Rather, an agency is to consider 

‘‘reasonable’’ alternatives. See id. CEQ 

guidance also instructs that ‘‘[w]hen 

there are potentially a very large number 

of alternatives, only a reasonable 

number of examples, covering the full 

spectrum of alternatives, must be 

analyzed and compared in the EIS.’’ 

Forty Most Asked Questions Concerning 

CEQ’s National Environmental Policy 

Act Regulations, 46 FR 18026, 18027 

(March 23, 1981). 

Here, an infinite number of 

alternatives could theoretically have 

been defined along a continuum of 

potential CAFE standards. Given the 

infinite number of alternatives, and 

informed by CEQ regulations and 

guidance, NHTSA’s Environmental 

Impact Statement identifies and 

analyzes six alternatives. Specifically, 

NHTSA evaluates the six alternatives 

proposed in the NPRM as its reasonable 

range of alternatives. The agency 

examined the six specific alternatives 

described below to illustrate the effect 

of balancing the four factors differently 

on the range of potential stringency 

levels, the relationship of economic 

benefits to compliance costs, and the 

resulting environmental impacts. These 

alternatives capture a full spectrum of 

potential environmental impacts, 

ranging from vehicles continuing to 

maintain their MY 2010 fuel economy to 

standards based on the maximum 

technology expected to be available over 

the five-year period proposed in the 

NPRM (i.e., MYs 2011–2015). 

The six alternatives considered in this 

rulemaking, and analyzed in NHTSA’s 

the Environmental Impact Statement, 

are described as follows: 

• The ‘‘no increase’’ or ‘‘baseline’’ 

alternative assumes that NHTSA would 

not issue a rule regarding CAFE 

standards, or alternatively, that NHTSA 

would issue a rule continuing current 

standards during the time frame of the 

final rule standards. Either way, the 

‘‘baseline’’ alternative thus assumes that 

average fuel economy levels in the 

absence of CAFE standards beyond 2010 

would equal the higher of a 

manufacturer’s product plans or the 

manufacturer’s required level of average 

fuel economy for MY 2010. The MY 

2010 fuel economy standards in mpg 

(27.5 mpg for cars and 23.3 mpg for light 

trucks) represent the average fuel 

economy levels the agency believes 

manufacturers would continue to 

achieve, assuming the agency does not 

issue a rule.381 The baseline alternative 

provides a useful reference point for 

measuring the impact of the new 

authorities granted to NHTSA under 

EISA. The agency uses this baseline in 

both its NEPA and EPCA analyses. 

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382This analysis produced stringencies at which 

benefits were approximately, but not necessarily 

exactly, equal to costs. The precision of this 

exercise is limited by several factors, including (1) 

the discrete amounts by which NHTSA varied 

stringency levels under consideration, (2) ‘‘carrying 

over’’ of technologies between model years, and (3) 

rounding of fuel economy levels, CAFE levels, and 

required CAFE levels. 

383We note that the requirement in subsection 

32902(b)(2)(B) specific to the MY 2021–2030 

standards is markedly different from the 

requirements in subsections 32902(b)(2)(A) and (C) 

specific to the MY 2011–2020 standards. The single 

model year specific requirement in subsection 

32902(b)(2)(B) simply repeats the general 

requirement in subsection 32902(a), i.e., that the 

standards must be set at the maximum feasible 

level. In contrast, the model year-specific 

requirements in subsections 32902(b)(2(A) and (C) 

do not repeat the general requirement. Instead, they 

constitute separate and additional requirements 

regarding the stringency of the MY 2011–2020 

standards. 

• The ‘‘25 percent below optimized’’ 

alternative reflects standards that are 

more stringent than the ‘‘baseline’’ 

alternative, but less stringent than the 

‘‘optimized’’ alternative. The required 

average CAFE levels under this 

alternative are less stringent than those 

under the optimized alternative by 25 

percent of the difference in required fuel 

economy between the optimized 

alternative and the ‘‘total costs equal 

total benefits’’ alternative. For purposes 

of comparison, we note that the average 

fuel economy levels required by this 

alternative fall below those under the 

optimized alternative by the same 

absolute amount by which the levels 

under the ‘‘25 percent above optimized’’ 

alternative exceed those under the 

optimized alternative. 

• The ‘‘25 percent above optimized’’ 

alternative reflects standards that 

exceed the required average fuel 

economy levels of the optimized 

alternative by 25 percent of the 

difference between the average fuel 

economy levels required by the 

optimized alternative and those 

required by the total costs equal total 

benefits alternative. 

• The ‘‘50 percent above optimized’’ 

alternative reflects standards that 

exceed the required average fuel 

economy levels of the optimized 

alternative by 50 percent of the 

difference between the average fuel 

economy levels required by the 

optimized alternative and those 

required by the total costs equal total 

benefits alternative. 

• The ‘‘total costs equal total 

benefits’’ alternative requires average 

fuel economy levels that result from 

increasing fuel economy targets until 

the total cost of all applied technologies 

equals the total benefits of all applied 

technologies. Adopting this alternative 

would result in zero net benefits in the 

agency’s analysis because the benefits to 

society are completely offset by the 

costs.382

• The ‘‘technology exhaustion’’ 

alternative reflects standards that are 

based on progressively increasing 

stringency in a given model year until 

every manufacturer without a history of 

paying civil penalties has exhausted all 

technologies estimated to be available 

during that model year. Except for 

phase-in constraints, this analysis was 

performed using the same technologyrelated estimates (e.g., incremental 

costs, incremental fuel savings, 

availability, applicability, and 

dependency on vehicle redesign and 

refresh cycles) as used for the other 

alternatives. For the technology 

exhaustion alternative, NHTSA removed 

phase-in constraints in order to develop 

an estimate of the effects of fuel 

economy increases that might be 

achieved if manufacturers could apply 

as much technology as theoretically 

possible, while recognizing that some 

technologies require major changes to 

vehicle architecture and can therefore 

be applied only as part of a redesign or 

refresh. Thus, in each year, NHTSA 

increased the stringency until the first 

manufacturer exhausted available 

technologies; beyond this stringency, 

NHTSA estimated that the manufacturer 

would be unable to comply (NHTSA is 

precluded from considering 

manufacturers’ ability to use CAFE 

credits in setting standards) and would 

be forced to pay civil penalties. NHTSA 

then increased the stringency until the 

next manufacturer was unable to 

comply, and continued to increase the 

stringency of the standard until every 

manufacturer was unable to apply 

enough technology to comply. 

C. EPCA Provisions Relevant to the 

Selection of the Final Standards 

1. 35 in 2020 

Section 102(a)(2) of EISA adds to 49 

U.S.C. § 32902(b) a requirement that 

states as follows: 

(A) AUTOMOBILE FUEL ECONOMY 

AVERAGE FOR MODEL YEARS 2011 

THROUGH 2020—The Secretary shall 

prescribe a separate fuel economy standard 

for passenger automobiles and a separate 

average fuel economy standard for nonpassenger automobiles for each model year 

beginning with model year 2011 to achieve 

a combined fuel economy average for model 

year 2020 of at least 35 miles per gallon for 

the total fleet of passenger and non-passenger 

automobiles manufactured for sale in the 

United States for that model year. 

(Emphasis added.) As discussed, this 

requirement is one of several that EISA 

mandated for CAFE standards between 

MY 2011 and MY 2020. Subsection 

32902(a) contains a general requirement, 

not limited to any particular model year 

or period of model years, that the 

standards for a model year must be the 

‘‘maximum feasible’’ standards for that 

model year. Subsections 32902(b)(2)(A) 

and (C) set forth three requirements 

specific to MYs 2011–2020. The 

standards for those years must be 

sufficiently high to result in a combined 

(passenger car and light truck) fleet fuel 

economy of at least 35 mpg by MY 2020, 

they must increase annually, and they 

must increase ratably. Each of these 

general and specific requirements must 

be interpreted in light of the other 

requirements.383

In the NPRM, NHTSA explained that 

the 35 mpg figure is not a standard and 

is not a requirement applicable to any 

individual manufacturer or group of 

manufacturers. Instead, it is a 

requirement applicable to the agency 

regarding the combined effect of the 

separate standards for passenger cars 

and light trucks that NHTSA is to 

establish for the years leading up to MY 

2020 and most particularly for MY 2020 

itself. EISA does not specify precisely 

how compliance with this requirement 

is to be ensured or how or when the 

CAFE of the industry-wide combined 

fleet for MY 2020 is to be calculated for 

purposes of determining compliance. As 

a practical matter, to ensure that an 

industry-wide combined average fuel 

economy for passenger cars and light 

trucks of at least 35 mpg is achieved, the 

standard for MY 2020 passenger cars 

would have to produce an industrywide average for passenger cars that is 

significantly above 35 mpg and the one 

for MY 2020 light trucks in an industrywide average for light trucks that might 

or might not be below 35 mpg. 

Similarly, the CAFE of some 

manufacturers’ combined fleet of MY 

2020 passenger cars and light trucks 

would be above 35 mpg, while the 

combined fleet of others might or might 

not be below 35 mpg. 

NHTSA received numerous comments 

regarding the 35 mpg-in-2020 

requirement referring to the 35 mpg 

requirement as a floor and not a ceiling 

and urging the agency to set standards 

that raise the industry-wide combined 

average to 35 mpg sooner, as early as 

MY 2015. 

On the other hand, many 

manufacturers commented that the 

proposed standards were too aggressive 

in the first couple of years and even 

overall for the full 5-year period. They 

argued that there was insufficient lead 

time. Some manufacturers said NHTSA 

should revert to setting standards based 

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384 153 CONG. REC. H14253 (editor’s note) and 

H14444 (daily ed. Dec. 6, 2007) (statement of Rep. 

Markey). 

385 73 FR 24364 (May 2, 2008). 

386 Id. 

387Alliance comment at 45, Docket No. NHTSA– 

2008–0089–0179.1, citing American Heritage 

Dictionary 1027 (2d college ed. 1991). 

388 73 FR 24456 (May 2, 2008). 

389Alliance comments at 48, citing 42 FR 33537 

(June 30, 1977). 

390 Id. at 49. 

391 Id. 

392 GM comments at 8 of 10, Docket No. NHTSA– 

2008–0089–0182. 

393Ford comments at 11, fn 1, Docket No. 

NHTSA–2008–0089–0202.1. 

394 Id. 

on the capabilities of the least capable 

manufacturer. 

NHTSA is well aware that the 35 

mpg-in-2020 requirement is a floor and 

not a ceiling. EISA specifically states 

that the industry-wide combined 

average must be at least 35 mpg. 

However, the agency must also issue 

standards at the maximum feasible level 

in each model year, as discussed below. 

The agency has discretion as to how it 

makes that determination, with due 

regard to the 35 mpg-in-2020 

requirement, and has done so based on 

the best available information and data 

and with full awareness of the three 

obligations under EISA (maximum 

feasible standards for each model year, 

annual ratable increases and a combined 

fleet average of at least 35 mpg in 2020) 

and environmental concerns under 

NEPA. The standards for MY 2010 are 

27.5 mpg for passenger cars and 23.5 

mpg for light trucks. The final standards 

for MY 2011 are 30.2 mpg for passenger 

cars and 24.1 mpg for light trucks, 

which represents a rise of 2.7 mpg and 

0.6 mpg, respectively, over the 

standards for MY 2010. NHTSA is 

confident that the final MY 2011 

standards represent full compliance 

with these obligations and will continue 

to monitor manufacturers’ achieved 

average fuel economy levels and 

capabilities to ensure that the minimum 

35 mpg fleet requirement will be met as 

expeditiously as possible. 

2. Annual Ratable Increase 

Section 102(a)(2) of EISA also adds to 

49 U.S.C. § 32902(b) a requirement that 

states as follows: 

(C) PROGRESS TOWARD STANDARD 

REQUIRED—In prescribing average fuel 

economy standards under subparagraph (A), 

the Secretary shall prescribe annual fuel 

economy standard increases that increase the 

applicable average fuel economy standard 

ratably beginning with model year 2011 and 

ending with model year 2020. 

(Emphasis added.) Congress gave no 

indication in EISA itself as to what it 

meant by the term ‘‘ratably,’’ but 

NHTSA notes that Representative 

Markey inserted an extension of remarks 

into the Congressional Record stating as 

follows: 

In asking for ‘‘ratable’’ progress, the intent of 

Congress is to seek relatively proportional 

increases in fuel economy standards each 

year, such that no single year through 2020 

should experience a significantly higher 

increase than the previous year.384

In the NPRM, NHTSA stated that ‘‘EPCA 

requires that the MY 2011–2019 CAFE 

standards for passenger cars and for 

light trucks must both increase ratably 

to at least the levels necessary to meet 

[the] 35 mpg requirement for MY 

2020.’’ 385 NHTSA interpreted the 

‘‘increase ratably’’ requirement ‘‘to 

mean that the standards must make 

steady progress toward the levels 

necessary for the average fuel economy 

of the combined industry wide fleet of 

all new passenger cars and light trucks 

sold in the United States during MY 

2020 to reach at least 35 mpg.’’ 386

Several commenters argued that 

NHTSA had interpreted the ‘‘increase 

ratably’’ requirement incorrectly, 

frequently linking this argument to a 

criticism of the front-loading of the 

proposed standards as inconsistent with 

the ‘‘increase ratably’’ requirement. 

The Alliance commented that NHTSA 

had provided insufficient explanation or 

analysis of its interpretation that 

‘‘ratable’’ meant ‘‘steady progress’’ 

within the context of EISA. The 

Alliance speculated that NHTSA may 

have based its interpretation on the title 

of the EISA section adding the ‘‘increase 

ratably’’ requirement, ‘‘Progress Toward 

Standard Required,’’ but argued that 

titles of sections should only be used for 

interpretive clues if the text of the 

section is ambiguous, and that NHTSA 

should undertake a full definitional 

analysis of ‘‘ratably’’ in order to 

determine its meaning in the context of 

EISA. 

The Alliance commented that the two 

primary dictionary definitions of 

‘‘ratable’’ are ‘‘capable of being rated, 

estimated, or appraised,’’ and 

‘‘proportional.’’ 387 The Alliance argued 

that the meaning of ‘‘proportionally’’ 

made more sense in the context of EISA, 

without providing any particular 

explanation of why it believed that that 

definition made more sense, but citing 

NHTSA’s use of the term ‘‘diminishes 

ratably’’ later in the NPRM with 

reference to the proportional phase-out 

of the AMFA credit.388

The Alliance further argued that 

NHTSA appeared to be incorrect in 

equating ‘‘ratable increase’’ with ‘‘steady 

progress,’’ since the term ‘‘steady 

progress’’ appeared in an earlier version 

of EPCA and there is a presumption 

against equating different statutory 

words chosen by Congress. However, 

the Alliance commented that if NHTSA 

is indeed correct that ‘‘ratable increase’’ 

meant ‘‘steady progress,’’ then NHTSA 

should consider how it interpreted 

‘‘steady progress’’ in prior 

rulemakings—that is, as requiring 

‘‘annual increases in average fuel 

economy, but with none of the annual 

increments varying dramatically from 

the other annual increases.’’ 389

The Alliance concluded by arguing 

that whether ‘‘ratably’’ means ‘‘steady 

progress’’ or ‘‘proportionally,’’ ‘‘it seems 

clear that ‘ratably’ is intended to impose 

some limitation on the variability in the 

rate of increase of CAFE standards over 

time.’’ 390 The Alliance stated that 

NHTSA should undertake a more 

complete analysis of the ‘‘increase 

ratably’’ requirement for the final rule, 

and address how the ‘‘front-loaded’’ 

proposed standards ‘‘square with EISA’s 

directive.’’ 391

GM supported the Alliance 

comments, and further urged NHTSA to 

consider a more gradual, less ‘‘front 

loaded’’ increase in the CAFE standards 

adopted in the final rule. GM argued 

that ‘‘standards [should be] more 

aligned with the ratable levels of 

increase noted in [EISA], i.e., a 

progression that is more even, less 

aggressive than the proposed aggressive 

and front loaded 4.5%/yr rate, and more 

in line with the approximately 3%/yr 

rates needed to achieve the goal of 

EISA.’’ 392

Ford also supported the Alliance 

comments, and commented that the 

dictionary definition of ‘‘ratable’’ must 

be ‘‘proportional’’ in the context of 

EISA, because ‘‘capable of being rated’’ 

‘‘does not make sense in the context of 

CAFE standard setting.’’ 393 Thus, Ford 

argued, the ‘‘current, front-loaded 

proposal does not appear to reflect a 

series of ‘ratable’ increases,’’ if ‘‘the rate 

of increase [should be] roughly constant 

from year to year.’’ 394 Ford additionally 

commented that NHTSA had provided 

no justification for how the proposed 

standards reflected a ‘‘ratable increase.’’ 

Ford suggested that to solve this 

problem of the proposed standards not 

being ‘‘ratable,’’ NHTSA should 

determine fuel economy targets for 

passenger cars and light trucks for MY 

2015, and then set footprint-based 

constrained logistic function standards 

for MY 2011–2014 at approximately a 

3.8 percent per year increase to reach 

the calculated MY 2015 levels. Ford 

stated that the 3.8 percent per year 

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395 Id. at 11–12. 

396Toyota comments at 2 of 15, Docket No. 

NHTSA–2008–0089–0212. 

397 Id. 

398 Id. at 8 of 15. 

399WLF comments at 4, Docket No. NHTSA– 

2008–0089–0228.1. 

400ACEEE comments at 5, Docket No. NHTSA– 

2008–0089–0211.1. 

increase would be ‘‘more equalized 

(‘ratable’).’’ 395

Toyota also combined its comments 

on the ‘‘increase ratably’’ requirement 

with criticism of the rate of increase in 

the stringency of the proposed 

standards. Toyota argued that ‘‘While 

the term ‘ratable’ was not defined in 

EISA, Toyota believes this language was 

intended to recognize that large and/or 

inconsistent jumps in fuel economy 

targets are difficult for manufacturers to 

plan for because of product cycles and 

the lead time needed to incorporate 

technology throughout the fleet 

consistent with these product 

cycles.’’ 396 Toyota further argued that 

the 4.5 percent average rate of increase 

in the proposed standards was far 

greater than the ‘‘nominal 3.3% implied 

by the term ‘ratable’ in EISA.’’ 397

Toyota added, however, with reference 

to the rate of increase in stringency of 

targets for smaller-footprint light trucks, 

that nothing in EISA suggested that 

‘‘ratable’’ applied to individual footprint 

targets.398 Toyota urged NHTSA to 

‘‘reduce the disparity in year-to-year 

fuel economy increases to be more 

‘ratable.’ ’’ 

Other commenters on the ‘‘increase 

ratably’’ requirement included the 

Washington Legal Foundation (WLF) 

and the American Council for an Energy 

Efficient Economy (ACEEE). WLF stated 

that it agreed with the Alliance 

comments that the ‘‘front-loading 

approach is inconsistent with EISA, 

which requires the yearly standards to 

be set ‘ratably’ over the ten-year 

period,’’ although it did not explain 

further what it thought the ‘‘increase 

ratably’’ requirement meant.399 ACEEE 

made no attempt to define or interpret 

‘‘ratable,’’ but commented that NHTSA 

should ensure ‘‘ratable’’ progress toward 

an average of at least 35 mpg in MY 

2020 by including in the final rule ‘‘an 

express provision requiring NHTSA to 

periodically review progress toward the 

required fuel economy level and revise 

the standards accordingly.’’ 400 This 

provision would mandate ‘‘mid-course 

corrections’’ in the standards if 

necessary. 

NHTSA has further considered the 

‘‘increase ratably’’ requirement in light 

of the comments received, bearing in 

mind that the three basic requirements 

of EISA for the MY 2011–2020 

standards—35 mpg in 2020, increase 

annually and ratably, and maximum 

feasible—must be interpreted together 

so as to best achieve EPCA and EISA’s 

overarching goal of energy conservation. 

NHTSA does not believe that the 35 

mpg-in-2020 requirement implies any 

intent by Congress to limit ‘‘ratable’’ 

increases to a particular percentage as 

suggested by several commenters. As 

discussed above, 35 mpg in 2020 is a 

floor, not a ceiling, and increasing 

standards at the percentage rate required 

just to meet the 35-in-2020 target would 

not necessarily be consistent with the 

agency’s assessment of what standards 

will be maximum feasible in future 

model years. 

NHTSA does agree with the 

commenters, however, that Congress’ 

use of the term ‘‘ratably’’ appears to be 

intended to impose some limitation on 

the variability in the rate of increase of 

CAFE standards over time. Given the 

other statutory requirements of EPCA 

and EISA, NHTSA currently concludes 

that the best interpretation of the 

‘‘increase ratably’’ requirement remains 

similar to the 1980s requirement that 

CAFE standards increase annually, but 

with none of the annual increments 

varying disproportionately from the 

other annual increases. This 

interpretation is consistent with 

Representative Markey’s views 

expressed in his extension of remarks. 

From MY 1978 to MY 1985, for 

example, passenger car standards 

increased anywhere from 0.5 to 2.0 mpg 

per year, a range of 1.5 mpg. The ratio 

of the smallest to largest increase was 1 

to 4. 

While it is difficult in setting only one 

year of CAFE standards to demonstrate 

that the increase is ‘‘ratable,’’ the final 

combined standards for MY 2011 are 

27.3 mpg, which represents a rise of 2 

mpg over the combined standards for 

MY 2010. This is consistent with both 

historical increases in CAFE and with 

Congress’ other requirements in EISA. 

NHTSA believes, therefore, that the MY 

2011 standards represent a ‘‘ratable’’ 

increase over the MY 2010 standards. 

With regard to the comment by 

ACEEE that NHTSA should include an 

express provision in the final rule that 

NHTSA must undertake ‘‘mid-course 

corrections’’ to ensure ‘‘ratable’’ 

progress toward the 35 mpg requirement 

in 2020, NHTSA does not believe that 

such an addition is necessary. The 

agency is required to set standards at the 

maximum feasible level for each model 

year, and has the authority under 49 

U.S.C. § 32902(g) to revise standards 

upward if necessary to reflect a new 

determination of maximum feasible, as 

long as it does so 18 months before the 

beginning of the model year whose 

standards are in question. NHTSA will 

carefully monitor manufacturers’ 

achieved levels of average fuel 

economy, as well as changes in their 

capabilities, and set standards 

accordingly. 

3. Maximum Feasibility and the Four 

Underlying EPCA Considerations 

As explained above, EPCA requires 

the agency to set fuel economy 

standards for each model year and for 

each fleet separately at the ‘‘maximum 

feasible’’ level for that model year and 

fleet. 49 U.S.C. § 32902(a). In 

determining the maximum feasible level 

of average fuel economy, the agency 

considers four statutory factors as 

required by 49 U.S.C. 32902(f): 

technological feasibility, economic 

practicability, the effect of other motor 

vehicle standards of the Government on 

fuel economy, and the need of the 

United States to conserve energy, which 

includes environmental considerations, 

along with additional relevant factors 

such as safety. In balancing these 

considerations, we are also mindful of 

EPCA’s overarching purpose of energy 

conservation, as well as the 

requirements that standards must 

increase ratably to at least the level at 

which the combined U.S. fleet achieves 

35 mpg in MY 2020. We are also 

mindful that environmental concerns 

are important to making the correct 

decision in this rulemaking. NHTSA’s 

NEPA analysis for this rulemaking has 

informed the agency’s final action. 

Section VI discussed how the agency 

fits the target curves and analyzes 

different levels of CAFE stringency. This 

section sets forth the agency’s 

interpretation of the four EPCA statutory 

factors, and how NHTSA has balanced 

the factors with NEPA considerations in 

deciding what final standards would be 

the maximum feasible ones for MY 

2011. 

(a) Technological Feasibility 

NHTSA defines ‘‘technological 

feasibility’’ as pertaining to whether a 

particular method of improving fuel 

economy can be available for 

commercial application in the model 

year for which a standard is being 

established. NHTSA explained in the 

NPRM that whether a technology may 

be feasibly applied in a given model 

year is not simply a function of whether 

the technology will exist in some form 

in that model year, but also whether the 

data sources reviewed by the agency 

support a conclusion that the 

technology will be mature enough to be 

commercially applied in that model 

year, whether it will conflict with other 

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401See, e.g., Docket No. NHTSA–2008–0089– 

0192.1. 

402See Tables IX–3 and IX–4 below. 

403Ward’s Automotive, ‘‘Ward’s U.S. Light 

Vehicle Sales Summary,’’ December 2008. Available 

at: http://wardsauto.com/keydata/ 

USSalesSummary0812.xls / (Last accessed February 

6, 2008). 

404Commerce Department data indicates no 

apparent change in nominal prices of new vehicle 

sales over the past few years. 

405 General Motors Corp, monthly sales report for 

December 2008. Available at: http://www.gm.com/ 

corporate/investor_information/sales_prod/ 

hist_sales.jsp (last accessed February 6, 2009). 

406 General Motors Corp. annual report for 2007, 

quarterly earnings announcement for the third 

quarter of 2008. Available at http://www.gm.com/ 

corporate/investor_information/earnings/index.jsp 

(last accessed November 12, 2008). 

407Ford Motor Company, Fourth quarter 2008 

financial results. Available at: http://www.ford.com/ 

about-ford/investor-relations/company-reports/ 

financial-results (last accessed February 6, 2009). 

408Ford Motor Company, Annual Report 2007, p. 

121 and fourth quarter 2008 earning release, Slide 

26. 

409Ward’s Automotive, op. cit. 

410Robert Nardelli, ‘‘Chrysler’s Plan for ShortTerm and Long-Term Viability,’’ submitted to 

Senate Committee on Banking, Housing, and Urban 

Affairs, December 2, 2008. Available at: http:// 

banking.senate.gov/public/files/ 

ChryslerUSSenateViabilityPlan.pdf (last accessed 

February 6, 2009). 

technologies being applied, etc. Many 

commenters stated that ‘‘the technology 

is available to make all cars go farther 

on a gallon of gas—farther than NHTSA 

proposes.’’ 401 According to NHTSA’s 

final rule analysis, manufacturers 

overall will likely need to apply 

advanced fuel-saving technologies at 

significantly higher levels in order to 

meet the standards than NHTSA 

estimated in the NPRM,402 although we 

note that manufacturers are free to meet 

the standards using whatever 

technologies they choose. 

However, as NHTSA described in 

Chapter IV above, simply because a 

technology exists does not make it 

feasible to apply it to all vehicles during 

MY 2011. While NHTSA recognizes, for 

example, that hybrid vehicles like the 

Toyota Prius are very popular currently 

with many American consumers, and 

that diesel vehicles on the road in 

Europe generally achieve higher fuel 

economy levels than otherwiseequivalent gasoline-engine vehicles 

here, it would still not be 

technologically feasible for NHTSA to 

set standards at the level that require all 

vehicles sold in the U.S. to be either 

hybrids or diesels by MY 2011. As 

discussed at much greater length in 

Chapter IV, component supply issues, 

engineering resource issues, federal 

emissions regulation issues (in the case 

of diesels), etc., together make such a 

level of technology application 

infeasible in the time frame covered by 

the rulemaking. 

NHTSA also recognizes, however, that 

there are potentially levels of 

technological feasibility between the 

level at which NHTSA has set the 

standards and the hypothetical example 

given above of a completely dieselizedhybridized MY 2011 fleet. Nevertheless, 

technological feasibility is but one of 

four EPCA factors that the agency must 

balance. While higher stringency levels 

might still be technologically feasible, 

they might not be consistent with the 

demands of the other factors, and in fact 

might be outweighed by those factors. 

(b) Economic Practicability 

As explained in the NPRM, NHTSA 

has historically assessed whether a 

potential CAFE standard is 

economically practicable in terms of 

whether the standard is one ‘‘within the 

financial capability of the industry, but 

not so stringent as to threaten 

substantial economic hardship for the 

industry.’’ See, e.g., Public Citizen v. 

NHTSA, 848 F.2d 256, 264 (DC Cir. 

1988). 

As has been widely reported in the 

public domain throughout this 

rulemaking, and as shown in public 

comments, the national and global 

economies are in crisis. Even before 

those recent developments, the 

automobile manufacturers were already 

facing substantial difficulties. Together, 

these problems have made NHTSA’s 

economic practicability analysis 

particularly important and challenging 

in this rulemaking. 

Automobile sales have dropped 

significantly. U.S. motor vehicle sales in 

2008 were 18 percent below 2007 levels. 

January 2009 industry sales were 37 

percent lower than in January 2008.403

The sales of every major manufacturer 

declined. Vehicle manufacturers have 

not been able to raise prices to offset 

declining unit sales.404

The financial state of the major U.S. 

automotive manufacturers is 

particularly difficult. General Motors’ 

2008 U.S. vehicle sales were down 23 

percent, and January 2009 sales were 

down 51 percent.405 GM last earned an 

accounting profit in 2004, and has lost 

a cumulative $72 billion between 2005 

and the third quarter of 2008.406 GM has 

a negative net worth of $60 billion, and 

consumed more than $3.5 billion in 

cash in the third quarter. GM is largely 

unable to borrow additional funds in 

capital markets, and must rely on a 

dwindling pool of cash to fund any 

further operating losses and capital 

investments. 

Ford Motor Company’s 2008 sales 

declined 20 percent.407 The firm has 

lost nearly $30 billion since 2006. The 

firm has a negative net worth of $2 

billion, and consumed some $5.5 billion 

in cash in the fourth quarter of 2008.408

Ford is also largely unable to borrow 

additional funds in capital markets, and 

must also rely on a dwindling pool of 

cash to fund any further operating losses 

and capital investments. 

Chrysler is closely held, and 

consequently does not publish financial 

statements. However, Chrysler’s 2008 

unit sales were 30 percent below last 

year’s sales, and January 2009 sales 

were off 55 percent.409 In a report 

submitted to the Senate Banking 

Committee in December 2008, Chrysler 

indicated that, if the Federal 

Government provided $13 billion in 

financing, Chrysler expected to end 

2009 with some $6.7 billion in net 

cash.410 However, absent federal 

intervention, it is not clear that Chrysler 

would be able to survive 2009 in one 

piece. 

As the figures set forth above 

demonstrate, the automobile industry is 

already experiencing substantial 

economic hardship, even in the absence 

of new fuel economy standards. All 

three firms have announced a steady 

stream of plant closings, layoffs, and 

employment of new employees at 

reduced wages. 

NHTSA believes these hardships have 

much to do with the condition of the 

national economy and perhaps the price 

of gasoline, and little, if anything, to do 

with the stringency of CAFE standards 

for the current or recent model years. 

We believe that given the scale of the 

recent decline in industry sales, and the 

restrictiveness of private credit markets, 

that near-term developments will be 

compelled by the industry’s immediate 

financial situation, rather than by the 

long-term financial consequences of this 

rulemaking. 

Market forces are already requiring 

manufacturers to improve the fuel 

economy of their vehicles, as shown 

both by changes in product plans 

reported to NHTSA, and by automaker 

announcements in recent weeks. The 

improvements in fleet fuel economy 

required by this rule are consistent with 

the pressure induced by changing 

consumer preferences. 

The various compliance flexibility 

mechanisms permitted by EISA, 

including flexible and alternative fuel 

vehicles, banking, averaging, and 

trading of fuel economy credits will also 

reduce compliance costs to some degree. 

By statute, NHTSA is not permitted to 

consider the benefits of flexibility 

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14378 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

411The authorizing language for this provision is 

in Section 136 of EISA. This language is amended 

and funds are appropriated in the Emergency 

Economic Stabilization Act of 2008 (H.R. 1424, Pub. 

L. 110–343). See also the DOE Advanced 

Technology Vehicle Manufacturing Loan Program 

Web site: http://www.atvmloan.energy.gov/ (last 

accessed February 6, 2009). 

412U.S. Department of the Treasury, ‘‘Indicative 

Summary of Terms for Secured Term Loan 

Facility,’’ December 19, 2008, for Chrsyler and GM. 

Available at http://www.treasury.gov/press/ 

releases/hp1333.htm (last accessed February 6, 

2009). 

mechanisms in assessing the costs and 

benefits of the rule. 

On the other hand, the agency is 

mindful that CAFE standards do affect 

the relative competitiveness of different 

vehicle manufacturers, and recognizes 

that standards more stringent than those 

promulgated here could have a more 

detrimental effect. 

However, the core of the problem for 

the agency is to determine what new 

standards might be economically 

practicable within the MY 2011 time 

frame, given the state of both the 

domestic and the international auto 

industries. The complexity of an 

economic practicability determination 

has been materially increased by the 

decision of GM and Chrysler to seek, 

and the U.S. Government to provide, 

substantial financial assistance. 

Congress has appropriated $7.5 billion 

(to support a maximum of $25 billion in 

loans under Section 136 of EISA to 

support the development of advanced 

technology vehicles and components in 

the United States.411 DOE reports that 

75 requests for funding, totaling some 

$38 billion have been received by the 

deadline date, of which 23 requests 

were deemed ‘‘substantially complete,’’ 

and hence eligible for further 

consideration among the initial tranche 

of projects. 

The Treasury Department has also 

advanced substantial funding to GM, 

Chrysler and GMAC under the Troubled 

Asset Relief Program (TARP). (Ford 

elected not to accept public funding 

under the TARP). GM received a loan of 

$13.4 billion, while Chrysler received 

$4 billion.412 GM and Chrysler have also 

submitted restructuring plans to the 

Treasury Department in February 2009 

requesting additional Federal assistance 

to ‘‘achieve and sustain long-term 

viability’’ while ‘‘comply[ing] with 

applicable Federal fuel efficiency and 

emission requirements.’’ Since this rule 

had not been promulgated at the time 

the report was submitted, GM and 

Chrysler were left with a degree of 

doubt about exactly what CAFE 

standards would apply to MYs 2011 and 

thereafter. 

Given the foregoing, therefore, the 

agency has decided that in this 

exceptional situation, economic 

practicability must be determined based 

on whether the expenditures needed to 

achieve compliance with the final MY 

2011 standards are ‘‘within the financial 

capability of the industry, but not so 

stringent as to threaten substantial 

economic hardship for the industry,’’ no 

matter who contributes the funds. This 

is an operational definition of a 

standard set using cost-benefit analysis. 

We have attempted to set the MY 2011 

CAFE standards so that they are both 

technologically and economically 

feasible while providing the maximum 

national public social benefit. In 

principle, most vehicles meeting the 

standard will provide social benefits to 

the public at large and private benefits 

to automobile owners greater than their 

extra cost. 

One of the primary ways in which the 

agency seeks to ensure that its standards 

are within the financial capability of the 

industry is to attempt to ensure that 

manufacturers have sufficient lead time 

to modify their manufacturing plans to 

comply with the final standards in the 

model years covered by them. 

Employing appropriate assumptions 

about lead time in our analysis helps to 

avoid applying technologies before they 

are ready to be applied, or when their 

benefits are insufficient to justify their 

costs. It also helps avoid basing 

standards on the assumption that 

technologies could be applied more 

rapidly than practically achievable by 

manufacturers. NHTSA considers these 

matters in its analysis of issues 

including refresh and redesign 

schedules, phase-in caps, and learning 

rates. 

A number of manufacturers 

commented that the proposed standards 

were too stringent in the early years and 

were therefore not economically 

practicable. In reevaluating the range of 

fuel-saving technologies expected to be 

available in MY 2011, the agency has 

developed more realistic estimates of 

the set of technologies available, the 

extent to which these technologies are 

most likely to be applied either at a 

vehicle freshening or redesign, and the 

limits (i.e., caps) that should be applied 

to the rates at which these technologies 

can be phased in. NHTSA believes the 

resultant MY 2011 standards, which 

also reflect all other inputs to NHTSA 

analysis, are not inappropriately ‘‘front 

loaded,’’ particularly given that they 

cover only one model year. 

NHTSA also considers the potential 

impact on employment. There are three 

potential areas of employment that fuel 

economy standards could affect 

employment. The first is the hiring of 

additional engineers by automobile 

companies and their suppliers to do 

research and development and testing 

on new technologies to determine their 

capabilities, durability, platform 

introduction, etc. The second area is the 

impact that new technologies would 

have on the production line. The third 

area is the potential impact that sales 

gains or losses could have on 

production employment. 

Chapter VII of the FRIA contains 

estimates of employment impacts. The 

calculations assume that compliance 

costs are passed onto consumers in the 

form of higher prices. These higher 

vehicle prices (net of the benefits of 

added fuel savings and added resale 

value) lead to reduced demand for 

vehicles. Estimates of sales losses are 

made using the price changes and the 

elasticity of demand for new vehicles 

(¥1.0). Losses in sales are translated 

into losses in jobs by dividing through 

by the average number of vehicles 

produced per full time jobs in the 

automotive industry (approximately 

10.5 vehicles per job). In some rare 

cases, the fuel savings benefits exceed 

the compliance costs leading a 

reduction in price, and increase in sales, 

and an increase in employment. 

The estimated job losses in 2011 for 

the six alternatives appear in Table VII– 

1 for the passenger car and light truck 

fleets. The first two alternatives (25 

Percent Below Optimized, Optimized) 

have roughly similar losses in 

employment: 714 to 1,024 jobs lost in 

2011. The next most stringent 

alternative (25 Percent Above 

Optimized) results in job losses that are 

triple the losses in the Optimized 

alternative. Job losses from the next two 

alternatives (50 Percent Above 

Optimized and TC = TB) are 4.5 times 

and 8 times higher than the Optimized 

alternative, but are still not a large 

number (8,232 for TC= TB). The 

Technology Exhaustion alternative 

would result in significant impacts on 

employment (55,740). 

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(c) Effect of Other Motor Vehicle 

Standards of the Government on Fuel 

Economy 

This EPCA statutory factor constitutes 

an express recognition that fuel 

economy standards should not be set 

without giving due consideration to the 

effects of efforts to address other 

regulatory concerns, such as motor 

vehicle safety and pollutant emissions. 

The primary influence of many of these 

regulations is the addition of weight to 

the vehicle, with the commensurate 

reduction in fuel economy. 

Manufacturers incorporate this added 

weight in their product plans, which 

have informed the market forecast the 

agency has used as a starting point for 

analysis that the agency has conducted 

to set the standards. Because the 

addition of weight to the vehicle is only 

relevant if it occurs within the time 

frame of the regulations, i.e., during MY 

2011, we consider the Federal Motor 

Vehicle Safety Standards set by NHTSA 

and the Federal motor vehicle emissions 

standards set by EPA which become 

effective during the time frame. 

Federal Motor Vehicle Safety Standards 

NHTSA has evaluated the impact of 

the Federal Motor Vehicle Safety 

Standards (FMVSS) using MY 2010 

vehicles as a baseline. NHTSA has 

issued or proposed to issue a number of 

FMVSSs or amendments to FMVSSs 

scheduled to become effective between 

the baseline year and MY 2011. These 

have been analyzed for their potential 

impact on vehicle weight for vehicles 

manufactured in these years—as noted 

above, the fuel economy impact, if any, 

of these new requirements will take the 

form of increased vehicle weight 

resulting from the design changes 

needed to meet the new FMVSSs. 

Weight Impacts of Required Safety 

Standards (Final Rules) 

NHTSA has issued two final rules on 

safety standards that become effective 

for passenger cars and light trucks for 

MY 2011. These have been analyzed for 

their potential impact on passenger car 

and light truck weights, using 

manufacturers’ voluntary plans as a 

baseline. 

1. FMVSS No. 126, Electronic Stability 

Control 

2. FMVSS No. 214, Side Impact Oblique 

Pole Test 

FMVSS No. 126, Electronic Stability 

Control 

The phase-in schedule for vehicle 

manufacturers is as follows: 

The final rule requires 75 percent of 

all light vehicles to meet the ESC 

requirement for MY 2010, 95 percent of 

all light vehicles to meet the ESC 

requirements by MY 2011, and all light 

vehicles must meet the requirements by 

MY 2012. 

The agency’s analysis of weight 

impacts found that ABS adds 10.7 lbs. 

and ESC adds 1.8 lbs. per vehicle for a 

total of 12.5 lbs. Based on 

manufacturers’ plans for voluntary 

installation of ESC, 85 percent of 

passenger cars in MY 2010 would have 

ABS and 52 percent would have ESC. 

Thus, the total incremental added 

weight over manufacturers’ plans in MY 

2011 for passenger cars would be about 

1.8 lbs. (0.10*10.7 + 0.43*1.8). Light 

trucks manufacturers’ plans show that 

99 percent of all light trucks would have 

ABS and that 74 percent would have 

ESC by MY 2010. Thus, for light trucks 

the incremental weight impacts of 

adding ESC would be 0.4 lbs. (0.21*1.8) 

in MY 2011. 

FMVSS No. 214, Oblique Pole Side 

Impact Test 

The phase-in requirements for the 

side impact test are as follows: 


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413 Khadilkar, et al. ‘‘Teardown Cost Estimates of 

Automotive Equipment Manufactured to Comply 

with Motor Vehicle Standard—FMVSS 214(D)— 

Side Impact Protection, Side Air Bag Features’’, 

April 2003, DOT HS 809 809. 

414Ludtke & Associates, ‘‘Perform Cost and 

Weight Analysis, Head Protection Air Bag Systems, 

FMVSS 201’’, page 4–3 to 4–5, DOT HS 809 842. 

415See 70 FR 53753, the PRIA is in Docket No. 

22143, entry #2 ‘‘Preliminary Regulatory Impact 

Analysis, FMVSS 216, Roof Crush Resistance,’’ 

August 2005. 

A teardown study of 5 thorax air bags 

resulted in an average weight increase 

per vehicle of 4.77 pounds (2.17 kg).413

A second study 414 performed teardowns 

of 5 window curtain systems. One of the 

window curtain systems was very heavy 

(23.45 pounds). The other four window 

curtain systems had an average weight 

increase per vehicle of 6.78 pounds 

(3.08 kg), a figure which is assumed to 

be average for all vehicles in the future. 

Based on manufacturers’ plans to 

voluntarily provide window curtains 

and torso bags, we estimate that 90 

percent of passenger cars and light 

trucks would have window curtains for 

MY 2010 and 72 percent would have 

torso bags. A very similar percentage is 

estimated for MY 2011. Thus, the final 

rule requiring 20 percent compliance is 

not likely to impact manufacturers’ 

weights in MY 2011. 

Weight Impacts of Proposed/Planned 

Safety Standards 

Proposed FMVSS No. 216, Roof Crush 

On August 23, 2005, NHTSA 

proposed amending the roof crush 

standard to increase the roof crush 

standard from 1.5 times the vehicle 

weight to 2.5 times the vehicle 

weight.415 The NPRM proposed to 

extend the standard to vehicles with a 

GVWR of 10,000 pounds or less, thus 

including many light trucks that had not 

been required to meet the standard in 

the past. The proposed effective date 

was the first September 1 occurring 

three years after publication of the final 

rule. A Supplemental NPRM was 

published by the agency in January 

2008, asking for public comment on a 

number of issues that may affect the 

content of the final rule, including 

possible variations in the proposed 

requirements. In the PRIA, the average 

passenger car weight was estimated to 

increase by 4.0 pounds and the average 

light truck weight was estimated to 

increase by 6.1 pounds for a 2.5 strength 

to weight ratio. Based on comments to 

the NPRM, the agency believes that this 

weight estimate is likely to increase. 

However, the agency does not yet have 

an estimate for the final rule. 

Regardless, the final rule will not be 

effective for MY 2011 vehicles. 

Planned NHTSA Initiative on Ejection 

Mitigation 

The agency is planning on issuing a 

proposal on ejection mitigation. The 

likely result of the planned proposal is 

for window curtain side air bags (likely 

to be used to meet the FMVSS No. 214 

oblique pole test in all vehicles) to be 

larger and for a rollover sensor to be 

installed. Preliminary agency estimates 

are that current curtain bags need be 

widened by 28 percent to fully cover the 

window opening area. According to a 

cost and weight analysis (DOT HS 809 

842), head air bags (loomed cloth) 

installed in a vehicle weigh 2.59 lbs and 

the inflators weigh 4.73 lbs. Thus, the 

incremental weight would be about 2 

lbs. (2.59 lbs + 4.73 lbs) x 0.28 = 2 lbs. 

However, this analysis is not complete 

at this time and will not be effective for 

MY 2011 vehicles. 

Summary—Overview of Anticipated 

Weight Increases 

The table below summarizes estimates 

made by NHTSA regarding the weight 

added by the above discussed standards 

or likely rulemakings. NHTSA estimates 

that weight additions required by final 

rules and likely NHTSA regulations 

effective in MY 2011, compared to the 

MY 2010 fleet and manufacturers’ plans, 

will increase passenger car weight by at 

least 10.4 lbs. and light truck weight by 

at least 10.6 lbs. 


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416See 71 FR 77872 (Dec. 27, 2006). 

417CARB comments at 10–11, Docket No. 

NHTSA–2008–0089–0173. 

418See 65 FR 6698 (Feb. 10, 2000). 

419See 59 FR 16262 (Apr. 6, 1994). 

420Additionally, in calculating criteria pollutant 

emissions factors for analyzing air quality impacts, 

MOBILE6.2 accounted for EPA’s emission control 

requirements for passenger cars and light trucks, 

including exhaust (tailpipe) emissions, evaporative 

emissions, and the Tier 2 program. See FEIS § 3.3.2. 

421NESCAUM, ‘‘White Paper: Comparing the 

Emissions Reductions of the LEV II Program to the 

Tier 2 Program,’’ October, 2003. 

Based on NHTSA’s weight-versusfuel-economy algorithms, a 3–4 pound 

increase in weight equates to a loss of 

0.01 mpg in fuel economy. Thus, the 

agency’s estimate of the safety/weight 

effects for cars is 0.006 mpg or less and 

for light trucks is 0.001 mpg or less for 

already-issued or likely future safety 

standards. 

Federal Motor Vehicle Emissions 

Standards 

As discussed above, because the 

addition of weight to a vehicle is only 

relevant to its ability to achieve the MY 

2011 CAFE standards if it occurs in that 

time frame, NHTSA only considers 

Federal motor vehicle emissions 

standards that become effective during 

the time frame. 

In the NPRM, NHTSA explained that 

on December 27, 2007, EPA published 

a final rule for fuel economy labeling 

that employs a new vehicle-specific, 5- 

cycle approach to calculating fuel 

economy labels which incorporates 

estimates of the fuel efficiency of each 

vehicle during high speed, aggressive 

driving, air conditioning operation and 

cold temperatures into each vehicle’s 

fuel economy label.416 The rule took 

effect starting with MY 2008, and will 

not impact CAFE standards or test 

procedures, or add weight to a vehicle 

or directly impact a manufacturer’s 

ability to meet the CAFE standards. It 

will, however, allow for the collection 

of appropriate fuel economy data to 

ensure that existing test procedures 

better represent real-world conditions, 

and provide consumers with a more 

accurate estimate of fuel economy based 

on more comprehensive factors 

reflecting real-world driving use. 

CARB commented that the NPRM had 

not addressed certain federal and 

California emissions regulations that 

NHTSA had analyzed in previous 

rulemakings, and stated that ‘‘NHTSA 

must analyze the potential effect of 

these emissions regulations on its 

proposed standards.’’ CARB further 

stated that ‘‘the NPRM must analyze the 

impact of California’s ZEV regulations 

through at least MY 2011,’’ which the 

commenter stated would ‘‘require 

NHTSA to consider the impact of 

rapidly shifting technologies that 

manufacturers will apply to meet a 

combination of government mandates 

and market conditions, most notably the 

electrification of vehicle 

drivetrains.’’ 417

In response, NHTSA reiterates that 

emissions standards that are completely 

phased in before MY 2011 are already 

accounted for in the agency’s baseline 

for this rulemaking. EPA’s ‘‘Tier 2’’ 

standards, which apply to all vehicles 

currently subject to CAFE and are 

designed to focus on reducing the 

emissions most responsible for the 

ozone and particulate matter (PM) 

impact from these vehicles, are 

scheduled to be completely phased in 

by 2009.418 EPA’s onboard vapor 

recovery (ORVR) system standards, 

which apply to all passenger cars and 

light trucks below 8,500 pounds GVWR, 

were completely phased in by MY 

2008.419 Thus, there is no additional 

effect of these emissions regulations on 

MY 2011 vehicles for NHTSA to 

analyze, beyond what manufacturers 

have already included in their product 

plans in order to comply with these 

regulations, which NHTSA already 

accounts for.420

NHTSA agrees with CARB, however, 

that portions of the ZEV standards come 

into effect during MY 2011, although 

compliance with these standards is also 

already accounted for in manufacturers’ 

product plans and thus forms part of 

NHTSA’s baseline analysis. The State of 

California has established several 

emission requirements under section 

209(b) of the Clean Air Act as part of its 

Low Emission Vehicle (LEV) program. 

California initially promulgated these 

section 209(b) standards in its LEV I 

standards, and has subsequently 

adopted more stringent LEV II 

standards, also under section 209(b). 

The relevant LEV II regulations have 

been completely phased in for passenger 

cars and light trucks as of MY 2007. 

The LEV II Program has requirements 

for ‘‘zero emission vehicles’’ (ZEVs) that 

apply to passenger cars and light trucks 

up to 3,750 pounds loaded vehicle 

weight (LVW) beginning in MY 2005, 

while trucks between 3,750 and 8,500 

pounds are phased in to the ZEV 

regulation from 2007–2012. The ZEV 

requirements begin at 10 percent of 

vehicles sold by a manufacturer in 

California in 2005, and ramp up to 16 

percent for 2018 under different paths. 

California will allow the 16 percent 

requirement to be met by greater 

numbers of ‘‘partial ZEVs’’ until 2018, 

which include ultra-clean gasolineengine vehicles and hybrids. 

Compliance with the ZEV standards is 

most often achieved through more 

sophisticated combustion management, 

frequently involving some of the 

technologies considered by NHTSA in 

its analysis. The associated 

improvements and refinement in engine 

controls generally improve fuel 

efficiency and have a positive impact on 

fuel economy.421 However, such gains 

may be diminished because the 

advanced technologies required by the 

program can affect the impact of other 

fuel economy improvements, primarily 

due to increased weight. The agency has 

considered this potential impact in our 

evaluation of manufacturer product 

plans, many of which voluntarily 

identified particular models as ZEV or 

PZEV-compliant. This indicates to 

NHTSA that the manufacturers have 

already included compliance with these 


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422 42 FR 63184, 63188 (Dec. 15, 1977). 

423Energy Information Administration, Annual 

Energy Review 2006, Table 5.21, p. 171. Available 

at http://www.eia.doe.gov/emeu/aer/pdf/pages/ 

sec5_51.pdf (last accessed Nov. 29, 2007). 

424Energy Information Administration, Annual 

Energy Review 2006, Table 5.1, p. 125. Available at 

http://www.eia.doe.gov/emeu/aer/pdf/pages/ 

sec5_5.pdf (last accessed Nov. 29, 2007). 

standards in their product plans, which 

in turn indicates that compliance with 

these standards is already accounted for 

in the agency’s baseline. 

CARB also commented that ‘‘NHTSA 

will need to consider the impact of 

California and other adopting states’ 

motor vehicle GHG emission standard 

when those standards receive a waiver 

of preemption under the Clean Air Act; 

this may require reopening this 

rulemaking or starting a new one.’’ In 

response, NHTSA notes again that EPA 

denied California’s request for a waiver, 

and while NHTSA recognizes that EPA 

is seeking comment anew on the waiver 

issue, the agency cannot prejudge how 

it would respond to any EPA decision 

until EPA makes a decision. Thus, 

NHTSA need not determine at this time 

that it should reopen the rulemaking or 

begin a new one in the event that EPA 

decided to grant the waiver. 

(d) Need of the United States to 

Conserve Energy 

Congress’ requirement to set 

standards at the maximum feasible level 

and inclusion of the need of the nation 

to conserve energy as a factor to 

consider in setting CAFE standards 

ensures that standard setting decisions 

are made with this purpose and all of 

the associated benefits in mind. As 

discussed above, ‘‘the need of the 

United States to conserve energy’’ is a 

broad concept encompassing ‘‘the 

consumer cost, national balance of 

payments, environmental, and foreign 

policy implications of our need for large 

quantities of petroleum, especially 

imported petroleum.’’ 422 Due to the 

breadth and scope of these issues, 

NHTSA does not believe that the need 

of the United States to conserve energy 

need be limited to consideration of 

purely domestic effects. While the 

overarching goal of EPCA is energy 

conservation, this energy savings factor 

(and related environmental concerns in 

connection with climate change) must 

nonetheless be balanced with the other 

EPCA factors. EPCA does not require or 

authorize the issuance of standards that 

require the reducing of fuel 

consumption regardless of cost. The 

benefits of the energy savings from 

overly high standards would not 

outweigh countervailing severe 

economic costs. See, e.g., Public Citizen 

v. NHTSA, 248 F.2d 256, 265 (DC Cir. 

1988). Environmental implications 

principally include reductions in 

emissions of criteria pollutants and 

carbon dioxide and the associated 

public health and climate effects. 

The need to reduce energy 

consumption is, from several different 

standpoints, more crucial today than it 

was at the time of EPCA’s enactment in 

the late 1970s. U.S. energy consumption 

has been outstripping U.S. energy 

production at an increasing rate. At the 

time of this final rule, crude oil prices 

are currently around $40 per barrel, 

having peaked at $134 in mid-July 2008, 

despite having averaged about $13 per 

barrel as recently as 1998, and gasoline 

prices have doubled in this period.423

Net petroleum imports now account for 

60 percent of U.S. domestic petroleum 

consumption.424 World crude oil 

production continues to be highly 

concentrated, exacerbating the risks of 

supply disruptions and their negative 

effects on both the U.S. and global 

economies. Figure VII–1 below shows 

the increase of crude oil imports and the 

decline of U.S. oil production since 

1920. 

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425Bureau of Labor Statistics, 2006 Consumer 

Expenditure Survey, http://www.bls.gov/cex/#tables 

(last accessed Oct. 23, 2008). 

The need of the nation to reduce 

energy consumption would be reflected 

in the buying decisions of vehicle 

purchasers, if: 

• Vehicle buyers behaved as if they 

had unbiased expectations of their 

future driving patterns and fuel prices; 

• The public social, economic, 

security, and environmental impacts of 

petroleum consumption were fully 

identified, quantified and reflected in 

current and future gasoline prices; and 

• Vehicle buyers behaved as if they 

accounted for the impact of fuel 

economy on their future driving costs in 

their purchasing decisions. 

Basic economic theory suggests that the 

price of vehicles should reflect the value 

that the consumer places on the fuel 

economy attribute of his or her vehicle. 

It is not clear that consumers have the 

information or inclination to value the 

impact of fuel economy in their vehicle 

purchasing decisions. Consumers 

generally have no direct incentive to 

value benefits that are not included in 

the price of fuel—for example, benefits 

such as energy security and limiting 

global climate change. These are the 

market failures that EPCA requires 

NHTSA to address as part of 

considering the need of the nation to 

conserve energy. 

In this rulemkaing, NHTSA quantifies 

the need of the nation to conserve 

energy by calculating how much a 

vehicle buyer ought to value fuel 

economy, based both on fuel prices and 

potentially estimable externalities 

(including energy security, the benefits 

of mitigating a ton of CO2 emissions, 

criteria pollutant emissions, noise, 

safety, and others). NHTSA discusses 

the specific issues related to the need of 

the United States to conserve energy in 

more detail below. 

