24352 Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 

DEPARTMENT OF TRANSPORTATION 

National Highway Traffic Safety 

Administration 

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

and 537 

[Docket No. NHTSA–2008–0089] 

RIN 2127–AK29 

Average Fuel Economy Standards, 

Passenger Cars and Light Trucks; 

Model Years 2011–2015 

AGENCY: National Highway Traffic 

Safety Administration (NHTSA), 

Department of Transportation (DOT). 

ACTION: Notice of Proposed Rulemaking 

(NPRM). 

SUMMARY: This document proposes 

substantial increases in the Corporate 

Average Fuel Economy (CAFE) 

standards for passenger cars and light 

trucks that would enhance energy 

security by improving fuel economy. 

Since the carbon dioxide (CO2) emitted 

from the tailpipes of new motor vehicles 

is the natural by-product of the 

combustion of fuel, the increased 

standards would also address climate 

change by reducing tailpipe emissions 

of CO2. Those emissions represent 97 

percent of the total greenhouse gas 

emissions from motor vehicles. 

Implementation of the new standards 

would dramatically add to the billions 

of barrels of fuel already saved since the 

beginning of the CAFE program in 1975. 

DATES: Comments must be received on 

or before July 1, 2008. 

ADDRESSES: You may submit comments 

to the docket number identified in the 

heading of this document by any of the 

following methods: 

• Federal eRulemaking Portal: Go to 

http://www.regulations.gov. Follow the 

online instructions for submitting 

comments. 

• Mail: 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. 

• Hand Delivery or Courier: West 

Building Ground Floor, Room W12–140, 

1200 New Jersey Avenue, SE., between 

9 a.m. and 5 p.m. Eastern Time, Monday 

through Friday, except Federal holidays. 

• Fax: (202) 493–2251. 

Regardless of how you submit your 

comments, you should mention the 

docket number of this document. 

You may call the Docket Management 

Facility at 202–366–9826. 

Instructions: For detailed instructions 

on submitting comments and additional 

information on the rulemaking process, 

see the Public Participation heading of 

the Supplementary Information section 

of this document. Note that all 

comments received will be posted 

without change to http:// 

www.regulations.gov, including any 

personal information provided. 

Privacy Act: Please see the Privacy 

Act heading under Rulemaking 

Analyses and Notices. 

FOR FURTHER INFORMATION CONTACT: For 

policy and technical issues: Ms. Julie 

Abraham or Mr. Peter Feather, Office of 

Rulemaking, National Highway Traffic 

Safety Administration, 1200 New Jersey 

Avenue, SE., Washington, DC 20590. 

Telephone: Ms. Abraham (202) 366– 

1455; Mr. Feather (202) 366–0846. 

For legal issues: Mr. Stephen Wood or 

Ms. Rebecca Schade, Office of the Chief 

Counsel, National Highway Traffic 

Safety Administration, 1200 New Jersey 

Avenue, SE., Washington, DC 20590. 

Telephone: (202) 366–2992. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Executive overview 

A. Summary 

B. Energy Independence and Security Act 

of 2007 

C. Proposal 

1. Standards 

a. Stringency 

b. Benefits 

c. Costs 

d. Flexibilities 

2. Credits 

II. Background 

A. Contribution of fuel economy 

improvements to addressing energy 

independence and security and climate 

change 

1. Relationship between fuel economy and 

CO2 tailpipe emissions 

2. Fuel economy improvements/CO2

tailpipe emission reductions since 1975 

B. Chronology of events since the National 

Academy of Sciences called for 

reforming and increasing CAFE 

standards 

1. National Academy of Sciences CAFE 

report (February 2002) 

a. Significantly increasing CAFE standards 

without reforming them would adversely 

affect safety 

b. Environmental and other externalities 

justify increasing the CAFE standards 

2. Final rule establishing reformed 

(attribute-based) CAFE standards for MY 

2008–2011 light trucks (March 2006) 

3. Twenty-in-Ten Initiative (January 2007) 

4. Request for passenger car and light truck 

product plans (February 2007) 

5. Supreme Court decision in 

Massachusetts v. EPA (April 2007) 

6. Coordination between NHTSA and EPA 

on development of rulemaking proposals 

(Summer–Fall 2007) 

7. Ninth Circuit decision re final rule for 

MY 2008–2011 light trucks (November 

2007) 

8. Enactment of Energy Independence and 

Security Act of 2007 (December 2007) 

C. Energy Policy and Conservation Act, as 

amended 

1. Vehicles subject to standards for 

automobiles 

2. Mandate to set standards for automobiles 

3. Structure of standards 

4. Factors governing or considered in the 

setting of standards 

5. Consultation in setting standards 

6. Compliance flexibility and enforcement 

III. Fuel economy enhancing technologies 

A. Data sources for technology 

assumptions 

B. Technologies and estimates of costs and 

effectiveness 

1. Engine technologies 

2. Transmission technologies 

3. Vehicle technologies 

4. Accessory technologies 

5. Hybrid technologies 

C. Technology synergies 

D. Technology cost learning curve 

E. Ensuring sufficient lead time 

1. Linking to redesign and refresh 

2. Technology phase-in caps 

IV. Basis for attribute-based structure for 

setting fuel economy standards 

A. Why attribute-based instead of a single 

industry-wide average? 

B. Which attribute is most appropriate? 

1. Footprint-based function 

2. Functions based on other attributes 

C. The continuous function 

V. Volpe model/analysis/generic description 

of function 

A. The Volpe model 

1. What is the Volpe model? 

2. How does the Volpe model apply 

technologies to manufacturers’ future 

fleets? 

3. What effects does the Volpe model 

estimate? 

4. How can the Volpe model be used to 

calibrate and evaluate potential CAFE 

standards? 

5. How has the Volpe model been updated 

since the April 2006 light truck CAFE 

final rule? 

a. Technology synergies 

b. Technology learning curves 

c. Calibration of reformed CAFE standards 

6. What manufacturer information does the 

Volpe model use? 

7. What economic information does the 

Volpe model use? 

a. Costs of fuel economy technologies 

b. Potential opportunity costs of improved 

fuel economy 

c. The on-road fuel economy ‘gap’ 

d. Fuel prices and the value of saving fuel 

e. Consumer valuation of fuel economy and 

payback period 

f. Vehicle survival and use assumptions 

g. Growth in total vehicle use 

h. Accounting for the rebound effect of 

higher fuel economy 

i. Benefits from increased vehicle use 

j. Added costs from congestion, crashes 

and noise 

k. Petroleum consumption and import 

externalities 

l. Air pollutant emissions 

(i) Impacts on criteria air pollutant 

emissions 

(ii) Reductions in CO2 emissions 

(iii) Economic value of reductions in CO2

emissions 


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1Pub. L. 110–140, 121 Stat. 1492 (Dec. 18, 2007). 

m. The value of increased driving range 

n. Discounting future benefits and costs 

o. Accounting for uncertainty in benefits 

and costs 

B. How has NHTSA used the Volpe model 

to select the proposed standards? 

1. Establishing a continuous function 

standard 

2. Calibration of initial continuous 

function standards 

3. Adjustments to address policy 

considerations 

a. Curve crossings 

b. Steep curve for passenger cars 

c. Risk of upsizing 

VI. Proposed fuel economy standards 

A. Standards for passenger cars and light 

trucks 

1. Proposed passenger car standards MY 

2011–2015 

2. Proposed light truck standards MY 

2011–2015 

3. Energy and environmental backstop 

4. Combined fleet performance 

B. Estimated technology utilization under 

proposed standards 

C. Costs and benefits of proposed standards 

D. Flexibility mechanisms 

E. Consistency of proposed standards with 

EPCA statutory factors 

1. Technological feasibility 

2. Economic practicability 

3. Effect of other motor vehicle standards 

of the Government on fuel economy 

4. Need of the U.S. to conserve energy 

F. Other considerations in setting 

standards under EPCA 

1. Safety 

2. Alternative fuel vehicle incentives 

3. Manufacturer credits 

G. Environmental impacts of the proposed 

standards 

H. Balancing the factors to determine 

maximum feasible CAFE levels 

VII. Standards for commercial medium- and 

heavy-duty on-highway vehicles and 

‘‘work trucks’’

VIII. Vehicle classification 

A. Origins of the regulatory definitions 

B. Rationale for the regulatory definitions 

in light of the current automobile market 

C. NHTSA is not proposing to change 

regulatory definitions at this time 

IX. Enforcement 

A. Overview 

B. CAFE credits 

1. Credit trading 

2. Credit transferring 

3. Credit carry-forward/carry-back 

C. Extension and phasing out of flexiblefuel incentive program 

X. Regulatory alternatives 

XI. Sensitivity and Monte Carlo analysis 

XII. Public participation 

XIII. Regulatory notices and analyses 

A. Executive Order 12866 and DOT 

Regulatory Policies and Procedures 

B. National Environmental Policy Act 

C. Regulatory Flexibility Act 

D. Executive Order 13132 (Federalism) 

E. Executive Order 12988 (Civil Justice 

Reform) 

F. Unfunded Mandates Reform Act 

G. Paperwork Reduction Act 

H. Regulation Identifier Number (RIN) 

I. Executive Order 13045 

J. National Technology Transfer and 

Advancement Act 

K. Executive Order 13211 

L. Department of Energy Review 

M. Plain Language 

N. Privacy Act 

XIV. Regulatory Text 

I. Executive overview 

A. Summary 

This document is being issued 

pursuant to the Energy Independence 

and Security Act of 2007 (EISA), which 

Congress passed in December 2007. 

EISA mandates the setting of separate 

maximum feasible standards for 

passenger cars and for light trucks at 

levels sufficient to ensure that the 

average fuel economy of the combined 

fleet of all passenger cars and light 

trucks sold by all manufacturers in the 

U.S. in model year (MY) 2020 equals or 

exceeds 35 miles per gallon. That is a 40 

percent increase above the average of 

approximately 25 miles per gallon for 

the current combined fleet. 

Congress enabled NHTSA to require 

these substantial increases in fuel 

economy by requiring that passenger car 

standards be reformed through basing 

them on one or more vehicle attributes. 

The attribute-based approach was 

originally recommended by the National 

Academy of Sciences in 2002 and 

adopted by NHTSA for light trucks in 

2006. The new approach is a substantial 

improvement over the old approach of 

specifying the same numerical standard 

for each manufacturer. It avoids creating 

undue risks of adverse safety and 

employment impacts and distributes 

compliance responsibilities among the 

vehicle manufacturers more equitably. 

This document proposes standards for 

MYs 2011–2015, the maximum number 

of model years for which NHTSA can 

establish standards in a single 

rulemaking under EISA. Since lead time 

is a significant consideration in 

determining the stringency of future 

standards, the agency needs to establish 

the standards as far in advance as 

possible so as to maximize the amount 

of lead time for manufacturers to 

develop and implement plans for 

making the vehicle design changes 

necessary to achieve the requirements of 

EISA. 

In developing the proposed standards, 

the agency considered the four statutory 

factors underlying maximum feasibility 

(technological feasibility, economic 

practicability, the effect of other 

standards of the Government on fuel 

economy, and the need of the nation to 

conserve energy) as well as other 

relevant considerations such as safety. 

After assessing what fuel saving 

technologies would be available, how 

effective they are, and how quickly they 

could be introduced, and then factoring 

that information into the computer 

model its uses for applying technologies 

to particular vehicle models, the agency 

then balanced the factors relevant to 

standard setting. In its decision making, 

the agency used a marginal benefit-cost 

analysis that placed monetary values on 

relevant externalities (both energy 

security and environmental 

externalities, including the benefits of 

reductions in CO2 emissions). In the 

above process, the agency consulted 

with the Department of Energy and 

particularly the Environmental 

Protection Agency regarding a wide 

variety of matters, including, for 

example, the cost and effectiveness of 

available technologies, improvements to 

the computer model, and the selection 

of appropriate analytical assumptions. 

This document also proposes to add 

a new regulation designed to give 

manufacturers added flexibility in using 

credits earned by exceeding CAFE 

standards. The regulation would 

authorize the trading of credits between 

manufacturers. In addition, it would 

permit a manufacturer to transfer its 

credits from one of its compliance 

categories to another of its categories. 

NHTSA is also publishing two 

companion documents, one requesting 

vehicle manufacturers to provide up-todate product plans for the model years 

covered by this document, and the other 

inviting Federal, State, and local 

agencies, Indian tribes, and the public to 

participate in identifying the 

environmental issues and reasonable 

alternatives to be examined in an 

environmental impact statement. 

B. Energy Independence and Security 

Act of 2007 

The Energy Independence and 

Security Act of 2007 (EISA)1 builds on 

the President’s ‘‘Twenty in Ten’’

initiative, which was announced in 

January 2007. That initiative sought to 

reduce gasoline usage by 20 percent in 

the next 10 years. The enactment of 

EISA represents a major step forward in 

expanding the production of renewable 

fuels, reducing oil consumption, and 

confronting global climate change. 

EISA will help reduce America’s 

dependence on oil by reducing U.S. 

demand for oil by setting a national fuel 

economy standard of at least 35 miles 

per gallon by 2020—which will increase 

fuel economy standards by 40 percent 

and save billions of gallons of fuel. In 

January 2007, the President called for 

the first statutory increase in fuel 

economy standards for passenger 


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24354 Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 

2Although NHTSA established an attribute-based 

standard for MY 2011 light trucks in its 2006 final 

rule, EISA mandates a new rulemaking, reflecting 

new statutory considerations and a new, up-to-date 

administrative record, and consistent with EPCA as 

amended by EISA, to establish the standard for 

those light trucks. 

3The externalities included in our analysis do 

not, however, include those associated with the 

reduction of the other GHG emitted by automobiles, 

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

hydroflurocarbons (HFCs). Actual air conditioner 

operation is not included in the test procedures 

used to obtain both (1) emission rates for purposes 

of determining compliance with EPA criteria 

pollutant emission standards and (2) fuel economy 

values for purposes of determining compliance with 

NHTSA CAFE standards, although air conditioner 

operation is included in ‘‘supplemental’’ federal 

test procedures used to determine compliance with 

corresponding and separate EPA criteria pollutant 

emission standards. 

automobiles (referred to below as 

‘‘passenger cars’’) since those standards 

were mandated in 1975, and EISA 

delivers on that request. EISA also 

includes an important reform the 

President has called for that allows the 

Transportation Department to issue 

‘‘attribute-based standards,’’ which will 

ensure that increased fuel efficiency 

does not come at the expense of 

automotive safety. EISA also mandates 

increases in the use of renewable fuels 

by setting a mandatory Renewable Fuel 

Standard requiring fuel producers to use 

at least 36 billion gallons of renewable 

fuels in 2022. 

As the President noted in signing 

EISA, the combined effect of the various 

actions required by the Act will be to 

produce some of the largest CO2

emission reductions in our nation’s 

history. 

EISA made a number of important 

changes to the Energy Policy and 

Conservation Act (EPCA) (Pub. L. 94–

163), the 1975 statute that governs the 

CAFE program. EISA: 

• Replaces the old statutory default 

standard of 27.5 mpg for passenger cars 

with a mandate to establish separate 

passenger car and light truck standards 

annually, beginning with MY 2011, set 

at the maximum feasible level. The 

standards for MYs 2011–2020 must, as 

a minimum, be set sufficiently high to 

ensure that the average fuel economy of 

the combined industrywide fleet of all 

new passenger cars and light trucks sold 

in the United States during MY 2020 is 

at least 35 mpg.2

• Limits to five the number of years 

for which standards can be established 

in a single rulemaking. That 

requirement, in combination with the 

requirement to start rulemaking with 

MY 2011, necessitates limiting this 

rulemaking to MYs 2011–2015. 

• Mandates the reforming of CAFE 

standards for passenger cars by 

requiring that all CAFE standards be 

based on one or more vehicle attributes, 

thus ensuring that the improvements in 

fuel economy do not come at the 

expense of safety. NHTSA pioneered 

that approach in its last rulemaking on 

CAFE standards for light trucks. 

• Requires that for each model year, 

beginning with MY 2011, the domestic 

passenger cars of each manufacturer of 

those cars must achieve a measured 

average fuel economy that is not less 

than 92 percent of the average fuel 

economy of the combined fleet of 

domestic and non-domestic passenger 

cars sold in the United States in that 

model year. 

• Provides greater flexibility for 

automobile manufacturers by (a) 

increasing from three to five the number 

of years that a manufacturer can carry 

forward the compliance credits it earns 

for exceeding CAFE standards, (b) 

allowing a manufacturer to transfer the 

credits it has earned from one of its 

classes of automobiles to another, and 

(c) authorizing the trading of credits 

between manufacturers. 

C. Proposal 

1. Standards 

a. Stringency 

This document proposes to set 

attribute-based fuel economy standards 

for passenger cars and light trucks 

consistent with the Reformed CAFE 

approach that NHTSA used in 

establishing the light truck standards for 

MY 2008–2011 light trucks. Separate 

passenger car standards would be set for 

MYs 2011–2015, and light truck 

standards would be set for MYs 2011–

2015. As noted above, EISA limits the 

number of model years for which 

standards may be established in a single 

rulemaking to five. We are proposing to 

establish standards for five years to 

maximize the amount of lead time that 

we can provide the manufacturers. This 

is necessary to make it possible to 

achieve the levels of average fuel 

economy required by MY 2020. 

Each vehicle manufacturer’s required 

level of CAFE would be based on target 

levels of average fuel economy set for 

vehicles of different sizes and on the 

distribution of that manufacturer’s 

vehicles among those sizes. Size would 

be defined by vehicle footprint. The 

level of the performance target for each 

footprint would reflect the technological 

and economic capabilities of the 

industry. The target for each footprint 

would be the same for all 

manufacturers, regardless of differences 

in their overall fleet mix. Compliance 

would be determined by comparing a 

manufacturer’s harmonically averaged 

fleet fuel economy levels in a model 

year with a required fuel economy level 

calculated using the manufacturer’s 

actual production levels and the targets 

for each footprint of the vehicles that it 

produces. 

The proposed standards were 

developed using a computer model 

(known as the ‘‘Volpe Model’’) that, for 

any given model year, applies 

technologies to a manufacturer’s fleet 

until the manufacturer reaches 

compliance with the standard under 

consideration. The standards were 

tentatively set at levels such that, 

considering the seven largest 

manufacturers, the cost of the last 

technology application equaled the 

benefits of the improvement in fuel 

economy resulting from that 

application. We reviewed these 

proposed standards to consider the 

underlying increased use of 

technologies and the associated impact 

on the industry. This process recognizes 

that the relevance of costs in achieving 

benefits, and uses benefit figures that 

include the value of reducing the 

negative externalities (economic and 

environmental) from producing and 

consuming fuel. These environmental 

externalities include, among other 

things, reducing tailpipe emissions of 

CO2.3 In view of the process used to 

develop the proposed standards, they 

are also referred to as ‘‘optimized 

standards.’’

Compared to the 2006 rulemaking that 

established the MY 2008–11 CAFE 

standards for light trucks, this 

rulemaking much more fully captures 

the value of the costs and benefits of 

setting CAFE standards. This is 

important because assumptions 

regarding gasoline price projections, 

along with assumptions for 

externalities, are based on changed 

economic and environmental and 

energy security conditions and play a 

big role in the agency’s balancing of the 

statutory considerations in arriving at a 

determination of maximum feasible. In 

light of EISA and the need to balance 

the statutory considerations in a way 

that reflects the current need of the 

nation to conserve energy, including the 

current assessment of the climate 

change problem, the agency revisited 

the various assumptions used in the 

Volpe Model to determine the level of 

the standards. Specifically, in running 

the Volpe Model and stopping at a point 

where marginal costs equaled marginal 

benefits or where net benefits to society 

are maximized, the agency used higher 

gasoline prices and higher estimates for 

energy security values ($0.29 per gallon 

instead of $0.09 per gallon). The agency 

also monetized carbon dioxide (at 


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Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 24355 

4 Given the contributions made by CAFE 

standards to addressing not only energy 

independence and security, but also to reducing 

tailpipe emissions of CO2, fleet performance is 

stated in the above discussion both in terms of fuel 

economy and the associated reductions in tailpipe 

emissions of CO2 since the CAFE standard will have 

the practical effect of limiting those emissions 

approximately to the indicated levels during the 

official CAFE test procedures established by EPA. 

The relationship between fuel consumption and 

carbon dioxide emissions is discussed ubiquitously, 

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

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

co2_inc.htm, which provides a rounded value of 20 

pounds of CO2 per gallon of gasoline). (Last 

accessed April 20, 2008.) The CO2 emission rates 

shown are based on gasoline characteristics. 

