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[Federal Register Volume 75, Number 235 (Wednesday, December 8, 2010)]
[Proposed Rules]
[Pages 76337-76345]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-30631]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 85, 86, and 600

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Parts 531 and 533

[EPA-HQ-OAR-2010-0799; FRL-9235-8; NHTSA-2010-0131]
RIN 2060-AQ54; RIN 2127-AK79

2017 and Later Model Year Light-Duty Vehicle GHG Emissions and 
CAFE Standards: Supplemental Notice of Intent

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

ACTION: Supplemental Notice of Intent to conduct a joint rulemaking.

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SUMMARY: On May 21, 2010, President Obama issued a Presidential 
Memorandum requesting that the Environmental Protection Agency (EPA) 
and the National Highway Traffic Safety Administration (NHTSA), on 
behalf of the Department of Transportation, develop, through notice and 
comment rulemaking, a coordinated National Program under the Clean Air 
Act (CAA) and the Energy Policy and Conservation Act (EPCA), as amended 
by the Energy Independence and Security Act (EISA), to improve fuel 
economy and to reduce greenhouse gas emissions of light-duty vehicles 
for model years 2017-2025. President Obama requested that the agencies 
issue a Notice of Intent (NOI) to issue a proposed rulemaking that 
announces plans for setting stringent fuel economy and greenhouse gas 
emissions standards for light-duty

[[Page 76338]]

vehicles for model year 2017 and beyond. On September 30, 2010, the 
agencies issued the requested Notice, which described the agencies' 
initial assessment of potential levels of stringency for a National 
Program for model years 2017-2025 (See 75 FR 62739 (Oct. 13, 2010). 
This Supplemental Notice highlights input on many of the key issues the 
agencies have received in response to the September NOI and the 
accompanying Interim Joint Technical Assessment (TAR) developed by EPA, 
NHTSA, and the California Air Resources Board, and also provides an 
overview of many of the key technical analyses the agencies have 
planned and are conducting to support the upcoming proposed rule.

DATES: The agencies currently expect to issue a proposed rulemaking for 
a coordinated National Program for model year 2017-2025 light-duty 
vehicles by September 30, 2011, and a final rulemaking by July 31, 
2012.

ADDRESSES: See the FOR FURTHER INFORMATION CONTACT section.

FOR FURTHER INFORMATION CONTACT: EPA: Tad Wysor, Office of 
Transportation and Air Quality, Assessment and Standards Division, 
Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI 
48105; telephone number: 734-214-4332; fax number: 734-214-4816; e-mail 
address: wysor.tad@epa.gov, or Assessment and Standards Division 
Hotline; telephone number (734) 214-4636; e-mail address 
asdinfo@epa.gov. DOT/NHTSA: Rebecca Yoon, Office of Chief Counsel, 
National Highway Traffic Safety Administration, 1200 New Jersey Avenue, 
SE., Washington, DC 20590. Telephone: (202) 366-2992.

SUPPLEMENTARY INFORMATION:

How can I get copies of this document and other related information?

    NHTSA and EPA have established dockets for the September 30, 2010 
Notice of Intent and upcoming rulemaking under Docket ID numbers NHTSA-
2010-0131 and EPA-HQ-OAR-2010-0799, respectively. You may read the 
materials placed in the dockets (e.g., the comments submitted in 
response to the September 30, 2010 Notice of Intent by other interested 
persons) at any time by going to http://www.regulations.gov. Follow the 
online instructions for accessing the dockets. You may also read the 
materials at the EPA Docket Center or NHTSA Docket Management Facility 
at the following locations: EPA: EPA Docket Center, EPA/DC, EPA West, 
Room 3334, 1301 Constitution Ave., NW., Washington, DC. The Public 
Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through 
Friday, excluding legal holidays. The telephone number for the Public 
Reading Room is (202) 566-1744. NHTSA: Docket Management Facility, M-
30, U.S. Department of Transportation, West Building, Ground Floor, Rm. 
W12-140, 1200 New Jersey Avenue, SE., Washington, DC 20590. The Docket 
Management Facility is open between 9 a.m. and 5 p.m. Eastern Time, 
Monday through Friday, except Federal holidays.

How do I prepare and submit comments?

    The dockets established by the agencies will remain open for the 
duration of the rulemaking. While the agencies have not established a 
set comment period for this Supplemental NOI, you may continue to 
submit comments to the dockets throughout the course of the rulemaking. 
An explanation of how to submit comments to the rulemaking dockets is 
available in the September NOI, 75 FR 62739 (Oct. 13, 2010), or you may 
contact the agency officials listed above for more information.

I. Introduction

A. Purpose of This Supplemental Notice of Intent (NOI)

    This Supplemental Notice of Intent represents a further step in the 
process that EPA and NHTSA have initiated to develop a proposed 
rulemaking to establish greenhouse gas (GHG) and fuel economy standards 
for model years 2017-2025 light-duty vehicles. This document is meant 
to aid the public's understanding of some of the key issues facing the 
agencies in developing the upcoming rulemaking. This Supplemental NOI 
highlights many of the key comments that the agencies have received in 
response to the initial Notice of Intent issued on September 30, 2010, 
and to the Interim Joint Technical Assessment Report that accompanied 
that Notice.\1\ This Supplemental NOI, however, does not present a 
comprehensive summary of comments received to date. This Supplemental 
NOI also discusses the agencies' plans for some of the key technical 
work and analyses that will be undertaken in developing the upcoming 
proposed rulemaking.
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    \1\ In addition to publishing the September NOI in the Federal 
Register (see supra Note 1 above), the agencies also posted both the 
September NOI and the Interim Joint TAR on our Web sites. Readers 
may access them at http://www.epa.gov/otaq/climate/regulations.htm 
and http://www.nhtsa.gov/fuel-economy.
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    The purpose of this Supplemental NOI has changed from the agencies' 
original intent for this document. The September NOI stated that a 
principal goal of the Supplemental NOI would be ``to narrow the range 
of potential stringencies for the future proposed standards, as well as 
to reflect new technical data and information and, as appropriate, 
further analysis supplementing the Interim Joint TAR.'' \2\ However, 
given the short amount of time between the issuance of the September 
NOI/TAR and this Supplemental NOI, the agencies were unable to complete 
several additional pieces of technical research in time for inclusion 
in analysis to support this Supplemental NOI. Additionally, based on 
the stakeholder input between the end of September and now and on 
public comments, the agencies have concluded that narrowing the range 
of potential stringencies would not be appropriate at this time. As 
discussed further in this Notice, in order to develop the proposed 
standards, a more complete analysis will need to be done. Therefore, at 
this time we are not updating the assessment presented in the September 
NOI, and instead we will continue to conduct analyses for purposes of 
developing the proposal. Many of the public comments supported the 
agencies' plans, noted in the September NOI, as to types and scope of 
analyses to be conducted for the proposed rulemaking. Therefore, the 
agencies are moving forward with this work as further described in 
Section III. As NHTSA and EPA move forward, we will continue to work 
with California in our technical assessments of potential standards, 
and will continue extensive dialogue with stakeholders.
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    \2\ 75 FR 62741.
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B. Background on the September NOI and Interim Joint Technical 
Assessment Report

