Summary of Interagency Working Comments Received on Draft Rule under EO 12866 Review. Subject to

Further Policy Review

1 Below is a summary of interagency comments received during EO 12866 review of the draft proposed rule establishing GHG emissions standard s and fuel efficiency standards for medium and heavy duty trucks. They are for your cons ideration and subject to further policy review.

1) Alternatives to Propos ed Stringency levels

A thorough assessment of the merits of the pr oposed standards should assess those standards against alternative standards of lesser and greater stringenc y. With one minor exception, EPA and NHTSA’s rulemaking documents only ev aluate their propose d standard against
alternatives that involve different scopes of regulation with resp ect to the set of vehicles and engines covered, not against al ternative stringencies.

OMB Circular A-4 states...”You should carefully c onsider all appropriate alternatives for the key attributes or provisions of the rule. The previous discussion outlines examples of appropriate alternatives. Where there is a contin uum of alternatives for a standard (such as the level of stringency), you ge nerally should analyze at leas t three options: the preferred option; a more stringent option that achieves additional benefi ts (and presumably costs more) beyond those realized by the pref erred option; and a less stringen t option that costs less (and presumably generates fewer benef its) than the preferred option.”

The NPRM does not propose or analyze alternativ e levels of stringenci es for each category. Please analyze alternativ es to proposed stringency levels similar to what was done for the MY 2012-2016 light duty CAFE rule. Please also include these alternatives in the NPRM for public comment.

2) Alternative Baselines

Analyzing alternative stringencie s described above w ould also assist in addressing another concern: uncertainty regarding the appropriate baseline. Spec ifically, given that EPA and NHTSA finds that its standards will produce substa ntial net benefits to vehicle owners, it is possible that it may have underest imated the degree of fuel economy that would be achieved in the baseline. In light of this, to ensure that the merits of its standards are robust to alternative business-as-usual fuel economy levels, EPA and NHTSA should evaluate its standards against alternative baselines that assume a gr eater degree of fuel economy improvement in the baseline. Analytically, analyses of standards involving lesser-thanproposed stringency, or analyses of the propos ed stringency agains t baselines involving greater-than-anticipated fuel economy would produce the same useful information that can
be used to assess the benefits of the proposed standards both ag ainst alternatives, and in the
face of different baselines.

3) Restrictions on flexibilitiesSummary of Interagency Working Comments Received on Draft Rule under EO 12866 Review. Subject to

Further Policy Review

2 EPA and NHTSA propose to limit the potential use of averaging and trading provisions to within “regulatory classes.” This provision woul d increase the cost of the rule relative to an alternative approach that coul d allow broader use of averagin g and trading. Moreover, an alternative more flexible approach w ould have the same, and perhaps even increased environmental and fuel economy benefits. Fu rther, EPA’s and NHTSA’s decision about the degree of flexibility to allow for in this narrow instance should be viewed in the context of the precedent it may set for future EPA greenhous e gas regulations. In that context, there should be a strong presumption in favor of greater flexibility.

At page 38 of the preamble, the agencies state: “the agencies propose to restrict the use of averaging to limited sets of vehi cles and engines expected to have similar emission or fuel consumption characteristics. For example, averaging would be allowed among Class 7 lowroof day cab vehicles, but not among those vehi cles and Class 8 sleeper cabs or vocational vehicles. Also, we propose that credits genera ted by vehicles not be applicable to engine compliance, and vice versa.” At page 189, the agencies state: “I n the current program,
manufacturers are restricted to only averaging, banking and trad ing credits generated within a regulatory class.”

These restrictions in the potential use of flexibility provisions will increase the cost of the rule (potentially substantially so) relative to an alternative approach that allows averaging and trading across regulatory classes and across vehicle a nd engine compliance. The agencies offer two reasons for this limitati on: “Engine and truck manufacturers have commonly expressed ... a concern that some ma nufacturers with a wi de range of product offerings spanning a number of regulatory cate gories would be able to use the ABT program provisions to generate credits in regulatory class markets where they face less competition and then use those credits to compete unfairly in other regulatory categories where they face greater competition. Second, we have recognized that the estimation of emission credits is not an absolutely precise process and actual emission reductions or increases ‘in-use’ will vary due to differences in vehicle duty cy cles, maintenance practi ces and any number of other factors. By restricti ng credit trading between like produ cts, the agencies gain some degree of assurance that the operation and use of the vehi cles generating credits and consuming credits will be similar.” (p. 189). Neither of these reasons strikes us several
reviewers as a sufficient basis for restricting averaging and trading, and thereby foregoing potentially substantial cost sa vings. First, if the opport unity does in fact exist for
manufacturers to cross-subsidize certain products via their use of fuel economy credits, they presumably already have that capability via th eir pricing decisions al one. The incremental effect of allowing trading of these credits acro ss classes is therefore likely limited. Second, it is not clear that impacts on competitive dynamics in a market should be sufficient rationale to forego realizing overall cost saving s. Finally, the agencies can cer tainly take particular steps to ensure that averaging and trading across clas ses either is environmentally neutral (or even beneficial), or introduces no le ss uncertainty than av eraging and trading across heterogeneous vehicles and vehicle applicat ions within a given class.Summary of Interagency Working Comments Received on Draft Rule under EO 12866 Review. Subject to

Further Policy Review

3 For these reasons, we strongl y recommend that the agencies remove restrictions on
flexibilities.

4) Alternative compliance fee

Given the substantial uncertainty about the true co st of this rule, we believe that some firm cost containment mechanism, such as an alte rnative compliance fee, should be considered. Did EPA and NHTSA already evaluate whether or not such a cost containment mechanism could be incorporated into the proposed rulemaking?