Because diesel fuel contains more carbon (per 

gallon) than gasoline, the presence of diesel engines 

in the fleet—which NHTSA expects to increase in 

response to the proposed CAFE standards—will 

cause the actual CO2 emission rate corresponding 

to any given CAFE level to be slightly higher than 

shown here. (The agency projects that 4 percent of 

the MY 2015 passenger car fleet and 10 percent of 

the MY 2015 light truck fleet will have diesel 

engines.) Conversely (and hypothetically), applying 

the same CO2 emission standard to both gasoline 

and diesel vehicles would discourage 

manufacturers from improving diesel engines, 

which show considerable promise as a means to 

improve fuel economy. 

5Those numbers set out several paragraphs 

above. 

6The proposed standards are, in the first 

instance, based on the confidential product plans 

submitted by the manufacturers in the spring of 

2006. The final rule will be based on the 

confidential plans submitted in the next several 

months. The agency anticipates that those new 

plans, which presumably will reflect in some 

measure the enactment of EISA and the issuance of 

this proposal, will project higher levels of average 

fuel economy than the 2006 product plans. 

7The $22 billion estimate is based on a 7% 

discount rate for valuing future impacts. NHTSA 

Continued 

$7.00/ton), which it did not do in the 

previous rulemaking, and expanded its 

technology list. In addition, the agency 

used cost estimates that reflect 

economies of scale and estimated 

‘‘learning’’-driven reductions in the cost 

of technologies as well as quicker 

penetration rates for advanced 

technologies. These changes to the 

inputs to the model had a major impact 

on increasing the benefits in certain 

model years by allowing for greater 

penetration of technologies. 

The agency cannot set out the exact 

level of CAFE that each manufacturer 

will be required to meet for each model 

year under the proposed passenger car 

or light truck standards since the levels 

will depend on information that will not 

be available until the end of each of the 

model years, i.e., the final actual 

production figures for each of those 

years. The agency can, however, project 

what the industry wide level of average 

fuel economy would be for passenger 

cars and for light trucks if each 

manufacturer produced its expected mix 

of automobiles and just met its 

obligations under the proposed 

‘‘optimized’’ standards for each model 

year. Adjacent to each average fuel 

economy figure is the estimated 

associated level of tailpipe emissions of 

CO2 that would be achieved.4

For passenger cars: 

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

emissions of CO2) 

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

emissions of CO2) 

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

emissions of CO2) 

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

emissions of CO2) 

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

emissions of CO2) 

For light trucks: 

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

emissions of CO2) 

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

emissions of CO2) 

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

emissions of CO2) 

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

emissions of CO2) 

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

emissions of CO2) 

The combined industry wide average 

fuel economy (in miles per gallon, or 

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

for both cars and light trucks, if each 

manufacturer just met its obligations 

under the proposed ‘‘optimized’’

standards for each model year, would be 

as follows: 

MY 2011: 27.8 mpg (2.5 mpg increase above 

MY 2010; 320 g/mi CO2) 

MY 2012: 29.2 mpg (1.4 mpg increase above 

MY 2011; 304 g/mi CO2) 

MY 2013: 30.5 mpg (1.3 mpg increase above 

MY 2012; 291 g/mi CO2) 

MY 2014: 31.0 mpg (0.5 mpg increase above 

MY 2013; 287 g/mi CO2) 

MY 2015: 31.6 mpg (0.6 mpg increase above 

MY 2014; 281 g/mi CO2) 

The annual average increase during 

this five year period is approximately 

4.5 percent. Due to the uneven 

distribution of new model introductions 

during this period and to the fact that 

significant technological changes can be 

most readily made in conjunction with 

those introductions, the annual 

percentage increases are greater in the 

early years in this period. 

Given a starting point of 31.8 mpg in 

MY 2015, the average annual increase 

for MYs 2016–2020 would need to be 

only 2.1 percent in order for the 

projected combined industry wide 

average to reach at least 35 mpg by MY 

2020, as mandated by EISA. 

In addition, per EISA, each 

manufacturer’s domestic passenger fleet 

is required in each model year to 

achieve 27.5 mpg or 92 percent of the 

CAFE of the industry wide combined 

fleet of domestic and non-domestic 

passenger cars 5 for that model year, 

whichever is higher. This requirement 

results in the following alternative 

minimum standard (not attribute-based) 

for domestic passenger cars: 

MY 2011: 28.7 mpg (310 g/mi of tailpipe 

emissions of CO2) 

MY 2012: 30.2 mpg (294 g/mi of tailpipe 

emissions of CO2) 

MY 2013: 31.3 mpg (284 g/mi of tailpipe 

emissions of CO2) 

MY 2014: 32.0 mpg (278 g/mi of tailpipe 

emissions of CO2) 

MY 2015: 32.9 mpg (270 g/mi of tailpipe 

emissions of CO2) 

The agency is also issuing, along with 

this document, a notice requesting 

updated product plan information and 

other data to assist in developing a final 

rule. We recognize that the 

manufacturer product plans relied upon 

in developing this proposal—those 

plans received in late spring of 2007 in 

response to an early 2007 request for 

information—may already be outdated 

in some respects. We fully expect that 

manufacturers have revised those plans 

to reflect subsequent developments, 

especially the enactment of EISA. 

We solicit comment on all aspects of 

this proposal, including the 

methodology, economic assumptions, 

analysis and tentative conclusions. In 

particular, we solicit comment on 

whether the proposed levels of CAFE 

satisfy EPCA, e.g., reflect an appropriate 

balancing of the explicit statutory 

factors and other relevant factors. Other 

specific areas where we request 

comments are identified elsewhere in 

this preamble and in the Preliminary 

Regulatory Impact Analysis (PRIA). 

Based on public comments and other 

information, including new data and 

analysis, and updated product plans,6

the standards adopted in the final rule 

could well be different from those 

proposed in this document. 

b. Benefits 

We estimate that the proposed 

standards for passenger cars would save 

approximately 18.7 billion gallons of 

fuel and avoid tailpipe CO2 emissions 

by 178 billion metric tons over the 

lifetime of the passenger cars sold 

during those model years, compared to 

the fuel savings and emissions 

reductions that would occur if the 

standards remained at the adjusted 

baseline (i.e., the higher of 

manufacturer’s plans and the 

manufacturer’s required level of average 

fuel economy for MY 2010). 

We estimate that the value of the total 

benefits of the proposed passenger car 

standards would be approximately $31 

billion 7 over the lifetime of the 5 model 


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24356 Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 

estimated benefits using both 7% and 3% discount 

rates. Under a 3% rate, net consumer benefits for 

passenger car CAFE improvements total $28 

million. 8The $56 billion estimate is based on a 7% 

discount rate for valuing future impacts. NHTSA 

estimated benefits using both 7% and 3% discount 

rates. Under a 3% rate, net consumer benefits for 

light truck CAFE improvements total $70 million. 9See Section V.A.7 below for discussion of 

payback period. 10The fuel prices (shown here in 2006 dollars) 

used to calculate the length of the payback period 

are those projected (Annual Energy Outlook 2008, 

revised early release) by the Energy Information 

Administration over the life of the MY 2011–2015 

light trucks, not current fuel prices. 

11Congress required that DOT establish a credit 

‘‘transferring’’ regulation, to allow individual 

manufacturers to move credits from one of their 

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

exceeding the light truck standard for compliance 

in the domestic passenger car standard). Congress 

allowed DOT to establish a credit ‘‘trading’’

regulation, so that credits may be bought and sold 

between manufacturers and other parties. 

12To the extent that manufacturers comply with 

a CAFE standard with diesel automobiles instead of 

gasoline ones, the level of CO2 tailpipe emissions 

would be less. As noted above, the agency projects 

that 4 percent of the MY 2015 passenger car fleet 

and 10 percent of the MY 2015 light truck fleet will 

have diesel engines. The CO2 tailpipe emissions of 

a diesel powered passenger car are 15 percent 

higher than those of a comparable gasoline power 

passenger car. 

years combined. This estimate of 

societal benefits includes direct impacts 

from lower fuel consumption as well as 

externalities and also reflects offsetting 

societal costs resulting from the rebound 

effect. 

We estimate that the proposed 

standards for light trucks would save 

approximately 36 billion gallons of fuel 

and prevent the tailpipe emission of 343 

million metric tons of CO2 over the 

lifetime of the light trucks sold during 

those model years, compared to the fuel 

savings and emissions reductions that 

would occur if the standards remained 

at the adjusted baseline. We estimate 

that the value of the total benefits of the 

proposed light truck standards would be 

approximately $57 billion 8 over the 

lifetime of the 5 model years of light 

trucks combined. This estimate of 

societal benefits includes direct impacts 

from lower fuel consumption as well as 

externalities and also reflects offsetting 

societal costs resulting from the rebound 

effect. 

c. Costs 

The total costs for manufacturers just 

complying with the standards for MY 

2011–2015 passenger cars would be 

approximately $16 billion, compared to 

the costs they would incur if the 

standards remained at the adjusted 

baseline. The resulting vehicle price 

increases to buyers of MY 2015 

passenger cars would be recovered or 

paid back 9 in additional fuel savings in 

an average of 56 months, assuming fuel 

prices ranging from $2.26 per gallon in 

2016 to $2.51 per gallon in 2030.10

The total costs for manufacturers just 

complying with the standards for MY 

2011–2015 light trucks would be 

approximately $31 billion, compared to 

the costs they would incur if the 

standards remained at the adjusted 

baseline. The resulting vehicle price 

increases to buyers of MY 2015 light 

trucks would be paid back in additional 

fuel savings in an average of 50 months, 

assuming fuel prices ranging from $2.26 

to $2.51 per gallon. 

d. Flexibilities 

The agency’s benefit and cost 

estimates do not reflect the availability 

and use of flexibility mechanisms, such 

as compliance credits and credit trading 

because EPCA prohibits NHTSA from 

considering the effects of those 

mechanisms in setting CAFE standards. 

EPCA has precluded consideration of 

the FFV adjustments ever since it was 

amended to provide for those 

adjustments. The prohibition against 

considering compliance credits was 

added by EISA. 

The benefit and compliance cost 

estimates used by the agency in 

determining the maximum feasible level 

of the CAFE standards assume that 

manufacturers will rely solely on the 

installation of fuel economy technology 

to achieve compliance with the 

proposed standards. In reality, however, 

manufacturers are likely to rely to some 

extent on flexibility mechanisms 

provided by EPCA (as described in 

Section VI) and will thereby reduce the 

cost of complying with the proposed 

standards to a meaningful extent. 

2. Credits 

NHTSA is also proposing a new Part 

536 on use of ‘‘credits’’ earned for 

exceeding applicable CAFE standards. 

Part 536 will implement the provisions 

in EISA authorizing NHTSA to establish 

by regulation a credit trading program 

and directing it to establish by 

regulation a credit transfer program.11

Since its enactment, EPCA has 

permitted manufacturers to earn credits 

for exceeding the standards and to apply 

those credits to compliance obligations 

in years other than the model year in 

which it was earned. EISA extended the 

‘‘carry-forward’’ period to five model 

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

at three model years. Under the 

proposed Part 536, credit holders 

(including, but not limited to, 

manufacturers) will have credit 

accounts with NHTSA, and will be able 

to hold credits, apply them to 

compliance with CAFE standards, 

transfer them to another ‘‘compliance 

category’’ for application to compliance 

there, or trade them. A credit may also 

be cancelled before its expiry date, if the 

credit holder so chooses. Traded credits 

will be subject to an ‘‘adjustment factor’’

to ensure total oil savings are preserved, 

as required by EISA. EISA also prohibits 

credits earned before MY 2011 from 

being transferred, so NHTSA has 

developed several regulatory restrictions 

on trading and transferring to facilitate 

Congress’ intent in this regard. 

Additional information on the proposed 

Part 536 is available in section IX below. 

II. Background 

A. Contribution of Fuel Economy 

Improvements to Addressing Energy 

Independence and Security and Climate 

Change 

1. Relationship Between Fuel Economy 

and CO2 Tailpipe Emissions 

Improving fuel economy reduces the 

amount of tailpipe emissions of CO2. 

CO2 emissions are directly linked to fuel 

consumption because CO2 is the 

ultimate end product of burning 

gasoline. The more fuel a vehicle burns, 

the more CO2 it emits. Since the CO2

emissions are essentially constant per 

gallon of fuel combusted, the amount of 

fuel consumption per mile is directly 

related to the amount of CO2 emissions 

per mile. Thus, requiring improvements 

in fuel economy indirectly, but 

necessarily requires reductions in 

tailpipe emissions of CO2 emissions. 

This can be seen in the table below. To 

take the first value of fuel economy from 

the table below as an example, a 

standard of 21.0 mpg would indirectly 

place substantially the same limit on 

tailpipe CO2 emissions as a tailpipe CO2

emission standard of 423.2 g/mi of CO2, 

and vice versa.12


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13 IPCC (2007): Climate Change 2007: Mitigation 

of Climate Change. Contribution of Working Group 

III to the Fourth Assessment Report of the 

Intergovernmental Panel on Climate Change [B. 

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

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

United Kingdom and New York, NY, USA. 

TABLE II–1.—CAFE STANDARDS (MPG) AND THE LIMITS THEY INDIRECTLY PLACE ON TAILPIPE EMISSIONS OF

CO2 (G/MI)* 

CAFE Std CO2 CAFE Std CO2 CAFE Std CO2 CAFE Std CO2 CAFE Std CO2 CAFE Std CO2

21.0 ....... 444.4 26.0 341.8 31.0 286.7 36.0 246.9 41.0 216.8 46.0 193.2 

22.0 ....... 404.0 27.0 329.1 32.0 277.7 37.0 240.2 42.0 211.6 47.0 188.3 

23.0 ....... 386.4 28.0 317.4 33.0 269.3 38.0 233.9 43.0 206.7 48.0 189.1 

24.0 ....... 370.3 29.0 306.4 34.0 261.4 39.0 227.9 44.0 202.0 49.0 181.4 

25.0 ....... 355.5 30.0 296.2 35.0 253.9 40.0 222.2 45.0 197.5 50.0 177.7 

This table is based on calculations that use the figure of 8,887 grams of CO2 per gallon of gasoline consumed, based on characteristics of 

gasoline vehicle certification fuel. To convert a mpg value into CO2 g/mi, divide 8,887 by the mpg value. 

2. Fuel Economy Improvements/CO2

Tailpipe Emission Reductions Since 

1975 

The need to take action to reduce 

greenhouse gas emissions, e.g., motor 

vehicle tailpipe emissions of CO2, in 

order to forestall and even mitigate 

climate change is well recognized.13

Less well recognized are two related 

facts. First, improving fuel economy is 

the only method available to motor 

vehicle manufacturers for making 

significant reductions in the CO2

tailpipe emissions of motor vehicles and 

thus must be the core element of any 

effort to achieve those reductions. 

Second, the significant improvements in 

fuel economy since 1975, due to the 

CAFE standards and in some measure to 

market conditions as well, have directly 

caused reductions in the rate of CO2

tailpipe emissions per vehicle. 

In 1975, passenger cars manufactured 

for sale in the U.S. averaged only 15.8 

mpg (562.5 grams of CO2 per mile or 

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

fuel economy of passenger cars had 

increased to 31.3 mpg, causing g/mi of 

CO2 to fall to 283.9. Similarly, in 1975, 

light trucks averaged 13.7 mpg (648.7 g/ 

mi of CO2). By 2007, the average fuel 

economy of light trucks had risen to 

23.1 mpg, causing g/mi of CO2 to fall to 

384.7. 

TABLE II–2.—IMPROVEMENTS IN MPG/ 

REDUCTIONS IN G/MI OF CO2 PASSENGER CARS

[1975–2007] 

 MPG G/MI of CO2

1975 .................. 15.8 562.5 

2007 .................. 31.3 283.9 

TABLE II–3.—IMPROVEMENTS IN MPG/ 

REDUCTIONS IN G/MI OF CO2 LIGHT

TRUCKS

[1975–2007] 

MPG G/MI of CO2

1975 .................. 13.7 648.7 

2007 .................. 23.1 384.7 

If fuel economy had not increased 

above the 1975 level, cars and light 

trucks would have emitted an additional 

11 billion metric tons of CO2 into the 

atmosphere between 1975 and 2005. 

That is nearly the equivalent of 

emissions from all U.S. fossil fuel 

combustion for two years (2004 and 

2005). The figure below shows the 

amount of CO2 emissions avoided due 

to increases in fuel economy. 

BILLING CODE 4910–59–P 


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14National Research Council, ‘‘Effectiveness and 

Impact of Corporate Average Fuel Economy (CAFE) 

Standards,’’ National Academy Press, Washington, 

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

openbook.php?isbn=0309076013 (last accessed 

April 20, 2008). The conference committee report 

for the Department of Transportation and Related 

Agencies Appropriations Act for FY 2001 (Pub. L. 

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

to evaluate the effectiveness and impacts of CAFE 

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

response to the direction from Congress, NAS 

published this lengthy report. 

15Two of the 12 members of the committee 

dissented from the majority’s safety analysis and 

conclusions. 

16NAS, p. 9. 

17Reformed CAFE has several advantages 

compared to Unreformed CAFE: 

First, Reformed CAFE increases energy savings. 

The energy-saving potential of Unreformed CAFE is 

limited because only a few full-line manufacturers 

are required to make improvements. Under 

Reformed CAFE, which accounts for size 

differences in product mix, virtually all 

manufacturers will be required to use advanced 

fuel-saving technologies to achieve the requisite 

fuel economy for their automobiles. 

Second, Reformed CAFE reduces the chances of 

adverse safety consequences. Downsizing of 

vehicles as a CAFE compliance strategy is 

discouraged under Reformed CAFE since as 

vehicles become smaller, the applicable fuel 

economy target becomes more stringent. 

Third, Reformed CAFE provides a more equitable 

regulatory framework for different vehicle 

manufacturers. Under Unreformed CAFE, the cost 

burdens and compliance difficulties have been 

imposed nearly exclusively on the full-line 

manufacturers. 

Fourth, Reformed CAFE is more market-oriented 

because it more fully respects economic conditions 

and consumer choice. Reformed CAFE does not 

force vehicle manufacturers to adjust fleet mix 

toward smaller vehicles although they can make 

adjustments if that is what consumers are 

demanding. Instead, it allows the manufacturers to 

adjust the mix of their product offerings in response 

to the market place. 

18NAS, pp. 3 and 20. 

19NAS, p. 20. 

20NAS, p. 3 (Finding 5). 

B. Chronology of Events Since the 

National Academy of Sciences Called 

for Reforming and Increasing CAFE 

Standards 

1. National Academy of Sciences CAFE 

Report (February 2002) 

a. Significantly Increasing CAFE 

Standards Without Reforming Them 

Would Adversely Affect Safety 

In the congressionally-mandated 

report entitled ‘‘Effectiveness and 

Impact of Corporate Average Fuel 

Economy (CAFE) Standards,’’ 14 a 

committee of the National Academy of 

Sciences (NAS) (‘‘2002 NAS Report’’) 

concluded that the then-existing form of 

passenger car and light truck CAFE 

standards created an incentive for 

vehicle manufacturers to comply in part 

by downweighting and even downsizing 

their vehicles and that these actions had 

led to additional fatalities. The 

committee explained that these 

problems arose because the CAFE 

standards subjected all passenger cars to 

the same fuel economy target and all 

light trucks to the same target, 

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

that this experience suggests that 

consideration should be given to 

developing a new system of fuel 

economy targets that reflects differences 

in such vehicle attributes. 

Looking to the future, the committee 

said that while it is technically feasible 

and potentially economically 

practicable to improve fuel economy 

without reducing vehicle weight or size 

and, therefore, without significantly 

affecting the safety of motor vehicle 

travel, the actual strategies chosen by 

manufacturers to improve fuel economy 

will depend on a variety of factors. In 

the committee’s judgment, the extensive 

downweighting and downsizing that 

occurred after fuel economy 

requirements were established in the 

1970s suggested that the likelihood of a 

similar response to further increases in 

fuel economy requirements must be 

considered seriously. Any reduction in 

vehicle size and weight would have 

safety implications. 