(i) Consumer Cost 

The Bureau of Labor Statistics 

estimates that about 4.9 percent of 

personal consumption expenditures in 

2006 were accounted for by vehicle fuel 

and oil.425 Given much higher gasoline 

prices since, the figure will certainly be 

higher in 2007–2008. Historically, 

gasoline consumption has been 

relatively insensitive to fluctuations in 

both price and consumer income, in 

large part because consumers are largely 

‘‘locked in’’ in the short run to 

particular travel patterns by their choice 

of job, housing, schools, and lifestyle. 

People in most parts of the country tend 


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426Energy Information Administration, Petroleum 

Supply Annual 2007, http://tonto.eia.doe.gov/dnav/ 

pet/pet_sum_snd_d_nus_mbbl_a_cur.htm (last 

accessed Oct. 23, 2008). 

427U.S. Department of Commerce, Bureau of the 

Census, FT900, U.S. International Trade in Goods 

and Services, August 2008. http://www.census.gov/ 

foreign-trade/Press-Release/current_press_release/ 

press.html (last accessed October 21, 2008). 

428However, increases in ethanol fuel 

consumption have mitigated the growth in 

transportation-related emissions somewhat 

(emissions from energy inputs to ethanol 

production plants are counted in the industrial 

sector). 

429The above statistics are derived from Energy 

Information Administration, ‘‘Emissions of 

Greenhouse Gases Report,’’ Report # DOE/EIA–0573 

(2006), released November 28, 2007. Available at 

http://www.eia.doe.gov/oiaf/1605/ggrpt/ 

carbon.html (last accessed Oct. 23, 2008). 

430The Final Environmental Impact Statement 

(FEIS) is available on NHTSA’s Web site at 

http://www.nhtsa.gov, under ‘‘Fuel Economy.’’ On 

October 17, 2008, EPA published a notice 

announcing the availability of NHTSA’s EIS for this 

rulemaking. 73 FR 61859. 

to view gasoline consumption as a nondiscretionary expense. 

Other non-discretionary expenses 

such as housing (34 percent of 

expenditures) and insurance/social 

security (11 percent), and health 

expenditures (6 percent) are larger, but 

more predictable. The mirror image of 

the relative stability in gasoline 

consumption is instability in the 

amount of money available in 

household budgets for everything else, 

and particularly for savings and 

discretionary expenses. When gasoline’s 

share in consumer expenditures rises, 

the public experiences fiscal distress. 

This fiscal distress can, in some cases, 

have macroeconomic consequences for 

the economy at large. 

NHTSA incorporates the impacts of 

consumer cost into its analysis through 

the use of fuel price projections in 

setting fuel economy standards. It 

should be noted that fuel economy is 

not free for consumers: consumers must 

‘‘pay’’ for fuel economy through some 

combination of higher vehicle prices or 

loss of valued vehicle attributes. Vehicle 

purchases accounted for 7 percent of 

consumer expenditures in 2006. NHTSA 

uses cost-benefit analysis to help ensure 

that consumers do not lose more 

through higher vehicle costs than they 

gain through lower fuel consumption. 

(ii) National Balance of Payments 

According to EIA, imports of crude oil 

and petroleum products accounted for 

about 65 percent of U.S. petroleum 

consumption in 2007.426 Since U.S. 

crude oil and liquids production is only 

affected by fluctuations in crude oil 

prices over a period of years, any 

changes in petroleum consumption 

largely flow into changes in the quantity 

of imports; and any changes in crude oil 

or wholesale products prices directly 

flow into changes in the value of 

imports. Thus, any improvement in 

light duty vehicle fuel economy will 

flow into a corresponding reduction in 

merchandise imports, just as higher 

prices flow into an increase in the value 

of imports. 

According to the Census, in 2007, the 

United States imported $293 billion in 

crude oil and petroleum products, 

accounting for 36 percent of the dollar 

value of U.S. imports of goods.427 In the 

first eight months of 2008, petroleum 

accounted for 49 percent of the dollar 

value of U.S. merchandise imports. The 

United States gross domestic product is 

about $14 trillion per year, so petroleum 

imports only account for about 2 

percent of GDP. Nonetheless, petroleum 

imports are large enough to create a 

discernable fiscal drag, particularly 

since the usual macroeconomic 

adjustment mechanisms, such as price 

or income elasticity, or offsetting 

changes in currency valuation, are not 

very effective in reducing petroleum 

imports. Hence, most of the burden for 

any necessary macroeconomic 

adjustment will be borne by other 

sectors of the economy, and unrelated 

imports. Conversely, however, measures 

that reduce petroleum consumption, 

such as fuel economy standards, will 

flow directly into the balance-ofpayments account, and strengthen the 

domestic economy to some degree. 

(iii) Environmental Implications 

The need to conserve energy is also 

more crucial today because of growing 

greenhouse gas emissions from growing 

petroleum consumption by the on-theroad fleet of motor vehicles, and 

growing concerns about the climate 

effects of those emissions. Since 1999, 

the transportation sector has led all U.S. 

end-use sectors in emissions of CO2. 

Transportation sector CO2 emissions in 

2006 were 407.5 million metric tons 

higher than in 1990, an increase that 

represents 46.4 percent of the growth in 

unadjusted energy related CO2

emissions from all sectors over the 

period. Petroleum consumption, which 

is directly and substantially related to 

fuel economy, is the largest source of 

CO2 emissions in the transportation 

sector.428 Moreover, transportation 

sector emissions from gasoline and 

diesel fuel combustion generally 

parallel total vehicle miles traveled. The 

need of the nation to conserve energy 

encompasses all of these issues, since 

CO2 emissions from passenger cars and 

light trucks decrease as fuel economy 

improves and more energy is 

conserved.429 Indeed, the only way to 

make the substantial necessary 

reductions in CO2 tailpipe emissions is 

to improve fuel economy. 

These MY 2011 CAFE standards will 

reduce passenger car and light truck fuel 

consumption and CO2 tailpipe 

emissions over the next several decades, 

responding to the need of the nation to 

conserve energy, as EPCA intended. 

More specifically, the final standards 

will save over 9 billion gallons of fuel 

and avoid over 8 million metric tons of 

CO2 tailpipe emissions over the lifetime 

of the regulated vehicles. 

NHTSA evaluated in great detail the 

potential environmental impacts 

associated with such CO2 emissions 

reductions and other environmental 

impacts of the proposed standards 

through the Final Environmental Impact 

Statement prepared in conjunction with 

this rulemaking.430 They take the form 

of unambiguous reductions in emissions 

of CO2, and very small and uncertain 

changes in emissions of urban air 

pollutants and toxic pollutants, with 

reductions in emissions of most 

pollutants. 

(iv) Foreign Policy Considerations 

Fuel economy standards have only an 

indirect and general impact on U.S. 

foreign policy. U.S. foreign policy has 

been affected for decades by rising U.S. 

and world dependency of crude oil as 

the basis for modern transportation 

systems. In general, the United States 

and oil exporting states have a powerful 

long-term mutual interest in a smoothly 

functioning international oil market. 

However, other governments sometimes 

behave erratically, and, on occasion, 

will pursue short-term benefits at the 

expense of long-term advantage. 

• The political stability of major oil 

exporting states and states controlling 

petroleum transportation routes is 

important to the United States, because 

chaos could lead to an interruption of 

oil production or shipments and 

worldwide increases in oil prices 

affecting the U.S. and world economy. 

Physical shortages of petroleum would 

be even more disruptive than high 

prices. 

• The United States may give 

additional consideration to the political 

views of the governments of current or 

potential future oil exporting states, 

because the United States would like to 

influence these governments to invest in 

increased oil production capacity, to 

produce more oil, to sell their oil at 

reasonable prices, and to encourage 

other oil exporters to do the same. 

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• The United States may, under some 

circumstances, be prepared to overlook 

otherwise objectionable behavior by 

actual or potential oil exporters. 

• The United States must take an 

interest in the military security of major 

foreign oil production, refining, export, 

and transportation facilities because 

damage to these facilities could affect 

the U.S. and world economy, even if the 

affected facilities do not produce or ship 

petroleum for the U.S. market. 

• To the extent that oil exporting 

states accumulate large foreign currency 

reserves as a result of cumulative 

balance-of-payments surpluses, the 

United States may have additional 

reasons for giving such states additional 

consideration. 

NHTSA considers oil price 

externalities that cover the benefits 

associated with reduced risk of an oil 

price spike, possibly induced by foreign 

political developments. However, other 

externalities in connection with foreign 

policy considerations such as those set 

forth above are exceedingly difficult to 

quantify, much less monetize as a 

discrete economic value. No commenter 

set forth a methodology by which 

NHTSA could reasonably quantify this 

particular set of externalities, and 

NHTSA is unaware of literature which 

addresses quantifying these 

considerations. Nevertheless, in 

considering the need of the nation to 

conserve energy, NHTSA has taken 

foreign policy considerations into 

account as a part of its qualitative 

analysis. For further discussion of how 

NHTSA accounts for petroleum 

consumption and import externalities in 

its analysis, see section V.B.11 above. 

Accordingly, upon consideration of 

the entire record, and on the basis of all 

public comments and applicable law, 

NHTSA has considered the need of the 

nation to conserve energy. 

4. Comparison of Alternatives 

NHTSA’s analyses of the levels of 

CAFE that would be required under the 

alternatives considered by the agency 

and the associated costs are described 

below and then summarized in Tables 

VII–2 through VII–6: 

VII–2. Average Required CAFE Levels: 

Under an attribute-based CAFE 

standard, the CAFE level required of 

each manufacturer depends on the 

distribution of footprint values and 

projected sales of individual models 

comprising the fleet of vehicles it 

produces. Table VII–2 contains a salesweighted harmonic average of these 

requirements. 

VII–3. Average CAFE Shortfall: If a 

manufacturer is not expected to achieve 

the required CAFE level, either because 

of an expected economic decision or 

because all opportunities to add 

technology are expected to be 

exhausted, the manufacturer is expected 

to have a shortfall that will result in 

civil penalties (unless sufficient CAFE 

credits are available to offset the 

shortfall). Table VII–3 summarizes these 

shortfalls (where they exist) at the 

industry-wide level. 

VII–4. Total Benefits (versus 

Baseline): The societal benefits resulting 

from each alternative are calculated 

relative to the baseline CAFE standards. 

Section V discusses the components of 

these benefits. Table VII–4 shows the 

discounted present value of benefits 

accrued over the useful life of vehicles 

sold in MY 2011. 

VII–5. Total Costs (versus Baseline): 

The total costs of each alternative are 

measured by the estimated industrywide increase in technology outlays 

from those under baseline CAFE 

standards. 

VII–6. Net Benefits (versus Baseline): 

Net benefits reflect the amount by 

which total benefits exceed total costs. 

In Table VII–6, negative values (in 

parentheses) indicate instances in 

which total costs exceed total benefits. 

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431Negative values mean that costs exceed 

benefits. 

NHTSA believes that some differences 

among specific alternatives analyzed are 

worth noting here. As Tables VII–4 and 

VII–5 reveal, costs increase more rapidly 

than do benefits as required CAFE levels 

increase, particularly beyond the level 

at which total costs equal total benefits. 

Increasing compliance costs reduce both 

new vehicle sales and employment. 

Each of the alternatives that is more 

stringent than the Optimized 

Alternative will reduce sales and 

employment from the levels observed 

under the Optimized Alternative, as 

documented in the FRIA in Chapter VII. 

Additionally, under the more stringent 

alternatives, the agency predicts that 

increasing numbers of manufacturers 

will run out of technology to apply, and 

potentially resort to paying statutory 

penalties. The CAFE shortfalls shown in 

Table VII–3 measure how widespread 

this outcome could become. Underlying 

the differences in costs, benefits, and 

net benefits among the alternatives are 

differences in the extent to which 

NHTSA has estimated that fuel 

economy technologies would be applied 

in response to the standards 


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432 49 U.S.C. 32901(a)(7). ‘‘All-electric’’ would 

thus not include a plug-in hybrid (PHEV), since that 

vehicle is also capable of operating on gasoline. 

433 49 U.S.C. 32906(a). NHTSA notes that if there 

is any possible misinterpretation of this table, the 

schedule laid out by Congress in EISA controls. 

434See generally FEIS, available at Docket No. 

NHTSA–2008–0060–0605. 

corresponding to each of these 

alternatives. 

Along the continuum, each alternative 

represents a different way in which 

NHTSA could conceivably balance the 

four EPCA factors and the attendant 

environmental concerns. The 

alternatives that fall above the 

Optimized Alternative (the +25, +50, TC 

= TB, and Technology Exhaustion 

alternatives), if chosen, would represent 

an agency decision to put progressively 

more emphasis on reducing energy 

consumption and CO2 emissions, due to 

the need of the nation to conserve 

energy, and less on the other factors, 

such as economic practicability and the 

impacts of higher stringencies on the 

industry. The ¥25% alternative, in 

contrast, would represent an agency 

decision to put more emphasis on the 

economic situation of the industry and 

its ability to apply advanced 

technologies in the relevant timeframe, 

while placing less on the other factors, 

such as the need of the nation to 

conserve energy. 

5. Other Considerations Under EPCA 

(a) Safety 

NHTSA explains in Section VIII 

below that it has historically considered 

safety in setting the CAFE standards. 

NHTSA refers the reader to that 

discussion. 

(b) AMFA Credits 

49 U.S.C. § 32902(h) expressly 

prohibits NHTSA from considering the 

fuel economy of ‘‘dedicated’’ 

automobiles in setting CAFE standards. 

Dedicated automobiles are those that 

operate only on an alternative fuel, like 

all-electric or natural gas vehicles.432

Dedicated vehicles often achieve higher 

mile per gallon (or equivalent) ratings 

than regular gasoline vehicles, so this 

prohibition prevents NHTSA from 

raising CAFE standards by averaging 

these vehicles into our determination of 

a manufacturer’s maximum feasible fuel 

economy level. 

Section 32902(h) also directs NHTSA 

to ignore the fuel economy incentives 

for dual-fueled (e.g., E85-capable) 

automobiles in setting CAFE standards. 

§ 32905(b) and (d) use special 

calculations for determining the fuel 

economy of dual-fueled automobiles 

that give those vehicles higher fuel 

economy ratings than otherwiseidentical regular automobiles. Through 

MY 2014, manufacturers may use this 

‘‘dual-fuel’’ incentive to raise their 

average fuel economy up to 1.2 miles 

per gallon higher than it would 

otherwise be. After MY 2014, Congress 

has set a schedule by which the dualfuel incentive diminishes partially each 

year until it is extinguished after MY 

2019.433 This issue is discussed further 

in Section XII.C below. 

Although manufacturers may use this 

additional credit for their CAFE 

compliance, NHTSA may not consider it 

in setting standards. As above, this 

prohibition prevents NHTSA from 

raising CAFE standards by averaging 

these vehicles into our determination of 

a manufacturer’s maximum feasible fuel 

economy level. 

No comments were received regarding 

the statutory prohibition on NHTSA’s 

consideration of these alternative-fuel 

vehicle incentives, but the agency notes 

that given that the MY 2011 standards 

increase more rapidly vis-a`-vis the MY 

2010 standards than any CAFE 

standards since the inception of the 

CAFE program, we believe it likely that 

manufacturers will use the incentive to 

a considerable degree. 

(c) Flexibility Mechanisms: Credits, 

Fines 

As discussed at length below in 

Chapter XII, EPCA and EISA also allow 

manufacturers to use credits (either 

earned or purchased) and to pay fines in 

order to meet CAFE standards. 

However, 49 U.S.C. 32902(h)(3) 

expressly states that NHTSA ‘‘may not 

consider, when prescribing a fuel 

economy standard, the trading, 

transferring, or availability of credits 

under section 32903.’’ Thus, NHTSA 

may not raise CAFE standards because 

manufacturers have enough credits to 

meet higher standards, nor may NHTSA 

lower standards because manufacturers 

do not have enough credits to meet 

existing standards. 

A number of commenters, including 

AIAM, Mercedes, Ferrari, NADA, and 

ACEEE, suggested that the use of the 

credit trading system which NHTSA 

proposed to develop under the new 

authority given by EISA would not 

likely be very extensive, at least 

initially, due to competitive concerns 

among manufacturers. Whether this 

prediction will be borne out remains to 

be seen, but the agency notes that credit 

trading gives more flexibility and could 

potentially lower compliance costs for 

manufacturers, which should provide 

an incentive for manufacturers to engage 

in trading. 

As for fines, CFA commented that 

‘‘NHTSA allows the historical desire of 

automakers to avoid paying fines to pull 

down the level of the standard, by 

assuming that setting standards at a 

level that might cause automakers to 

pay fines does no good.’’ CFA suggested 

that fines are ‘‘not only punitive; they 

are motivational.’’ 

NHTSA considers the levels of 

stringency at which different 

manufacturers are estimated to run out 

of technology and begin paying fines. 

NHTSA agrees that fines may be 

motivational, but believes that CFA 

misunderstands how fines function in 

standard setting. All manufacturers 

(except the few that have paid fines 

historically) are assumed to be willing 

to pay any price, no matter how high, 

in order to avoid paying fines. In the 

agency’s analysis, as implemented using 

the Volpe model, manufacturers cease 

adding technology to achieve 

compliance only when there are no 

more technologies available to add. 

This is not because NHTSA wishes to 

protect the manufacturers from having 

to pay fines, but for the following two 

reasons: First, because the point at 

which manufacturers run out of 

technology gives NHTSA a strong 

indication of what would be 

economically practicable and 

technologically feasible, and second, 

because if manufacturers are paying 

fines instead of meeting the CAFE 

standards, the projected level of fuel 

savings is not being achieved. NHTSA 

recognizes that fines are motivational 

for manufacturers, particularly for the 

U.S. domestic manufacturers, but 

continues to believe that setting 

standards above the levels achievable 

through fuel saving technologies at 

reasonable cost because we think that 

manufacturers might be motivated to 

avoid paying fines would only result in 

higher standards, without resulting in 

additional fuel savings. 

D. Analysis of Environmental 

Consequences in Selecting the Final 

Standards 

The FEIS analyzes in detail the 

potential direct, indirect, and 

cumulative impacts of the alternatives. 

NHTSA’s Preferred Alternative, the 

Optimized CAFE Standards, was one of 

the alternatives that was explicitly 

evaluated in the FEIS.434 As discussed 

in Section XVI.B of this Final Rule, the 

FEIS evaluates the aggregate 

environmental impacts associated with 

each alternative for the entire five-year 

period (i.e., the environmental impacts 

that would result if MY 2011–2015 

passenger cars and light trucks met the 

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435The estimates of fuel consumption and fuel 

savings presented in Table VII–9 correspond to the 

‘‘Mid-2’’ case described in the Final EIS. 

436However, this assumption overstates impacts, 

because EISA requires standards to increase each 

model year between MY 2011 and MY 2020. 

higher, proposed CAFE standards for 

those years). In this section we also 

present selected consequences 

associated with each alternative’s CAFE 

standards for MY 2011 passenger cars 

and light trucks. These consequences 

include the effects of alternative 

standards on fuel consumption and 

associated emissions of greenhouse 

gases, as well as on emissions of criteria 

and hazardous air pollutants. 

Environmental impacts associated with 

the alternative CAFE standards for MY 

2011 passenger cars and light trucks 

remain aggregated for MYs 2011–2015, 

and are reported in the FEIS. See 

Chapter 3, Chapter 4 and Appendix B of 

the FEIS. The aggregate impacts 

analyzed in the FEIS remain relevant, 

since the MY 2011 impacts associated 

with the CAFE standards fall within the 

spectrum of those aggregated impacts. 

The Technology Exhaustion 

Alternative is the overall 

Environmentally Preferable Alternative. 

Specifically, the Technology Exhaustion 

Alternative is the Environmentally 

Preferable Alternative in terms of the 

following reductions: Fuel use, CO2

emissions, criteria air pollutant 

emissions, and their resulting health 

impacts, and emissions of almost all 

mobile source air toxics (MSATs). 

Because it would impose the highest 

car and light truck CAFE standards for 

MY 2011 among the alternatives 

considered, the Technology Exhaustion 

Alternative would result in the largest 

reductions in fuel use and GHG 

emissions. As explained in Chapter 5 of 

the FEIS, the reductions in fuel 

consumption resulting from higher fuel 

economy cause emissions during fuel 

refining and distribution to decline. For 

most pollutants, this decline is more 

than sufficient to offset the increase in 

tailpipe emissions that results from 

increased driving due to the rebound 

effect of higher fuel economy, leading to 

a net reduction in total emissions from 

fuel production, distribution, and use. 

Because of this effect, the Technology 

Exhaustion Alternative would also lead 

to the largest reductions in emissions of 

criteria air pollutants and their resulting 

health impacts, as well as the largest 

reductions in emissions of almost all 

mobile source air toxics (MSATs). 

NHTSA’s environmental analysis 

indicates that emissions of the MSATs 

acrolein would increase under some 

alternatives, with the largest increases 

in emissions of these MSATs projected 

to occur under the Technology 

Exhaustion Alternative. The analysis of 

acrolein emissions presented in the 

FEIS, however, is incomplete, because 

emissions factors for acrolein during 

fuel production and distribution are 

unavailable, so that the agency is thus 

unable to estimate the net change in 

total acrolein emissions likely to result 

under each alternative. If the agency had 

been able to estimate reductions in 

‘‘upstream’’ emissions of acrolein as 

part of its analysis, total acrolein 

emissions under each alternative would 

increase by smaller amounts than those 

amounts reported in the EIS, or even 

decline. However, given that the agency 

is unable to estimate the net change in 

total acrolein emissions, the agency is 

unable to conclude which alternative is 

environmentally preferable with respect 

to acrolein emissions. 

Overall, however, the Technology 

Exhaustion alternative is the agency’s 

Environmentally Preferable Alternative. 

For additional discussion regarding the 

alternatives considered by the agency in 

reaching its decision, including the 

Environmentally Preferable Alternative, 

see Section VII of this Final Rule. For a 

discussion of the environmental impacts 

associated with each alternative, see 

Chapter 3, Chapter 4 and Appendix B of 

the FEIS. 

The effects of the alternative’s CAFE 

standards on the global climate— 

including temperatures, precipitation, 

and sea-level—have been the subject of 

particular public interest and comment. 

Reducing the effects of fuel use and 

GHG emissions on the global climate 

can translate into impacts on key 

resources, including freshwater 

resources, terrestrial ecosystems, coastal 

ecosystems, land use, human health, 

and environmental justice. Although 

some of the alternative’s CAFE 

standards considered for MY 2011 have 

the potential to substantially reduce 

future GHG emissions from cars and 

light trucks, none of them would reduce 

emissions sufficiently to reverse 

projected future growth in total U.S. 

transportation-sector emissions, or to 

avoid the projected effects of climate 

change caused by manmade emissions. 

As noted in the FEIS, even for those 

alternatives that would lead to the 

largest reductions in GHG emissions, 

however, the magnitudes of any changes 

in projected climate effects that could be 

forestalled are likely to be on the order 

of one one-hundredth of a degree 

Celsius in surface temperatures, a 

reduction of 0.02 percent to 0.03 percent 

in the rate of precipitation increase, and 

1 millimeter or less of sea-level change. 

The potential impacts on key resources 

that might be avoided if these changes 

in climate could be forestalled are too 

small to meaningfully address 

quantitatively in terms of their impacts 

on resources. Given the enormous global 

values of these resources, these 

distinctions are nevertheless likely to be 

important, but they are simply too small 

for current quantitative techniques to 

resolve. Consequently, the discussion of 

resource impacts does not distinguish 

among the CAFE alternatives, but rather 

provides a qualitative review of the 

benefits of reducing GHG emissions and 

the magnitude of the risks involved in 

climate change. 

Table VII–9 compares fuel 

consumption by the entire U.S. 

passenger car fleet during selected 

future years under alternative CAFE 

standards for MY 2011.435 Each of these 

estimates assumes that the standard 

established for MY 2011 would apply to 

all subsequent model years.436 As the 

table shows, total fuel consumption by 

passenger cars would increase over the 

period from 2020–2060 under each 

alternative. Table VII–9 also reports the 

reduction in fuel use under each 

alternative from the level that would 

result if the MY 2010 CAFE standard for 

passenger cars instead remained in 

effect indefinitely (the ‘‘No Action’’ 

alternative). Fuel savings under each 

alternative increase in CAFE standards 

would rise progressively over the period 

shown, as an increasing fraction of 

passenger cars in use complied with the 

standard established for MY 2011. 

Table VII–10 reports estimated fuel 

consumption by the U.S. light truck 

fleet during future years under 

alternative CAFE standards for MY 

2011, as well as the reductions in fuel 

use that would result under each 

alternative that would raise CAFE 

standards for MY 2011. As with the 

previous table, the estimates of fuel use 

reported in Table VII–10 assume that 

the light truck CAFE standard 

established for MY 2011 would apply to 

all subsequent model years, and these 

estimates show that total fuel use by 

light trucks would increase over the 

foreseeable future under each 

alternative. As with passenger cars, the 

reductions in fuel consumption by the 

U.S. light trucks fleet under each 

alternative increase in CAFE standards 

would rise progressively through 2060, 

as an increasing fraction of light trucks 

in use complied with the standard 

established for MY 2011. 

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Table VII–11 projects cumulative total 

emissions of CO2 by all U.S. passenger 

cars and light trucks over the period 

from 2010 through 2100 under each 

alternative for MY 2011 CAFE 

standards. As in the preceding tables, 

these estimates assume that the CAFE 

standards established for MY 2011 

under each alternative would apply to 


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437Emissions of volatile organic compounds 

(VOC) during vehicle operation include evaporative 

emissions that occur when vehicles are parked or 

stored, and while they are being refueled at retail 

stations. 

438Unlike GHGs, criteria and hazardous air 

pollutants are relatively short-lived; thus their 

concentrations in the atmosphere and the resulting 

impacts on human health depend primarily on 

emissions during the immediate period being 

analyzed, rather than on their cumulative emissions 

over an extended period. 

all subsequent model years, and include 

emissions occurring during fuel 

production, distribution, and use. Table 

VII–11 also reports the reductions in 

cumulative CO2 emissions from 2010– 

2100 under each alternative that would 

increase passenger car and light truck 

CAFE standards for MY 2011 (the 

‘‘Action’’ alternatives); these reductions 

are measured from the level of 

emissions that would occur if the MY 

2010 car and light truck CAFE standards 

were extended to MY 2011 and 

remained in effect throughout this 

period (the ‘‘No Action’’ alternative). 

The reductions in cumulative CO2

emissions over an extended period such 

as that shown in Table VII–11 (2010– 

2100) provide a more meaningful 

comparison of the impacts of alternative 

CAFE standards for MY 2011 on the 

potential for global climate change than 

would the reductions in CO2 emissions 

for individual future years. This is 

because CO2 remains in the earth’s 

atmosphere for a prolonged period once 

it has been emitted, and the likely 

increase in future global temperatures is 

determined by the cumulative 

atmospheric concentration of CO2 (and 

other GHGs). Thus the most accurate 

measure of the impact of higher CAFE 

standards on the potential for global 

climate change is the resulting 

reduction in cumulative CO2 emissions 

by cars and light trucks over an 

extended period, as vehicles meeting 

those higher standards are gradually 

incorporated into the U.S. vehicle fleet. 

NHTSA’s Final EIS presented a 

detailed analysis of the potential effects 

of alternative car and light truck CAFE 

standards for MY 2011–2015 on 

anticipated future changes in the global 

climate. This analysis was based on 

estimates of the effects of alternative 

increases in CAFE standards for those 

model years on fuel consumption and 

emissions of greenhouse gases (GHG), 

analogous to those reported in Tables 

VII–9 through VII–11 for the MY 2011 

CAFE standards. The agency projected 

the extent to which these projected 

reductions in GHG emissions might 

lower future atmospheric concentrations 

of GHGs, and utilized a global climate 

modeling system to simulate the 

consequences of reduced GHG 

concentrations for future increases in 

mean surface temperatures, the 

projected future rise in sea levels, and 

regional precipitation patterns. For 

additional discussion of the FEIS 

climate analysis, see FEIS § 3.4 and 4.4. 

NHTSA analyzed the air quality 

impacts of alternative CAFE standards 

for MY 2011 cars and light trucks by 

estimating the changes in total 

emissions of criteria air pollutants and 

selected mobile source air toxics 

(MSATs) from their Baseline levels that 

would occur under each Action 

alternative. The agency’s analysis 

considered emissions of these pollutants 

during vehicle use (‘‘tailpipe’’ 

emissions), as well as emissions 

throughout the processes of producing 

and distributing fuel (‘‘upstream’’ 

emissions).437 Because improving fuel 

economy results in an increase in the 

number of miles passenger cars and 

light trucks are driven (the ‘‘rebound’’ 

effect), tailpipe emissions of each 

pollutant are projected to increase by 

progressively larger amounts under 

alternatives that require higher fuel 

economy levels. In contrast, higher 

CAFE standards reduce the volume of 

fuel supplied, thus reducing emissions 

throughout the fuel production and 

distribution process. 

The net effect of each alternative is 

equal to the increase in tailpipe 

emissions resulting from added 

rebound-effect driving, minus the 

reduction in upstream emissions 

resulting from the lower volume of fuel 

that must be supplied. Although the 

relative magnitude of these two effects 

differs among individual pollutants, the 

reduction in upstream emissions of 

most (but not all) pollutants outweighs 

the increase in tailpipe emissions, 

leading to a net reduction in their total 

emissions. Similarly, the net reduction 

in total emissions of each pollutant is 

usually—although not always—larger 

for alternatives that require higher fuel 

economy levels. For further explanation 

of the air quality methodology, see FEIS 

§ 3.3.2. 

Table VII–12 reports total emissions 

of criteria air pollutants from passenger 

cars and light trucks during selected 

future years with alternative CAFE 

standards for MY 2011.438 Total 

emissions of each pollutant include 

those that occur during vehicle use, as 

well as from fuel production and 

distribution. These emissions estimates 

assume that each alternative CAFE 

standard for MY 2011 cars and light 

trucks would remain in effect during 

subsequent model years, so that over 

time an increasing fraction of all cars 

and light trucks in use will have met 

those standards. As the table indicates, 

emissions of carbon monoxide (CO), 

nitrogen oxides (NOx), and volatile 

organic compounds (VOC) are projected 

to decline over the future as 


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improvements in emissions controls 

offset the effect of increasing vehicle 

use, while emissions of fine particulates 

(PM2.5) and sulfur oxides (SOx) are 

projected to increase. 

Table VII–13 shows that emissions of 

each criteria pollutant are projected to 

decline from their levels under the No 

Action Alternative by progressively 

larger amounts as CAFE standards for 

MY 2011 cars and light trucks become 

more stringent. This occurs because the 

reductions in emissions from fuel 

production and distribution grow in 

proportion to the larger fuel savings that 

result from more stringent standards, 

and more than offset the larger increases 

in tailpipe emissions from additional 

driving that result from increased fuel 

economy. The table also shows that the 

reductions in emissions are projected to 

grow over the future under each 

alternative, as an increasing fraction of 

cars and light trucks in service consists 

of those required to meet the alternative 

CAFE standards considered for MY 

2011. 


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Establishing higher CAFE standards 

for MY 2011 cars and light trucks is also 

expected to affect emissions of some 

hazardous air pollutants (also known as 

mobile source air toxics, or MSATs) that 

occur during fuel production and use. 

NHTSA examined the effect of 

alternative CAFE standards on 

emissions of the MSATs acetaldehyde, 

acrolein, benzene, 1, 3-butadiene, diesel 

particulate matter (DPM), and 

formaldehyde, which EPA and the 

Federal Highway Administration have 

identified as a primary concern when 

assessing the environmental impacts of 

motor vehicle use. 

Table VII–14 reports total emissions 

of these air toxics by passenger cars and 

light trucks during selected future years 

under alternative CAFE standards for 

MY 2011. As in the agency’s analysis of 

criteria air pollutant emissions, these 

estimates include emissions during 

vehicle use as well as from fuel 

production and distribution, and also 

assume that each alternative CAFE 

standard for MY 2011 cars and light 

trucks would remain in effect for 

subsequent model years. The table 

indicates that emissions of 

acetaldehyde, acrolein, benzene, 1,3- 

Butadiene, and formaldehyde are 

projected to decline significantly in 

future years under each alternative, 

including the Baseline or No Action 

alternative. This occurs because the 

rates at which these MSATs are emitted 

during vehicle operation, fuel 

production, and fuel distribution are 

projected to decline steadily throughout 

the future. In contrast, future emissions 

of diesel particulate matter (DPM) are 

projected to increase under each 

alternative standard, as manufacturers 

increasingly rely on converting gasoline 

models to diesel power in order to 

achieve higher fuel economy. 


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Table VII–15 reports the changes in 

emissions of each MSAT from their 

levels under the Baseline or No Action 

alternative that are projected to occur 

under alternative CAFE standards for 

MY 2011 cars and light trucks. The table 

shows that in most future years future 

emissions of acetaldehyde, benzene, 1,3- 

butadiene, and DPM would decline 

from their Baseline levels under each 

alternative CAFE standard considered 

for MY 2011. The reductions in 

emissions of these MSATs would 

generally increase over the future, as an 

increasing fraction of cars and light 

trucks in use met the MY 2011 CAFE 

standards. As with criteria pollutants, 

the reductions in emissions of these 

MSATs are expected to be larger under 

alternatives that would impose higher 

CAFE standards, because the declines in 

emissions resulting from reduced fuel 

production and distribution grow in 

proportion to the larger fuel savings that 

result from more stringent standards, 

and more than offset the larger increases 

in tailpipe emissions from additional 

driving that result from increased fuel 

economy. In contrast, emissions of 

acrolein and, under some alternatives, 

formaldehyde are projected to increase 

slightly from their levels under the 

Baseline alternative, since the increases 

in tailpipe emissions of these MSATs 

outweigh the reductions in emissions 


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439The projected increases in future emissions of 

acrolein may result from the agency’s inability to 

obtain ‘‘upstream’’ emission factors for this 

pollutant, which prevented it from estimating the 

reduction in acrolein emissions resulting from 

lower fuel production and distribution. It is 

possible that if the agency had been able to do so, 

lower acrolein emissions during fuel production 

and distribution would have more than offset the 

increase in emissions from fuel use by cars and 

light trucks, causing total acrolein emissions to 

decline. 

from fuel refining and distribution.439

For additional detail on this analysis see 

FEIS § 3.3.3; Chapter 5. 

For additional detail on this analysis see 

FEIS § 3.3.3; Chapter 5. 

The declines in future emissions of 

criteria air pollutants and MSATs 

resulting from the final MY 2011 CAFE 

standards would be expected to reduce 

the adverse health effects stemming 

from population exposure to harmful 

accumulations of these pollutants. In 

the Final EIS, the agency presented a 

detailed analysis of the air quality and 


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440The Ninth Circuit in CBD agreed that NHTSA 

has discretion to balance the factors in determining 

what level of stringency is maximum feasible. CBD, 

538 F.3d 1172, 1197 (9th Cir. 2008). 

health effects of reductions in 

population exposure to criteria air 

pollutants and MSATs that were 

projected to result from alternative 

CAFE standards for MY 2011–15. That 

analysis suggested that significant 

reductions in adverse health effects and 

economic damages caused by exposure 

to these pollutants (primarily PM2.5, the 

largest known contributor to adverse 

health effects) could result if higher 

CAFE standards were adopted for those 

model years. (See § 3.3.2.4.2 of the FEIS 

for a detailed description of NHTSA’s 

approach for developing the 

quantitative estimates of changes in 

health effects from exposure to air 

pollution resulting from alternative 

CAFE standards for MY 2011–15.) 

E. Picking the Final Standards 

1. Eliminating the Alternatives Facially 

Inconsistent With EPCA 

(a) No-Action Alternative 

Two of the alternatives analyzed by 

NHTSA are facially inconsistent with 

EPCA. Regardless of how this 

alternative is defined, i.e., either in 

terms of setting no standard or setting 

the MY 2011 standards at the MY 2010 

level, the ‘‘no-action’’ or ‘‘baseline’’ 

alternative violates EPCA. Under the 

former definition, the no-action 

alternative violates, among other EPCA 

provisions, subsections 32902(a) and 

(b)(1) and (2), each of which requires the 

Secretary to establish CAFE standards 

for each model year separately. Under 

the latter definition, the no-action 

alternative violates subsection 

32902(b)(2)(A) which requires the MY 

2011–2020 standards to be set high 

enough to ensure that the industry-wide 

fleet achieves a combined passenger car/ 

light truck average fuel economy of at 

least 35 mpg. It also violates the 

requirement in subsection 

32902(b)(2)(B) that the standards for 

MYs 2011–2020 increase annually and 

ratably. 

(b) Technology Exhaustion Alternative 

Although the technology exhaustion 

alternative is the environmentally 

preferable alternative for NEPA 

purposes, it does not reflect any 

consideration of economic practicability 

or technological feasibility. This 

omission violates subsections 32902(a) 

and (b), which require setting standards 

at the maximum feasible level, and 

subsection 32902(f), which requires that 

‘‘(w)hen deciding maximum feasible 

average fuel economy under this 

section, the Secretary of Transportation 

shall consider technological feasibility, 

economic practicability, the effect of 

other motor vehicle standards of the 

Government on fuel economy, and the 

need of the United States to conserve 

energy.’’ (Emphasis added.) 

2. Choosing Among the Remaining 

Alternatives 

(a) Difficulty and importance of 

Achieving a Reasonable Balancing of the 

Factors 

Section 1(a) of E.O. 12866 provides 

that ‘‘(i)n choosing among alternative 

regulatory approaches, agencies should 

select those approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety, and other advantages; 

distributive impacts; and equity), unless 

a statute requires another regulatory 

approach.’’ The Ninth Circuit ruled in 

CBD v. NHTSA, 538 F.3d 1172, 1197, 

that EPCA does not require another 

regulatory approach. 

We recognize that the Ninth Circuit 

coupled that ruling with the following 

cautionary statement about basing 

decisions about the stringency of CAFE 

standards on the principle of 

maximizing net benefits: 

(W)e reject only Petitioners’ contention 

that EPCA prohibits NHTSA’s use of 

marginal cost-benefit analysis to set CAFE 

standards. Whatever method it uses, NHTSA 

cannot set fuel economy standards that are 

contrary to Congress’s purpose in enacting 

the EPCA-energy conservation. We must still 

review whether NHTSA’s balancing of the 

statutory factors is arbitrary and capricious. 

Additionally, the persuasiveness of the 

analysis in Public Citizen and Center for 

Auto Safety is limited by the fact that they 

were decided two decades ago, when 

scientific knowledge of climate change and 

its causes were not as advanced as they are 

today. * * * The need of the nation to 

conserve energy is even more pressing today 

than it was at the time of EPCA’s enactment. 

* * * 

What was a reasonable balancing of 

competing statutory priorities twenty years 

ago may not be a reasonable balancing of 

those priorities today. (footnotes omitted) 

538 F.3d 1172, 1197–98. 

As discussed below, achieving a 

reasonable balancing of the factors is 

critical. While, as the Court suggested, 

there are risks associated with setting 

standards that are too low, there are also 

considerable risks associated with 

setting standards that are too high. Both 

types of risks must be part of the 

balancing process. 

We recognize that the on-road fleet of 

passenger cars and light trucks is one of 

largest consumers of petroleum and 

emitters of CO2 in the U.S. economy. We 

recognize too that global CO2 emissions 

have been exceeding the highest of the 

IPCC 2007 scenarios. We appreciate 

that, among the remaining alternatives, 

the total cost/total benefit alternative is 

the one that reduces those emissions the 

most. 

At the same time, we cannot fail to 

recognize and fully take into account 

the very serious conditions of the 

automobile industry, the national 

economy, and even the global economy. 

We understand that some aid has been 

authorized and appropriated for the 

automobile industry and that the 

possibility of other aid has been 

broached, but the extent to which that 

aid will mitigate the industry’s 

downward spiral is uncertain. What is 

certain is that the mere fact substantial 

aid is even being discussed is a 

reflection of the unusual and extremely 

serious conditions we face. 

(b) The Correct Balancing of the Factors 

for Setting the MY 2011 Standards Is To 

Maximize Societal Net Benefits 

We have discussed above how 

NHTSA considered and balanced the 

four statutory factors. This section 

discusses NHTSA’s decision that the 

final standards are the maximum 

feasible for MY 2011. 

Congress left the determination of 

what levels of CAFE standards are 

‘‘maximum feasible’’ to NHTSA’s 

discretion, requiring only that NHTSA 

consider the four statutory factors. 49 

U.S.C. 32902. NEPA applies 

independently to require consideration 

of environmental factors in the decisionmaking process. The EPCA factors are in 

tension and tend to pull in opposite 

directions in terms of stringency, with 

technological feasibility and especially 

the need of the nation to conserve 

energy pointing toward higher standards 

and economic practicability pointing 

toward lower ones. Accordingly, 

NHTSA has historically considered the 

factors from the perspective of balancing 

them, given EPCA’s overarching 

purpose of energy conservation.440

Thus, NHTSA determines that standards 

are the maximum feasible if they 

represent the proper balancing of the 

four statutory factors, based on all the 

information before the agency and the 

entire record. 

The ‘‘need of the United States to 

conserve energy’’ primarily functions to 

encourage NHTSA to set standards ever 

higher. Many commenters cast the need 

of the nation to conserve energy in 

terms of the impact of CAFE standards 

on global warming, and urged NHTSA 

to give this factor more weight than the 

others in its determination of the 

maximum feasible standards, in order to 

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have the maximum possible beneficial 

impact. Many of these commenters 

suggested that if NHTSA gave more 

weight to the need of the nation to 

conserve energy, it would set standards 

at levels substantially higher, for 

example, than those necessary to raise 

the industry-wide combined average to 

35 mpg by MY 2015, or at the level at 

which total costs equal total benefits, 

and so forth. 

NHTSA recognizes that seriousness of 

the global warming problem facing the 

nation and the world today, and that 

CAFE is one of many actions needed 

around the world to address that 

problem. NHTSA also recognizes that 

the higher CAFE standards are, the less 

they add to global warming and other 

environmental impacts (as 

demonstrated in our FEIS), just as the 

higher CAFE standards are, the less oil 

the United States must purchase from 

abroad, with the corresponding impacts 

on consumer costs, national balance of 

payments, and foreign policy objectives. 

The final standards for MY 2011 push 

CAFE higher and faster than any set of 

standards since the earliest years of the 

program, and, we believe, likely put the 

agency on track to meet EISA’s MY 2020 

requirement of an industry-wide 

combined average of at least 35 mpg 

several years ahead of time. 

However, NHTSA reiterates that it is 

required to consider and balance the 

other three factors in addition to the 

need of the nation to conserve energy in 

determining the maximum feasible level 

of the standards. While considering the 

need of the nation to conserve energy 

alone might counsel for setting the 

standards at the levels suggested by 

proponents of higher standards, NHTSA 

does not believe that those standards 

would be consistent with economic 

practicability or technological 

feasibility. 

Manufacturers commented that even 

standards set at the proposed levels 

would be above the maximum feasible 

level because, in their view, NHTSA 

had overestimated benefits and 

underestimated costs of the fuel-saving 

technologies. Conversely, many other 

commenters argued that the proposed 

standards were below the maximum 

feasible level because, in their view, 

NHTSA had underestimated benefits 

and overestimated costs of the 

technologies. 

To respond to these commenters, and 

aid in resolving their conflicting views 

and arguments, NHTSA re-examined all 

of its technology assumptions, with the 

assistance of Ricardo, as described in 

Chapter IV. This effort resulted in the 

agency’s revising the methodology 

underlying the development of many of 

its technology assumptions in ways that 

the agency believes makes its final rule 

analysis substantially more robust than 

its NPRM analysis. NHTSA is confident 

that its revised analysis ensures that the 

standards adopted in this final rule are 

technologically feasible. The effect of 

other motor vehicle standards of the 

Government on fuel economy is 

incorporated into the agency’s analysis 

through the baseline and the 

manufacturers’ product plans. 

Yet the question of economic 

practicability and what level of 

stringency would cause manufacturers 

substantial economic hardship must be 

considered not only in terms of 

technological feasibility, but also in 

terms of the economic situation today 

and as it is anticipated to be in the 

period leading up to and including MY 

2011. The current economic realities are 

markedly different from those at the 

time of the NPRM; just several months 

later, the national and global economies 

are in crisis and by all accounts in 

recession. As the economy contracts and 

consumers reassess their personal 

spending priorities, manufacturers are 

increasingly less able to pass the costs 

of fuel economy-improving technologies 

on to consumers. As discussed above in 

the section on economic practicability, 

manufacturers have only so much 

ability to absorb those costs, especially 

given the financial difficulties of some 

of the larger manufacturers. 

NHTSA additionally notes that the 

agency has the authority under 49 

U.S.C. § 32902(c) to amend the 

standards for a model year to a level that 

the Secretary decides is the maximum 

feasible average fuel economy level for 

that model year. NHTSA has previously 

used this authority to lower the MY 

1986 passenger car standards because 

they were deemed to be beyond 

maximum feasible. However, NHTSA 

believes that the authority to lower 

CAFE standards in MYs 2011–2020 has 

been constricted by the EISA 

requirements that standards increase 

annually and ratably and result in a 

combined fleetwide average fuel 

economy of at least 35 mpg in MY 2020. 

Thus, being unable to predict the 

economic situation in MY 2011, NHTSA 

is particularly mindful of economic 

practicability in establishing the current 

standards. 

For this MY 2011 final rule, in 

balancing the EPCA factors against one 

another and carefully considering the 

environmental impacts associated with 

the various alternatives evaluated, 

NHTSA continues to believe that the 

proper overall balance of all relevant 

consideration is the point at which 

social net benefits are maximized, and 

results in CAFE standards that are the 

maximum feasible for MY 2011. As 

mentioned above, in identifying this 

point for this model year, NHTSA 

evaluated more than 100 alternative 

stringency levels, and for each one, 

calculated net benefits in a manner that 

explicitly accounted for the need of the 

nation to conserve energy, and for the 

benefits of reducing greenhouse gas 

emissions. EPCA’s overarching purpose 

of energy conservation is met by setting 

standards at the maximum feasible 

level—EPCA does not require or even 

permit that standards be set beyond the 

maximum feasible level in order to 

achieve more energy conservation. 

NEPA’s purpose is to integrate 

environmental considerations into that 

decision-making process. Setting 

standards at the point at which social 

net benefits are maximized in NHTSA’s 

analysis results in standards that still 

increase higher and faster than any 

standards since the earliest years of the 

program, do not require the addition of 

technologies that the agency does not 

believe will pay for themselves, and 

result in measurable environmental 

benefits. The standards thus fulfill 

NEPA’s objectives and, under EPCA, the 

need of the nation to conserve energy, 

while not imposing substantial 

economic hardship on the industry, 

while taking into account the feasibility 

of applying technologies appropriately 

and consistent with manufacturers’ 

natural cycles, and the other motor 

vehicle standards of the government 

which manufacturers have to comply 

with. NHTSA is exercising its discretion 

and informed judgment, based upon the 

entire record and including the FEIS, as 

to the precise levels of CAFE that are the 

maximum feasible for MY 2011 

passenger cars and light trucks, as 

mandated by 49 U.S.C. 32902. NHTSA 

emphasizes that it will continue to 

evaluate alternative approaches for 

determining the maximum feasible 

standards for future CAFE rulemakings, 

and is deciding no more than that the 

approach taken for MY 2011 is 

reasonable under the circumstances 

surrounding this rulemaking. 

VIII. Safety 

A. Summary of NHTSA’s Approach in 

This Final Rule 

NHTSA has devoted substantial 

efforts over the years studying the 

relationship between vehicle weight 

reductions and vehicle injuries and 

deaths based upon a broad base of 

available empirical data. More recently, 

NHTSA addressed these issues in a 

1997 study, which was reviewed by the 

National Academy in its 2002 report. 

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441Effectiveness and Impact of Corporate Average 

Fuel Economy (CAFE) Standards (NRC, 2002), at 

118. 

442Transportation Research Board, Letter 

Report—Committee to Review Federal Estimates of 

the Relationship of Vehicle Weight to Fatality and 

Injury Risk, Accession Number 00723787. See 

http://onlinepubs.trb.org/onlinepubs/reports/ 

letrept.html (last accessed Nov. 11, 2008). 

443 Kahane, C. J., 1997. Relationships Between 

Vehicle Size and Fatality Risk in Model Year 1985– 

93 Passenger Cars and Light Trucks, NHTSA 

Technical Report, DOT HS 808 570. Springfield, 

VA: National Technical Information Services. 

This 1997 study, led by Dr. Charles 

Kahane of NHTSA, ‘‘stands alone as a 

comprehensive, scientific analysis of the 

vehicle weight and safety issue.’’ 441

Thereafter, in a 2003 study, again led 

by Dr. Kahane, NHTSA analyzed 

historical fatality rates in crashes 

involving MY 1991–1999 vehicles, both 

passenger cars and light trucks. 

NHTSA’s 2003 study built upon and 

updated the earlier 1997 study analyzed 

by the National Academy. Among other 

things, the 2003 study concluded that 

there is a ‘‘crossover weight,’’ a 

statistically derived weight above which 

vehicle weight reductions have a net 

benefit, instead of a net harm, in terms 

of reduced vehicle injuries and deaths 

to society. The 2003 study found that 

this crossover point occurs somewhere 

in the range of 4,224 pounds to 6,121 

pounds. The 2003 study concluded that 

the most likely location of the crossover 

point is 5,085 pounds. 

Based upon the findings of the 2003 

study, in setting fuel economy levels in 

this final rule, NHTSA did not assume 

that manufacturers would reduce 

vehicle weight to improve fuel economy 

for vehicles of 5,000 pounds or less. 

NHTSA has taken this approach so that 

manufacturers are not encouraged to 

downsize vehicles in a way that would 

be likely to cause a significant number 

of deaths and injuries. Conversely, 

NHTSA has considered reduced vehicle 

weight in its standard-setting analysis 

for vehicles above 5,000 pounds, since 

the data indicates no safety penalty is 

likely for reducing weight for such 

vehicles. Nevertheless, the agency will 

continue to consider whether it should 

set future CAFE standards in a manner 

that assumes manufacturers may, 

without compromising highway safety, 

reduce the mass of vehicles below 5,000 

pounds. 

B. Background 

As the courts have recognized, 

‘‘NHTSA has always examined the 

safety consequences of the CAFE 

standards in its overall consideration of 

relevant factors since its earliest 

rulemaking under the CAFE program.’’ 

Competitive Enterprise Institute v. 

NHTSA, 901 F.2d 107, 120 n. 11 (D.C. 

Cir. 1990) (‘‘CEI I’’) (citing 42 FR 33534, 

33551 (June 30, 1977)). The courts have 

consistently upheld NHTSA’s 

implementation of EPCA in this 

manner. See, e.g., Competitive 

Enterprise Institute v. NHTSA, 956 F.2d 

321, 322 (D.C. Cir. 1992) (‘‘CEI II’’) (in 

determining the maximum feasible fuel 

economy standard, ‘‘NHTSA has always 

taken passenger safety into account.’’) 

(citing CEI I, 901 F.2d at 120 n. 11); 

Competitive Enterprise Institute v. 

NHTSA, 45 F.3d 481, 482–83 (D.C. Cir. 

1995) (‘‘CEI III’’) (same); Center for 

Biological Diversity v. NHTSA, 538 F.3d 

1172, 1203–04 (9th Cir. 2008) 

(upholding NHTSA’s analysis of vehicle 

safety issues associated with weight in 

connection with the MY 2008–11 light 

truck CAFE rule). As early as 1974, 

before Congress even enacted EPCA, the 

Department of Transportation and EPA 

warned Congress of potential adverse 

safety effects associated with increasing 

fuel economy requirements for vehicles. 

See CEI I, 901 F.2d at 120 n. 11 (citing 

53 FR 39275, 39294 (1988), in turn 

citing a report from the Department of 

Transportation and EPA, ‘‘Potential for 

Motor Vehicle Fuel Economy 

Improvements: Report to the Congress,’’ 

(Oct. 24, 1974), which discussed ‘‘the 

possible trade offs in the areas of 

improved fuel economy, lower 

emissions, and increased occupant 

safety,’’ noting that ‘‘a sustained or 

increased shift to small cars * * * 

would likely lead to an increase in the 

rate of highway deaths and serious 

injuries’’). 

The relationship of vehicle weight to 

safety has been a contentious issue for 

many years. This contentiousness arises, 

at least in part, from the difficulty of 

isolating vehicle weight from other 

confounding factors (e.g., driver factors, 

such as age and gender, other vehicle 

factors, such as engine size and 

wheelbase, and environmental factors, 

such as rural/urban). In addition, 

several vehicle factors are closely 

related, such as vehicle mass, 

wheelbase, track width, and structural 

integrity. (Historically, as vehicles got 

longer and wider, they also got heavier). 

The papers that were initially published 

addressing vehicle size and safety did 

not attempt to fully address all of these 

factors. 

1. NHTSA’s Early Studies 

It was important for NHTSA to help 

move the debate forward with more 

serious analyses. After all, NHTSA must 

understand the relationship between 

vehicle factors and safety, both for 

establishing our safety standards and for 

establishing our CAFE standards. In July 

1991, NHTSA published a study of the 

effects of passenger car downsizing 

during 1970–1982 titled Effect of Car 

Size on Fatality and Injury Risk. In this 

report, NHTSA concluded that changes 

in the size and weight composition of 

the new car fleet from 1970 to 1982 

resulted in increases of nearly 2,000 

deaths and 20,000 serious injuries per 

year over the number of deaths and 

serious injuries that would have 

occurred absent this downsizing. 

Parties reviewing NHTSA’s 1991 

report identified a number of areas that 

could be improved. Suggestions 

included extending the analyses to 

include light trucks and vans, 

examining finer gradations to 

distinguish the relative impacts of 

weight reduction for the heavier cars 

from the lighter cars, analyzing all crash 

modes, and doing more to isolate the 

effects of vehicle mass from behavioral 

and environmental variables. 

NHTSA agreed that these suggestions 

would make the study more useful as a 

tool for NHTSA decisions on safety and 

fuel economy standards. Accordingly, 

NHTSA developed a more 

comprehensive analytic model to 

encompass all light vehicles, and to 

allow a finer look at safety impacts in 

different segments of the light vehicle 

population. This study was NHTSA’s 

first effort to estimate the effect of a 100- 

pound weight reduction in each of the 

important crash modes, and to do this 

separately for cars and light trucks. 

NHTSA recognized that the findings, 

whatever they were, would likely be 

controversial, so the agency chose to 

have the draft report peer-reviewed by 

the National Academy of Sciences 

before publishing the document. The 

Academy published its review on June 

12, 1996.442 The report expressed 

concerns about the methods used in the 

analyses and concluded, in part, ‘‘the 

Committee finds itself unable to endorse 

the qualitative conclusions in the 

reports about projected highway 

fatalities and injuries because of large 

uncertainties associated with the results 

* * *.’’ These reservations were 

principally concerned with the question 

of whether the NHTSA analyses had 

adequately controlled for confounding 

factors, such as driver age, gender, and 

aggressiveness. 