5) Probabilistic Uncertainty Analysis OMB Circular A-4 states, “For major rules involving annual economic effects of $1 billion or more , you should present a formal quantitative analysis of the relevant uncerta inties about benefits and costs. In other words, you should try to provide some estimate of the probability dist ribution of regulatory benefits and costs. In summarizing the probability distributions, you sh ould provide some estimates of the central tendency (e.g., mean and median) along with a ny other information you think will be useful such as ranges, variances, specified low-end and high-end percentile estimates, and other
characteristics of the distribution.”

The RIA does not include a formal probabilistic uncertainty analysis, as opposed to the light duty vehicle rule. Please provide this analysis. Further discu ssion of particular sources of uncertainty is provided below.

6) Estimates of costs and benefits

Several reviewers had concerns about the timel ine used to estimate the rule’s costs and benefits, as presented in Section VIII of the NPRM and discussed in further detail in the RIA. Costs and benefits of model year 2014 to 2018 st andards have been estimated for every year
from 2012 to 2050 as if the 2018 standards re main in place for model years through 2050. This results in the aggregate es timates of costs and benefits be ing largely driven by long-term values (i.e., beyond 2020) associated with the impacts of the standards on trucks manufactured decades in the future. However, both costs and benefits are measured against a baseline fuel economy associated with MY 2010 ve hicles that is assumed to remain constant through 2050. The selection of a constant base line is problematic for estimating long-term costs and benefits, particular ly given assumptions about de clining technology costs and increasing fuel prices. For example, if hi storical trends in fuel economy improvements continue into the future, there should be a point at which, ev en in the baseline, vehicles would exceed the standards proposed here. In such a case, the standards would become nonbinding, and, beyond that point in time, the pr ogram would neither impose costs nor produce
benefits.Summary of Interagency Working Comments Received on Draft Rule under EO 12866 Review. Subject to

Further Policy Review

4 More generally, given that the question at hand relates to the merits of standards for MY 2014 to MY 2018, and the standards will almost cer tainly be revisited in response to new information in future years, the results of anal ysis of these standards should not be driven, as they currently are, by estimates of the standard s’ effects on trucks manufactured decades into
the future.

In light of the above, we sugge st that EPA and NHSTA re-eva luate the approach taken to presenting estimates of costs and benefits, and shif t the focus of this analysis to the near- and
medium-term costs and benefits of the rule. For example, one possible option would be to estimate costs and benefits for only MY 2014 to MY 2018 trucks, over their estimated useful lifetimes. Other approaches could also be us ed. Presumably, this would not require new analysis, but rather simply altering what is draw n from the existing analysis to present in the preamble and RIA.

7) Market Failure

Much of the agencies’ argument for why regul ation is needed in the truck market is predicated on the NAS report assertion that “there are commonly acknowledged
characteristics in the commercial truck and buses marketplace that may be improved by a regulatory approach, such as split incentives between owners and operators (e.g., trailers) and the short payback period of 18 months to 2 years.”

a) Please provide citations s upporting the statement that new truck buyers require a short payback period (i.e,, presumably as manifested by an inappropriately high discount rate) for fuel saving t echnologies and seek comment on whether
this is accurate.

b) The “split-incentives” hypothesis is testab le (as should be many, if not all of the other hypothesized market failures). Have the agencies (or researchers) ever tested the split-incentives hypothesis empi rically? If so, plea se provide cites and a summary of those results. If not, plea se indicate in the preamble that there is no empirical evidence confirming this hypo thesis and seek data that will enable the agencies to test it and determine it s magnitude before issuance of a final
rule.

Regarding the discussion of reasons why the tr ucking market does not ad equately internalize the fuel efficiency gains from employing av ailable technologies (starting on p.303 of the
NPRM): Reason #(1) cited is that trucking companies do not have adequate information about technologies availa ble or the fuel efficien cy of various trucks.Summary of Interagency Working Comments Received on Draft Rule under EO 12866 Review. Subject to

Further Policy Review

5 c) OMB Circular A-4 states that “If interv ention is contemplated to address a

market failure that arises from inad equate or asymmetric information, informational remedies will often be preferred.” Did EPA and NHTSA

consider the provision of more information? For example, manufacturers of vehicles with GVW over 8500 could be required to test and report fuel economy.

Please assess the benefits and costs of providing fuel economy information to prospective purchasers of the engines and vehicles the proposal would regulate, with particular attention to EPA’s experience with SmartWay, which is essentially an informational program as opposed to a regulatory one.

Regarding the reasons: several reviewers were concerned that reason #( 4) “Uncertainty about Future Cost Savings” (p.306 of NPRM) may not represent the economics literature completely accurately.

 The two Metcalf papers from 1995 are about irreversible investments in home energy
items such as attic insulation, which has no resale value, and where consumers have an “option value” of waiting before i nvesting. (See Hassett and Metcalf. 1993. “Energy Conservation Investment: Do Cons umers Discount the Future Correctly?” Energy Policy .) That line of reasoning does not a pply to trucks, which have a resale

value.

 Metcalf and Hassett (1999), footnoted but not discussed, shows that engineering estimates of efficiency gains from ho me energy purchases exceed the actual efficiency gains in practice, and that if actual gains are considered, consumers’

investment decisions look much more rational and in line with market discount rates. That line of reasoning would suggest there are little private net benefits from this rule.

 The Greene paper is about loss-aversion, a behavioral phenomenon more relevant to individual consumers than trucking busine sses that are contemplating investments that would yield savings one of their highest op erating costs.

d) Given the points raised above, please provide empirical evidence for reason #4 that would be applicable to th e market for commercial trucks.