The committee cautioned that the 

safety effects of downsizing and 

downweighting are likely to be hidden 

by the generally increasing safety of the 

light-duty vehicle fleet.15 It said that 

some might argue that this improving 

safety picture means that there is room 

to improve fuel economy without 

adverse safety consequences; however, 

such an approach would not achieve the 

goal of avoiding the adverse safety 

consequences of fuel economy 

increases. Rather, the safety penalty 

imposed by increased fuel economy (if 

weight reduction is one of the measures) 

will be more difficult to identify in light 

of the continuing improvement in traffic 

safety. Although it is anticipated that 

these safety innovations will improve 

the safety of vehicles of all sizes, that 

does not mean that downsizing to 

achieve fuel economy improvements 

will not have any safety costs. If two 

vehicles of the same size are modified, 

one both by downsizing it and adding 

the safety innovations and the other just 

by adding the safety innovations, the 

latter vehicle will in all likelihood be 

safer. 

The committee concluded that if an 

increase in fuel economy were 

implemented pursuant to standards that 

are structured in a way that encourages 

either downsizing or the increased 

production of smaller vehicles, some 

additional traffic fatalities would be 

expected. Without a thoughtful 

restructuring of the program, there 

would be the trade-offs that must be 

made if CAFE standards were increased 

by any significant amount.16

In response to these conclusions, 

NHTSA began issuing attribute-based 

CAFE standards for light trucks and 

sought legislative authority to issue 

attribute-based CAFE standards for 

passenger cars before undertaking to 

raise the car standards. Congress went a 

step further in enacting EISA, not only 

authorizing the issuance of attributebased standards, but also mandating 

them. 

Fully realizing all of the safety and 

other 17 benefits of these reforms will 

depend in part on whether the 

unreformed, non-attribute based 

greenhouse standards adopted by 

California and other states are 

implemented. Apart from issues of 

relative stringency, the effects on 

vehicle manufacturers of implementing 

those state emission standards should 

be substantially similar to the effects of 

implementing non-attribute-based CAFE 

standards, given the nearly identical 

nature of most aspects of those emission 

standards and CAFE standards in terms 

of technological means of compliance 

and methods of measuring performance. 

b. Environmental and Other 

Externalities Justify Increasing the CAFE 

Standards 

The 2002 NAS report also concluded 

that the CAFE standards have 

contributed to increased fuel economy, 

which in turn has reduced dependence 

on imported oil, improved the nation’s 

terms of trade, and reduced emissions of 

carbon dioxide (a principal greenhouse 

gas), relative to what they otherwise 

would have been. If fuel economy had 

not improved, gasoline consumption 

(and crude oil imports) would be about 

2.8 million barrels per day (mmbd) 

greater than it is.18 Reducing fuel 

consumption in vehicles also reduces 

carbon dioxide emissions. If the nation 

were using 2.8 mmbd more gasoline, 

carbon emissions would be more than 

100 million metric tons of carbon 

(mmtc) higher. Thus, improvements in 

light-duty vehicle (4 wheeled motor 

vehicles under 10,000 pounds gross 

vehicle weight rating) fuel economy 

have reduced overall U.S. emissions by 

about 7 percent.19

The report concluded that 

technologies exist that could 

significantly further reduce fuel 

consumption by passenger cars and 

light trucks within 15 years, while 

maintaining vehicle size, weight, utility 

and performance.20 Light duty trucks 


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21NAS, p. 4 (Finding 5). 

22NAS, pp. 4 (Finding 6) and 64. 

23NAS, pp. 8–9. 

24NAS, pp. 2, 13, and 83. 

25NAS, pp. 4 and 85–86. 

26NAS, pp. 4–5 (Finding 10). 

27NAS, p. 29. 

28NAS, p. 3 (Finding 2). 

29NAS, p. 5 (Finding 12). 

30NAS, p. 87. 31 71 FR 17566; April 6, 2006. 

were said to offer the greatest potential 

for reducing fuel consumption.21 The 

report also noted that vehicle 

development cycles—as well as future 

economic, regulatory, safety and 

consumer preferences—would influence 

the extent to which these technologies 

could lead to increased fuel economy in 

the U.S. market. To assess the economic 

trade-offs associated with the 

introduction of existing and emerging 

technologies to improve fuel economy, 

the NAS conducted what it called a 

‘‘cost-efficient analysis’’ based on the 

direct benefits (value of saved fuel) to 

the consumer—‘‘that is, the committee 

identified packages of existing and 

emerging technologies that could be 

introduced over the next 10 to 15 years 

that would improve fuel economy up to 

the point where further increases in fuel 

economy would not be reimbursed by 

fuel savings.’’ 22

The committee emphasized that it is 

critically important to be clear about the 

reasons for considering improved fuel 

economy. While the dollar value of the 

saved fuel would be largest portion of 

the potential benefits, the committee 

noted that there is theoretically 

insufficient reason for the government 

to issue higher standards just to obtain 

those direct benefits since consumers 

have a wide variety of opportunities to 

buy a fuel-efficient vehicle.23

The committee said that there are two 

compelling concerns that justify a 

government mandated increase in fuel 

economy, both relating to externalities. 

The most important concern, it argued, 

is the one about the accumulation in the 

atmosphere of greenhouse gases, 

principally carbon dioxide.24

A second concern is that petroleum 

imports have been steadily rising 

because of the nation’s increasing 

demand for gasoline without a 

corresponding increase in domestic 

supply. The high cost of oil imports 

poses two risks: Downward pressure on 

the strength of the dollar (which drives 

up the cost of goods that Americans 

import) and an increase in U.S. 

vulnerability to macroeconomic shocks 

that cost the economy considerable real 

output. 

To determine how much the fuel 

economy standards should be increased, 

the committee urged that all social 

benefits be considered. That is, it urged 

not only that the dollar value of the 

saved fuel be considered, but also that 

the dollar value to society of the 

resulting reductions in greenhouse gas 

emissions and in dependence on 

imported oil should be calculated and 

considered. The committee said that if 

it is possible to assign dollar values to 

these favorable effects, it becomes 

possible to make at least crude 

comparisons between the socially 

beneficial effects of measures to 

improve fuel economy on the one hand, 

and the costs (both out-of-pocket and 

more subtle) on the other. The 

committee chose a value of about $0.30/ 

gal of gasoline for the externalities 

associated with the combined impacts 

of fuel consumption on greenhouse gas 

emissions and on world oil market 

conditions.25

The report expressed concerns about 

increasing the standards under the 

CAFE program as currently structured. 

While raising CAFE standards under the 

existing structure would reduce fuel 

consumption, doing so under alternative 

structures ‘‘could accomplish the same 

end at lower cost, provide more 

flexibility to manufacturers, or address 

inequities arising from the present’’

structure.26 Further, the committee said, 

‘‘to the extent that the size and weight 

of the fleet have been constrained by 

CAFE requirements * * * those 

requirements have caused more injuries 

and fatalities on the road than would 

otherwise have occurred.’’ 27

Specifically, it noted: ‘‘The 

downweighting and downsizing that 

occurred in the late 1970s and early 

1980s, some of which was due to CAFE 

standards, probably resulted in an 

additional 1300 to 2600 traffic fatalities 

in 1993.’’ 28

To address those structural problems, 

the report suggested various possible 

reforms. The report found that the 

‘‘CAFE program might be improved 

significantly by converting it to a system 

in which fuel targets depend on vehicle 

attributes.’’ 29 The report noted further 

that under an attribute-based approach, 

the required CAFE levels could vary 

among the manufacturers based on the 

distribution of their product mix. NAS 

stated that targets could vary among 

passenger cars and among trucks, based 

on some attribute of these vehicles such 

as weight, size, or load-carrying 

capacity. The report explained that a 

particular manufacturer’s average target 

for passenger cars or for trucks would 

depend upon the fractions of vehicles it 

sold with particular levels of these 

attributes.30

In February 2002, Secretary Mineta 

asked Congress ‘‘to provide the 

Department of Transportation with the 

necessary authority to reform the CAFE 

program, guided by the NAS report’s 

suggestions.’’

2. Final Rule Establishing Reformed 

(Attribute-Based) CAFE Standards for 

MY 2008–2011 Light Trucks (March 

2006) 

The 2006 final rule reformed the 

structure of the CAFE program for light 

trucks and established higher CAFE 

standards for MY 2008–2011 light 

trucks.31 Reforming the CAFE program 

enables it to achieve larger fuel savings, 

while enhancing safety and preventing 

adverse economic consequences. 

During a transition period of MYs 

2008–2010, manufacturers may comply 

with CAFE standards established under 

the reformed structure (Reformed CAFE) 

or with standards established in the 

traditional way (Unreformed CAFE). 

This permits manufacturers and the 

agency to gain experience with 

implementing the Reformed CAFE 

standards. Under the 2006 rule, all 

manufacturers were required to comply 

with a Reformed CAFE standard in MY 

2011. 

Under Reformed CAFE, fuel economy 

standards were restructured so that they 

are based on a measure of vehicle size 

called ‘‘footprint,’’ which is the product 

of multiplying a vehicle’s wheelbase by 

average its track width. A target level of 

fuel economy was established for each 

increment in footprint (0.1 ft2). Trucks 

with smaller footprints have higher fuel 

economy targets; conversely, larger ones 

have lower targets. A particular 

manufacturer’s compliance obligation 

for a model year will be calculated as 

the harmonic average of the fuel 

economy targets for the manufacturer’s 

vehicles, weighted by the distribution of 

manufacturer’s production volumes 

among the footprint increments. Thus, 

each manufacturer will be required to 

comply with a single overall average 

fuel economy level for each model year 

of production. 

The approach for determining the fuel 

economy targets was to set them just 

below the level where the increased cost 

of technologies that could be adopted by 

manufacturers to improve fuel economy 

would first outweigh the added benefits 

that would result from such technology. 

These targets translate into required 

levels of average fuel economy that are 

technologically feasible because 

manufacturers can achieve them using 

available technologies. Those levels also 

reflect the need of the nation to reduce 


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32 72 FR 8664; February 27, 2007. 33 127 S.Ct. 1438 (2007). 34 508 F.3d 508. 

energy consumption because they 

reflect the economic value of the savings 

in resources, as well as of the reductions 

in economic and environmental 

externalities that result from producing 

and using less fuel. 

The Unreformed CAFE standards are: 

22.5 miles per gallon (mpg) for MY 

2008, 23.1 mpg for MY 2009, and 23.5 

mpg for MY 2010. To aid the transition 

to Reformed CAFE, the Reformed CAFE 

standards for those years were set at 

levels intended to ensure that the 

industry-wide costs of the Reformed 

standards are roughly equivalent to the 

industry-wide costs of the Unreformed 

CAFE standards in those model years. 

For MY 2011, the Reformed CAFE 

standard was set at the level that 

maximizes net benefits. Net benefits 

include the increase in light truck prices 

due to technology improvements, the 

decrease in fuel consumption, and a 

number of other factors. All of the 

standards were set at the maximum 

feasible level, while accounting for 

technological feasibility, economic 

practicability and other relevant factors. 

We carefully balanced the costs of the 

rule with the benefits of reducing energy 

consumption. Compared to Unreformed 

CAFE, Reformed CAFE enhances overall 

fuel savings while providing vehicle 

manufacturers with the flexibility they 

need to respond to changing market 

conditions. Reformed CAFE will also 

provide a more equitable regulatory 

framework by creating a level-playing 

field for manufacturers, regardless of 

whether they are full-line or limited-line 

manufacturers. We were particularly 

encouraged that Reformed CAFE will 

eliminate the incentive to downsize 

some of their fleet as a CAFE 

compliance strategy, thereby reducing 

the adverse safety risks associated with 

the Unreformed CAFE program. 

3. Twenty-in-Ten Initiative (January 

2007) 

In his January 2007 State of the Union 

address, the President announced his 

Twenty-in-Ten initiative for increasing 

the supply of renewable and alternative 

fuels and reforming and increasing the 

CAFE standards. Consistent with the 

NAS report, he urged the authority be 

provided to reform CAFE for passenger 

cars by adopting an attribute-based 

system (for example, a size-based 

system) reduces the risk that vehicle 

safety is compromised, helps preserve 

consumer choice, and helps spread the 

burden of compliance across all product 

lines and manufacturers. He also urged 

that authority be provided to set the 

CAFE standards, based on cost/benefit 

analysis, using sound science, and 

without impacting safety. 

4. Request for Passenger Car and Light 

Truck Product Plans (February 2007) 

In late February 2007, NHTSA 

published a notice to acquire new and 

updated information regarding vehicle 

manufacturers’ future product plans to 

aid in implementing the President’s 

plan for reforming and increasing CAFE 

standards for passenger cars and further 

increasing the already reformed light 

truck standards. More specifically, the 

agency said: 

* * * we are seeking information related 

to fuel economy improvements for MY 2007–

2017 passenger cars and MY 2010–2017 light 

trucks. The agency is seeking information in 

anticipation of obtaining statutory authority 

to reform the passenger car CAFE program 

and to set standards under that structure for 

MY 2010–2017 passenger cars. The agency is 

also seeking this information in anticipation 

of setting standards for MY 2012–2017 light 

trucks.32

5. Supreme Court Decision in 

Massachusetts v. EPA (April 2007) 

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

Court issued its opinion in 

Massachusetts v. EPA.33 The Court 

ruled that the state of Massachusetts had 

standing because it had already lost a 

small amount of land and stood to lose 

more due to global warming induced 

increases in sea level; that some portion 

of this harm was traceable to the 

absence of a regulation issued by EPA 

requiring reductions in GHG emissions 

(CO2 emissions, most notably) by motor 

vehicles; and that issuance of such an 

EPA regulation by EPA would reduce 

the risk of further harm to 

Massachusetts. On the merits, the Court 

ruled that greenhouse gases are 

‘‘pollutants’’ under the Clean Air Act 

and that the Act therefore authorizes 

EPA to regulate greenhouse gas 

emissions from motor vehicles if EPA 

makes the necessary findings and 

determinations under section 202 of the 

Act. 

The Court considered EPCA briefly, 

noting that it and the Clean Air Act have 

different overall purposes. It noted 

further that the two acts overlap, but did 

not define the nature or extent of that 

overlap. It concluded that EPCA did not 

relieve EPA of its statutory obligations 

and expressed confidence that the two 

acts could be consistently administered. 

The Court did not address the express 

preemption provision in EPCA. 

6. Coordination Between NHTSA and 

EPA on Development of Rulemaking 

Proposals (Summer–Fall 2007) 

In the wake of the Supreme Court’s 

decision and in the absence of the 

legislation he called for in his 2007 

State of the Union message, the 

President called on NHTSA and EPA to 

take the first steps toward regulations 

that would cut gasoline consumption 

and greenhouse gas emissions from 

motor vehicles, using his Twenty-in-Ten 

initiative as a starting point. He asked 

them ‘‘to listen to public input, to 

carefully consider safety, science, and 

available technologies, and evaluate the 

benefits and costs before they put forth 

the new regulation.’’ He also issued an 

executive order directing all of the 

departments and agencies to work 

together on the proposal. 

Pursuant to the President’s directive, 

NHTSA and EPA staff jointly assessed 

which technologies would be available 

and their effectiveness and cost. They 

also jointly assessed the key economic 

and other assumptions affecting the 

stringency of future standards. Finally, 

they worked together in updating and 

further improving the Volpe model that 

had been used to help determine the 

stringency of the MY 2008–2011 light 

truck CAFE standards. Much of the 

work between NHTSA and EPA staff 

was reflected in rulemaking proposals 

being developed by NHTSA prior to the 

enactment of EISA and was 

substantially retained when NHTSA 

revised its proposals to be consistent 

with that legislation. Ultimately, the 

proposals being published today are 

based on NHTSA’s assessments of how 

they meet EPCA, as amended by EISA. 

7. Ninth Circuit Decision Re Final Rule 

for MY 2008–2011 Light Trucks 

(November 2007) 

On November 15, 2007, the United 

States Court of Appeals for the Ninth 

Circuit issued its decision in Center for 

Biological Diversity v. NHTSA,34 the 

challenge to the MY 2008–11 light truck 

CAFE rule. The Court rejected the 

petitioners’ argument that EPCA 

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

all of the social benefits (i.e., 

externalities as well as direct benefits to 

consumers) of improved fuel savings in 

determining the stringency of the CAFE 

standards. It cautioned, however, that it 

had not reviewed whether the agency’s 

balancing of the statutory factors in 

setting those standards was arbitrary 

and capricious. In that regard, it noted 

that much had changed since a court of 

appeals had last (i.e., in the late 1980’s) 

reviewed the agency’s balancing of 

those factors in a rulemaking. 

Specifically, it noted increases in 

scientific knowledge of climate change 


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35The agency has developed a value for those 

reductions and used it in the analyses underlying 

the standards proposed in this NPRM. For further 

discussion, see section V of this preamble. 

36EISA’s requirement that standards be based on 

one or more vehicle attributes and its specification 

for domestic passenger cars, but not for 

nondomestic passenger cars or light trucks of an 

absolute CAFE level appear to preclude the 

specification of such a backstop standard for the 

latter two categories of automobiles. For further 

discussion, see Section VI of this preamble. 

37 In this NPRM, NHTSA examines the legislative 

history of the statutory definitions of ‘‘automobile’’

and ‘‘passenger automobile’’ and the term 

‘‘nonpassenger automobile’’ and analyses the 

impact of that moving any vehicles out of the 

nonpassenger automobile (light truck) category into 

the passenger automobile (passenger car) category 

would have the level of standards for both groups 

of automobiles. For further discussion, see Section 

VIII of this preamble. 

38EISA removed these vehicles from the statutory 

definition of ‘‘automobile’’ and mandated the 

establishment of CAFE standards for them 

following the completion of reports by the National 

Academy of Sciences and NHTSA. 

39On February 9, NHTSA filed a petition with the 

Ninth Circuit for rehearing en banc on the issue of 

whether the panel in CBD acted within its authority 

in ordering the agency to prepare an EIS instead of 

remanding the issue to the agency and directing it 

to conduct a new, fuller environmental analysis and 

decide whether an EIS is required. In addition, 

NHTSA has published a notice of intent to prepare 

an environmental impact statement, thus beginning 

the EIS process for this rulemaking, as discussed in 

Section XIII.B. of this NPRM. 

40The deadline in EPCA for issuing a final rule 

establishing, for the first time, a CAFE standard for 

a model year is 18 months before the beginning of 

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

deadline applies to issuing a final rule amending an 

existing CAFE standard so as to increase its 

stringency. Given that the agency has long regarded 

October 1 as the beginning of a model year, the 

statutory deadline for increasing the MY 2009 

standard was March 30, 2007, and the deadline for 

increasing the MY 2010 standard is March 30, 2008. 

Thus, the only model year for which there is 

sufficient time to gather all of the necessary 

information, conduct the necessary analyses and 

complete a rulemaking is MY 2011. As noted earlier 

in this document, however, EISA requires that a 

new standard be established for that model year. 

This rulemaking is being conducted pursuant to 

that requirement. 

41While EISA excluded work trucks from 

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

regulation under EPCA. EISA requires that work 

trucks be subjected to CAFE standards, but only 

first after the National Academy of Sciences 

completes a study and then after NHTSA completes 

a follow-on study. Congress thus recognized and 

made allowances for the practical difficulties that 

led NHTSA to decline to include work trucks in its 

final rule for MY 2008–11 light trucks. 

42 49 U.S.C. 32902(a)(19). 

43 49 U.S.C. 32902(a)(3). 

and in the need to reduce importation 

of petroleum since that time. 

Further, the Court found that NHTSA 

had been arbitrary and capricious in its 

treatment of the following issues: 

• NHTSA’s decision not to monetize 

the benefit of reducing CO2 emissions 

and use that value in conducting its 

marginal benefit-cost analysis based on 

its view that the value of the benefit of 

CO2 emission reductions resulting from 

fuel consumption reductions was too 

uncertain to permit the agency to 

determine a value for those emission 

reductions;35

• NHTSA’s decision not to establish a 

‘‘backstop’’ (i.e., a fixed minimum CAFE 

standard applicable to 

manufacturers); 36

• NHTSA’s decision not to proceed to 

revise the regulatory definitions for the 

passenger car and light truck categories 

of automobiles so that some vehicles 

currently classified as light trucks are 

instead classified as passenger cars; 37

• NHTSA’s decision not to subject 

most medium- and heavy-duty pickups 

and most medium- and heavy-duty 

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

and 10,000 pounds gross vehicle weight 

rating (GVWR,) to the CAFE 

standards; 38

• NHTSA’s limited assessment of 

cumulative impacts and regulatory 

alternatives in its Environmental 

Assessment (EA) under the National 

Environmental Policy Act (NEPA), and 

its decision to prepare and publish an 

EA, coupled with a finding of no 

significant impact, instead of an 

Environmental Impact Statement 

(EIS).39

The Court did not vacate the 

standards, but instead said it would 

remand the rule to NHTSA to 

promulgate new standards consistent 

with its opinion ‘‘as expeditiously as 

possible and for the earliest model year 

practicable.40 Under the decision, the 

standards established by the April 2006 

final rule would remain in effect unless 

and until amended by NHTSA. 