NHTSA responded at length to the 

committee report, and revised its report 

to address the committee 

recommendations. The revised report 

was published as a finished document 

in 1997,443 with a new Appendix F 

titled ‘‘Summary and Response to TRB’s 

Recommendations on the Draft Report.’’ 

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444See 62 FR 34491 (June 26, 1997). 

445 Dr. Greene’s report is available online at 

http://www.osti.gov/bridge/servlets/purl/625225– 

KPQDOu/webviewable/625225.pdf (last accessed 

October 28, 2008). 

446Effectiveness and Impact of Corporate Average 

Fuel Economy (CAFE) Standards (NRC, 2002). 

447 Id., at 24. 

448 Id., at 69–70. 

449 Id., at 27. 

450 Id., at 28. 

In this 1997 report, NHTSA 

concluded that, calibrated from 1985–93 

cars and light trucks involved in crashes 

in calendar years 1989–1993, there was 

little overall effect for a 100-pound 

weight reduction in light trucks and 

vans, because increased fatalities of 

truck occupants were offset by a 

reduction of fatalities in the vehicles 

that collided with the lighter trucks, 

whereas a 100-pound reduction in cars 

was associated with an increase of about 

300 fatalities per year. Based on this 

analysis and subsequent activities, the 

safety consequences of weight reduction 

have been considered by NHTSA in 

deciding upon the appropriate 

stringency of each of the new safety and 

fuel economy requirements since that 

time. 

NHTSA’s 1997 report did not end the 

public discussion of this issue. NHTSA 

followed its standard practice of 

publishing a notice announcing the 

report and inviting public comment on 

the 1997 report.444 In addition to 

comments to NHTSA’s docket, other 

papers analyzing the relationship of 

vehicle weight and safety were 

published. For instance, Dr. David L. 

Greene of the U.S. Department of 

Energy’s Oak Ridge National Laboratory 

published a report titled Why CAFE 

Worked soon after NHTSA’s 1997 report 

was released.445 In section 5.2 of this 

report, Dr. Greene’s introductory 

paragraph reads as follows: 

Vehicle weight significantly affects the 

safety of the vehicle’s occupants. Enough 

credible work has been done on this subject 

that this assertion cannot be seriously 

questioned (citations omitted). On the other 

hand, the nature of the trade-off between 

vehicle mass and safety is often 

misunderstood, and the implications for fuel 

economy regulations are generally 

misinterpreted. The relationship between fuel 

economy, mass, and public safety is complex, 

yet it is probably reasonable to conclude that 

reducing vehicle mass to improve fuel 

economy will require some trade-off with 

safety. The rational person will realize that 

individuals, manufacturers, and governments 

are constantly making trade-offs between 

safety and cost, safety and other vehicle 

attributes, safety and convenience, etc. 

(citation omitted). An essential feature of a 

rational economic consumer is the 

willingness to trade-off risk for money and, 

since fuel economy saves money, to trade-off 

safety for fuel economy. 

David L. Greene, 1997, Why CAFE 

Worked, ORNL/CP–94482, Oak Ridge 

National Laboratory, Oak Ridge, 

Tennessee, at 22 (Emphases added). 

It is noteworthy that Dr. Greene’s 

published work explicitly acknowledges 

the vehicle weight-safety trade-off 

documented by NHTSA’s studies of the 

real world crash data. As to Dr. Greene’s 

concerns that the trade-off will be 

misunderstood, NHTSA has been clear 

on this point. NHTSA wants to ensure 

that the public, manufacturers, and 

governments are aware of the empirical 

data that demonstrate that there is a 

trade-off between vehicle mass and 

safety. Parties must understand this 

trade-off exists and the size of the tradeoff should be quantified as accurately as 

possible, so it can be considered as part 

of the decision on average fuel economy 

standards. 

2. The 2002 National Academy of 

Sciences Study 

The next significant event in the 

vehicle weight and safety discussion 

began in October 2000, when the 

Department of Transportation’s 

Appropriations Act for fiscal year 2001 

was signed into law. That 

appropriations law included a provision 

directing DOT to fund a National 

Academy of Sciences (NAS) study on 

the effectiveness and impacts of CAFE 

standards. NAS released its final study 

in January 2002 (hereafter, the 2002 

NAS Report).446

As part of a comprehensive look at the 

impacts of CAFE standards, it was 

necessary for the 2002 NAS Report to 

address the safety impacts of CAFE 

standards. In Chapter 2 of the study, 

NAS looked back at the safety impacts 

of past CAFE standards. Among other 

observations, NAS recognized that 

much of the increase in fuel economy 

between 1975 and 1988 was due to 

reductions in the size and weight of 

vehicles, which led to increased safety 

risks.447 In fact, NAS noted that ‘‘the 

preponderance of evidence indicates 

that this downsizing of the vehicle fleet 

resulted in a hidden safety cost, namely 

travel safety would have improved even 

more had vehicles not been 

downsized.’’ 448

The committee then focused its 

analysis on the 1997 NHTSA analysis 

led by Dr. Kahane. Since there are many 

published papers on this subject in the 

literature, the question must be asked, 

‘‘Why did the National Academy of 

Sciences choose the NHTSA analyses 

out of all the published papers?’’ The 

NAS committee clearly and 

unequivocally answered this in its 

report, where it found that ‘‘NHTSA’s 

fatality analyses are still the most 

complete available in that they 

accounted for all crash types in which 

vehicles might be involved, for all 

involved road users, and for changes in 

crash likelihood as well as 

crashworthiness.’’ 449 The NAS 

committee went on to find that ‘‘The 

April 1997 NHTSA analyses allow the 

committee to reestimate the 

approximate effect of downsizing the 

fleet between the mid-1970s and 1993.’’ 

In other words, a committee of the 

National Academy of Sciences found 

that NHTSA’s analyses were the most 

thorough of all the published papers, 

and that NHTSA’s analyses were 

sufficiently persuasive and rigorous to 

permit a reasonable estimate of the 

safety penalty associated with 

downsizing the fleet. In the committee’s 

words: 

Thus, the majority of this committee 

believes that the evidence is clear that past 

downweighting and downsizing of the lightduty vehicle fleet, while resulting in 

significant fuel savings, has also resulted in 

a safety penalty. In 1993, it would appear 

that the safety penalty included between 

1,300 and 2,600 motor vehicle crash deaths 

that would not have occurred had vehicles 

been as large and heavy as in 1976.450

While this look back is informative, the 

greater challenge is to use this 

understanding of the past to guide 

future actions. Again the NAS 

committee offered clear guidance in this 

regard. The NAS Report said: 

In summary, the majority of the committee 

finds that the downsizing and weight 

reduction that occurred in the late 1970s and 

early 1980s most likely produced between 

1,300 and 2,600 crash fatalities and between 

13,000 and 26,000 serious injuries in 1993. 

The proportion of these casualties 

attributable to CAFE standards is uncertain. 

It is not clear that significant weight 

reduction can be achieved in the future 

without some downsizing, and similar 

downsizing would be expected to produce 

similar results. Even if weight reduction 

occurred without any downsizing, casualties 

would be expected to increase. Thus, any 

increase in CAFE as currently structured 

could produce additional road casualties, 

unless it is specifically targeted at the largest, 

heaviest light trucks. 

For fuel economy regulations not to have 

an adverse impact on safety, they must be 

implemented using more fuel-efficient 

technology. Current CAFE requirements are 

neutral with regard to whether fuel economy 

is improved by increasing efficiency or by 

decreasing vehicle weight. One way to 

reduce the adverse impact on safety would be 

to establish fuel economy requirements as a 

function of vehicle attributes, particularly 

vehicle weight (see Chapter 5). * * * 

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451 Id., at 77. 

452One of the two dissenters was Dr. David 

Greene, the author of the 1997 report Why CAFE 

Worked, discussed supra. 

453Effectiveness and Impact of Corporate Average 

Fuel Economy (CAFE) Standards, at 118. 

454 2002 NAS Report, at Appendix A. 

455 Id., at 27–28. 

456 Id., at 6. 

457Charles J. Kahane, ‘‘Vehicle Weight, Fatality 

Risk, and Crash Compatibility of Model Year 1991– 

99 Passenger Cars and Light Trucks,’’ DOT HS 809 

662, October 2003. This report is available online 

at http://www.nhtsa.dot.gov/cars/rules/regrev/ 

evaluate/pdf/809662.pdf (last accessed Oct. 28, 

2008). 

458See 68 FR 66153 (Nov. 5, 2003). 

If an increase in fuel economy is effected 

by a system that encourages either 

downweighting or the production and sale of 

more small cars, some additional traffic 

fatalities would be expected. Without a 

thoughtful restructuring of the program, that 

would be the trade-off that must be made if 

CAFE standards are increased by any 

significant amount.451

This discussion by the NAS committee 

was an impetus for NHTSA to use its 

existing statutory authority to reform its 

light truck CAFE program. This 

involved moving away from the single 

flat standard for light trucks, because 

those standards’ neutrality with regard 

to decreasing vehicle weight, in lieu of 

increasing efficiency to improve fuel 

economy, means they necessarily have a 

potential safety trade-off. In place of the 

single flat standard, NHTSA established 

an attribute-based standard that is a 

function of the vehicle’s footprint. 

Under this attribute-based standard, the 

fuel economy target for a vehicle 

increases as the vehicle is downsized. 

As long as vehicle manufacturers have 

to expend the same levels of advanced 

technology for each footprint size, there 

is no incentive to change the vehicle to 

get a less-demanding fuel economy 

target. Thus, the necessary safety tradeoff under the single flat standard system 

does not arise under an attribute-based 

system. That is not to suggest there are 

no safety consequences if vehicle mass 

is reduced—there are, as documented by 

NHTSA and explained by the National 

Academy of Sciences. However, the 

standards are no longer structured to 

confer an advantage to a manufacturer 

that makes downsizing trade-offs. This 

is a key feature of the attribute-based 

fuel economy program NHTSA 

implemented for light trucks. 

Two of the 13 NAS committee 

members dissented on the safety 

issues.452 The dissent acknowledges 

that, ‘‘Despite these limitations, 

Kahane’s analysis is far and away the 

most comprehensive and thorough 

analysis’’ of the safety issue.453 The 

dissent’s primary disagreement with the 

other 11 committee members centers on 

the large uncertainties associated with 

NHTSA’s analyses. The dissent 

acknowledges NHTSA’s efforts in the 

study led by Dr. Kahane to quantify the 

safety penalty, but concludes that the 

number of factors in real world crashes 

is so large and the controls used by the 

analytical models introduce so much 

uncertainty that it is not possible to 

definitively make any statements about 

a safety penalty.454

It should also be noted that the 

majority of the committee responded to 

the dissent by saying: 

However, the committee does not agree 

that these concerns should prevent the use of 

NHTSA’s careful analyses to provide some 

understanding of the likely effects of future 

improvements in fuel economy, if those 

improvements involve vehicle downsizing. 

The committee notes that many of the points 

raised in the dissent (for example, the 

dependence of the NHTSA results on specific 

estimates of age, sex, aggressive driving and 

urban vs. rural location) have been explicitly 

addressed in Kahane’s response to the [NAS] 

review and were reflected in the final 1997 

report. The estimated relationship between 

mass and safety were (sic) remarkably robust 

in response to changes in the estimated 

effects of these parameters. The committee 

also notes that the most recent NHTSA 

analyses yield results that are consistent with 

the agency’s own prior estimates of the effect 

of vehicle downsizing (citations omitted) and 

with other studies of the likely effects of 

weight and size changes in the vehicle fleet 

(citation omitted). The consistency over time 

and methodology provides further evidence 

of the robustness of the adverse safety effects 

of vehicle size and weight reduction.455

In addition, the NAS Committee 

unanimously agreed that NHTSA 

should undertake additional research on 

the subject of fuel economy and safety, 

‘‘including (but not limited to) a 

replication, using current field data, of 

its 1997 analysis of the relationship 

between vehicle size and fatality 

risk.’’ 456 NHTSA concurred with this 

recommendation, and thereafter, 

NHTSA undertook a replication of the 

1997 study, using the additional field 

data that had become available: 

NHTSA’s 2003 study, led again by Dr. 

Kahane. 

As Congress was developing the bill 

that ultimately became EISA, Congress 

considered NHTSA’s reformed light 

truck CAFE program established under 

existing NHTSA authority in deciding 

what additional CAFE authority NHTSA 

should be given and what constraints 

should be put on that authority. 

Ultimately, EISA was enacted, which 

mandates that NHTSA establish an 

attribute-based CAFE system for cars 

and light trucks. 

3. NHTSA’s Updated 2003 Study 

In October 2003, NHTSA published 

its updated study.457 NHTSA’s update 

again used regression models to 

calibrate crash fatality rates per billion 

miles for model year 1991–1999 

passenger cars, pickup trucks, SUVs, 

and vans during calendar years 1995– 

2000. These rates were calibrated 

separately by vehicle weight, vehicle 

type, driver age and gender, urban/rural 

and other vehicle, driver, and 

environmental factors. One major point 

of note is that, as the analyses get more 

sophisticated and able to differentiate 

the safety trade-off among different 

types of vehicles, each analysis NHTSA 

has ever conducted continues to show 

that there is a safety trade-off for the 

existing light vehicle fleet as vehicle 

mass is reduced. 

After controlling for vehicle, driver 

and environmental factors, the new 

study found that: 

• The association between vehicle 

weight and overall crash fatality rates in 

the heavier 1991–1999 light trucks and 

vans was not significant. Thus, there 

was no safety penalty for reducing 

weight in these vehicles. 

• In the other three groups of 1991– 

1999 vehicles—the lighter light trucks 

and vans, the heavier cars, and 

especially the lighter cars—fatality rates 

increased as weights decreased. 

Æ Lighter light trucks and vans would 

have an increase of 234 fatalities per 

year per 100-pound weight reduction. 

Æ Heavier cars would have an 

increase of 216 fatalities per year per 

100-pound weight reduction. 

Æ Lighter cars would have an increase 

of 597 fatalities per year per 100-pound 

weight reduction. 

• There is a crossover weight, above 

which crash fatality rates increase for 

heavier light trucks and vans, because 

the added harm for other road users 

from the additional weight exceeds any 

benefits for the occupants of the 

vehicles. This occurs in the interval of 

4,224 pounds to 6,121 pounds, with the 

most likely single point being 5,085 

pounds. The fatality rate changes by less 

than ±1 percent per 100-pound weight 

increase over this range. 

The draft report was reviewed before 

publication by experts in statistical 

analysis of crash data and related 

vehicle weight and safety issues: Drs. 

James H. Hedlund, Adrian K. Lund, and 

Donald W. Reinfurt. The review process 

is on record—the comments on the draft 

are available in Docket NHTSA–2003– 

16318–0004. Consistent with NHTSA’s 

standard practice, NHTSA published its 

analysis and sought public comment on 

it.458 NHTSA then docketed a response 

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459 Docket No. NHTSA–2003–16318–0016. 

to the public comments on November 9, 

2004.459 There were three principal 

criticisms of NHTSA’s updated study, 

which are summarized below together 

with NHTSA’s response. 

(1) The analyses only considered the 

relationship of vehicle mass to fatality 

risk. It did not consider other attributes 

of vehicle size, such as track width and 

wheelbase. Dynamic Research Inc. (DRI) 

presented analyses that included all 

three of these variables, and its analysis 

indicated that mass was harmful (i.e., 

reducing it would be positive for safety) 

while track width and wheelbase were 

beneficial. If true, this meant that weight 

reduction would benefit safety if track 

width and wheelbase were maintained. 

Agency response: The DRI results 

were strongly biased as a consequence 

of including 2-door cars in the analysis. 

Two-door muscle and sports cars stand 

apart from all other groups of cars by 

having a short wheelbase relative to 

their weight. They also have by far the 

highest fatality rates of all cars, for 

reasons mostly related to the drivers. 

The regression analysis immediately 

identifies short wheelbase with high 

weight as a disastrous combination. 

Being a regression, it tells you that you 

can make any car safer, including 4-door 

cars, by increasing wheelbase and/or 

reducing weight. This bias is amplified 

by treating highly correlated size 

attributes as independent factors in the 

model. 

To clarify this latter concern, 

NHTSA’s analyses are calibrating the 

historical relationship of vehicle mass 

and fatality risk. In this type of analysis, 

‘‘vehicle mass’’ incorporates not only 

the effects of vehicle mass per se, but 

also the effects of many other size 

attributes that are historically and/or 

causally related to mass, such as 

wheelbase, track width, and structural 

integrity. If historical relationships 

between mass and these other size 

attributes continue, future changes in 

mass will continue to be associated with 

similar changes in fatality risk. If the 

historical relationships change, one will 

be able to analyze the mass and size 

attributes independently, but it will take 

some years to get such data. 

However, as a check of DRI’s 

suggestion that mass was not as 

significant as track width and 

wheelbase, NHTSA ran both its 1997 

and 2003 analyses of 4-door cars only 

with mass, track width, and wheelbase 

as separate variables. When we did this, 

we saw that mass continued to have a 

substantial effect, even independent of 

track width and wheelbase in all crash 

modes except rollovers. In fact, only 

curb weight had a consistent, significant 

effect in both the data sets used in 

NHTSA’s 1997 analyses and his 2003 

analyses. This was publicly reported 

over four years ago, in NHTSA’s 

November 2004 response to the 

comments on his 2003 analyses. 

After considering the DRI submission, 

NHTSA made no change to the findings 

in its 2003 report. 

(2) Marc Ross, of the University of 

Michigan, and Tom Wenzel, of 

Lawrence Berkeley National Laboratory, 

commented that vehicle ‘‘quality’’ has a 

much stronger relationship with fatality 

risk than vehicle mass. They suggest 

that lighter cars have a higher fatality 

risk on average because they are usually 

the least expensive cars and, in many 

cases, the ‘‘poorest quality’’ cars. If true, 

weight reduction is fairly harmless, as 

long as the lighter cars are of the same 

‘‘quality’’ as the heavier cars they 

replace. 

Agency response: In their analyses, 

Ross and Wenzel did not adjust their 

rates for driver age and gender. Absent 

those adjustments, the analysis mingles 

the effects of what sort of people buy 

and drive the car with the intrinsic 

safety of the car, making its conclusions 

about the intrinsic safety of the car 

suspect, at best. On average, and 

considering all crash modes as well as 

both weight groups of cars, controlling 

for price has little effect on the weightsafety coefficients in NHTSA’s analyses. 

As a final check, NHTSA ran an analysis 

of head-on collisions of two 1991–99 

cars, since this is a pure measure of the 

vehicle’s performance. The results were 

that the more expensive vehicle’s driver 

had a slightly higher fatality risk than 

the less expensive vehicle’s driver, 

although the difference was not 

statistically significant. This indicates 

that the lower fatality rates for more 

expensive cars in Ross and Wenzel’s 

study are not due to expensive cars’ 

superior performance in crashes. 

Accordingly, NHTSA the Ross and 

Wenzel comment did not warrant a 

change in NHTSA’s report. 

(3) The Alliance of Automobile 

Manufacturers, DaimlerChrysler, 

William E. Wecker Associates, and 

Environmental Defense all question the 

accuracy and robustness of the report’s 

calculation of a ‘‘crossover weight,’’ 

above which weight reductions have a 

net benefit, instead of harm. NHTSA’s 

report said that this crossover point 

occurs somewhere in the range of 4,224 

pounds to 6,121 pounds (this is the 

‘‘interval estimate’’); with the most 

likely location of the crossover point at 

5,085 pounds (this is the ‘‘point 

estimate’’). Wecker suggested that 

NHTSA’s interval estimate of from 4,224 

to 6,121 pounds only takes sampling 

error into account. Wecker identified 

additional factors that make this 

estimate not robust, and suggests that 

the interval estimate should be wider. 

The Alliance and DaimlerChrysler 

suggested that the crossover weight 

could be substantially greater than 5,085 

pounds, in which case weight 

reductions for light trucks and vans in 

the 5–6,000 pound range would have 

detrimental net effects on safety. 

Conversely, Environmental Defense 

believes the crossover weight is well 

below 5,085 pounds, in which case 

there would be opportunities to reduce 

vehicle mass in many light trucks and 

vans without any safety penalty. 

Agency response: While NHTSA’s 

report estimates the crossover weight, 

the report expressly acknowledged the 

uncertainty about the exact location of 

the crossover weight. That is why the 

report highlighted the interval estimate, 

instead of the point estimate. It is 

important to note that the net weightsafety relationship remains close to zero 

for many hundreds of pounds above and 

below the point estimate for the 

crossover weight. As shown on pages 

163–166 of NHTSA’s 2003 report, the 

crash fatality rate changes by less than 

±1 percent per 100-pound weight 

increase over a 1,200 pound range on 

either side of the point estimate for the 

crossover weight. The data and analysis 

in the report will not show a statistically 

significant relationship, in either 

direction, between weight and safety for 

the heavier light trucks and vans. That 

is the important information the report 

puts in front of the decision maker—that 

the robust relationship between weight 

and safety that exists for most vehicles 

does not exist for the heavier light 

trucks and vans. With the available data, 

one cannot develop a precise point 

estimate for this crossover weight. 

Thus, NHTSA determined that its 

report did not require changes in 

response to these comments. 

4. Summary of Studies Prior to This 

Rulemaking 

Several important observations can be 

made based on the various studies 

performed in the years preceding this 

rulemaking on the relationship between 

safety and vehicle weight in the context 

of fuel economy: 

1. The question of the effect of weight 

on vehicle safety is a complex question 

that poses serious analytic challenges. 

The issue has been addressed in the 

literature for more than two decades. 

2. NHTSA has been actively engaged 

in this discussion. 

3. All of NHTSA’s analyses have 

found that there is a strong correlation 

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460As discussed below, DRI acknowledged this 

observation to be accurate and submitted a new 

2005 analysis that excludes 2-door cars in response 

to NHTSA’s suggestions. 

461 73 FR 44354 (July 30, 2008). 

462 Docket No. EPA–HQ–OAR–2008–0318–0084. 

between vehicle mass and vehicle safety 

for cars and light trucks, up to a certain 

weight range. 

a. Given the historic fact that vehicles 

have been made primarily of steel, there 

are a number of other parameters that 

are highly correlated with vehicle mass. 

These factors include vehicle size (e.g., 

track width and wheelbase). 

b. The precise weight point at which 

the safety penalty ends is difficult to 

pinpoint, because the fatality rate curve 

is so flat at that point. NHTSA can say 

with high confidence that the crossover 

point is in the range of 4,224 to 6,121 

pounds. There are safety penalties for 

reductions of weight below this 

crossover weight. There is no reduced 

societal safety for reducing weight on 

vehicles that weigh more than this 

crossover point, because the reduced 

risk for other road users would exceed 

any reduced benefits for the occupants 

of the heavy vehicle. 

4. The National Academy of Sciences 

has twice peer-reviewed NHTSA’s work 

in this area. The 2002 NAS Report 

found that there was a safety penalty for 

reducing weight in all but the heaviest 

light trucks. The study stated that ‘‘the 

downsizing and weight reduction that 

occurred in the late 1970s and early 

1980s most likely produced between 

1,300 and 2,600 crash fatalities in 

1993.’’ 

a. Neither the Academy nor NHTSA is 

suggesting that all of the downsizing 

and weight reduction were a direct 

response to the CAFE standards. It is 

difficult to objectively quantify what 

amount of downsizing was a response to 

CAFE standards, and what was a 

response to other real or perceived 

market forces. However, the Academy 

stated that some of the downsizing was 

in response to CAFE standards. 

b. NHTSA does not accord the safety 

dissent, which represented the views of 

two of the 13 committee members, the 

same stature as the views expressed in 

the body of the report, which represents 

the views of 11 of the 13 committee 

members. 

5. In response to the National 

Academy’s unanimous 2002 

recommendation, NHTSA updated its 

previous work on weight and safety in 

2003 to reflect the most recent data. 

This update found that the trends were 

similar, and if anything the safety 

penalty was now higher for reducing 

weight in small cars. This update also 

found that there is a crossover weight, 

which occurs somewhere between 4,264 

and 6,121 pounds, with a point estimate 

at 5,085 pounds, above which there is 

no safety penalty for reducing vehicle 

weight. This is because the added harm 

for other road users from the additional 

weight exceeds any benefits for the 

occupants of the vehicles. NHTSA 

embodied this finding in its CAFE 

rulemaking by restricting materials 

substitution in its development of 

stringency levels to vehicles over 5,000 

pounds. 

6. NHTSA published its update and 

asked for public comments on the 

updated document. 

7. In response to the request for 

comments, NHTSA received two recent 

studies to review. After reviewing these 

studies, NHTSA concluded that both 

studies had inadvertently introduced 

significant biases in their analyses. 

NHTSA made public its review of these 

studies in November 2004. 

a. One of these studies was a 2002 

study by DRI that purported to analyze 

mass, track width, and wheelbase as 

independent variables. DRI’s 2002 paper 

indicated that reducing mass would be 

beneficial, while reducing track width 

and wheelbase would be harmful. If 

true, this meant that weight reduction 

would benefit safety if track width and 

wheelbase were maintained. As 

discussed above, NHTSA concluded 

that the DRI results were strongly biased 

as a consequence of including 2-door 

cars in the analysis and explained why 

this was so.460

b. The other of these studies was a 

2002 analysis by Ross and Wenzel that 

suggested that lighter cars have a higher 

fatality risk because they are the least 

expensive and, in many cases, the 

poorest quality cars. The implication of 

this analysis was that weight reduction 

is fairly harmless, as long as the lighter 

cars are of the same ‘‘quality’’ as the 

heavier cars they replace. NHTSA noted 

that the Ross and Wenzel analyses did 

not adjust for driver age and gender. 

Absent those adjustments, the analysis 

mingles the effects of what sort of 

people buy and drive the car with the 

intrinsic safety of the car, making its 

conclusions about the intrinsic safety of 

the car suspect, at best. 

B. Response to Comments in This 

Rulemaking on Safety and Vehicle 

Weight 

With this background, NHTSA will 

now address the comments it received 

on safety in response to its NPRM. First, 

however, it is important to understand 

how NHTSA has embodied the 

accumulated knowledge and expertise 

from the studies explained above in this 

final rule. The rule is a performance 

standard that does not dictate the way 

manufacturers satisfy the standard. It 

does not preclude manufacturers from 

reducing the weight of future vehicles. 

Instead, in calculating its stringency 

standards, NHTSA has not considered 

weight-reducing materials substitution 

as a methodology for improving fuel 

economy of vehicles of 5,000 pounds or 

less. NHTSA has done so based on 

available data in order not to encourage 

downsizing of vehicles in a way that 

would be likely to cause a significant 

number of deaths and injuries. At the 

same time, for vehicles above 5,000 

pounds, where the data indicate no 

safety penalty is likely for reducing 

weight, NHTSA has considered 

materials substitution in its standardsetting analysis. The effect of this is to 

encourage weight reductions to improve 

fuel economy where doing so is not 

likely to endanger lives. We believe this 

careful drawing of a data-based line in 

our analysis is the best way to serve 

both safety and fuel economy. 

As an overview, many commenters 

questioned the continuing validity of 

the 2002 NAS Report, the 2003 NHTSA 

study led by Dr. Kahane, or both. 

NHTSA notes both these reports were 

based on considerable empirical data 

and thoroughly peer-reviewed. More 

recent studies will need to be of a very 

high quality for NHTSA to adopt them 

in lieu of the the 2002 NAS Report and 

the 2003 NHTSA analyses. 

1. Views of Other Government Agencies 

After our proposed rule was 

published and after the comment period 

had closed for the proposal, EPA 

published an Advance Notice of 

Proposed Rulemaking (ANPRM) on 

regulating greenhouse gas emissions 

under the Clean Air Act.461 The ANPRM 

was accompanied by a Vehicle 

Technical Support Document—Mobile 

Source.462 The Technical Support 

Document contains a discussion on pp. 

15–17 of the safety issues. EPA provided 

a brief summary of the issues involved 

and cited no new work in that area. 

Agency response: The work cited by 

EPA has already been addressed by 

NHTSA within the discussion of the 

2002 NAS study and within NHTSA’s 

responses to other comments to the 

NPRM docket regarding the Wenzel and 

Ross study. 

CARB also commented on the 

relationship between vehicle weight and 

safety. CARB stated that the NHTSA 

study led by Dr. Kahane ‘‘assumed that 

weight and size are completely 

correlated,’’ and argued that NHTSA 

should have focused more closely on 

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14402 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

the DRI reports and other recent studies, 

which it said concluded that ‘‘safety is 

primarily a design issue, not a weight 

issue.’’ CARB included with its 

comments an ‘‘expert report by David 

Greene,’’ which it said concluded after 

reviewing the existing research that 

‘‘there has been no relationship between 

fuel economy and traffic fatalities and 

that there should be none in the future.’’ 

CARB also commented that it 

believed that NHTSA was inconsistent 

by restricting materials substitution in 

its analysis to only vehicles over 5,000 

pounds, but also stating in the NPRM 

that footprint-based standards would 

facilitate the use of lightweight 

materials that are not yet cost-effective, 

which could eventually improve both 

safety and fuel economy. CARB argued 

that ‘‘NHTSA should expand the 

applicability of weight reduction 

technologies to vehicles under 5,000 

pounds,’’ because weight reduction can 

be ‘‘a viable technology if accompanied 

by proper vehicle design to assure 

vehicle safety is not compromised.’’ 

Agency response: The available 

empirical data are derived from vehicles 

that are in use on the public roads, and 

weight and size are highly correlated in 

those vehicles. Underlying this, larger 

vehicles contain more steel and weigh 

more. NHTSA has not and is not now 

claiming that weight and size are 

completely correlated. Thus, for any 

given curb weight, there may not be 

some variations in the track widths and 

wheelbases of vehicle make-models at 

that curb weight. However, these 

variations are not random—they are 

nearly always correlated with the 

vehicle’s market class or design group. 

NHTSA agrees that, conceptually, 

substitution of strong, lightweight 

materials should be a less harmful way 

to downweight than reducing the size of 

the vehicle. CARB has not supported its 

concept by presenting information on 

how this would be achieved or the 

consequences on the feasibility and 

practicability of doing so. There is not 

yet sufficient empirical evidence to 

conclude that material substitution is 

harmless, let alone beneficial to safety. 

NHTSA is proceeding cautiously and 

erring on the side of the safety of the 

public until there is more convincing 

evidence that requiring investments by 

vehicle makers in greater fuel efficiency 

through use of lightweight materials 

will not have the significant unintended 

consequence of simultaneously 

reducing the safety protection afforded 

to the American people, and attendant 

deaths as have occurred in the past. 

As for the DRI reports, NHTSA 

reviewed its 2002 report and publicly 

responded in 2004 that the DRI results 

were strongly biased as a result of 

including 2-door cars in the analysis. To 

DRI’s credit, they reviewed their report 

and agreed that this flaw needed to be 

corrected. DRI submitted a new study 

which, they say, limited some of their 

analyses to 4-door cars excluding police 

cars. DRI further claimed that it could 

now mimic NHTSA’s logistic regression 

approach for an analysis of model year 

1991–98 4-door cars in calendar year 

1995–1999 crashes. DRI claims that its 

new analysis still shows results 

directionally similar to its earlier 

work—increased risk for lower track 

width and wheelbase, reduced risk for 

lower mass—although DRI 

acknowledges that the wheelbase and 

mass effects are no longer statistically 

significant after removing the 2-door 

cars from the analysis. 

NHTSA does not accept the updated 

DRI analysis because it contains results 

that are inconsistent with results 

NHTSA has seen and, in light of this, 

DRI has not justified its results. For 

example in MY 1991–1998, the average 

car weighing x + 100 pounds had a track 

width that was 0.34 inches larger and a 

wheelbase that was 1.01 inch longer. 

Thus, we could say that a ‘‘historical’’ 

100-pound weight reduction would 

have been accompanied by a 0.34 inch 

track width reduction and a 1.01 inch 

wheelbase reduction. However, using a 

reasonable check, if one dissociates 

weight, track width, and wheelbase and 

treats them as independent parameters, 

DRI’s logistic regression of model year 

1991–1998 4-door cars excluding police 

cars attributes the following effects: 

Now if we apply NHTSA’s logistic 

regression analyses to NHTSA’s 

database, exactly as described in the 

agency’s response to comments on its 

2003 report, except for limiting the data 

to model years 1991–98, instead of 

1991–99, the results are not at all like 

DRI’s. For NHTSA, mass still has the 

largest effect, exceeding track width, 

and it moves in the expected direction. 


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463See, e.g., Kahane (2003), Table 2 on P. xi. 

464This is the same Dr. Greene who concluded in 

his 1997 report, cited above, that ‘‘it is probably 

reasonable to conclude that reducing vehicle mass 

to improve vehicle economy will require some 

trade-off with safety.’’ 

465Sanjana Ahmad and David L. Greene, 2005, 

‘‘Effect of Fuel Economy on Automobile Safety: A 

Reexamination,’’ Transportation Research Record 

1941, Transportation Research Board of the 

National Academy of Sciences. 466 2002 NAS Report at 77. 

NHTSA obtains its estimates by 

adding the results from 12 individual 

logistic regressions: six types of crashes 

multiplied by two car-weight groups 

(less than 2,950 pounds; 2,950 pounds 

or more).463 DRI has apparently not 

followed the same procedures, based on 

the widely differing results. 

Based on the evidence before us now, 

NHTSA is not persuaded by the DRI 

analysis. Even though NHTSA’s 

analyses continue to attribute a much 

larger effect for mass than for track 

width or wheelbase in small cars, 

NHTSA has never said that mass alone 

is the single factor that increases or 

decreases fatality risk. There may not be 

a single factor, but rather it may be that 

mass and some of the other factors that 

are historically correlated with mass, 

such as wheelbase and track width, 

together are the factors. We can say that 

NHTSA’s analyses do not corroborate 

the 2005 DRI analysis, suggesting that 

mass can be reduced without safety 

harm and perhaps with safety benefit. 

We would note that comparatively, it 

would seem the least harmful way to 

reduce mass would be from materials 

substitution, where one replaces a heavy 

material with a lighter one that delivers 

the same performance, or other designs 

that reduce mass while maintaining 

wheelbase and track width. There is an 

absence of supporting data for the thrust 

of the 2005 DRI analysis. We cannot 

analyze data on that yet, because those 

changes have not happened to any 

substantial number of vehicles. We do 

know that mass has historically been 

correlated with wheelbase and track 

width, and that reductions in mass have 

also reduced those other factors. Until 

there is a more credible analysis than 

the 2005 DRI study that demonstrates 

that mass does not matter for safety, 

NHTSA concludes it should be guided 

by the decades’ worth of studies 

suggesting that mass is the most 

important of the related factors. 

The report by Dr. David Greene that 

was submitted by CARB as part of its 

comments is a document submitted by 

Dr. Greene when he was an expert 

witness in a lawsuit.464 We note that Dr. 

Greene was one of the two dissenters to 

the 2002 NAS report. Dr. Greene 

reiterates the arguments in his dissent to 

the 2002 NAS Report; namely, mass 

alone should not have any safety effect 

except in crashes where two vehicles 

collide with each other (which 

undisputedly occurs, with fatal results). 

In light of this view, all the empirical 

data showing higher fatality rates for 

lighter vehicles in single-vehicle crashes 

and elsewhere are due to something 

other than mass. Therefore, we conclude 

mass may be reduced without harming 

safety. But, as explained above, mass 

has been historically correlated with 

other factors, such as size and structural 

integrity. Unless NHTSA can determine 

based on data what the significant 

parameters are and demonstrate ways to 

reduce mass without affecting the 

significant parameters, NHTSA cannot 

simply ignore the empirical data 

showing higher fatality rates for lighter 

vehicles. 

Dr. Greene’s expert report refers to the 

Ross and Wenzel and DRI studies, 

which have been discussed at length 

above. Dr. Greene also refers to a study 

titled ‘‘The Effect of Fuel Economy on 

Automobile Safety: A 

Reexamination.’’ 465 This report is a 

long-term (1966–2002) time-series 

analysis of the annual number of crash 

fatalities in the United States, the 

average fuel economy of the vehicles on 

the road that year, and some other 

factors such as the price of fuel, the 

national speed limit, population, and 

annual vehicle miles traveled. The 

conclusion is that national fatalities did 

not increase, in fact tended to decrease, 

from the early 1970s forward, while fuel 

economy improved. Therefore, fuel 

economy has not had an adverse effect 

on safety. Suffice it to say that this is an 

exceedingly ‘‘macro’’ level to examine 

the relationships between fuel economy 

and fatality risk. Long-term time-series 

analyses are unlikely to separate the 

effects of downsizing for the other 

demographic, economic, and 

technological trends that have had an 

impact on fatality rates over the period. 

For instance, seat belt use has risen from 

14 percent to 82 percent, many lifesaving safety features (e.g., front and 

side airbags) have been added to 

vehicles, impaired driving is not as 

accepted, and so forth. It is general 

knowledge that traffic fatalities are now 

lower than 1970, primarily as a result of 

the major safety advances just 

mentioned. The reexamination ignores 

the effects of these variables and leaps 

to the conclusion that fuel economy did 

not have an adverse effect on safety—a 

conclusion that is at odds with the 2002 

NAS study. But the relevant question in 

the safety/fuel economy context is, 

‘‘Would fatalities have been even lower 

if cars had not been downsized?’’ To 

analyze that relationship accurately, it 

would be necessary to compare the 

fatality risk of small and large vehicles, 

not just the trend in total fatalities, over 

this long period. 

With respect to CARB’s suggestion 

that NHTSA expand the applicability of 

weight reduction technologies to 

vehicles under 5,000 pounds, because 

weight reduction can be accompanied 

by proper vehicle design to assure 

vehicle safety is not compromised, the 

agency repeats its general view that 

there may be possibilities in the use 

materials substitution and other 

processes to reduce weight without 

reducing vehicle safety. This should be 

explored. However, there are no data or 

analyses that show this to be true today. 

NHTSA specifically does not find either 

the 2002 or 2005 DRI analyses to be 

demonstrative, since the former study 

was strongly biased by including 2-door 

cars and the latter study says it 

mimicked NHTSA’s database and 

NHTSA’s analysis method, but got 

results that are substantially different. 

Until NHTSA can see thorough 

evidence using a significant and valid 

empirical data set, which is yet to be 

presented, that weight reduction can be 

accomplished without safety trade-offs, 

the agency will continue to set its CAFE 

standards at levels that do not 

encourage weight reduction in vehicles 

that weigh less than the safety crossover 

identified in NHTSA’s 2003 analyses. 

We recognize that given the lives at 

stake, this reflects caution, but we 

believe it is also prudent. 

We also note that the California CO2

emissions standards for which 

California requested a waiver under the 

Clean Air Act sets up a program that 

uses the same ‘‘flat standards’’ approach 

for its standards that the 2002 NAS 

Report found gives rise to the safety 

concerns identified in that report. The 

consequences of this structure for the 

program have been identified by 2002 

report: ‘‘If an increase in fuel economy 

is effected by a system that encourages 

either downweighting or the production 

and sale of more small cars, some 

additional traffic fatalities would be 

expected. Without a thoughtful 

restructuring of the program, that would 

be the trade-off that must be made if 

CAFE standards are increased by any 

significant amount.’’ 466

2. Comments From Other Parties 

Several comments were received from 

parties other than government agencies 

on the weight-safety issue. NRDC argued 

that NHTSA should not have relied on 

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14404 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

467Sierra Club et al. cited ‘‘Building a Better SUV: 

A Blueprint for Saving Lives, Money and Gasoline,’’ 

by CAS and UCS. This 2003 pamphlet is accessible 

online at http://www.ucsusa.org/assets/documents/ 

clean_vehicles/building_a_better_suv_web.pdf (last 

accessed October 28, 2008). 

only on its 2003 study led by Dr. 

Kahane, because Wenzel and Ross had 

commented to NHTSA’s 2005 light 

truck CAFE NPRM that ‘‘the 

relationship between car weight and 

safety is tenuous at best,’’ and because 

Dr. Kahane himself stated that his study 

‘‘does not claim that mass per se is the 

specific factor that increases or decreases 

fatality risk* * *’’ ‘‘In that sense, it is 

irrelevant whether mass, wheelbase, track 

width or some other attribute is the principal 

causal factor on fatality risk. If you decrease 

mass, you will also tend to reduce wheelbase, 

track width and other dimensions of size.’’ 

NRDC stated that this may no longer be 

correct for future vehicle designs, and 

argued that NHTSA had recognized as 

much in the NPRM by stating that highstrength, light-weight materials may 

help manufacturers reduce vehicle 

weight without reducing size or safety. 

NRDC further argued that vehicle 

design, ‘‘which could in fact be 

enhanced with lightweight materials,’’ 

is much more relevant to safety. Thus, 

NRDC concluded that NHTSA should 

apply material substitution to lighter 

vehicles in its analysis. 

The comments received from Wenzel 

and Ross stand in direct contradiction to 

the 2002 NAS Report, which said, 

‘‘Thus, the majority of this committee 

believes that the evidence is clear that 

past downweighting and downsizing of 

the light-duty vehicle fleet, while 

resulting in significant fuel savings, has 

also resulted in a safety penalty.’’ The 

Wenzel and Ross comment was also 

based on their study, discussed earlier, 

which NHTSA said in 2004 is flawed, 

since it did not control for driver age 

and gender. Thus, the findings of 

Wenzel and Ross are not helpful since 

they mingle the effects of what sort of 

people buy and drive the car with the 

intrinsic safety of the car, making its 

conclusions about the intrinsic safety of 

the car suspect, at best. 

NRDC is correct insofar as NHTSA 

has not claimed that mass alone is the 

single factor that is entirely responsible 

for the safety factor, and in the future 

there may be demonstrations that 

weight (the amount has not been 

identified) can be removed without 

adversely affecting safety. However, as 

we said in response to the same point 

from CARB, when setting CAFE 

standards, NHTSA will continue to 

limit its consideration of weight 

reduction to vehicles over 5,000 pounds 

until there is convincing empirical 

evidence that there are no negative 

safety consequences from removing 

weight from lighter vehicles. 

Sierra Club et al. also commented that 

vehicle design is more important than 

weight to vehicle safety. This is largely 

the same point made by other 

commenters. The point is very general, 

and there are no analyses that 

demonstrate this proposition is true. 

Sierra Club also argued that NHTSA 

should not use its retrospective 2003 

study to analyze future standards, 

because of the design improvements and 

because ‘‘[s]ubstitution of light weight, 

high strength materials such as low 

alloy steels and aluminum will decrease 

both primary and secondary vehicle 

weight while maintaining vehicle size 

and increasing crashworthiness.’’ 

NHTSA believes that it would be 

irresponsible to set standards by 

ignoring the available data, based on the 

hope that a promising development will 

come to fruition. The available data 

indicate that there is a safety penalty for 

weight reductions in vehicles under a 

certain weight. 

Sierra Club et al. also stated that ‘‘The 

industry’s long history of consistent 

opposition to the CAFE law has relied 

on a flawed size/safety argument,’’ 

which it suggested also affected 

Congress’ action in establishing EISA. 

Sierra Club argued, however, that that 

argument was disproven by the fact that 

manufacturers can obviously build 

vehicles that ‘‘demonstrate size, safety, 

and fuel economy performance’’ such as 

the Prius or the hybrid Escape. These 

vehicles tend to be cited for use of 

hybrid propulsion systems. They often 

have heavy battery systems but lighter 

engines. In any event, manufacturers 

continue to offer a full range of vehicles, 

and they strive to deliver safety, fuel 

economy, and value in all of their 

vehicles. However, the available data at 

the level of the entire fleet demonstrate 

that, below a certain weight range, there 

has been a safety penalty from 

downweighting vehicles. The 

introduction of new vehicle models 

does nothing to change that historical 

record and it is unknown how the new 

models will affect the fleet wide fatality 

risk in future years. 

Sierra Club additionally repeated the 

oft-stated assertion that smaller cars 

continue to become safer as 

manufacturers ‘‘apply side airbags, 

design vehicles to better protect 

occupants, and utilize light weight 

materials that enhance safety.’’ It is of 

course true that, with the advent of 

important safety features like side air 

bags and Electronic Stability Control, 

combined with higher levels of seat belt 

use, today’s small vehicles should have 

a better safety record than those 

produced a decade ago. However, that is 

not really the question that is being 

considered in deciding on the safety 

penalty for weight reduction—the 

question is whether today’s small 

vehicles have a safety penalty compared 

to today’s vehicles that weigh 100 

pounds more. Unless there are some 

safety technologies that are offered only 

on small cars, or that are more effective 

on small cars, the additional safety 

technologies will not affect the relative 

safety performance between vehicles 

with a 100-pound weight difference. It 

is proper to compare vehicles of the 

same time period, not a light vehicle 

today with air bags and a heavy vehicle 

of years ago without air bags. If offered 

today, the heavy vehicle would have air 

bags and better safety performance. 

Sierra Club also argued that a study 

by the Center for Auto Safety and UCS 

‘‘found that applying existing fuelsaving and safety technology to a 

conventional Ford Explorer would 

result in a 71 percent improvement in 

fuel economy and 2,900 fewer traffic 

fatalities if all SUVs met equivalent 

safety standards,’’ while ‘‘At the same 

time, the redesigned vehicle resulted in 

greater consumer savings and lower 

global warming emissions as a result of 

the improved fuel economy.’’ 467 The 

document generated by the Center for 

Auto Safety and UCS does not address 

the safety penalty as weight is reduced. 

This document asserts that if several 

safety and fuel-savings technologies 

were used on a 2001 Ford Explorer, it 

would achieve greater fuel economy and 

have a better safety record. The safety 

and fuel savings benefits, along with the 

costs, are extrapolated from different 

sources. The paper does state that the 

redesign would reduce the test weight of 

the vehicle by 10 percent, to 4100 

pounds (p. 10). However, the question 

of the safety consequences of reducing 

the vehicle mass by 400 pounds is not 

answered by any data, since the 

redesigned vehicle does not exist. As 

such, this document is not persuasive. 

Sierra Club additionally cited studies 

on materials by the Aluminum 

Association’s Auto and Light Truck 

Group, Automotive Composites 

Alliance, and World Autosteel as 

offering ‘‘evidence that proper 

application of weight saving materials 

from engine blocks to hoods and beyond 

provide opportunities for broader 

consideration of weight reduction.’’ 

NHTSA understands that materials 

substitution is possible. The question 

here is whether weight reduction 

through materials substitution should be 

considered in establishing the CAFE 

standards. As explained previously, 

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468Final Regulatory Impact Analysis, FMVSS 214 

Amending Side Impact Dynamic Test Adding 

Oblique Pole Test, Docket No. NHTSA–2007– 

29134–0004, Table V–A on p. V–2. 

NHTSA is not considering weight 

reduction for vehicles below 5,000 

pounds in this round of CAFE 

rulemaking, because there has been no 

demonstration that there would not be 

an adverse safety effect from doing so. 

In subsequent CAFE rulemakings, 

NHTSA will re-examine what has been 

demonstrated and decide whether its 

previous position should be adjusted. 

However, based on the data and 

analyses available now, NHTSA has 

decided not to consider weight 

reduction for vehicles below 5,000 

pounds in setting the standards. Sierra 

Club specifically identified the Jaguar XJ 

as an ‘‘[a]luminum intensive vehicle’’ 

that ‘‘demonstrate[s] that properly 

designed lighter weight vehicles can 

excel at safety.’’ This is a restatement of 

Sierra Club’s prior comment that the 

Toyota Prius and the hybrid Ford 

Escape show there is no safety penalty, 

and NHTSA’s response is the same as 

shown above. Sierra Club concluded 

that ‘‘Since vehicle safety is an 

important consideration in and of itself, 

NHTSA should use its legal authority to 

set tighter safety standards for the 

purpose of addressing important public 

safety considerations.’’ This is an 

argument put forward with the best of 

intentions, but it is not germane to the 

safety penalty issue. If all vehicles have 

new safety standard requirements, they 

would all have a somewhat reduced 

absolute fatality risk. However, the 

safety penalty arises relative to peer 

vehicles. Unless there is some safety 

standard that is most effective for small 

vehicles and less effective for larger 

vehicles, new safety standards will not 

affect the relative safety risk between 

larger and smaller vehicles. 

The Aluminum Association also 

commented that vehicle safety is more 

tied to vehicle design (using aluminum) 

than to vehicle weight. The Aluminum 

Association suggested that NHTSA’s 

2003 study is outdated, as it ‘‘was 

retrospective and looked at 1990-era 

vehicles,’’ and not predictive of the 

future. The Aluminum Association 

argued that vehicles in the MY 2011– 

2015 time frame will be much safer, 

subject to increasing numbers of safety 

standards and new safety initiatives for 

rollover and compatibility, and subject 

also to attribute-based CAFE standards, 

which the NPRM had suggested would 

improve vehicle safety. The Aluminum 

Association argued that the vehicles 

evaluated in the 2003 NHTSA study 

were not subject to these factors, and 

thus concluded that ‘‘the historical 

proposition that lighter vehicles must be 

smaller (and potentially less safe) is no 

longer valid.’’ To repeat, until there is 

an analysis showing this to be true, 

NHTSA will not consider weight 

reductions for vehicles below 5,000 

pounds, since the data show that there 

has been a safety penalty for those 

vehicles from weight reduction in the 

past. 

C. Comments on Other Issues Related to 

Safety 

1. Vehicle Compatibility Design Issues 

Other commenters addressed vehicle 

compatibility design specifically, rather 

than design overall. Public Citizen, 

Sierra Club et al., and the Aluminum 

Association commented that NHTSA 

should consider vehicle safety and 

downweighting in terms of 

compatibility in multi-vehicle crashes, 

rather than in terms of individual 

vehicle weight. Public Citizen suggested 

that NHTSA’s decision not to include 

downweighting for lighter vehicles was 

‘‘inconsistent with its own research on 

incompatibility,’’ and stated that 

because Senator Feinstein had 

attempted to include provisions in EISA 

requiring NHTSA to undertake 

rulemakings to improve vehicle 

compatibility but had not been 

successful, NHTSA should initiate such 

rulemaking on its own. 

Agency response: Compatibility is a 

safety concern that NHTSA has been 

investigating for some time now. 

Moreover, the commenters’ point that 

any compatibility benefits should be 

weighed against any disbenefits 

associated with downweighting is 

logically correct. However, NHTSA 

research on compatibility has shown 

that compatibility is substantially 

influenced by factors other than mass, 

including vehicle geometry, stiffness, 

and crush space. For example, full size 

pick-up trucks are higher and stiffer 

than subcompact cars. 

While we do not know the precise 

effect of these factors, it is fair to say 

that simply downweighting heavier 

vehicles would not effectively address 

the compatibility issue. Thus, there are 

no currently available analyses that 

would allow NHTSA or anyone to 

quantify the compatibility benefits 

simply from weight reduction. In 

addition, NHTSA has taken action to 

address compatibility for existing 

vehicles. Beginning September 1, 2010, 

new requirements for head protection in 

side impact crashes will start being 

phased-in for all light vehicles sold in 

the United States. This will require a 

first-in-the-world pole test, and become 

the first side impact standard in the 

world to require that performance be 

assessed with both a mid-sized adult 

male and a small adult female. Even 

with the huge benefits of Electronic 

Stability Control factored into the 

analysis, NHTSA estimates this 

technology will save 1,029 lives each 

year once implemented on the fleet.468

However, as explained above, these 

absolute benefits do not change the 

higher relative safety risk lighter 

vehicles have in collisions with heavier 

vehicles. 

Sierra Club et al. commented that ‘‘the 

disparity in the weights of vehicles is 

much more important to occupant safety 

than the average weight of all vehicles 

sharing the road.’’ Sierra Club stated 

that the disparity in vehicle weight 

among passenger cars has decreased 

since 1975, and that ‘‘[o]verall the 

passenger fleet has homogenized toward 

a 3,500 pound vehicle.’’ Sierra Club 

then argued that relative upweighting 

with improvements in fuel economy 

among small cars have provided a net 

safety gain in the vehicle fleet, which 

would be even greater ‘‘but for the 

super-sizing of pickups and SUVs in 

this time frame.’’ However, Sierra Club 

argued that ‘‘[t]he days of the supersized 

SUVs and pickups are over due to 

higher fuel prices,’’ and that ‘‘[w]hen 

the next EPA Trends Report comes out, 

the light duty truck fleet will have been 

homogenized to a safer, more fuel 

efficient fleet as was the passenger car 

fleet earlier, eliminating the more severe 

crashes.’’ Sierra Club concluded that 

NHTSA should have accounted for the 

safety benefits of this mix shift in its 

analysis. These assertions were not 

supported by data or analyses. 

Moreover, Sierra Club has not explained 

why a parent of a large family would 

buy a subcompact instead of a minivan, 

or a contractor or tradesman would not 

buy a full size pick-up truck or van. 

The Aluminum Association cited the 

DRI analysis with regard to vehicle 

compatibility, which it described as 

showing ‘‘that vehicle crash 

compatibility can be improved by 

providing increased crush space and 

better energy management; and with the 

size-based approach, if there was a 20% 

weight reduction across the vehicle size 

classes, heavier vehicles would shed 

significantly more weight than smaller 

vehicles, also improving fleet 

compatibility.’’ As explained above, the 

DRI analyses are not persuasive. 

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2. Whether Manufacturers Downweight 

in Response to Increased CAFE 

Stringency 

The Alliance, Subaru, Washington 

Legal Foundation, and the American 

Iron and Steel Institute suggested that 

the stringency of the standards, as 

measured by their rate of increase 

(particularly in the earlier years covered 

by the rulemaking), could encourage 

manufacturers to employ 

downweighting as a means of 

compliance, which could lead to 

adverse safety consequences. Thus, even 

though NHTSA did not include material 

substitution or downweighting for 

lighter vehicles in its analysis, 

commenters indicated that 

downweighting was nonetheless a likely 

response to the proposed standards. 

The CAFE standards are now 

established as a continuous function 

varying according to the size of the 

vehicle’s footprint. To the extent the 

vehicle manufacturers choose to 

downweight their vehicles by making 

them smaller, they are faced with a 

higher CAFE target. To the extent the 

function is not artificially constrained, it 

will require approximately equal 

amounts of additional technology for 

each point on the curve. For example, 

if an additional $200 worth of fuel 

savings technology have to be added to 

a vehicle to meet its fuel economy 

target, then downsizing it will still 

require at least $200 in additional fuel 

savings technology. In the latter case, 

the manufacturer would also have the 

cost of downsizing the model. 

Accordingly, NHTSA is confident that 

the attribute-based system is oriented 

not to bestow benefits for downsizing a 

vehicle model. 

The CAFE program is a performancebased program. NHTSA does not dictate 

the design of a particular passenger car 

or light truck. The program is not 

intended to ensure that no vehicle 

maker ever downsizes a vehicle. If a 

vehicle maker decides to downsize a 

model, it would be because the 

manufacturer perceives that to be more 

effective, taking all factors into account, 

than other strategies for increasing fuel 

economy in that model. 