Reason #(5) “Adjustment and Transactions Cost s” suggests that thes e new technologies “are likely to be adopted over time without market inte rvention, but with delays.” The implication is that by 2020 or 2030, many of these technologies might have widespread adoption without the fuel economy mandate.Summary of Interagency Working Comments Received on Draft Rule under EO 12866 Review. Subject to

Further Policy Review

6 e) Does that not mean that the benefits in those years of mandating the technologies (or their accompanying fuel efficiencies) are zero?

f) More generally, the analysis appears to assume there will be no gains in fuel efficiency without the rule: does the anal ysis then overstate the benefits of the rule? Figure 1-4 in the RIA shows th at fuel economy in trucks more than

doubled from 1975 to 2005. How much of the doubling is due to technology, as opposed to changed driving patterns, f reight characteristics, and capacity utilization? Would the part of the trend due to technology not continue, even if at a slower pace?

The relevant payback period for the suggested te chnology adoption is short (less than a year for
vocational and combination trucks, accordi ng to the RIA p. 320-321). This suggests that information asymmetries in the used truck mark et may not be the cause of inefficiently low technology adoption. Since most combination tractors are typically sold afte r three to five years or more (see for example RIA p. 1-27), the inve stment should be recouped well before the truck is offered on a secondary market.

g) Please explain (with supporting empi rical evidence) ho w payback periods shorter than the average age of a used truck can be consistent with new truck purchasers not opting for fuel-saving technologies.

8) Credits for advanced technologies

EPA and NHTSA propose offering additional “speci al credits” for “adva nced technologies”, naming electrical vehicles and hybr id powertrain as examples of advanced technologies that
could earn these credits. There are many different governme nt interventions seeking to promote research, development, and deploym ent of various new technologies, including these vehicle technologies. Given that no stat utory mandate exists to do so, use of these standards as a mechanism for promoting partic ular technologies raises concerns regarding
whether this standard should be used as a means to promote pa rticular technologies — rather than being a technology-neutral st andard. Such special credits, all things equal, may carry
with them an unknown cost and otherwise make the rulemaking less e ffective at achieving environmental and fuel economy benefits. Fi nally, as a technical matter, the proposed rulemaking suggests that electric vehicles could be credited as if they have no greenhouse gas
emissions associated with their use.

9) Innovative Technology Credits -- Similar to the concern ra ised above, to what degree is EPA choosing technologies by giving extra cr edit (essentially, funds, because the extra credits are tradable) to manufacturers that de velop new technologies that EPA and NHTSA decide are worthy? (See p. 205-209 of the preamble.) The reviewers recommend revisingSummary of Interagency Working Comments Received on Draft Rule under EO 12866 Review. Subject to

Further Policy Review

7 the proposal to encourage innovation, without mandating that EPA serve as the arbiter of which technologies deserve extra credit.

a. What is actually covered under “innova tive technologies?” In other words, how do we make sure there is a transp arent process, in which EPA publicly discloses which technologies it awards ex tra credit, (i.e. what is considered “off-cycle”)?
b. What is the expected value of the to tal amount of credits generated on an
annual basis under the innova tive technology proposal?

c. Lastly, if EPA and NHTSA are provi ding tradable credits to reward manufacturers for developing certain new technologies, shouldn’t this be subject to the appropriations process? How is this different from DOE providing grant funds to th e private sector to stim ulate the development of new technologies?

10) Compliance Preview Meetings -- EPA should take comment on the degree to which compliance preview meetings (“which provide the Agency an opportunity to review a manufacturer’s new product plans and ABT projections,” according to page 211 of the preamble) would affect normal business practices and constitute a burden in terms of both added cost and time to the product development cy cle. Also, the RIA does not appear to take
these costs into account.

11) Compliance Testing Strategy -- How does EPA plan to address compliance testing in future
iterations of this rule? Does th e agency plan to develop a full vehicle standard? What are the pros and cons of testing compliance using a model (e.g. [TEST]) versus building a full vehicle test cell in the Ann Arbor Lab and requi ring industry to build id entical test cells? What are the costs associated with building thes e test facilities? What are costs associated with building additional chassi s dynamometer test cells, both for EPA and for industry? Also, will [TEST] need to be validated on an ongoing basis, or will it be “validated” once the peer review is completed?

12) Early option credits

NHTSA proposes allowing manufacturers to volunta rily opt in to their HD program in 2014 or 2015, and thereby generate early credits. Give n that such manufacturers will have to meet EPA standards over this time period, we would a ppreciate further clarif ication about how the early credit option would work while avoiding the creation of strategic incentives for opting in. For example, it seems possible that the ea rly credit option could offer more efficient manufacturers an opportunity to strategically opt in while less effici ent manufacturers do not, thus creating an excess supply of credits for the period beyond 2015.Summary of Interagency Working Comments Received on Draft Rule under EO 12866 Review. Subject to

Further Policy Review

8 13) Evaluation of uncertainty

The assessment of costs and benefits would be improved by further sensitivity analysis of some key uncertain variables. For example, given the centrality of fuel prices to the estimates of payback periods and net benefits, furt her sensitivity analysis of fuel prices would shed light on the robustness of the proposed standards. Other ex amples of potentially significant sources of uncertain ty are technology costs, rates of learning, technology adoption rates, and vehicle lifetimes.

14) RPE and Learning curve : Please discuss the rationale for deviating from the NAS recommendation on RPE. Also, please provide evidence for the time learning curve used in the analysis. Given that the regulation doesn’t appear to be very technology forcing, please provide evidence for taking 2 learning curve disc ounts, which serves to lower the cost of the
rule and is in total is a more aggressive learning curve then the agencies have used in the past. Please clearly present the costs with and without lear ning discounts (probably in a tabular form would be the best). Also, how we re the fixed costs spread over the relevant
trucks/trailers?