    As discussed above, the September NOI was issued in response to a 
May 21, 2010 Presidential Memorandum, which requested that NHTSA and 
EPA develop, through notice and comment rulemaking, a coordinated 
National Program under the Clean Air Act (CAA) and the Energy Policy 
and Conservation Act (EPCA), as amended by the Energy Independence and 
Security Act (EISA), to improve fuel economy and reduce greenhouse gas 
emissions of light-duty vehicles for model years 2017-2025. The 
Presidential Memorandum stated ``The program should also seek to 
achieve substantial annual progress in reducing transportation sector 
greenhouse gas emissions and fossil fuel consumption, consistent with 
my Administration's overall energy and

[[Page 76339]]

climate security goals, through the increased domestic production and 
use of existing, advanced, and emerging technologies, and should 
strengthen the industry and enhance job creation in the United 
States.'' This upcoming rulemaking will build on the first phase of the 
National Program for fuel economy and GHG emissions standards, for 
model year 2012-2016 vehicles, which was issued on April 1, 2010.\3\ 
The Presidential Memorandum also requested that the agencies work with 
the State of California to develop a technical assessment to inform the 
rulemaking process. EPA and NHTSA worked with CARB to develop an 
initial technical assessment consistent with the President's request. 
The agencies released the document, the Interim Joint Technical 
Assessment Report (TAR), in conjunction with the September NOI.\4\
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    \3\ See 75 FR 25324 (May 7, 2010).
    \4\ ``Interim Joint Technical Assessment Report: Light-Duty 
Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel 
Economy Standards for Model Years 2017-2025,'' issued jointly by 
EPA, NHTSA and CARB, September 2010. Available at http://www.nhtsa.gov/fuel-economy and http://www.epa.gov/OTAQ/climate/
regulations.htm.
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    In the Interim Joint TAR, the agencies and CARB conducted an 
initial fleet-wide analysis of improvements in overall average GHG 
emissions and fuel economy levels. The agencies stated in the September 
NOI that for purposes of an initial assessment, this range represents a 
reasonably broad range of stringency increases for potential future GHG 
emissions standards and is also consistent with the increases suggested 
by CARB in its letter of commitment in response to the President's 
memorandum. We analyzed a range of potential stringency scenarios for 
model year 2025, representing a 3, 4, 5, and 6 percent per year 
estimated decrease in GHG levels from the model year 2016 fleet-wide 
average of 250 gram/mile (g/mi). Thus, the model year 2025 scenarios 
analyzed in the TAR range from 190 g/mi (calculated to be equivalent to 
47 miles per gallon, mpg) under the 3 percent per year reduction 
scenario to 143 g/mi (calculated to be equivalent to 62 mpg) under the 
6 percent per year scenario.\5\ These levels correspond to on-road 
values of 37 to 50 mpg, respectively. For each of these scenarios, 
NHTSA, EPA, and CARB also analyzed four ``technological pathways'' by 
which these levels could be attained. These pathways were meant to 
represent ways that a hypothetical manufacturer could increase fuel 
economy and reduce greenhouse gas emissions, and do not represent ways 
that they would be required to or necessarily would respond to future 
standards. Each technology pathway emphasizes a different mix of 
advanced technologies, by assuming various degrees of penetration of 
advanced gasoline technologies, mass reduction, hybrid electric 
vehicles (HEVs), plug-in hybrids (PHEVs), and electric vehicles 
(EVs).\6\
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    \5\ The modeled scenarios, like the EPA's MY 2012-2016 
standards, include the potential use of air conditioning emission 
reductions, which EPA estimated at 15 grams (compared to a 2008 
baseline) in 2025 for all four technology paths. The estimates for 
further air conditioning reductions are largely due to an 
anticipated increase in the use of alternative refrigerants. As a 
result of including A/C-related emission reductions in the modeling, 
however, the ``mpg-equivalent'' values presented in the September 
NOI and Interim Joint TAR do not reflect analysis of potential CAFE 
improvements, and should be taken as merely illustrative mpg levels 
if manufacturers achieved all modeled GHG emission improvements 
through reductions in tailpipe emissions. The agencies note 
additionally that real-world CO2 is typically 25 percent 
higher and real-world fuel economy is typically 20 percent lower. 
Thus the 3% to 6% range evaluated in the September assessment would 
span a range of real-world fuel economy values (again, if all 
improvements were achieved through reductions of tailpipe emissions) 
of approximately 37 to 50 mpg-equivalent, which correspond to the 
regulatory test procedure values of 47 to 62, respectively.
    \6\ Pathway A represented an approach where the industry would 
focus on HEVs, with less reliance on advanced gasoline vehicles and 
mass reduction, relative to Pathways B and C; Pathway B focused on 
advanced gasoline vehicles and mass reduction at a more moderate 
level (higher than in Pathway A but less than in Pathway C); Pathway 
C focused on advanced gasoline vehicles and mass reduction, and to a 
lesser extent on HEVs; and Pathway D focused on the use of PHEV, EV, 
and HEV technology, and relied less on advanced gasoline vehicles 
and mass reduction. Further information on the four technology 
pathways is provided in Section II.A.3 of the September NOI and in 
Section 6.3 of the Interim Report.
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    The TAR also discusses the significant additional technical 
information and analysis that will be needed to support the rulemaking 
development process. For the initial assessment in the TAR, we analyzed 
the vehicle fleet as one single industry-wide fleet, which did not 
account for differences among individual manufacturers and did not 
separately analyze car and truck fleet standards, as required by EPCA/
EISA. By focusing the analysis on the technology itself, independent of 
the individual manufacturer, the agencies produced results that 
indicated how that single hypothetical fleet could achieve greater GHG 
reductions and improved fuel economy in the most efficient manner. 
Treating the entire fleet as a single fleet assumes, for example, that 
averaging GHG performance across all vehicle platforms is possible 
irrespective of who the individual manufacturer is for a particular 
vehicle platform. This can be thought of as analyzing the fleet as if 
there was a single large manufacturer, instead of multiple individual 
manufacturers. In addition, this analysis assumed there are no 
statutory or other limits on manufacturers' ability to transfer credits 
between passenger car and light truck fleets, no limits on the ability 
to trade credits between manufacturers, and that all manufacturers 
fully utilize such flexibilities with no transfer costs in doing so.
    The approach used for the TAR analyses provides an initial and 
approximate evaluation of the potential costs and benefits of the 
fleet-wide scenarios modeled. The agencies, however, cautioned in the 
Interim Joint TAR that several of the simplifications employed in the 
September NOI/TAR evaluation would not be used for purposes of a full 
Federal rulemaking analysis because such analysis must reflect all 
statutory requirements and limitations faced by the agencies in setting 
GHG and CAFE standards. The agencies noted that EPCA/EISA, in 
particular, are fairly prescriptive as compared to the CAA. In order to 
ensure that NHTSA's statutory framework is accounted for, and as 
permitted under the CAA, the agencies' analysis for the NPRM will 
examine attribute-based standards under which each manufacturer is 
subject to its own individual passenger car and light truck CAFE and 
GHG requirements for each model year, where the standard for each 
manufacturer is based on the production-weighted average of its 
passenger car and light truck targets, with the targets established in 
the attribute-based curves.
    Additionally, the NPRM's CAFE analysis will account for EPCA/EISA 
restrictions on credit use and transfer/trading, the ability of 
manufacturers to pay fines in lieu of compliance, the differential 
impact of potential standards on individual manufacturers (historically 
relevant to NHTSA's determinations of whether standards are 
economically practicable), and a more extensive analysis of relevant 
social benefits.\7\ The NOI also noted NHTSA's practice of considering 
safety effects in determining appropriate levels of standards 
stringency, as recognized approvingly in case law over several decades. 
In addition, EPA has also considered safety impacts in previous mobile 
source rules, including for the 2012-2016 National Program. Generally,