On February 6, 2008, the Government 

petitioned for en banc rehearing by the 

Ninth Circuit on the limited issue of 

whether it was appropriate for the 

panel, having held that the agency 

insufficiently explored the 

environmental implications of the MY 

2008–11 rulemaking in its EA, to order 

the agency to prepare an EIS rather than 

simply remanding the matter to the 

agency for further analysis. 

As of the date of the issuance of this 

proposal, the Court has not yet issued 

its mandate in this case. 

8. Enactment of Energy Security and 

Independence Act of 2007 (December 

2007) 

As noted above in section I.B., EISA 

significantly changed the provisions of 

EPCA governing the establishment of 

future CAFE standards. These changes 

made it necessary for NHTSA to pause 

in its efforts so that it could assess the 

implications of the amendments made 

by EISA and then, as required, revise 

some aspects of the proposals it had 

been developing (e.g., the model years 

covered and credit issues). 

C. Energy Policy and Conservation Act, 

as Amended 

EPCA, which was enacted in 1975, 

mandates a motor vehicle fuel economy 

regulatory program to improve the 

nation’s energy security and energy 

efficiency. It gives the authority under 

EPCA to regulate fuel economy to DOT, 

which has delegated that authority to 

NHTSA at 49 CFR 1.50. EPCA allocates 

the responsibility for implementing the 

program as follows: NHTSA sets CAFE 

standards for passenger cars and light 

trucks; EPA calculates the average fuel 

economy of each manufacturer’s 

passenger cars and light trucks; and 

NHTSA enforces the standards based on 

EPA’s calculations. 

We have summarized below EPCA, as 

amended by EISA. We request comment 

on how EPCA should be implemented 

to achieve the goals and meet the 

requirements of EISA. For example, 

what assumptions, methodologies and 

computations should be used in 

establishing and implementing the new 

standards? 

1. Vehicles Subject to Standards for 

Automobiles 

With two exceptions, all four-wheeled 

motor vehicles with a gross vehicle 

weight rating of 10,000 pounds or less 

will be subject to the CAFE standards, 

beginning with MY 2011. The 

exceptions will be work trucks 41 and 

multi-stage vehicles. Work trucks are 

defined as vehicles that are: 

—rated at between 8,500 and 10,000 pounds 

gross vehicle weight; and 

—are not a medium-duty passenger vehicle 

(as defined in section 86.1803–01 of title 

40, Code of Federal Regulations, as in 

effect on the date of the enactment of the 

Ten-in-Ten Fuel Economy Act).42

Medium-duty passenger vehicles 

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

GVWR sport utility vehicles (SUVs), 

short bed pick-up trucks, and passenger 

vans, but exclude pickup trucks with 

longer beds and cargo vans rated at 

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

is those excluded pickup trucks and 

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

manufactured in different stages by 2 or 

more manufacturers, if no intermediate 

or final-stage manufacturer of that 

vehicle manufactures more than 10,000 

multi-stage vehicles per year.43

Under EPCA, as it existed before 

EISA, the agency had discretion 

whether to regulate vehicles with a 

GVWR between 6,000 and 10,000 lbs., 

GVWR. It could regulate the fuel 


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44Under EPCA, prior to its amendment by EISA, 

the standard for passenger cars was 27.5 mpg unless 

amended to a higher or lower level by DOT. Per 

EISA, the standard will remain at 27.5 mpg through 

MY 2010. 

45 67 FR 77015, 77021; December 16, 2002. 

46CEI–I, 793 F.2d 1322, 1352 (DC Cir. 1986). 

economy of vehicles with a GVWR 

within that range under CAFE if it 

determined that (1) standards were 

feasible for these vehicles, and (2) either 

(a) that these vehicles were used for the 

same purpose as vehicles rated at not 

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

their regulation would result in 

significant energy conservation. 

EISA eliminated the need for 

administrative determinations in order 

to subject vehicles between 6,000 and 

10,000 lbs. GVWR to the CAFE 

standards for automobiles. Congress did 

so by making the determination itself 

that all vehicles within that GVWR 

range should be included, with the 

exceptions noted above. 

2. Mandate To Set Standards for 

Automobiles 

As amended by EISA, EPCA requires 

that the agency establish standards for 

all new automobiles for each model year 

at the maximum feasible levels for that 

model year. A manufacturer’s 

individual passenger cars and light 

trucks are not required to meet a 

particular fuel economy level. Instead, 

the harmonically averaged fuel economy 

of a manufacturer’s production of 

passenger cars (or light trucks) in a 

particular model year must meet the 

standard for those automobiles for that 

model year. 

For model years 2011–2020, several 

special requirements, in addition to the 

maximum feasible requirement, are 

specified.44 Each of the requirements 

must be interpreted in light of the other 

requirements. For those model years, 

separate standards for passenger cars 

and for light trucks must be set at high 

enough levels to ensure that the CAFE 

of the industry wide combined fleet of 

new passenger cars and light trucks for 

MY 2020 is not less than 35 mpg. The 

35 mpg figure is not a standard 

applicable to any individual 

manufacturer. It is a requirement, 

applicable to the agency, regarding the 

combined effect of the separate 

standards for passenger cars and light 

trucks that NHTSA is to establish for 

MY 2020. EISA does not specify 

precisely how compliance with this 

requirement is to be ensured or how or 

when the CAFE of the industry wide 

combined fleet for MY 2020 is to be 

calculated for purposes of determining 

compliance. As a practical matter, to 

ensure that this level is achieved, the 

standard for MY 2020 passenger cars 

would have to be above 35 mpg and the 

one for MY 2020 light trucks might or 

might not be below 35 mpg. Similarly, 

the CAFE of some manufacturers’

combined fleet of passenger cars and 

light trucks would be above 35 mpg, 

while the combined fleet of others might 

or might not be below 35 mpg. The 

standards for passenger cars and those 

for light trucks must increase ratably 

each year. The CAFE of each 

manufacturer’s fleet of domestic 

passenger cars must meet a sliding, 

absolute minimum level in each model 

year: 27.5 mpg or 92 percent of the 

projected CAFE of the industry wide 

fleet of new domestic passenger cars for 

that model year. 

EPCA, as it existed before EISA, EPCA 

required that light truck standards be set 

at the maximum feasible level for each 

model year, but simply specified a 

default standard of 27.5 mpg for 

passenger cars for MY 1985 and 

thereafter. It permitted, but did not 

require that NHTSA establish a higher 

or lower standard for passenger cars if 

the agency found that the maximum 

feasible level of fuel economy is higher 

or lower than 27.5 mpg. 

3. Structure of Standards 

The standards for passenger cars and 

light trucks must be based on one or 

more vehicle attributes and expressed in 

terms of a mathematical function. This 

makes it possible to increase the CAFE 

standards for both passenger cars and 

light trucks significantly without 

creating incentives to improve fuel 

economy in ways that reduce safety. 

Formerly, EPCA provided authority for 

this approach for light trucks, but not 

passenger cars. 

4. Factors Governing or Considered in 

the Setting of Standards 

In determining the maximum feasible 

level of average fuel economy for a 

model year, EPCA requires that the 

agency consider four factors: 

technological feasibility, economic 

practicability, the effect of other 

standards of the Government on fuel 

economy, and the need of the nation to 

conserve energy. EPCA does not define 

these terms or specify what weight to 

give each concern in balancing them; 

thus, NHTSA defines them and 

determines the appropriate weighting 

based on the circumstances in each 

CAFE standard rulemaking. 

‘‘Technological feasibility’’ means 

whether a particular method of 

improving fuel economy can be 

available for commercial application in 

the model year for which a standard is 

being established. 

‘‘Economic practicability’’ means 

whether a standard is one ‘‘within the 

financial capability of the industry, but 

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

economic consequences, such as a 

significant loss of jobs or the 

unreasonable elimination of consumer 

choice.’’ 45 In an attempt to ensure the 

economic practicability of attribute 

based standards, the agency considers a 

variety of factors, including the annual 

rate at which manufacturers can 

increase the percentage of its fleet that 

has a particular type of fuel saving 

technology, and cost to consumers. 

Since consumer acceptability is an 

element of economic practicability, the 

agency has limited its consideration of 

fuel saving technologies to be added to 

vehicles to those that provide benefits 

that match their costs. 

Disproportionately expensive 

technologies are not likely to be 

accepted by consumers. 

At the same time, the law does not 

preclude a CAFE standard that poses 

considerable challenges to any 

individual manufacturer. The 

Conference Report for EPCA, as enacted 

in 1975, makes clear, and the case law 

affirms, ‘‘(A) determination of maximum 

feasible average fuel economy should 

not be keyed to the single manufacturer 

which might have the most difficulty 

achieving a given level of average fuel 

economy.’’46 Instead, the agency is 

compelled ‘‘to weigh the benefits to the 

nation of a higher fuel economy 

standard against the difficulties of 

individual automobile manufacturers.’’

Id. The law permits CAFE standards 

exceeding the projected capability of 

any particular manufacturer as long as 

the standard is economically practicable 

for the industry as a whole. Thus, while 

a particular CAFE standard may pose 

difficulties for one manufacturer, it may 

also present opportunities for another. 

The CAFE program is not necessarily 

intended to maintain the competitive 

positioning of each particular company. 

Rather, it is intended to enhance fuel 

economy of the vehicle fleet on 

American roads, while protecting motor 

vehicle safety and the totality of 

American jobs and the overall United 

States economy. 

‘‘The effect of other motor vehicle 

standards of the Government on fuel 

economy’’ means ‘‘the unavoidable 

adverse effects on fuel economy of 

compliance with emission, safety, noise, 

or damageability standards.’’ In the case 

of emission standards, this includes 

standards adopted by the Federal 

government and can include standards 

adopted by the States as well, since in 

certain circumstances the Clean Air Act 


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47 49 U.S.C. 32919 and 71 FR 17566, 17654–70; 

April 6, 2006. 

48Center for Auto Safety v. NHTSA, 793 F.2d 

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

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

(noting that ‘‘NHTSA itself has interpreted the 

factors it must consider in setting CAFE standards 

as including environmental effects’’); and Center for 

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

(9th Cir. 2007). 

49 42 FR 63,184, 63,188 (Dec. 15, 1977) (emphasis 

added). 

50For example, the final rules establishing CAFE 

standards for MY 1981–84 passenger cars, 42 FR 

33,533, 33,540–1 and 33,551; June 30, 1977, and for 

MY 1983–85 light trucks, 45 FR 81,593, 81,597; 

December 11, 1980. 

51 53 FR 39,275, 39,302; October 6, 1988. 

52 54 FR 21985, 

53The IPCC 2007 reports can be found at 

http://www.ipcc.ch/. (Last accessed April 20, 2008.) 

54See, e.g., Center for Auto Safety v. NHTSA 

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

(Administrator’s consideration of market demand as 

component of economic practicability found to be 

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

established broad guidelines in the fuel economy 

statute; agency’s decision to set lower standard was 

a reasonable accommodation of conflicting 

policies). As the United States Court of Appeals 

pointed out in upholding NHTSA’s exercise of 

judgment in setting the 1987–1989 passenger car 

standards, ‘‘NHTSA has always examined the safety 

consequences of the CAFE standards in its overall 

consideration of relevant factors since its earliest 

rulemaking under the CAFE program.’’ Competitive 

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

120 at n.11 (DC Cir. 1990). 

55 In addition, Executive Order No. 13432 

provides that a Federal agency undertaking a 

regulatory action that can reasonably be expected to 

directly regulate emissions, or to substantially and 

predictably affect emissions, of greenhouse gases 

from motor vehicles, shall act jointly and 

consistently with other agencies to the extent 

possible and to consider the views of other agencies 

regarding such action. 

56 49 U.S.C. 32904(c). 

permits States to adopt and enforce 

State standards in lieu of the Federal 

ones. It does not, however, include State 

standards expressly preempted by 

EPCA.47

‘‘The need of the United States to 

conserve energy’’ means ‘‘the consumer 

cost, national balance of payments, 

environmental, and foreign policy 

implications of our need for large 

quantities of petroleum, especially 

imported petroleum.’’ Environmental 

implications principally include 

reductions in emissions of criteria 

pollutants and carbon dioxide. A prime 

example of foreign policy implications 

are energy independence and security 

concerns. 

The agency has considered 

environmental issues in making 

decisions about the setting of standards 

from the earliest days of the CAFE 

program. As the three courts of appeal 

have noted in decisions stretching over 

the last 20 years,48 the agency defined 

the ‘‘need of the Nation to conserve 

energy’’ in the late 1970’s as including 

‘‘the consumer cost, national balance of 

payments, environmental, and foreign 

policy implications of our need for large 

quantities of petroleum, especially 

imported petroleum.’’ 49 Pursuant to 

that view, the agency declined to 

include diesel engines in determining 

the maximum feasible level of average 

fuel economy for passenger cars and for 

light trucks because particulate 

emissions from diesels were then both 

a source of concern and unregulated.50

In the late 1980’s, NHTSA cited 

concerns about climate change as one of 

its reasons for limiting the extent of its 

reduction of the CAFE standard for MY 

1989 passenger cars 51 and for declining 

to reduce the standard for MY 1990 

passenger cars.52 Since then, DOT has 

considered the indirect benefits of 

reducing tailpipe carbon dioxide 

emissions in its fuel economy 

rulemakings pursuant to the statutory 

requirement to consider the nation’s 

need to conserve energy by reducing 

consumption. In this rulemaking, 

consistent with the Ninth Circuit’s 

decision and its observations about the 

potential effect of changing information 

about climate change on the balancing 

of the EPCA factors and aided by the 

2007 reports of the United Nations 

Intergovernmental Panel on Climate 

Change 53 and other information, 

NHTSA is monetizing the reductions in 

tailpipe emissions of CO2 that will 

result from the CAFE standards and is 

proposing to set the MY 2011–15 CAFE 

standards at levels that reflect the value 

of those reductions in CO2. as well as the 

value of other benefits of those 

standards. In setting CAFE standards, 

NHTSA also considers environmental 

impacts under NEPA, 42 U.S.C. 4321–

4347. 

In addition, the agency is permitted to 

consider additional relevant societal 

considerations. For example, 

historically, it has considered the 

potential for adverse safety 

consequences when deciding upon a 

maximum feasible level. This practice is 

sanctioned in case law.54

EPCA requires that the MY 2011–2019 

CAFE standards for passenger cars and 

for light trucks must both increase 

ratably to at least the levels necessary to 

meet 35 mpg requirement for MY 2020. 

NHTSA interprets this to mean that the 

standards must make steady progress 

toward the levels necessary for the 

average fuel economy of the combined 

industry wide fleet of all new passenger 

cars and light trucks sold in the United 

States during MY 2020 to reach at least 

35 mpg. 

Finally, EPCA provides that in 

determining the level at which it should 

set CAFE standards for a particular 

model year, NHTSA may not consider 

the ability of manufacturers to take 

advantage of several EPCA provisions 

that facilitate compliance with the 

CAFE standards and thereby reduce the 

costs of compliance. As noted below in 

Section II, manufacturers can earn 

compliance credits by exceeding the 

CAFE standards and then use those 

credits to achieve compliance in years 

in which their measured average fuel 

economy falls below the standards. 

Manufacturers can also increase their 

CAFE levels through MY 2019 by 

producing alternative fuel vehicles. 

EPCA provides an incentive for 

producing these vehicles by specifying 

that their fuel economy is to be 

determined using a special calculation 

procedure that results in those vehicles 

being assigned a high fuel economy 

level. 

5. Consultation in Setting Standards 

EPCA provides that NHTSA is to 

consult with the Department of Energy 

(DOE) and Environmental Protection 

Agency in prescribing CAFE standards. 

It provides further that NHTSA is to 

provide DOE with an opportunity to 

provide written comments on draft 

proposed and final CAFE standards.55

6. Compliance Flexibility and 

Enforcement 

EPCA specifies a precise formula for 

determining the amount of civil 

penalties for failure to comply with a 

standard. The penalty, as adjusted for 

inflation by law, is $5.50 for each tenth 

of a mpg that a manufacturer’s average 

fuel economy falls short of the standard 

for a given model year multiplied by the 

total volume of those vehicles in the 

affected fleet (i.e., import or domestic 

passenger car, or light truck), 

manufactured for that model year. The 

amount of the penalty may not be 

reduced except under the unusual or 

extreme circumstances specified in the 

statute. 

Likewise, EPCA provides that 

manufacturers earn credits for 

exceeding a standard. The amount of 

credit earned is determined by 

multiplying the number of tenths of a 

mpg by which a manufacturer exceeds 

a standard for a particular category of 

automobiles by the total volume of 

automobiles of that category 

manufactured by the manufacturer for a 

given model year. 

EPA is responsible for measuring 

automobile manufacturers’ CAFE so that 

NHTSA can determine compliance with 

the CAFE standards. In making these 

measurements for passenger cars, EPA is 

required by EPCA 56 to use the EPA test 


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57National Research Council, ‘‘Effectiveness and 

Impact of Corporate Average Fuel Economy (CAFE) 

Standards,’’ National Academy Press, Washington, 

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

openbook.php?isbn=0309076013 (last accessed 

April 20, 2008). 

58EPA Staff Technical Report: Cost and 

Effectiveness Estimates of Technologies Used to 

Reduce Light-duty Vehicle Carbon Dioxide 

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

procedures in place as of 1975 (or 

procedures that give comparable 

results), which are the city and highway 

tests of today, with adjustments for 

procedural changes that have occurred 

since 1975. 

EPA’s fuel economy test procedures 

specify equations for calculating fuel 

economy. These equations are based on 

the carbon balance technique which 

allows fuel economy to be determined 

from measurement of exhaust 

emissions. This technique relies upon 

the premise that the quantity of carbon 

in a vehicle’s exhaust gas is equal to the 

quantity of carbon consumed by the 

engine as fuel. 

When NHTSA finds that a 

manufacturer is not in compliance, it 

notifies the manufacturer. Surplus 

credits generated from the five previous 

years can be used to make up the deficit. 

If there are no (or not enough) credits 

available, then the manufacturer can 

either pay the fine, or submit a carry 

back plan to the agency. A carry back 

plan describes what the manufacturer 

plans to do in the following three model 

years to make up for the deficit in 

credits. NHTSA must examine and 

determine whether to approve the plan. 

III. Fuel Economy Enhancing 

Technologies 

In the Agency’s last two rulemakings 

covering light truck CAFE standards for 

MYs 2005–2007 and MYs 2008–2011, 

the agency relied on the 2002 National 

Academy of Sciences’ report, 

Effectiveness and Impact of Corporate 

Average Fuel Economy Standards (‘‘the 

2002 NAS Report’’) 57 for estimating 

potential fuel economy benefits and 

associated retail costs of applying 

combinations of technologies in 10 

classes of production vehicles. The NAS 

cost and effectiveness numbers were the 

best available estimates at this time, 

determined by a panel of experts formed 

by the National Academy of Sciences, 

and the report had been peer reviewed 

by individuals chosen for their diverse 

perspectives and technical expertise in 

accordance with procedures approved 

by the Report Review Committee of the 

National Research Council. However, 

since the publication of the 2002 NAS 

Report, there has been substantial 

advancement in fuel-saving 

technologies, including technologies not 

discussed in the NAS Report that are 

expected to appear on vehicles in the 

MY 2011–2015 timeframe. There also 

have been reports issued and studies 

conducted by several other 

organizations and companies that 

discuss fuel economy technologies and 

their benefits and costs. NHTSA has 

contracted with the NAS to update the 

fuel economy section, Chapter 3, of the 

2002 NAS Report. However, this update 

will not be available in time for this 

rulemaking. Due to the expedited nature 

of this rulemaking, NHTSA, in 

consultation with the Environmental 

Protection Agency (EPA), developed an 

updated technology cost and 

effectiveness list to be used in this 

document. 

This list presents NHTSA and EPA 

technical staff’s current assessment of 

the costs and effectiveness from a broad 

range of technologies which can be 

applied to cars and light-duty trucks. 

EPA published the results of this 

collaboration in a report and submitted 

it to the NAS committee.58 A copy of the 

report and other studies used in the 

technology update will be placed in 

NHTSA’s docket. 