15) Simulation Model

The analysis contains references to TEST, but there aren’t many details about exactly how the agency estimated the key parameters in th e model (e.g., numbers of data points) or how it uses the various inputs to ca lculate reductions. Such information would be useful for the public in evaluating the effectiveness of the model in providing reasonable estimates of the impact of the rule. Has this model been publis hed and peer reviewed? Please include the full code and model in the NPRM for public commen t. Are there other models that achieve the same purpose? Do manufactures have models? Ar e there other third pa rty developed models available? Would there be any differences between this model and any in house testing that manufactures already developed? Will they get similar ratings or will they notice significant

differences?

16) Costs and Cost Effectiveness

It is unclear from Chapter 2 of the RIA exactly where the agencies got the cost estimates from. There are general citations to NAS and TIAX and other st udies but the agencies never specifically pinpoint which technology cost es timate came from which study. Please provide

a detailed chart with the fo llowing info: name of technol ogy, cost estimate of technology,

citation for where this cost estimate is based off of, and analysis of cost effectiveness.Summary of Interagency Working Comments Received on Draft Rule under EO 12866 Review. Subject to

Further Policy Review

9 17) Treatment of Fuel Savings in RIA and NPRM

The agencies include fuel savings in the cost category throughout the RIA and NPRM. Please include this category only in the benefits section because fuel savings are benefits not costs. Please make this change throughout the RIA and NPRM.

18) Information to consumers.

Several commenters suggest that EPA a nd NHTSA consider and take comment on approaches for providing information to consumer s that will enable them to make decisions that maximize their utility, factoring in effici ency and environmental information. As the NPRM is currently written, the Agencies believe that they are unable to provide meaningful information along these lines because of the di versity of HD vehicles and uses and the many assumptions that would need to be made. It would be useful to que ry whether this NPRM presents an opportunity to seek comment on ho w the Government could facilitate greater

access to more detailed information for HD vehi cles, similar to what has been accomplished for passenger vehicles both on labels and through the Fuel Economy Website.

19) Leakage effect from impacts on global fuel prices

—

EPA provides a very good discussion of th e problem—that a decline in domestic oil consumption from increased fuel economy may re duce oil prices and thus lead to increased consumption elsewhere—but does not estimate how large that impacts would be and include in the cost-benefit analysis. NHTSA provides a quantitative estimate on this effect for the light duty rule. EPA could draw on that analysis to include a quantitative estimate of the leakage effect. Please include this in the RIA.

20) Separate Standards

. If CO2 (or CO2 equivalent) is a linear function of gallons of fuel consumed, why propose separate standards for fuel economy and CO2/mile? Why the separate phase-in times for the two different rules? Could not the same regulatory goal be achieved with just the simple gallons per 1000 t on-mile standard, with less confusion? (See, eg., page 85 of the preamble.)

21) Analytic Timeline and baseline : Please clarify whether the rulemaking pertains to only
trucks and trailers manufactured between 2014 through 2018, and accordingly the analysis. Are the trucks/trailers produced in 2019 and on included in the analysis? What is the anticipated scope of the rulemaking—e.g., number of trucks/trailers a ffected? Number of
firms affected? Number of drivers affected ? What does this indus try look like in the absence of this rule? Some technologies are already commercially av ailable and have been adopted (e.g., trailer aerodynamics)Summary of Interagency Working Comments Received on Draft Rule under EO 12866 Review. Subject to

Further Policy Review

10 22) Tires: How does this NPRM affect the retreading of tires? Is ther e any weather-related safety concern with reduced tire rolling resistance?

23) Weight reduction : Do EPA/NHTSA anticipate that this NPRM will affect the markets for
aluminum and titanium?

24) Idle control : Please provide the basis for assumed id le hours per year, miles per year and payload (Table 2-22).

25) Difficulty in assessing technology control co sts, effectiveness of controls, and benefits : It’s difficult to link Tables 2- 23, 2-24, 2-25, and 2-26 to the bene fits section. Please clarify. Same comment applies to the vocational trucks as well.

26) Tire pressure monitoring system : Doesn’t DOT already have a rule in place to deal with
this?

27) Route planning : What are the costs associated with adoption of this strategy? Also, firms already seem to have a large incentive to optimize routing as a business practice, and it is not clear that the rulemaking would pr ovide a strong additional incentive.

28) HFC: Please discuss and es timate the HFC-134a consumption baselines under two scenarios: (1) the US proposal to amend the Montreal Protoc ol gets adopted; (2) the US proposal to amend the Montreal Protocol does not get adopte d. Also, please assess the reduction of HFC-134a consumption that is attributable to this rulemaking.

29) Increased congestion cost : Please clarify how the costs are estimated? Also did EPA and
NHTSA estimate additional accidents?

30) Time value associated with reduced refueling: How many refills in th e baseline? What is the assumed time saved per refill?

31) Fuel savings : What is the assumed price of fuel used in fuel savings calculations? What is the source of the price information?

32) Please seek comment on the safety effects of low rolling resistance tires for trucks.

33) It would be useful to provide estimates of the likely percentage increases in truck prices as a
result of the rule.Summary of Interagency Working Comments Received on Draft Rule under EO 12866 Review. Subject to

Further Policy Review

11

34) Please provide a fuller discussion of the assumpti ons used to construct the baseline. What, for example, is assumed about the adoption of low rolling resistance tires in the absence of
the rule?

35) Please clarify- It seems the agencies are not considering weight of tractor but considering only weight reduction in wheel and tires? If using modeli ng, why does it matter how much weight reduction is? It seems how much the entire vehicle we ighs matters more than how much weight reduction there is. If you are only interested in weight reduction, what is it compared to? And why only consider weight re duction in tires and wheels? How are they
different from rest of the vehicle?

36) Given the size of the RIA, it would be useful to have a discussion and a table that provides a list of the key assumptions used in the cost and benefit estimates, e.g. annual mileage of trucks, cost of fuel, life of trucks, number a nd kind of each truck sold. This will add to the transparency and reproducibility of the analysis.