[[Page 76340]]

the agencies stressed that much work remained to be done, and that the 
upcoming rulemaking to develop the standards for MYs 2017 and beyond 
will be based on a full analysis that is consistent with both statutes 
and similar to the analysis for the MYs 2012-2016 rulemaking. Moreover, 
as noted in the September NOI, the agencies analyzed scenarios in the 
3-6% range, but we have made no decisions on the appropriate standards 
for the NPRM. For the full proposed rulemaking, the agencies are not 
precluded from considering standards outside of this range. For 
purposes of the Draft Environmental Impact Statement and NPRM discussed 
below, NHTSA intends to analyze standards both within and outside this 
range, as well as an alternative which is estimated to maximize net 
benefits.
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    \7\ Relevant social benefits would include, for example, the 
social cost of carbon, criteria pollution reduction and energy 
security improvements. A much more detailed discussion of caveats 
with respect to the September NOI/TAR analysis can be found in 
Section 6.2 of the Interim Joint TAR, pp. 6-1 through 6-6.
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II. Highlights of Stakeholder Input to Date on the September NOI and 
TAR

    EPA and NHTSA requested comment on the initial assessments 
contained in the September NOI and the TAR. The agencies received 
comments from more than 30 organizations and more than 100,000 
individuals. In addition to the public comments, NHTSA, EPA, and CARB 
met individually with the ten largest automobile original equipment 
manufacturers (OEMs),\8\ as well as environmental non-governmental 
organizations (NGOs),\9\ and representatives of State and local 
governments.\10\ We summarize below some key themes that we heard from 
stakeholders, both in the public comments and in the outreach meetings. 
This summary is meant to provide an overview of many key issues we 
heard from stakeholders, and is in no way meant to reflect a full 
summary of the public comments received. We encourage readers 
interested in more details to review the actual public comments 
received in the agencies' dockets. The agencies will continue to 
consider all of these comments as we develop the proposed rulemaking.
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    \8\ NHTSA, EPA, and CARB met with the representatives of the 
following OEMs: Chrysler, Ford, General Motors, Honda, Toyota, 
Hyundai, Nissan, BMW, Daimler, and Volkswagen.
    \9\ NHTSA, EPA, and CARB met with representatives from several 
environmental NGOs, including the Natural Resources Defense Council, 
Union of Concerned Scientists, Sierra Club, National Wildlife 
Federation, ACEEE, Environment America, Safe Climate Campaign, and 
Environmental Defense Fund.
    \10\ NHTSA, EPA and CARB met with representatives of the 
National Association of Clean Air Agencies (NACAA) and the Northeast 
States for Coordinated Air Use Management (NESCAUM), and several 
representatives of individual State and local governments.
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A. Continuing the National Program for Model Years 2017-2025