NHTSA believes that the estimates 

used for this document, which rely on 

the best available public and 

confidential information, are defensible 

and reasonable predictions for the next 

five years. Nevertheless, NHTSA still 

believes that the ideal source for this 

information comes from a peer reviewed 

process such as the NAS. NHTSA will 

continue to work with NAS to update 

this list on a five year interval as 

required by the Energy Independence 

and Security Act of 2007. 

The majority of the technologies 

discussed in this section are in 

production and available on vehicles 

today, either in the United States, Japan, 

or Europe. A number of the technologies 

are commonly available, while others 

have only recently been introduced into 

the market. In a few cases, we provide 

estimates on technologies which are not 

currently in production, but are 

expected to be so in the next few years. 

These are technologies which can be 

applied to cars and trucks that are 

capable of achieving significant 

improvements in fuel economy and 

reductions in carbon dioxide emissions, 

and improve vehicle fuel economy, at 

reasonable costs. 

NHTSA and EPA conducted the 

technology examination using concepts 

from the 2002 NAS report which 

constituted a starting point for the 

analysis. In the NAS Report, there were 

three exemplary technology paths or 

scenarios identified for each class of 

production vehicles, which lead to 

successively greater improvements in 

fuel consumption and greater costs. Path 

I included production-intent 

technologies that will be available 

within 10 years and could be 

implemented under current economic 

and regulatory conditions. Path II 

included more costly production-intent 

technologies that are technically feasible 

for introduction within 10 years if 

economic and regulatory conditions 

justify their use. Path III included 

emerging technologies that will be 

available within 10 to 15 years but that 

may require further development prior 

to commercial introduction. These three 

paths represented vehicle development 

steps that would offer increasing levels 

of fuel economy gains (as incremental 

gains) at incrementally increasing cost. 

As stated earlier, since the publication 

of the 2002 NAS Report, automotive 

technology has continued to advance 

and many of the technologies that were 

identified in the report as emerging have 

already entered the marketplace. 

In this rulemaking, NHTSA in 

consultation with EPA have examined a 

variety of technologies, looking beyond 

path I and path II to path III and to 

emerging technologies beyond path III. 

These technologies were in their infancy 

when the 2002 NAS Report was being 

formulated. In addition, unlike for past 

rulemakings where NHTSA projected 

the use of different variants of a 

technology as a combined technology, 

in this rulemaking, NHTSA working 

with EPA examined advanced forms 

and subcategories of existing 

technologies and reflected the 

effectiveness and cost for each of the 

variants separately for all ten vehicle 

classes. The specific technologies 

affected are variable valve timing (VVT), 

variable valve lift and timing (VVLT) 

and cylinder deactivation. 

Manufacturers are currently using many 

different types of VVTs and VVLTs, 

which have a variety of different names 

and methods. This rulemaking employs 

specific cost and effectiveness estimates 

for variants of VVT, including Intake 

Camshaft Phasing (ICP), Coupled 

Camshaft Phasing (CCP), and Dual 

(Independent) Camshaft Phasing (DCP). 

It also employs specific cost and 

effectiveness estimates for variants of 

VVLT, including Discrete Variable 

Valve Lift (DVVL) and Continuous 

Variable Valve Lift (CVVL). We also 

now include the effectiveness and cost 

estimates for each of the variants of 

cylinder deactivation. The most 

common type of cylinder deactivation is 

one in which an eight-cylinder overhead 


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24366 Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 

59 ‘‘Alternative and Future Technologies for 

Reducing Greenhouse Gas Emission from Road 

Vehicles’’ Sierra Research Report for Environment 

Canada, 1999 (SR99–07–01). http:// 

www.sierraresearch.com/ReportListing.htm (Last 

accessed April 20, 2008.) 

valve engine disables four of its 

cylinders under light loads. Cylinder 

deactivation could be incorporated on 

overhead cam engines, and can be 

applied to four and six cylinder engines 

as well (we have restricted application 

to 6 and 8 cylinder engines). Thus, the 

variants of cylinder deactivation that 

now have specific cost and effectiveness 

estimates include both overhead valve 

engine cylinder deactivation and 

overhead cam engine cylinder 

deactivation. 

The update also revisited technology 

lead time issues and took a fresh look 

at technology application rates, how to 

link certain technologies to certain 

redesign and refresh patterns, 

synergistic impacts resulting from 

adding technology packaging, and 

learning costs. 

A. Data Sources for Technology 

Assumptions 

A large number of technical reports 

and papers are available which contain 

data and estimates of the fuel economy 

improvements of various vehicle 

technologies. In addition to specific 

peer-reviewed papers respecting 

individual technologies, we also 

utilized a number of recent reports 

which had been utilized by various 

State and Federal Agencies and which 

were specifically undertaken for the 

purpose of estimating future vehicle fuel 

economy reduction effectiveness or 

improvements in fuel economy. The 

reports we utilized most frequently 

were: 

• 2002 National Academy of Science 

(NAS) report titled ‘‘Effectiveness and 

Impact of Corporate Average Fuel 

Economy Standards’’. At the time it was 

published, the NAS report was 

considered by many to be the most 

comprehensive summary of current and 

future fuel efficiencies improvements 

which could be obtained by the 

application of individual technologies. 

The focus of this report was fuel 

economy, which can be directly 

correlated with CO2 emissions. The 

2002 NAS report contains effectiveness 

estimates for ten different vehicle 

classifications (small car, mid-SUV, 

large truck, etc), but did not differentiate 

these effectiveness values across the 

classes. Where other sources or 

engineering principles indicated that a 

differentiation was warranted, we 

utilized the 2002 NAS effectiveness 

estimates as a starting point and further 

refined the estimate to one of the 

vehicle classes using engineering 

judgment or by consulting additional 

reliable sources. 

• 2004 Northeast States Center for a 

Clean Air Future (NESCCAF) report 

‘‘Reducing Greenhouse Gas Emissions 

from Light-Duty Motor Vehicles’’. This 

report, which was utilized by the 

California Air Resources Board for their 

2004 regulatory action on vehicle CO2

emissions, includes a comprehensive 

vehicle simulation study undertaken by 

AVL, a world-recognized leader in 

automotive technology and engineering. 

In addition, the report included cost 

estimates developed by the Martec 

Group, a market-based research and 

consulting firm which provides services 

to the automotive industry. The 

NESCCAF report considered a number 

of technologies not examined in the 

2002 NAS report. In addition, through 

the use of vehicle simulation modeling, 

the 2004 NESCCAF report provides a 

scientifically rigorous estimation of the 

synergistic impacts of applying multiple 

fuel economy technologies to a given 

vehicle. 

• 2006 Energy and Environmental 

Analysis Inc (EEA) report ‘‘Technology 

to Improve the Fuel Economy of Light 

Duty Trucks to 2015’’ Prepared for The 

U.S. Department of Energy and The U.S. 

Department of Transportation. This 

update of technology characteristics is 

based on new data obtained by EEA 

from technology suppliers and automanufacturers, and these data are 

compared to data from studies 

conducted earlier by EEA, the National 

Academy of Sciences (NAS), the 

Northeast States Center for a Clean Air 

future (NESCCAF) and California Air 

Resources Board (CARB). 

• Data from Vehicle Manufacturers, 

Component Suppliers, and other 

reports. We also evaluated confidential 

data from a number of vehicle 

manufacturers as well as a number of 

technology component suppliers. In 

February of 2007, the NHTSA published 

a detailed Request for Comment (RFC) 

in the Federal Register. This RFC 

included, among other items, a request 

for information from automotive 

manufacturers and the public on the 

fuel economy improvement potential of 

a large number of vehicle technologies. 

The manufacturer’s submissions to this 

RFC were supplemented by confidential 

briefing and data provided by vehicle 

component suppliers, who for many of 

the technologies considered are the 

actual manufacturers of the specific 

technology and often undertake their 

own development and testing efforts to 

investigate the fuel economy 

improvement potential of their 

products. Manufacturers that provided 

NHTSA and EPA with fuel economy 

cost and effectiveness estimates include 

BMW, Chrysler, Ford, General Motors, 

Honda, Nissan, Toyota and Volkswagen. 

The major suppliers that provided 

NHTSA with fuel economy cost and 

effectiveness estimates include BorgWarner, Bosch, Corning, Delphi, and 

Siemens. 

• Finally, to verify that the fuel 

economy cost and effectiveness 

estimates for each of the technologies 

was reasonable and within currently 

available estimates for these 

technologies, NHTSA examined those 

estimates provided by other reports or 

sources, such as the Martec (contained 

in the 2004 NESCAFF report) and Sierra 

Research reports.59

B. Technologies and Estimates of Costs 

and Effectiveness 

This section describes each 

technology and associated cost and 

effectiveness numbers. The technologies 

can be classified into five main groups 

similar to how they were classified in 

the NAS Report: engine technologies; 

transmission technologies; accessory 

technologies; vehicle technologies; and 

hybrid technologies. 

While NHTSA and EPA followed the 

general approach taken by the NAS in 

estimating the cost and effectiveness 

numbers, we decided to update some of 

these estimates to reflect better the 

changed marketplace and regulatory 

environment, as well as the 

advancement in and greater penetration 

of some production-intent and emerging 

technologies, which have led to lower 

costs. The values contained in the 2002 

NAS report were used to establish a 

baseline for the fuel economy cost and 

effectiveness estimates for each of the 

technologies. We then examined all 

other estimates provided by 

manufacturers and major suppliers or 

other sources. In examining these 

values, we gave more weight to values 

or estimates provided by manufacturers 

that have already implemented these 

technologies in their fleet, especially 

those that have introduced them in the 

largest quantities. Likewise, for 

technologies that have not penetrated 

the fleet to date, but will by early in the 

next decade (according to confidential 

manufacturer plans), we gave more 

weight to values or estimates provided 

by manufacturers that have stated that 

they will be introducing these 

technologies in their fleet, especially 

those that plan to introduce them in the 

largest quantities. In addition, for the 

technologies that will appear on 

vehicles by early in the next decade, we 

carefully examined the values provided 


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60The price increases noted in this chapter are 

slightly higher than shown in the NAS study, since 

they have been converted into calendar year 2006 

prices. 

by those suppliers who have developed 

these technologies and may have 

contracts in place to provide them to 

manufacturers. 

Because not all technologies can be 

applied on all types of vehicles, engines 

or transmissions, we separately 

evaluated 10 classes of vehicles to 

estimate fuel economy cost and 

effectiveness for each of the 

technologies. As discussed above, these 

ten classes, also used in NHTSA’s 2006 

light truck CAFE rule, were derived 

from the 2002 NAS Report, which 

estimated the feasibility, potential 

incremental fuel consumption benefit 

and the incremental cost of three 

product development paths for the 

following ten vehicle classes: 

Subcompact passenger cars, compact 

passenger cars, midsize passenger cars, 

large passenger cars, small sport utility 

vehicles, midsize sport utility vehicles, 

large sport utility vehicles, small 

pickups, large pickups, and minivans. 

The application of technologies to a 

vehicle class is limited not only by 

whether the manufacturer is capable of 

applying it within a particular 

development cycle, but also by whether 

the technology may physically be 

applied to the vehicle. For example, 

continuously variable transmissions 

(CVTs) were only allowed to be 

projected on vehicles with unibody 

construction, which includes all 

passenger cars and minivans and some 

small and midsize SUVs. CVTs could 

not be projected for use on vehicles with 

ladder-frame construction, which 

includes all pickups and large SUVs and 

some small and midsize SUVs. Another 

example is cylinder deactivation being 

limited to vehicles with 6- or 8-cylinder 

engines. To simplify the analysis, 

NHTSA assumed that each class of 

vehicles would typically have vehicle 

construction and engines with a specific 

number of cylinders that is most 

representative of that vehicle class. 

Although we looked at ten vehicle 

classes separately, for some technologies 

the estimated incremental fuel 

consumption benefit and incremental 

cost were the same across all vehicle 

classes (as for engine accessory 

improvement), while for other 

technologies the estimated incremental 

fuel consumption benefit and 

incremental cost differed across classes 

(as for hybrid drivetrains). The main 

difference was with which path(s) each 

technology was expected to be 

associated. 

The exact cost and benefit of a given 

technology depends on specific vehicle 

characteristics (size, weight, base 

engine, etc.) and the existence of 

additional technologies that were 

already applied to the vehicle. In the 

section below, ranges of incremental 

cost and fuel consumption reduction 

values are listed where the values 

depend on vehicle characteristics and 

are independent of the order in which 

they are applied to a vehicle. All costs, 

which are reflective of estimated retail 

price equivalents (RPEs) were inflated 

by the producer price index (if needed) 

and are presented in year 2006 dollars, 

because this is the last year for which 

final economic indexing is available. 

Some cost estimates are based on 

supplier costs. In those instances, 

multipliers were included in those costs 

so that they would be treated in the 

same manner as cost estimates that are 

based on manufacturer costs. These 

incremental values were calculated by 

subtracting out all same-path synergies 

associated with a given technology and 

any preceding items on the same path. 

Essentially, the incremental percent 

reduction in fuel consumption and cost 

impacts represent improvements 

beyond the ones realized due to 

technologies already applied to the 

vehicle. As an example, a 5-speed 

automatic transmission could 

incrementally reduce fuel consumption 

by 2 to 3 percent at an incremental cost 

of $75 to $165 per vehicle, relative to a 

4-speed automatic transmission. In turn, 

a 6-speed automatic transmission could 

incrementally reduce fuel consumption 

by 4.5 to 6.5 percent at an incremental 

cost of $10 to $20 per vehicle, relative 

to a 5-speed transmission. 

NHTSA acknowledges that this 

approach is different from the one it 

followed in establishing the reformed 

light truck standards for MYs 2008–

2011, where we relied nearly 

exclusively on the 2002 NAS report’s 

estimates. Our preference remains to 

rely upon peer-review and credible 

studies, such as the 2002 NAS report; 

however we believe that the estimates 

made by the joint EPA/NHTSA team are 

accurate and defensible. The agency 

seeks comments on our assumptions 

and the cost, effectiveness and 

availability estimates provided. NHTSA 

also seeks comments on whether the 

order in which these technologies was 

applied by the Volpe model is proper 

and whether we have accurately 

accounted for technologies already 

included on vehicles and whether we 

have accurately accounted for 

technologies that are projected to be 

applied to vehicles. The agency also 

seeks comments on the ‘‘synergy’’

factors (discussed below) it has applied 

in order to adjust the estimated 

incremental effectiveness of some pairs 

of technology and on whether similar 

adjustments to the estimated 

incremental cost of some technologies 

should be made. In preparation for a 

final rule, NHTSA intends to update its 

technology-related methodologies and 

estimates, and expects that these 

anticipated updates will affect the form 

and stringency of the final standards. 

a. Engine Technologies 

Low-Friction Lubricants 

The use of lower viscosity engine and 

transmission lubricants can reduce fuel 

consumption. More advanced multiviscosity engine and transmission oils 

are now available with improved 

performance in a wider temperature 

band, with better lubricating properties. 

However, even without any changes to 

fuel economy standards, most MY 

2011–2015 vehicles are likely to use 

5W–30 motor oil, and some will use 

even less viscous oils, such as 5W–20 or 

possibly even 0W–20 to reduce cold 

start friction. This may directionally 

benefit the fuel economy improvements 

of valvetrain technologies such as 

cylinder deactivation, which rely on a 

minimum oil temperature (viscosity) for 

operation. Most manufacturers therefore 

attributed smaller potential fuel 

economy reductions and cost increases 

to lubricant improvements. 

The NAS Report estimated that lowfriction lubricants could incrementally 

reduce fuel consumption by 1 percent at 

an incremental cost of $8 to $11.60 The 

NESCCAF study projected that lowfriction lubricants could incrementally 

reduce fuel consumption by 1 percent at 

an incremental cost of $5 to $15; while 

the EEA report projected that lowfriction lubricants could incrementally 

reduce fuel consumption by 1 percent at 

an incremental cost of $10 to $20. In 

contrast, manufacturer data projected an 

estimated fuel consumption potential of 

0 percent to 1 percent at an incremental 

cost that ranged from $1 to $11, with 

many of them stating the costs as 

ranging from $1 to $5. NHTSA believes 

that these manufacturer estimates are 

more accurate and estimates that lowfriction lubricants could reduce fuel 

consumption by 0.5 percent for all 

vehicle types at an incremental cost of 

$3, which represents the mid-point of 

$2.50, rounded up to the next dollar. 

Reduction of Engine Friction Losses 

All reciprocating and rotating 

components in the engine are 

candidates for friction reduction, and 

minute improvements in several 


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components can add to a measurable 

fuel economy improvement. The 

amount of energy an engine loses to 

friction can be reduced in a variety of 

ways. Improvements in the design of 

engine components and subsystems will 

result in friction reduction, improved 

engine operation, greater fuel economy 

and reduced emissions. Examples 

include low-tension piston rings, roller 

cam followers, crankshaft design, 

improved material coatings, material 

substitution, more optimal thermal 

management, piston surface treatments, 

and as lubricant friction reduction. 

Additionally, as computer-aided 

modeling software continues to 

improve, more opportunities for 

incremental friction reduction might 

become apparent. Even without any 

changes to fuel economy standards, 

most MY 2010–2015 vehicles are likely 

to employ one or more such techniques 

to reduce engine friction and other 

mechanical and hydrodynamic losses. 

The NAS Report estimated that such 

technologies could incrementally 

reduce fuel consumption by 1 to 5 

percent at an incremental cost of $36 to 

$146. NESCCAF predicted that such 

technologies could incrementally 

reduce fuel consumption by 0.5 percent 

at an incremental cost of $5 to $15; 

while the EEA report predicted that 

such technologies could reduce fuel 

consumption at an incremental cost of 

$10 to $55. Confidential manufacturer 

data indicates that engine friction 

reduction could incrementally reduce 

fuel consumption by 1 to 3 percent at 

an incremental cost of $0 to $168. Based 

on available information from these 

reports and confidential manufacturer 

data, NHTSA estimates that friction 

reduction could reduce fuel 

consumption for all vehicles by 1 to 3 

percent at a cost of $21 per cylinder. 

Thus, the incremental cost of engine 

friction reduction for a 4-cylinder 

engine is $0 to $84 (applicable to 

subcompact and compact cars); for a 6- 

cylinder engine is $0 to $126 (applicable 

to midsize cars, large cars, small 

pickups, small SUVs, minivans and 

midsize SUVs); and for an 8-cylinder 

engine is $0 to $168 (applicable to large 

pickups and SUVs). 

Multi-Valve Overhead Camshaft Engine 

It appears likely that many vehicles 

would still use overhead valve (OHV) 

engines with pushrods and one intake 

and one exhaust valve per cylinder 

during the early part of the next decade. 

Engines with overhead cams (OHC) and 

more than two valves per cylinder 

achieve increased airflow at high engine 

speeds and reductions of the valve 

train’s moving mass and enable central 

positioning of spark plugs. Such 

engines, which are already used in some 

light trucks, typically develop higher 

power at high engine speeds. The NAS 

Report projected that multi-valve OHC 

engines could incrementally reduce fuel 

consumption by 2 percent to 5 percent 

at an incremental cost of $109 to $146, 

and NHTSA found no sources to update 

these projections. 

For purposes of this rule, OHV 

engines and OHC engines were 

considered separately, and the model 

was generally not allowed to apply 

multivalve OHC technology to OHV 

engines, except where continuous 

variable valve timing and lift (CVVL) is 

applied to OHV engines. In that case, 

the model assumes conversion to DOHC 

valvetrain, because DOHC valvetrains 

are prerequisites for the application of 

any advanced engine technology over 

and above CVVL. Since applying CVVL 

to an OHV is the last improvement that 

could be made to such an engine, it’s 

logical to assume that manufacturers 

would redesign that engine as a DOHC 

and include CVVL as part of that 

redesign. 

For 4-cylinder engines we estimated 

that the cost to redesign an OHV engine 

as a DOHC that includes CVVL would 

be $599 ($169 for conversion to DVVL, 

$254 for conversion to CVVL, and $176 

for conversion to DOHC, which 

comprises an additional camshaft and 

valves), with estimated fuel 

consumption reduction of 2 to 3 

percent. For 6-cylinder engines we 

estimated that the cost to redesign an 

OHV engine as a DOHC that includes 

CVVL would be $1262 ($246 for 

conversion to DVVL, $488 for 

conversion to CVVL, and $550 for 

conversion to DOHC, which comprises 

an additional camshaft and valves), with 

estimated fuel consumption reduction 

of 1 to 4 percent. For 8-cylinder engines 

we estimated that the cost to redesign an 

OHV engine as a DOHC that includes 

CVVL would be $1380 ($322 for 

conversion to DVVL, $508 for 

conversion to CVVL, and $550 for 

conversion to DOHC, which comprises 

an additional camshaft and valves), with 

estimated fuel consumption reduction 

of 2 to 3 percent. Incremental cost 

estimates for DVVL and CVVL are 

discussed below. 