37) Absent standards, if trucking companies wanted to save fuel, they would choose the lowestcost strategies to reduce fuel consumption. This might invol ve more driver training or purchase of optimal routing t echnologies. However, if standards are set, trucking companies may be forced into higher cost ways of saving fuel. Some might argue that once standards are set, trucking companies will still ha ve an incentive to engage in the lower cost strategies that are outside of the standards setting, but this may not be true. Having more fuel efficient trucks makes engaging in mana gement and driver training less profitable for trucking companies. So high-cost fuel sa ving technologies may “crowd out” lower cost strategies that are outside of st andard setting. Please provide an estimate of this lost fuel economy and seek comment on this point.

38) The North American Free Trade Agreement re quired the US to allow access to Mexican trucking companies starting in 2000, t hough that dispute is still ongoing.

 Is there a concern that this regulation c ould cause truck assembly plants or sales
offices to move to Mexico, to sell trucks to Mexican trucking companies operating in the US, thereby avoiding the fuel economy standards?

 More generally, how, if at all, does this rule intera ct with the NAFTA trucking dispute?

39) P.38 of Preamble. “we propose that credits ge nerated by vehicles no t be applicable to engine compliance, and vice versa.”Summary of Interagency Working Comments Received on Draft Rule under EO 12866 Review. Subject to

Further Policy Review

12  Can the agencies elaborate? It sounds lik e this restriction misses an opportunity for reducing the cost of achieving fuel economy.

40) Why are fleet turnover effects not estimated?

‐ We suggest the RIA document the sensitivity of the benefits to a reasonable guess as to

the size of the fleet turnover e ffect. Suppose, for example, that regulations cause truck companies to delay by one year their purchas e of new trucks, increasing the average age of the fleet. By how much would that dimi nish the estimated fuel economy savings and

CO2 emissions reduction?

41) ORNL estimates the macro premium at $4.68/ bbl in 2004$. That would be $5.33 in 2008$. Why does the RIA use $7.39?

42) Did the agency consider as an “alternative” a fuel tax, along the lines of the recommendation in the NAS report?

43) Both the RIA and the preamble devote space to estimating the effect of the rule on GDP. Both are careful to note that changes in GDP do not represent either bene fits or costs of the

rule. Is there a reason those estimations are included in the two documents, and if not can they be dropped ?

44) Early adoption credits for NHTSA Fuel Economy Rule. Our understanding was that because GHG is a linear function of gallons, ther e is really no logica l reason to have two separate policies. The only reason there are tw o policies here is that the two agencies have slightly different statutory obligations, and th at in particular NHTSA is required to wait longer than EPA before implementation. Further, we think and hope it is true that the two standards are designed so that there are as few differences between them as possible: if I comply with one, I automatically comply with the other, and vice versa. In that case, if I must comply with the EPA standard before I am required to comply with the NHTSA standard, don’t I automatically “voluntarily” co mply with the NHTSA st andard. And if that is true, should we be giving credits for acti ons firms are effectively required to take?

45) Parallel to consumer welfar e loss in the April CAFE rule

. The CAFE rule issued in April also struggled with the issue of why consumers don’t themselv es take advantage of fuel efficiency gains. That RIA had something this RIA misses: a sensitivity analysis. Table

VIII-18 of the RIA for that rule estimates the ne t benefits of the fuel economy standards for light duty vehicles where the private benefits are reduced by 25 % and 50%, to account for potential welfare losses from switching to less -preferred more efficient vehicles. See theSummary of Interagency Working Comments Received on Draft Rule under EO 12866 Review. Subject to

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13 final RIA, p.431-32 (http://www.nhtsa.gov/stat icfiles/rulemaking/ pdf/cafe/CAFE_2012- 2016_FRIA_04012010.pdf )

Did the agencies consider a similar sensitivity an alysis for this rule? If so, why was it omitted? If not, would they consider including it now. It would not require much work beyond an additional table and a few paragr aphs of prose, most of which could be adapted from the light duty RIA. If anything, such an analysis would be more important in this rulemaking, as the “consumers” in this case are businesses with a presumably strong incentive to lower what is one of their larges t operating costs, even if they don’t suffer the

full cost of the externalities associat ed with their fuel use decisions.

46) Unit Used for Regulations

The NAS report “Technologies and Approaches to Reducing the Fuel Consumption of Mediumand Heavy-Duty Vehicles”, dated March 17, 2010, hi ghlights the critical im portance of selecting an appropriate unit to repres ent the work performed by the truck. The current EPA/NHTSA document interchangeably uses “fuel economy” a nd “fuel consumption” without providing any specificity on the metric to be used for re gulations. These reviewers agree with the NAS recommendation 2-1 stipulating that “ Any regulation of MHDVs fuel consumption should use load-specific fuel consumption (LSFC) as th e metric and be based on using an average (or typical) payload based on national data repres entative of the classes and duty cycle of the
vehicle. ”

The NPRM does not explain the desirability of regulating on the basis of cargo ton-mile of operation as opposed to other metrics. We beli eve that the NPRM shoul d discuss the current philosophy of regulation of light duty passenger vehicles and ask whether it is appropriate for heavy duty vehicles. The report by Bertram et al should be include d as a reference.

The terms “ton-mile” and “gallons -per-ton-mile” should be include d in the list of acronyms and
text discussion.

47) Point of Regulation

Even though the NAIC code of the parties to be regulated are provide d the NPRM discussion could be clearer on where the point the regulation would be.

48) Drive cycle.