    There was widespread stakeholder support for continuing the 
National Program for improved fuel economy and greenhouse gas standards 
for model years 2017-2025.
    In both the written comments in response to the NOI and in our 
recent meetings with automotive companies (both the meetings held 
during July-August 2010 prior to the NOI, and in our meetings with 
automotive companies in October-November 2010, after the publication of 
the NOI), all manufacturers indicated their support for the 
continuation of the National Program approach, established in the 2012-
2016 Joint NHTSA-EPA final rule, for model years 2017 and later. The 
manufacturers emphasized the significant benefits in the development of 
coordinated fuel economy and greenhouse gas standards that can be met 
with a single fleet of vehicles that can be sold nationwide. OEMs were 
also supportive of the on-going coordination between NHTSA and EPA with 
CARB in the development of 2017-2025 program, including coordination on 
the time frame for the State and Federal rulemaking, in order to help 
ensure alignment of the State and Federal standards.
    Many automotive companies that provided comments and two OEM 
associations expressed concern regarding the potential effects a 
revised California Zero Emission Vehicle (ZEV) program could have on a 
manufacturer's ability to achieve a ``single national fleet,'' because 
the ZEV program could drive the use of particular vehicle technologies 
that may not be chosen by manufacturers to meet the Federal CAFE and 
GHG standards.
    Support for the concept of the National Program approach was also 
included in written comments from auto dealers and automotive component 
manufacturers.
    The States and environmental NGOs also expressed strong support for 
the continuation of the National Program in model years 2017-2025, and 
stated that the agencies should continue to fully include California in 
this process. Environmental NGOs stated that stringent GHG and fuel 
economy standards are needed to make America more energy independent, 
reduce global warming pollution to curb the impacts of climate change, 
and save consumers money at the pump keeping it in the American 
economy. Several NGOs also stated that future standards can help ensure 
the U.S. auto industry remains competitive globally, and emphasized 
that other countries and regions are moving forward with strengthened 
standards and plans for vehicle electrification programs.
    Although the environmental NGOs support a National Program, some 
suggested that the goal of a ``single national fleet'' does not mean 
that the EPA and NHTSA standards need to be identical. These commenters 
suggested that, as with the MYs 2012-2016 final rulemaking, the two 
agencies' standards continue to include some important differences 
based on differences in statutes, such as the treatment of air 
conditioning, electric vehicles, and credit transfers.
    In addition, we have received comments from more than 100,000 
individuals supporting stronger Federal fuel economy and greenhouse gas 
standards for model years 2017-2025.

B. Level of the Standards

    Since publication of the September NOI and release of the Interim 
Joint Technical Report, the agencies have held further meetings with 
the ten largest auto manufacturers (OEMs), and from those meetings and 
written comments from OEMs and two OEM associations, we received a 
range of perspectives from the companies regarding the potential levels 
of stringency that the agencies should consider evaluating for model 
years 2017-2025 standards in the upcoming full rulemaking. In general, 
the OEMs indicated that they are investing significantly in the full 
range of technologies discussed by the agencies in the September NOI 
and TAR, and the OEMs agree that many of those technologies offer a 
significant potential for reducing fuel consumption and GHG emissions. 
However, many OEMs also commented that the potential of certain 
technologies to reduce fuel consumption and GHG emissions was less than 
the agencies had projected, as discussed further below. Auto 
manufacturers indicated that they know how to produce a wide range of 
advanced technologies, and that they intend to introduce a wide range 
of vehicle models that rely upon these technologies, including advanced 
gasoline and diesel vehicles, hybrid-electric vehicles, plug-in hybrid 
electric vehicles, and battery-electric vehicles, during the model 
years in question. Many OEMs also commented, however, that due to its 
fundamental approach (as well as specific assumptions regarding 
available technologies), the analysis presented in the TAR understated 
the challenges and costs that manufacturers would face in attempting to 
achieve the examined scenarios.

[[Page 76341]]