We understand that this leaves open 

the possibility that manufacturers could 

reduce the vehicle weight, but keep the 

vehicle size constant. In theory, the way 

to do this would be through materials 

substitution, where one replaces a heavy 

material with a lighter one. NHTSA is 

intentionally not discouraging materials 

substitution, because we agree that this 

approach is conceptually appealing as 

long as safety is not compromised. 

Public Citizen argued, in contrast, that 

downweighting of lighter vehicles is not 

a common compliance strategy, and that 

manufacturers had primarily responded 

to NHTSA’s earliest CAFE standards in 

the 1980s by applying technologies, 

with ‘‘only 15 percent came from weight 

reductions, and then weight was only 

removed from the heaviest vehicles.’’ 

NHTSA notes that the 1992 study cited 

by Public Citizen concerning 

manufacturers’ reactions to the early 

1980s passenger car standards is now 16 

years old. Since that date, the 2002 NAS 

Report concluded a decade later that 

some of the downsizing and 

downweighting that occurred between 

the late 1970s and 1993 was due to 

CAFE standards and that ‘‘the evidence 

is clear that past downweighting and 

downsizing of the light-duty vehicle 

fleet, while resulting in significant fuel 

savings, has also resulted in a safety 

penalty. In 1993, it would appear that 

the safety penalty included between 

1,300 and 2,600 motor vehicle crash 

deaths that would not have occurred 

had vehicles been as large and heavy as 

in 1976.’’ We find the NAS report more 

persuasive than the 1992 study cited by 

Public Citizen. 

Public Citizen went on to suggest that 

NHTSA was ‘‘reinforc[ing] the common 

myth that fuel economy standards 

reduce vehicle safety by promoting 

downweighting.’’ Again NHTSA notes 

the findings of the 2002 NAS report on 

the adverse safety impact of downsizing 

and that Public Citizen provides no 

evidence to support its view that this is 

a ‘‘myth.’’ 

3. Whether Flat Standards Are More or 

Less Harmful to Safety Than FootprintBased Standards 

The Alliance, the Aluminum 

Association, and the Washington Legal 

Foundation agreed with the agency’s 

assessment that a footprint-based 

standard is safer than a flat standard. 

Public Citizen, in contrast, suggested 

that under the flat standards of the 

1980s, manufacturers primarily 

responded by applying additional 

technologies, and only reduced weight 

from the heaviest vehicles, which would 

suggest no safety risk from 

downweighting due to flat standards. 

Public Citizen’s repeated citations of 

a 1992 study do not make it more 

persuasive. A decade after that study, a 

NAS panel found that manufacturers 

downweighted and downsized the fleet, 

partly in response to the CAFE 

standards. This directly contradicts the 

1992 study cited by Public Citizen. As 

of this rulemaking, the National 

Academy of Sciences has published a 

seminal report stating that there is a 

safety concern with flat standards. The 

fact that two of the 13 members 

dissented does not diminish the import 

of that. Informed by this conclusion, 

EPCA, as amended by EISA, now 

prohibits NHTSA from establishing flat 

CAFE standards, subject to required 

minimum standard for domestic 

passenger cars. With the passage of this 

law, for the purposes of this rule, the 

debate is resolved and Federal fuel 

economy regulations will be attributebased, not flat standards. 

4. Whether NHTSA Should Set Identical 

Targets for Passenger Cars and Light 

Trucks for Safety Reasons 

Public Citizen suggested that the fact 

that fuel economy targets may be 

different for identical-footprint cars and 

light trucks encourages manufacturers to 

build a vehicle as a truck instead of as 

a car, and argued that NHTSA should 

change the regulatory definitions of 

passenger cars and light trucks to 

improve safety. Public Citizen also 

argued that the attribute-based CAFE 

standards ‘‘eliminate[] the leveling 

effect of the corporate average (that is, 

balancing lighter vehicles against 

heavier ones).’’ 

Regardless of the merits of Public 

Citizen’s comment, the law specifies 

that NHTSA must establish separate 

standards for cars and light trucks. The 

agency believes that this requirement 

also mandates that the agency consider 

the capabilities of the car and light truck 

fleets separately. The standards for the 

light truck fleet (and thus the footprint/ 

mpg targets for that fleet) tend to be 

lower than those of the passenger car 

fleet because light trucks simply do not 

have the capability to reach standards as 

high as the passenger car standards. 

NHTSA does not believe it could 

establish identical separate standards, 

because identical standards would not 

be ‘‘maximum feasible’’ for both cars 

and light trucks. See 49 USC 32902(a), 

(b), and (f). NHTSA has addressed the 

regulatory definitions for passenger cars 

and light trucks in Section XI. 

5. Whether NHTSA Should Have 

Considered the 2002 NAS Report 

Dissent in Deciding Not To Apply 

Material Substitution for Vehicles 

Under 5,000 Pounds 

CBD stated that NHTSA had 

‘‘misrepresented’’ the findings of the 

2002 NAS Report by stating only the 

conclusion of the majority and not 

additionally stating the finding of two 

dissenting members ‘‘that weight 

reduction for vehicles greater than 4,000 

lbs. curb weight would result in a safety 

benefit, as was discussed in detail in the 

recent Ninth Circuit opinion.’’ Public 

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Citizen also referred to the NAS dissent 

in arguing that ‘‘Kahane’s study 

oversimplifies the relationship between 

weight and safety, obfuscates findings 

which show that reducing weight from 

only the heaviest vehicles actually 

improves safety, and overlooks the 

relationship between the difference in 

vehicle weight, rather than simply the 

weight of the vehicle.’’ Sierra Club et al. 

also referred to the NAS dissent in 

stating that ‘‘According to K.G. Duleep, 

who served as a consultant to the NAS 

Committee, had the NAS incorporated 

appropriate weight reductions into the 

ranges of possible fuel economy 

improvements, in addition to the NAS 

report’s mostly drive train 

improvements, its total fuel economy 

recommendations would have been 

20% higher.’’ 

The reason NHTSA does not accord 

the same significance to the dissent as 

to the majority is explained above. 

Essentially, when 11 members of a 

committee support a position and 

present it in the body of the report, that 

is given more weight than the opinion 

of two dissenting members that appears 

in an appendix to the report. NHTSA 

believes that the information in the 

report is the information that is put out 

with the full imprimatur of the National 

Academy committee. 

IX. The Final Fuel Economy Standards 

for MY 2011 

For both passenger cars and light 

trucks, the agency is determining final 

CAFE standards estimated, as for the 

previously-promulgated reformed MY 

2008–2011 light truck standards, to 

maximize net benefits to society. Before 

setting these final standards the agency 

also considered under NEPA the 

environmental impacts of these 

standards, as detailed in the FEIS. 

A. Final Passenger Car Standard 

We have determined that the final 

standard for MY 2011 passenger cars 

result in a required fuel economy level 

that is technologically feasible, 

economically practicable, and set by 

taking into account the effect of other 

motor vehicle standards of the 

Government on fuel economy, the need 

of the United States to conserve energy, 

and additional environmental 

considerations under NEPA. Values for 

the parameters defining the target 

function for this final standard for cars 

are as follows: 

Where, per the adjusted continuous function 

formula above in Section VI: 

A = the maximum fuel economy target (in 

mpg) 

B = the minimum fuel economy target (in 

mpg) 

C = the footprint value (in square feet) at 

which the fuel economy target is midway 

between a and b 

D = the parameter (in square feet) defining 

the rate at which the value of targets 

decline from the largest to smallest 

values 

The resultant target function has the 

following shape: 

Based on the product plan 

information provided by manufacturers 

in response to the May 2008 request for 

information and the incorporation of 

publicly available supplemental data 

and information, NHTSA has estimated 

the required average fuel economy 

levels under the final standard for MY 

2011 passenger cars as follows: 


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B. Final Light Truck Standard 

NHTSA is also finalizing the light 

truck fuel economy standard for MY 

2011. In taking a fresh look at what 

truck standard should be established for 

MY 2011, as required by EISA, NHTSA 

used the newer set of assumptions that 

it had developed for the final standards. 

The agency used the EIA High Price 

Case projections for available gasoline 

prices, which are on average 

approximately $0.40 per gallon higher 

than the projections used in the NPRM. 

Other differences in assumptions 

include more current product plan 

information, an updated technology list 

and updated costs and effectiveness 

estimates and penetration rates for 

technologies, and updated values for 

externalities such as carbon dioxide 

emission reductions. 

The final standard is ‘‘optimized’’ for 

MY 2011 light trucks—the process for 

establishing it is described at length 

above, but it may be briefly described as 

maximizing net social benefits plus antibacksliding measures. We have 

determined that the final light truck 

standard for MY 2011 represents the 

maximum feasible fuel economy level 

for that approach. In reaching this 

conclusion, we have balanced the 

express statutory factors and other 

relevant considerations, such as safety 

and effects on employment, and have 

considered the NEPA analysis and 

conclusions in the FEIS with regard to 

the chosen agency action. 

The final standard is determined by a 

continuous function specifying fuel 

economy targets applicable at different 

vehicle footprint sizes, the equation for 

which is given above in Section VI. 

Values for the parameters defining the 

final standard target function for light 

trucks are as follows: 

Where: 

A = the maximum fuel economy target (in 

mpg) 

B = the minimum fuel economy target (in 

mpg) 

C = the footprint value (in square feet) at 

which the fuel economy target is midway 

between a and b 

D = the parameter (in square feet) defining 

the rate at which the value of targets 

decline from the largest to smallest 

values 

The resultant target function has the 

following shape: 


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Based on the product plans provided 

by manufacturers in response to the 

May 2008 request for information and 

the incorporation of publicly available 

supplemental data and information, the 

agency has estimated the required 

average fuel economy levels under the 

final optimized standard for MY 2011 as 

follows: 

We note that a manufacturer’s 

required fuel economy level for a model 

year under the final standards would be 

based on its actual production numbers 

in that model year. Therefore, its official 

required fuel economy level would not 

be known until the end of that model 

year. However, because the targets for 

each vehicle footprint would be 

established in advance of the model 

year, a manufacturer should be able to 

estimate its required level accurately. 

C. Energy and Environmental Backstop 

As discussed in the NPRM, EISA 

expressly requires each manufacturer to 

meet a minimum fuel economy standard 

for domestically manufactured 

passenger cars in addition to meeting 


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14410 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

469 49 U.S.C. 32902(b)(4). 

470A flat standard is one that requires each 

manufacturer to achieve the same numerical level 

of CAFE. 

the standards set by NHTSA. The 

minimum standard ‘‘shall be the greater 

of (A) 27.5 miles per gallon; or (B) 92 

percent of the average fuel economy 

projected by the Secretary for the 

combined domestic and non-domestic 

passenger automobile fleets 

manufactured for sale in the United 

States by all manufacturers in the model 

year. * * *’’ 469 The agency must 

publish the projected minimum 

standards in the Federal Register when 

the passenger car standards for the 

model year in question are promulgated. 

NHTSA calculated 92 percent of the 

final projected passenger car standards 

as the minimum standard, which for 

MY 2011 is 27.8. The final calculated 

minimum standards will be updated to 

reflect any changes in the projected 

passenger car standards. 

In CBD v NHTSA, the Ninth Circuit 

agreed with the agency that EPCA, as it 

was then written, did not explicitly 

require the adoption of a backstop, i.e., 

a minimum CAFE standard that is fixed. 

A fixed minimum standard is one that 

does not change in response to changes 

in a manufacturer’s vehicle mix. 

The Court said, however, that the 

issue was not whether the adoption was 

expressly required, but whether it was 

arbitrary and capricious for the agency 

to decline to adopt a backstop. The 

Court said that Congress was silent in 

EPCA on this issue. The Court 

concluded that it was arbitrary and 

capricious for the agency to decline to 

adopt a backstop because it did not, in 

the view of the Court, address the 

statutory factors for determining the 

maximum feasible level of average fuel 

economy. The Court remanded the 

matter back to NHTSA to reconsider the 

issue under the appropriate standard. 

NHTSA explained in the NPRM that 

it believes that it considered and 

discussed the express statutory factors 

such as technological feasibility and 

economic practicability and related 

factors such as safety in deciding not to 

adopt a backstop. The agency stated that 

further discussion is not warranted 

because Congress has spoken directly on 

this issue since the Ninth Circuit’s 

decision by enacting EISA. Congress 

expressly mandated that CAFE 

standards for automobiles be attributebased and they must adjust in response 

to changes in vehicle mix. NHTSA 

suggested that this mandate precludes 

the agency from adopting a fixed 

minimum standard, except in the one 

case in which Congress mandated a 

fixed and flat 470 minimum standard for 

domestic passenger cars—not in the 

cases of nondomestic passenger cars or 

light trucks. 

Given the requirement for attributebased standards and the limited express 

exception to that requirement, NHTSA 

tentatively concluded in the NPRM that 

had Congress intended backstops to be 

established for either of the other two 

compliance categories, it would have 

required them. Absent explicit statutory 

language that provides the agency 

authority to set flat standards, the 

agency suggested that the setting of a 

supplementary minimum flat standard 

for the other two compliance categories 

would be contrary to the requirement to 

set an attribute-based standard under 

EISA. 

The agency noted, however, that the 

curve of an attribute-based standard has 

several features that limit backsliding, 

some of which NHTSA added as it 

refined the Volpe model for the purpose 

of this rulemaking, and some of which 

(such as the lower asymptote, which 

serves as a backstop) are inherent in the 

logistic function. NHTSA stated that it 

believed that these features help address 

the concern that has been expressed 

regarding the possibility of vehicle 

upsizing without compromising the 

benefits of reform. NHTSA also noted 

that the 35 mpg requirement in and of 

itself serves as a backstop, because the 

agency must set the standards high 

enough to ensure that the average fuel 

economy level of the combined car and 

light fleet is making steady progress 

toward and achieves the statutory 

requirement of at least 35 mpg by 2020. 

NHTSA explained that if the agency 

finds that this requirement might not be 

achieved, it will consider setting 

standards for model years 2016 through 

2020 early enough and in any event 

high enough to ensure reaching the 35 

mpg requirement. 

The Attorneys General, Sierra Club et 

al., UCS, and ACEEE opposed NHTSA’s 

view not to adopt a backstop for 

imported passenger cars and light trucks 

and argued that the agency must adopt 

backstop standards, while AIAM and 

NADA supported the agency’s decision. 

The Attorneys General argued that 

because Congress had not changed the 

definition of ‘‘maximum feasible fuel 

economy,’’ NHTSA remained 

‘‘obligated’’ by the Ninth Circuit 

opinion to consider a backstop for those 

additional fleets. The Attorneys General 

stated that the possibility that attributebased standards ‘‘will cause a ‘race to 

the bottom’ ’’ still existed, and that the 

agency must therefore consider a 

backstop. 

Sierra Club et al. also argued that 

NHTSA had misinterpreted Congress’ 

intent in EISA. Sierra Club stated that 

Congressman Markey’s extended 

remarks inserted into the Congressional 

Record were clear evidence of Congress’ 

intent with regard to the backstop. 

Sierra Club also argued that a September 

2007 letter from the United Auto 

Workers to Speaker Nancy Pelosi and 

Majority Leader Harry Reid, which 

suggested that the domestic minimum 

passenger car standard was intended to 

protect jobs in the U.S., was evidence 

that ‘‘the provision in EISA is tied to 

employment, not oil conservation.’’ 

Sierra Club concluded that NHTSA is 

not precluded from adopting backstop 

standards for imported passenger cars 

and light trucks, and is required to do 

so by the Ninth Circuit opinion. Sierra 

Club additionally cited EPA’s ANPRM, 

which it stated indicates that EPA will 

pursue an ‘‘environmental backstop.’’ 

UCS agreed that the 35-in-2020 

requirement is a kind of backstop, and 

that the ratable-increase requirement 

between MY 2011 and 2020 is an 

‘‘implied’’ backstop, but nevertheless 

argued that NHTSA should implement a 

regulated backstop for the other fleets. 

UCS commented that ‘‘the same 

concerns of the Ninth Circuit court 

persist,’’ because ‘‘there is no 

mechanism to ensure the market does 

not undermine [the proposed] 

standards.’’ UCS stated that this could 

occur because ‘‘if maximum feasible 

fuel economy levels are found to exceed 

35 mpg, the legislated minimum will 

not ensure those levels (and, thus, 

maximum feasible energy savings) are 

achieved.’’ 

ACEEE commented that the lower 

asymptote is not an adequate backstop, 

because the lower asymptote in 2015 

resulted in ‘‘a combined value of 27.5 

mpg, assuming a 48% sales share for 

cars,’’ which ACEEE said ‘‘is scarcely 

higher than today’s combined standard 

and certainly does not constitute ratable 

progress toward achieving 35 mpg in 

2020.’’ ACEEE argued that the lower 

asymptotes could not guarantee that ‘‘oil 

savings from the CAFE program will not 

fall short of the savings anticipated with 

the passage of the law.’’ ACEEE stated 

that to ensure ratable progress toward an 

average of at least 35 mpg in 2020 and 

to mitigate ‘‘the dangers of upsizing and 

otherwise gaming the standards,’’ 

NHTSA should commit to ‘‘mid-course 

corrections’’ between MY 2011 and 

2020 as necessary. 

In contrast, AIAM supported 

NHTSA’s decision not to adopt a 

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backstop for imported passenger cars 

and light trucks. AIAM argued that a 

backstop for those fleets would ‘‘defeat 

the purpose of the attribute format by 

limiting the flexibility of manufacturers 

to respond to shifts in market demand,’’ 

and that the lower asymptote ‘‘provides 

a disincentive to upsizing of vehicles [in 

that footprint range], since the standard 

would become increasingly difficult to 

meet.’’ AIAM also suggested that a 

backstop would not likely increase fuel 

savings since consumers appear to be 

moving away from large cars and trucks. 

While NADA agreed with NHTSA 

regarding the clarity of Congress’ 

decision not to adopt backstops, it also 

argued that NHTSA ‘‘should not attempt 

to artificially create backstops’’ through 

the lower asymptotes of the car and 

light truck curves. NADA stated that 

NHTSA should instead ‘‘let the curves 

end in conformance with the largest 

vehicle’s footprint.’’ 

NHTSA respectfully disagrees with 

the characterization raised by the 

Attorneys General and other 

commenters that it ‘‘did not consider’’ a 

backstop in the NPRM. As made clear 

by the NPRM and as discussed above, 

the opposite is true. The agency also 

respectfully disagrees with UCS’ 

characterization of the Ninth Circuit 

CBD opinion as it concerns the backstop 

issue. As discussed in the NPRM, 

Congress’ enactment of EISA addressed 

the backstop issue by clearly specifying 

a flat minimum standard for domestic 

passenger cars, and by not clearly 

specifying a flat minimum standard for 

imported passenger cars and light 

trucks. Congress was aware of this issue 

from the 2006 light truck final rule and 

the CBD decision, but expressly 

required a backstop for only one fleet of 

vehicles. 

NHTSA notes the very limited nature 

of EISA’s legislative history with regard 

to the backstop issue. No Senate, House, 

or conference reports were created 

during the legislative process that 

culminated in EISA. The floor 

statements during Congressional 

consideration of EISA are also sparse. In 

any event, however, floor statements, 

regardless of who made them, are 

entitled to less weight than conference 

reports because, in the views of many 

courts, they do not represent statements 

on the final terms of a bill agreed to by 

both houses. See, e.g., In re Burns, 887 

F.2d 1541 (11th Cir. 1989), in which the 

Court of Appeals was called upon to 

interpret provisions of the Bankruptcy 

Act which were arguably ambiguous. 

The Court noted that ‘‘[w]hatever degree 

of solicitude is due to legislative history 

materials in the usual cast, ‘[s]trict 

adherence to the language and structure 

of the Act is particularly appropriate 

where, as here, a statute is the result of 

a series of carefully crafted 

compromises.’ ’’ Id. at 1545 (citing 

Community for Creative Non-Violence v. 

Reid, 490 U.S. 730, n. 14 (1989)). 

‘‘Accordingly, the best indicators of 

congressional intent in this narrow 

instance are the language and structure 

of the Code itself, not the accompanying 

statements of legislators that carry the 

potential for reclaiming that which was 

yielded in the actual drafting 

compromise.’’ Id. See also In re Kelly, 

841 F.2d 908, 913 n. 3 (9th Cir. 1988) 

(‘‘Stray comments by individual 

legislators, not otherwise supported by 

statutory language or committee reports, 

cannot be attributed to the full body that 

voted on the bill. The opposite inference 

is far more likely.’’) 

Here, there are no floor statements to 

provide guidance on the backstop issue. 

Rather, various members, including 

Representative Markey, inserted 

material into the Congressional Record 

after floor action. There is no indication 

that the material inserted into the record 

was raised, debated, or otherwise before 

the full House or Senate during floor 

consideration. Materials inserted by 

members after congressional action are 

not indicative of congressional intent. 

Instead, ‘‘[t]he intent of Congress as a 

whole is more apparent from the words 

of the statute itself than from a 

patchwork record of statements inserted 

by individual legislators and proposals 

that may never have been adopted by a 

committee, much less an entire 

legislative body—a truth which gives 

rise to ‘the strong presumption that 

Congress expresses its intent through 

the language it chooses.’ ’’ Sigmon Coal 

Co., Inc. v. Apfel, 226 F.3d 291, 304–05 

(4th Cir 2000) (quoting INS v. CardozaFonseca, 480 U.S. 421, 432 n. 12 

(1987)), aff’d sub. nom., Barnhart v. 

Sigmon Coal Co., Inc., 534 U.S. 438 

(2002). The Supreme Court in Sigmon 

similarly held that ‘‘[f]loor statements 

from two Senators cannot amend the 

clear and unambiguous language of a 

statute.’’ Guided by the Supreme Court’s 

guidance on this issue, ‘‘[w]e see no 

reason to give greater weight to the 

views of two Senators than to the 

collective votes of both Houses, which 

are memorialized in the unambiguous 

statutory text.’’ 534 U.S. at 457. ‘‘We are 

not aware of any case * * * in which 

we have given authoritative weight to a 

single passage of legislative history that 

is in no way anchored in the text of the 

statute.’’ Shannon v. United States, 512 

U.S. 573, 583 (1994). 

The agency disagrees that there is any 

indication that the September 2007 

UAW letter to Speaker Pelosi and 

Majority Leader Reid, relied upon by the 

Sierra Club, constitutes the legislative 

intent for including the EISA backstop 

requirement for domesticallymanufactured passenger cars in addition 

to meeting the standards set by NHTSA, 

i.e., tied to employment concerns and 

not energy conservation. The UAW’s 

letter, by itself and without any 

supporting statement or information in 

the legislative history, cannot 

reasonably be presumed to constitute 

that the intent of the backstop was 

employment. 

Thus, consistent with applicable case 

law, NHTSA must interpret the words of 

EISA itself. NHTSA continues to believe 

that the 35 mpg requirement of EISA is 

an inherent backstop, as UCS noted in 

its comments. NHTSA also agrees with 

the ACEEE comment insofar as the 

agency will continue to monitor 

manufacturer progress toward meeting 

the required fuel economy stringencies. 

The agency must set the standards high 

enough to ensure that the average fuel 

economy level of the combined car and 

light truck fleet is increasing ratably 

toward and achieves the statutory 

requirement of at least 35 mpg by 2020. 

If the agency finds that this requirement 

might not be achieved, it will consider 

setting standards for model years up to 

and including MY 2020 early enough 

and in any event high enough to ensure 

reaching the 35 mpg requirement. 

However, NHTSA disagrees with the 

AIAM comments that a backstop 

standard would defeat the purpose of 

the attribute-based CAFE system by 

limiting the flexibility of manufacturers 

to respond to shifts in market demand. 

NHTSA also disagrees with NADA’s 

comment that, beyond Congress 

explicitly enacting a backstop for 

domestically-manufactured passenger 

cars at 27.5 mpg or 92 percent of the 

industry-wide domestic passenger car 

fleet in any given model year, 

whichever is higher, the agency cannot 

impose additional anti-backsliding 

measures. EPCA requires the agency to 

balance the four statutory factors when 

determining maximum feasible CAFE 

standards, and the agency has 

considered these factors—particularly 

the need of the nation to conserve 

energy—in deciding whether to adopt 

additional measures that operate as 

‘‘backstops.’’ Thus, in balancing the four 

EPCA factors under 49 U.S.C. § 32902(f), 

the agency has adopted in these 

standards additional measures which 

operate as ‘‘backstops’’ applicable to all 

CAFE-regulated vehicles. First, as set 

forth in Section VI above, the MY 2011 

curves have features that limit 

backsliding, some of which were added 

by NHTSA as the agency refined and 

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471The $1.0 billion estimate is based on a 7 

percent discount rate for valuing future impacts. 

NHTSA estimated stringencies that would 

maximize net societal benefits using both 7 percent 

and 3 percent discount rates. For the reader’s 

reference, total consumer benefits for passenger car 

CAFE improvements total $2.6 billion using a 3 

percent discount rate. 

472 Gross consumer benefits are benefits measured 

prior to accounting for the negative impacts of the 

rebound effect. They include fuel savings, 

consumer surplus from additional driving, reduced 

refueling time, reduced petroleum market 

externalities, reduced criteria pollutants, and 

reduced greenhouse gas production. Negative 

impacts from the rebound effect include added 

congestion, noise, and crash costs due to additional 

driving. 

473Based on a value of $2.00 per ton of carbon 

dioxide. At a value of $33.00 per ton of carbon 

dioxide, the benefit per gallon of reducing in CO2

emissions would be $0.29; and at a value of $80.00 

per ton of carbon dioxide, the benefit per gallon 

would be $0.71. However, to calculate the gross and 

net benefits per gallon of fuel saved using global 

SCC values, one would need to remove monopsony 

costs, which would make the value per gallon of 

‘‘Reduction in Oil Import Externalities’’ equal to 

$0.11. 

modified the Volpe model for purposes 

of this rulemaking. Second, the lower 

asymptote, which serves as a backstop, 

is inherent in the logistic function. 

While the agency respectfully disagrees 

with ACEEE’s comment regarding the 

sufficiency of the lower asymptote as a 

backstop, as discussed above, it is not 

the only ‘‘backstop’’ embodied in this 

rule. 

In having considered carefully the 

comments to the NPRM, however, 

NHTSA nonetheless accepts at least the 

possibility that Congress’ silence in 

EISA regarding backstops for imported 

passenger cars and light trucks could be 

reasonably interpreted as permissive 

rather than restrictive. For purposes of 

the MY 2011 standards, however, and 

upon consideration of the entire record, 

NHTSA declines to adopt ‘‘backstops’’ 

beyond that set forth in this section. The 

‘‘race to the bottom’’ feared by 

commenters seems unlikely as a result 

of the MY 2011 standards, particularly 

given the lack of lead time available to 

manufacturers to change their MY 2011 

vehicles and the public’s apparently 

growing preference for smaller vehicles. 

Moreover, the backstop and antibacksliding mechanisms described 

above not only address the ‘‘race to the 

bottom’’ concern, but are also consistent 

with the attribute-based approach of 

Reformed CAFE. NHTSA continues to 

believe that backstop standards for 

imported passenger cars and light trucks 

are neither legally required nor 

necessary at this time to ensure fuel 

savings. However, the agency will 

continue to monitor manufacturers’ 

product plans and CAFE compliance, 

and will revisit the backstop issue in 

subsequent rulemakings if it becomes 

necessary to ensure that expected fuel 

savings are ultimately realized. 

D. Combined Fleet Performance 

The combined industry wide average 

fuel economy (in mpg) levels for both 

cars and light trucks, if each 

manufacturer just met its obligations 

under the final ‘‘optimized’’ standards 

for MY 2011, would be 27.3 mpg, or 

325.5 grams CO2 per mile. This 

represents an increase of approximately 

7.9 percent over the previous model 

year’s standards. 

E. Costs and Benefits of Final Standards 

1. Benefits 

NHTSA estimates that the final 

standard for MY 2011 passenger cars 

would save approximately 0.5 billion 

gallons of fuel and prevent 4.3 million 

metric tons of tailpipe CO2 emissions 

over the lifetime of the passenger cars 

sold during that model year, compared 

to the fuel savings and emissions 

reductions that would occur if the 

standards remained at the adjusted 

baseline (i.e., the higher of 

manufacturer’s plans and the 

manufacturer’s required level of average 

fuel economy for MY 2010). 

NHTSA also estimates that the value 

of the total benefits of the final standard 

for MY 2011 passenger cars would be 

$1.03 billion 471 over the lifetime of the 

vehicles manufactured in that model 

year. This estimate of societal benefits 

includes direct impacts from lower fuel 

consumption as well as externalities, 

and also reflects offsetting societal costs 

resulting from the rebound effect. Direct 

benefits to consumers, including fuel 

savings, consumer surplus from 

additional driving, and reduced 

refueling time, account for 88 percent 

($1.0 billion) of the $1.1 billion in 

gross 472 consumer benefits resulting 

from increased passenger car CAFE. 

Petroleum market externalities account 

for roughly 10 percent ($0.1 billion). 

Environmental externalities, i.e., 

reduction of air pollutants, account for 

roughly 2 percent ($0.03 billion), about 

31 percent ($0.01 billion) of which is 

the result of greenhouse gas (primarily 

CO2) reduction. Increased congestion, 

noise and accidents from increased 

driving will offset approximately $0.1 

billion of the $1.1 billion in consumer 

benefits, leaving net consumer benefits 

of $1.0 billion. 

The following table sets out the 

relative dollar value of the various 

benefits of this rulemaking on a per 

gallon saved basis and averaging across 

the passenger car and light truck fleets: 

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474The $0.9 billion estimate is based on a 7 

percent discount rate for valuing future impacts. 

NHTSA estimated stringencies that would 

maximize net societal benefits using both 7 percent 

and 3 percent discount rates. For the reader’s 

reference, total consumer benefits for light truck 

CAFE improvements are $1.2 billion under a 3 

percent discount rate. 

475See Section V.B.5 above for discussion of 

payback period. 

476The fuel prices (shown here in 2006 dollars) 

used to calculate the length of the payback period 

are those projected (Annual Energy Outlook 2008, 

final release) by the Energy Information 

Administration over the life of the MY 2011–2015 

light trucks, not current fuel prices. 

NHTSA further estimates that the 

final standard for light trucks would 

save approximately 0.42 billion gallons 

of fuel and prevent 4.03 million metric 

tons of tailpipe CO2 emissions over the 

lifetime of the light trucks sold during 

MY 2011, compared to the fuel savings 

and emissions reductions that would 

occur if the standards remained at the 

adjusted baseline. 

For light trucks, NHTSA estimates 

that the value of the total benefits of the 

final MY 2011 standard would be $0.92 

billion 474 over the lifetime of the light 

trucks sold in that year. This estimate of 

societal benefits includes direct impacts 

from lower fuel consumption as well as 

externalities and also reflects offsetting 

societal costs resulting from the rebound 

effect. Direct benefits to consumers, 

including fuel savings, consumer 

surplus from additional driving, and 

reduced refueling time, account for 88 

percent ($0.9 billion) of the $1.0 billion 

in gross consumer benefits resulting 

from increased light truck CAFE. 

Petroleum market externalities account 

for roughly 10 percent ($0.1 billion). 

Environmental externalities, i.e., 

reduction of air pollutants, account for 

roughly 2 percent ($0.02 billion), about 

32 percent of which is the result of 

greenhouse gas (primarily CO2) 

reduction ($0.01 billion). Increased 

congestion, noise and accidents from 

increased driving will offset roughly 

$0.07 billion of the $1.0 billion in 

consumer benefits, leaving net 

consumer benefits of $0.9 billion. 

2. Costs 

The total costs for manufacturers just 

complying with the standard for MY 

2011 passenger cars would be 

approximately $0.5 billion, compared to 

the costs they would incur if the 

standard remained at the adjusted 

baseline. The resulting vehicle price 

increases to buyers of MY 2011 

passenger cars would be recovered or 

paid back 475 in additional fuel savings 

in an average of 4.4 years (average 2011 

per car price increase, excluding civil 

penalties owed by manufacturers 

estimated to owe them, was $64), 

assuming fuel prices ranging from $2.97 

per gallon in 2016 to $3.62 per gallon 

in 2030.476

The total costs for manufacturers just 

complying with the standard for MY 

2011 light trucks would be 

approximately $0.65 billion, compared 

to the costs they would incur if the 

standard remained at the adjusted 

baseline. The resulting vehicle price 

increases to buyers of MY 2011 light 

trucks would be paid back in additional 

fuel savings in an average of 7.7 years 

(average 2011 per truck price increase, 

excluding civil penalties owed by 

manufacturers estimated to owe them, is 

$126) assuming fuel prices ranging from 

$2.97 to $3.62 per gallon. 

Comparison of estimated benefits to 

estimated costs 

The table below compares the 

incremental benefits and costs for the 

car and light truck CAFE standards, in 

millions of dollars. 


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14414 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

The average annual per vehicle cost 

increases are shown in the FRIA. 

F. Environmental Impacts of Final 

Standards 

On October 17, 2008, the EPA 

published a Notice of Availability of 

NHTSA’s Final Environmental Impact 

Statement (FEIS), which, as required by 

the National Environmental Policy Act 

(NEPA), 42 U.S.C. 4321 et seq., analyzed 

the potential environmental impacts of 

alternative CAFE standards being 

considered by the agency. 73 FR 61859. 

In response to comments on the DEIS, 

the FEIS, among other things, analyzed 

how the agency’s alternatives were 

affected by variations in certain 

economic assumptions. The agency 

carefully considered and analyzed each 

of the individual economic assumptions 

to determine which assumptions most 

accurately represent future economic 

conditions. For a discussion of the 

economic assumptions relied on by the 

agency in this final rule, see Section V. 

The economic assumptions used by 

the agency in this final rule correspond 

to the ‘‘Mid-2’’ Scenario set of 

assumption analyzed in the FEIS. See 

FEIS § 2.2. The Optimized Alternative 

utilizing the Mid-2 Scenario economic 

assumptions, which were prompted in 

part by public comments, falls within 

the spectrum of alternatives set forth in 

the DEIS and the FEIS, and all relevant 

environmental impacts associated with 

the Optimized Alternative have been 

considered by NHTSA. The 

environmental impacts calculated to 

result under the Optimized Alternative 

utilizing the Mid-2 Scenario economic 

assumptions were presented in 

Appendix B of the FEIS, and discussed 

in Chapters 3 and 4 of the FEIS. The 

tables that follow in this section were 

developed from the tables provided in 

Appendix B of the FEIS. 

As discussed in Section XVI of this 

Final Rule, the FEIS evaluates the 

aggregate environmental impacts 

associated with each alternative for a 

five-year period (i.e., the environmental 

impacts that would result if MY 2011– 

2015 passenger cars and light trucks met 

the higher, proposed CAFE standards 

for those years). However, the impacts 

resulting from this Final Rule, covering 

MY 2011 alone, fall within the spectrum 

of environmental impacts analyzed in 

the FEIS under the Optimized 

Alternative, Mid-2 Scenario. 

This section presents selected 

consequences that would be associated 

with the final CAFE standards for MY 

2011 passenger cars and light trucks 

(i.e., the Optimized Alternative, Mid-2 

Scenario CAFE standards for MY 2011). 

These consequences include the effects 

of the MY 2011 standards on fuel 

consumption and associated emissions 

of greenhouse gases, as well as on 

emissions of criteria and hazardous air 

pollutants. Environmental impacts 

associated with the final CAFE 

standards for MY 2011 passenger cars 

and light trucks remain aggregated for 

MYs 2011–2015, and are reported in the 

FEIS. See Chapter 3, Chapter 4 and 

Appendix B of the FEIS. The aggregate 

impacts analyzed in the FEIS remain 

relevant, since the MY 2011 impacts 

associated with the CAFE standards fall 

within the spectrum of those aggregated 

impacts. 

Table IX.F–1 shows the estimated 

impact of the final CAFE standards for 

MY 2011 on fuel consumption by 

passenger cars and light trucks during 

selected years from 2020 to 2060. 

Because the estimates of fuel 

consumption shown in the table assume 

that the CAFE standards established for 

MY 2011 would apply to all subsequent 

model years produced over this period, 

the proportion of the U.S. fleet 

consisting of cars and light trucks that 

met the MY 2011 CAFE standards 

would increase over the time period it 

spans. The table reports total fuel 

consumption for passenger cars and 

light trucks, including both gasoline and 

diesel, under the No Action Alternative 

(Baseline) and under the final standards 

chosen by the agency (the Optimized 

Alternative). The impact of the chosen 

standards on future fuel consumption 

by cars and light trucks is measured by 

the reduction from its level under the 

No Action or Baseline alternative that is 

projected to occur with the final 

standard in effect. 


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A more informative measure of the 

impact of the final MY 2011 CAFE 

standards than the reductions in fuel 

use during any specific future year is 

their effect on cumulative fuel 

consumption by the U.S. car and light 

truck fleet over an extended future 

period. This is because the reduction in 

cumulative fuel consumption over the 

future that results from higher CAFE 

standards determines their impact on 

total GHG emissions, the accumulation 

of these gases in the earth’s atmosphere, 

and any resulting impact on the global 

climate. Table IX.F–2 projects future 

fuel use by U.S. passenger cars and light 

trucks under the Baseline or No Action 

alternative and the final CAFE standards 

for MY 2011, and shows the reductions 

in fuel use that will result from adopting 

the MY 2011 standards. As with the 

estimates of fuel consumption reported 

in the previous table, those shown in 

Table IX.F–2 assume that the MY 2011 

CAFE standards would also apply to 

subsequent model years. The fuel 

savings shown in the table grow not 

only as they are estimated for 

progressively longer time spans, but also 

because an increasing fraction of cars 

and light trucks in service during future 

years consists of models that meet the 

higher CAFE standards adopted 

beginning with MY 2011. 


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14416 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

477 In the case of volatile organic compounds 

(VOC), emissions from vehicle operation also 

include evaporative emissions that occur when 

vehicles are parked or stored, and while they are 

being refueled at retail stations. Emissions from 

vehicle operation are estimated by multiplying the 

total number of miles that cars and light trucks are 

driven annually by emissions factors for each 

pollutant, measured in grams of pollutant emitted 

per mile traveled. Emissions from fuel production 

and distribution are estimated by multiplying the 

total volume of fuel consumed by cars and light 

trucks by emissions per gallon during each phase 

of fuel supply, including petroleum extraction and 

transportation, fuel refining, storage, and 

distribution to retail outlets. 

478Unlike GHGs, criteria and hazardous air 

pollutants are relatively short-lived; thus their 

concentrations in the atmosphere and the resulting 

impacts on human health depend primarily on 

emissions during the immediate period being 

analyzed, rather than on their cumulative emissions 

over an extended period. 

NHTSA analyzed the air quality 

consequences of alternative CAFE 

standards by estimating total emissions 

of each criteria air pollutant and mobile 

source air toxic (MSAT) attributable to 

passenger cars and light trucks under 

each alternative, and assessing the 

changes in emissions of each pollutant 

from their Baseline levels that would 

occur under alternative standards. 

Emissions of these pollutants include 

those that occur while vehicles are 

being operated (‘‘tailpipe’’ emissions), 

as well as emissions that occur 

throughout the processes of producing 

and distributing fuel (‘‘upstream’’ 

emissions).477 Because improving fuel 

economy results in an increase in the 

number of miles passenger cars and 

light trucks are driven (the ‘‘rebound’’ 

effect), tailpipe emissions of each 

pollutant are projected to increase by 

progressively larger amounts under 

alternatives that require higher fuel 

economy levels. In contrast, each action 

alternative reduces the volume of fuel 

that must be supplied, thus reducing 

emissions throughout the fuel 

production and distribution process. 

The net effect of each alternative is 

equal to the increase in tailpipe 

emissions resulting from added 

rebound-effect driving, minus the 

reduction in upstream emissions 

resulting from the lower volume of fuel 

that must be supplied. Although the 

relative magnitude of these two effects 

differs among individual pollutants, the 

reduction in upstream emissions of 

most (but not all) pollutants outweighs 

the increase in tailpipe emissions, 

leading to a net reduction in their total 

emissions. Similarly, the net reduction 

in total emissions of each pollutant is 

usually—although not always—larger 

for alternatives that require higher fuel 

economy levels. For further explanation 

of the air quality methodology, see FEIS 

§ 3.3.2. 

Table IX.F–3 reports nationwide 

emissions of criteria air pollutants from 

passenger cars and light trucks 

(including both tailpipe and upstream 

emissions) under the Baseline 

alternative for selected years, and 

compares these to emissions levels 

expected to result from the final CAFE 

standards for MY 2011.478 As the table 

shows, total emissions of each criteria 

pollutant are projected to decline as a 

consequence of the final MY 2011 CAFE 

standards, as reductions in upstream 

emissions due to the lower volume of 

fuel production and distribution more 

than offset any increases in tailpipe 

emissions resulting from additional 

driving. 


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479The projected increases in future emissions of 

acrolein may result from the agency’s inability to 

obtain ‘‘upstream’’ emission factors for this 

pollutant, which prevented it from estimating the 

reduction in acrolein emissions resulting from 

lower fuel production and distribution. It is 

possible that if the agency had been able to do so, 

lower acrolein emissions during fuel production 

and distribution would have more than offset the 

increase in emissions from fuel use by cars and 

light trucks, causing total acrolein emissions to 

decline. 

In addition to their effects on 

emissions of criteria air pollutants, the 

final CAFE standards for MY 2011 are 

expected to affect emissions of some 

hazardous air pollutants (also known as 

mobile source air toxics, or MSATs) 

from fuel production and use. The 

MSATs included in this analysis are 

acetaldehyde, acrolein, benzene, 

1,3-butadiene, diesel particulate matter 

(DPM), and formaldehyde, which EPA 

and the Federal Highway 

Administration have identified as the 

MSATs of primary concern for assessing 

the environmental impacts of motor 

vehicle use. 

Table IX.F–4 reports total nationwide 

emissions of these air toxics by 

passenger cars and light trucks during 

selected future years under the Baseline 

or No Action alternative, as well as with 

the final MY 2011 CAFE standards in 

effect. As in the previous analyses of 

GHG and criteria air pollutant 

emissions, these estimates assume that 

the MY 2011 CAFE standards for cars 

and light trucks would also apply to 

subsequent model years. The table 

shows that emissions of acetaldehyde, 

benzene, 1,3-butadiene, DPM, and 

formaldehyde during future years would 

decline from their Baseline levels with 

the final CAFE standards for MY 2011 

in effect. In contrast, emissions of 

acrolein are projected to increase 

slightly during some future years from 

their levels under the Baseline 

alternative with the final MY 2011 

CAFE standards in effect.479 For 

additional detail on this analysis see 

FEIS § 3.3.3; Chapter 5. 


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480 49 U.S.C. 32902(k)(1). The NAS study is 

currently underway as of the publication of this 

final rule. 

481 49 U.S.C. 32902(k)(2). 

482 49 U.S.C. 32902(k)(2) and (3). 

The declines in future emissions of 

criteria air pollutants and MSATs 

resulting from the final MY 2011 CAFE 

standards would be expected to reduce 

the adverse health effects stemming 

from population exposure to harmful 

accumulations of these pollutants. In 

the Final EIS, the agency presented a 

detailed analysis of the air quality and 

health effects of reductions in 

population exposure to criteria air 

pollutants and MSATs projected to 

result from alternative CAFE standards 

for MY 2011–2015. That analysis 

suggested that significant reductions in 

adverse health effects and economic 

damages caused by exposure to these 

pollutants (primarily PM2.5, the largest 

known contributor to adverse health 

effects) could result if higher CAFE 

standards were adopted for model years 

2011 through 2020. See § 3.3.2.4.2 of the 

FEIS for a description of NHTSA’s 

approach to providing these quantitative 

estimates of adverse health effects of 

conventional health pollutants 

associated with the final CAFE 

standards. 

NHTSA’s Final EIS also presented a 

detailed analysis of the potential effects 

of alternative car and light truck CAFE 

standards for MY 2011–2015 on the 

global climate. This analysis first 

estimated the effects of alternative 

increases in CAFE standards on fuel 

consumption and resulting emissions of 

greenhouse gases (GHG) over an 

extended future period beginning when 

those standards would take effect. Next, 

the agency projected the extent to which 

these projected reductions in GHG 

emissions might lower future 

atmospheric concentrations of GHGs. 

Finally, the agency utilized a widelyrecognized global climate modeling 

system, known as MAGICC (Model for 

the Assessment of Greenhouse-gas 

Induced Climate Change), to simulate 

the consequences of reduced GHG 

concentrations for future increases in 

global mean surface temperatures and 

the projected future rise in sea levels, 

and approximated the likely 

consequences of these developments for 

regional precipitation patterns. For 

additional discussion of the FEIS 

climate analysis, see FEIS § 3.4 and 4.4. 

The agency’s analysis demonstrated 

that small but potentially important 

beneficial effects on the pace and extent 

of future climate change were likely to 

result from the long-term reductions in 

GHG emissions that would result from 

adopting higher CAFE standards for 

model years 2011 through 2015, 

particularly if increases in CAFE 

standards continued through model year 

2020. 

X. Other Fuel Economy Standards 

Required by EISA 

In the NPRM, NHTSA explained that 

it is not promulgating standards for 

commercial medium- and heavy-duty 

on-highway vehicles or work trucks as 

part of this rule, because Congress was 

clear in EISA that several steps were 

necessary before such a rulemaking 

could begin. Section 103 of EISA added 

the following definitions to 49 U.S.C. 

32901(a) for these vehicles: 

• ‘‘Commercial medium- and heavy-duty onhighway vehicle’’ means an on-highway 

vehicle with a gross vehicle weight rating 

of 10,000 pounds or more; and 

• ‘‘Work truck’’ means a vehicle that— 

(A) is rated at between 8,500 and 10,000 

pounds gross vehicle weight; and 

(B) is not a medium-duty passenger vehicle 

(as defined in 40 CFR 86.1803–01, as in 

effect on the date of EISA’s enactment). 

EISA added a new provision to 49 

U.S.C. 32902 requiring DOT, in 

consultation with DOE and EPA, to 

examine the fuel efficiency of these 

vehicles and determine the appropriate 

test procedures and methodologies for 

measuring the fuel efficiency of these 

vehicles, as well as the appropriate 

metric for measuring and expressing 

their fuel efficiency performance and 

the range of factors that affect their fuel 

efficiency. This study would need to be 

performed within 1 year of the 

publication of the NAS study required 

by section 108 of EISA.480

Then, within two years of the 

completion of the study, DOT, in 

consultation with DOE and EPA, would 

need to undertake rulemaking to 

determine * * * how to implement a 

commercial medium- and heavy-duty onhighway vehicle and work truck fuel 

efficiency improvement program designed to 

achieve the maximum feasible improvement, 

and shall adopt and implement appropriate 

test methods, measurement metrics, fuel 

economy standards, and compliance and 

enforcement protocols that are appropriate, 

cost-effective, and technologically feasible for 

commercial medium- and heavy-duty onhighway vehicles and work trucks.481

EISA also requires a four-year lead time 

for fuel economy standards promulgated 

under this section, and would allow 

separate standards to be prescribed for 

different classes of vehicles.482

NHTSA received relatively few 

comments on this issue, perhaps not 

surprising since it is essentially 

concerned with a future rulemaking. 

Two commenters disagreed with 

NHTSA’s characterization of Section 

102 of EISA ‘‘mandating’’ or ‘‘requiring’’ 

that NHTSA develop CAFE standards 

for commercial medium- and heavyduty on-highway vehicles and work 

trucks. Both Cummins, Inc. and EMA 

commented that NHTSA should change 

terminology used in footnotes 38 and 41 

of the NPRM suggesting that CAFE 

standards were ‘‘mandated’’ for these 

vehicles. Both commenters argued that 

Congress did not necessarily have 

CAFE-type standards in mind for these 

vehicles in Section 102, as evidenced by 

the fact that Congress required a NAS 

study to be followed by another study 

by DOT in consultation with EPA and 

DOE. The commenters stated that 

Section 102 simply requires that 

NHTSA eventually implement a ‘‘fuel 

efficiency improvement program’’ with 

‘‘fuel economy standards,’’ but not 

necessarily CAFE standards. As 

Cummins argued, because the ‘‘truck 

sector has no broadly accepted metric 

for measuring fuel efficiency,’’ ‘‘there 

could be major unintended 

consequences’’ if NHTSA implemented 

‘‘a CAFE-like system that regulates by a 

miles per gallon metric,’’ because such 

a system ‘‘could improve fuel economy 

but cause overall worse fuel efficiency 

by promoting multiple smaller trucks to 

do the same work that one does today.’’ 

Cummins and EMA stated that NHTSA 

should therefore remove all terminology 

in the final rule suggesting that NHTSA 

would apply the ‘‘CAFE system’’ to 

commercial medium- and heavy-duty 

on-highway vehicles and work trucks. 

Agency response: NHTSA disagrees 

with Cummins and EMA that CAFE 

standards for commercial medium- and 

heavy-duty on-highway vehicles and 

work trucks were not mandated by 

Section 102 of EISA. Congress was clear 

in Section 102 that, following 

completion of the required NAS and 

agency studies, NHTSA must engage in 

rulemaking to subject these vehicles to 

average fuel economy standards under 

EPCA and EISA, as the commenters 

recognized. Whether or not the precise 

contours of those standards are the same 

as the attribute-based average fuel 

economy standards established for 

passenger cars and light trucks, they 

will still be average fuel economy 

standards for fleets of particular 

vehicles. NHTSA sees no reason not to 

call these ‘‘corporate average fuel 

economy’’ or ‘‘CAFE’’ standards, and 

does not believe that such term 

connotes any pre-judgment on the part 

of the agency with respect to the 

outcomes of the required studies or 

eventual regulations. 

NHTSA also received comments from 

NACAA and the Wisconsin DNR stating 

that CAFE standards should be applied 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14419 

to all passenger cars and light trucks up 

to 10,000 pounds GVWR. Wisconsin 

DNR argued that extending the 

standards to these vehicles would 

‘‘capture the full range of noncommercial passenger vehicles.’’ 

Agency response: NHTSA explained 

in the NPRM that all four-wheeled 

motor vehicles with a gross vehicle 

weight rating of 10,000 pounds or less 

will be subject to the CAFE standards 

beginning in MY 2011, with the 

exception of commercial medium- and 

heavy-duty on-highway vehicles and 

work trucks, as discussed above. This 

follows up on NHTSA’s statements in 

the 2006 final rule setting CAFE 

standards for MY 2008–2011 light 

trucks, where the agency said that it 

would begin regulating medium-duty 

passenger vehicles (MDPVs) under the 

light truck CAFE standards in MY 2011. 

MDPVs have been included in the final 

rule standards, although they make up 

a very small percentage (less than 1 

percent) of light trucks in that model 

year. 

XI. Vehicle Classification 

Vehicle classification, for purposes of 

the CAFE program, refers to whether 

NHTSA considers a vehicle to be a 

passenger automobile or light truck, and 

thus subject to either the passenger 

automobile or the light truck standards. 

NHTSA created regulatory definitions 

for passenger automobiles and light 

trucks, found at 49 CFR part 523, to 

guide the agency and manufacturers in 

determining which vehicles are which. 

As NHTSA explained in the NPRM, 

the statutory language is clear that some 

vehicles must be passenger automobiles 

(cars) and some must be non-passenger 

automobiles (light trucks). Passenger 

automobiles were defined in EPCA as 

‘‘any automobile (other than an 

automobile capable of off-highway 

operation) which the Secretary [i.e., 

NHTSA] decides by rule is 

manufactured primarily for use in the 

transportation of not more than 10 

individuals.’’ EPCA § 501(2), 89 Stat. 

901. 

Thus, under EPCA, there are two 

general groups of automobiles that 

qualify as non-passenger automobiles or 

light trucks: (1) those defined by 

NHTSA in its regulations as other than 

passenger automobiles due to their 

having not been manufactured 

‘‘primarily’’ for transporting up to ten 

individuals; and (2) those expressly 

excluded from the passenger category by 

statute due to their capability for offhighway operation, regardless of 

whether they were manufactured 

primarily for passenger transportation. 

NHTSA’s classification rule directly 

tracks those two broad groups of nonpassenger automobiles in subsections (a) 

and (b), respectively, of 49 CFR 523.5. 

In the NPRM, NHTSA took a fresh 

look at the regulatory definitions in light 

of its desire to ensure clarity in how 

vehicles are classified, the passage of 

EISA, and the Ninth Circuit’s decision 

in CBD. NHTSA explained the origin of 

the current definitions of passenger 

automobiles and light trucks by tracing 

them back through the history of the 

CAFE program, and did not propose to 

change the definitions themselves at 

that time, because the agency tentatively 

concluded that doing so would not lead 

to increased fuel savings. The NPRM 

did, however, propose to tighten the 

coverage of its regulatory definition of 

‘‘light truck’’ to ensure that, starting in 

MY 2011, 2WD versions of SUVs are no 

longer classified as off-highway capable 

light trucks under 49 CFR 523.5(b), 

simply because the SUV also comes in 

a 4WD version. This tightening of 

NHTSA’s definitions will, as explained 

below, have significant impacts on fuel 

savings and preventing increased 

emission of carbon dioxide. 

A. Summary of Comments 

NHTSA received a number of 

comments on the vehicle classification 

issue from a range of organizations. 

Many commenters (including the 

Alliance, GM, Ford, and Toyota) 

supported the clarification in the NPRM 

concerning how 2WD vehicles should 

be classified. These commenters sought 

clarification that the change in how 

these 2WD vehicles are classified would 

become effective in MY 2011 and not 

earlier. Others (Nissan, NADA, and 

AIAM) questioned NHTSA’s position on 

that issue, arguing that 2WD vehicles 

should be classified in the same way as 

4WD versions of the same model. Some 

(Alliance, Ford, Toyota, and the Sierra 

Club) noted that moving large numbers 

of 2WD vehicles from the light truck 

category to the passenger category may 

have a significant impact on the 

stringency of the curves, and that the 

NPRM curves did not reflect this 

impact. 

Several commenters (Public Citizen, 

Honda, UCS, CBD, and Sierra Club) 

argued that the rule’s classification 

definitions needed to be revised. The 

commenters relied on several 

arguments: first, that the current 

definitions did not comport with the 

Ninth Circuit’s opinion in CBD (which 

directed NHTSA either to ‘‘revise its 

regulatory definitions of passenger 

automobile and light trucks or provide 

a valid reason for not doing so’’) and do 

not reflect the fact that many light 

trucks are used as passenger vehicles; 

second, that they were not ratified by 

Congress in EISA; third, they do not 

ensure that some vehicles that these 

commenters believe should be classified 

as passenger cars are in fact classified as 

such; and fourth, that they allow 

manufacturers to ‘‘game’’ the definitions 

by making minor changes to vehicles to 

obtain a light truck classification and 

thus, a lower fuel economy target. One 

commenter (GM) urged NHTSA to 

define ‘‘base form’’ (a term used in a 

1981 interpretation concerning the 

classification of 2WD vehicles) and 

‘‘model type,’’ contending that these 

new definitions would help clarify how 

certain vehicles should be classified. 

NHTSA responds to these comments 

below. 