The average speed of each driving cycle, as well as statistics such as number of stops per mile, percent of time roadway idling, percent of time overnight idli ng, top speed, share of miles on interstates should be provided. Some, though not al l of the driving cycle st atistics that would be relevant are found in the EVS-21 paper. We s uggest a similar, but mo re thorough discussion.Summary of Interagency Working Comments Received on Draft Rule under EO 12866 Review. Subject to

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14 The “Higher Productivity Vehicle Report” of the American Tran sportation Research Institute and the general topic that it discu sses (larger trucks) should be a refe rence. It can be obtained at: http://www.atri-online.org/index.php?opti on=com_wrapper&view=wrapper&Itemid=84 The ATRI report presents results based on a drivi ng cycle that is appropri ate for class 8 tractor trailers – the “combination long-haul” case. Such a driving cycle should be included in the RIA.

The question of how to develop a fleet fuel consumption estimate per cargo ton-mile carried should be discussed, and the groupings over wh ich it should be done should be examined.

On page 335 of the Preamble, the first full para graph, "The first three va lues are based on the average SCC from three integrated assessment m odels, at discount rates of 2.5, 3, and 5 percent, respectively." should be "The first three valu es are based on the average SCC from three integrated assessment models, at discount ra tes of 5, 3, and 2.5 percent, respectively."

Specific Comments

49) Page 1-39. The document incorrectly describes Plug-in Hybrids as “ The third type of HD hybrid vehicle is a ‘plug-in’” . Hybrids can be electric or hy draulic as correctly mentioned. PHEVs simply mean that the battery can be rech arged from a plug. They are in fact electric hybrids. 50) Page 2-64 First bullet says “The internal combustion engine can be optimized (through downsizing, modifying the operating cycle, or other control techniques) to operate at or near its most efficient point more of the time”. We think the text meant to say that “the powertrain control strategy can be developed to operate the e ngine at or near its most efficient point most of the time”. 51) Page 2-64, second paragraph mentions “ Although plug-in hybrids are not considered feasible for truck applications for propulsion power, this mechani sm is explored further for trucks in a separate section discussing extended idle ”. Several OEMs are currently working on PHEV trucks for propulsion. Some applicati ons with low distances, such as P&D, are very well suited to these confi gurations. In addition, while we ag ree that the curre nt status of the battery makes a wide implementation diffi cult, future technologies will most likely expand the powertrain choice option for more a pplications. The statement above should be
revised to be less definitive con cerning the feasibility of PHEVS. 52) Page 2-66, first paragraph mentions “ EPA is experimenting with a Class 6 hydraulic hybrid that achieves a fuel economy increase simila r to electric hybrid gains and given high manufacturing volumes at with similar electric hybrid costs ”. EPA should provide a reference to justify this statement. 53) Page 3-25, section 3.1.2.6. OEMs have made it clear that, for some engine, several engine maps have to be used to properly characterize fuel consumption. This is especially true for line-haul engines. The document shoul d specify how this will be achieved. 54) Page 3-7, first paragraph, “ Class 7/8 tractor aerodynamics are currently developed by manufacturers using coastdown testing, wind tunnel testing and co mputational fluid dynamics. The agencies are proposing to allo w all three aerodynam ic evaluation methods ”.Summary of Interagency Working Comments Received on Draft Rule under EO 12866 Review. Subject to

Further Policy Review

15 There is currently no consensus about how to perform any of these methods. A good example is wind tunnel where mo st of the companies have different systems and disagree with each other results. Providing a choice of method without proper evaluation of the
uncertainties within each method and between methods could lead to gaming. 55) Page 3-9, last paragraph, “ Since heavy-duty coastdowns in volve more uncertainty, more tests are required to achieve and acceptable certainty in the mean of the resulting coefficients. “. The term “acceptable uncertainty ” needs to be quantified. 56) Page 3-15, Figure 3-1. Similar to the previous comment, the rolling resistance coefficient uncertainty can lead to selecting a different bi n for the model. What is the impact on LSFC? Will manufacturers be able to perform many tests and pick the values they want? 57) Page 3-15, Drag coefficient section “ We estimated frontal area of the International truck to be 99 ft2 (9.2 m2) by measuring the various dimensions of the tractor cab and other equipment such as exterior mirrors and tires ”. A discussion of the accuracy is the
estimation is needed. 58) Page 3-24, Third paragraph mentions “ However, the use of these type of application specific cycles in a regulatory scheme will lead to a pr oliferation of cycles for every application, an
outcome that is not desirable. ” Why only three cycles if the model can handle any type of cycle? Isn’t it possible to have specific repr esentative drive cycles for each of the main applications (maybe ~10?). 59) Page 3-24, section 3.4.2, The NAS report demonstr ated that grade needs to be taken into account to properly evaluate the fuel consump tion benefits of some technologies, including HEVs. Grade can easily be taken into account in a vehicle simulation tool. 60) Page 3.-24, Drive cycle selection: it appears th at all the drive cycles are time based rather than distance based. This approach is not appropriate since it does not allow a proper comparison of vehicles with di fferent transmission technologi es, especially for line-haul applications. We recommend using two drivers, one time based and another distance based depending on the application to ensure a fair comparison of technologies. 61) Page 3-24, Drive cycle selection. What happens if the maximum speed of the truck is lower than 65 mph? 62) Page 3-24 & 3-36, Drive cycle se lection. How is the difference in idling taken into account? Using the same three cycles will most certain ly lead to not accurately representing fuel displacement potential for some technologies on specific applications. For example, real world drive cycles with refuse trucks have s hown an idle time of 77% for front-loaders, 70% for real loaders and only 50% for side loaders (SLA). 63) Page 3-31, section 3.7 states “ EPA and NHTSA are proposing tw o methods to demonstrate benefits of a hybrid powertrain – chassis and engine testing, and ther eby generate credits through the use of such technology ”. HEVs have been evalua ted through vehicle modeling
and simulation tools such as PSAT and Autonomie for the past decade. Requiring testing for advanced technologies will lead to slowing down their introduction since additional cost will be required compared to conventional ve hicles. Different processes lead to favoring some technologies over other. We recommend using MIL (Model in the Loop) for conventional (as currently propo sed) and SIL (Software in th e Loop) for electric driveSummary of Interagency Working Comments Received on Draft Rule under EO 12866 Review. Subject to