    Manufacturers stated that EPCA does not allow unlimited credit 
transfers, and stated that an analysis consistent with EPCA would 
support less stringent CAFE standards than an analysis of the sort 
presented in the September NOI and TAR.
    Both manufacturers and the Consumer Federation of America (CFA) 
supported the agencies' plans to assess manufacturers' individual 
abilities to meet new standards.
    Both in meetings with the agencies and in written comments, many 
OEMs nonetheless indicated that the level of stringency they could 
achieve in the future was not necessarily constrained by the 
availability of technology--that is, that technology does exist that 
they could deploy to meet fairly stringent standards. However, the OEMs 
emphasized that their ability to deploy that technology in a way that 
would help them to meet stringent standards and continue to offer 
vehicles that consumers would purchase would depend on a number of 
other important factors, some of which are outside their direct 
control. Some of these factors include: the current relative high cost 
for some advanced technologies and uncertainty regarding the degree of 
cost reduction that will occur in the 2017-2025 timeframe; the future 
price of gasoline and diesel fuel; the existence of future consumer 
incentives for some advanced technologies; the level of consumer 
acceptance for HEV, PHEV, and EV technologies; and the willingness of 
consumers to pay higher prices for vehicles with advanced technologies 
and lower fuel consumption. Many OEMs also stressed that their ability 
to comply with future standards will be closely tied to the regulatory 
details of the model year 2017-2025 program, including the specific 
shape of the CAFE and GHG footprint-based standard curves for passenger 
cars and trucks, EPA's treatment of upstream CO2 emissions 
for electricity-derived vehicle power, and other details regarding the 
structure of the program.
    Based on the uncertainties expected during the 2017-2025 time 
frame, as described above, one OEM association stated in written 
comments that numeric commitments to rates of stringency increase are 
not possible for the 2017-2025 time frame, and several OEMs stated 
similarly in individual meetings with the agencies. However, just over 
half of the firms provided comments in individual meetings with the 
agencies on the maximum rate of increase in stringency that they 
thought their firms could achieve for that time frame (as opposed to 
rates of increase that they believed were feasible for the industry as 
a whole). Most were in the 3 percent to 4 percent per year range, 
although one stated 2.5 percent per year and another stated between 5 
percent and 6 percent per year. In all cases, these estimates of 
potential rates of increase included the assumption that 15 g/mi worth 
of additional CO2 credits for air conditioning system 
improvements would be available for the MY 2017-2025 period, and the 
majority also included the assumption that upstream emissions from 
electric power generation would not be included in their compliance 
calculations for EVs and PHEVs.
    Many commenters discussed the merits of the agencies including a 
framework for a ``mid-term review'' of the MYs 2017-2025 standards. The 
majority of OEMs supported a mid-term review, but varied in their views 
of how to structure it. OEMs who supported a future review stated that 
it was necessary due to a number of factors, such as the long time 
between standards promulgated in 2012 and the implementation of the 
standards in the model year 2017-2025 timeframe, and also a number of 
key uncertainties regarding future events and conditions as mentioned 
above, like OEMs' ability to reduce technology costs, future fuel 
prices, and the willingness of consumers to purchase the advanced 
technology vehicles. Many OEMs suggested that if the current rulemaking 
established standards from model year 2017-2025, then a review of the 
later model year (2020-2025, or 2021-2025) standards should be 
undertaken in the 2014 to 2017 time frame, and re-examine only the 
appropriateness of those model year standards, in part due to lead time 
concerns with changing the earlier model year standards. As an 
alternative, one auto industry association suggested that instead of 
incorporating a mid-term review, the agencies should break the MY 2017-
2025 standard setting process into three separate rulemakings, rather 
than establishing standards for all of these MYs in the current 
rulemaking process.
    OEM recommendations also varied regarding how such a review should 
be undertaken, what factors should be considered, and what should be 
the role of the agencies (including potentially CARB). Many OEMs 
stressed that a review should not just examine their ``progress'' in 
meeting the standards, but should also focus on external conditions (as 
discussed above, fuel price, technology costs, and consumer 
acceptance). Several manufacturers and one OEM association additionally 
recommended that the review process include using an independent panel 
of experts to periodically consider whether rulemaking assumptions have 
turned out to be valid. Depending on the details and facts that come to 
light during the review, several OEMs stated that the results of any 
future review of the standards could result in an increase in 
stringency, a decrease in stringency, or no change in stringency. Most 
OEMs stated that they would give this topic additional consideration as 
the agencies move forward with the development of the Joint NPRM.
    Many State and local governments, including the Northeast States 
for Coordinated Air Use Management (NESCAUM), the National Association 
of Clean Air Agencies (NACAA), and the governors of nine States, along 
with environmental NGOs, and a large number of individuals voiced 
strong support for proposing standards based on a 6 percent annual rate 
of improvement, or alternatively, a 60 mpg standard by 2025. Many of 
these commenters stated that the agencies' analysis in the September 
NOI and TAR indicates that the 6 percent level is technically feasible 
and cost-effective, would provide the greatest estimated lifetime owner 
fuel savings, and is necessary to keep the U.S. auto industry 
competitive globally by requiring them to build more fuel-efficient 
vehicles. NESCAUM commented that, under the initial assessment, the 6 
percent rate of increase represented the only scenario that projected 
widespread introduction of PHEVs and EVs. In addition, Environment 
America submitted letters from more than 150 State and local elected 
officials, leaders of a number of businesses, and organizations 
supporting standards that would require 60 mpg by 2025.
    The Governors of nine States, including New York, Maine, Maryland, 
Massachusetts, New Mexico, Oregon, Pennsylvania, Vermont, and 
Washington, stated their support for a standard of 60 mpg by 2025, and 
cite a key reason that more efficient vehicles will reduce unnecessary 
consumer spending at the pump, keeping money in their State and local 
economies.
    Several NGOs stated that the September NOI and Interim TAR provide 
a strong basis for setting a standard of at least 6 percent annual 
improvement rate, which they believe is level that provides the 
greatest GHG reduction and oil saving benefits. Some groups stated that 
much of the basic vehicle design and technology to build a fleet that 
achieves at least 62 mpg is already in use in vehicles today, in the 
form of hybrids, PHEVs, and EVs entering the market this fall. They

[[Page 76342]]

further stated that this fleetwide level is achievable for 
manufacturers especially given that the agencies are providing 6 to 15 
years of leadtime.
    The Union of Concerned Scientists and Natural Resources Defense 
Council conducted a joint analysis of fleetwide annual emission 
reductions in the MYs 2017-2025 timeframe, and they stated the TAR 
substantiates their assessment's conclusion that a 6% annual reduction 
is both technically feasible and cost effective. Further, these groups 
stated that their analysis would support a 7% annual reduction by model 
year 2025 if using the TAR's 0 g/mi accounting method for EV upstream 
emissions. Several other groups also recommended that the agencies 
analyze scenarios more stringent than 6 percent, such as 7 percent, or 
other approaches such as a rate representing the point at which net 
benefits are maximized, or a rate representing the point at which total 
costs are equal to total benefits. Some NGOs also commented that the 3 
and 4 percent scenarios fail to significantly advance clean vehicle 
technology, noting that the TAR analysis projected no use of EVs or 
PHEVs by manufacturers in meeting these scenarios.
    Environmental NGOs and States that offered comments on a mid-term 
review expressed concern that it could be used to weaken the standards 
and that it could cause uncertainty for manufacturers by implying that 
later year standards would be somehow less binding. These commenters 
suggested that this could undermine the development of advanced 
technologies, and that any review, if one must occur, should be limited 
in scope, focus only on later model years, occur only once, and 
consider more stringent standards.