NHTSA believes that the NESCCAF 

report and confidential manufacturer 

data are more accurate, and thereby 

estimates that a conversion of an OHV 

engine to a DOHC engine with CVVL 

could incrementally reduce fuel 

consumption by 1 to 4 percent at an 

incremental cost of $599 to $1,380 

compared to an OHV with VVT. 

Cylinder Deactivation 

For the vast majority of vehicles, each 

cylinder is always active while the 

engine is running. Under partial load 

conditions, the engine’s specific fuel 

consumption could be reduced if some 

cylinders could be disabled, such that 

the active cylinders operate at higher 

load. In cylinder deactivation, some 

(usually half) of the cylinders are ‘‘shut 

down’’ during light load operation—the 

valves are kept closed, and no fuel is 

injected—as a result, the trapped air 

within the deactivated cylinders is 

simply compressed and expanded as an 

air spring, with minimal friction and 

heat losses. The active cylinders 

combust at almost double the load 

required if all of the cylinders were 

operating. Pumping losses are 

significantly reduced as long as the 

engine is operated in this ‘‘partcylinder’’ mode. 

The theoretical engine operating 

region for cylinder deactivation is 

limited to no more than roughly 50 

percent of peak power at any given 

engine speed. In practice, however, 

cylinder deactivation is employed 

primarily at lower engine cruising loads 

and speeds, where the transitions in and 

out of deactivation mode are less 

apparent to the operator and where the 

noise and vibration (NVH) associated 

with fewer firing cylinders may be less 

of an issue. Manufacturers are exploring 

the possibilities of increasing the 

amount of time that part-cylinder mode 

might be suitable to a vehicle with more 

refined powertrain and NVH treatment 

strategies. 

General Motors and Chrysler Group 

have incorporated cylinder deactivation 

across a substantial portion of their V8- 

powered lineups. Honda (Odyssey, 

Pilot) and General Motors (Impala, 

Monte Carlo) offer V6 models with 

cylinder deactivation. 

There are two variants of cylinder 

deactivation. The most common type of 

cylinder deactivation is one in which an 

eight-cylinder overhead valve engine 

disables four cylinders under light 

loads. Thus an eight-cylinder engine 

could disable four cylinders under light 

loads, such as when the vehicle is 

cruising at highway speed. This 

technology could be applied to four and 

six cylinder engines as well. General 

Motors and Chrysler Group have 

incorporated cylinder deactivation 

across a substantial portion of their V8- 

powered overhead valve lineups. 

Cylinder deactivation could be 

incorporated on overhead cam engines 

and can be applied to four and six 

cylinder engines as well. Honda has 

already begun offering three V6 models 


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with cylinder deactivation (Accord, 

Odyssey, and Pilot) and GM will soon 

release cylinder deactivation on its 3.9L 

6-cylinder engine. Fuel economy 

improvement potential scales roughly 

with engine displacement-to-vehicle 

weight ratio: the higher displacementto-weight vehicles, operating at lower 

relative loads for normal driving, have 

the potential to operate in part-cylinder 

mode more frequently. 

Honda’s technology includes the use 

of active engine mounts and noise 

damping amongst other items added to 

its V6 engines with cylinder 

deactivation. This, of course, increases 

the cost relative to a four or eight 

cylinder OHC engine. 

Some manufacturers are getting 

results in excess of 6 percent and most 

are at the high end of the range. This 

higher number is supported by official 

fuel economy test data on a V6 Honda 

Odyssey with cylinder deactivation 

compared to the same vehicle (and 

engine displacement) without cylinder 

deactivation and by confidential 

manufacturer information. 

The NAS Report projected that 

cylinder deactivation could 

incrementally reduce fuel consumption 

by 3 percent to 6 percent at an 

incremental cost of $112 to $252. The 

NESCCAF study projected that cylinder 

deactivation could incrementally reduce 

fuel consumption by 1.7 percent to 4.2 

percent at an incremental cost of $161 

to $210; while the EEA report projected 

that cylinder deactivation could 

incrementally reduce fuel consumption 

by 5.2 percent to 7.2 percent at an 

incremental cost of $105 to $135. 

Confidential manufacturer data and 

official fuel economy test data indicates 

that cylinder deactivation could 

incrementally reduce fuel consumption 

by at least 6 percent at an incremental 

cost of $203 to $229. NHTSA believes 

that these manufacturer estimates are 

more accurate and thus estimates that 

cylinder deactivation could reduce fuel 

consumption by 4.5 percent to 6 percent 

at an incremental cost of $203 to $229. 

Variable Valve Timing 

Variable valve timing is a 

classification of valvetrain designs that 

alter the timing of the intake valve, 

exhaust valve, or both, primarily to 

reduce pumping losses, increase 

specific power, and control residual 

gases. VVT reduces pumping losses 

when the engine is lightly loaded by 

positioning the valve at the optimum 

position needed to sustain horsepower 

and torque. VVT can also improve 

thermal efficiency at higher engine 

speeds and loads. Additionally, VVT 

can be used to alter (and optimize) the 

effective compression ratio where it is 

advantageous for certain engine 

operating modes. 

Variable valve timing has been 

available in the market for quite a while. 

By the early 1990s, VVT had made a 

significant market penetration with the 

arrival of Honda’s ‘‘VTEC’’ line of 

engines. VVT has now become a widely 

adopted technology: for the 2007 model 

year, over half of all new cars and light 

trucks have engines with some method 

of variable valve timing. Therefore, the 

degree of further improvement across 

the fleet is limited to vehicles that have 

not already implemented this 

technology. 

Manufacturers are currently using 

many different types of variable valve 

timing, which have a variety of different 

names and methods. The major types of 

VVT are listed below: 

Intake Camshaft Phasing (ICP) 

Valvetrains with ICP—the simplest 

type of cam phasing—can modify the 

timing of the intake valve while the 

exhaust valve timing remains fixed. 

This requires the addition of a cam 

phaser for each bank of intake valves on 

the engine. An in-line 4-cylinder engine 

has one bank of intake valves, while Vconfigured engines would have two 

banks of intake valves. The NAS Report 

projected that ICP could incrementally 

reduce fuel consumption by 3 percent to 

6 percent at an incremental cost of $35; 

while the EEA report projected that ICP 

could reduce fuel consumption at an 

incremental cost of $35. The NESCCAF 

study projected that ICP could 

incrementally reduce fuel consumption 

by 1 percent to 2 percent at an 

incremental cost of $49. Consistent with 

the EEA report and NESCCAF study, we 

have used this $35 manufacturer cost to 

arrive at incremental cost of $59 per 

cam phaser or $59 for an in-line 4 

cylinder and $119 for a V-type, thus 

NHTSA estimates that ICP could 

incrementally reduce fuel consumption 

by 1 to 2 percent at an incremental cost 

of $59 to $119. 

Coupled Camshaft Phasing (CCP) 

Coupled (or coordinated) cam phasing 

is a design in which both the intake and 

exhaust valve timing are varied with the 

same cam phaser. For an overhead cam 

engine, the same phaser added for ICP 

would be used for CCP control. As a 

result, its costs should be identical to 

those for ICP. For an overhead valve 

engine, only one phaser would be 

required for both inline and Vconfigured engines since only one 

camshaft exists. Therefore, for overhead 

valve engines, the cost is estimated at 

$59 regardless of engine configuration, 

using the logic provided for ICP. 

The NESCCAF study projected that 

CCP could incrementally reduce fuel 

consumption by 1 percent to 3 percent 

above that obtained by ICP. Confidential 

manufacturer data also projects that that 

CCP could incrementally reduce fuel 

consumption by 1 percent to 3 percent 

above that obtained by ICP. According 

to the NESCCAF report and confidential 

manufacturer data, NHTSA estimates 

that CCP could incrementally reduce 

fuel consumption by 1 to 3 percent at 

an incremental cost of $59 to $119 

above ICP valvetrains. 

Dual (Independent) Camshaft Phasing 

(DCP) 

The most flexible VVT design is dual 

cam phasing, where the intake and 

exhaust valve opening and closing 

events are controlled independently. 

This design allows the option of 

controlling valve overlap, which can be 

used as an internal EGR strategy. Our 

estimated incremental compliance cost 

for this technology is built upon that for 

VVT–ICP where an additional cam 

phaser is added to control each bank of 

exhaust valves less the cost to the 

manufacturer of the removed EGR valve. 

The incremental compliance cost for a 

4-cylinder engine is estimated to be $59 

for each bank of valves, plus an 

estimated piece cost of $30 for the 

valves, for a total incremental 

compliance cost of $89. The incremental 

compliance cost for a V6 or a V8 engine 

is estimated to be $59 for each bank of 

intake valves (i.e., two banks times $59/ 

bank = $119), $59 for each bank of 

exhaust valves (i.e., another $119) 

minus an estimated $29 incremental 

compliance cost for the removed EGR 

valve; the total incremental compliance 

cost being $209. 

According to the NESCCAF report 

and confidential manufacturer data, it is 

estimated that DCP could incrementally 

reduce fuel consumption by 1 to 3 

percent at an incremental cost of $89 to 

$209 compared to engines with ICP or 

CCP. 

Because ICP and CCP have the same 

cost and similar effectiveness, it is 

assumed that manufacturers will choose 

the technology that best fits the specific 

engine architecture and application. 

Variable Valve Lift and Timing 

Some vehicles have engines for which 

both valve timing and lift can be at least 

partially optimized based on engine 

operating conditions. Engines with 

variable valve timing and lift (VVLT) 

can achieve further reductions in 

pumping losses and further increases in 

thermal efficiency. Controlling the lift 


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height of the valves provides additional 

flexibility and potential for further fuel 

consumption reduction. By reducing the 

valve lift, engines can decrease the 

volumetric flow at lower operating 

loads, improving fuel-air mixing and incylinder mixture motion which results 

in improved thermodynamic efficiency 

and also potentially reduced overall 

valvetrain friction. Also, by moving the 

throttling losses further downstream of 

the throttle valve, the heat transfer 

losses that occur from the throttling 

process are directed into the fresh 

charge-air mixture just prior to 

compression, delaying the onset of 

knock-limited combustion processes. At 

the same time, such systems may also 

incur increased parasitic losses 

associated with their actuation 

mechanisms. 

The NAS report projected that VVLT 

could incrementally reduce fuel 

consumption by 1 to 2 percent over VVT 

alone at an incremental cost of $73 to 

218. 

Manufacturers are currently using 

many different types of variable valve 

lift and timing, which have a variety of 

different names and methods. The major 

types of VVLT are listed below: 

Discrete Variable Valve Lift 

Discrete variable valve lift (DVVL) is 

a method in which the valvetrain 

switches between multiple cam profiles, 

usually 2 or 3, for each valve. These cam 

profiles consist of a low and a high-lift 

lobe, and may include an inert or blank 

lobe to incorporate cylinder 

deactivation (in the case of a 3-step 

DVVL system). According to the 

NESCCAF report and confidential 

manufacturer data, it is estimated that 

DVVL could incrementally reduce fuel 

consumption by 0.5 to 3 percent at an 

incremental cost of $169 to $322 

compared to VVT depending on engine 

size and overhead cam versus overhead 

valve engines. Included in this cost 

estimate is $25 for controls and 

associated oil supply needs (these costs 

not reflected in the NESCCAF study). 

We also project that a single valve lifter 

could control valve pairs, thus engines 

with dual intake and/or dual exhaust 

valves would require only one lifter per 

pair of valves. Due to this, the estimated 

costs for applying DVVL to overhead 

cam and overhead valve engines are the 

same. 

Continuous Variable Valve Lift 

Continuous variable valve lift (CVVL) 

employs a mechanism that varies the 

pivot point in the rocker arm. This 

design is realistically limited to 

overhead cam engines. Currently, BMW 

has implemented this type of system in 

its Valvetronic engines, which employs 

fully flexible valve timing to allow an 

extra set of rocker arms to vary the valve 

lift height. CVVL enables intake valve 

throttling in engines, which allows for 

the use of more complex systems of 

sensors and electronic controls to enable 

further optimization of valve lift. 

The NESCCAF study projected 

incremental costs from $210 to $420, 

depending on vehicle class, while the 

EEA report projected incremental costs 

of $180 to $350, depending on vehicle 

class. Confidential manufacturer data 

projects that CVVL could incrementally 

reduce fuel consumption by 1.5 by 4 

percent at an incremental cost of $200 

to $515. NHTSA believes that these 

manufacturer estimates are more 

accurate than NESCCAF estimates, thus 

it gives more weight to them. According 

to the NESCCAF report and confidential 

manufacturer data, NHTSA estimates 

that CVVL could incrementally reduce 

fuel consumption by 1.5 by 4 percent at 

an incremental cost of $254 to $508 

compared to VVT with cost estimates 

varying from $254, $466, and $508 for 

a 4-, 6-, and 8-cylinder engine, 

respectively. 

Camless Valve Actuation 

Camless valve actuation relies on 

electromechanical actuators instead of 

camshafts to open and close the 

cylinder valves. When 

electromechanical actuators are used to 

replace cams and coupled with sensors 

and microprocessor controls, valve 

timing and lift can be optimized over all 

conditions. An engine valvetrain that 

operates independently of any 

mechanical means provides the ultimate 

in flexibility for intake and exhaust 

timing and lift optimization. With it 

comes infinite valve overlap variability, 

the rapid response required to change 

between operating modes (such as HCCI 

and GDI), intake valve throttling, 

cylinder deactivation, and elimination 

of the camshafts (reduced friction). This 

level of control can enable even further 

incremental reductions in fuel 

consumption. 

Camless valvetrains have been under 

research for many decades due to the 

design flexibility and the attractive fuel 

economy improvement potential they 

might provide. Despite the promising 

features of camless valvetrains, 

significant challenges remain. High 

costs and design complexity have 

reduced manufacturers’ enthusiasm for 

camless engines in light of other 

competing valvetrain technologies. The 

advances in VVT, VVLT, and cylinder 

deactivation systems demonstrated in 

recent years have reduced the potential 

efficiency advantage of camless 

valvetrains. 

The NAS Report projected that 

camless valve actuation could 

incrementally reduce fuel consumption 

by 5 to 10 percent over VVLT at an 

incremental cost of $336 to $673. 

Confidential manufacturer information 

provides incremental fuel consumption 

losses that range from 2 to 10 percent at 

costs that range from $300 to $1,100. 

The NESCCAF study projected that 

camless valve actuation could 

incrementally reduce fuel consumption 

by 11 to 13 percent at an incremental 

cost of $805 to $1,820; while the EEA 

report projected that camless valve 

actuation could incrementally reduce 

fuel consumption by 10 to 14 percent at 

an incremental cost of $210 to $600. 

These benefits and costs are believed to 

be incremental to engines with VVT. 

In reviewing our sources for costs, we 

have determined that the adjusted costs 

presented in the 2002 NAS study, which 

ranged from $336 to $673—depending 

on vehicle class—represent the best 

available estimates. Subtracting out the 

improvements associated with the 

application of VVLT provides an 

estimated fuel consumption reduction 

of 2.5 percent. 

Stoichiometric Gasoline Direct Injection 

Technology 

Gasoline direct injection (GDI, or 

SIDI) engines inject fuel at high pressure 

directly into the combustion chamber 

(rather than the intake port in port fuel 

injection). Direct injection improves 

cooling of the air/fuel charge within the 

cylinder, which allows for higher 

compression ratios and increased 

thermodynamic efficiency. Injector 

design advances and increases in fuel 

pressure have promoted better mixing of 

the air and fuel, enhancing combustion 

rates, increasing exhaust gas tolerance 

and improving cold start emissions. GDI 

engines achieve higher power density 

and match well with other technologies, 

such as boosting and variable valvetrain 

designs. 

Several manufacturers (Audi, BMW, 

and Volkswagen) have recently released 

GDI engines while General Motors and 

Toyota will be introducing GDI engines. 

In addition, BMW and GM have 

announced their plans to dramatically 

increase the number of GDI engines in 

their portfolios. 

The NESCCAF report projected that 

the incremental cost for GDI of $189 to 

$294; while the EEA report projected an 

incremental cost of $77 to $135. 

Confidential manufacturer data provides 

data with higher upper end costs than 

these estimates, with incremental fuel 

consumption estimates ranging from 1 


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to 2 percent. For our analysis, we have 

estimated the costs of individual 

components of a GDI system and used 

a ‘‘bottom up’’ approach looking at 

incremental costs for injectors, fuel 

pumps, etc., to arrive at system 

incremental compliance costs ranging 

from $122 to $420 for small cars and up 

to $228 to $525 for large trucks. The 

lower end of the ranges represents our 

best estimate using a bottom up 

approach while the upper end of the 

ranges represent levels more consistent 

with the manufacturer CBI submittals. 

As a result, we estimate that 

stoichiometric GDI could incrementally 

reduce fuel consumption by 1 to 2 

percent at an incremental cost of $122 

to $525 compared to engines of similar 

power output. 

Gasoline Engine Turbocharging and 

Engine Downsizing 

The specific power of a naturally 

aspirated engine is limited, in part, by 

the rate at which the engine is able to 

draw air into the combustion chambers. 

Turbocharging and supercharging are 

two methods to increase the intake 

manifold pressure and cylinder chargeair mass above naturally aspirated 

levels. By increasing the pressure 

differential between the atmosphere and 

the charging cylinders, superchargers 

and turbochargers increase this 

available airflow, and thus increase the 

specific power level, and with it the 

ability to reduce engine size while 

maintaining performance. This 

effectively reduces the pumping losses 

at lighter loads in comparison to a 

larger, naturally aspirated engine, while 

at the same time reducing net friction 

losses 

Almost every major manufacturer 

currently markets a vehicle with some 

form of boosting. While boosting has 

been a common practice for increasing 

performance for several decades, it has 

considerable fuel economy potential 

when the engine displacement is 

reduced. Specific power levels for a 

boosted engine often exceed 100 hp/L—

compared to average naturally aspirated 

engine power density of roughly 70 hp/ 

L. As a result, engines can 

conservatively be downsized roughly 30 

percent to achieve similar peak output 

levels. 

In the last decade, improvements to 

turbine design have improved their 

reliability and performance across the 

entire engine operating range. New 

variable geometry turbines spool up to 

speed faster (eliminating the oncecommon ‘‘turbo lag’’) while maintaining 

high flow rates for increased boost at 

high speeds. 

Turbocharging and downsizing 

involve the addition of a boost system, 

removal of two cylinders in most cases 

(from an 8-cylinder to a 6, or a 6 to a 

4) and associated valves, and the 

addition of some form of cold start 

control system (e.g., air injection) to 

address possible cold start emission 

control. The NAS Report projected that 

turbocharging and downsizing could 

incrementally reduce fuel consumption 

by 5 to 7 percent at an incremental cost 

of $364 to $582. The EEA report 

projected turbocharging and downsizing 

could incrementally reduce fuel 

consumption by 5.2 to 7.8 percent. 

In developing estimated costs for 

turbocharging and downsizing an 

engine, NHTSA, in conjunction with 

EPA, relied upon piece cost estimates 

contained in the NESCCAF report. The 

cost estimates provided by the 

NESCCAF report are as follows: $600 for 

the turbocharger and associated parts; 

$90 for an air injection pump and 

associated parts (each turbocharger 

requires an air injection pump); $75 per 

cylinder and associated components; 

$15 per each valve and associated 

components; and $150 per camshaft. 

In developing the cost estimates for 

each of the 10 classes of vehicles, we 

determined the most logical type of 

downsizing that would occur for each 

class and starting with the turbocharger 

and air injector cost, either added or 

deleted cost, depending on the 

situation. For subcompact and compact 

cars, we determined that the downsizing 

wouldn’t involve the removal of any 

cylinders, valves and camshafts, but 

instead would result in a manufacturer 

using a smaller displacement 4-cylinder 

engine and adding the turbocharger and 

the air injector to the smaller engine. 

Thus, for subcompact and compact cars, 

we estimated the cost of turbocharging 

and downsizing to be $690 ($600 for the 

turbocharger plus $90 for the air 

injector). 