Further Policy Review

16 configurations. These approaches are curr ently the ones being considered by OEMs in Europe. 64) Page 3-33, last sentence of second paragraph “ It is expected that pre-transmission, parallel hybrids would be the most likely choice for engine-based hybrid certification .” Any configuration can be implemented using that pro cess as it is currently the case within several
OEMs and research entities. 65) Page 3-35, second paragraph, “ We are proposing to add a ne w optional PTO test to the standard set of test cycles in order for manufacturers of advanced PTO systems to demonstrate in the laboratory environmen t fuel consumption and GHG reductions that would be realized from their systems in the real world .” While the regulations are supposed to be based on vehicle modeling and simulation to be able to handle any application option, it appears that any specific technologies, such as PTO, HEVs... will have to be evaluated through testing. We believe that any tec hnology can be properly evaluated through modeling and simulation given proper dr iving cycles and component data. 66) Page 3-36 – Table 3-13. How generic is the percentage of PTO usage for different applications? 67) Page 4-2, section 4.1.2, “‘The simulation model will be the primary t ool used to certify Class 2b through Class 8 heavy-duty, non-hybrid truck GHG emissions.”. We believe that all technologies can and s hould be evaluated through vehi cle modeling tool to avoid favoring technologies. 68) Page 4-3, section 4.2.2. The se ction mentions that users can change any of the model parameters, but that they should not (page 4-5, “manufacturers ca nnot alter any default settings or select alternative drive cycles ”). What is preventing users from changing parameters since the models are in Simulink / StateFlow? 69) Page 4-3, section 4.2.2. Much work and time has been spent to properly model gear selection and gear shifting in Autonomie. How was EPA/NHTSA specific algorithm developed? This is a cr itical part of heavy duty modeling and is not discussed in this section. 70) Page 4-5, last bullet “ Alignment of data from different sources such as dynamometer emissions benches, portable emissions meas urement systems, or engine control units ”.
Vehicle simulation tool are known to be unre liable to emission modeling. Validation results should be provided for the emissions. 71) Page 4-5, section 4.3.1, Detailed informati on should be provided on validation results, including instantaneous gear shifting, engine speed, e ngine torque, fuel rate.. 72) Page 4-6, section 4.4. “ While several existing heavy-duty vehicle simulation models are widely accepted by the research community and industry, one drawback is that their codes are not designed for the proposed regulatory program ”. This is correct, however, these codes have been validated over the long term on numerous applications and allow the use of modeling and simulation for any technologies. In addition, these codes can be very quickly modified for regulatory/labeling purposes. An on-going project with ACEA for HD labeling using Autonomie demonstrates that point. 73) Page 4-6, section 4.4.1, “ EPA proceeded with the development of a heavy-duty truck simulation package which produces GHG output comparable to many sophisticated forward-looking models ,” Information supporting this statement should be provided.Summary of Interagency Working Comments Received on Draft Rule under EO 12866 Review. Subject to

Further Policy Review

17 74) Page 4-7, Figure 4.1, Why is the user able to select Engine characteristics (Family, Sub Family, Model Year...) if one ca nnot change the engine data? 75) Page 4-8, first section, “ However, some technologies may crea te detrimental effects due to their usage pattern and some may be too compl ex to model. For example , it may be difficult to accurately model those improvements which are based on each manufacturer’s proprietary control strategies .” Difficult does not mean impossible. OEMs in Europe are currently pushing for the integration of propr ietary control strategies into the labeling process. The software tools currently allow su ch implementation as well. This is necessary to properly evaluate a technol ogy. OEMs are already modeling ad vanced controls, so this
would not be an additional burden to them as long as the tool is designed for that purpose.

76) This proposal does not include a discussion of the upstream benefits of combusting biofuels
in lieu of conventional fuels. Those benefits are clearly articulated in the RFS2, which
should be referenced in this document. In addition, there are several places where the
differentiation of fossil fuel carbon dioxide fr om biogenic carbon dioxid e and is appropriate (see specific references below).

77) Also, different implementation schedules are being proposed by EPA and the National Highway Traffic Safety Administration (NHT SA). The NHTSA schedule gives additional time for manufacturers to comply with the proposed standards, and we support NHTSAs proposed schedule.

78) Moreover, we are concerned with the documents th at refer to the choice of diesel particulate emissions reduction to be handled by the manufact urer and not prescribed in detail by the government . To meet the current particulate emissions from diesel engines, manufacturers have developed several different emission strategies. Most of these involve a regeneration process (a superheated mode within the ex haust system that incinerates the stored particulates when they reach a prescribed level). The regeneration process requires the vehicle to either stop or ope rate in a reduced speed mode while it is taking place. We (along with other agencies that have emergency vehicles) have a need for a temporary, emergency by-pass to the regeneration process. Yes, the result will be isolated,
elevated emissions until the vehicle can reach a safe place for regeneration. However, a by-pass technology would ensure that our fire engines (or other emergency equipment) would be able to safely retre at from a life- or property-threatening situation. We know that other state/county agencies are also concerned, as some have ambulances that can be forced into go-slow mo de for regeneration at the time a patient is being transported to a hospital. (The only reference to regeneration said that the potentially higher emissions emitted during th e regeneration process itself would not be measured or regulated.)Summary of Interagency Working Comments Received on Draft Rule under EO 12866 Review. Subject to

Further Policy Review

18 They also support the proposed focus on chassi s manufacturers (and no t the body manufacturers) regarding vocational vehicles not otherwise co vered by the HD pickup and van standards (EPA requested feedback on this issue).