C. Technology Costs, Effectiveness, Feasibility, and Safety

    Our stakeholder meetings with the OEMs, as well as the written 
comments from several OEMs and two trade associations, raised several 
concerns with the September NOI and the TAR regarding the agencies' 
initial assessment of technology cost, effectiveness, and feasibility. 
In addition several OEMs discussed the important issues regarding 
vehicle mass reduction and potential impacts on vehicle safety. We 
summarize here some of the major issues raised by the OEMs.
    Most automotive companies commented that the agencies' estimates of 
most technology costs were in general too low, though for some OEMs 
this was not the case for all technologies. Nearly every OEM stressed 
that the agencies' costs estimates for lithium-ion batteries for HEVs/
PHEVs/EVs and mass reduction in particular were significantly too low 
compared to their projections for the 2020-2025 timeframe. One OEM 
association provided a list of several reasons why they believe the TAR 
cost estimates are too low, including the TAR projection that batteries 
will last the life of the vehicle and the agencies' estimates for 
indirect costs, which they stated are low compared to a 2009 National 
Research Council Report. The OEM association also commented that the 
agencies should consider the potential for stranded capital in the 
2017-2025 analysis in the event the MYs 2017-2025 standards result in a 
significant change in future vehicle designs compared to the investment 
manufactures have made and are making now to comply with the MYs 2012-
2016 standards. This OEM association also noted more generally that 
while the OEMs supported the MYs 2012-2016 standards, they had not 
evaluated the agencies' analysis for that rulemaking carefully, and 
upon revisiting it found a number of assumptions carried into the TAR 
with which they do not agree.
    OEMs discussed with the agencies their concerns that the 
effectiveness (the technologies' ability to reduce CO2 and 
fuel consumption) of both individual technologies as well as the 
packages of technologies identified in the TAR were too optimistic. In 
some cases manufacturers stated that they thought the differences were 
due to a range of potential engineering considerations which the TAR 
may not properly have accounted for, such as vehicle performance, 
utility (e.g., towing capability), and comfort (e.g., noise, vibration, 
and harshness), the role of competing regulatory or technical 
requirements (e.g., criteria pollutant and/or safety standards), and 
assumptions regarding future gasoline fuel properties (e.g., octane 
levels), although OEMs acknowledged that their review of the TAR's 
technical effectiveness assessment was still ongoing. However, there 
were a number of OEMs that agreed with our assessment of a number of 
specific packages or individual technologies. The agencies expect to 
discuss these issues with the OEMs in much more depth over the next 
several months in order to assess the basis of these concerns, which 
could be based in part on the possibility of different assumptions 
about baseline technologies by the agencies and the OEMs.
    With regard to the feasibility of applying the technologies 
identified in the TAR, in general the OEMs agreed with the agencies 
that most of the technologies identified in the TAR could be applied to 
at least some vehicle models in the 2017-2025 timeframe (as nearly all 
of the technologies considered are either available today or are 
expected to be introduced into the market within the next few years). 
However, the OEMs highlighted several specific areas where they did not 
agree with the assessment in the TAR, or they believed that challenges 
exist. All OEMs stated that mass reduction will be an important element 
of their future fuel economy/CO2 reduction strategy, 
however; all of the OEMs also stated that mass reduction cannot be done 
as aggressively as indicated by several of the Technology Pathways 
analyzed in the TAR. All manufacturers and one OEM association 
expressly stated that a 30 percent net mass reduction from model year 
2008 to model year 2025 was not technically feasible. Reasons cited 
included, but were not limited to, manufacturing constraints, mass 
increases associated with known and potential vehicle safety 
requirements that may be developed between now and model year 2025, 
future voluntary standards (such as those established by NHTSA through 
the New Car Assessment Program (NCAP) and the Insurance Institute for 
Highway Safety (IIHS)), and other potential voluntary improvements, 
noise/vibration/harshness considerations, and the potential safety 
implications of severe weight reduction. One OEM association noted the 
agencies' commitment to on-going work noted in the September NOI and 
stated that the agencies must complete these studies to inform the 
Joint NPRM, indicating that a failure by the agencies (and particularly 
NHTSA) to evaluate fully the potential safety effects of mass reduction 
in the 2017-2025 timeframe could leave the final rule legally 
vulnerable. Many manufacturers commented that reducing mass in the 20-
25% range would likely not be practical for many vehicle models because 
of high costs and, in some cases, because they have already 
incorporated today some of the mass reduction technologies that could 
be used to reduce mass in the 20-25% range. Manufacturers encouraged 
the agencies to continue to analyze this issue carefully.
    Several environmental NGOs and the State organizations also 
expressed support for the continued technical work EPA, NHTSA, and CARB 
are doing on costs, effectiveness, mass reduction, and vehicle safety.
    One automotive supplier association (the Aluminum Association)

[[Page 76343]]

commented that the mass reduction on the order of 15-30 percent 
discussed in the TAR was technologically achievable based in part 
through the use of aluminum.
    Several OEMs also commented during our stakeholder meetings on the 
relatively high level of penetration of full hybrids for a number of 
the Technology Pathways for the higher levels of stringency evaluated 
in the TAR. Some auto companies indicated that the HEV levels which 
approached nearly 70 percent of the new vehicle fleet may not be 
feasible from a lead-time perspective (independent of the OEMs' 
concerns regarding the willingness of consumers to purchase those 
quantities of HEVs).