B. Response to Comments 

1. This Rule Substantially Tightens 

NHTSA’s Vehicle Classification 

Definitions 

(a) Under § 523.5(b), Only Vehicles That 

Actually Have 4WD Will Be Classified 

as 4WD Vehicles 

As proposed in the NPRM, NHTSA 

has tightened the coverage of its 

regulatory definition of ‘‘light truck’’ to 

ensure that 2 wheel drive (2WD) 

versions of an SUV are not classified as 

light trucks under 49 CFR § 523.5(b) 

simply because the SUV also comes in 

a 4WD version. In order to be properly 

classifiable as a light truck under Part 

523, a 2WD SUV must either be over 

6,000 lbs GVWR and meet 4 out of 5 

ground clearance characteristics to make 

it off-highway capable under § 523.5(b), 

or meet one of the functional 

characteristics under § 523.5(a) (e.g., 

greater cargo carrying capacity than 

passenger carrying capacity). In other 

words, a 2WD vehicle of 6,000 lbs 

GVWR or less, even if it has a sufficient 

number of clearance characteristics, 

cannot be considered off-highway 

capable. This is based on the plain 

meaning of § 523.5(b) (which refers to a 

vehicle that ‘‘has’’ 4WD) and the statute 

(49 U.S.C. 32901(a)(18)(b) speaks of a 

vehicle that ‘‘is a 4-wheel drive 

automobile’’). No change in the 

regulatory definition is needed. The 

clarification accomplishes NHTSA’s 

purpose. This clarification, which the 

vehicle manufacturers largely 

supported, resulted in the reclassification of approximately 1.5 

million 2WD SUVs from light trucks to 

passenger cars in MY 2011. The result 

of this re-classification is an increase of 

0.3 mpg in the combined passenger car 

and light truck standards for MY 2011. 

As noted above, several commenters 

agreed with NHTSA’s clarification on 

the 2WD vehicles but asked for 

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14420 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

483 49 U.S.C. 32902 (g)(2). 

484Thus, according to Nissan, if less than onethird of the ‘‘variants’’ of an SUV sold are 2WD, 

those 2WD variants are properly classified along 

with the 4WD ‘‘base’’ vehicle. 

485 45 FR 81593, 81599–60 (Dec. 11, 1980). 486See, e.g., 40 CFR 86.1832–01. 

assurance that it would be applied only 

to MY 2011 and later production. The 

Alliance commented that it agreed that 

NHTSA’s vehicle classification 

‘‘regulations are consistent with 

congressional intent as expressed by 

EPCA and EISA,’’ and that it did ‘‘not 

object to NHTSA’s interpretations and 

its proposed regulatory revisions to 49 

CFR Part 523, provided that these are 

effective with the 2011 model year.’’ 

The Alliance argued that this would 

help avoid ‘‘the need to reexamine and 

re-issue standards for 2009 and 2010 

model years,’’ which the Alliance stated 

had been ‘‘developed based on a data set 

with 4x2 utilities included in the truck 

fleet.’’ Ford agreed, arguing that 

reclassifying 2WD SUVs for MYs 2008– 

2010 would ‘‘make it more difficult for 

many manufacturers to meet the light 

truck standards (as well as the car 

standards) and would amount to an 

improper increase in the stringency of 

the MY 2008–2010 standards.’’ NHTSA 

hereby clarifies that its intention is that 

its clarification on the treatment of 2WD 

vehicles under § 523.5(b) become 

effective with regard to MY 2011 

vehicles. Applying that treatment earlier 

would require the agency to change the 

standards for those model years, which 

the agency is statutorily prevented from 

doing later than 18 months before the 

start of the model year to which the 

amended standard applies, if the 

standards would be more stringent.483

Some commenters noted that this 

clarification, although thoroughly 

discussed in the NPRM, was not 

reflected in the stringency curves of the 

proposed standard. NHTSA believes 

that its announced intention to apply 

this clarification in the final rule was 

adequate notice to all concerned that the 

stringency levels of the final rule would 

reflect the concomitant movement of 

many 2WD vehicles from the light truck 

to the passenger car fleet. Commenters 

who are manufacturers had every 

opportunity to analyze how the change 

might affect their fleets and comment 

accordingly. In the period since 

issuance of the NPRM, NHTSA has had 

the opportunity to evaluate new 

manufacturer product plans in order to 

analyze the full impact of the 

clarification on the standard. As noted 

above, this change has resulted in an 

increase in the standards and fuel 

savings for MY 2011. The final curves 

for passenger cars and light trucks 

reflect this change. 

Nissan disagreed with NHTSA’s 

proposal to classify certain 2WD SUVs 

as passenger cars, offering the following 

basic arguments: (1) That NHTSA has 

always interpreted and set standards 

with 2WD SUVs as light trucks, even in 

the MY 2008–2011 CAFE rule (as 

evidenced, for example, by the CAFE 

reporting requirements that specify that 

a manufacturer must indicate whether a 

light truck has 4WD—Nissan argued 

that that presumed that some light 

trucks did not); (2) that NHTSA’s 1981 

interpretation states that vehicle 

classification is determined by the base 

vehicle; (3) that classifying 2WD SUVs 

as light trucks because they also come 

in 4WD is consistent with EPA 

emissions test procedures which 

describe equipment as ‘‘optional’’ if a 

manufacturer expects less than onethird of the models sold to be equipped 

with it;484 and (4) that NHTSA must 

provide notice and comment before 

changing the standards. 

With regard to Nissan’s comment that 

NHTSA has always interpreted and set 

standards with 2WD SUVs as light 

trucks, even in the MY 2008–2011 CAFE 

rule, NHTSA has never stated that 2WD 

SUVs are necessarily light trucks simply 

because they also come in 4WD, and in 

fact has stated to the contrary. As early 

as 1980, in the final rule promulgating 

light truck CAFE standards for MYs 

1983–1985, NHTSA responded to a 

comment from GM requesting a change 

to the regulatory definitions to ensure 

that 2WD SUVs may be classified as 

light trucks even if their GVWR fell 

below 6,000 pounds. NHTSA stated 

that, ‘‘Under the agency’s current 

regulations in 49 CFR Part 523, such a 

change in the vehicle’s GVWR would 

result in their being classified as 

passenger automobiles.’’ Although 

NHTSA’s technical analysis for the 1980 

final rule ‘‘treat[ed] 4x2 utility vehicles 

* * * as light trucks, consistent with 

the classification of current vehicles,’’ 

NHTSA expressly cautioned that ‘‘this 

treatment should not be interpreted as a 

statement by the agency that all future 

designs of 4x2 utility vehicles * * * 

will continue to be classified as light 

trucks.’’ 485 NHTSA also stated as much 

in a 1981 letter of interpretation, 

discussed in greater detail below. Thus, 

in response to Nissan’s comment, while 

NHTSA has previously set standards 

with 2WD SUVs as light trucks, the 

agency has long held that 2WD SUVs 

are not inherently light trucks, and that 

the definitions could be tightened in the 

future. The fact that the reporting 

requirements include ‘‘4WD (yes/no)’’ 

does not, as Nissan suggests, indicate 

that 2WD SUVs may be light trucks 

under § 523.5(b) if their GVWR is less 

than 6,000 pounds. 

Nissan’s comments focus on how it 

believes NHTSA has construed and 

applied its definitions in the past. But 

Nissan does not make an argument that 

NHTSA’s reading of its own rules, as 

proposed in the NPRM, is not a 

reasonable reading of those rules. In 

fact, NHTSA believes that it is 

reasonable to read a rule 

(§ 523.5(b)(1)(i)) that refers to a vehicle 

that ‘‘has 4-wheel drive’’ as 

encompassing only vehicles that have 

4WD. The same is true with regard to 

the statute (49 U.S.C. 32901(a)(18)(B)), 

which speaks of a vehicle that ‘‘is a 4- 

wheel drive automobile.’’ NHTSA 

merely intends to read the rule and 

statute according to their plain meaning. 

NHTSA also disagrees that the 

November 1981 letter of interpretation 

indicates that vehicle classification is 

always determined by the base vehicle. 

In that letter, NHTSA used the term 

‘‘base vehicle’’ for classifying vehicles 

under § 523.5(a), not § 523.5(b). NHTSA 

has never used the term ‘‘base vehicle’’ 

to describe a vehicle as off-highway 

capable and thus properly classifiable 

under § 523.5(b). A vehicle either is or 

is not off-highway capable—the fact that 

the vehicle may also come in 4WD does 

not make the 2WD version off-highway 

capable. 

With regard to Nissan’s comment 

about EPA emissions test procedures 

describing equipment as ‘‘optional’’ if a 

manufacturer expects less than onethird of the models sold to be equipped 

with it, NHTSA has examined EPA’s 

regulations and remains unconvinced 

that 2WD would be the kind of 

‘‘optional’’ equipment covered. EPA 

regulations describe ‘‘optional’’ 

equipment as an ‘‘item’’ that could add 

weight or influence emissions in the 

test. If anything was ‘‘optional’’ 

equipment, then, it would appear to be 

the presence of 4WD, which both adds 

weight to a vehicle and causes it to emit 

more pollution, compared to 2WD.486

NHTSA would of course defer to EPA’s 

interpretation of its own regulations, but 

does not find Nissan’s argument 

convincing for purposes of this 

rulemaking. 

And finally, with regard to Nissan’s 

comment that the agency was 

reclassifying 2WD SUVs without 

providing notice and comment, NHTSA 

disagrees—these changes have been 

made with full notice, as provided in 

the NPRM, and an opportunity for 

comment, and are appropriate and 

timely revisions to NHTSA’s application 

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487See http://www.nhtsa.dot.gov/cars/rules/ 

interps/gm/81/nht81–3.36.html (last accessed 

September 23, 2008) for the full text of the letter 

of interpretation to GM. 

488 73 FR 24459, fn. 207 (May 2, 2008). 

of Part 523. In the NPRM, NHTSA 

specifically sought comment on the 

proposed changes to the vehicle 

classification system and whether 

further changes were appropriate. 

AIAM also disagreed with NHTSA’s 

proposal to classify certain 2WD SUVs 

as passenger cars. AIAM stated that 

larger 2WD SUVs had originally been 

classifiable as light trucks per the 

statutory off-highway definition, but 

that over time ‘‘smaller, more fuel 

efficient versions of SUVs were offered 

in the U.S. market.’’ AIAM thus 

suggested that NHTSA should classify 

‘‘all SUVs in the same category and 

provide lead-time for manufacturers 

before the new criteria take effect,’’ as 

NHTSA had done for minivans and the 

‘‘three row’’ requirement in its 2006 rule 

on light truck standards. In response, 

the agency notes that a vehicle’s fuel 

economy capability has no bearing on 

its proper classification as a passenger 

car or as a light truck. NHTSA believes 

that the lead time between when the 

final rule standards are promulgated 

and when the revised definitions take 

effect (MY 2011) should be sufficient for 

manufacturers, particularly given the 

increasing consumer preference for 

higher fuel economy vehicles and 

NHTSA’s announced intention to move 

in this direction in the NPRM. 

In summary, NHTSA believes its 

clarification of how, starting with MY 

2011, it will apply § 523.5(b) to 2WD 

vehicles of 6,000 lbs or less GVWR 

constitutes a reasonable and significant 

tightening of its definitions related to 

vehicle classification. As a result, in MY 

2011, approximately 1.5 million 

vehicles formerly classified as light 

trucks will be classified as passenger 

automobiles, which will produce an 

average increase of 0.3 mpg in the 

combined passenger car and light truck 

standards in those years. 

(b) The Final Rule Amends § 523.5(a)(4) 

To Prevent Gaming That Might 

Jeopardize Fuel Savings Created by 

NHTSA’s Clarified Position on 2WD 

Vehicles 

In explaining in the NPRM (73 FR 

24459) that 2WD SUVs would no longer 

be classifiable as light trucks simply 

because a version is also available in 

4WD, NHTSA noted that, alternatively, 

a 2WD automobile may properly be 

classified as a light truck under 

§ 523.5(a)(4) if it provides ‘‘greater 

cargo-carrying than passenger-carrying 

volume.’’ In that context, NHTSA 

mentioned a 1981 letter of interpretation 

to GM.487 The 1981 letter stated that 

‘‘two-wheel drive utility vehicles which 

are truck derivatives and which, in base 

form, have greater cargo-carrying 

volume than passenger-carrying volume 

should be classified as light trucks for 

fuel economy purposes.’’ NHTSA stated 

in the NPRM that ‘‘base form’’ means 

‘‘the version of the vehicle sold as 

‘standard,’ without optional equipment 

installed, and does not include a version 

that would meet the cargo volume 

criterion only if ‘delete options’ were 

exercised to remove standard 

equipment.’’ NHTSA gave the example 

of a base vehicle that comes equipped 

with a standard second-row seat, which 

the agency stated could not be classified 

as a light truck simply on the basis that 

the purchaser has an option to delete 

that second-row seat.488

In its comments, GM urged NHTSA to 

incorporate the definition of ‘‘base 

form’’ into Part 523. However, it is 

possible that a literal application of the 

1981 letter’s definition of ‘‘base form’’ 

could result in gaming of the 

classification system. For example, with 

regard to a particular vehicle, a 

manufacturer could describe as optional 

a second-row seat that is in fact an item 

that the manufacturer expects to install 

in nearly every vehicle of that model. In 

fact, even with regard to a vehicle that 

has long come equipped with a secondrow seat as standard equipment, the 

manufacturer could suddenly describe 

that seat as optional. Even if most, or 

even all, vehicles of that model 

continued to be sold with second-row 

seats, the manufacturer’s mere 

description of the seat as optional could, 

if the manufacturer’s description of the 

vehicle’s ‘‘base form’’ were the only 

consideration, allow the manufacturer 

to argue that the vehicle is a light truck 

because its base form has greater cargocarrying than passenger-carrying 

volume. 

The vehicles described by GM in the 

1981 correspondence have little relation 

to the 2WD SUVs of today. To the best 

of the agency’s knowledge, most 2WD 

SUVs are routinely offered with a 

standard full bench or pair of captain’s 

chairs in the second row. Additionally, 

far fewer 2WD SUVs manufactured 

today are based on a truck chassis. To 

permit a manufacturer to continue to 

sell 2WD SUVs with second-row seats 

and consider them light trucks merely 

because the manufacturer has decided 

to list those seats as an option rather 

than as a standard feature of the base 

vehicle would be to stand the November 

1981 interpretation on its head. That 

interpretation was intended to prevent 

gaming of the ‘‘greater cargo-carrying 

volume’’ category of light trucks by 

limiting it to vehicles where carrying 

cargo was clearly the primary function 

for which the vehicle was designed. We 

cannot permit that interpretation to be 

used to produce the precisely opposite 

result, i.e., to categorize 2WD vehicles 

that are primarily designed to be sold 

with a second-row seat for passengers as 

light trucks merely because the 

manufacturer suddenly labels the 

second-row seat as an option. 

Therefore, in response to comments 

and consistent with Congress’ intent in 

EISA, starting with MY 2011, 2WD 

SUVs (including crossovers that are 

2WD) may only be properly classified as 

light trucks under § 523.5(a)(4) if they 

are, like cargo vans, designed and sold 

primarily to serve a cargo-carrying 

function. The final rule amends that 

section to say: ‘‘Provide, as sold to the 

first retail purchaser, greater cargocarrying than passenger-carrying 

volume, such as in a cargo van; if a 

vehicle is sold with a second-row seat, 

its cargo-carrying volume is determined 

with that seat installed, regardless of 

whether the manufacturer has described 

that seat as optional.’’ In light of this 

clarifying rule text, there is no need at 

this time to provide a definition for 

‘‘base form.’’ The manufacturer must 

categorize its vehicles based upon the 

vehicle attributes when it is sold. If a 

cargo van is manufactured as such with 

no rear seating and is sold in that 

configuration then it can be considered 

a light truck under § 523.5(a)(4). If the 

same vehicle is sold with rear seating, 

it cannot be a truck under § 523.5(a)(4). 

GM’s HHR provides an example of this 

concept. The HHR is available and sold 

in a ‘‘panel’’ version with no rear 

seating and a passenger version with 

rear seating. The panel version if 

actually sold that way can be a light 

truck under § 523.5(a)(4); the passenger 

version, when sold with rear seating, 

cannot be a truck under § 523.5(a)(4) 

even if the manufacturer were to label 

that seating as optional. 

Thus, through interpretation and 

changes to the rule text, NHTSA has 

significantly tightened the definitions 

governing which vehicles may be 

classified as light trucks. 2WD SUVs of 

6,000 lbs or less GVWR may no longer 

be properly classified as light trucks 

under § 523.5(b) simply because they 

also come in 4WD. Additionally, 2WD 

SUVs may not be properly classified as 

light trucks simply because a 

manufacturer asserts that their base 

form has no back seat and thus would 

‘‘provide greater cargo-carrying than 

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14422 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

passenger-carrying volume’’ according 

to § 523.5(a)(4). 

2. Especially as Tightened by This Rule, 

NHTSA’s Classification Definitions Are 

More Difficult To Game Than 

Commenters Suggest 

As described above, this final rule 

effectuates significant changes in 

NHTSA’s definitions and their 

interpretation that will substantially 

reduce any opportunities to game those 

definitions. NHTSA disagrees with the 

commenters’ argument that the 

standards allow manufacturers to 

‘‘game’’ the definitions by making minor 

changes to vehicles to obtain a light 

truck classification and thus, a lower 

fuel economy target. 

Several commenters, including Sierra 

Club et al., UCS, and Honda commented 

that manufacturers are ‘‘gaming’’ the 

existing definitions by making changes 

to passenger cars in order to classify 

them as light trucks and obtain the 

benefit of lower fuel economy targets. 

UCS suggested that the ‘‘loophole’’ is a 

function of both the statutory 

requirement to set separate standards for 

passenger cars and light trucks, which 

‘‘accommodat[es] an industry interest in 

having non-passenger vehicles held to 

less stringent fuel economy standards 

than passenger vehicles of the same 

attribute,’’ and of NHTSA’s ‘‘equating 

SUVs, minivans, crossovers and even 

some station wagons with nonpassenger vehicles.’’ UCS argued that 

‘‘The association of these categories has 

allowed automakers to tweak passenger 

vehicle characteristics in order to have 

them classified as light trucks that are 

held to lower fuel economy standards.’’ 

The Sierra Club stated that the current 

definitions are being abused, with 

manufacturers classifying as light trucks 

‘‘obvious examples [of] many sedans 

and station wagons, such as the Chrysler 

PT Cruiser, Dodge Magnum, and the 

Subaru Outback sedan,’’ as well as 

‘‘SUVs and minivans [which] are 

advertised, sold, and used as passenger 

vehicles.’’ Sierra Club argued that the 

attribute-based system, under which 

manufacturers are subject to standards 

based on their fleet mix, encourages 

further gaming, as evidenced by the 

‘‘surge in ‘crossover’ vehicles that are 

more car-like and intended as passenger 

vehicles but are still classified as nonpassenger vehicles and can therefore 

meet a lower fuel economy than cars.’’ 

Honda stated that NHTSA should 

change the light truck definitions 

because ‘‘the current system is much too 

easy to game, which creates competitive 

impacts and diverts limited engineering 

resources to figuring out how to game 

the latest rules instead of improving fuel 

economy,’’ and ‘‘in the long run, * * * 

will also encourage shifting sales 

towards vehicles classified as light 

trucks and cause increases in real world 

fuel consumption.’’ 

In response to the above comments, 

NHTSA notes that separate standards 

for passenger cars and light trucks are a 

statutory requirement under EISA. 

NHTSA believes, as explained 

elsewhere in this notice, that that 

requirement extends to setting the target 

curves for the passenger car fleet based 

only on the passenger cars, and the 

target curves for the light truck fleet 

based only on the light trucks. NHTSA 

does not believe that it has the authority 

to combine the fleets for the purposes of 

setting the standards. 

Moreover, with regard to ‘‘crossovers’’ 

and commenters’ examples of ‘‘many 

sedans and station wagons’’ being 

classified as light trucks, the agency 

notes that as a result of the tightened 

implementation of our vehicle 

definitions, many crossovers are in fact 

now properly classified as passenger 

cars. To the extent that crossovers are 

not classified as passenger cars, it is, we 

believe, only because they either (1) 

have 4WD and meet 4 out of 5 ground 

clearance characteristics; (2) are over 

6,000 lbs GVWR and meet 4 out of 5 

ground clearance characteristics; or (3) 

have three rows of seats and the 

capability to expand cargo-carrying 

volume through folding or removing 

seats. 

Of the specific examples of the PT 

Cruiser, the Dodge Magnum, and the 

Subaru Outback sedan, NHTSA believes 

that manufacturers currently classify 

these vehicles as light trucks either 

because they come in four-wheel drive 

and have the required ground clearance, 

or because their rear seats may be easily 

removed to create a flat, floor level 

surface that increases cargo-carrying 

capacity. After MY 2011, vehicles may 

only be classified as light trucks on the 

basis of permitting expanded use of the 

vehicle for cargo-carrying purposes if 

they have three rows of standard 

designated seating positions that fold 

flat or are removable. As currently 

designed, the PT Cruiser and the 

Magnum do not meet this requirement, 

so NHTSA would likely classify these 

vehicles as passenger cars as well. If the 

Outback sedan does in fact have 4WD 

(or AWD) and meet the required ground 

clearance characteristics, NHTSA is 

required by EPCA and EISA to consider 

it a light truck, regardless of its body 

shape. 

Finally, NHTSA believes that minor 

changes are not sufficient, and that 

fairly major changes would be necessary 

in order to reclassify a passenger car as 

a light truck. To make a 2WD SUV a 

light truck, for example, manufacturers 

would need either to add a third row of 

seats to it (and otherwise meet the 

requirements for expanded cargo space) 

convert it to 4WD, or raise its GVWR 

over 6,000 lbs and ensure that it met 4 

out of the 5 ground clearance 

characteristics. These changes are not 

minor, and likely can be made only 

every few years at the time of one of the 

periodic vehicle redesigns. 

Additionally, the minor benefit to be 

gained in terms of a lower target must 

be balanced against consumer demand. 

In a time of high gas prices and 

increasing consumer interest in high 

fuel economy vehicles, it seems unlikely 

to NHTSA that manufacturers would 

take the risk of turning passenger cars 

into light trucks solely to obtain the 

slightly lower light truck target 

standard. 

3. Additional Changes in NHTSA’s 

Classification Definitions Would Not 

Result in Greater Fuel Savings and 

Lower CO2 Emissions 

We have explained above the 

recategorization of 2WD vehicles that 

will result from NHTSA’s tightening of 

its classification definitions. NHTSA 

considered whether recategorization of 

additional vehicles through further 

changes to its classification definitions 

would result in additional fuel economy 

improvements and therefore lower 

emissions of carbon dioxide. One of the 

concerns underlying the Ninth Circuit’s 

decision in CBD was the potential 

impact of vehicle categorization on the 

ultimate fuel economy for light trucks. 

The commenters, too, were concerned 

about this in general. NHTSA has 

considered this issue carefully. In 2006, 

when NHTSA issued its MY 2008–2011 

light truck fuel economy rule, and in 

2007, when the Ninth Circuit issued its 

initial opinion in CBD concerning that 

2006 light truck rule, EISA had not been 

enacted. Under EPCA as it then existed, 

the passenger car standard was a flat 

27.5 mpg average requirement. Reclassifying light trucks (which had a 

standard far below 27.5 mpg) as 

passenger cars, in the flat pre-EISA 

world, intuitively would have resulted 

in their having to meet a higher 

standard, or in the manufacturers’ 

having to build more small, lightweight 

vehicles in order to balance out former 

light trucks newly subject to the higher 

passenger standard, and could have 

resulted in more fuel savings. This 

assumption may no longer be correct, 

because such a recategorization could 

now result in lower standards for 

passenger automobiles. 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14423 

In EISA, Congress made both the 

passenger car and light truck standards 

attribute-based, which means that the 

fuel economy target curves for each 

standard are a function of the fleet 

subject to that standard. In developing 

the curves that determine fuel economy 

targets for each vehicle footprint, 

NHTSA fits the curve based in part on 

the sizes (footprint) and fuel economy 

levels (given the estimated effects of 

adding fuel-saving technologies) of the 

vehicles in each regulatory class. 

Consider, for example, a small SUV 

typically classified as a light truck, and 

assume that the small SUV gets 

relatively good fuel economy for a truck. 

Moving the small SUV out of the truck 

fleet may reduce the overall average fuel 

economy level required of light trucks, 

because the vehicles remaining in that 

regulatory class will be the larger ones 

that have relatively lower fuel economy. 

Averaging their capabilities will result 

in a lower target than if the small SUV 

in question remained in the light truck 

fleet. Moving the SUV into the 

passenger car fleet may either boost or 

lower the average fuel economy level 

required of passenger cars, depending 

on how the size and potential fuel 

economy of the given SUV compares to 

those of the vehicles that were already 

classified as passenger cars. 

NHTSA’s analysis indicates that the 

direction and magnitude of the net 

effects of vehicle re-classification 

depend on the composition of the fleet 

and the specific nature of the change in 

classification. As shown in Figure XI–1, 

assigning 2WD SUVs and those vehicles 

that do not meet the third row 

requirement to the passenger car fleet 

would add to the passenger car fleet a 

set of vehicles (labeled ‘‘PC Formerly 

Classified as LT’’) with fuel economy 

levels that are generally (though not 

universally) in the same range as those 

of passenger cars of similar footprint. 

However, further reassigning to the 

passenger car fleet minivans and 

vehicles that do meet the third row 

requirement, as commenters appear to 

suggest, would add to the passenger car 

fleet a set of vehicles (labeled ‘‘LT 

Reassigned to PC under Alternative 

Definition’’) with fuel economy levels 

that are generally (though not 

universally) lower than those of 

passenger cars of similar footprint. 

Figure XI–2 shows how the composition 

of the light truck fleet is affected by 

such shifts. Reassigning either the 

smaller or larger group of vehicles to the 

passenger car fleet removes from the 

light truck fleet vehicles that are 

generally (though not universally) 

smaller and more efficient than the 

vehicles that remain in the light truck 

fleet. 

In contrast, a number of commenters, 

including CBD, Sierra Club et al., and 

UCS, did not address NHTSA’s 

discussion and commented that NHTSA 

should revise the definitions of 

passenger car and light truck in 

accordance with the Ninth Circuit’s 

opinion, generally for the purpose of 

increasing fuel savings. Honda also 

commented that NHTSA should revise 

its definitions to be consistent with that 

opinion. None of those commenters 

specified precisely which vehicles 

should be reclassified as passenger cars 

instead of light trucks. 


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The following table shows how, for 

MY 2011, reclassifying 2WD SUVs by 

virtue of NHTSA’s tightened 

classification decisions changed average 

required CAFE levels, and how 

additionally reclassifying minivans and 

vehicles that do not meet the third row 

requirement would have changed 

average required CAFE levels. The 

overall averages reflect changes in the 

size of each fleet under each approach 

to vehicle classification, again bearing 

in mind that ‘‘Alternative Definition’’ in 

the tables refers to moving all light 

trucks that meet the 3-rows criterion of 

§ 523.5(a)(5)(ii) into the passenger car 

fleet. 

Similarly, the next table shows how 

these changes in vehicle classification 

affected the amount of fuel consumed 

over the useful lives of vehicles in the 

MY 2011 fleet. 


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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14425 

489NHTSA’s analysis of the effects of thenpending MY 2011–2015 standards, documented in 

the October 2008 EIS, indicated that the 

reclassification reflected in today’s final rule would 

reduce the total lifetime fuel consumption and 

carbon dioxide emissions (p. 10–229) of vehicles 

sold during this period. 490We note that in both cases, NHTSA’s analysis 

did not identify a set of technologies that enabled 

these manufacturers to attain the required light 

truck CAFE levels. 491Of course, the agency recognizes that if 

manufacturers do cease to build and sell 2WD SUVs 

in response to this tightening of the definition, fuel 

savings would likely decrease relative to NHTSA’s 

estimates in this final rule. 

492The October 2008 EIS also indicates that for 

the analysis of the effects of then-pending MY 

2011–2015 standards, the reclassification of 

minivans and 2WD SUVs with 3 rows would reduce 

overall average required CAFE levels by an average 

of 0.4 mpg during MYs 2011–2015, raising total 

lifetime fuel consumption and carbon dioxide 

emissions (p. 10–231) of vehicles sold during this 

period. 

As discussed above, in the context of 

the MY 2011 passenger car and light 

truck standards, moving about 1.5 

million 2WD SUVs from the light truck 

to the passenger car fleet results in an 

average increase of 0.3 mpg in the 

combined passenger car and light truck 

standards for MY 2011. However, 

specific fleet differences are such that 

this change leads to increases in lifetime 

fuel consumption and carbon dioxide 

emissions of about 0.03 billion gallons 

and 0.06 million metric tons, 

respectively, than under standards that 

would apply under the former 

definitions.489 This is due to the fact 

that the reassignment of vehicles 

changed the shapes of the passenger car 

and light truck target curves, which 

caused different results for different 

manufacturers depending on their fleet 

mixes. Although the overall combined 

average required fuel economy increases 

by 0.3 mpg, the overall average achieved 

fuel economy decreases very slightly (by 

about 0.009 mpg), such that total fuel 

consumption and emissions are very 

slightly higher, as noted. This occurs 

because for both Ford and General 

Motors, the reassignment of vehicles 

causes the planned CAFE levels of these 

manufacturers’ light truck fleets to fall 

by 0.7 mpg (Ford) and 0.8 mpg (General 

Motors), but causes the corresponding 

required CAFE to fall by only 0.3 mpg, 

and causes the corresponding achieved 

CAFE levels to fall by 1.2 mpg (Ford) 

and 0.8 mpg (General Motors).490

It is possible, as some industry 

commenters suggested, that 

manufacturers will respond to the 

tightening of the definition by ceasing to 

build 2WD versions of SUVs, which 

could reduce fuel savings. However, 

NHTSA expects that manufacturer 

decisions will be driven in much greater 

measure by consumer demand than by 

NHTSA’s regulatory definitions. In this 

era of high gasoline prices and 

increasing consumer interest in high 

fuel economy vehicles, NHTSA believes 

that there will still be demand for 2WD 

SUVs, whether they are classified for 

CAFE purposes as passenger cars or as 

light trucks.491

Nevertheless, going further and 

reclassifying other light trucks as 

passenger cars, as some commenters 

would have NHTSA do, would change 

the form and stringency of the curves for 

the maximum feasible standards. It 

would reduce the overall average 

required CAFE level by an average of 0.1 

mpg MY 2011 and reduce lifetime fuel 

and carbon dioxide savings by about 

0.13 billion gallons and 0.64 million 

metric tons, respectively.492

Accordingly, EPCA and EISA’s 

overarching purpose of energy 

conservation would not be better 

fulfilled by further changing the vehicle 

classifications. 

4. The Vehicle Classification Definitions 

Embodied in This Final Rule Are 

Consistent With NHTSA’s Statutory 

Authority and Respond to the Ninth 

Circuit’s Opinion 

Some commenters (Public Citizen, 

Sierra Club, CBD) argued broadly that 

the standards do not reflect the fact that 

many light trucks are used as passenger 

vehicles, and that, therefore, more of 

them should be classified as passenger 

cars. NHTSA discussed at length in the 

NPRM that the fact that vehicles are 

used for personal transportation does 

not make them passenger cars for 

purposes of CAFE. The commenters’ 

argument overlooks the statutory 

definition of passenger automobile. 

Passenger automobiles were defined in 

EPCA as ‘‘any automobile (other than an 

automobile capable of off-highway 

operation) which the Secretary [i.e., 

NHTSA] decides by rule is 

manufactured primarily for use in the 

transportation of not more than 10 

individuals.’’ EPCA § 501(2), 89 Stat. 

901. The statute does not employ the 

word ‘‘used.’’ If Congress had wanted all 

vehicles used to transport passengers to 

be classified as passenger automobiles, 

it would have said ‘‘used primarily’’ in 

EPCA, instead of ‘‘manufactured 

primarily.’’ The definition of ‘‘passenger 

automobile’’ itself excludes two types of 

passenger-carrying vehicles: (1) Vehicles 

capable of off-highway operation 

regardless of whether they transport any 

number of passengers, and (2) vehicles 

manufactured primarily to transport 

more than 10 passengers. This indicates 

that Congress envisioned from the start 

of the program that some vehicles 

would be used for passenger 

transportation but, for fuel economy 

purposes, not be classified as passenger 

automobiles. Congress also authorized 

NHTSA to define, by rule, those 

vehicles ‘‘manufactured primarily’’ for 

carrying 10 or fewer passengers, 

indicating that Congress also envisioned 

that other passenger-carrying vehicles 

would be excluded from the definition 

if manufactured primarily for another 

purpose. 

NHTSA refers readers to the 

discussion in the NPRM at 73 FR 

24458–24461 (May 2, 2008) for 

additional information on this issue. See 

further the discussion of EPCA’s 

legislative history in the proposal and 

final rule establishing NHTSA’s vehicle 

definition regulation. 41 FR 55368, 

55369–55371, December 20, 1976, and 

42 FR 38362, 38365–38367, July 28, 

1977. That discussion, and not the 

incorrect and anomalous description of 

it in a preliminary notice published by 

the agency in late 2003 (68 FR 74908, 

74926, December 29, 2003), represents 

the agency’s historical position. 

NHTSA also explained in the NPRM 

that in EISA Congress specifically 

addressed the vehicle classification 

issue. It redefined ‘‘automobile,’’ added 

a definition of ‘‘commercial mediumand heavy-duty on-highway vehicle,’’ 

defined ‘‘non-passenger automobile’’ 

and defined ‘‘work truck.’’ Significantly, 

it did not change other definitions and 

its new definition of ‘‘non-passenger 

automobile,’’ which is most relevant in 

this context, in no way contradicted 

how NHTSA has long construed that 

term. In enacting EISA, Congress 

demonstrated its full awareness of how 

NHTSA classifies vehicles for fuel 

economy purposes and chose not to 

alter those classifications. That strongly 

suggests Congressional approval of the 

agency’s 30-year approach to vehicle 

classification. 

Moreover, Congress has given clear 

direction that overall objectives must be 

obtained regardless of vehicle 

classification. EISA adds a significant 

requirement to EPCA—the combined car 

and light truck fleet must achieve at 

least 35 mpg in the 2020 model year. 

Thus, regardless of whether the entire 

fleet is classified as cars or light trucks, 

or any proportion of each, the result 

must still be a fleet performance of at 

least 35 mpg in 2020. This suggests that 

Congress did not want to spend 

additional time on the subject of 

whether vehicles are cars or light trucks. 

Instead, Congress focused on mandating 

fuel economy performance, regardless of 

classifications. 

A number of commenters, including 

Sierra Club, UCS, and Honda, disagreed 

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14426 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

493See, e.g., Representative Markey’s insertions at 

153 CONG. REC. H14253 (editor’s note) and H14444 

(daily ed. Dec. 6, 2007) (statement of Cong. Markey). 

494See, e.g., In re Burns, 887 F.2d 1541 (11th Cir. 

1989). See also In re Kelly, 841 F.2d 908, 913 n. 3 

(9th Cir. 1988) (‘‘Stray comments by individual 

legislators, not otherwise supported by statutory 

language or committee reports, cannot be attributed 

to the fully body that voted on the bill. The 

opposite inference is far more likely.’’) 

495See, e.g., Sigmon Coal Co., Inc. v. Apfel, 226 

F.3d 291, 304–05 (4th Cir 2000) (quoting INS v. 

Cardoza-Fonseca, 480 U.S. 421, 432 n. 12 (1987)), 

aff’d sub. nom., Barnhart v. Sigmon Coal Co., Inc., 

534 U.S. 438 (2002), and Shannon v. United States, 

512 U.S. 573, 583 (1994). 

496NAS Report at 88; CBD, 538 F.3d at 1209. 

497See 40 CFR Part 600.002–93. 

with the idea that Congress had 

expressed approval of NHTSA’s 

classification system through its 

changes in EISA. The commenters 

argued instead that Congress’s failure to 

address NHTSA’s definitions for 

passenger car and light truck could just 

as well represent Congress’s agreement 

with the Ninth Circuit’s opinion in CBD, 

which found NHTSA’s failure to revise 

its definitions or adequately explain its 

decision not to revise them to be 

arbitrary and capricious. UCS referred to 

Representative Edward Markey’s (D– 

MA) extended comments on the Senate 

amendments to H.R. 6, which he 

submitted to the Congressional Record 

upon EISA’s passage, and in which he 

stated that 

Section 106 is intended to clarify that Title 

I does not impact fuel economy standards or 

the standard-setting process for vehicles 

manufactured before model year 2011. This 

section is not intended to codify, or 

otherwise support or reject, any standards 

applying before model year 2011, and is not 

intended to reverse, supersede, overrule, or 

in any way limit the November 15, 2007 

decision of the U.S. Court of Appeals for the 

Ninth Circuit in Center for Biological 

Diversity v. National Highway Traffic Safety 

Administration (No. 06–71891).493

Sierra Club and UCS argued that Rep. 

Markey’s extended remarks indicate that 

Congress did not intend to nullify the 

decision of the Ninth Circuit. Honda 

also argued that ‘‘If [Congress] did not 

agree with the court order, they would 

have addressed it in EISA.’’ 

NHTSA has carefully considered the 

discussion of this issue in the extension 

of remarks by Rep. Markey. No Senate, 

House, or conference reports were 

created during the legislative process 

that culminated in EISA. The floor 

statements during Congressional 

consideration of EISA are also sparse. In 

any event, however, floor statements, 

regardless of who made them, are 

entitled to less weight than conference 

reports (even if they existed here) 

because they may not represent 

statements on the final terms of a bill 

agreed to by both houses.494 Various 

members, including Representative 

Markey, also inserted material into the 

Congressional Record after floor debate. 

Materials inserted by members after 

congressional action are not indicative 

of congressional intent.495

Regardless of the weight that might be 

accorded to Rep. Markey’s remarks, 

Congress did not amend the definition 

of ‘‘passenger automobile’’ or direct the 

agency to amend the definition of that 

term in the agency’s classification 

regulation, and Rep. Markey’s remarks 

do not contradict, much less address, 

these points. 

Moreover, even if Congress’ intent 

was not to disturb the Ninth Circuit’s 

decision with regard to vehicle 

classification, NHTSA’s action is 

responsive to the Court’s concerns and 

consistent with the Court’s decision. 

The court said, ‘‘Thus, we remand to 

NHTSA to revise its regulatory 

definitions of passenger automobile and 

light truck or provide a valid reason for 

not doing so.’’ 538 F.3d at 1209. In 

reaching its conclusion, the court stated 

that NHTSA had failed to follow a NAS 

recommendation that NHTSA ‘‘tighten’’ 

its definition of light truck, ‘‘a step EPA 

has already taken for emissions 

standards purposes.’’ Id. The court did 

not indicate specifically how it thought 

NHTSA should change its definitions or 

what would constitute a valid reason for 

not doing so. 

As explained at length above, NHTSA 

has, since the court’s decision, made 

significant changes in how it applies its 

light truck definition and, in this final 

rule, in one aspect of the definition 

itself. In order to be classified as offhighway capable, a vehicle weighing 

6,000 lbs GVWR or less must actually 

have 4WD. And, only vehicles actually 

manufactured and sold without secondrow seats will be considered as having 

greater cargo-carrying volume than 

passenger-carrying volume. The first 

change has resulted in moving 

approximately 1.5 million vehicles from 

the light truck category to the passenger 

category in the years covered by this 

rule, which raises the MY 2011 

combined standards by 0.3 mpg. The 

second change will help prevent any 

gaming of the tightened definition based 

on a manufacturer’s arbitrary 

declaration of what constitutes a 

vehicle’s ‘‘base form.’’ These changes 

constitute a very significant tightening 

of NHTSA’s vehicle classification 

standards, which is what the court 

indicated was necessary. Moreover, the 

agency has also explained above in great 

detail why further changes to its 

definitions would not improve, and 

would in fact weaken, the fuel economy 

standards and accompanying fuel 

savings. 

With regard to the argument that 

EPA’s definitions are ‘‘tighter’’ than 

NHTSA’s, NHTSA notes that this is not 

an apt comparison for several reasons. 

First, the NAS Report and the Ninth 

Circuit are referring to EPA’s Tier 2 

criteria pollutant emissions 

requirements for mobile sources.496

These requirements are different from 

the CAFE requirements. The effect of 

having more light trucks on the roads 

(and thus wanting to limit their 

classification as light trucks) is greater 

for criteria pollutant emissions purposes 

than for CAFE purposes. 

Second, EPA continues to use the 

same definitions as NHTSA does for 

CAFE purposes.497 Even though EPA 

has changed its definitions for Tier 2 

purposes, the effect of those changes 

was to move only four vehicle models— 

the Chrysler PT Cruiser, the Chevrolet 

HHR, the Honda Element, and the 

Dodge Magnum—whose combined 

production is currently less than 

250,000 per year (less than 20 percent 

of the number of vehicles reclassified as 

a result of our tightening the 

implementation of our vehicle 

definitions). As discussed above, none 

of these vehicles currently come in 4WD 

or meet the 3-row fold-flat requirement, 

so as currently designed, starting in MY 

2012, NHTSA would likely classify 

these vehicles as passenger cars as well. 

And third, after MY 2009, EPA will 

have no distinction between passenger 

cars and light trucks for Tier 2 

purposes—all vehicles will be subject to 

the same standard. In summary, EPA’s 

action has little relevance to vehicle 

classification for CAFE purposes. This is 

proved by the fact that EPA ultimately 

intends to do away with the distinction 

between passenger car requirements and 

light truck requirements in Tier 2, an 

option that EPCA would not permit 

NHTSA to implement for CAFE. 

Accordingly, NHTSA believes that the 

vehicle classification standards and 

clarification of those standards 

embodied in this final rule are 

consistent with Congress’s directives in 

EPCA and EISA, and respond to the 

Ninth Circuit’s decision with regard to 

vehicle classification. 

XII. Flexibility Mechanisms and 

Enforcement 

This section addresses comments 

received on the enforcement aspects of 

the flexibility mechanisms provided by 

EPCA and EISA for manufacturers in 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14427 

498Federal Civil Penalties Inflation Adjustment 

Act of 1990, 28 U.S.C. 2461 note, as amended by 

the Debt Collection Improvement Act of 1996, Pub. 

L. 104–134, 110 Stat. 1320, § 31001(s). 

499 49 U.S.C. 32912(c). 

500UCS cited http://data.bls.gov/cgi-bin/ 

cpicalc.pl, stating ‘‘Comparison between 1975 and 

2008.’’ 

complying with the CAFE standards. 

These mechanisms include payment of 

civil penalties or fines; trade, transfer, 

and application of credits earned for 

over-compliance; and the manufacturing 

incentive for dual-fueled automobiles. 

Section VII.C.5 above addresses 

comments received with respect to how 

these flexibility mechanisms interact 

with the standard-setting process. 

Additionally, although this section does 

not repeat NHTSA’s overview in the 

NPRM of the CAFE enforcement 

program, because no comments were 

received on it, NHTSA refers interested 

readers to the discussion in that 

document at 73 FR 24461 (May 2, 2008). 

A. NHTSA’s Request for Comment 

Regarding Whether the Agency Should 

Consider Raising the Civil Penalty for 

CAFE Non-Compliance 

In the NPRM, NHTSA explained that 

the civil penalty for failing to comply 

with a CAFE standard, as adjusted for 

inflation by law,498 is $5.50 for each 

tenth of a mpg that a manufacturer’s 

average fuel economy falls short of the 

standard for a given model year 

multiplied by the total volume of those 

vehicles in the affected fleet (i.e., import 

or domestic passenger car, or light 

truck), manufactured for that model 

year. NHTSA has collected $772.9 

million in total penalties as of January 

16, 2009. 

NHTSA also explained that EPCA 

authorizes increasing the civil penalty 

up to $10, exclusive of inflationary 

adjustments, if NHTSA decides that the 

increase in the penalty— 

(i) Will result in, or substantially 

further, substantial energy conservation 

for automobiles in model years in which 

the increased penalty may be imposed; 

and 

(ii) Will not have a substantial 

deleterious impact on the economy of 

the United States, a State, or a region of 

a State.499

NHTSA explained that it did not 

intend to change the penalty in this 

rulemaking, but sought comment on 

whether it should initiate a proceeding 

to consider raising the civil penalty, 

since it recognized that paying penalties 

could be a less expensive way for 

manufacturers to comply with CAFE 

standards than by applying technology 

or by buying credits from other 

manufacturers. 

GM, Ferrari, Porsche, Volkswagen, 

Mercedes, and NADA commented that 

NHTSA should not raise fines and 

should not initiate rulemaking to 

consider doing so, because doing so 

would not substantially improve energy 

conservation. All manufacturers who 

commented on this issue took exception 

with what they considered to be 

NHTSA’s characterization in the NPRM 

that manufacturers were choosing to pay 

penalties as a strategic decision instead 

of adding fuel saving technology to their 

vehicles. Ferrari, Porsche, Volkswagen, 

and Mercedes generally argued that 

because of the nature of their products, 

increasing fines would not improve 

their vehicles’ fuel economy 

performance, due to the demands of the 

market for luxury performance vehicles. 

Volkswagen and Mercedes both stated 

that they had already employed many if 

not all of the technologies considered by 

NHTSA in the NPRM, and that higher 

penalties thus would be no incentive for 

them to apply more technology. Porsche 

and Mercedes argued that raising 

penalties would only serve to punish 

‘‘niche manufacturers’’ offering a 

limited line of vehicles. 

Mercedes also argued that NHTSA 

had suggested in the NPRM that an 

increase in civil penalties would be 

ameliorated by the new regulation 

permitting credit trading, because 

Mercedes anticipated that the credit 

trading market would not likely be very 

robust. 

NADA commented that it is 

‘‘premature’’ to initiate proceedings to 

raise the civil penalties, because ‘‘While 

historically a few manufacturers have 

found paying civil penalties to be 

substantially less expensive than 

installing fuel saving technologies, no 

evidence exists to suggest that vehicle 

manufacturers that have never paid a 

fine will choose to do so rather than 

attempt to comply with the 2011–2015 

standards.’’ NADA argued that NHTSA 

should only initiate rulemaking to 

increase penalties when it ‘‘can show 

that vehicle manufacturers are electing 

to pay fines as an alternative to 

investing in fuel saving technologies.’’ 

In contrast, UCS and ACEEE 

commented that NHTSA should raise 

fines in order to compel manufacturers 

to add more fuel economy-improving 

technologies to their vehicles. UCS 

commented that because the NPRM 

indicated that ‘‘a significant number of 

manufacturers will opt for civil 

penalties over compliance with fuel 

economy requirements,’’ thus, 

‘‘Increasing the civil penalty would 

ensure the benefits are actually 

realized.’’ UCS stated that the penalty 

has been $5 since EPCA was enacted in 

1975, and argued that ‘‘inflation has 

devalued that penalty’’ over time, such 

that ‘‘A fine of equivalent value today 

would need to be more than $20 per 0.1 

mpg.’’ 500 UCS argued that NHTSA 

should ‘‘use existing authority to 

increase the CAFE noncompliance civil 

penalty from $5 to $10 per 0.1 mpg,’’ in 

order to increase its effectiveness in 

light of the ‘‘escalating economic and 

environmental importance of energy 

conservation.’’ 

ACEEE also commented that NHTSA 

should consider raising the penalty. 

Although ACEEE recognized that 

historically ‘‘the incentive to meet CAFE 

has been for some manufacturers far 

greater than the avoided cost of CAFE 

fines, because those companies, or their 

shareholders, attach great importance to 

complying with all applicable laws,’’ it 

argued that ‘‘DaimlerChrysler’s payment 

of substantial fines for MY 2006 may 

signal increased willingness on the part 

of manufacturers to fall short of CAFE 

standards, even if this means incurring 

fines.’’ Thus, since even NHTSA 

recognized that paying penalties may be 

less expensive than applying 

technologies to meet CAFE standards, 

ACEEE concluded that NHTSA should 

consider raising the penalty. 

Agency response: NHTSA will take 

these comments into consideration in 

deciding whether to initiate rulemaking 

to raise the civil penalty for CAFE noncompliance. However, NHTSA wishes 

to respond to three points raised by 

commenters at this time. First, as 

discussed in the NPRM, the CAFE 

penalty was raised to $5.50 by 

application of an act of Congress, 

effective in model year 1998, to account 

for inflation, and prior to that was $5 

since 1975 as stated by UCS. Second, in 

contrast to Mercedes’ comments, 

NHTSA never suggested in the NPRM 

that it would consider raising penalties 

because of the additional compliance 

flexibility allowed by the credit transfer 

and trading programs. NHTSA may only 

raise penalties if doing so would ‘‘result 

in, or substantially further, substantial 

energy conservation,’’ as established by 

statute. With regard to the 

manufacturers who argued that their 

fleet mix forces them to pay penalties, 

NHTSA would like to clarify that under 

the attribute-based Reformed CAFE 

system, each manufacturer has its own 

required fuel economy level based on its 

particular mix of vehicles. NHTSA will 

continue to review the statutory criteria 

(i.e., whether increased penalties would 

substantially further energy 

conservation and the likely economic 

effects of higher penalties) in deciding 

whether to initiate rulemaking to raise 

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14428 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

501The credit provision (currently codified at 49 

U.S.C. 32903) was originally section 508 of EPCA’s 

Public Law version. 

502NAS Report, Finding 11, at 113. 

503 ‘‘Trading’’ refers to movement of credits 

between the earning manufacturer and another 

entity. ‘‘Transfer’’ refers to application of a 

manufacturer’s credits to one of its fleets other than 

the fleet in which the credits were earned. 

504Proposed § 536.5(d), at 73 FR 24485 (May 2, 

2008). 

the civil penalty for CAFE noncompliance. 

B. CAFE Credits 

As discussed in the NPRM, the ability 

to earn and apply credits has existed 

since EPCA’s original enactment,501 but 

the potential for trading credits, i.e., 

selling credits to other manufacturers or 

buying credits from them, was first 

raised in the 2002 NAS Report. NAS 

found that 

Changing the current CAFE system to one 

featuring tradable fuel economy credits and 

a ‘‘cap’’ on the price of these credits appears 

to be particularly attractive. It would provide 

incentives for all manufacturers, including 

those that exceed the fuel economy targets, 

to continually increase fuel economy, while 

allowing manufacturers flexibility to meet 

consumer preferences.502

However, as also discussed in the 

NPRM, Congress did not grant NHTSA 

authority to implement credit trading 

and transfer programs 503 until the 

passage of EISA in December 2007. 

Section 104 of EISA not only gave 

NHTSA authority to implement credit 

trading and transfer programs, but also 

extended the carry-forward period for 

credits from 3 to 5 years. 

In the NPRM, NHTSA proposed a new 

Part 536 setting up these two credit 

programs, and sought comment 

generally on (1) whether the agency had 

correctly interpreted Congress’ intent; 

(2) whether there were any ways to 

improve the proposed credit trading and 

transferring systems consistent with 

EISA and Congress’ intent that the 

agency might have overlooked; and (3) 

whether any of the aspects of the 

programs proposed by the agency were 

either inconsistent with EISA and 

Congress’ intent or the rest of the CAFE 

regulations, or were otherwise 

unworkable. 

NHTSA received a number of 

comments on the proposed Part 536, 

which the agency has divided by issue 

below. 

Comments Regarding Credits Generally 

Who may be credit holders? 

NHTSA stated in the NPRM that 

although only manufacturers may earn 

credits and apply them toward 

compliance, NHTSA would allow 

credits to be purchased or traded by 

both manufacturers and nonmanufacturers in order to facilitate 

greater flexibility in the credit market. 

NHTSA received comments regarding 

this proposed decision from AIAM, 

NADA, and the Wisconsin DNR, all of 

which were in favor of the decision, and 

generally stated that the additional 

flexibility in the credit market would 

facilitate and improve the market for 

credits. NADA cautioned that it did not 

believe the market would be particularly 

robust due to competitive concerns, but 

did suggest that the market would be 

enhanced by allowing nonmanufacturers to purchase and sell 

credits. 

Agency response: Comments favored 

the decision to allow non-manufacturers 

to be credit holders, and because 

NHTSA continues to believe that this 

broad definition of ‘‘credit holders’’ best 

serves the purposes of the credit trading 

program, this definition will be 

maintained in the final rule. 

When a manufacturer has a shortfall, 

should NHTSA automatically apply 

oldest credits first or transfer credits to 

make up that shortfall? 

In the proposed § 536.5, NHTSA 

proposed to manage some aspects of 

credit use by manufacturers 

automatically. For example, NHTSA 

would debit credits automatically from 

a manufacturer if the manufacturer fell 

below the standard in a compliance 

category, beginning with the oldest 

credits held by the manufacturer in that 

compliance category, transferring the 

oldest available credits in other 

categories if necessary, and notifying the 

manufacturer of its need to purchase 

additional credits, develop a carry-back 

plan, or pay fines if there were still 

insufficient credits to achieve 

compliance.504 NHTSA was silent in the 

preamble with respect to its rationale for 

this proposal. 

The Alliance, AIAM, Toyota, and 

Ford commented on NHTSA’s proposal 

to use a manufacturer’s oldest credits 

first and to transfer credits 

automatically if the manufacturer did 

not have sufficient credits in the 

original compliance category to make up 

the shortfall. The commenters generally 

argued that NHTSA was unduly 

restricting manufacturers’ flexibility to 

manage credits at their own discretion, 

and that such a proposal was 

inconsistent with EISA. 

The Alliance argued that the 

‘‘automatic transfer is inconsistent with 

the history of NHTSA’s administration 

of the CAFE program and EISA,’’ stating 

that ‘‘Congress intended for the 

manufacturer to manage its own 

credits’’ as ‘‘acknowledged in the 

NPRM.’’ The Alliance suggested that 

NHTSA’s explanation in the NPRM that 

manufacturers should instruct NHTSA 

which credits to transfer when it wanted 

to transfer credits indicated that the 

agency recognized manufacturers’ right 

to control credit transfers. The Alliance 

argued that ‘‘A manufacturer facing a 

shortfall in a given fleet should retain 

the flexibility to manage that shortfall as 

it sees fit, including filing a carryback 

plan, acquiring traded credits or by a 

combination of various actions.’’ 

AIAM agreed that NHTSA’s approach 

of debiting oldest credits first ‘‘should 

be followed in most cases,’’ but 

commented that in cases where ‘‘a 

manufacturer prefers to use available 

credits from some other compliance 

category or time period first, NHTSA 

should, upon request by the 

manufacturer, provide the manufacturer 

that flexibility.’’ AIAM suggested that 

manufacturers might ‘‘wish to preserve 

credits in a particular category and year 

to enhance trading opportunities or to 

comply with inter-category credit 

transfer limitations.’’ AIAM also stated 

that ‘‘nothing in [EISA] * * * mandates 

that manufacturers must use available 

credits in any particular order.’’ 

Toyota also commented that EISA did 

not specify a particular order in which 

credits should be applied, and argued 

that NHTSA should maximize flexibility 

in manufacturers’ use of credits and 

allow manufacturers to make their own 

decisions unless they made decisions 

inconsistent with the law or unless 

there was ‘‘some clear reason’’ to restrict 

flexibility. 