For large trucks and large SUVs we 

determined that the most logical engine 

downsizing would involve replacing an 

8-cylinder overhead valve engine with a 

turbocharged 6-cylinder dual overhead 

cam engine. This change would result in 

the removal of 2 cylinders, and the 

addition of a turbocharger, an air 

injector, 8 valves and 2 camshafts. Thus, 

we have estimated the cost of 

turbocharging and downsizing to be 

$810 ($600 for the turbocharger plus $90 

for the air injector, plus $120 for eight 

valves plus $150 for a camshaft and 

minus $150 for the removal of two 

cylinders). 

For midsize cars, large cars, small 

trucks, small SUVs, midsize SUVs and 

minivans, we determined that the most 

logical engine downsizing would 

involve replacing a 6-cylinder dual 

overhead cam engine with a 

turbocharged 4-cylinder dual overhead 

cam engine. This change would result in 

the removal of 2 cylinders, 8 valves and 

2 camshafts and the addition of a 

turbocharger and air injector. Thus, we 

have estimated the cost of turbocharging 

and downsizing to be $120 ($600 for the 

turbocharger plus $90 for the air 

injector, minus $150 for the removal of 

two cylinders, minus $120 for the 

removal of eight valves and minus $300 

for the removal of two camshafts). 

Thus, we have estimated the cost for 

a boosted/downsized engine system at 

$690 for small cars, $810 for large 

trucks, and $120 for other vehicle 

classes. Projections of the fuel 

consumption reduction potential of a 

turbocharged and downsized engine 

from the NAS Report are backed by EEA 

estimates and confidential manufacturer 

data. According to the NAS Report, the 

EEA report, cost estimates developed in 

conjunction with EPA and confidential 

manufacturer data, NHTSA estimates 

that downsized turbocharged engines 

could incrementally reduce fuel 

consumption from 5 to 7.5 percent at an 

incremental cost of $120 to $810. 

Diesel Engine 

Diesel engines have several 

characteristics that give them superior 

fuel efficiency to conventional gasoline, 

spark-ignited engines. Pumping losses 

are greatly reduced due to lack of (or 

greatly reduced) throttling. The diesel 

combustion cycle operates at a higher 

compression ratio, with a very lean air/ 

fuel mixture, and typically at much 

higher torque levels than an equivalentdisplacement gasoline engine. 

Turbocharged light-duty diesels 

typically achieve much higher torque 

levels at lower engine speeds than 

equivalent-displacement naturallyaspirated gasoline engines. 

Additionally, diesel fuel has higher 

energy content per gallon. However, 

diesel engines have emissions 

characteristics that present challenges to 

meeting Tier 2 emissions standards. 

Compliance strategies are expected to 

include a combination of combustion 

improvements and after-treatment. 

Several key advances in diesel 

technology have made it possible to 

reduce emissions coming from the 

engine (prior to after-treatment). These 

technologies include improved fuel 

systems (higher pressures and more 

responsive injectors), advanced controls 

and sensors to optimize combustion and 

emissions performance, higher EGR 

levels to reduce NOX, lower 


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compression ratios and advanced 

turbocharging systems. 

For after-treatment, the traditional 3- 

way catalyst found on gasoline-powered 

vehicles is ineffective due to the leanburn combustion of a diesel. All diesels 

will require a particulate filter, an 

oxidation catalyst, and a NOX reduction 

strategy to comply with Tier 2 emissions 

standards. 

The NOX reduction strategies most 

common are outlined below: 

Lean NOX Trap Catalyst AfterTreatment 

A lean NOX trap (LNT) operates, in 

principle, by storing NOX (NO and NO2) 

when the engine is running in its 

normal (lean) state. When the control 

system determines (via mathematical 

model or a NOX sensor) that the trap is 

saturated with NOX, it switches to a rich 

operating mode. This rich mode 

produces excess hydrocarbons that act 

as a reducing agent to convert the stored 

NOX to N2 and water, thereby 

‘‘regenerating’’ the LNT and opening up 

more locations for NOX to be stored. 

LNTs are sensitive to sulfur deposits 

which can reduce catalytic performance, 

but periodically undergo a desulfation 

engine operating mode to clean it of 

sulfur buildup. 

According to confidential 

manufacturer data, NHTSA estimates 

that LNT-based diesels can 

incrementally reduce fuel consumption 

by 8 to 15 percent at an incremental cost 

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

injected turbocharged and downsized 

internal combustion engine. These costs 

are based on a ‘‘bottom up’’ cost 

analysis that was performed with EPA 

which then subtracted the costs of all 

previous steps on the decision tree prior 

to diesel engines. 

Selective Catalytic Reduction NOX AfterTreatment 

SCR uses a reductant (typically, 

ammonia derived from urea) 

continuously injected into the exhaust 

stream ahead of the SCR catalyst. 

Ammonia combines with NOX in the 

SCR catalyst to form N2 and water. The 

hardware configuration for an SCR 

system is more complicated than that of 

an LNT, due to the onboard urea storage 

and delivery system (which requires a 

urea pump and injector into the exhaust 

stream). While there is no required rich 

engine operating mode prescribed for 

NOX reduction, the urea is typically 

injected at a rate of 3 to 4 percent of that 

of fuel consumed. Manufacturers 

designing SCR systems are intending to 

align urea tank refills with standard 

maintenance practices such as oil 

changes. Incremental fuel consumption 

reduction estimates for diesel engines 

with an SCR system range from 11 to 20 

percent at an incremental cost of $2,051 

to $2,411 compared to a direct injected 

turbocharged and downsized internal 

combustion engine. These costs are 

based on a ‘‘bottom up’’ cost analysis 

that was performed with EPA, which 

then subtracted the costs of all previous 

steps on the decision tree prior to diesel 

engines. 

Based on public information and on 

recent discussions that NHTSA and EPA 

have had with auto manufacturers and 

aftertreatment device manufacturers, 

NHTSA has received strong indications 

that LNT systems would probably be 

used on smaller vehicles while the SCR 

systems would be used on larger 

vehicles and trucks. The primary reason 

given for this choice is the trade off 

between the rhodium needed for the 

LNT and the urea injection system 

needed for SCR. The breakeven point 

between these two cost factors appears 

to occur around 3.0 liters. Thus, it is 

believed that it is cheaper to 

manufacture diesel engines smaller than 

3.0 liters with an LNT system, and that 

conversely, it is cheaper to manufacture 

diesel engines larger than 3.0 liters with 

a SCR system. Of course, there are other 

factors that influence a manufacturer’s 

decision on which system to use, but we 

have used this rule-of-thumb for our 

analysis. 

b. Transmission Technologies 

Five-, Six-, Seven-, and Eight-Speed 

Automatic Transmissions 

The number of available transmission 

speeds influences the width of gear ratio 

spacing and overall coverage and, 

therefore, the degree of transmission 

ratio optimization available under 

different operating conditions. In 

general, transmissions can offer a greater 

available degree of engine optimization 

and can therefore achieve higher fuel 

economy when the number of gears is 

increased. However, potential gains may 

be reduced by increases in transmission 

weight and rotating mass. Regardless of 

possible changes to fuel economy 

standards, manufacturers are 

increasingly introducing 5- and 6-speed 

automatic transmissions on their 

vehicles. Additionally, some 

manufacturers are introducing 7-, and 8- 

speed automatic transmissions, with 7- 

speed automatic transmissions 

appearing with increasing frequency. 

Automatic 5-Speed Transmissions 

As automatic transmissions have been 

developed over the years, more forward 

speeds have been added to improve fuel 

efficiency and performance. Increasing 

the number of available ratios provides 

the opportunity to optimize engine 

operation under a wider variety of 

vehicle speeds and load conditions. 

Also, additional gears allow for 

overdrive ratios (where the output shaft 

of the transmission is turning at a higher 

speed than the input shaft) which can 

lower the engine speed at a given road 

speed (provided the engine has 

sufficient power at the lower rpm point) 

to reduce pumping losses. However, 

additional gears can add weight, 

rotating mass, and friction. 

Nevertheless, manufacturers are 

increasingly adding 5-speed automatic 

transmissions to replace 3- and 4-speed 

automatic transmissions. 

The 2002 NAS study projected that 5- 

speed automatic transmissions could 

incrementally reduce fuel consumption 

by 2 to 3 percent at an incremental cost 

of $76 to $167. The NESCCAF study 

projected that 5-speed automatic 

transmissions could incrementally 

reduce fuel consumption by 1 percent at 

an incremental cost of $140; while the 

EEA report projected that 5-speed 

automatic transmissions could 

incrementally reduce fuel consumption 

by 2 to 3 percent at an incremental cost 

of $130. Confidential manufacturer data 

projected that 5-speed automatic 

transmissions could incrementally 

reduce fuel consumption by 1 to 6 

percent at an incremental cost of from 

$60 to $281. NHTSA believes that the 

NAS study’s estimates are still valid and 

estimates that 5-speed automatic 

transmissions could incrementally 

reduce fuel consumption by 2.5 percent 

at an incremental cost of $76 to $167 

(relative to a 4-speed automatic 

transmission). 

Automatic 6-, 7-, and 8-Speed 

Transmissions 

In addition to 5-speed automatic 

transmissions, manufacturers can also 

choose to utilize 6-, 7-, or 8-speed 

automatic transmissions. Additional 

ratios allow for further optimization of 

engine operation over a wider range of 

conditions, but this is subject to 

diminishing returns as the number of 

speeds increases. As additional 

planetary gear sets are added (which 

may be necessary in some cases to 

achieve the higher number of ratios), 

additional weight and friction are 

introduced. Also, the additional shifting 

of such a transmission can be perceived 

as bothersome to some consumers, so 

manufacturers need to develop 

strategies for smooth shifts. Some 

manufacturers are replacing 4-speed 

automatics with 6-speed automatics 

(there are also increasing numbers of 5- 

speed automatic transmissions that are 


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being replaced by 6-speed automatic 

transmissions), and 7-, and 8-speed 

automatics have entered production, 

albeit in lower-volume applications. 

The NAS study projected that 6-, 7- or 

8-speed transmissions could 

incrementally reduce fuel consumption 

by 1 to 2 percent at an incremental cost 

of $70 to $126. Confidential 

manufacturer data projected that 6-, 7- 

or 8-speed transmissions could 

incrementally reduce fuel consumption 

by 1 to 3 percent at an incremental cost 

of $20 to $120. However, according to 

the EEA report, a Lepelletier gear set 

design provides for 6-speeds at the same 

cost as a 5-speed automatic. Based on 

that analysis, we have estimated the cost 

of a 6-speed automatic to be equivalent 

to that for a 5-speed automatic. We have 

not developed any estimate costs for 7- 

or 8-speed transmissions because of the 

diminishing returns in efficiency versus 

the costs for transmissions beyond 6- 

speeds. NHTSA estimates that 6-, 7-, or 

8-speed automatic transmissions could 

incrementally reduce fuel consumption 

by 0.5 to 2.5 percent at an incremental 

cost of $0 to $20 (relative to a 5-speed 

automatic transmission). We are 

estimating up to an additional $20 in 

costs because we have tried to account 

for the engineering effort in addition to 

the hardware which we believe the EEA 

did not and we wanted to capture some 

of the higher costs reported by 

manufacturers. 

Aggressive Shift Logic 

In operation, an automatic 

transmission’s controller decides when 

to upshift or downshift based on a 

variety of inputs such as vehicle speed 

and throttle position according to 

programmed logic. Aggressive shift logic 

(ASL) can be employed so that a 

transmission is engineered in such a 

way as to maximize fuel efficiency by 

upshifting earlier and inhibiting 

downshifts under some conditions. 

Through partial lock-up under some 

operating conditions and early lock-up 

under others, automatic transmissions 

can achieve some reduction in overall 

fuel consumption. Aggressive shift logic 

is applicable to all vehicle types with 

automatic transmissions, and since in 

most cases it would require no 

significant hardware modifications, it 

can be adopted during vehicle redesign 

or refresh or even in the middle of a 

vehicle’s product cycle. The application 

of this technology does, however, 

require a manufacturer to confirm that 

driveability, durability, and noise, 

vibration, and harshness (NVH) are not 

significantly degraded. 

The NAS study projected that 

aggressive shift logic could 

incrementally reduce fuel consumption 

by 1 to 2 percent at an incremental cost 

of $0 to $70. Confidential manufacturer 

data projected that aggressive shift logic 

could incrementally reduce fuel 

consumption by 0.5 to 3 percent at an 

incremental cost of $18 to $70. The NAS 

study estimates and confidential 

manufacturer data are within the same 

ranges, thus NHTSA believes that the 

NAS estimates are still accurate. Thus, 

NHTSA estimates aggressive shift logic 

could incrementally reduce fuel 

consumption by 1 to 2 percent at an 

incremental cost of $38, which is 

approximately the average of the 

midpoint of the NAS cost range and the 

manufacturer cost range. 

Early Torque Converter Lockup 

A torque converter is a fluid coupling 

located between the engine and 

transmission in vehicles with automatic 

transmissions and continuously-variable 

transmissions (CVTs). This fluid 

coupling allows for slip so the engine 

can run while the vehicle is idling in 

gear, provides for smoothness of the 

powertrain, and also provides for torque 

multiplication during acceleration. 

During light acceleration and cruising, 

this slip causes increased fuel 

consumption, so modern automatic 

transmissions utilize a clutch in the 

torque converter to lock it and prevent 

this slippage. Fuel consumption can be 

further reduced by locking up the torque 

converter early, and/or by using partiallockup strategies to reduce slippage. 

Some torque converters will require 

upgraded clutch materials to withstand 

additional loading and the slipping 

conditions during partial lock-up. As 

with aggressive shift logic, confirmation 

of acceptable driveability, performance, 

durability and NVH characteristics is 

required to successfully implement this 

technology. 

The 2002 NAS study did not include 

any estimates for this technology. The 

NESCCAF study projected that early 

torque converter lockup could 

incrementally reduce fuel consumption 

by 0.5 percent at an incremental cost of 

$0 to $10; while the EEA report 

projected that low-friction lubricants 

could incrementally reduce fuel 

consumption by 0.5 percent at an 

incremental cost of $5. NHTSA 

estimates the cost of this technology 

(i.e., the calibration effort) at $30 based 

in part on NESCCAF and the CBI 

submissions which provided costs with 

a midpoint of $30. We have used a 

higher value here than NESCCAF and 

EEA because we have tried to account 

for the engineering effort in addition to 

the hardware which we believe 

NESCCAF and EEA did not do and 

which were captured in the 

manufacturers’ higher costs. 

NHTSA estimates that early torque 

converter lockup could incrementally 

reduce fuel consumption by 

approximately 0.5 percent at an 

incremental cost of approximately $30. 

Automated Shift Manual Transmissions 

An automated manual transmission 

(AMT) is mechanically similar to a 

conventional transmission, but shifting 

and launch functions are controlled by 

the vehicle. There are two basic types of 

AMTs, single-clutch and dual-clutch. A 

single-clutch AMT is essentially a 

manual transmission with automated 

clutch and shifting. Because there are 

some shift quality issues with singleclutch designs, dual-clutch AMTs are 

more common. A dual-clutch AMT uses 

separate clutches for the even-numbered 

gears and odd-numbered gears. In this 

way, the next expected gear is preselected, which allows for faster and 

smoother shifting. 

Overall, AMTs likely offer the greatest 

potential for fuel consumption 

reduction among the various 

transmission options presented in this 

report because they offer the inherently 

lower losses of a manual transmission 

with the efficiency and shift quality 

advantages of computer control. AMTs 

offer the lower losses of a manual 

transmission with the efficiency 

advantages of computer control. The 

lower losses stem from the elimination 

of the conventional lock-up torque 

converter and a greatly reduced need for 

high pressure hydraulic circuits to hold 

clutches to maintain gear ratios (in 

automatic transmissions) or hold 

pulleys in position to maintain gear 

ratio (in continuously variable 

transmissions, discussed below). 

However, the lack of a torque converter 

will affect how the vehicle launches 

from rest, so an AMT will most likely 

be paired with an engine that offers 

enough torque in the low-RPM range to 

allow for adequate launch performance. 

An AMT is mechanically similar to a 

conventional manual transmission, but 

shifting and launch functions are 

controlled by the vehicle rather than the 

driver. A switch from a conventional 

automatic transmission with torque 

converter to an AMT incurs some costs 

but also allows for some cost savings. 

Savings can be realized through 

elimination of the torque converter 

which is a very costly part of a 

traditional automatic transmission, and 

through reduced need for high pressure 

hydraulic circuits to hold clutches (to 

maintain gear ratios in automatic 

transmissions) or hold pulleys (to 

maintain gear ratios in Continuously 


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Variable Transmissions). Cost increases 

would be incurred in the form of 

calibration efforts since transmission 

calibrations would have to be redone, 

and the addition of a clutch assembly 

for launce and gear changes. 

The NESCCAF study projected that 

AMTs could incrementally reduce fuel 

consumption by 5 to 8 percent at an 

incremental cost of $0 to $280; while 

the EEA report projected that lowfriction lubricants could incrementally 

reduce fuel consumption by 6 to 7 

percent at an incremental cost of $195 

to $225. Confidential manufacturer data 

projected that AMTs could 

incrementally reduce fuel consumption 

by 2 to 5 percent at an incremental cost 

of $70 to $400. 

Taking all these estimates into 

consideration, NHTSA estimates that 

AMTs could incrementally reduce fuel 

consumption by 4.5 to 7.5 percent at an 

incremental cost of approximately $141. 

We believe that, overall, the hardware 

associated with an AMT, whether single 

clutch or dual clutch, is no more costly 

than that for a traditional automatic 

transmission given the savings 

associated with removal of the torque 

converter and high pressure hydraulic 

circuits, which is estimated to amount 

to at least $30. Nonetheless, given the 

need for engineering effort (e.g., 

calibration and vehicle integration 

work) when transitioning from a 

traditional automatic to an AMT, we 

have estimated the incremental 

compliance cost at $141, independent of 

vehicle class, which is the midpoint of 

the NESCCAF estimates and within the 

range provided confidential 

manufacturer data. 

Continuously Variable Transmission 

A Continuously Variable 

Transmission (CVT) is unique in that it 

does not use gears to provide ratios for 

operation. Unlike manual and automatic 

transmissions with fixed transmission 

ratios, CVTs provide, within their 

operating ranges, fully variable 

transmission ratios with an infinite 

number of gears. This enables even finer 

optimization of the transmission ratio 

under different operating conditions 

and, therefore, some reduction of 

pumping and engine friction losses. 

CVTs use either a belt or chain on a 

system of two pulleys. 

The main advantage of a CVT is that 

the engine can operate at its most 

efficient point more often, since there 

are no fixed ratios. Also, CVTs often 

have a wider range of ratios than 

conventional automatic transmissions. 

The most common CVT design uses 

two V-shaped pulleys connected by a 

metal belt. Each pulley is split in half 

and a hydraulic actuator moves the 

pulley halves together or apart. This 

causes the belt to ride on either a larger 

or smaller diameter section of the pulley 

which changes the effective ratio of the 

input to the output shafts. 

It is assumed that CVTs will only be 

used on cars, small SUVs, midsize 

crossover vehicles and minivans 

because they are currently used mainly 

in lower-torque applications. While a 

high-torque CVT could be developed for 

small pickup trucks and large pickup 

trucks and large SUVs, it would likely 

have to be treated separately in terms of 

effectiveness. We do not see 

development in the area of high-torque 

CVTs and therefore did not include this 

type in our analysis. 

The 2002 NAS study projected that 

CVTs could incrementally reduce fuel 

consumption by 4 to 8 percent at an 

incremental cost of $140 to $350. The 

NESCCAF study projected that CVTs 

could incrementally reduce fuel 

consumption by 4 percent at an 

incremental cost of $210 to $245. 

Confidential manufacturer data 

projected that CVTs could incrementally 

reduce fuel consumption by 3 to 9 

percent at an incremental cost of $140 

to $800. These values are incremental to 

a 4-speed transmission. 

Based on an aggregation of 

manufacturers’ information, we estimate 

a CVT benefit of about 6 percent over a 

4-speed automatic. This is above the 

NESCCAF value, but in the range of 

NAS. In reviewing our sources for costs, 

we have determined that the adjusted 

costs presented in the 2002 NESCCAF 

study represent the best available 

estimates. Subtracting the estimated fuel 

consumption reduction and costs of 

replacing a 4-speed automatic 

transmission with a 5-speed automatic 

transmission results in NHTSA’s 

projecting that CVTs could 

incrementally reduce fuel consumption 

by 3.5 percent when compared to a 

conventional 5-speed automatic 

transmission at an incremental cost of 

$100 to $139. 