D. Program Design Elements, Credit Opportunities and Flexibilities

    Several commenters provided feedback on how various credit programs 
and other flexibilities contained in the model year 2012-2016 program 
might be assessed or adapted for the MYs 2017-2025 program.
1. Program Design Elements
    Automotive OEMs, both in their written comments and in recent 
stakeholder meetings with the agencies, have stated that the agencies 
should continue many of the program design elements as well as 
flexibilities provided in the model year 2012-2016 National Program. A 
number of OEMs have stated that the agencies should continue with the 
use of separate car and truck based standards (as required by EPCA/
EISA) and continue to use vehicle footprint as the attribute for 
determining a manufacturer's CAFE and CO2 standards.
2. Credits and Flexibilities
    All automotive OEMs supported the agencies providing as much 
flexibility as possible through credit programs. Automotive OEMs 
generally expressed support for the continuation of both NHTSA's and 
EPA's regulatory provisions regarding the banking and trading of fuel 
economy/GHG credits, including the provisions for carry-forward and 
carry-back of credits across model years. A number of OEMs expressed 
concern, that additional flexibilities could be particularly important 
for the MYs 2017-2025 time frame, given the stringency of the MY 2012-
2016 standards. Regarding other program flexibilities, OEMs in general 
support the continuation of the flexibilities included in the model 
year 2012-2016 National Program, including the availability of emission 
credits for improvement in air conditioning GHG emissions under the EPA 
standards, and the availability of off-cycle GHG emission credits for 
technologies that produce real-world emission reductions but that are 
not captured under the regulatory test procedure, and provisions for 
unlimited credit trading between cars and trucks and between companies. 
A number of OEMs also supported the continuation of the 2012-2016 
programs provisions for credit transfer between the car and truck 
fleets, as well as trading of credits between automotive firms. Some 
automotive OEMs and their trade associations suggested that EPA and 
NHTSA may need to consider additional program flexibility for small and 
intermediate volume manufacturers for model years 2017-2025, similar to 
the compliance flexibility provided by EPA in the TLAAS program in the 
model year 2012-2016 program.
    Some environmental groups similarly expressed support for 
provisions that give manufacturers greater flexibility, such as 
averaging, banking, and trading, but emphasized that the provisions 
must not undermine the technology-forcing nature or the emissions 
benefits of the program. Several groups also stressed the need for 
transparency to provide clear public accounting of any credits and 
compliance programs. One environmental group, however, stated that 
while flexibilities might have been appropriate for the early years of 
the National Program, they should not persist indefinitely, and the MYs 
2012-2016 standards should have provided plenty of time for 
manufacturers to achieve compliance by adding technology to their 
vehicles. This commenter therefore argued that the agencies should 
dispense with the credits, incentives and flexibilities discussed in 
the September NOI, including averaging, banking, and trading (ABT).
    Environmental groups generally commented that EPA should establish 
air conditioning standards rather than continue credits based on air 
conditioning system improvements.
    Environmental groups commented that given the extensive amount of 
lead time contemplated for the rulemaking, along with the fleet 
improvements that will have arisen due to model year 2012-2016 
standards, the agencies should not constrain stringency levels in the 
2017-2025 rule based on lead time considerations. These environmental 
groups indicated, as stated in the model year 2012-2016 rulemaking and 
the TAR, that most vehicle models are redesigned (not merely refreshed) 
every five years, such that most manufacturers should have ample 
opportunity to apply new technologies prior to MY 2025. In addition, 
some environmental groups commented that there is no evidence or 
compelling policy rationale to support continuing the Temporary Lead-
time Allowance Alternative Standards (TLAAS) that were provided in the 
model year 2012-2016 program. In addition, one NGO commenter urged that 
EPA establish standards for small volume manufacturers (i.e., those 
manufacturers with annual U.S. sales of less than 5,000 vehicles), and 
that NHTSA end the statutory exemption from generally-applicable CAFE 
standards allowed for manufacturers of less than 10,000 vehicles 
worldwide annually, as this commenter believes that by 2017, these 
manufacturers will have had ample time to bring their fleets into 
compliance.
3. Treatment of Upstream Emissions
    With the exception of one company, all OEMs and their trade 
associations supported the use of a zero gram/mile CO2 
tailpipe emissions value under the EPA regulations for all electric 
vehicles (EVs) as well as the grid-derived electricity for plug-in 
hybrid electric vehicles (PHEVs). OEMs provided a range of reasons for 
their position, including their perspectives that: automotive 
manufacturers do not have any control over the GHG emissions used to 
produce grid electricity, thus it would be unfair for EPA to require 
manufacturers to accept the burden of emissions for which vehicles are 
not directly (at the tailpipe) responsible; the inclusion of upstream 
emissions would be a significant deterrent to OEMs for investing the 
significant capital resources necessary to bring EVs and PHEVs to the 
market, and the resulting compliance value for those vehicles would not 
be significantly better than for non-EV and non-PHEV vehicles; there is 
too much variation across the national electricity grid in terms of 
CO2-generation intensity for a single upstream value to be 
meaningful; and such an approach is not consistent with EPA's historic 
regulation of light-duty vehicles, as EPA does not account for the 
upstream emissions associated with gasoline and diesel production in 
vehicle compliance values (the Edison Electric Institute commented 
similarly).
    The Edison Electric Institute (EEI) commented that EPA should be 
consistent in the treatment of upstream emissions by not including 
upstream emissions for any vehicles. EEI argues that there is too much 
variation in upstream energy production to produce ``national average'' 
values for any energy type.

[[Page 76344]]

    The treatment of advanced technology vehicles continues to be a key 
concern for environmental groups. Environmental groups continue to 
believe that upstream CO2 emissions should be accounted for 
in determining vehicle emission rates for all vehicles. NRDC and the 
Union of Concerned Scientists also support the inclusion of upstream 
emissions accounting for electric vehicles, and they provided an 
analysis and comments that they believe support standards increasing at 
a 6 percent annual rate if upstream emissions are included, and up to 7 
percent annual rate if a 0 g/mile CO2 emissions rate is used 
for the electric portion of vehicle operation.
    The agencies also received comments from Natural Gas Interests 
strongly supporting the inclusion of full life-cycle GHG emissions for 
all petroleum and non-petroleum-fueled vehicles in determining vehicle 
compliance, noting that natural gas vehicles have 30 percent lower 
life-cycle GHG emissions compared to their gasoline-fueled 
counterparts.
    Two automotive material supplier trade associations, the American 
Iron and Steel Institute and the World Steel Association, recommended 
that EPA and NHTSA include not only upstream emissions from fuel 
production (e.g., gasoline fuel and electricity) in the regulatory 
standard, but the entire life-cycle emissions of the vehicle 
manufacturing process as well. These commenters suggested that the 
inclusion of lifecycle GHG emissions at both the supplier and the OEM 
levels from the manufacturing process is the most appropriate method to 
ensure an overall reduction in GHG emissions from light-duty vehicles.
    The State of New York Department of Transportation commented that 
they recognize the valid concerns about upstream emissions generation 
in the production of electricity and other energy sources used in 
fuels, and encourage the agencies to work cooperatively with the 
Department of Energy to develop incentives to expand clean, low-carbon 
power generation in the U.S.

E. Other Comments

    The agencies received additional comments in several areas 
including assumptions used in economic and benefit analyses (e.g., 
discount rates should be higher or lower, rebound effect should be 
higher or lower, values used to assess the social cost of carbon, 
potential consumer welfare effects), ensuring program benefits beyond 
fuel savings are properly accounted for, consideration of higher oil 
price scenarios, and potential employment impacts. Several commenters 
also provided recommendations regarding the need for the agencies to 
consider the role of EV/PHEV vehicle charging locations/infrastructure 
in the development of the 2017-2025 standards.
    NACAA commented that they believe State and local governments have 
a key role to play in supporting the development of infrastructure for 
electric vehicle charging. State commenters also asked the agencies to 
work with DOE to encourage the installation of charging stations in 
homes and public locations, such as parking lots.
    NACAA also commented that there are potential co-benefits of 
improved fuel economy/GHG standards in helping meet clean air goals for 
criteria pollutants and air toxics, especially if the new standards are 
stringent enough to encourage meaningful penetrations of electrified 
vehicles.
    Several environmental NGOs recommended that the agencies should 
establish backstop standards to ensure that the projected fleet-wide 
reductions are still met in the event of shifts in sales mix and 
average vehicle size.
    All of these comments will be considered as we conduct our analyses 
for the proposed rulemaking.