Ford argued that NHTSA’s proposal to 

transfer credits automatically to make 

up manufacturer shortfalls was 

‘‘inconsistent with EISA,’’ because the 

statutory language with regard to the 

credit transfer program was permissive, 

stating that the Secretary of 

Transportation shall establish a 

regulation to ‘‘allow’’ manufacturers to 

transfer credits and apply them to 

different compliance categories in order 

to achieve compliance. Ford suggested 

that the automatic transfer of credits by 

NHTSA would interfere with 

manufacturers’ flexibility to decide how 

to manage a shortfall. For example, Ford 

argued, a manufacturer may prefer to 

submit a carry-back plan rather than to 

transfer surplus credit to another 

category, and EISA did not give NHTSA 

the discretion to interfere in the 

manufacturer’s decision in that regard. 

Agency response: NHTSA did not 

intend to allocate credits without 

allowing the manufacturer an 

opportunity to comment. NHTSA agrees 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14429 

505See Letter of Interpretation to William Shapiro 

of Volvo Cars, Jan. 13, 2000, available at http:// 

isearch.nhtsa.gov/files/18644KWII.ogms.html (last 

accessed Sept. 18, 2008), and Letter of 

Interpretation to William F. Canever of Ford Motor 

Company, Oct. 22, 1990, available at http:// 

isearch.nhtsa.gov/files/2741y.html (last accessed 

Sept. 18, 2008). 

with the commenters that manufacturers 

must ultimately be responsible for how 

their shortfalls are addressed, and has 

revised the regulatory text accordingly. 

EPCA originally stated, with regard to 

conventional carry-forward/carry-back 

credits, that application of credits was 

to occur automatically (‘‘shall apply’’) if 

a manufacturer was short of the average 

fuel economy required and had credits 

available. The application of those 

credits offset any penalty to be paid by 

the manufacturer. 49 U.S.C. 32903(d). 

EISA did not change that provision. 

However, EISA did introduce the two 

new credit programs for transfers and 

trades. 

In the past, NHTSA developed carryforward plans for manufacturers 

automatically if carry-forward credits 

existed, and submitted the plan to the 

manufacturer so that it could comment 

on the proposed allocation plan. Only if 

no carry-forward credits were available 

would NHTSA ask the manufacturer to 

submit a carry-back plan or to pay a 

fine. 

Upon further review the agency has 

decided that Congress clearly intended 

to give the manufacturer an opportunity 

to comment before any application of 

credits occurs. See 49 U.S.C. 32903(d). 

Accordingly, we have revised the text so 

that instead of NHTSA allocating credits 

automatically, a manufacturer with 

credits available will be required to 

submit a credit allocation plan to offset 

its confirmed shortfall. NHTSA will 

require manufacturers to submit a plan 

whenever NHTSA is informed by EPA 

that a manufacturer has not met the 

CAFE standards in a particular 

compliance category. An enforcement 

action will be initiated each time the 

agency receives notification from EPA 

that a standard has not been met. An 

enforcement letter will be sent to the 

responsible manufacturer identifying 

available credits and requesting that a 

credit allocation plan be submitted or 

penalty be paid. NHTSA will review 

and accept plans as received and 

allocate credits accordingly. 

Should credits be denominated in mpg 

or in gallons for purposes of transfers 

and trades? 

49 U.S.C. 32903(c) indicates that 

Congress intended credits to be 

denominated in tenths of a mpg, but 49 

U.S.C. 32903(f) states that total oil 

savings must be preserved when trading 

credits. Because there is no similar 

caution that total oil savings must be 

preserved when transferring credits, 

NHTSA proposed in the NPRM to 

denominate credits in mpg rather than 

in gallons, but the agency also sought 

comment on whether transferred credits 

should be denominated in gallons to 

ensure that no transfers resulted in any 

loss of fuel savings. When using the 

terms ‘‘denominating credits in 

gallons,’’ the agency meant that credits 

be adjusted to preserve total oil savings 

as specified for credit trades in 

§ 32903(f). Section § 32903(c) defines 

credits as the number of tenths of a mile 

per gallon the average fuel economy of 

a fleet exceeds the standard times the 

number of vehicles in that 

manufacturer’s fleet. Therefore, credits 

should always be denominated in miles 

per gallon. In the comments below, 

those who argue that credits should be 

denominated in mpg are opposing any 

adjustment to credit transfers to prevent 

losses in fuel savings. 

The Alliance, AIAM, NADA, and 

Toyota commented that NHTSA should 

denominate credits in mpg. The 

commenters generally argued that 

because § 32903(c) indicates that credits 

are to be denominated in tenths of mpg, 

and because Congress did not specify in 

EISA that oil savings must be preserved 

in credit transfers, the agency should 

not attempt to read anything into the 

statute that is not plainly there. AIAM 

also stated that, ‘‘Using different units 

for transferred credits and other credits, 

as mentioned by the agency, would 

create unnecessary confusion and could 

create accounting problems.’’ Toyota 

argued that ‘‘Since Congress specified 

the application of an adjustment factor 

for traded credits but did not specify 

such a requirement for transferred 

credits, the clear intent of Congress is 

that it intended transferred credits to be 

calculated in the same manner as 

carryforward/carryback credits.’’ 

Honda and EDF commented that 

NHTSA should denominate credits in 

gallons rather than in mpg. Honda 

stated that ‘‘trading MPG will erode the 

total fuel/GHG reductions, which is not 

appropriate,’’ and argued that EISA did 

not prohibit trading credits in gallons 

instead of mpg, because it simply 

addresses the maximum increase that 

manufacturers may obtain from 

transferred credits, not the maximum 

decrease. 

EDF commented that denominating 

credits in gallons instead of mpg 

‘‘would be a more straightforward and 

simple way for the Agency to ensure 

that total oil savings are preserved in 

trading, banking and borrowing of CAFE 

credits,’’ and would also ‘‘maximize the 

environmental integrity of the 

program.’’ EDF stated that NHTSA had 

correctly identified the risk that 

‘‘increasing fuel economy by one mpg at 

a higher fuel economy level results in 

less oil savings (and therefore less 

reductions in GHGs) than increasing 

fuel economy by one mpg at a lower fuel 

economy level.’’ EDF argued that in 

order to promote the need of the nation 

to conserve energy, ‘‘Expressing CAFE 

credits in gallons of fuel saved, rather 

than in mpg, would be a natural, and 

less confusing, way to present the oil 

saving benefits from exceeding the 

standard (or the ‘oil-saving-deficit’ as a 

result of non-compliance).’’ 

Agency response: From the discussion 

above, it is clear that credits must be 

denominated in mpg per § 32903(c)(1). 

The question is whether all credits, 

traded and transferred, should be 

adjusted to preserve fuel oil savings. As 

discussed, § 32903(c) states that credits 

are earned in tenths of a mile per gallon; 

§ 32903(d) and (e) refer to applying 

credits on a mile per gallon basis, 

§ 32903(f) states that total oil savings 

must be preserved only when credits are 

traded. There is no other clear 

expression of congressional intent in the 

text of the statute suggesting that 

NHTSA would have authority to adjust 

transferred credits, even in the interest 

of preserving oil savings. However, the 

goal of the CAFE program is energy 

conservation; ultimately the U.S. would 

reap a greater benefit from ensuring that 

fuel oil savings are preserved for both 

trades and transfers. Furthermore, 

accounting for traded credits differently 

than for transferred credits does add 

unnecessary burden on program 

enforcement. Thus, NHTSA will adjust 

credits both when they are traded and 

when they are transferred so that no loss 

in fuel savings occurs. 

Comments Regarding Carry-Forward/ 

Carry-Back Credits 

When should EISA’s extension of the 

carry-forward period from 3 to 5 years 

take effect? 

When Congress changed the carryforward period from 3 to 5 years in 

EISA, it did not clearly specify to which 

credits that change was to apply. EISA’s 

effective date was December 20, 2007, 

and NHTSA has historically defined the 

model year as beginning on October 1 of 

the previous calendar year (thus, the 

agency would define MY 2008 as 

beginning on October 1, 2007).505 In the 

NPRM, NHTSA concluded that because 

EISA was enacted in the middle of MY 

2008, the best interpretation of when the 

extension of the carry-forward period 

should take effect was to apply it only 

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14430 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

506 73 FR 24487 (May 2, 2008); proposed section 

49 CFR 536.9(d). 

to vehicles manufactured in or after MY 

2009. Interpreting the change as 

applying to all subsequent MY 2008 

vehicles would have required the 

agency to find some way to prorate the 

change in credit lifespan, which the 

agency concluded would present 

considerable administrative difficulty, 

especially given that credits are 

denominated by year of origin and not 

month and year of origin. Thus, the 

agency added regulatory text stating that 

credits earned in MY 2008 or before had 

a 3-year carry-forward lifespan, and 

credits earned in MY 2009 or later had 

a 5-year carry-forward lifespan. 

AIAM, Toyota, Chrysler, and NADA 

commented on this issue, and all argued 

that Congress intended the 5-year carryforward provision to be effective 

concurrent with EISA’s effective date. 

AIAM stated that it believed that any 

credits earned and not expired as of the 

effective date of EISA, including MY 

2005–2007 credits, must be available for 

use in any of the five following model 

years. AIAM argued that if Congress had 

intended the 5-year carry-forward 

period to begin in MY 2009, it would 

have included such a limitation, as it 

included the provision disallowing 

transfers of credits earned before MY 

2011. AIAM thus concluded that to 

maximize flexibility in use of credits, 

‘‘enhancements to the credit system 

mandated by Congress must be made 

effective immediately, except where 

Congress has specified otherwise.’’ 

Toyota also commented that because 

Congress included an express start date 

for credit transfers, it must have 

intended that the 5-year carry-forward 

provision be effective on EISA’s 

effective date. Toyota argued that 

Congress did address which credits 

could be used for 5-year carry-forward 

plans by stating in 49 U.S.C. § 32903(a) 

that when a manufacturer earns credits 

under this section, those ‘‘credits may 

be applied to— 

(1) Any of the 3 consecutive model 

years immediately before the model year 

for which the credits are earned; and 

(2) to the extent not used by 

paragraph (1) of this subsection, any of 

the 5 consecutive model years 

immediately after the model year for 

which the credits are earned. (Toyota’s 

emphasis) 

Toyota argued that Congress thus 

‘‘clearly identifies the credits that are 

available for the 5-year carry-forward 

provision as being those that are not 

applied to the 3-year carry-back 

provision,’’ and that Congress put no 

other limitation on when the 5-year 

carry-forward credits may be used. 

Toyota concluded that because the 

intent of Congress is clear in the 

statutory language, the agency has no 

room for interpretation under Chevron. 

NADA also commented that ‘‘Credit 

system changes set out in EISA should 

take effect immediately, except as 

otherwise specified.’’ NADA argued that 

even though the transfer provisions 

‘‘may not take effect until MY 2011, any 

existing and future earned credits 

should immediately be available for the 

new five year carry-forward period and 

for trading.’’ 

Chrysler also commented that because 

Congress had chosen to put specific 

effective dates in some credit provisions 

but not in the carry-forward provision, 

the 5-year carry-forward provision must 

be applicable to MY 2008 credits. 

Chrysler argued that NHTSA’s 

arguments regarding the difficulty of 

prorating MY 2008 credits were 

unavailing, because NHTSA could 

simply apply the 5-year carry-forward 

provision to all credits earned in MY 

2008 and after. Chrysler further argued 

that NHTSA has ‘‘not felt it necessary to 

pro-rate credits (or penalties) when 

transfers of ownership take place, 

instead assigning the full year’s credits 

(or penalties) to a single manufacturer, 

as agreed to among the parties 

involved.’’ Chrysler also stated that 

‘‘when carry-forward/carry-back credits 

were extended from 1 to 3 years as a 

result of the Automobile Fuel Efficiency 

Act of 1980 * * * NHTSA did not see 

any need to pro-rate credits. Instead, the 

agency’s final rule [ ] had an 

immediate effective date.’’ Chrysler 

suggested that if the agency is 

determined to prorate the MY 2008 

credits, ‘‘it can simply divide the 

number of days after enactment but 

before October 1, 2009 (which is 285 

days) by 365 and then multiply the 

credits earned in MY 2008 by the 

resultant (0.781).’’ 

Agency response: NHTSA has 

decided to revise the implementation of 

the 5 year carry-forward allowance by 

changing the effective date from MY 

2009 to MY 2008. As discussed, because 

EISA was enacted in the middle of MY 

2008, NHTSA concluded in the NPRM 

that the best interpretation of this 

change in lifespan was to apply it only 

to vehicles manufactured in or after MY 

2009, because the alternative of finding 

some way to prorate the change in 

lifespan presented considerable 

administrative difficulties. 

However, 49 U.S.C. 32903(b)(2) 

specifies that credits are available to a 

manufacturer at the end of the model 

year in which earned. Due to the fact 

that the MY 2008 credits were not 

finalized when EISA became effective, 

the agency agrees that it is reasonable to 

begin the 5-year carry-forward provision 

in MY 2008. The agency does not 

believe that this provision should be 

applied to all unexpired credits (MYs 

2005–2007) as suggested by AIAM, but 

only to those credits that are actually 

earned in MY 2008 or after. 

Can carry-forward/carry-back credits not 

acquired by trade or transfer be used to 

meet the minimum domestic passenger 

car standard? 

Through EISA, Congress clearly 

intended to limit the use of traded or 

transferred credits by manufacturers in 

order to achieve compliance with the 

minimum domestic passenger car 

standards specified in Section 102(b)(4). 

See Section 104(a)(4), codified (in 

relevant part) at 49 U.S.C. § 32903(f)(2) 

and (g)(4), respectively. In NHTSA’s 

proposed regulatory text, the agency 

included these prohibitions, and also 

stated as follows: 

If a manufacturer’s average fuel economy 

level for domestically manufactured 

passenger cars is lower than both the 

attribute-based standard and the minimum 

standard, then the difference between the 

attribute-based standard and the minimum 

standard may be relieved by the use of 

credits, but the difference between the 

minimum standard and the manufacturer’s 

actual fuel economy level may not be 

relieved by credits and will be subject to 

penalties.506

NHTSA did not explain its reasoning in 

the NPRM for this provision, which 

prompted comments from a number of 

companies, including the Alliance, 

Chrysler, Ford, GM, and Toyota. 

The commenters stated that the 

proposed § 536.9(d) improperly 

prevents manufacturers from employing 

carry-back and carry-forward credits to 

meet the minimum domestic passenger 

car standard. The commenters argued 

that Congress only explicitly prohibited 

the use of traded and transferred credits 

to meet the minimum domestic 

passenger car standard, but did not 

explicitly prohibit the use of originating 

manufacturer carry-forward/-back 

credits, and that therefore NHTSA 

should not assume that Congress 

intended more than it expressly stated. 

The commenters further stated that 

NHTSA was unduly and unnecessarily 

restricting manufacturers’ flexibility in 

using credits to meet the standards, 

when the purpose of the carry-forward/ 

carry-back allowances was to maximize 

flexibility. 

Chrysler further argued that although 

‘‘NHTSA may have assumed that the 

use of the word minimum [in EISA 

§ 102(b)(4)] might imply that the actual 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14431 

507Chrysler cited 49 CFR 531.2 and 533.2. 

level of the standard each year may be 

attained to ensure compliance,’’ this 

would be inconsistent with NHTSA’s 

own regulations that allow the use of 

credits to meet average fuel economy 

standards for cars and light trucks that 

NHTSA refers to as ‘‘minimum’’ 

levels.507 Chrysler suggested that the 

minimum domestic passenger car 

standard was simply a ‘‘new category’’ 

of standards, and that ‘‘allowing the use 

of carry-forward/carry-back credits does 

not spoil the statutory scheme nor does 

it result in reduced fleet fuel economy, 

since credits for exceeding the 

minimum standard must ultimately be 

earned.’’ 

Ford also further argued that because 

the compliance provision of EPCA, 49 

U.S.C. 32911(b), includes all fuel 

economy standards under § 32902, and 

states that ‘‘Compliance is determined 

after considering credits available to the 

manufacturer under section 32903 of 

this title,’’ that credits may be used to 

meet the minimum domestic passenger 

car standard just as they may be used to 

meet the passenger car and light truck 

standards. 

Agency response: NHTSA agrees with 

the commenters that Congress did not 

clearly establish in EISA that carryforward and carry-back credits may not 

be used to comply with the minimum 

domestic passenger car standard, unlike 

traded and transferred credits which 

clearly may not be used, per 

§ 32903(f)(2) and (g)(4). As Ford argued 

in its comments, 49 U.S.C. 32903(a), 

which provides for the carry-forward 

and carry-back periods, expressly states 

that credits may be earned for exceeding 

‘‘an applicable average fuel economy 

standard under subsections (a) through 

(d) of section 32902.’’ Congress included 

the minimum domestic passenger car 

standard requirement in § 32902(b)(4), 

which may suggest that Congress both 

intended for manufacturers to be able to 

earn credits for exceeding it, and to be 

able to use carry-forward and carry-back 

credits to achieve compliance with it. 

NHTSA has some concern that if the 

purpose of the minimum domestic 

passenger car standard required by 

Congress is to ensure a certain 

minimum level of fuel savings, that 

Congress may not have intended that 

credits be used to meet it, but NHTSA 

accepts that the language of the statute 

does not clearly indicate such a lack of 

intent. 

A manufacturer’s actual CAFE value 

may be above or below both or only one 

of its corresponding attribute-based or 

minimum standards. Also, a 

manufacturer’s attribute-based standard 

may be above or below its 

corresponding minimum standard. For 

each situation it must be clear how 

credits can be earned and allocated. 49 

U.S.C. § 32903(a) states that credits are 

earned when a manufacturer ‘‘exceeds 

an applicable average fuel economy 

standard under subsections (a) through 

(d) of section 32902,’’ which appears to 

include the minimum domestic 

passenger car standard under 

32902(b)(4). To determine a credit 

excess or shortfall, a manufacturer’s 

actual CAFE value is compared against 

either the attribute-based standard value 

or the minimum standard value, 

whichever is larger. Also, if a 

manufacturer’s actual CAFE value is 

less than the minimum standard, only 

conventional carry-forward and carryback credits earned by the originating 

manufacturer can be used to offset the 

shortfall between the actual CAFE value 

and the minimum standard. 

Whether Pre-MY 2011 Passenger Car 

Credits May Be Carried Forward for 5 

Years 

AIAM requested that ‘‘NHTSA 

confirm that pre-2011 passenger auto 

credits, which are compiled separately 

for domestic and import fleets of a 

manufacturer, may be carried forward 

into 2011 and later years (subject to the 

5 year limitation).’’ 

Agency response: As NHTSA 

explained above, the agency has 

decided to apply the 5-year carryforward provision to all credits earned 

in MY 2008 and after. Thus, credits 

earned in MYs 2008, 2009, and 2010 

would be available to manufacturers 

through MY 2013, 2014, and 2015, 

respectively. However, credits earned 

before MY 2008 remain subject to the 3- 

year carry-forward lifespan, which 

means that a credit earned in MY 2007 

would expire at the end of the MY 2010 

model year, and not be available for MY 

2011 or later. 

Whether There is a Cut-Off Date for 

Consideration and use of Carry-Back 

Credits 

AIAM also requested that NHTSA 

confirm that the proposed § 536.7(e) ‘‘is 

not intended to establish an arbitrary 

cut-off date for consideration of carryback credits.’’ The proposed § 536.7(e) 

states that carry-back credits ‘‘from any 

source’’ may not be used for compliance 

more than three years after the noncompliance. AIAM argued that because 

‘‘Precise final CAFE values are not 

established by the end of a model year,’’ 

and because ‘‘Final determination of 

CAFE may be delayed for a significant 

period of time, due to the need for EPA 

to verify the data and to report to 

NHTSA,’’ that therefore ‘‘Manufacturers 

should be permitted to develop a 

compliance approach based on credits, 

even if the final accounting takes place 

more than 3 years after the 

noncompliance.’’ AIAM concluded that 

‘‘A manufacturer should not be 

prohibited from carrying back credits for 

the three model year period based on 

administrative delays in establishing 

final CAFE calculations.’’ 

Agency response: NHTSA did not 

intend for the proposed § 536.7(e) to 

suggest that the agency meant to change 

the 3-year carry-back provision. As 

specified in § 536.7(a), credits earned in 

any model year may be used in carryback plans approved by NHTSA, 

pursuant to 49 U.S.C. § 32903(b), for up 

to three model years prior to the years 

in which the credits were earned. As 

further specified in § 536.7(c), NHTSA 

will determine ultimate compliance 

with the approved carry-back plan upon 

receipt of the final verified CAFE model 

year figures received from EPA. NHTSA 

recognizes that because manufacturers 

have 90 days after the end of the model 

year to submit final CAFE fleet numbers 

to EPA, and because it may take up to 

several months after that before EPA can 

validate the final data and report back 

to the manufacturer and NHTSA, it is 

possible that the literal 3-year period 

may be exceeded. NHTSA will revise 

the regulatory text to clarify that there 

is no expiration or cut-off date 

associated with this process or with 

available carry-back credits. 

Comments Regarding Credit Trading 

Issues 

When should the credit trading program 

begin? 

In the NPRM, NHTSA proposed to 

begin the credit trading program with 

credits earned in MY 2011 or later. 

AIAM commented that because EISA 

established a 2011 effective date for 

credit transfers, but added no specific 

effective date for credit trades, Congress 

must have intended ‘‘to not limit the 

trading system.’’ Thus, AIAM supported 

an immediate effective date for trading 

of all credits in existence as of 

December 20, 2007. 

Agency response: NHTSA disagrees 

with AIAM that it must allow all credits 

in existence as of December 20, 2007 to 

be immediately tradable. Although 

Congress mandated in EISA that 

NHTSA establish a credit transfer 

program, it gave the agency discretion to 

establish a credit trading program. Part 

of the agency’s discretion in establishing 

a credit trading program lies in deciding 

when it should begin. While NHTSA 

supports flexibility in manufacturer use 

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14432 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

of credits, NHTSA believes that it is 

logical for credit trading to begin in MY 

2011, at the same time as the new 

standards take effect, and be limited to 

credits earned in or after MY 2011. 

Allowing credit trading to include 

credits earned prior to MY 2011 could 

provide a windfall of credits for 

manufacturers currently exceeding, for 

example, the 27.5 mpg passenger car 

standard, which NHTSA believes would 

be inconsistent with Congress’ intent in 

allowing the agency to develop a credit 

trading program. Additionally, for ease 

of implementation and management of 

the credit trading and transferring 

programs, the agency continues to 

believe that both programs should 

commence for credits earned after 2010, 

as Congress has stipulated for 

transferred credits. 

How should NHTSA calculate the 

adjustment factor to preserve total oil 

savings? 

Congress stated in EISA that any 

credit trading program established must 

be set up ‘‘such that the total oil savings 

associated with manufacturers that 

exceed the prescribed standards are 

preserved when trading credits to 

manufacturers that fail to achieve the 

prescribed standards.’’ EISA Sec. 104, to 

be codified at 49 U.S.C. § 32903(f)(1). 

NHTSA explained in the NPRM that 

EISA requires total oil savings to be 

preserved because one credit is not 

necessarily equal to another, as 

Congress realized. For example, the fuel 

savings lost if the average fuel economy 

of a manufacturer falls one-tenth of a 

mpg below the level of a relatively low 

standard are greater than the average 

fuel savings gained by raising the 

average fuel economy of a manufacturer 

one-tenth of a mpg above the level of a 

relatively high CAFE standard. 

In order to ensure that total oil 

savings are preserved in credit trades, 

NHTSA proposed to subject traded 

credits to an adjustment factor. NHTSA 

explained that the effect of applying the 

adjustment factor would be to increase 

the value of credits that were earned for 

exceeding a relatively low CAFE 

standard and are intended to be applied 

to a compliance category with a 

relatively high CAFE standard, and to 

decrease the value of credits that were 

earned for exceeding a relatively high 

CAFE standard and are intended to be 

applied to a compliance category with a 

relatively low CAFE standard. NHTSA 

proposed to multiply the value of each 

credit (with a nominal value of 0.1 mpg 

per vehicle) by an adjustment factor 

calculated by the following formula: 

/ . A

VMTe

MPGe MPGe

VMTu

MPGu

=

∗ ⎛

⎝

⎜ ⎞

⎠

⎟ − −

⎛

⎝

⎜ ⎞

⎠

⎟ ⎛

⎝

⎜ ⎞

⎠

⎟

∗ ⎛

⎝

⎜ ⎞

⎠

⎟ −

1 1

0 1

1 1

MPGu − 0 1

⎛

⎝

⎜ ⎞

⎠

⎟ ⎛

⎝

⎜ ⎞

⎠

⎟

⎛

⎝

⎜

⎜

⎜

⎜

⎞

⎠

⎟

⎟

⎟

⎟ .

Where A = adjustment factor applied to 

traded credits by multiplying mpg for a 

particular credit; 

VMTe = lifetime vehicle miles traveled for 

the compliance category in which the 

credit was earned (152,000 miles for 

domestic and imported passenger cars; 

179,000 miles for light trucks); 

VMTu = lifetime vehicle miles traveled for 

the compliance category in which the 

credit is used for compliance (152,000 

miles for domestic and imported 

passenger cars; 179,000 miles for light 

trucks); 

MPGe = fuel economy standard for the 

originating manufacturer, compliance 

category, and model year in which the 

credit was earned; 

MPGu = fuel economy standard for the 

manufacturer, compliance category, and 

model year in which the credit will be 

used. 

NHTSA further explained it was 

proposing to use the fuel economy 

standard in the formula rather than the 

actual fuel economy or some average of 

the two, primarily because we believe it 

will be more predictable for credit 

holders and traders. However, we 

sought comment on those two 

alternatives, since they may be more 

precise in their ability to account for 

fuel savings. 

Several commenters addressed 

NHTSA’s proposal to use the fuel 

economy standard rather than the actual 

fuel economy in the adjustment factor 

formula. AIAM ‘‘agree[d] that 

[NHTSA’s] approach is sensible and 

facilitates record keeping,’’ and argued 

that ‘‘The proposed approach would 

encourage credit trading by valuing 

credits at a higher level, thereby 

providing an additional incentive for 

manufacturers to exceed the standards 

by substantial margins.’’ 

Cummins, Inc., commented instead 

that the adjustment factor formula 

should include ‘‘actual fuel economy’’ 

achieved by the manufacturer instead of 

‘‘target fuel economy,’’ because doing so 

‘‘would ensure that total fuel savings are 

preserved.’’ Cummins further 

commented that NHTSA should apply 

the adjustment factor to both trades and 

transfers, which would ‘‘ensure that we 

are meeting the EISA’s objective of 

reducing the United States’ dependence 

on oil. 

Wisconsin DNR commented that 

using either actual fuel economy or an 

average of actual and formula-based fuel 

economy in calculating the adjustment 

factor would be preferable to NHTSA’s 

proposed approach of using the fuel 

economy standard. Wisconsin DNR 

argued that ‘‘The proposed approach 

inflates the actual fuel economy 

achieved and reduces the net benefit in 

terms of fuel savings and pollution 

reductions.’’ 

ACEEE, in contrast, commented that 

the adjustment factor formula ‘‘does not 

ensure oil savings,’’ and that the use of 

any formula is inappropriate, because 

‘‘The increase in fuel economy in one 

compliance category needed to offset 

the additional fuel consumption 

associated with a shortfall in fuel 

economy in another compliance 

category can be expressed precisely, in 

closed form, and this should be required 

by the rule.’’ ACEEE argued that the 

formula’s use of a ‘‘linear approximation 

to a non-linear function’’ makes it 

inherently imprecise, and that that 

imprecision may result in errors that are 

‘‘far from negligible.’’ ACEEE presented 

the following example: 

If * * * one manufacturer exceeds a 22 

mpg standard by 2 mpg and wishes to trade 

credits to a manufacturer falling short of a 34 

mpg target (in a compliance category with the 

same lifetime vehicle miles traveled), the 

proposed adjustment factor would allow the 

second manufacturer to use those credits to 

comply at 29.2 mpg. The result would be that 

the extra fuel consumed by the second 

manufacturer’s vehicles exceeds the fuel 

saved by the first manufacturer’s vehicles by 

21 percent. 

ACEEE argued that this result was 

unacceptable and ‘‘inconsistent with the 

requirements of EISA.’’ 

Honda and Toyota both commented 

on the ‘‘lifetime vehicle miles traveled’’ 

estimates used as constants in the 

adjustment factor formula. Honda 

expressed concern ‘‘about the use of 

different lifetime mileage for cars versus 


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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14433 

light trucks,’’ due to the rise in fuel 

prices changing driving behavior, and 

stated that ‘‘the separate lifetime 

mileage for cars and light trucks based 

upon historical data may be 

inappropriate when applied to current 

and future markets.’’ 

Toyota commented that ‘‘NHTSA may 

need to adjust those mileage 

accumulation rates to reflect alignment 

with the types of vehicles that NHTSA 

expects to be classified as cars and 

trucks in the future,’’ suggesting that, as 

an example, ‘‘moving some portion of 

2WD SUVs to the car compliance 

category would tend to raise the average 

car lifetime mileage accumulation and 

lower the average truck lifetime mileage 

accumulation.’’ Toyota argued that ‘‘To 

the extent possible, NHTSA should 

ensure that the VMT rates in the 

adjustment equation reflect the vehicles 

in each category.’’ 

Agency response: The agency has reevaluated the adjustment factor 

proposed in the NPRM based upon the 

comments received. Various formulas 

for the adjustment factor could be 

derived in an attempt to ensure total 

fuel oil savings are preserved, which are 

dependent on assumptions made 

relating to fuel prices, rebound affects 

and vehicle miles traveled (VMT). The 

relationship between fuel (gallons) 

saved or lost as fuel economy (mpg) 

increases or decreases is non-linear. The 

effect of applying an adjustment factor 

would be to increase the value of credits 

that were earned for exceeding a 

relatively low CAFE standard and to 

decrease the value of credits that were 

earned for exceeding a relatively high 

CAFE standard. Furthermore, the fuel 

savings lost if the average fuel economy 

of a manufacturer falls one-tenth of a 

mpg below the level of a given standard 

are greater than the fuel savings gained 

by raising the average fuel economy of 

a manufacturer one-tenth of a mpg 

above the level of the same or higher 

CAFE standard. 

The NPRM formula set the adjustment 

factor at the ratio of the inverse of the 

earner’s (seller) and the user’s (buyer) 

CAFE target standard values, modified 

for the total vehicle miles traveled 

(VMT) by compliance category. For 

example, if one manufacturer had an 

attribute-weighted target standard of 21 

mpg, and another manufacturer had an 

attribute-weighted target standard of 25 

mpg, and the VMT was constant, then 

the adjustment factor was 

approximately 1.19 (the ratio of the 

inverse of the two target standard 

values, 25/21 = 1.19). This adjustment 

factor is accurate as long as the actual 

fuel economy values of the earner and 

user are close to their respective CAFE 

target standard values. However, ACEEE 

commented correctly that if the actual 

fuel economy values for the seller and/ 

or buyer are several mpg different from 

their respective target standard values, 

using only the CAFE standard in the 

adjustment factor formula could 

produce an adjustment factor that 

provides the buyer with more fuel 

savings than the seller actually saved. 

NHTSA believes that this issue can be 

resolved with a revised adjustment 

factor formula that sets the adjustment 

factor at the ratio of the average fuel 

savings per mpg achieved by the 

originating manufacturer and average 

fuel savings needed per mpg required by 

the user (which, in the case of credit 

transfers, would be the same 

manufacturer). This approach ensures 

that fuel oil savings are preserved by 

applying an adjustment to each credit 

based upon each credit’s ‘‘fuel oil 

value.’’ As an example, in a trade 

situation there is a seller (earner) who 

has excess credits to sell and a buyer 

(user) who has a credit deficit. Consider 

a seller and a buyer with the following 

situations, as described in the table 

below: 

Assume that the buyer wants to 

purchase only enough seller credits to 

offset half of its 400,000 credit shortfall. 

The buyer needs to purchase 9,437,000 

(18,874,000/2) gallons worth of credits 

from the seller. If each seller credit is 

worth 16.2357 gallons as calculated 

above then the number of seller credits 

that must be purchased by the buyer is 

(9,437,000 gal)/(16.2357 gal/credit) = 

581,250 credits 

Thus, the buyer must purchase 581,250 

credits of the seller’s 7,000,000 available 

credits. 


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14434 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

To depict this relationship as an 

adjustment factor A = (buyer gal/credit)/ 

(seller gal/credit) 

A = 47.1850/16.2357 = 2.9062 

(rounded to four decimal places) 

The buyer has to multiply the credit 

shortfall it wants to offset by the 

adjustment factor to determine the 

number of seller credits that must be 

obtained from the seller as follows: 

(200,000 credit shortfall) x (A) = 581,240 

seller credits required 

(rounded to the nearest integer) 

The following adjustment factor 

equation is derived from the above 

example: 

A = ∗ ∗

∗ ∗

⎛

⎝

⎜ ⎞

⎠

⎟ VMTu MPGae MPGse

VMTe MPGau MPGsu

Where: 

A = Adjustment Factor applied to traded or 

transferred credits to ensure fuel oil 

savings is preserved (rounded to four 

decimal places); 

VMTe = Lifetime vehicle miles traveled for 

the compliance category in which the 

credit was earned: 150,992 miles for 

domestically manufactured and 

imported passenger cars, 172,552 miles 

for light trucks; 

VMTu = Lifetime vehicle miles traveled for 

the compliance category in which the 

credit is used for compliance: 150,992 

miles for domestically manufactured and 

imported passenger cars, 175,552 miles 

for light trucks; 

MPGse = Fuel economy target standard for 

the originating manufacturer, 

compliance category, and model year in 

which the credit was earned; 

MPGae = Actual fuel economy value for the 

originating manufacturer, compliance 

category, and model year in which the 

credit was earned. 

MPGsu = Fuel economy target standard for 

the user, compliance category, and 

model year in which the credit is used 

for compliance; 

MPGau = Actual fuel economy value for the 

user manufacturer, compliance category, 

and model year in which the credit is 

used for compliance. 

The revised adjustment factor thus 

includes both actual fuel economy value 

and the fuel economy targets to which 

the buyer and seller are subject, and 

helps to ensure that total fuel savings 

are preserved in trades. Additionally, as 

discussed above, given that the 

overarching purpose of the CAFE 

program is energy conservation, the 

nation would ultimately gain greater 

energy benefits by ensuring that total 

fuel savings are preserved in both credit 

trades and credit transfers. Thus, 

NHTSA has decided to adjust credits 

both when they are traded and when 

they are transferred so that no loss of 

fuel savings occurs. The same 

adjustment factor will be calculated and 

applied to transferred credits as was 

explained above for traded credits. 

Additionally, as noted above, Honda 

and Toyota commented that the agency 

should evaluate and possibly revise the 

values of the passenger car and light 

truck total vehicle miles traveled (VMT) 

values used in the adjustment factor 

equation. 

Agency response: The agency agrees 

with the commenters that the VMT 

values should be revised. VMT is an 

important value used in the adjustment 

equation because it defines a vehicle’s 

total lifetime miles traveled. The agency 

has moved approximately 1.5 million 

MY 2011 2WD sport utility vehicles 

from the light truck fleet into the 

passenger car fleet. Also, the agency has 

moved to a higher fuel price forecast, 

which by way of the rebound effect 

lowers the VMT each year in every 

vehicle compliance category. For 

modeling purposes, four classes of VMT 

are used: passenger car, pickup, van and 

SUV. Table X–1 below shows the 

survival rates for passenger cars and 

light trucks (one survival rate applies to 

all three truck classes) and the average 

annual miles driven for each vehicle 

class. 

In general, light trucks are driven 

more miles per year and survive more 

years than passenger cars. Among the 

light truck vehicle classes, SUVs are 

driven the most miles, while vans are 

driven the least. Changes in the analysis 

from the NPRM to the final rule include 

moving over 1.5 million SUVs from MY 

2011 that were classified as light trucks 

in the NPRM to the passenger car 

classification in the final rule. This 

means that the car VMT described in the 

NPRM must be adjusted to include these 

reclassified vehicles. The light truck 

fleet VMT must also be adjusted because 

the light truck fleet now has less SUVs. 

Considering EISA’s revisions to EPCA’s 

credit carry-forward and carry-back 

provisions which allow credits to be 

used over a longer time frame, with 

greater potential variation in VMT 

factors for a given credit, NHTSA has 

concluded that VMT factors for use in 

credit calculations should reflect model 

years beyond MY 2011. Compared to 

developing VMT factors specific to MY 

2011, NHTSA believes this approach 

will better ensure preservation of fuel 

savings over time. 

Over the five model years addressed 

by the NPRM, the passenger car fleet 

now contains 47.04 million vehicles. 

There are 39.86 million vehicles that 

were classified as passenger cars in the 

NPRM (84.7 percent), plus 7.18 million 

SUVs (15.3 percent) that are reclassified 

as passenger cars in the final rule. The 

truck fleet over the five model years 

contains 35.77 million vehicles—41.4 

percent are pickups, 43.9 percent are 

SUVs, and 14.7 percent are vans. This 

reflects a reduction in SUVs in the truck 

fleet from the NPRM to the final rule. 

In each fleet, the adjusted VMT in 

each year is the sum of the vehicle 

classes weighted by survival rate and 

market share. Adjusted car VMT equals 

the car VMT times the car survival rate 

times the car market share (84.7 

percent), plus the SUV VMT times the 

SUV survival rate times the proportion 

of SUVs in the car fleet (15.3 percent). 

Adjusted Car VMTt = Car VMTt * Car 

Survivalt * 0.847 + SUV VMTt * SUV 

Survivalt * 0.153, where t denotes model 

year 

Adjusted truck VMT equals the pickup 

truck VMT times the pickup truck 

survival rate times the pickup truck 

market share (41.4 percent), plus the 

SUV VMT times the SUV survival rate 

times the proportion of SUVs in the 

truck fleet (43.9 percent), plus the van 

VMT times the van survival rate times 

the proportion of vans in the truck fleet 

(14.7 percent). 

Adjusted Truck VMTt = Pickup VMTt * 

Pickup Survivalt * 0.414 + SUV VMTt * 

SUV Survivalt * 0.439 + Van VMTt * Van 

Survivalt * 0.147, where t denotes model 

year 

Total VMT is the sum over 36 years for 

the adjusted car and truck VMT. For 

passenger cars, the adjusted VMT is 

150,922 miles. For light trucks, the 

adjusted VMT is 172,552 miles. NHTSA 

expects to reevaluate trends in vehicle 

survival and mileage accumulation in 

the future, and to adjust these VMT 

factors accordingly in future CAFE 

rulemakings. 


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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14435 

Comments Regarding Credit Transfer 

Issues 

Whether NHTSA Should Prevent 

Credits Received by Trade From Being 

Transferred in Quantities Beyond the 

Transfer Cap 

In the NPRM, NHTSA proposed to 

allow manufacturers to transfer credits 

that they had obtained by trade from 

one compliance category to another, but 

not to allow credits obtained by trade 

and subsequently transferred to be used 

to exceed the statutory cap on increases 

in a manufacturer’s fuel economy 

attributable to transferred credits under 

49 U.S.C. 32903(g)(3). 

AIAM and Volkswagen commented 

that NHTSA should not limit the benefit 

of cross-compliance category trades via 

the cap on transfers. AIAM argued that 

a trade from, for example, Manufacturer 

A’s passenger car fleet to Manufacturer 

B’s light truck fleet should be 

considered a direct trade, rather than a 

trade followed by a transfer as NHTSA 

indicated in the NPRM. AIAM stated 

that ‘‘The agency’s limitation is 

inconsistent with the express language 

of Congress in applying the maximum 

credit limit only to credit transfers.’’ VW 

argued that unlimited trading should be 

allowed because the adjustment factor is 

in place to preserve total oil savings. 

Agency response: NHTSA disagrees 

with the commenters that the example 

given by AIAM would be a direct trade 

rather than a trade followed by a 

transfer. Allowing traded credits to be 

used in the manner suggested by AIAM 

would circumvent the limit 

requirements set up by Congress for 

credit transfers. EISA provided NHTSA 

with the authority to develop a credit 

trading program along with the 

mandated credit transferring program. 

As part of the trading program, the 

agency decided not to specify limits on 

trades within the same compliance 

category. Further, the agency is 

clarifying the definition of ‘‘trade’’ in 

the regulatory text to make plain its 

intent that trades occur between 

manufacturers within the same 

compliance category only. Still, the 

agency believes that the limits that 

apply to transfers should apply to all 

transfers, including the transfer of 

credits earned by an originating 

manufacturer between its compliance 

categories and transfers of credits 

acquired by trade. 

Further, NHTSA believes that VW is 

mistaken that the adjustment factor 

means that trading may be unlimited. 

The traded credit adjustment factor and 

the limits applied to transferred credits 

are two separate requirements. The 

adjustment factor is applied to ensure 


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14436 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

508 49 U.S.C. 32906(a). NHTSA notes that the 

incentive for dedicated alternative-fuel 

automobiles, automobiles that run exclusively on 

an alternative fuel, at 49 U.S.C. § 32905(a), was not 

phased-out by EISA. 509Available at http://www.nhtsa.gov/staticfiles/ 

DOT/NHTSA/Vehicle%20Safety/Test%20

Procedures/Associated%20Files/TP%20537–

00%20Draft.pdf (last accessed Oct. 1, 2008). 

that credit values are standardized 

across different manufacturers, which 

ultimately preserves total oil savings. 

The credit transfer limits, in contrast, 

ensure that only a specified amount of 

a manufacturer’s noncompliant fuel 

economy value can be offset by 

transferred credits. A traded credit that 

is subsequently transferred for 

compliance is adjusted to ensure total 

oil saving is preserved and is subject to 

the transfer limitations of Section 

536.5(d)(3). 

C. Extension and Phasing out of 

Flexible-Fuel Incentive Program 

NHTSA explained in the NPRM that 

EPCA encourages manufacturers to 

build alternative-fueled and dual-fueled 

vehicles by using a special, statutorilyspecified calculation procedure for 

determining the fuel economy of these 

vehicles. The fuel economy calculation 

is based on the assumption that the 

vehicle operates on the alternative fuel 

a significant portion of the time. This 

approach gives such vehicles a muchhigher fuel economy level compared to 

similar gasoline-fueled vehicles, and 

lets those vehicles be factored into a 

manufacturer’s general fleet fuel 

economy calculation, but only to the 

extent that the overall fleet fuel 

economy rises 1.2 mpg per compliance 

category in a model year. 

Congress extended the incentive in 

EISA for dual-fueled automobiles 

through MY 2019, but provided for its 

phase out between MYs 2015 and 

2019.508 The maximum fuel economy 

increase which may be attributed to the 

incentive is thus as follows: 

NHTSA further explained in the 

NPRM that 49 CFR Part 538 implements 

the statutory alternative-fueled and 

dual-fueled automobile manufacturing 

incentive, and that NHTSA was not 

proposing to amend Part 538 in this 

rulemaking to reflect the changes in 

EISA, but that the agency would 

undertake this task in a future 

rulemaking. 

NHTSA received two comments on 

this issue. Cummins, Inc. stated that it 

‘‘supports the continuation of the flexfuel credit,’’ because ‘‘The use of 

alternative fuels such as biodiesel can 

reduce the dependence on foreign oil 

and produce domestic economic 

benefits for local producers of these 

fuels.’’ 

The Alliance commented that despite 

NHTSA’s statement in the NPRM that it 

would not be including changes to Part 

538 in this rulemaking, it would ‘‘not be 

difficult to implement’’ changes in this 

rulemaking, and would not require 

supplemental notice and comment. The 

Alliance offered proposed text 

amending 49 CFR § 538.9, and argued 

that the proposal was simply a 

‘‘ministerial implementation of 49 

U.S.C. § 32906(a),’’ as ‘‘Existing Section 

538.9 of the Title 49 Code of Federal 

Regulations is clearly a ministerial 

application of EPCA.’’ 

Agency response: NHTSA agrees with 

the Alliance that amending 49 CFR 

§ 538.9 would be simply a ministerial 

implementation of 49 U.S.C. § 32906(a), 

but reiterates that it will undertake this 

task in a near-future rulemaking. 

Meanwhile, to the extent that 49 U.S.C. 

32906(a) differs from 49 CFR 538.9, the 

statute supersedes the regulation, and 

regulated parties may rely on the text of 

the statute. NHTSA appreciates the 

comment from Cummins, but notes that 

the decision to extend the 

manufacturing incentive was that of 

Congress and not of the agency. 

XIII. Test Procedure for Measuring 

Wheelbase and Track Width and 

Calculating Footprint 

The reformed CAFE program requires 

manufacturers to use vehicle wheelbase 

and track width data to establish target 

standards for each of its compliance 

categories. Manufacturers are required 

to provide these data to the agency in 

the pre-model year reports as specified 

in 49 CFR part 537, ‘‘Automotive Fuel 

Economy Reports.’’ As part of its 

assigned CAFE responsibilities, 

NHTSA’s Office of Vehicle Safety 

Compliance (OVSC) is establishing a 

program to validate the wheelbase and 

track width data for selected vehicle 

configurations (models). As mentioned 

in the NPRM, the OVSC has developed 

a draft test procedure for measuring 

production vehicle wheelbase and track 

width dimensions. This test procedure 

was made available on NHTSA’s 

website.509 It will be used by NHTSA 

and will not be a requirement that 

manufacturers must follow. 

Accordingly, NHTSA is not required to 

provide notice and an opportunity to 

comment on its procedure. 

Nevertheless, the agency sought 

comments in the NPRM on the draft test 

procedure. In response, the Alliance and 

SEA, Ltd., submitted comments that are 

categorized into three subject areas, 

including test procedure execution, 

measured value tolerances, and 

administrative or editorial issues. All of 

the comments were considered. An 

updated revision to the procedure will 

be posted on the NHTSA web site 

concurrent with the final rule. 

Following is a brief discussion of the 

key issues in each of these three areas. 

A. Test Procedure Execution 

The Alliance commented that the base 

tires and test weight should be 

confirmed prior to executing the test. 

Vehicle track width is determined with 

a vehicle equipped with the base tire. 

The test procedure already included 

identification of the base tire 


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information. However, in response to 

the Alliance’s comment, we are 

modifying 49 CFR Part 537 to include a 

requirement for manufacturers to 

provide base tire information in their 

pre-model year CAFE reports. As for 

confirming the vehicle weight, it is 

NHTSA’s intent to conduct testing at the 

vehicle’s unloaded vehicle weight. The 

test procedure has been revised to 

specify this loading condition. 

Additionally, NHTSA does not 

currently have a definition for ‘‘base 

tire.’’ Recent discussions with 

manufacturers have indicated to the 

agency that there is some confusion 

with regard to what the term means. 

Since different tire sizes may affect 

vehicle track width, and thus affect 

footprint, a precise definition for ‘‘base 

tire’’ is necessary to prevent gaming. A 

definition has been added to 49 CFR 

523.2. 

The Alliance further stated that the 

actual measurement point for the track 

width is under the tire at the geometric 

center of the tire tread patch when in 

contact with the ground (tire to ground 

interface). NHTSA’s draft procedure, 

which called for measuring the track 

width at the front center of the front 

tires and at the rear center of the rear 

tires at ground level, provided a means 

for measuring the approximate front and 

rear track widths. The differences 

between the two measurement 

techniques are unknown but would be 

impacted by camber and toe angles. 

NHTSA has evaluated other approaches 

that may be more accurate for measuring 

the vehicle track width. The Alliance 

suggested a possible technique of rolling 

the vehicle over an impressionable 

material and measuring the 

perpendicular distance between the 

corresponding axle tire patch tread 

centers. A second technique for 

determining the track width from the 

geometric center of the tire tread patch 

was provided in the comments from 

SEA, Ltd. SEA, Ltd. has been 

conducting track width and wheelbase 

measurements for NHTSA’s NCAP 

rollover static stability factor (SSF) 

program for the past seven years. The 

NCAP procedure involves measuring 

the inside and outside, front and rear 

width dimensions between the tires on 

each axle and then averaging those 

measured dimensions to calculate an 

accurate front and rear axle track width. 

Averaging the measurements mitigate 

the potential for measurement errors 

caused by a vehicle’s toe and camber 

angles. NHTSA has decided to follow 

the approach used by the NCAP and has 

revised the test procedure accordingly. 

The Alliance also commented on the 

procedure used to verify that the front 

tires are pointed in the forward 

direction during testing. NHTSA agrees 

that placement of tires, including 

steering angle and suspension 

adjustments can have an impact on 

measured results. During testing the 

front tires will be placed in a ‘‘straight 

ahead position’’ parallel to the 

longitudinal axis of the vehicle, 

although the agency does not believe 

that it is necessary to specify particular 

tolerances. The test procedure has been 

modified to include an additional step 

of rolling the vehicle in a straight line 

forward and backwards once positioned 

on the test surface to ensure any steering 

and suspension loading and imbalances 

caused from steering the vehicle onto 

the test surface are removed. 

Furthermore, NHTSA is confident that 

by adopting the NCAP test technique 

the placement of the front tires is no 

longer a critical issue affecting the track 

width measurements. 

B. Measured Value Tolerances 

The Alliance questioned what 

tolerances the agency will allow 

between manufacturer-provided 

wheelbase, track width and footprint 

data, and the corresponding agencymeasured and -calculated wheelbase, 

track width and footprint data. The 

Alliance argued that just being off by 1⁄8- 

inch for the wheelbase and 1⁄8-inch for 

the track width can result in a 0.2 

square foot difference in footprint. 

NHTSA understands that both test 

instrumentation accuracy and the 

inherent measurement variations 

between design dimensions and 

physical measurements must be 

considered when determining an 

acceptable tolerance between 

manufacturer-reported data and 

NHTSA-measured data. In the short 

term, the agency plans to collect 

physical data by measuring wheelbase 

and track width dimensions of 

production vehicles in the field. Also, 

the agency is in the process of asking 

each manufacturer for data relating to 

known tolerances between design and 

production measurements and 

analyzing the tolerances from the 

vehicles measured by the NCAP 

program. The agency plans to collect 

and analyze these data along with the 

field data to understand better the 

tolerances that can be expected. NHTSA 

plans to revise its test procedure 

accordingly to address the issue raised. 

The Alliance also expressed concern 

with the accuracy of the hand level and 

tape measure proposed to be used in the 

draft test procedure, and argued that 

more accurate means exist and should 

be employed in order to eliminate any 

sources that would cause discrepancies 

between design data and field 

measurements. The agency agrees with 

the Alliance and has identified more 

accurate instrumentation that is now 

referenced in the test procedure and 

will be used for measuring wheelbase 

and track width dimensions. Further 

research is ongoing to identify 

instrumentation that can be easily 

adapted to this kind of application. The 

agency is open to any further 

suggestions that the Alliance or anyone 

else has for identifying other 

inexpensive and portable tools and 

instrumentation that can be used with a 

high level of accuracy and repeatability 

for making field measurements. When 

instrumentation changes are made the 

NHTSA test procedure will reflect them 

accordingly. 

The Alliance also commented that 

wheelbase and track width 

measurement procedures round the 

measurements to a finer level than is 

repeatable. The Alliance appeared to be 

referencing the statements in the test 

procedure which allow for recording the 

track width and wheelbase 

measurements to the nearest 1⁄8-inch 

and then rounding to the nearest 1⁄10- 

inch. Measuring the wheelbase and 

track width in inches and rounding to 

the nearest 1⁄10-inch is required by the 

definition of footprint as specified in 49 

CFR Part 523. The test procedure has 

been revised to remove references to 

recording the measurements to the 

nearest 1⁄8′′ and now incorporates 

making the measurement to a more 

precise value of millimeters that 

correlates to the measuring instruments 

the agency has decided to use. However, 

the test procedure will retain 

requirements for rounding wheelbase 

and track width measurements to the 

nearest 1⁄10-inch after converting from 

metric units to English units. 

C. Administrative and Editorial Issues 

The Alliance suggested that the test 

procedure reference SAE J1100 (W101). 

‘‘L101 Wheelbase’’ and ‘‘W101–1, 2 

Tread Width Front & Rear Tires’’ are the 

applicable SAE items equivalent to the 

agency’s definitions of wheelbase and 

track width in Part 523. The Alliance 

argued that the use of these dimensions 

is a standard practice for the industry 

and should be incorporated in NHTSA’s 

test procedure. 

In response to the Alliance’s 

comment, the agency notes that the 

definitions for wheelbase in SAE J1100 

and 49 CFR part 523 are the same. Both 

SAE J1100 and 49 CFR 523.2 define 

‘‘wheelbase’’ as the longitudinal 

distance between front and rear wheel 

centerlines. However, differences exist 

in SAE J1100 and the Part 523 

mstockstill on PROD1PC66 with RULES2

14438 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

510The molecular weight of Carbon (C) is 12, and 

the molecular weight of Oxygen (O) is 16, thus the 

molecular weight of CO2 is 44. One ton of C = 44/ 

12 tons CO2 = 3.67 tons CO2. 1 gallon of gas weighs 

2,819 grams, of that 2,433 grams are carbon. $1.00 

CO2 = $3.67 C and $3.67/ton * ton/1000kg * kg/ 

1000g * 2433g/gallon = (3.67 * 2433)/1000 * 1000 

= $0.0089/gallon 

definitions for track width. SAE J1100 

defines ‘‘track width’’ as the lateral 

distance between the centerlines of the 

tires at ground, whereas Part 523 

specifies the lateral distance between 

the centerlines of the base tires at 

ground, including the camber angle. 

Base tire size and camber angle impact 

the track width dimension. Vehicle 

manufacturers must report wheelbase 

and track width dimensions per the part 

523 definitions in MY 2008 and later 

pre-model year CAFE reports required 

by 49 CFR part 537. However, plan view 

and profile view figures depicting the 

vehicle wheelbase and track width 

measurements, similar to what is 

provided in SAE J1100, will be added to 

the NHTSA test procedure for 

clarification. 

The Alliance also commented that 

manufacturers already attest in the preMY report that they follow 49 CFR part 

537 for things like analytically-derived 

fuel economy, and argued that this 

official certification should extend to 

the wheelbase, track width and footprint 

data provided. The Alliance appears to 

suggest that the agency should accept 

the data submitted by the vehicle 

manufacturers without implementing 

any type of validation enforcement 

program. The primary mission of 

NHTSA’s enforcement is to ensure and 

verify that manufacturers conform to 

appropriate Federal regulations and 

comply with required Federal motor 

vehicle safety standards. Verification of 

the key data used to calculate the 

manufacturer’s fuel economy standards 

required by 49 CFR parts 531 and 533 

is essential to meeting this mission. 

The Alliance also questioned the use 

of the term ‘‘Apparent Noncompliance’’ 

in the test procedure and requested 

clarification regarding what would 

constitute a failure. In response, the 

OVSC test data collected will be used to 

validate wheelbase and track width data 

submitted by each manufacturer 

required by 49 CFR Part 537. Collected 

data may identify possible discrepancies 

between manufacturer-submitted data 

and production vehicle measurements. 