For #78-82 below, Please add the additional highlighted text:

79) Page 14: “...As in the recent light-duty vehicl e rule establishing CAFE and GHG standards for MYs 2012-2016 light-duty vehicles, EPA’s and NHTSA’s proposed standards for the heavy-duty sector are largely harmonized with one another due to the close and direct relationship between improving the fuel efficiency of these vehicles and reducing their fossil
fuel carbon dioxide (CO 2 ) tailpipe emissions. For all vehi cles that consume carbon-based
fuels, the amount of CO 2 emissions is essentially constant per gallon for a given type of fuel

that is consumed. T he more efficient a heavy-duty tr uck is in completing its work, the lower its environmental impact will be, because the less fuel consumed to move cargo a given distance, the less CO 2 emitted into the air. T he technologies available for improving fuel efficiency, and ther efore for reducing both CO 2 emissions and fuel consumption, are

one and the same. 1 Because of this close technica l relationship, NHTSA and EPA have been able to rely on jointly-developed assump tions, analyses, and analytical conclusions to support the standards and other provisions that NHTSA and EPA are proposing under our separate legal authorities...”

80) Page 29: “...The proposed EPA and NHTSA standa rd curves are based on a set of vehicle, engine, and transmission technolog ies expected to be used to meet the recently established GHG and fuel economy standards for model y ear 2012-2016 light-duty vehicles, with full

consideration of how these t echnologies would perform in heavy-duty vehicle testing and use. All of these technologi es are already in use or ha ve been announced for upcoming model years in some light-duty vehicle models , and some are in use in a portion of HD pickups and vans as well. The technologies include:

 advanced 8-speed automatic transmissions

 aerodynamic improvements

 electro-hydraulic power steering

 engine friction reductions

 Use of biofuel blends

1 However, as discussed below, in addition to addressing CO 2 , the EPA’s proposed standards also include provisions to address other GHGs (nitrous oxide, methane, and air conditioning refrigerant emissions).), as required by the Endangerment Finding under the Clean Air Act. See Section II

.Summary of Interagency Working Comments Received on Draft Rule under EO 12866 Review. Subject to

Further Policy Review

19  Improved accessories

 low friction lubricants in powertrain components

 lower rolling resistance tires

 lightweighting

 gasoline direct injection

 gasoline engine coupled cam phasing

 diesel aftertreatment optimization

 air conditioning system leakage re duction (for EPA program only)

81) Page 258-259: “...EPA used MOVES to estima te downstream GHG inventories from these proposed rules. We expect reductions in fossil fuel CO 2 emissions from all heavy-duty

vehicle classes. The reductions come from engine improvements and road load improvements. EPA expects CH 4 and N 2 O emissions to increase very slightly because of VMT rebound and because significant vehicle reductions are not expected from these proposed rules. Overall, downstream GHG emissions (CO 2 eq) will be reduced significantly, and is described in the following subsections. For fossil fuel CO 2 and fuel consumption, the total energy consumption “pollutant” was run in MOVES rather than CO 2 itself. The energy was converted to fuel consumption based on fuel heating values used in the development of MOVES emission and energy rates 2 . These values are 122,893 kJ/gallon for gasoline and 138,451 kJ/gallon for diesel. To calculate CO 2 , the agencies assumed a CO 2 content of 8,887 g/gallon for gasoline and 10,180 g/gallon fo r diesel. (EPA requests comment on how to calculate biogenic CO2 emissions from biofue l mixes of gasoline and diesel with ethanol
and biodiesel)...”

82) Page 260: Table 0-1: Annual Upstream GHG Emissions Reductions in 2018, 2030, and

2050 Add column.

Fossil
Fuel CO 2 (MMT) Biogenic
CO2 (MMT) Fossil
Fuel CH 4 (MMT
CO 2 eq) N 2 O (MMT
CO 2 eq) Total GHG (MMT
CO 2 eq)

2018 4.5 0.8 0.02 5.3

2030 12.7 2.0 0.06 14.7Summary of Interagency Working Comments Received on Draft Rule under EO 12866 Review. Subject to

Further Policy Review

20 2050 19.8 3.1 0.10 22.9

83) Page 273: Emissions Inventory Impacts

Upstream Impacts of the Program

***[Include discussion of fossil fuel CO2 em ission reductions from use of biofuels]

84) What exactly is being proposed? This document is full of detailed information, and is very hard to navigate. We highly recommend a more thorough executive summary for easier reading by the public. We also suggest incl uding easy-to-understand ch arts up front that spell out the elements of the proposed rule and the associated costs and benefits.

85) How would increasing the weight limit on trucks in certain areas affect these rules? E.g. would a truck be able to haul 100,000 lbs. a nd still comply with the fuel efficiency
standards?

86) Have you considered allowing a high er weight limits on trucks as an alternative? That is, allowing trucks to haul more weight would theoretically allow for fewer trucks, which
would reduce overall CO2 output per ton-mile.

87) Are there safety implications for the vari ous technology improvements? E.g. reducing the rolling resistance on tires seems to contradict safety goals.

88) The section on "How would this propos ed program impact fuel consumption, GHG emissions, and climate change", from page 256 -273, most of what is discussed regarding GHG and climate change is cited (to CCSP and USGCRP). However, EPA's estimates (page 272) on how the program would affect temperatur e increases and ph levels of the ocean is marked with a placeholder (no numbers), so there's not much we could say about that number (whether or not it is realistic, etc) or determine if the methodology is actually correct. Please provide this information so that we can evaluate the methodology.