III. Plans for Developing the Proposed Rulemaking

A. Continued Stakeholder Outreach and Key Areas of Technical Analysis 
in Developing the Proposed Rulemaking

    This Supplemental NOI is an early step in NHTSA's and EPA's plans 
to propose a coordinated National Program for model year 2017-2025 
light-duty vehicles with which (as with the model year 2012-2016 
program) manufacturers could comply by building a single vehicle fleet. 
As NHTSA and EPA proceed to develop the proposed rulemaking, we plan to 
continue our ongoing dialogue with stakeholders, and we specifically 
welcome additional data and information that can inform our rulemaking 
efforts.
    EPA and NHTSA intend to continue working with the California Air 
Resources Board in developing the underlying technical assessments that 
will inform our future proposed standards and we will continue to work 
with CARB on additional program related issues and seek their input as 
we work toward our common goal of a National Program. We will continue 
to coordinate on a number of on-going studies, including technology 
cost, effectiveness, mass feasibility, and mass-related safety studies.
    As we indicated in the September NOI and Interim Joint TAR, there 
are numerous areas of technical work that EPA and NHTSA have underway 
as part of developing our proposed standards. Some of these key areas 
include new technical assessments of advanced gasoline, diesel, and 
hybrid vehicle technology effectiveness; several new projects to 
evaluate the cost, feasibility, and safety impacts of mass reduction 
from vehicles; an on-going project to improve our cost estimates for 
advanced technologies; further consideration of battery life, 
durability, cost and safety; and further review of the lead time needed 
to implement advanced technologies. The agencies are working very 
closely with the Department of Energy on a number of projects related 
to these technical areas.
    In addition, for the 2017-2025 NPRM, NHTSA and EPA will conduct an 
analysis of the effects of the proposed standards on vehicle safety, 
including societal effects. CARB is undertaking and coordinating with 
EPA and NHTSA on a study of how a future vehicle design that 
incorporates high levels of mass reduction complies with vehicle safety 
standards and voluntary safety guidelines. NHTSA is also initiating a 
new study of the feasible amount of mass reduction based on a mid-size 
passenger car platform, and the effects of several advanced mass 
reduction design concepts on fleet safety. The NHTSA studies are being 
coordinated with EPA, DOE, and CARB.
    The agencies expect that several, but not all of these studies will 
be completed in time to inform the NPRM. Others are expected to be 
completed in time to inform the final rule.
    As discussed above, the agencies' initial assessment in the Interim 
Joint TAR was limited to a fleet-wide level analysis of improvements in 
overall average GHG emissions and fuel economy level, which included a 
number of simplifying assumptions. NHTSA and EPA acknowledged in the 
September NOI that for the upcoming proposed rulemaking, we would 
conduct a more refined analysis, as required by EPCA/EISA and as 
allowed by the CAA, including separate analyses for car and light truck 
vehicle fleets, year-by-year attribute-based standards, and 
manufacturer-specific estimates of potential attribute-based standard 
targets and costs, among other statutory requirements. NHTSA and EPA 
also will perform a more thorough assessment of the impacts of proposed 
standards, as was done for the model year 2012-2016 rulemaking, 
including

[[Page 76345]]

analysis of improved energy security, monetized benefits of 
CO2 reductions, impacts of other pollutants, an assessment 
of the societal costs and benefits of potential standards, an 
assessment of potential safety impacts, an assessment of impacts on 
automobile sales, an assessment of employment impacts, an assessment of 
the regulatory program's key design elements and flexibility 
mechanisms, and related issues.
    Finally, as discussed in the September NOI, EPA is currently in the 
process of conducting an assessment of the potential need for 
additional controls on light-duty vehicles' non-greenhouse gas 
emissions and gasoline fuel quality. EPA expects to coordinate the 
timing of any final action on new non-greenhouse gas emissions 
regulations for light-duty vehicles and gasoline with the final action 
on greenhouse gas emissions and CAFE regulations discussed in this 
Supplemental NOI.
    In his May 21, 2010 Memorandum, the President highlighted the 
opportunity for the U.S. to lead the world in developing a new 
generation of clean cars and trucks, to spur economic growth and to 
create high[hyphen]quality jobs. In developing the proposal, the 
agencies will continue to gather input from stakeholders, including the 
OEMs and labor unions, on the potential impacts of standards on worker 
productivity, jobs, the automotive sector, and the opportunities for 
economic growth.

B. Anticipated Rulemaking Schedule

    The May 21, 2010 Presidential Memorandum called for EPA and NHTSA 
to include in the September Notice of Intent a ``schedule for setting 
those standards as expeditiously as possible, consistent with providing 
sufficient leadtime to vehicle manufacturers.'' As we indicated in the 
September NOI, the agencies expect to issue a joint Notice of Proposed 
Rulemaking (NPRM) by September 30, 2011, and a final rule by July 31, 
2012.
    As required by the National Environmental Policy Act (NEPA), and by 
NHTSA and Council of Environmental Quality (CEQ) regulations, NHTSA 
will be developing a Draft Environmental Impact Statement (DEIS), to 
inform the upcoming NPRM. In the coming months, NHTSA will issue a 
scoping notice to request comment on the regulatory options that the 
DEIS should consider. A Final EIS (FEIS) will be issued at least 30 
days prior to the release of the final rule.
    As with any notice-and-comment rulemaking process, the agencies 
will provide full opportunity for the public to participate in the 
rulemaking process, consistent with EPCA/EISA, the Clean Air Act, 
Administrative Procedure Act, other applicable law, and Administration 
policies on openness and transparency in government. Upon publication 
of the NPRM, the agencies will open a public comment period for 
receiving written comments and expect to hold at least one joint public 
hearing to receive oral comments. We will describe all of these 
opportunities for public involvement in the NPRM which will be 
published in the Federal Register, and we will post this information on 
each agency's Web site associated with this rulemaking.

    Dated: November 30, 2010.
Ray LaHood,
Secretary, Department of Transportation.

    Dated: November 30, 2010.
Lisa P. Jackson,
Administrator, Environmental Protection Agency.
[FR Doc. 2010-30631 Filed 12-7-10; 8:45 am]
BILLING CODE 6560-50-P
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