Footprint calculations derived from the 

wheelbase and track width 

measurements are critical for 

determining compliance with CAFE 

standards. Any noted discrepancies will 

have to be discussed with the respective 

vehicle manufacturer and resolved prior 

to the manufacturer submittal of final 

data to the Environmental Protection 

Agency. If the vehicle manufacturer’s 

data are found to be in error, it could be 

classified as a non-conformance to the 

CAFE pre-model year reporting 

requirements of 49 CFR part 537. This 

would not qualify as a non-compliance 

to a safety standard. The test procedure 

text will be updated to reflect this 

distinction. However, a nonconformance to the CAFE footprint 

requirements could result in a redetermination of applicable fuel 

economy target standards for each 

respective vehicle model and 

compliance category. 

Finally, the Alliance argued that the 

procedure should measure dimensions 

using metric units of measure and a 

conversion to English should follow at 

the end only to generate English 

equivalents for secondary reporting. The 

Alliance stated that ‘‘The manufacturers 

that comprise the Alliance of 

Automobile Manufacturers, are citizens 

of the world and it makes our great 

country look arrogant when we continue 

to author Technical Procedures based 

on English units.’’ It is the agency’s 

common practice in development of test 

procedures to follow the unit of measure 

format used in the corresponding 

regulation or standard. The agency has 

worked for several years to issue revised 

and new regulations and standards 

employing the metric system of 

measures. However, to date, not all of 

the agency regulations and standards 

have been converted. 49 CFR Part 523 

specifies wheelbase and track width 

dimensions to be measured in inches 

and rounded to the nearest tenth of an 

inch. In this case, we have decided to 

accept the Alliance’s recommendation 

and have revised the test procedure to 

measure dimensions in metric units and 

then convert to English-equivalent 

units. 

XIV. Sensitivity and Monte Carlo 

Analysis 

NHTSA is establishing fuel economy 

standards, based on the Volpe model 

analysis, that maximize net societal 

benefits—that is, where the estimated 

benefits to society exceed the estimated 

cost of the rule by the highest amount. 

This analysis is based, among other 

things, on many underlying estimates, 

all of which entail uncertainty. Future 

fuel prices, the cost and effectiveness of 

available technologies, the damage cost 

of carbon dioxide emissions, the 

economic externalities of petroleum 

consumption, and other factors cannot 

be predicted with certainty. 

Recognizing these uncertainties, 

NHTSA has used the Volpe model to 

conduct both sensitivity analyses, by 

changing one factor at a time, and a 

probabilistic uncertainty analysis (a 

Monte Carlo analysis that allows 

simultaneous variation in these factors) 

to examine how key measures (e.g., mpg 

levels of the standard, total costs and 

total benefits) vary in response to 

changes in these factors. 

However, NHTSA has not conducted 

a probabilistic uncertainty analysis to 

evaluate how optimized stringency 

levels respond to such changes in these 

factors. The Volpe model currently does 

not have the capability to integrate 

Monte Carlo simulation with stringency 

optimization. 

The agency has performed several 

sensitivity analyses to examine 

important assumptions. The analyses 

include: 

(1) The value of reducing CO2

emissions. We examined $2 per metric 

ton as a domestic value, $33 per metric 

ton as a global value and $80 per metric 

ton as a global value, with the main 

analysis using a value of $2 per metric 

ton as a domestic value. These values 

can be translated into dollars per gallon 

by multiplying by 0.0089 metric tons 

per gallon 510, as shown below: 

$2 per ton CO2 = $2*0.0089 = $0.0178 

per gallon 

$33.00 per ton CO2 = $33*0.0089 = 

$0.2937 per gallon 

$80.00 per ton CO2 = $80*0.0089 = 

$0.712 per gallon 

(2) The value of monopsony costs. For 

domestic values of CO2, the main 

analysis uses $0.266 per gallon for 

monopsony costs. At the low end of the 

range for domestic values, the 

sensitivity analysis uses a value of 

$0.210. For global values of CO2, a $0 

value of monopsony cost is appropriate. 

As discussed previously in Section V, 

this is consistent with the fact that 

monopsony payments are a transfer 

rather than a real economic benefit 

when viewed from the same global 

perspective, and thus have a net value 

of zero. 

(3) The price of gasoline. The main 

analysis uses the AEO 2008 High Price 

case forecast for the price of gasoline 

(see Table VIII–3). In this sensitivity 

analysis we also examine the AEO 2008 

Reference Case forecast of the price of 

gasoline. 

(4) Military security. For one of the 

scenarios, we assumed a $0.05 

reduction in military security costs for 

each gallon of fuel saved. The derivation 

of this estimate is discussed in detail in 

Section V. 

Sensitivity analyses were performed on 

only the optimized (7%) alternative. In 

the PRIA, we examined the sensitivity 

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511 In a few cases the upper range results were 

obtained from the 7% rate and the lower range 

results were obtained from the 3% rate. While this 

may seem counterintuitive, it results from the 

random selection process that is inherent in the 

Monte Carlo technique. 

512NEPA is codified at 42 U.S.C. 4321–47. CEQ 

NEPA implementing regulations are codified at 40 

Code of Federal Regulations (CFR) Parts 1500–08. 

513NHTSA’s Decision to proceed with the 

Optimized Alternative using economic assumptions 

that are reflected in the Mid-2 Scenario, which were 

prompted in part by public comments, is within the 

spectrum of alternatives set forth in the DEIS and 

the FEIS, and the environmental impacts of this 

decision are within the spectrum of impacts 

analyzed in the DEIS and the FEIS. 

of the price of gasoline (low, reference, 

and high case), values of reducing CO2

emissions ($0 to $14 per ton), combined 

externalities ($0.120 and $0.504 per 

gallon), and the rebound effect (10 to 20 

percent). Only the price of gasoline had 

a significant impact on the results. 

The results of the sensitivity analyses 

indicate that the much wider values of 

CO2 examined have almost no impact 

on the achieved mpg levels for 

passenger cars and a small impact on 

the levels for light trucks. This occurs 

because the effect of the higher global 

values for reducing CO2 emissions is 

partly offset by the accompanying 

reduction of the benefit from savings in 

monopsony costs from its domestic 

value of $0.266 per gallon to its global 

value of $0.000. However, the extent to 

which eliminating the monopsony 

benefit offsets the higher values of 

reducing CO2 emissions is limited by 

the fact that these values continue to 

grow at the assumed 2.4 percent rate 

over the period spanned by the analysis, 

while the monopsony benefit remains 

fixed. 

The lower fuel prices forecast in the 

AEO 2008 Reference Case have no 

discernible difference in the projected 

achievable levels for passenger cars but 

result in a lower projected achievable 

level (by 0.3 mpg) for light trucks in MY 

2011. Assuming a savings in military 

security costs of $0.05 per gallon has no 

significant impact on the level of the 

standards. 

OMB Circular A–4 requires formal 

probabilistic uncertainty analysis of 

complex rules where there are large, 

multiple uncertainties whose analysis 

raises technical challenges or where 

effects cascade and where the impacts of 

the rule exceed $1 billion. The agency 

identified and quantified the major 

uncertainties in the preliminary 

regulatory impact analysis and 

estimated the probability distribution of 

how those uncertainties affect the 

benefits, costs, and net benefits of the 

alternatives considered in a Monte Carlo 

analysis. The results of that analysis, 

summarized for the combined passenger 

car and light truck fleet across both the 

7 percent (typically the lower range) and 

3 percent (typically upper range) 

discount rates511 are as follows: 

Fuel Savings: The analysis indicates 

that MY 2011 vehicles (both passenger 

cars and light trucks) will experience 

between 732 million and 1,114 million 

gallons of fuel savings over their useful 

lifespan. 

Total Costs: The analysis indicates 

that vehicle manufacturers will invest 

between $760 million and $2,235 

million to improve the fuel economy of 

MY 2011 passenger cars and light 

trucks. 

Societal Benefits: The analysis 

indicates that changes to MY 2011 

passenger cars and light trucks to meet 

the proposed CAFE standards will 

produce overall societal benefits valued 

between $1,003 million and $2,229 

million. 

Net Benefits: The uncertainty analysis 

indicates that the net impact of the 

higher CAFE requirements for MY 2011 

passenger cars and light trucks will 

range from a net loss of $913 million to 

a net benefit of $1,224 million. There is 

at least an 80 percent certainty (the 

lower of the passenger car and light 

truck certainty levels) that changes 

made to MY 2011 vehicles to achieve 

the higher CAFE standards will produce 

a net benefit. 

XV. NHTSA’s Record of Decision 

On January 7, 2009, the Department of 

Transportation announced that the Bush 

Administration decided not to finalize 

its rulemaking on CAFE, stating that 

‘‘recent financial difficulties of the 

automobile industry will require the 

next administration to conduct a 

thorough review of matters affecting the 

industry, including how to effectively 

implement the Energy Independence 

and Security Act of 2007 (EISA).’’ 

Statement from the U.S. Department of 

Transportation, available at http:// 

www.dot.gov/affairs/dot0109.htm (last 

accessed Feb. 9, 2009). 

On January 26, 2009, President 

Obama issued a memorandum to the 

Secretary of Transportation and the 

Administrator of NHTSA, directing 

NHTSA ‘‘to publish in the Federal 

Register by March 30, 2009, a final rule 

prescribing increased fuel economy for 

model year 2011.’’ See 74 FR 4907. 

President Obama also requested that 

‘‘before promulgating a final rule 

concerning model years after model year 

2011, [the agency] consider the 

appropriate legal factors under EISA, 

the comments filed in response to the 

[NPRM], the relevant technological and 

scientific considerations, and to the 

extent feasible, the forthcoming report 

by the National Academy of Sciences 

mandated under section 107 of EISA. 

* * *’’ Id. President Obama also 

requested that NHTSA ‘‘consider 

whether any provisions regarding 

preemption are consistent with the 

EISA, the Supreme Court’s decision in 

Massachusetts v. EPA and other 

relevant provisions of law and the 

policies underlying them.’’ See id. 

In accordance with President Obama’s 

directive, this Final Rule promulgates 

the fuel economy standards for MY 2011 

only. The agency is deferring further 

action at this time in order to evaluate 

the appropriate course of action 

concerning fuel economy standards for 

model years after MY 2011. This Final 

Rule constitutes the Record of Decision 

(ROD) for NHTSA’s MY 2011 CAFE 

standards, pursuant to the National 

Environmental Policy Act (NEPA) and 

the Council on Environmental Quality’s 

(CEQ) implementing regulations.512 See 

40 CFR § 1505.2. 

As required by CEQ regulations, this 

Final Rule and ROD sets forth the 

following: (1) The agency’s decision; (2) 

alternatives considered by NHTSA in 

reaching its decision, including the 

environmentally preferable alternative; 

(3) the factors balanced by NHTSA in 

making its decision, including 

considerations of national policy; (4) 

how these factors and considerations 

entered into its decision; and (5) the 

agency’s preferences among alternatives 

based on relevant factors, including 

economic and technical considerations 

and agency statutory missions. This 

Final Rule also addresses mitigation as 

required by CEQ regulations and 

applicable laws. 

The Agency’s Decision 

After carefully reviewing and 

analyzing all of the information in the 

public record including technical 

support documents, the FEIS, public 

and agency comments submitted on the 

Draft Environmental Impact Statement 

(DEIS), public and agency comments 

submitted on the FEIS, and public and 

agency comments submitted on the 

NPRM, NHTSA’s decision is to proceed 

with the Optimized Alternative, Mid-2 

Scenario for MY 2011 (NHTSA’s 

Decision).513 Specifically, the agency’s 

decision is to implement the following 

CAFE standards for MY 2011: 30.2 mpg 

for passenger cars and 24.1 mpg for light 

trucks. In the DEIS and the FEIS, the 

agency identified the Optimized 

Alternative (maximizing societal net 

benefits) as NHTSA’s Preferred 

Alternative. For a discussion of the 

agency’s selection of the Optimized 

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514 42 FR 63184, 63188 (Dec. 15, 1977). 

Alternative, see Section VII(E)(2)(b) of 

this Final Rule. 

Alternatives Considered by NHTSA in 

Reaching its Decision, Including the 

Environmentally Preferable Alternative 

When preparing an EIS, NEPA 

requires an agency to compare the 

potential environmental impacts of its 

proposed action and a reasonable range 

of alternatives. NHTSA identified 

alternative stringencies that represent 

the full spectrum of potential 

environmental impacts and safety 

considerations. Specifically, the DEIS 

and FEIS analyzed the impacts of the 

following six ‘‘action’’ alternatives: 25 

Percent Below Optimized, Optimized, 

25 Percent Above Optimized, 50 Percent 

Above Optimized, Total Costs Equal 

Total Benefits, and Technology 

Exhaustion. The DEIS and FEIS also 

analyzed the impacts that would be 

expected if NHTSA imposed no new 

requirements (the No Action 

Alternative). In accordance with CEQ 

regulations, the agency selected a 

Preferred Alternative in the DEIS and 

FEIS (the Optimized Alternative). 

In response to public comments, the 

FEIS expanded the analysis to 

determine how the proposed 

alternatives are affected by variations in 

the economic assumptions input into 

the computer model NHTSA uses to 

calculate the costs and benefits of 

various potential CAFE standards (the 

Volpe model). Specifically, the agency 

calculated and analyzed mpg standards 

and environmental impacts associated 

with each alternative under four model 

input scenarios: Reference Case, High 

Scenario, Mid-1 Scenario, and Mid-2 

Scenario. See FEIS § 2.2.2. With this 

expanded analysis, the FEIS presented 

the agency with a broad, comprehensive 

spectrum of the alternatives, varied 

economic inputs, and potential 

environmental impacts. 

The agency compared the potential 

environmental impacts of alternative 

mpg levels, analyzing direct, indirect, 

and cumulative impacts. For a 

discussion of the environmental impacts 

associated with each of the alternatives, 

including the Optimized Alternative 

using the Mid-2 Scenario, see Chapter 3, 

Chapter 4 and Appendix B to the FEIS. 

The agency considered and analyzed 

each of the individual economic 

assumptions to determine which 

assumptions most accurately represent 

future economic conditions. For a 

discussion of the analysis supporting 

the selection of the economic 

assumptions relied on by the agency in 

this Final Rule, see Section V. The 

economic assumptions used by the 

agency in this Final Rule are reflected 

in the Mid-2 Scenario set of 

assumptions analyzed in the FEIS. See 

FEIS § 2.2. 

The Technology Exhaustion 

Alternative is the overall 

Environmentally Preferable Alternative. 

Specifically, the Technology Exhaustion 

Alternative is the Environmentally 

Preferable Alternative in terms of the 

following reductions: Fuel use, CO2

emissions, criteria air pollutant 

emissions, and their resulting health 

impacts, and emissions of almost all 

mobile source air toxics (MSATs). 

Because it would impose the highest 

car and light truck CAFE standards for 

MY 2011 among the alternatives 

considered, the Technology Exhaustion 

Alternative would result in the largest 

reductions in fuel use and GHG 

emissions. As explained in Chapter 5 of 

the FEIS, the reductions in fuel 

consumption resulting from higher fuel 

economy cause emissions during fuel 

refining and distribution to decline. For 

most pollutants, this decline is more 

than sufficient to offset the increase in 

tailpipe emissions that results from 

increased driving due to the rebound 

effect of higher fuel economy, leading to 

a net reduction in total emissions from 

fuel production, distribution, and use. 

Because of this effect, the Technology 

Exhaustion Alternative would also lead 

to the largest reductions in emissions of 

criteria air pollutants and their resulting 

health impacts, as well as the largest 

reductions in emissions of almost all 

mobile source air toxics (MSATs). 

NHTSA’s environmental analysis 

indicates that emissions of the MSATs 

acrolein would increase under some 

alternatives, with the largest increases 

in emissions of these MSATs projected 

to occur under the Technology 

Exhaustion Alternative. The analysis of 

acrolein emissions presented in the 

FEIS, however, is incomplete, because 

emissions factors for acrolein during 

fuel production and distribution are 

unavailable, so that the agency is thus 

unable to estimate the net change in 

total acrolein emissions likely to result 

under each alternative. If the agency had 

been able to estimate reductions in 

‘‘upstream’’ emissions of acrolein as 

part of its analysis, total acrolein 

emissions under each alternative would 

increase by smaller amounts than those 

amounts reported in the EIS, or even 

decline. However, given that the agency 

is unable to estimate the net change in 

total acrolein emissions, the agency is 

unable to conclude which alternative is 

environmentally preferable with respect 

to acrolein emissions. 

Overall, however, the Technology 

Exhaustion alternative is the agency’s 

Environmentally Preferable Alternative. 

For additional discussion regarding the 

alternatives considered by the agency in 

reaching its decision, including the 

Environmentally Preferable Alternative, 

see Section VII of this Final Rule. For a 

discussion of the environmental impacts 

associated with each alternative, see 

Chapter 3, Chapter 4 and Appendix B of 

the FEIS. 

Factors Balanced By NHTSA In Making 

Its Decision, Including Considerations 

Of National Policy 

Section VII of this Final Rule 

discusses the factors balanced by 

NHTSA in making its decision. Notably, 

49 U.S.C. 32902(b)(2)(A) and (C) set 

forth the following three requirements 

specific to MYs 2011–2020: (1) The 

standards must be sufficiently high to 

result in a combined (passenger car and 

light truck) fleet fuel economy of at least 

35 mpg by MY 2020; (2) the standards 

must increase annually; and (3) the 

standards must increase ratably. 

EPCA also requires the agency to 

determine what level of CAFE 

stringency would be ‘‘maximum 

feasible’’ for each model year by 

considering the four competing factors 

of technological feasibility, economic 

practicability, the effect of other motor 

vehicle standards of the Government on 

fuel economy, and the need of the 

United States to conserve energy, which 

includes environmental considerations, 

along with additional relevant factors 

such as safety. 

‘‘The need of the United States to 

conserve energy’’ is a broad concept 

encompassing ‘‘the consumer cost, 

national balance of payments, 

environmental, and foreign policy 

implications of our need for large 

quantities of petroleum, especially 

imported petroleum.’’514 NHTSA has 

historically considered safety in setting 

the CAFE standards. For an explanation 

of the agency’s historical consideration 

of safety in setting the CAFE standards, 

see Section VIII. 

Finally, NEPA directs that 

environmental considerations are a 

factor integrated into the agency’s 

decisionmaking process. To accomplish 

that purpose, NEPA requires an agency 

to compare the potential environmental 

impacts of its proposed action to those 

of a reasonable range of alternatives. 

For further discussion of the factors 

balanced by NHTSA in making its 

decision, including considerations of 

national policy, see Section VII of this 

Final Rule. 

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515 Id. (citing Robertson, 490 U.S. at 352 (noting 

that NEPA does not contain a substantive 

requirement that a complete mitigation plan be 

actually formulated and adopted)). See also Valley 

Community Preservation Com’n v. Mineta, 231 F. 

Supp. 2d 23, 41 (D.D.C. 2002) (noting that NEPA 

does not require that a complete mitigation plan be 

formulated and incorporated into an EIS). 

516See Robertson, 490 U.S. at 333 (holding, inter 

alia, that ‘‘NEPA does not impose a substantive 

duty on agencies to mitigate adverse environmental 

effects or to include in each EIS a fully developed 

mitigation plan’’). See also Valley Community 

Preservation Com’n, 231 F. Supp. 2d 23. 

How the Factors and Considerations 

Balanced by NHTSA Entered Into its 

Decision 

The agency recognizes that the CAFE 

program is designed to raise fuel 

economy standards for both passenger 

cars and light trucks. The agency also 

recognizes that the enactment of EISA 

represents a major step forward in, 

among other things, reducing oil 

consumption and reducing CO2

emissions in order to combat global 

climate change. While the agency’s 

balancing of the need of the nation 

factor ensures consideration of climate 

change issues, the NEPA analysis also 

promotes consideration of the 

environmental factor by NHTSA when 

making its decision. The agency further 

recognizes that under EPCA, it is 

required to set fuel economy standards 

for each model year and for each fleet 

separately at the ‘‘maximum feasible’’ 

level for that model year and fleet by 

balancing the factors identified above. 

49 U.S.C. 32902(a). In doing so, while 

considering the need of the nation to 

conserve energy alone might counsel for 

setting the standards at the levels 

suggested by proponents of higher 

standards, NHTSA does not believe that 

such an action would be consistent 

with, among other things, economic 

practicability, which it is required to 

consider under EPCA. 

As has been widely reported in public 

throughout this rulemaking, and as 

shown in public comments, the national 

and global economies are in crisis. Even 

before the recent economic 

developments, the automobile 

manufacturers were already facing 

substantial difficulties. Further, at this 

time, NHTSA cannot know the full 

scope, depth or duration of the crisis 

unfolding in the national and world 

economies. These problems have made 

NHTSA’s economic practicability 

analysis particularly important and 

challenging in this rulemaking. 

NHTSA’s Decision attempts to 

balance the factors by setting the CAFE 

standards so that they are both 

technologically and economically 

feasible, especially in light of the 

current economic climate, while 

providing the maximum national public 

social benefit. 

For further discussion of how the 

factors and considerations balanced by 

the agency entered into NHTSA’s 

Decision, see Sections VII and IX.F of 

this Final Rule. 

The Agency’s Preferences Among 

Alternatives Based on Relevant Factors, 

Including Economic and Technical 

Considerations and Agency Statutory 

Missions 

With regard to MY 2011, the No 

Action Alternative and Technology 

Exhaustion Alternative, while useful for 

illustrative purposes, is facially 

inconsistent with the requirements of 

EPCA, and thus was not selected as the 

agency’s decision. The No Action 

Alternative violates EPCA because it (1) 

does not fulfill the requirement that the 

Secretary establish CAFE standards for 

each model year separately; (2) does not 

fulfill the requirement that MY 2011– 

2020 standards are to be set high enough 

to ensure that the industry-wide fleet 

achieves a combined passenger car/light 

truck average fuel economy of at least 35 

mpg; and (3) does not fulfill the 

requirement that the standards for MYs 

2011–2020 increase annually and 

ratably. Although the Technology 

Exhaustion Alternative is the 

environmentally preferable alternative 

for NEPA purposes, it does not reflect 

any consideration of economic 

practicability, and thus is facially 

inconsistent with the requirements of 

EPCA. 

Considering the remaining 

alternatives available for MY 2011, the 

agency chose the Optimized Alternative 

because maximizing benefits helps 

ensure that manufacturers are not forced 

to apply technologies that will not pay 

for themselves. NEPA’s purpose is to 

integrate environmental considerations 

into the decision-making process. For 

MY 2011, setting standards at the point 

at which social net benefits are 

maximized in NHTSA’s analysis results 

in standards that still increase higher 

and faster than any standards since the 

earliest years of the program, do not 

require the addition of technologies that 

the agency does not believe will pay for 

themselves, and result in measurable 

environmental benefits. The standards 

for MY 2011 thus fulfill EPCA’s 

objectives regarding the need of the 

nation to conserve energy, while not 

imposing substantial economic hardship 

on the industry, while taking into 

account the feasibility of applying 

technologies appropriately and 

consistent with manufacturers’ natural 

cycles, and the other motor vehicle 

standards of the government with which 

manufacturers have to comply. 

In short, in balancing the EPCA 

factors against one another and carefully 

considering the environmental impacts 

associated with the various alternatives 

evaluated, NHTSA continues to believe 

that the proper overall balance of all 

relevant consideration is the point at 

which social net benefits are 

maximized, and results in CAFE 

standards that are the maximum feasible 

for MY 2011. 

For further discussion of the agency’s 

preferences among alternatives based on 

relevant factors, including economic 

and technical considerations, see 

Sections VII.E and IX.F of this Final 

Rule. 

Mitigation 

NHTSA’s Decision results in a 

decrease in CO2 emissions and 

associated climate change effects, a 

reduction in total criteria air pollutant 

emissions and toxic air pollutant 

emissions, and a decrease in energy 

consumption as compared to the No 

Action Alternative. In addition, the 

Optimized Alternative will reduce 

adverse health outcomes and health 

costs related to motor vehicle air 

pollution. The Optimized Alternative 

will generally have beneficial 

environmental impacts and health 

effects. 

Under NEPA, an EIS is required to 

contain ‘‘ ‘a reasonably complete 

discussion of possible mitigation 

measures.’ ’’ Northern Alaska 

Environmental Center v. Kempthorne, 

457 F.3d 969, 979 (9th Cir. 2006) (citing 

Robertson v. Methow Valley Citizens 

Council, 490 U.S. 332, 352 (1989)). 

Essentially, ‘‘[t]he mitigation must ‘‘ ‘be 

discussed in sufficient detail to ensure 

that environmental consequences have 

been fairly evaluated.’ ’’ Id. (citing City 

of Carmel-By-The-Sea v. U.S. Dept. of 

Transp., 123 F.3d 1142, 1154 (9th Cir. 

1997)). NEPA, however, ‘‘does not 

require an agency to formulate and 

adopt a complete mitigation plan.’’ 515

An agency is not required to mitigate 

adverse consequences of an 

environmental action; it is only required 

to analyze them.516 Indeed, ‘‘ ‘it would 

be inconsistent with NEPA’s reliance on 

procedural mechanisms—as opposed to 

substantive, result-based standards—to 

demand the presence of a fully 

developed plan that will mitigate 

environmental harm before an agency 

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517The agency also changed the FEIS as a result 

of updated information that became available after 

issuance of the DEIS. 

can act.’ ’’ Id. (citing Robertson, 490 U.S. 

at 333). 

Chapter 5 of the FEIS explains that 

Federal transportation funds 

administered by the Federal Highway 

Administration (FHWA) might be 

available to assist in funding projects to 

reduce any increases in MSATs. 

NHTSA acknowledges that the 

absolute level of GHG emissions will 

continue to rise over current levels. This 

was explained in the FEIS. See Figure 

3.4–4 and Table 3.4–1 of the FEIS. The 

increase in emissions from factors such 

as an increase in vehicle miles traveled 

(VMT) is beyond NHTSA’s jurisdiction 

to control under EPCA, as amended by 

EISA. Essentially, NHTSA does not have 

the statutory authority to reduce the 

total amount of GHGs emitted by all 

vehicles driven, because NHTSA, under 

its statutory authority conferred by 

EPCA, cannot control how many miles 

citizens elect to drive. See FEIS §§ 10.1– 

10.2. In view of this statutory directive, 

it is not reasonable for NHTSA to 

explore mitigation strategies related to 

the quantity of vehicle miles traveled by 

the public. 

Based on the agency’s current 

understanding of global climate change, 

certain effects are likely to occur due to 

the increasing global GHG emissions 

entering the atmosphere. The Optimized 

Alternative will not prevent these 

effects. Instead, the Optimized 

Alternative may diminish the effects of 

climate change by contributing to global 

GHG reductions from currently 

anticipated trends. As such, the 

Optimized Alternative will generally 

have beneficial environmental impacts 

and health effects. 

XVI. Regulatory Notices and Analyses 

The following discussion of relevant 

regulatory notices and analyses 

considers both the final rule and the 

FEIS together. 

A. Executive Order 12866 and DOT 

Regulatory Policies and Procedures 

Executive Order 12866, ‘‘Regulatory 

Planning and Review’’ (58 FR 51735, 

Oct. 4, 1993), provides for making 

determinations whether a regulatory 

action is ‘‘significant’’ and therefore 

subject to OMB review and to the 

requirements of the Executive Order. 

The Order defines a ‘‘significant 

regulatory action’’ as one that is likely 

to result in a rule that may: 

(1) Have an annual effect on the 

economy of $100 million or more or 

adversely affect in a material way the 

economy, a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

State, local or Tribal governments or 

communities; 

(2) Create a serious inconsistency or 

otherwise interfere with an action taken 

or planned by another agency; 

(3) Materially alter the budgetary 

impact of entitlements, grants, user fees, 

or loan programs or the rights and 

obligations of recipients thereof; or 

(4) Raise novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

set forth in the Executive Order. 

This rulemaking is economically 

significant. Accordingly, OMB reviewed 

it under Executive Order 12866. The 

rule is significant within the meaning of 

the Department of Transportation’s 

Regulatory Policies and Procedures. 

The benefits and costs of this final 

rule are described above. Because the 

rule is economically significant under 

both the Department of Transportation’s 

procedures and OMB guidelines, the 

agency has prepared a Final Regulatory 

Impact Analysis (FRIA) and placed it in 

the docket and on the agency’s Web site. 

Further, pursuant to OMB Circular A–4, 

we have prepared a formal probabilistic 

uncertainty analysis for this proposal. 

The circular requires such an analysis 

for complex rules where there are large, 

multiple uncertainties whose analysis 

raises technical challenges or where 

effects cascade and where the impacts of 

the rule exceed $1 billion. This rule 

meets these criteria on all counts. 

B. National Environmental Policy Act 

Under NEPA, a Federal agency must 

prepare an Environmental Impact 

Statement (EIS) on proposed actions 

that could significantly impact the 

quality of the human environment. The 

requirement is designed to serve three 

major functions: (1) To provide the 

decisionmaker(s) with a detailed 

description of the potential 

environmental impacts of a proposed 

action prior to its adoption, (2) to 

rigorously explore and evaluate all 

reasonable alternatives, and (3) to 

inform the public of, and allow 

comment on, such efforts. 

NHTSA prepared a draft EIS (DEIS), 

solicited and analyzed public comments 

thereon, including both a public hearing 

and written comments, and prepared a 

final EIS (FEIS), which responds to 

public comments and incorporates the 

information relevant to the effects of 

each of the alternatives considered in 

the EIS. Specifically, in March 2008, 

NHTSA issued a Notice of Intent (NOI) 

to prepare an EIS for the MY 2011–2015 

CAFE standards. 73 FR 16615; see 40 

CFR 1501.7. In April 2008, NHTSA 

issued a supplemental NOI. 73 FR 

22913. On June 26, 2008, NHTSA 

submitted the DEIS to the 

Environmental Protection Agency 

(EPA). On July 2, 2008, NHTSA 

published a Federal Register Notice of 

Availability of its DEIS. See 73 FR 

37922. NHTSA’s Notice of Availability 

also made public the date and location 

of a public hearing, and invited the 

public to participate at the hearing on 

August 4, 2008, in Washington, DC. See 

id. On July 3, 2008, the EPA issued its 

Notice of Availability of the DEIS, 

triggering the 45-day public comment 

period. See 73 FR 38204. See also 40 

CFR 1506.10. In accordance with CEQ 

regulations, the public was invited to 

submit written comments on the DEIS 

until August 18, 2008. See 40 CFR 1503, 

et seq. 

NHTSA mailed approximately 200 

copies of the DEIS to interested parties, 

including federal, state, and local 

officials and agencies; elected officials, 

environmental and public interest 

groups; Native American tribes; and 

other interested individuals, as listed in 

Chapter 9 of the DEIS. NHTSA held a 

public hearing on the DEIS at the 

National Transportation Safety Board 

Conference Center in Washington, DC, 

on August 4, 2008. 

NHTSA received 66 written 

comments from interested stakeholders, 

including the EPA, the Centers for 

Disease Control (CDC), state and local 

agencies, elected officials, automobile 

trade associations, organizations, and 

individuals. In addition, NHTSA 

received one petition with 10,540 

signatures. During the public comment 

hearing in Washington, DC, 44 

individuals provided oral statements. 

The transcript from the public hearing 

and written comments submitted to 

NHTSA are part of the administrative 

record, and are available on the Federal 

Docket, which can be found on the Web 

at http://www.regulations.gov, Reference 

Docket No. NHTSA–2008–0060. Written 

comments and the public hearing 

transcript can also be viewed in their 

entirety in Appendix D of the FEIS. 

NHTSA reviewed and analyzed all 

written and oral comments received 

during the public comment period in 

the preparation of the FEIS. NHTSA 

revised the FEIS in response to 

comments on the DEIS.517 For a more 

detailed discussion of NHTSA’s scoping 

and comment periods, please see 

Section 1.3 and Chapter 10 of the FEIS. 

On October 10, 2008, NHTSA 

submitted the FEIS to the EPA. On 

October 17, 2008, the EPA published a 

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518NEPA is codified at 42 U.S.C. 4321–47. CEQ 

NEPA implementing regulations are codified at 40 

Code of Federal Regulations (CFR) Parts 1500–08. 

519The Notice of Availability of the FEIS was 

published in the Federal Register by the EPA on 

October 17, 2008. 

520The Mid-2 Scenario is summarized in Section 

V of this Final Rule. See also FEIS Chapter 3, 

Chapter 4 and Appendix B. 

521 If, on account of the unforeseen current 

events, NHTSA were to attempt to isolate the 

environmental impacts of its Decision on its own, 

Continued 

Notice of Availability of the FEIS in the 

Federal Register. See 73 FR 61859. 

This Final Rule constitutes the Record 

of Decision (ROD) for NHTSA’s MY 

2011 CAFE standards, pursuant to the 

National Environmental Policy Act 

(NEPA) and Council on Environmental 

Quality’s (CEQ) implementing 

regulations.518 See 40 CFR § 1505.2. For 

additional information regarding 

NHTSA’s compliance with 40 CFR 

§ 1505.2, see Section XV of this Final 

Rule. 

The MY 2011 CAFE standards 

adopted in this Final Rule have been 

informed by analyses contained in the 

Final Environmental Impact Statement, 

Corporate Average Fuel Economy 

Standards, Passenger Cars and Light 

Trucks, Model Years 2011—2015, 

Docket No. NHTSA–2008–0060–0605 

(FEIS).519 For purposes of this 

rulemaking, the agency referred to an 

extensive compilation of technical and 

policy documents available in the 

dockets for the NPRM and Final Rule 

and for the EIS. The EIS docket and the 

rulemaking docket are available on the 

Federal Docket, which can be found on 

the Web at http://www.regulations.gov, 

Reference Docket Nos.: NHTSA–2008– 

0060 (EIS) and NHTSA–2008–0089 

(Rulemaking). 

The NPRM proposed fuel economy 

standards for MYs 2011–2015. 

Consistent with that proposal, the 

agency designed the FEIS to evaluate 

the aggregate environmental impacts 

associated with each alternative for the 

entire five-year period (i.e., the 

environmental impacts that would 

likely result if MY 2011—2015 

passenger cars and light trucks met the 

higher, proposed CAFE standards for 

those years). The aggregate 

environmental impacts provided in the 

FEIS remain relevant, since the MY 

2011 impacts associated with the CAFE 

standards fall within the spectrum of 

those aggregated impacts. See Chapter 3, 

Chapter 4 and Appendix B of the FEIS. 

Sections VII.D and IX.F of this Final 

Rule present the following 

consequences associated with each 

alternative, including NHTSA’s 

Decision, for MY 2011 passenger cars 

and light trucks: fuel consumption and 

associated emissions of greenhouse 

gases, as well as on emissions of criteria 

and hazardous air pollutants. 

Given the unusual circumstances 

surrounding this rulemaking (i.e., the 

Bush Administration’s decision to 

postpone issuing CAFE standards and 

the Obama Administration’s decision to 

sever the rulemaking so that it addresses 

only MY 2011), which are a matter of 

public record, one issue presented is 

whether the existing EIS remained 

sufficient, without change, to 

adequately inform the agency. Under 

CEQ Regulations, an agency shall 

prepare a supplemental EIS if ‘‘(i) The 

agency makes substantial changes in the 

proposed action that are relevant to 

environmental concerns; or (ii) There 

are significant new circumstances or 

information relevant to environmental 

concerns and bearing on the proposed 

action or its impacts.’’ 40 CFR 

§ 1502.9(c). 

Reviewing courts apply the ‘‘arbitrary 

and capricious’’ standard of the 

Administrative Procedure Act when 

evaluating whether an agency decision 

not to prepare a supplemental EIS was 

proper under NEPA. See Marsh v. 

Oregon Natural Resources Council, et 

al., 490 U.S. 360, 375–76 (1989) (noting 

that an agency should apply a ‘‘rule of 

reason’’ when deciding whether to 

prepare a supplemental EIS). A 

supplemental EIS is required if ‘‘there 

remains a major federal action to occur 

and if the new information is sufficient 

to show that the remaining action will 

affec[t] the quality of the human 

environment in a significant manner or 

to a significant extent not already 

considered * * *.’’ Marsh, 490 U.S. at 

374 (citations omitted) (quotations 

omitted). See also Operation of the 

Missouri River System Litigation v. U.S. 

Army Corps of Engineers, et al., 516 

F.3d 688 (8th Cir. 2008) (holding that a 

supplemental EIS is not required if the 

relevant environmental impacts were 

already considered by the agency). 

Courts have upheld agencies’ 

decisions not to supplement where the 

relevant environmental impacts of the 

proposed change have been fully 

considered. Thus, courts have 

interpreted the ‘‘substantial change’’ 

provision of the CEQ regulations to 

require agencies to issue a supplement 

if the changes will impact the 

environment ‘‘in a significant manner 

* * * not already considered by the 

federal agency.’’ Ark. Wildlife Fed’n v. 

U.S. Army Corps of Engineers, 431 F.3d 

1096, 1102 (8th Cir. 2005) (quoting 

Airport Impact Relief, Inc. v. Wykle, 192 

F.3d 197, 204 (1st Cir. 1999)). That is, 

a change is considered ‘‘substantial’’ 

under the regulations only where ‘‘it 

presents a ‘seriously different picture of 

the environmental impact’ ’’ than that 

previously considered. Id. (quoting 

South Trenton Residents Against 29 v. 

Fed. Highway Admin., 176 F.3d 658, 

663 (3d Cir. 1999)). 

In addition to asking whether the 

agency has fully considered the 

environmental impact of the proposed 

change, courts have also asked whether 

the change is ‘‘ ‘qualitatively within the 

spectrum of alternatives that were 

discussed’ in a prior FEIS.’’ In re 

Operation of the Missouri River System 

Litigation, 516 F.3d at 693 (quoting 

Dubois v. U.S. Dep’t of Agric., 102 F.3d 

1273, 1292 (1st Cir. 1996)). This 

language first appeared in a 1981 CEQ 

guidance document, commonly referred 

to as the CEQ ‘‘Forty Questions.’’ See 

Forty Most Asked Questions Concerning 

CEQ’s National Environmental Policy 

Act Regulations, 46 FR 18026, 18035 

(1981). 

Under applicable law, NHTSA has 

decided that a supplemental NEPA 

analysis for MY 2011 fuel economy 

standards is not required. Here, NHTSA 

analyzed alternatives in the FEIS for five 

model years so that the agency could 

capture a full spectrum of potential 

environmental impacts, ranging from 

vehicles continuing to maintain their 

MY 2010 fuel economy to standards 

based on the maximum technology 

expected to be available over a five-year 

period. NHTSA’s FEIS presented the 

agency and the public with a 

comprehensive analysis of this 

spectrum of environmental impacts. In 

regard to NHTSA’s Decision, the 

environmental impacts fall within the 

spectrum of environmental impacts 

analyzed under the Optimized Mid-2 

Scenario 520 in the FEIS, which the 

agency developed after consideration of 

public comments. 

In light of the President’s January 26, 

2009 Memorandum directing NHTSA to 

issue a final rule for MY 2011 only, and 

consistent with NEPA’s rule of reason 

and applicable case law, the relevant 

environmental impacts for MY 2011 

have been fully considered within the 

broader FEIS prepared for MYs 2011– 

2015, and the President’s directive to 

issue a final rule for a single model year 

does not present a seriously different 

picture of the environmental impacts 

that NHTSA analyzed, both 

incrementally and cumulatively, in its 

broader FEIS. In fact, the impacts 

analyzed in the FEIS are more 

comprehensive than any NEPA analysis 

that NHTSA could prepare in the short 

time between the President’s January 26, 

2009 Memorandum and today’s final 

rule.521 In short, the FEIS served to 

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the agency would fail to issue MY 2011 standards 

by March 30, 2009. As a result, the agency would 

fail to fulfill its EPCA statutory mandate of issuing 

fuel economy standards ratably beginning with MY 

2011 and President Obama’s directive of issuing 

MY 2011 standards by March 30, 2009. NHTSA’s 

failure to issue standards would also enable 

automobile manufacturers to establish any standard 

they deemed appropriate, or no standard 

whatsoever. 

522NEPA is codified at 42 U.S.C. 4321–4347. 

CEQ’s NEPA implementing regulations are codified 

at 40 CFR Pts. 1500–1508, and NHTSA’s NEPA 

implementing regulations are codified at 49 CFR 

part 520. 

inform the agency and support today’s 

decision, and no rule of reason could 

require the preparation of a 

supplemental environmental analysis 

for a single model year of fuel economy 

standards already contained within a 

comprehensive analysis for five model 

years. For a discussion of NHTSA’s 

Decision, see Section VII of this Final 

Rule. 

Based on the foregoing, the agency 

concludes that the environmental 

analysis and public involvement 

process complies with both the letter 

and spirit of NEPA implementing 

regulations issued by CEQ, DOT Order 

5610.1C, and NHTSA regulations.522

1. Clean Air Act (CAA) 

The CAA (42 U.S.C. 7401) is the 

primary Federal legislation that 

addresses air quality. Under the 

authority of the CAA and subsequent 

amendments, the EPA has established 

National Ambient Air Quality Standards 

(NAAQS) for six criteria pollutants, 

which are relatively commonplace 

pollutants that can accumulate in the 

atmosphere as a result of normal levels 

of human activity. The EPA is required 

to review the NAAQS every five years 

and to change the levels of the standards 

if warranted by new scientific 

information. 

The air quality of a geographic region 

is usually assessed by comparing the 

levels of criteria air pollutants found in 

the atmosphere to the levels established 

by the NAAQS. Concentrations of 

criteria pollutants within the air mass of 

a region are measured in parts of a 

pollutant per million parts of air (ppm) 

or in micrograms of a pollutant per 

cubic meter (μg/m3) of air present in 

repeated air samples taken at designated 

monitoring locations. These ambient 

concentrations of each criteria pollutant 

are compared to the permissible levels 

specified by the NAAQS in order to 

assess whether the region’s air quality is 

potentially unhealthful. 

When the measured concentrations of 

a criteria pollutant within a geographic 

region are below those permitted by the 

NAAQS, the region is designated by the 

EPA as an attainment area for that 

pollutant, while regions where 

concentrations of criteria pollutants 

exceed Federal standards are called 

nonattainment areas (NAAs). Former 

NAAs that have attained the NAAQS are 

designated as maintenance areas. Each 

NAA is required to develop and 

implement a State Implementation Plan 

(SIP), which documents how the region 

will reach attainment levels within time 

periods specified in the CAA. In 

maintenance areas, the SIP documents 

how the State intends to maintain 

compliance with the NAAQS. When 

EPA changes a NAAQS, States must 

revise their SIPs to address how they 

will attain the new standard. 

Section 176(c) of the CAA prohibits 

Federal agencies from taking actions in 

nonattainment or maintenance areas 

that do not ‘‘conform’’ to the State 

Implementation Plan (SIP). The purpose 

of this conformity requirement is to 

ensure that Federal activities do not 

interfere with meeting the emissions 

targets in the SIPs, do not cause or 

contribute to new violations of the 

NAAQS, and do not impede the ability 

to attain or maintain the NAAQS. The 

EPA has issued two sets of regulations 

to implement CAA Section 176(c): 

• The Transportation Conformity 

Rules (40 CFR 51 Subpart T), which 

apply to transportation plans, programs, 

and projects funded under title 23 

United States Code (U.S.C.) or the 

Federal Transit Act. Highway and 

transit infrastructure projects funded by 

FHWA or the Federal Transit 

Administration (FTA) usually are 

subject to transportation conformity. 

• The General Conformity Rules (40 

CFR part 51 Subpart W) apply to all 

other Federal actions not covered under 

transportation conformity. The General 

Conformity Rules established emissions 

thresholds, or de minimis levels, for use 

in evaluating the conformity of a 

project. If the net emission increases 

due to the project are less than these 

thresholds, then the project is presumed 

to conform and no further conformity 

evaluation is required. If the emission 

increases exceed any of these 

thresholds, then a conformity 

determination is required. The 

conformity determination may entail air 

quality modeling studies, consultation 

with EPA and State air quality agencies, 

and commitments to revise the SIP or to 

implement measures to mitigate air 

quality impacts. 

The CAFE standards and associated 

program activities are not funded under 

title 23 U.S.C. or the Federal Transit 

Act. Further, CAFE standards are 

established by NHTSA and are not an 

action undertaken by FHWA or FTA. 

Accordingly, the CAFE standards are 

not subject to transportation conformity. 

The General Conformity Rules contain 

several exemptions applicable to 

‘‘Federal actions,’’ which the conformity 

regulations define as: ‘‘any activity 

engaged in by a department, agency, or 

instrumentality of the Federal 

Government, or any activity that a 

department, agency or instrumentality 

of the Federal Government supports in 

any way, provides financial assistance 

for, licenses, permits, or approves, other 

than activities [subject to transportation 

conformity].’’ 40 CFR 51.852. 

‘‘Rulemaking and policy development 

and issuance’’ are exempted at 40 CFR 

51.853(c)(2)(iii). Since NHTSA’s CAFE 

standards involve a rulemaking process, 

its action is exempt from general 

conformity. Also, emissions for which a 

Federal agency does not have a 

‘‘continuing program responsibility’’ are 

not considered ‘‘indirect emissions’’ 

subject to general conformity under 40 

CFR 51.852. ‘‘Emissions that a Federal 

agency has a continuing program 

responsibility for means emissions that 

are specifically caused by an agency 

carrying out its authorities, and does not 

include emissions that occur due to 

subsequent activities, unless such 

activities are required by the Federal 

agency.’’ 40 CFR 51.852. Emissions that 

occur as a result of the final CAFE 

standards are not caused by NHTSA 

carrying out its statutory authorities and 

clearly occur due to subsequent 

activities, including vehicle 

manufacturers’ production of passenger 

car and light truck fleets and consumer 

purchases and driving behavior. Thus, 

changes in any emissions that result 

from NHTSA’s final CAFE standards are 

not those for which the agency has a 

‘‘continuing program responsibility’’ 

and NHTSA is confident that a general 

conformity determination is not 

required. NHTSA is evaluating the 

potential impacts of air emissions under 

NEPA. 

2. National Historic Preservation Act 

(NHPA) 

The NHPA (16 U.S.C. 470) sets forth 

government policy and procedures 

regarding ‘‘historic properties’’—that is, 

districts, sites, buildings, structures, and 

objects included in or eligible for the 

National Register of Historic Places 

(NRHP). See also 36 CFR part 800. 

Section 106 of the NHPA requires 

federal agencies to ‘‘take into account’’ 

the effects of their actions on historic 

properties. The agency concludes that 

the NHPA is not applicable to NHTSA’s 

Decision, because it does not directly 

involve historic properties. The agency 

has, however, conducted a qualitative 

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review of the related direct, indirect, 

and cumulative impacts, positive or 

negative, of the alternatives on 

potentially affected resources, including 

historic and cultural resources. See 

Section 3.5.7 of the FEIS. 

3. Executive Order 12898 

(Environmental Justice) 

Under Executive Order 12898, Federal 

agencies are required to identify and 

address any disproportionately high and 

adverse human health or environmental 

effects of its programs, policies, and 

activities on minority populations and 

low-income populations. NHTSA 

complied with this order by identifying 

and addressing the potential effects of 

the alternatives on minority and lowincome populations in Section 3.5.9. In 

Section 4.6 of the FEIS, the agency set 

forth a qualitative analysis of the 

cumulative effects of the alternatives on 

these populations. Given the foregoing, 

the agency concludes that it complied 

with Executive Order 12898. 

4. Fish and Wildlife Conservation Act 

(FWCA) 

The FWCA (16 U.S.C. 2900) provides 

financial and technical assistance to 

States for the development, revision, 

and implementation of conservation 

plans and programs for nongame fish 

and wildlife. In addition, the Act 

encourages all Federal agencies and 

departments to utilize their authority to 

conserve and to promote conservation of 

nongame fish and wildlife and their 

habitats. The agency concludes that the 

FWCA is not applicable to NHTSA’s 

Decision, because it does not directly 

involve fish and wildlife. 

5. Coastal Zone Management Act 

(CZMA) 

The Coastal Zone Management Act 

(16 U.S.C. 1450) provides for the 

preservation, protection, development, 

and (where possible) restoration and 

enhancement of the nation’s coastal 

zone resources. Under the statute, States 

are provided with funds and technical 

assistance in developing coastal zone 

management programs. Each 

participating State must submit its 

program to the Secretary of Commerce 

for approval. Once the program has been 

approved, any activity of a Federal 

agency, either within or outside of the 

coastal zone, that affects any land or 

water use or natural resource of the 

coastal zone must be carried out in a 

manner that is consistent, to the 

maximum extent practicable, with the 

enforceable policies of the State’s 

program. 

The agency concludes that the CZMA 

is not applicable to NHTSA’s Decision, 

because it does not involve an activity 

within, or outside of, the nation’s 

coastal zones. The agency has, however, 

conducted a qualitative review of the 

related direct, indirect, and cumulative 

impacts, positive or negative, of the 

alternatives on potentially affected 

resources, including coastal zones. See 

Section 4.5.5 of the FEIS. 

6. Endangered Species Act (ESA) 

The ESA (16 U.S.C. 1531) provides for 

the protection of species that are at risk 

of extinction throughout all or a 

significant portion of their range, and 

for the protection of ecosystems on 

which they depend. Under Section 7 of 

the ESA, all Federal agencies are 

required to undertake programs for the 

conservation of endangered and 

threatened species. 

Federal agencies are responsible for 

determining whether their proposed 

action requires consultation with Fish 

and Wildlife Service or National Marine 

Fisheries Service under Section 7 of the 

ESA. To make this determination, an 

agency examines the direct and indirect 

effects of its proposed action to see if 

the action ‘‘may affect’’ a listed species. 

For indirect effects, the impact to the 

species must be later in time, must be 

caused by the proposed action, and 

must be reasonably certain to occur. 

As stated in the FEIS, the action 

alternatives, including NHTSA’s 

Decision, show a reduction in emissions 

of CO2, NOX, PM2.5, SOX, VOC, DPM, 

benzene, and 1,3-butadiene compared to 

the No Action Alternative. The FEIS 

also quantified the resulting decreases 

in sea-level rise, changes in 

precipitation, and temperature 

decreases for each of the alternatives 

from decreasing CO2 emissions. NHTSA 

then qualitatively discussed the impacts 

to ecosystems, ocean acidification, 

natural resources, wildlife, and many 

other factors. Because it is beyond the 

ability of current modeling and the level 

of uncertainty is very high, it was not 

possible to quantitatively calculate the 

effects of the CO2 reduction on specific 

localized ecosystems. See United States 

Department of Interior, Fish and 

Wildlife Service, Memorandum, 

‘‘Expectations for Consultations on 

Actions that would Emit Greenhouse 

Gases,’’ dated May 14, 2008. NHTSA 

discussed the issue with the U.S. Fish 

and Wildlife Service to ensure proper 

compliance. Without sufficient data to 

establish the required causal connection 

(to the level of reasonable certainty) 

between the proposed rulemaking, GHG 

emissions, and the subsequent impacts 

to listed species or critical habitat, 

Section 7 consultation is not required. 

For additional discussion regarding 

NHTSA’s compliance with Section 7 of 

the ESA, please see Section 10.3.6.1, 

Section 3.5.2.2, and Section 4.7.2.1 of 

the FEIS. 

7. Floodplain Management (Executive 

Order 11988 & DOT Order 5650.2) 

These Orders require Federal agencies 

to avoid the long- and short-term 

adverse impacts associated with the 

occupancy and modification of 

floodplains, and to restore and preserve 

the natural and beneficial values served 

by floodplains. Executive Order 11988 

also directs agencies to minimize the 

impact of floods on human safety, 

health and welfare, and to restore and 

preserve the natural and beneficial 

values served by floodplains through 

evaluating the potential effects of any 

actions the agency may take in a 

floodplain and ensuring that its program 

planning and budget requests reflect 

consideration of flood hazards and 

floodplain management. DOT Order 

5650.2 sets forth DOT policies and 

procedures for implementing Executive 

Order 11988. The DOT Order requires 

that the agency determine if a proposed 

action is within the limits of a base 

floodplain, meaning it is encroaching on 

the floodplain, and whether this 

encroachment is significant. If 

significant, the agency is required to 

conduct further analysis of the proposed 

action and any practicable alternatives. 

If a practicable alternative avoids 

floodplain encroachment, then the 

agency is required to implement it. 

In this rulemaking, the agency is not 

occupying, modifying and/or 

encroaching on floodplains. The agency, 

therefore, concludes that the Orders are 

not applicable to NHTSA’s Decision. 

The agency has, however, conducted a 

review of the alternatives on potentially 

affected resources, including 

floodplains. See Chapters 3 and 4 of the 

FEIS. 

8. Preservation of the Nation’s Wetlands 

(Executive Order 11990 & DOT Order 

5660.1a) 

These Orders require Federal agencies 

to avoid, to the extent possible, 

undertaking or providing assistance for 

new construction located in wetlands 

unless the agency head finds that there 

is no practicable alternative to such 

construction and that the proposed 

action includes all practicable measures 

to minimize harms to wetlands that may 

result from such use. Executive Order 

11990 also directs agencies to take 

action to minimize the destruction, loss 

or degradation of wetlands in 

‘‘conducting Federal activities and 

programs affecting land use, including 

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523BMW, Mercedes, Chrysler, Ferrari, Ford, 

Subaru, General Motors, Honda, Hyundai, Lotus, 

Maserati, Mitsubishi, Nissan, Porsche, Suzuki, 

Toyota, and Volkswagen. 

524The Regulatory Flexibility Act only requires 

analysis of small domestic manufacturers. There are 

four passenger car manufacturers we know of and 

no light truck manufacturers: Avanti, Panoz, Saleen, 

and Shelby. 

but not limited to water and related land 

resources planning, regulating, and 

licensing activities.’’ DOT Order 5660.1a 

sets forth DOT policy for interpreting 

Executive Order 11990 and requires that 

transportation projects ‘‘located in or 

having an impact on wetlands’’ should 

be conducted to assure protection of the 

Nation’s wetlands. If a project does have 

a significant impact on wetlands, an EIS 

must be prepared. 

The agency is not undertaking or 

providing assistance for new 

construction located in wetlands. The 

agency, therefore, concludes that these 

Orders do not apply to NHTSA’s 

Decision. The agency has, however, 

conducted a review of the alternatives 

on potentially affected resources, 

including wetlands. See Chapters 3 and 

4 of the FEIS. 

9. Migratory Bird Treaty Act (MBTA), 

Bald and Golden Eagle Protection Act 

(BGEPA), Executive Order 13186. 

The MBTA provides for the protection 

of migratory birds that are native to the 

United States by making it illegal for 

anyone to pursue, hunt, take, attempt to 

take, kill, capture, collect, possess, buy, 

sell, trade, ship, import, or export any 

migratory bird covered under the 

statute. The statute prohibits both 

intentional and unintentional acts. 

Therefore, the statute is violated if an 

agency acts in a manner that harms a 

migratory bird, whether it was intended 

or not. See, e.g., United States v. FMC 

Corp., 572 F.2d 902 (2nd Cir. 1978). 

The BGEPA (16 U.S.C. 668) prohibits 

any form of possession or taking of both 

bald and golden eagles. Under the 

BGEPA, violators are subject to criminal 

and civil sanctions as well as an 

enhanced penalty provision for 

subsequent offenses. 

Executive Order 13186, 

‘‘Responsibilities of Federal Agencies to 

Protect Migratory Birds,’’ helps to 

further the purposes of the MBTA by 

requiring a Federal agency to develop a 

Memorandum of Understanding (MOU) 

with the Fish and Wildlife Service when 

it is taking an action that has (or is likely 

to have) a measurable negative impact 

on migratory bird populations. 

The agency concludes that the MBTA, 

BGEPA, and Executive Order 13186 do 

not apply to NHTSA’s Decision, because 

there is no disturbance and/or take 

involved in NHTSA’s Decision. 

10. Department of Transportation Act 

(Section 4(f)) 

Section 4(f) of the Department of 

Transportation Act of 1966 (49 U.S.C. 

303), as amended by Public Law § 109– 

59, is designed to preserve publicly 

owned parklands, waterfowl and 

wildlife refuges, and significant historic 

sites. Specifically, Section 4(f) of the 

Department of Transportation Act 

provides that DOT agencies cannot 

approve a transportation program or 

project that requires the use of any 

publicly owned land from a significant 

public park, recreation area, or wildlife 

and waterfowl refuge, or any land from 

a significant historic site, unless a 

determination is made that: 

• There is no feasible and prudent 

alternative to the use of land, and 

• The program or project includes all 

possible planning to minimize harm to 

the property resulting from use, or 

• A transportation use of Section 4(f) 

property results in a de minimis impact. 

The agency concludes that the Section 

4(f) is not applicable to NHTSA’s 

Decision because this rulemaking does 

not require the use of any publicly 

owned land. For a more detailed 

discussion, please see Section 3.5.6 of 

the FEIS. 

C. Regulatory Flexibility Act 

Pursuant to the Regulatory Flexibility 

Act (5 U.S.C. 601 et seq., as amended by 

the Small Business Regulatory 

Enforcement Fairness Act (SBREFA) of 

1996), whenever an agency is required 

to publish a notice of rulemaking for 

any proposed or final rule, it must 

prepare and make available for public 

comment a regulatory flexibility 

analysis that describes the effect of the 

rule on small entities (i.e., small 

businesses, small organizations, and 

small governmental jurisdictions). The 

Small Business Administration’s 

regulations at 13 CFR part 121 define a 

small business, in part, as a business 

entity ‘‘which operates primarily within 

the United States.’’ 13 CFR 121.105(a). 

No regulatory flexibility analysis is 

required if the head of an agency 

certifies the rule will not have a 

significant economic impact on a 

substantial number of small entities. 

I certify that the final rule will not 

have a significant economic impact on 

a substantial number of small entities. 

The following is NHTSA’s statement 

providing the factual basis for the 

certification (5 U.S.C. 605(b)). 

The final rule directly affects 

seventeen large single stage motor 

vehicle manufacturers.523 The final rule 

also affects four small domestic single 

stage motor vehicle manufacturers.524

According to the Small Business 

Administration’s small business size 

standards (see 13 CFR 121.201), a single 

stage automobile or light truck 

manufacturer (NAICS code 336111, 

Automobile Manufacturing; 336112, 

Light Truck and Utility Vehicle 

Manufacturing) must have 1,000 or 

fewer employees to qualify as a small 

business. All four of the vehicle 

manufacturers have less than 1,000 

employees and make less than 1,000 

vehicles per year. The rulemaking 

would not have a significant economic 

impact on the small vehicle 

manufacturers because under Part 525, 

passenger car manufacturer making less 

than 10,000 vehicles per year can 

petition NHTSA to have alternative 

standards set for those manufacturers. 

These manufacturers currently do not 

meet the 27.5 mpg standard and must 

already petition the agency for relief. If 

the standard is raised, it has no 

meaningful impact on these 

manufacturers, and they still must go 

through the same process and petition 

for relief. Given that there already is a 

mechanism for handling small 

businesses, which is the purpose of the 

Regulatory Flexibility Act, a regulatory 

flexibility analysis was not prepared. 

NHTSA received comments on its 

discussion of the Regulatory Flexibility 

Act from Ferrari and NADA. Ferrari 

argued that the proposed standards did 

impact small manufacturers because 

they must pay fines in lieu of 

compliance and alternative standards 

are not available for manufacturers 

producing over 10,000 vehicles per year. 

Ferrari further argued that these fines 

would be particularly onerous if 

NHTSA raised the fine amount. In 

response, NHTSA notes that it has not 

yet initiated rulemaking to consider 

raising the penalties for CAFE noncompliance, and that the regulations are 

clear that manufacturers producing 

more than 10,000 vehicles per year are 

not small manufacturers, while 

manufacturers producing less may 

petition the agency. While the decision 

whether to grant the petition is within 

the agency’s discretion, NHTSA has no 

interest in merely forcing manufacturers 

to pay fines. If an alternative standard 

is appropriate, NHTSA will set one. 

NADA commented that NHTSA 

should have undertaken a full 

regulatory flexibility analysis in order to 

evaluate the impact of the standards on 

U.S. car and truck dealers, arguing that 

many of these are small businesses as 

defined by the Small Business 

Administration. NHTSA disagrees that 

these entities are directly impacted by 

the CAFE standards, as they are not a 

regulated entity under CAFE. As stated 

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525 61 FR 4729 (Feb. 7, 1996). 

above, a regulatory flexibility analysis is 

not necessary for this rulemaking. 

D. Executive Order 13132 (Federalism) 

Executive Order 13132 requires 

NHTSA to develop an accountable 

process to ensure ‘‘meaningful and 

timely input by State and local officials 

in the development of regulatory 

policies that have federalism 

implications.’’ The Order defines the 

term ‘‘Policies that have federalism 

implications’’ to include regulations 

that have ‘‘substantial direct effects on 

the States, on the relationship between 

the national government and the States, 

or on the distribution of power and 

responsibilities among the various 

levels of government.’’ Under the Order, 

NHTSA may not issue a regulation that 

has federalism implications, that 

imposes substantial direct compliance 

costs, and that is not required by statute, 

unless the Federal government provides 

the funds necessary to pay the direct 

compliance costs incurred by State and 

local governments, or NHTSA consults 

with State and local officials early in the 

process of developing the proposed 

regulation. 

As noted above, the President has 

requested that NHTSA consider whether 

any provisions regarding preemption are 

consistent with EISA, the Supreme 

Court’s decision in Massachusetts v. 

EPA and other relevant provisions of 

law and the policies underlying them. 

To provide time for further careful 

consideration of these issues, NHTSA 

has decided not to include any 

preemption provisions in the regulatory 

text at this time and will examine those 

issues in the context of the rulemaking 

for MY 2012 and later years. 

E. Executive Order 12988 (Civil Justice 

Reform) 

Pursuant to Executive Order 12988, 

‘‘Civil Justice Reform,’’ 525 NHTSA has 

considered whether this rulemaking 

would have any retroactive effect. This 

final rule does not have any retroactive 

effect. 

F. Unfunded Mandates Reform Act 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

requires Federal agencies to prepare a 

written assessment of the costs, benefits, 

and other effects of a proposed or final 

rule that includes a Federal mandate 

likely to result in the expenditure by 

State, local, or tribal governments, in the 

aggregate, or by the private sector, of 

more than $100 million in any one year 

(adjusted for inflation with base year of 

1995). Adjusting this amount by the 

implicit gross domestic product price 

deflator for 2006 results in $126 million 

(116.043/92.106 = 1.26). Before 

promulgating a rule for which a written 

statement is needed, section 205 of 

UMRA generally requires NHTSA to 

identify and consider a reasonable 

number of regulatory alternatives and 

adopt the least costly, most costeffective, or least burdensome 

alternative that achieves the objectives 

of the rule. The provisions of section 

205 do not apply when they are 

inconsistent with applicable law. 

Moreover, section 205 allows NHTSA to 

adopt an alternative other than the least 

costly, most cost-effective, or least 

burdensome alternative if the agency 

publishes with the final rule an 

explanation why that alternative was 

not adopted. 

This final rule will not result in the 

expenditure by State, local, or tribal 

governments, in the aggregate, of more 

than $126 million annually, but it will 

result in the expenditure of that 

magnitude by vehicle manufacturers 

and/or their suppliers. In promulgating 

this final rule, NHTSA considered a 

variety of alternative average fuel 

economy standards lower and higher 

than those promulgated. NHTSA is 

statutorily required to set standards at 

the maximum feasible level achievable 

by manufacturers and has concluded 

that the final fuel economy standards 

are the maximum feasible standards for 

the MY 2011 passenger car and light 

truck fleets in light of the statutory 

considerations. 

G. Paperwork Reduction Act 

Under the procedures established by 

the Paperwork Reduction Act of 1995, a 

person is not required to respond to a 

collection of information by a Federal 

agency unless the collection displays a 

valid OMB control number. The final 

rule amends the reporting requirements 

under 49 CFR part 537, Automotive 

Fuel Economy Reports. In addition to 

the vehicle model information collected 

under the approved data collection 

(OMB control number 2127–0019) in 

part 537, passenger car manufacturers 

will also be required to provide data on 

vehicle footprint. Manufacturers and 

other persons wishing to trade fuel 

economy credits would be required to 

provide an instruction to NHTSA on the 

credits to be traded. For these changes, 

NHTSA is submitting to OMB a request 

for approval of the following collection 

of information. 

In compliance with the PRA, this 

notice announces that the Information 

Collection Request (ICR) abstracted 

below has been forwarded to OMB for 

review and comment. The ICR describes 

the nature of the information collections 

and their expected burden. This is a 

request for an amendment of an existing 

collection. 

Agency: National Highway Traffic 

Safety Administration (NHTSA). 

Title: 49 CFR part 537, Automotive 

Fuel Economy (F.E.) Reports. 

Type of Request: Amend existing 

collection. 

OMB Clearance Number: 2127–0019. 

Form Number: This collection of 

information will not use any standard 

forms. 

Requested Expiration Date of 

Approval: Three years from the date of 

approval. 

Summary of the Collection of 

Information 

So that NHTSA can determine a 

manufacturer’s required fuel economy 

level, NHTSA would require 

manufacturers to provide data on 

vehicle (including passenger car and 

light truck) footprint. This information 

collection would be included as part of 

the existing fuel economy reporting 

requirements. NHTSA would also 

require that manufacturers and other 

persons wishing to trade fuel economy 

credits provide an instruction to 

NHTSA on the credits to be traded. 

Description of the Need for the 

Information and Use of the Information 

NHTSA needs the footprint 

information to determine a 

manufacturer’s required fuel economy 

level and its compliance with that level. 

NHTSA needs the credit trading 

instruction to ensure that its records of 

a manufacturer’s available credits are 

accurate in order to determine whether 

a manufacturer has sufficient credits 

available to offset any non-compliance 

with the CAFE requirements in a given 

year. 

Description of the Likely Respondents 

(Including Estimated Number, and 

Proposed Frequency of Response to the 

Collection of Information) 

NHTSA estimates that 20 

manufacturers would submit the 

required information. The frequency of 

reporting would not change from that 

currently authorized under collection 

number 2127–0019. 

Estimate of the Total Annual Reporting 

and Recordkeeping Burden Resulting 

From the Collection of Information 

For footprint, NHTSA estimates that 

each passenger car manufacturer would 

incur an additional 10 burden hours per 

year. This estimate is based on the fact 

that data collection would involve only 

computer tabulation. Thus, each 

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526 62 FR 19885 (Apr. 23, 1997). 527 66 FR 28355 (May 18, 2001). 

passenger car manufacturer would incur 

an additional burden of 10 hours or a 

total on industry of an additional 200 

hours a year (assuming there are 20 

manufacturers). At an assumed rate of 

$21.23 an hour, the annual, estimated 

cost of collecting and preparing the 

additional passenger car footprint 

information is $4,246. 

For credit trading, NHTSA estimates 

that each instruction would incur an 

additional burden hour per year. This 

estimate is based on the fact that the 

data required is already available and 

thus the only burden is the actual 

preparation of the instruction. NHTSA 

estimates that the maximum 

instructions it would receive each year 

is 20. While non-manufacturers may 

also participate in credit trading, 

NHTSA does not believe that every 

manufacturer would need to, or be able 

to, participate in credit trading every 

year. NHTSA does not, at this time, 

have a way of estimating how many 

non-manufacturers may participate in 

credit trading. Therefore NHTSA 

believes that the total number of 

manufacturers is a reasonable estimate, 

for a total annual additional burden of 

20 hours a year. At an assumed rate of 

$21.23 an hour, the annual estimated 

cost of collecting and preparing the 

credit trading instruction is $425. 

NHTSA estimates that the 

recordkeeping burden resulting from the 

collection of information would be 0 

hours because the information would be 

retained on each manufacturer’s existing 

computer systems for each 

manufacturer’s internal administrative 

purposes. There would be no capital or 

start-up costs as a result of this 

collection. Manufacturers can collect 

and tabulate the information by using 

existing equipment. Thus, there would 

be no additional costs to respondents or 

record keepers. 

Comments are invited on: 

• Whether the collection of 

information is necessary for the proper 

performance of the functions of the 

Department, including whether the 

information will have practical utility. 

• Whether the Department’s estimate 

for the burden of the information 

collection is accurate. 

• Ways to minimize the burden of the 

collection of information on 

respondents, including the use of 

automated collection techniques or 

other forms of information technology. 

A comment to OMB is most effective 

if OMB receives it within 30 days of 

publication. Send comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, 725 17th Street, NW., 

Washington, DC 20503, Attn: NHTSA 

Desk Officer. PRA comments are due 

within 30 days following publication of 

this document in the Federal Register. 

The agency recognizes that the 

amendment to the existing collection of 

information contained in today’s final 

rule may be subject to revision in 

response to public comments and the 

OMB review. For further information 

please contact Peter Feather, Division 

Chief, Fuel Economy Division, Office of 

International Policy, Fuel Economy, and 

Consumer Programs, National Highway 

Traffic Safety Administration, 1200 New 

Jersey Avenue, SE., Washington, DC 

20590. You may also contact him by 

phone at (202) 366–0846 or by fax at 

(202) 493–2290. 

H. Regulation Identifier Number (RIN) 

The Department of Transportation 

assigns a regulation identifier number 

(RIN) to each regulatory action listed in 

the Unified Agenda of Federal 

Regulations. The Regulatory Information 

Service Center publishes the Unified 

Agenda in April and October of each 

year. You may use the RIN contained in 

the heading at the beginning of this 

document to find this action in the 

Unified Agenda. 

J. Executive Order 13045 

Executive Order 13045526 applies to 

any rule that: (1) is determined to be 

economically significant as defined 

under E.O. 12866, and (2) concerns an 

environmental, health or safety risk that 

NHTSA has reason to believe may have 

a disproportionate effect on children. If 

the regulatory action meets both criteria, 

we must evaluate the environmental 

health or safety effects of the final rule 

on children, and explain why the final 

regulation is preferable to other 

potentially effective and reasonably 

feasible alternatives considered by us. 

This final rule does not pose such a 

risk for children. The primary effects of 

this final rule are to conserve energy 

and to reduce tailpipe emissions of CO2, 

the primary greenhouse gas, by setting 

fuel economy standards for motor 

vehicles. 

K. National Technology Transfer and 

Advancement Act 

Section 12(d) of the National 

Technology Transfer and Advancement 

Act (NTTAA) requires NHTSA to 

evaluate and use existing voluntary 

consensus standards in its regulatory 

activities unless doing so would be 

inconsistent with applicable law (e.g., 

the statutory provisions regarding 

NHTSA’s vehicle safety authority) or 

otherwise impractical. 

Voluntary consensus standards are 

technical standards developed or 

adopted by voluntary consensus 

standards bodies. Technical standards 

are defined by the NTTAA as 

‘‘performance-based or design-specific 

technical specification and related 

management systems practices.’’ They 

pertain to ‘‘products and processes, 

such as size, strength, or technical 

performance of a product, process or 

material.’’ 

Examples of organizations generally 

regarded as voluntary consensus 

standards bodies include the American 

Society for Testing and Materials 

(ASTM), the Society of Automotive 

Engineers (SAE), and the American 

National Standards Institute (ANSI). If 

NHTSA does not use available and 

potentially applicable voluntary 

consensus standards, we are required by 

the Act to provide Congress, through 

OMB, an explanation of the reasons for 

not using such standards. 

The final rule categorizes passenger 

cars according to vehicle footprint 

(average track width X wheelbase). For 

purposes of this calculation, NHTSA 

will base these measurements on those 

developed by the automotive industry. 

Determination of wheelbase would be 

consistent with L101-wheelbase, 

defined in SAE J1100 MAY95, Motor 

vehicle dimensions. NHTSA’s final rule 

uses a modified version of the SAE 

definitions for track width (W101-treadfront and W102-tread-rear as defined in 

SAE J1100 MAY95). The definition of 

track width reduces a manufacturer’s 

ability to adjust a vehicle’s track width 

through minor alterations. 

L. Executive Order 13211 

Executive Order 13211527 applies to 

any rule that: (1) Is determined to be 

economically significant as defined 

under E.O. 12866, and is likely to have 

a significant adverse effect on the 

supply, distribution, or use of energy; or 

(2) that is designated by the 

Administrator of the Office of 

Information and Regulatory Affairs as a 

significant energy action. If the 

regulatory action meets either criterion, 

we must evaluate the adverse energy 

effects of the final rule and explain why 

the final regulation is preferable to other 

potentially effective and reasonably 

feasible alternatives considered by us. 

The final rule seeks to establish 

passenger car and light truck fuel 

economy standards that will reduce the 

consumption of petroleum and will not 

have any adverse energy effects. 

Accordingly, this final rulemaking 

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action is not designated as a significant 

energy action. 

M. Department of Energy Review 

In accordance with 49 U.S.C. 

32902(j)(2), NHTSA submitted this final 

rule to the Department of Energy for 

review. 

N. Privacy Act 

Anyone is able to search the 

electronic form of all comments 

received into any of our dockets by the 

name of the individual submitting the 

comment (or signing the comment, if 

submitted on behalf of an organization, 

business, labor union, etc.). You may 

review DOT’s complete Privacy Act 

statement in the Federal Register 

published on April 11, 2000 (Volume 

65, Number 70; Pages 19477–78) or you 

may visit http://www.dot.gov/ 

privacy.html. 

XVII. Regulatory Text 

List of Subjects in 49 CFR Parts 523, 

531, 533, 534, 535, 536, and 537 

Fuel economy, Reporting and 

recordkeeping requirements. 

■ For the reasons discussed in the 

preamble, under the authority of 49 

U.S.C. 32901, 32902, 32903, and 32907, 

and delegation of authority at 49 CFR 

1.50, NHTSA amends 49 CFR Chapter V 

as follows: 

PART 523—VEHICLE CLASSIFICATION 

■ 1. Revise the authority citation for part 

523 to read as follows: 

Authority: 49 U.S.C. 32901, delegation of 

authority at 49 CFR 1.50. 

■ 2. Amend § 523.2 by adding, in 

alphabetical order, definitions of ‘‘Base 

tire,’’ ‘‘Light truck,’’ and ‘‘Work truck,’’ 

and revising the definition of 

‘‘footprint’’ to read as follows: 

§ 523.2 Definitions. 

* * * * * 

Base tire means the tire specified as 

standard equipment by a manufacturer 

on each vehicle configuration of a 

model type. 

* * * * * 

Footprint is defined as the product of 

track width (measured in inches, 

calculated as the average of front and 

rear track widths, and rounded to the 

nearest tenth of an inch) times 

wheelbase (measured in inches and 

rounded to the nearest tenth of an inch), 

divided by 144 and then rounded to the 

nearest tenth of a square foot. For 

purposes of this definition, track width 

is the lateral distance between the 

centerlines of the base tires at ground, 

including the camber angle. For 

purposes of this definition, wheelbase is 

the longitudinal distance between front 

and rear wheel centerlines. 

* * * * * 

Light truck means a non-passenger 

automobile as defined in § 523.5. 

* * * * * 

Work truck means a vehicle that is 

rated at more than 8,500 and less than 

or equal to 10,000 pounds gross vehicle 

weight, and is not a medium-duty 

passenger vehicle as defined in 40 CFR 

86.1803–01 effective as of December 20, 

2007. 

* * * * * 

■ 3. Amend § 523.3 by revising 

paragraph (a) to read as follows: 

§ 523.3 Automobile. 

(a) An automobile is any 4-wheeled 

vehicle that is propelled by fuel, or by 

alternative fuel, manufactured primarily 

for use on public streets, roads, and 

highways and rated at less than 10,000 

pounds gross vehicle weight, except: 

(1) A vehicle operated only on a rail 

line; 

(2) A vehicle manufactured in 

different stages by 2 or more 

manufacturers, if no intermediate or 

final-stage manufacturer of that vehicle 

manufactures more than 10,000 multistage vehicles per year; or 

(3) A work truck. 

* * * * * 

■ 4. Revise § 523.5 to read as follows: 

§ 523.5 Non-passenger automobile. 

A non-passenger automobile means 

an automobile that is not a passenger 

automobile or a work truck and includes 

vehicles described in paragraphs (a) and 

(b) of this section: 

(a) An automobile designed to 

perform at least one of the following 

functions: 

(1) Transport more than 10 persons; 

(2) Provide temporary living quarters; 

(3) Transport property on an open 

bed; 

(4) Provide, as sold to the first retail 

purchaser, greater cargo-carrying than 

passenger-carrying volume, such as in a 

cargo van; if a vehicle is sold with a 

second-row seat, its cargo-carrying 

volume is determined with that seat 

installed, regardless of whether the 

manufacturer has described that seat as 

optional; or 

(5) Permit expanded use of the 

automobile for cargo-carrying purposes 

or other nonpassenger-carrying 

purposes through: 

(i) For non-passenger automobiles 

manufactured prior to model year 2012, 

the removal of seats by means installed 

for that purpose by the automobile’s 

manufacturer or with simple tools, such 

as screwdrivers and wrenches, so as to 

create a flat, floor level, surface 

extending from the forwardmost point 

of installation of those seats to the rear 

of the automobile’s interior; or 

(ii) For non-passenger automobiles 

manufactured in model year 2008 and 

beyond, for vehicles equipped with at 

least 3 rows of designated seating 

positions as standard equipment, permit 

expanded use of the automobile for 

cargo-carrying purposes or other 

nonpassenger-carrying purposes 

through the removal or stowing of 

foldable or pivoting seats so as to create 

a flat, leveled cargo surface extending 

from the forwardmost point of 

installation of those seats to the rear of 

the automobile’s interior. 

(b) An automobile capable of offhighway operation, as indicated by the 

fact that it: 

(1)(i) Has 4-wheel drive; or 

(ii) Is rated at more than 6,000 pounds 

gross vehicle weight; and 

(2) Has at least four of the following 

characteristics calculated when the 

automobile is at curb weight, on a level 

surface, with the front wheels parallel to 

the automobile’s longitudinal 

centerline, and the tires inflated to the 

manufacturer’s recommended 

pressure— 

(i) Approach angle of not less than 28 

degrees. 

(ii) Breakover angle of not less than 14 

degrees. 

(iii) Departure angle of not less than 

20 degrees. 

(iv) Running clearance of not less than 

20 centimeters. 

(v) Front and rear axle clearances of 

not less than 18 centimeters each. 

(Sec. 9, Pub. L. 89–670, 80 Stat. 981 (49 

U.S.C. 1657); sec. 301, Pub. L. 94–163, 89 

Stat. 901 (15 U.S.C. 2002); delegation of 

authority at 41 FR 25015, June 22, 1976.) 

PART 531—PASSENGER 

AUTOMOBILE AVERAGE FUEL 

ECONOMY STANDARDS 

■ 5. The authority citation for part 531 

continues to read as follows: 

Authority: 49 U.S.C. 32902; delegation of 

authority at 49 CFR 1.50. 

■ 6. Amend § 531.5 by revising 

paragraph (a), redesignating paragraph 

(b) as paragraph (d), and adding new 

paragraphs (b) and (c) to read as follows: 

§ 531.5 Fuel economy standards. 

(a) Except as provided in paragraph 

(d) of this section, each manufacturer of 

passenger automobiles shall comply 

with the average fuel economy 

standards in Table I, expressed in miles 

per gallon, in the model year specified 

as applicable: 

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14450 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

(b) For model year 2011, a 

manufacturer’s passenger automobile 

fleet shall comply with the fuel 

economy level calculated for that model 

year according to Figure 1 and the 

appropriate values in Table II. FIGURE 1: 

Required _ Fuel _ Economy _ Level N

N

T

i

i i

=

∑

Where: 

N is the total number (sum) of passenger 

automobiles produced by a 

manufacturer, 

Ni is the number (sum) of the ith model 

passenger automobile produced by the 

manufacturer, and 

Ti is fuel economy target of the ith model 

passenger automobile, which is 

determined according to the following 

formula, rounded to the nearest 

hundredth: 

T

a ba

e

e

x c /d

x c /d

=

+ − ⎛

⎝

⎜ ⎞

⎠

⎟ +

−

−

1

1 11

1

( )

( )

Where: Parameters a, b, c, and d are defined in 

Table II; 

e = 2.718; and 

x = footprint (in square feet, rounded to the 

nearest tenth) of the vehicle model 


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(c) In addition to the requirement of 

paragraph (b) of this section, each 

manufacturer shall also meet the 

minimum standard for domestically 

manufactured passenger automobiles 

expressed in Table III: 

* * * * * 

PART 533—LIGHT TRUCK FUEL 

ECONOMY STANDARDS 

7. The authority citation for part 533 

continues to read as follows: 

Authority: 49 U.S.C. 32902; delegation of 

authority at 49 CFR 1.50. 

8. Amend § 533.5 by revising Table V 

of paragraph (a) and paragraph (h) to 

read as follows: 

§ 533.5 Requirements. 

(a) * * * 


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* * * * * 

(h) For model year 2011, a 

manufacturer’s light truck fleet shall 

comply with the fuel economy level 

calculated for that model year according 

to Figure 1 and the appropriate values 

in Table V. 

PART 534—RIGHTS AND 

RESPONSIBILITIES OF 

MANUFACTURERS IN THE CONTEXT 

OF CHANGES IN CORPORATE 

RELATIONSHIPS 

■ 9. The authority citation for part 534 

continues to read as follows: 

Authority: 49 U.S.C. 32901; delegation of 

authority at 49 CFR 1.50. 

■ 10. Amend § 534.4 by revising 

paragraphs (c) and (d) to read as follows: 

PART 534—RIGHTS AND 

RESPONSIBILITIES OF 

MANUFACTURERS IN THE CONTEXT 

OF CHANGES IN CORPORATE 

RELATIONSHIPS 

9. The authority citation for part 534 

continues to read as follows: 

Authority: 49 U.S.C. 32901; delegation of 

authority at 49 CFR 1.50. 

10. Amend § 534.4 by revising 

paragraphs (c) and (d) to read as follows: 

§ 534.4 Successors and predecessors. 

* * * * * 

(c) Credits earned by a predecessor 

before or during model year 2007 may 

be used by a successor, subject to the 

availability of credits and the general 

three-year restriction on carrying credits 

forward and the general three-year 

restriction on carrying credits backward. 

Credits earned by a predecessor after 

model year 2007 may be used by a 

successor, subject to the availability of 

credits and the general five-year 

restriction on carrying credits forward 

and the general three-year restriction on 

carrying credits backward. 

(d) Credits earned by a successor 

before or during model year 2007 may 

be used to offset a predecessor’s 

shortfall, subject to the availability of 

credits and the general three-year 

restriction on carrying credits forward 

and the general three-year restriction on 

carrying credits backward. Credits 

earned by a successor after model year 

2007 may be used to offset a 

predecessor’s shortfall, subject to the 

availability of credits and the general 

five-year restriction on carrying credits 

forward and the general three-year 

restriction on carrying credits backward. 

■ 11. Amend § 534.5 by revising 

paragraphs (c) and (d) to read as follows: 

§ 534.5 Manufacturers within control 

relationships. 

* * * * * 

(c) Credits of a manufacturer within a 

control relationship may be used by the 

group of manufacturers within the 

control relationship to offset shortfalls, 

subject to the agreement of the other 

manufacturers, the availability of the 

credits, and the general three-year 

restriction on carrying credits forward 

or backward prior to or during model 

year 2007, or the general five-year 

restriction on carrying credits forward 

and the general three-year restriction on 

carrying credits backward after model 

year 2007. 

(d) If a manufacturer within a group 

of manufacturers is sold or otherwise 

spun off so that it is no longer within 

that control relationship, the 

manufacturer may use credits that were 

earned by the group of manufacturers 

within the control relationship while 

the manufacturer was within that 

relationship, subject to the agreement of 

the other manufacturers, the availability 

of the credits, and the general three-year 

restriction on carrying credits forward 

or backward prior to or during model 

year 2007, or the general five-year 

restriction on carrying credits forward 

and the general three-year restriction on 

carrying credits backward after model 

year 2007. 

PART 535—[REMOVED] 

■ 12. Remove Part 535. 

■ 13. Part 536 is added to read as 

follows: 

PART 536—TRANSFER AND TRADING 

OF FUEL ECONOMY CREDITS 

Sec. 

536.1 Scope. 

536.2 Application. 

536.3 Definitions. 

536.4 Credits. 

536.5 Trading infrastructure. 

536.6 Treatment of credits earned prior to 

model year 2011. 

536.7 Treatment of carryback credits. 

536.8 Conditions for trading of credits. 

536.9 Use of credits with regard to the 

domestically manufactured passenger 

automobile minimum standard. 

536.10 Treatment of dual-fuel and 

alternative fuel vehicles—consistency 

with 49 CFR Part 538. 

Authority: Sec. 104, Pub. L. 110–140 (49 

U.S.C. 32903); delegation of authority at 49 

CFR 1.50. 

§ 536.1 Scope. 

This part establishes regulations 

governing the use and application of 

CAFE credits up to three model years 

before and five model years after the 

model year in which the credit was 

earned. It also specifies requirements for 

manufacturers wishing to transfer fuel 

economy credits between their fleets 

and for manufacturers and other persons 

wishing to trade fuel economy credits to 

achieve compliance with prescribed fuel 

economy standards. 

§ 536.2 Application. 

This part applies to all credits earned 

(and transferable and tradable) for 

exceeding applicable average fuel 

economy standards in a given model 

year for domestically manufactured 

passenger cars, imported passenger cars, 

and light trucks. 

§ 536.3 Definitions. 

(a) Statutory terms. All terms defined 

in 49 U.S.C. § 32901(a) are used 

pursuant to their statutory meaning. 

(b) Other terms. 

Above standard fuel economy means, 

with respect to a compliance category, 

that the automobiles manufactured by a 

manufacturer in that compliance 

category in a particular model year have 

greater average fuel economy (calculated 

in a manner that reflects the incentives 

for alternative fuel automobiles per 49 

U.S.C. 32905) than that manufacturer’s 

fuel economy standard for that 

compliance category and model year. 

Adjustment factor means a factor used 

to adjust the value of a traded or 

transferred credit for compliance 

purposes to ensure that the compliance 

value of the credit when used reflects 

the total volume of oil saved when the 

credit was earned. 

Below standard fuel economy means, 

with respect to a compliance category, 

that the automobiles manufactured by a 

manufacturer in that compliance 

category in a particular model year have 

lower average fuel economy (calculated 

in a manner that reflects the incentives 

for alternative fuel automobiles per 49 

U.S.C. 32905) than that manufacturer’s 

fuel economy standard for that 

compliance category and model year. 

Compliance means a manufacturer 

achieves compliance in a particular 

compliance category when 

(1) The average fuel economy of the 

vehicles in that category exceed or meet 

the fuel economy standard for that 

category, or 

(2) The average fuel economy of the 

vehicles in that category do not meet the 

fuel economy standard for that category, 

but the manufacturer proffers a 

sufficient number of valid credits, 

adjusted for total oil savings, to cover 

the gap between the average fuel 

economy of the vehicles in that category 

and the required average fuel economy. 

A manufacturer achieves compliance 

for its fleet if the above conditions (1) 

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or (2) are simultaneously met for all 

compliance categories. 

Compliance category means any of 

three categories of automobiles subject 

to Federal fuel economy regulations. 

The three compliance categories 

recognized by 49 U.S.C. 32903(g)(6) are 

domestically manufactured passenger 

automobiles, imported passenger 

automobiles, and non-passenger 

automobiles (‘‘light trucks’’). 

Credit holder (or holder) means a legal 

person that has valid possession of 

credits, either because they are a 

manufacturer who has earned credits by 

exceeding an applicable fuel economy 

standard, or because they are a 

designated recipient who has received 

credits from another holder. Credit 

holders need not be manufacturers, 

although all manufacturers may be 

credit holders. 

Credits (or fuel economy credits) 

means an earned or purchased 

allowance recognizing that the average 

fuel economy of a particular 

manufacturer’s vehicles within a 

particular compliance category and 

model year exceeds that manufacturer’s 

fuel economy standard for that 

compliance category and model year. 

One credit is equal to 1⁄10 of a mile per 

gallon above the fuel economy standard 

per one vehicle within a compliance 

category. Credits are denominated 

according to model year in which they 

are earned (vintage), originating 

manufacturer, and compliance category. 

Expiry date means the model year 

after which fuel economy credits may 

no longer be used to achieve compliance 

with fuel economy regulations. Expiry 

Dates are calculated in terms of model 

years: for example, if a manufacturer 

earns credits for model year 2011, these 

credits may be used for compliance in 

model years 2008–2016. 

Fleet means all automobiles that are 

manufactured by a manufacturer in a 

particular model year and are subject to 

fuel economy standards under 49 CFR 

parts 531 and 533. For the purposes of 

this regulation, a manufacturer’s fleet 

means all domestically manufactured 

and imported passenger automobiles 

and non-passenger automobiles (‘‘light 

trucks’’). ‘‘Work trucks’’ and medium 

and heavy trucks are not included in 

this definition for purposes of this 

regulation. 

Light truck means the same as ‘‘nonpassenger automobile,’’ as that term is 

defined in 49 U.S.C. 32901(a)(17), and 

as ‘‘light truck,’’ as that term is defined 

at 49 CFR 523.5. 

Originating manufacturer means the 

manufacturer that originally earned a 

particular credit. Each credit earned will 

be identified with the name of the 

originating manufacturer. 

Trade means the receipt by NHTSA of 

an instruction from a credit holder to 

place one of its credits in the account of 

another credit holder. A credit that has 

been traded can be identified because 

the originating manufacturer will be a 

different party than the current credit 

holder. Traded credits are moved from 

one credit holder to the recipient credit 

holder within the same compliance 

category for which the credits were 

originally earned. If a credit has been 

traded to another credit holder and is 

subsequently traded back to the 

originating manufacturer, it will be 

deemed not to have been traded for 

compliance purposes. 

Transfer means the application by a 

manufacturer of credits earned by that 

manufacturer in one compliance 

category or credits acquired by trade 

(and originally earned by another 

manufacturer in that category) to 

achieve compliance with fuel economy 

standards with respect to a different 

compliance category. For example, a 

manufacturer may purchase light truck 

credits from another manufacturer, and 

transfer them to achieve compliance in 

the manufacturer’s domestically 

manufactured passenger car fleet. 

Vintage means, with respect to a 

credit, the model year in which the 

credit was earned. 

§ 536.4 Credits. 

(a) Type and vintage. All credits are 

identified and distinguished in the 

accounts by originating manufacturer, 

compliance category, and model year of 

origin (vintage). 

(b) Application of credits. All credits 

earned and applied are calculated, per 

49 U.S.C. 32903(c), in tenths of a mile 

per gallon by which the average fuel 

economy of vehicles in a particular 

compliance category manufactured by a 

manufacturer in the model year in 

which the credits are earned exceeds the 

applicable average fuel economy 

standard, multiplied by the number of 

vehicles sold in that compliance 

category. However, credits that have 

been traded between credit holders or 

transferred between compliance 

categories are valued for compliance 

purposes using the adjustment factor 

specified in paragraph (c) of this 

section, pursuant to the ‘‘total oil 

savings’’ requirement of 49 U.S.C. 

32903(f)(1). 

(c) Adjustment factor. When traded or 

transferred and used, fuel economy 

credits are adjusted to ensure fuel oil 

savings is preserved. For traded credits, 

the user (or buyer) of credits must 

multiply the calculated adjustment 

factor by the number of its shortfall 

credits it plans to offset in order to 

determine the number of equivalent 

credits to acquire from the earner (or 

seller). For transferred credits, the user 

of credits must multiply the calculated 

adjustment factor by the number of its 

shortfall credits it plans to offset in 

order to determine the number of 

equivalent credits to transfer from the 

compliance category holding the 

available credits. The adjustment factor 

is calculated by the following formula: 

A = ∗ ∗

∗ ∗

⎛

⎝

⎜ ⎞

⎠

⎟ VMTu MPGae MPGse

VMTe MPGau MPGsu

Where A = Adjustment Factor applied to 

traded or transferred credits; 

VMTe = Lifetime vehicle miles traveled for 

the compliance category in which the 

credit was earned: 150,922 miles for 

domestically manufactured and 

imported passenger cars, 172,552 miles 

for light trucks; 

VMTu = Lifetime vehicle miles traveled for 

the compliance category in which the 

credit is used for compliance: 150,922 

miles for domestically manufactured and 

imported passenger cars, 172,552 miles 

for light trucks; 

MPGse = Required fuel economy standard for 

the originating (earning) manufacturer, 

compliance category, and model year in 

which the credit was earned; 

MPGae = Actual fuel economy for the 

originating manufacturer, compliance 

category, and model year in which the 

credit was earned; 

MPGsu = Required fuel economy standard for 

the user (buying) manufacturer, 

compliance category, and model year in 

which the credit is used for compliance; 

MPGau = Actual fuel economy for the user 

manufacturer, compliance category, and 

model year in which the credit is used 

for compliance. 

§ 536.5 Trading Infrastructure. 

(a) Accounts. NHTSA maintains 

‘‘accounts’’ for each credit holder. The 

account consists of a balance of credits 


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in each compliance category and vintage 

held by the holder. 

(b) Who may hold credits. Every 

manufacturer subject to fuel economy 

standards under 49 CFR parts 531 or 

533 is automatically an account holder. 

If the manufacturer earns credits 

pursuant to this regulation, or receives 

credits from another party, so that the 

manufacturer’s account has a non-zero 

balance, then the manufacturer is also a 

credit holder. Any party designated as a 

recipient of credits by a current credit 

holder will receive an account from 

NHTSA and become a credit holder, 

subject to the following conditions: 

(1) A designated recipient must 

provide name, address, contacting 

information, and a valid taxpayer 

identification number or social security 

number; 

(2) NHTSA does not grant a request to 

open a new account by any party other 

than a party designated as a recipient of 

credits by a credit holder; 

(3) NHTSA maintains accounts with 

zero balances for a period of time, but 

reserves the right to close accounts that 

have had zero balances for more than 

one year. 

(c) Automatic debits and credits of 

accounts. 

(1) Upon receipt of a verified 

instruction to trade credits from an 

existing credit holder, NHTSA verifies 

the presence of sufficient credits in the 

account of the trader, then debits the 

account of the trader and credits the 

account of the recipient with credits of 

the vintage, origin, and compliance 

category designated. Traded credits 

identified by a specific compliance 

category are deposited into the 

recipient’s account in that same 

compliance category. If the recipient is 

not a current account holder, NHTSA 

establishes the account subject to the 

conditions described in § 536.5(b), and 

adds the credits to the newly-opened 

account. 

(2) NHTSA automatically deletes 

unused credits from holders’ accounts 

as they reach their expiry date. 

(d) Compliance. (1) NHTSA assesses 

compliance with fuel economy 

standards each year, utilizing the 

certified and reported CAFE data 

provided by the Environmental 

Protection Agency for enforcement of 

the CAFE program pursuant to 49 U.S.C. 

32904(e). Credit values are calculated 

based on the CAFE data from the EPA. 

If a particular compliance category 

within a manufacturer’s fleet has above 

standard fuel economy, NHTSA adds 

credits to the manufacturer’s account for 

that compliance category and vintage in 

the appropriate amount by which the 

manufacturer has exceeded the 

applicable standard. 

(2) If a manufacturer’s vehicles in a 

particular compliance category have 

below standard fuel economy, NHTSA 

will provide written notification to the 

manufacturer that it has failed to meet 

a particular fleet target standard. The 

manufacturer will be required to 

confirm the shortfall and must either: 

submit a plan indicating how it will 

allocate existing credits or earn, transfer 

and/or acquire credits; or pay the 

appropriate civil penalty. The 

manufacturer must submit a plan or 

payment within 60 days of receiving 

agency notification. 

(3) Credits used to offset shortfalls are 

subject to the three and five year 

limitations as described in § 536.6. 

(4) Transferred credits are subject to 

the limitations specified by 49 U.S.C. 

32903(g)(3) and this regulation. 

(5) The value, when used for 

compliance, of any credits received via 

trade or transfer is adjusted, using the 

adjustment factor described in 

§ 536.4(c), pursuant to 49 U.S.C. 

32903(f)(1). 

(6) Credit allocation plans received 

from a manufacturer will be reviewed 

and approved by NHTSA. NHTSA will 

approve a credit allocation plan unless 

it finds that the proposed credits are 

unavailable or that it is unlikely that the 

plan will result in the manufacturer 

earning sufficient credits to offset the 

subject credit shortfall. If a plan is 

approved, NHTSA will revise the 

respective manufacturer’s credit account 

accordingly. If a plan is rejected, 

NHTSA will notify the respective 

manufacturer and request a revised plan 

or payment of the appropriate fine. 

(e) Reporting. (1) NHTSA periodically 

publishes the names and credit holdings 

of all credit holders. NHTSA does not 

publish individual transactions, nor 

respond to individual requests for 

updated balances from any party other 

than the account holder. 

(2) NHTSA issues an annual credit 

status letter to each party that is a credit 

holder at that time. The letter to a credit 

holder includes a credit accounting 

record that identifies the credit status of 

the credit holder including any activity 

(earned, expired, transferred, traded, 

carry-forward and carry-back credit 

transactions/allocations) that took place 

during the identified activity period. 

§ 536.6 Treatment of credits earned prior 

to model year 2011. 

(a) Credits earned in a compliance 

category before model year 2008 may be 

applied by the manufacturer that earned 

them to carryback plans for that 

compliance category approved up to 

three model years prior to the year in 

which the credits were earned, or may 

be applied to compliance in that 

compliance category for up to three 

model years after the year in which the 

credits were earned. 

(b) Credits earned in a compliance 

category during and after model year 

2008 may be applied by the 

manufacturer that earned them to 

carryback plans for that compliance 

category approved up to three years 

prior to the year in which the credits 

were earned, or may be held or applied 

for up to five model years after the year 

in which the credits were earned. 

(c) Credits earned in a compliance 

category prior to model year 2011 may 

not be transferred or traded. 

§ 536.7 Treatment of carryback credits. 

(a) Carryback credits earned in a 

compliance category in any model year 

may be used in carryback plans 

approved by NHTSA, pursuant to 49 

U.S.C. 32903(b), for up to three model 

years prior to the year in which the 

credit was earned. 

(b) For purposes of this regulation, 

NHTSA will treat the use of future 

credits for compliance, as through a 

carryback plan, as a deferral of penalties 

for non-compliance with an applicable 

fuel economy standard. 

(c) If NHTSA receives and approves a 

manufacturer’s carryback plan to earn 

future credits within the following three 

model years in order to comply with 

current regulatory obligations, NHTSA 

will defer levying fines for noncompliance until the date(s) when the 

manufacturer’s approved plan indicates 

that credits will be earned or acquired 

to achieve compliance, and upon 

receiving confirmed CAFE data from 

EPA. If the manufacturer fails to acquire 

or earn sufficient credits by the plan 

dates, NHTSA will initiate compliance 

proceedings. 

(d) In the event that NHTSA fails to 

receive or approve a plan for a noncompliant manufacturer, NHTSA will 

levy fines pursuant to statute. If within 

three years, the non-compliant 

manufacturer earns or acquires 

additional credits to reduce or eliminate 

the non-compliance, NHTSA will 

reduce any fines owed, or repay fines to 

the extent that credits received reduce 

the non-compliance. 

(e) No credits from any source 

(earned, transferred and/or traded) will 

be accepted in lieu of compliance if 

those credits are not identified as 

originating within one of the three 

model years after the model year of the 

confirmed shortfall. 

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Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 14455 

§ 536.8 Conditions for trading of credits. 

(a) Trading of credits. If a credit 

holder wishes to trade credits to another 

party, the current credit holder and the 

receiving party must jointly issue an 

instruction to NHTSA, identifying the 

quantity, vintage, compliance category, 

and originator of the credits to be 

traded. If the recipient is not a current 

account holder, the recipient must 

provide sufficient information for 

NHTSA to establish an account for the 

recipient. Once an account has been 

established or identified for the 

recipient, NHTSA completes the trade 

by debiting the transferor’s account and 

crediting the recipient’s account. 

NHTSA will track the quantity, vintage, 

compliance category, and originator of 

all credits held or traded by all accountholders. 

(b) Trading between and within 

compliance categories. For credits 

earned in model year 2011 or thereafter, 

and used to satisfy compliance 

obligations for model year 2011 or 

thereafter: 

(1) Manufacturers may use credits 

originally earned by another 

manufacturer in a particular compliance 

category to satisfy compliance 

obligations within the same compliance 

category. 

(2) Once a manufacturer acquires by 

trade credits originally earned by 

another manufacturer in a particular 

compliance category, the manufacturer 

may transfer the credits to satisfy its 

compliance obligations in a different 

compliance category, but only to the 

extent that the CAFE increase 

attributable to the transferred credits 

does not exceed the limits in 49 U.S.C. 

32903(g)(3). For any compliance 

category, the sum of a manufacturer’s 

transferred credits earned by that 

manufacturer and transferred credits 

obtained by that manufacturer through 

trade must not exceed that limit. 

(c) Changes in corporate ownership 

and control. Manufacturers must inform 

NHTSA of corporate relationship 

changes to ensure that credit accounts 

are identified correctly and credits are 

assigned and allocated properly. 

(1) In general, if two manufacturers 

merge in any way, they must inform 

NHTSA how they plan to merge their 

credit accounts. NHTSA will 

subsequently assess corporate fuel 

economy and compliance status of the 

merged fleet instead of the original 

separate fleets. 

(2) If a manufacturer divides or 

divests itself of a portion of its 

automobile manufacturing business, it 

must inform NHTSA how it plans to 

divide the manufacturer’s credit 

holdings into two or more accounts. 

NHTSA will subsequently distribute 

holdings as directed by the 

manufacturer, subject to provision for 

reasonably anticipated compliance 

obligations. 

(3) If a manufacturer is a successor to 

another manufacturer’s business, it must 

inform NHTSA how it plans to allocate 

credits and resolve liabilities per 49 CFR 

Part 534, Rights and Responsibilities of 

Manufacturers in the Context of 

Corporate Relationships. 

(d) No short or forward sales. NHTSA 

will not honor any instructions to trade 

or transfer more credits than are 

currently held in any account. NHTSA 

will not honor instructions to trade or 

transfer credits from any future vintage 

(i.e., credits not yet earned). NHTSA 

will not participate in or facilitate 

contingent trades. 

(e) Cancellation of credits. A credit 

holder may instruct NHTSA to cancel 

its currently held credits, specifying the 

originating manufacturer, vintage, and 

compliance category of the credits to be 

cancelled. These credits will be 

permanently null and void; NHTSA will 

remove the specific credits from the 

credit holder’s account, and will not 

reissue them to any other party. 

(f) Errors or fraud in earning credits. 

If NHTSA determines that a 

manufacturer has been credited, through 

error or fraud, with earning credits, 

NHTSA will cancel those credits if 

possible. If the manufacturer credited 

with having earned those credits has 

already traded them when the error or 

fraud is discovered, NHTSA will hold 

the receiving manufacturer responsible 

for returning the same or equivalent 

credits to NHTSA for cancellation. 

(g) Error or fraud in trading. In 

general, all trades are final and 

irrevocable once executed, and may 

only be reversed by a new, mutuallyagreed transaction. If NHTSA executes 

an erroneous instruction to trade credits 

from one holder to another through 

error or fraud, NHTSA will reverse the 

transaction if possible. If those credits 

have been traded away, the recipient 

holder is responsible for obtaining the 

same or equivalent credits for return to 

the previous holder. 

§ 536.9 Use of credits with regard to the 

domestically manufactured passenger 

automobile minimum standard. 

(a) Each manufacturer is responsible 

for compliance with both the minimum 

standard and the attribute-based 

standard. 

(b) In any particular model year, the 

domestically manufactured passenger 

automobile compliance category credit 

excess or shortfall is determined by 

comparing the actual CAFE value 

against either the required standard 

value or the minimum standard value, 

whichever is larger. 

(c) Transferred or traded credits may 

not be used, pursuant to 49 U.S.C. 

32903(g)(4) and (f)(2), to meet the 

domestically manufactured passenger 

automobile minimum standard 

specified in 49 U.S.C. 32902(b)(4). 

(d) If a manufacturer’s average fuel 

economy level for domestically 

manufactured passenger automobiles is 

lower than the attribute-based standard, 

but higher than the minimum standard, 

then the manufacturer may achieve 

compliance with the attribute-based 

standard by applying credits. 

(e) If a manufacturer’s average fuel 

economy level for domestically 

manufactured passenger automobiles is 

lower than the minimum standard, then 

the difference between the minimum 

standard and the manufacturer’s actual 

fuel economy level may only be relieved 

by the use of credits earned by that 

manufacturer within the domestic 

passenger car compliance category 

which have not been transferred or 

traded. If the manufacturer does not 

have available earned credits to offset a 

credit shortage below the minimum 

standard then the manufacturer can 

submit a carry-back plan that indicates 

sufficient future credits will be earned 

in its domestic passenger car 

compliance category or will be subject 

to penalties. 

§ 536.10 Treatment of dual-fuel and 

alternative fuel vehicles—consistency with 

49 CFR Part 538. 

(a) Statutory alternative fuel and dualfuel vehicle fuel economy calculations 

are treated as a change in the underlying 

fuel economy of the vehicle for 

purposes of this regulation, not as a 

credit that may be transferred or traded. 

Improvements in alternative fuel or dual 

fuel vehicle fuel economy as calculated 

pursuant to 49 U.S.C. 32905 and limited 

by 49 U.S.C. 32906 are therefore 

attributable only to the particular 

compliance category and model year to 

which the alternative or dual-fuel 

vehicle belongs. 

(b) If a manufacturer’s calculated fuel 

economy for a particular compliance 

category, including any required 

calculations for alternative fuel and dual 

fuel vehicles, is higher or lower than the 

applicable fuel economy standard, 

manufacturers will earn credits or must 

apply credits or pay fines equal to the 

difference between the calculated fuel 

economy level in that compliance 

category and the applicable standard. 

Credits earned are the same as any other 

credits, and may be held, transferred, or 

traded by the manufacturer subject to 

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14456 Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules and Regulations 

the limitations of the statute and this 

regulation. 

(c) If a manufacturer builds enough 

alternative fuel or dual fuel vehicles to 

improve the calculated fuel economy in 

a particular compliance category by 

more than the limits set forth in 49 

U.S.C. 32906(a), the improvement in 

fuel economy for compliance purposes 

is restricted to the statutory limit. 

Manufacturers may not earn credits nor 

reduce the application of credits or fines 

for calculated improvements in fuel 

economy based on alternative or dual 

fuel vehicles beyond the statutory limit. 

PART 537—AUTOMOTIVE FUEL 

ECONOMY REPORTS 

■ 14. Revise the authority citation for 

part 537 to read as follows: 

Authority: 49 U.S.C. 32907, delegation of 

authority at 49 CFR 1.50. 

■ 15. Amend § 537.7 by revising 

paragraphs (b), (c)(4)(xvi)(A), and 

(c)(4)(xvi)(B) to read as follows: 

§ 537.7 Pre-model year and mid-model 

year reports. 

* * * * * 

(b) Projected average and required 

fuel economy. (1) State the projected 

average fuel economy for the 

manufacturer’s automobiles determined 

in accordance with § 537.9 and based 

upon the fuel economy values and 

projected sales figures provided under 

paragraph (c)(2) of this section. 

(2) State the projected final average 

fuel economy that the manufacturer 

anticipates having if changes 

implemented during the model year will 

cause that average to be different from 

the average fuel economy projected 

under paragraph (b)(1) of this section. 

(3) State the projected required fuel 

economy for the manufacturer’s 

passenger automobiles and light trucks 

determined in accordance with 49 CFR 

531.5(c) and 49 CFR 533.5(h) and based 

upon the projected sales figures 

provided under paragraph (c)(2) of this 

section. 

(4) State the projected final required 

fuel economy that the manufacturer 

anticipates having if changes 

implemented during the model year will 

cause the targets to be different from the 

target fuel economy projected under 

paragraph (b)(3) of this section. 

(5) State whether the manufacturer 

believes that the projections it provides 

under paragraphs (b)(2) and (b)(4) of this 

section, or if it does not provide an 

average or target under those 

paragraphs, the projections it provides 

under paragraphs (b)(1) and (b)(3) of this 

section, sufficiently represent the 

manufacturer’s average and target fuel 

economy for the current model year for 

purposes of the Act. In the case of a 

manufacturer that believes that the 

projections are not sufficiently 

representative for those purposes, state 

the specific nature of any reason for the 

insufficiency and the specific additional 

testing or derivation of fuel economy 

values by analytical methods believed 

by the manufacturer necessary to 

eliminate the insufficiency and any 

plans of the manufacturer to undertake 

that testing or derivation voluntarily 

and submit the resulting data to the 

Environmental Protection Agency under 

40 CFR 600.509. 

(c) * * * 

(4) * * * 

(xvi)(A) In the case of passenger 

automobiles: 

(1) Interior volume index, determined 

in accordance with subpart D of 40 CFR 

part 600, 

(2) Body style, 

(3) Beginning model year 2010, base 

tire as defined in 49 CFR 523.2, 

(4) Beginning model year 2010, track 

width as defined in 49 CFR 523.2, 

(5) Beginning model year 2010, 

wheelbase as defined in 49 CFR 523.2, 

and 

(6) Beginning model year 2010, 

footprint as defined in 49 CFR 523.2. 

(B) In the case of light trucks: 

(1) Passenger-carrying volume, 

(2) Cargo-carrying volume, 

(3) Beginning model year 2008, base 

tire as defined in 49 CFR 523.2, 

(4) Beginning model year 2008, track 

width as defined in 49 CFR 523.2, 

(5) Beginning model year 2008, 

wheelbase as defined in 49 CFR 523.2, 

and 

(6) Beginning model year 2008, 

footprint as defined in 49 CFR 523.2. 

Issued: March 23, 2009. 

Ronald L. Medford, 

Acting Deputy Administrator. 

[FR Doc. E9–6839 Filed 3–27–09; 8:45 am] 

BILLING CODE 4910–59–P 

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