Manual 6-, 7-, and 8-Speed 

Transmissions 

As with automatic transmissions, 

increasing the number of available ratios 

in a manual transmission can improve 

fuel economy by allowing the driver to 

select a ratio that optimizes engine 

operation at a given speed. Typically, 

this is achieved through adding 

additional overdrive ratios to reduce 

engine speed (which saves fuel through 

reduced pumping losses). Six-speed 

manual transmissions have already 

achieved significant market penetration, 

so manufacturers have considerable 

experience with them and the 

associated costs. For those vehicles with 

five-speed manual transmissions, an 

upgrade to a six-speed could 

incrementally reduce fuel consumption 

by 0.5 percent. Based on CBI 

submissions, which provided costs with 

a midpoint of $107, NHTSA estimates 

that 6-speed manual transmissions 

could incrementally reduce fuel 

consumption by 0.5 percent when 

compared to 5-speed automatic 

transmission at an incremental cost of 

$107. 

c. Vehicle Technologies 

Rolling Resistance Reduction 

Tire characteristics (e.g., materials, 

construction, and tread design) 

influence durability, traction control, 

vehicle handling, and comfort. They 

also influence rolling resistance—the 30 

frictional losses associated mainly with 

the energy dissipated in the deformation 

of the tires under load—and therefore, 

CO2 emissions. This technology is 

applicable to all vehicles, except for 

body-on-frame light trucks and 

performance vehicles (described in the 

next section). Based on a 2006 NAS/ 

NRC report, a 10 percent rolling 

resistance reduction would provide an 

increase in fuel economy of 1 to 2 

percent. The same report estimates a $1 

per tire cost for low rolling resistance 

tires. For four tires, our incremental 

compliance cost estimate is $6 per 

vehicle, independent of vehicle class, 

although not applicable to large trucks. 

Low Drag Brakes 

Low drag brakes reduce the sliding 

friction of disc brake pads on rotors 

when the brakes are not engaged 

because the brake shoes are pulled away 

from the rotating drum. While most 

passenger cars have already adopted 

this technology, there are indications 

that this technology is still available for 

body-on-frame trucks. According to 

confidential manufacturer data, low 

drag brakes could incrementally reduce 

fuel consumption by 1 to 2 percent at 

an incremental cost of $85 to $90. 

NHTSA has adopted these values for its 

analysis. 

Front or Secondary Axle Disconnect for 

Four-Wheel Drive Systems 

To provide shift-on-the-fly 

capabilities, many part-time four-wheel 

drive systems use some type of axle 

disconnect: Front axle disconnect in 

ladder-frame vehicles, and secondary 

(i.e., either front or rear) axle disconnect 

in unibody vehicles. Front and 

secondary axle disconnects serve two 

basic purposes. Using front axle 


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disconnect as an example, in two-wheel 

drive mode, the technology disengages 

the front axle from the front driveline so 

the front wheels do not turn the front 

driveline at road speed, saving wear and 

tear. Then, when shifting from two- to 

four-wheel drive ‘‘on the fly’’ (while 

moving), the front axle disconnect 

couples the front axle to the front 

differential side gear only when the 

transfer case’s synchronizing 

mechanism has spun the front 

driveshaft up to the same speed as the 

rear driveshaft. 

Four-wheel drive systems that have 

axle disconnect typically do not have 

either manual- or automatic-locking 

hubs. To isolate (for example) the front 

wheels from the rest of the front 

driveline, front axle disconnects use a 

sliding sleeve to connect or disconnect 

an axle shaft from the front differential 

side gear. 

This technology has been used by 

ladder-frame vehicles for some time, but 

has only started to appear on unibody 

vehicles recently. The incremental costs 

and benefits of applying front axle 

disconnect differ, depending on the 

vehicle’s type of construction. 

According to confidential manufacturer 

data, front axle disconnects for ladder 

frame vehicles could achieve 

incremental fuel consumption 

reductions of 1.5 percent at an 

incremental cost of $114, while 

secondary axle disconnects for unibody 

vehicles could achieve incremental fuel 

consumption reductions of 1 percent at 

an incremental cost of $676. NHTSA has 

adopted these estimates for its analysis. 

Aerodynamic Drag Reduction 

A vehicle’s size and shape determine 

the amount of power needed to push the 

vehicle through the air at different 

speeds. Changes in vehicle shape or 

frontal area can therefore reduce CO2

emissions. Areas for potential 

aerodynamic drag improvements 

include skirts, air dams, underbody 

covers, and more aerodynamic side 

view mirrors. NHTSA and EPA estimate 

a fleet average of 20 percent total 

aerodynamic drag reduction is 

attainable for passenger cars, whereas a 

fleet average of 10 percent reduction is 

more realistic for trucks (with a caveat 

for ‘‘high-performance’’ vehicles, 

described below). These drag reductions 

equate to increases in fuel economy of 

2 percent and 3 percent for trucks and 

cars, respectively. These numbers are in 

agreement with the technical literature 

and supported by confidential 

manufacturer information. The CBI 

submittals generally showed the RPE 

associated with these changes at less 

than $100. NHTSA and EPA estimate 

that the incremental compliance cost to 

range from $0 to $75, independent of 

vehicle class. 

Aerodynamic drag reduction 

technologies are readily available today, 

although the phase-in time required to 

distribute over a manufacturer’s fleet is 

relatively long (6 years or so). 

Weight Reduction 

The term weight reduction 

encompasses a variety of techniques 

with a variety of costs and lead times. 

These include lighter-weight materials, 

higher strength materials, component 

redesign, and size matching of 

components. Lighter-weight materials 

involve using lower density materials in 

vehicle components, such as replacing 

steel parts with aluminum or plastic. 

The use of higher strength materials 

involves the substitution of one material 

for another that possesses higher 

strength and less weight. An example 

would be using high strength alloy steel 

versus cold rolled steel. Component 

redesign is an on-going process to 

reduce costs and/or weight of 

components, while improving 

performance and reliability. An example 

would be a subsystem replacing 

multiple components and mounting 

hardware. 

The cost of reducing weight is 

difficult to determine and is dependent 

upon the methods used. For example, a 

change in design that reduces weight on 

a new model may or may not save 

money. On the other hand, material 

substitution can result in an increase in 

price per application of the technology 

if more expensive materials are used. 

For purposes of this proposed rule, 

NHTSA has considered only vehicles 

weighing greater than 5,000 pounds for 

weight reduction through materials 

substitution. Provided that those 

vehicles remain above 5,000 pounds 

weight, vehicles may realize up to 

roughly 2 percent incremental fuel 

consumption through materials 

substitution (corresponding to a 3 

percent reduction in vehicle weight) at 

incremental costs of $0.75 to $1.25 per 

pound reduced. 

d. Accessory Technologies 

Electric Power Steering 

Electric power steering (EPS) is 

advantageous over hydraulic steering in 

that it only draws power when the 

wheels are being turned, which is only 

a small percentage of a vehicle’s 

operating time. EPS may be 

implemented on many vehicles with a 

standard 12V system; however, for 

heavier vehicles, a 42V system may be 

required, which adds cost and 

complexity. 

The NAS study projected that a 12V 

EPS system could incrementally reduce 

fuel consumption by 1.5 to 2.5 percent 

at an incremental cost of $105 to $150. 

The NESCCAF study projected that a 

12V EPS could incrementally reduce 

fuel consumption by 1 percent at an 

incremental cost of $28 to $56; while 

the EEA report projected that a 12V EPS 

could incrementally reduce fuel 

consumption by 1.5 to 1.9 percent at an 

incremental cost of $70 to $90. 

According to confidential manufacturer 

data, electric power steering could 

achieve incremental fuel consumption 

reductions of 1.5 to 2.0 percent at an 

incremental cost of $118 to $197. 

NHTSA believes that these 

manufacturer estimates are more 

accurate and thus estimates that a 12V 

EPS system could incrementally reduce 

fuel consumption by 1.5 to 2 percent at 

an incremental cost of $118 to $197, 

independent of vehicle class. 

Engine Accessory Improvement 

The accessories on an engine, like the 

alternator, coolant, and oil pumps, are 

traditionally driven by the accessory 

belt. Improving the efficiency or 

outright electrification (12V) of these 

accessories (in the case of the 

mechanically driven pumps) would 

provide an opportunity to reduce the 

accessory loads on the engine. However, 

the potential for such replacement will 

be greater for vehicles with 42V 

electrical systems. Some large trucks 

also employ mechanical fans, some of 

which could also be improved or 

electrified. Additionally, there are now 

higher efficiency alternators which 

require less of an accessory load to 

achieve the same power flow to the 

battery. 

According to the NAS Report engine 

accessory improvement could achieve 

incremental fuel consumption 

reductions of 1 to 2 percent at an 

incremental cost of $124 to $166. 

Confidential manufacturer information 

is also within these ranges. The 

NESCCAF study estimated a cost of $56, 

but that estimate included only a high 

efficiency generator and did not include 

electrification of other accessories. In 

reviewing our sources for costs, we have 

determined that the adjusted costs 

presented in the 2002 NAS study, which 

ranged from $124 to $166—depending 

on vehicle class—represent the best 

available estimates. Based on the NAS 

study and confidential manufacturer 

information, NHTSA estimates that 

accessory improvement could 

incrementally reduce fuel consumption 

by 1 to 2 percent at an incremental cost 

of $124 to $166. 


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61The cost estimates are protected as confidential 

business information. 

Forty-Two Volt (42V) Electrical System 

Most vehicles today (aside from 

hybrids) operate on 12V electrical 

systems. At higher voltages, which 

appear to be under consideration to 

meet expected increases in on-board 

electrical demands, the power density of 

motors, solenoids, and other electrical 

components may increase to the point 

that new and more efficient systems, 

such as electric power steering, may be 

feasible. A 42V system can also 

accommodate an integrated starter 

generator. According to the NAS Report, 

42V engine accessory improvement 

could achieve incremental fuel 

consumption reductions of 1 to 2 

percent at an incremental cost of $194 

to $259. According to confidential 

manufacturer data, a 42V system could 

achieve incremental fuel consumption 

reductions of 0 to 4 percent at an 

incremental cost of $62 to $280. 

We believe that the state of 42V 

technology has evolved to where it is on 

par with the incremental costs and 

benefits of 12V engine accessory 

improvement. In reviewing our sources, 

we have determined that the numbers 

provided in the 2002 NAS study, which 

estimated that engine accessory 

improvement could achieve incremental 

fuel consumption reductions of 1 to 2 

percent at an incremental cost of $124 

to $166—depending on vehicle class—

represent the best available estimates for 

both 12V and 42V systems. Thus, we are 

estimating that a 42V electrical system 

could achieve incremental fuel 

consumption reductions of 1 to 2 

percent at an incremental cost of $124 

to $166. These estimates are 

independent of vehicle class and 

exclusive of improvements to the 

efficiencies or electrification of 12V 

accessories. These estimates are 

incremental to a 12V system, regardless 

of whether the 12V system has 

improved efficiency or not. 

e. Hybrid Technologies 

A hybrid describes a vehicle that 

combines two or more sources of 

propulsion energy, where one uses a 

consumable fuel (like gasoline) and one 

is rechargeable (during operation, or by 

another energy source). Hybrids reduce 

fuel consumption through three major 

mechanisms: by optimizing the 

operation of the internal combustion 

engine (through downsizing, or other 

control techniques) to operate at or near 

its most efficient point more of the time; 

by recapturing lost braking energy and 

storing it for later use; and by turning off 

the engine when it is not needed, such 

as when the vehicle is coasting or when 

stopped. 

Hybrid vehicles utilize some 

combination of the above three 

mechanisms to reduce fuel 

consumption. The effectiveness of a 

hybrid depends on the utilization of the 

above mechanisms and how 

aggressively they are pursued. Different 

hybrid concepts utilize these 

mechanisms differently, so they are 

treated separately in this analysis. 

Below is a discussion of the major 

hybrid concepts judged to be available 

for use within the timeframe of this 

rulemaking. 

Integrated Starter-Generator With IdleOff 

Integrated Starter-Generator (ISG) 

systems are the most basic of hybrid 

systems and offer mainly idle-stop 

capability. They offer the least power 

assist and regeneration capability of the 

hybrid approaches, but their low cost 

and easy adaptability to existing 

powertrains and platforms can make 

them attractive for some applications. 

ISG systems operate at around 42V and 

so have smaller electric motors and less 

battery capacity than other HEV designs 

because of their lower power demand. 

ISG systems replace the conventional 

belt-driven alternator with a belt-driven, 

higher power starter-alternator. The 

starter-alternator starts the engine 

during idle-stop operation, but often a 

conventional 12V gear-reduction starter 

is retained to ensure cold-weather 

startability. Also, during idle-stop, some 

functions such as power steering and 

automatic transmission hydraulic 

pressure are lost with conventional 

arrangements, so electric power steering 

and an auxiliary transmission pump are 

added. These components are similar to 

those that would be used in other 

hybrid designs. An ISG system could be 

capable of providing some launch assist, 

but it would be limited in comparison 

to other hybrid concepts. According to 

the NAS Report, an EEA report and 

confidential manufacturer data, ISG 

systems could achieve incremental fuel 

consumption reductions that range from 

5 to 10 percent. 

In addition, when idle-off is used (i.e., 

the petroleum fuelled engine is shut off 

during idle operation), an electric power 

steering and auxiliary transmission 

pump are added to provide for 

functioning of these systems which, in 

a traditional vehicle, were powered by 

the petroleum engine. The 2002 NAS 

study estimated the cost of these 

systems at $210 to $350 with a 12V 

electrical system and independent of 

vehicle class, while the NESCCAF study 

estimated the cost for these systems at 

$280 with a 12 Volt electrical system for 

a small car. The 2002 NAS study 

estimated the cost of these systems to be 

$210 to $350 with a 12 volt electrical 

system and independent of vehicle 

class, while the NESCCAF study 

estimated the cost for these systems of 

$280 with a 12 volt electrical system for 

a small car. Confidential manufacturer 

information provides cost estimates for 

ISGs that range from $418 to $800. We 

believe that the NAS and the NESCCAF 

estimates are still accurate for ISGs with 

a 12V system. Thus, if you add these 

cost estimates to those we estimated for 

42V systems plus associated equipment, 

which results an estimated incremental 

compliance cost of these systems, 

including the costs associated with 

upgrading to a 42 volt electrical system 

of $563 to $600, depending on vehicle 

class. 

Therefore, NHTSA estimates that ISG 

systems could achieve incremental fuel 

consumption reductions of 5 to 10 

percent at incremental costs of $563 to 

$600, depending on vehicle class (this 

includes the costs associated with 

upgrading to a 42 volt electrical system). 

Integrated Motor Assist (IMA)/Integrated 

Starter-Alternator-Dampener (ISAD) 

Hybrid 

Honda is the only manufacturer that 

uses Integrated Motor Assist (IMA), 

which utilizes a thin axial electric motor 

bolted to the engine’s crankshaft and 

connected to the transmission through a 

torque converter or clutch. This electric 

motor acts as both a motor for helping 

to launch the vehicle and a generator for 

recovering energy while slowing down. 

It also acts as the starter for the engine 

and the electrical system’s main 

generator. Since it is rigidly fixed to the 

engine, if the motor turns, the engine 

must turn also, but combustion does not 

necessarily need to occur. The Civic 

Hybrid uses cylinder deactivation on all 

four cylinders for decelerations and 

some cruise conditions. 

The main advantage of the IMA 

system is that it is relatively low cost 

and adapts readily to conventional 

vehicles and powertrains, while 

providing excellent efficiency gains. 

Packaging space is a concern for the 

physically longer engine-motortransmission assembly as well as the 

necessary battery pack, cabling and 

power electronics. According to EPA 

test data and confidential manufacturer 

data, the IMA system could achieve 

incremental fuel consumption 

reductions of 3.5 to 8.5 percent.61

NHTSA has adopted these estimates for 

its analysis. 


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62 GM’s cost estimates are protected as 

confidential business information. 

The 2002 NAS study did not consider 

this technology while the NESCCAF 

study estimated the cost for these 

systems at $2,310 to $2,940 for a small 

car and large car, respectively. We have 

used these estimates combined with 

confidential manufacturer data as the 

basis for our incremental compliance 

costs of $1,636 for the small car and 

$2,274 for the large car, expressed in 

2006 dollars. We have not estimated 

incremental compliance costs for the 

other vehicle classes because we do not 

believe those classes would use this 

technology and would, instead, use the 

hybrid technologies discussed below. 

2-Mode Hybrids 

GM, DaimlerChrysler, and BMW have 

formed a joint venture to develop a new 

HEV system based on HEV transmission 

technology originally developed by 

GM’s Allison Transmission Division for 

heavy-duty vehicles like city buses. This 

technology uses an adaptation of a 

conventional stepped-ratio automatic 

transmission by replacing some of the 

transmission clutches with two electric 

motors, which makes the transmission 

act like a CVT. Like Toyota’s Power 

Split design, these motors control the 

ratio of engine speed to vehicle speed. 

But unlike the Power Split system, 

clutches allow the motors to be 

bypassed, which improves both the 

transmission’s torque capacity for 

heavy-duty applications and fuel 

economy at highway speeds. According 

to confidential manufacturer data, 2- 

mode hybrids could achieve 

incremental fuel consumption 

reductions of 25 to 40 percent. NHTSA 

estimates that 2-mode hybrids could 

achieve fuel reductions of 3.5 percent to 

7 percent incremental to an Integrated 

Motor Assist (IMA)/Integrated StarterAlternator-Dampener (ISAD) Hybrid. 

The 2002 NAS study did not consider 

this technology, while the NESCCAF 

study estimated the costs to range from 

$4,340 to $5,600, depending on vehicle 

class. These estimates are not 

incremental to an Integrated Motor 

Assist (IMA)/Integrated StarterAlternator-Dampener (ISAD) Hybrid. To 

accurately project the cost of 2-mode 

hybrids when they were applied to 

midsize and large cars, we subtracted 

the estimated costs of an Integrated 

Motor Assist (IMA)/Integrated StarterAlternator-Dampener (ISAD) Hybrid. 

We have used the NESCCAF estimates 

as the basis for our incremental 

compliance costs of $1,501 to $5,127 in 

2006 dollars, incremental to an 

Integrated Motor Assist (IMA)/ 

Integrated Starter-Alternator-Dampener 

(ISAD) Hybrid or an ISG system 

depending on vehicle class.62 We have 

not estimated incremental compliance 

costs for small cars because we believe 

that this ISG or IMA/ISAD technology is 

a better fit for small cars. 

Power Split Hybrid 

Toyota’s Hybrid Synergy Drive system 

as used in the Prius is a completely 

different approach than Honda’s IMA 

system and uses a ‘‘Power Split’’ device 

in place of a conventional transmission. 

The Power Split system replaces the 

vehicle’s transmission with a single 

planetary gear and a motor/generator. A 

second, more powerful motor/generator 

is permanently connected to the 

vehicle’s final drive and always turns 

with the wheels. The planetary gear 

splits the engine’s torque between the 

first motor/generator and the drive 

motor. The first motor/generator uses its 

engine torque to either charge the 

battery or supply additional power to 

the drive motor. The speed of the first 

motor/generator determines the relative 

speed of the engine to the wheels. In 

this way, the planetary gear allows the 

engine to operate completely 

independently of vehicle speed, much 

like a CVT. 

The Power Split system allows for 

outstanding fuel economy in city 

driving. The vehicle also avoids the cost 

of a conventional transmission, 

replacing it with a much simpler single 

planetary and motor/generator. 

However, it is less efficient at highway 

speeds due to the requirement that the 

first motor/generator must be constantly 

spinning at a relatively high speed to 

maintain the correct ratio. Also, load 

capacity is limited to the first motor/ 

generator’s capacity to resist the 

reaction torque of the drive train. 

A version of Toyota’s Power Split 

system is also used in the Lexus RX400h 

and Toyota Highlander sport utility 

vehicles. This version has more 

powerful motor/generators to handle 

higher loads and also adds a third 

motor/generator on the rear axle of fourwheel-drive models. This provides the 

vehicle with four wheel drive capability 

and four wheel regenerative braking 

capability. Ford’s eCVT system used in 

the hybrid Escape is another version of 

the Power Split system, but four-wheeldrive models use a conventional transfer 

case and drive shaft to power the rear 

wheels. 

Other versions of this system are used 

in the Lexus GS450h and Lexus LS600h 

luxury sedans. These systems have 

modifications and additional hardware 

for sustained high-speed operation and/ 

or all-wheel-drive capability. However, 

the Power Split system isn’t planned for 

usage on full-size trucks and SUVs due 

to its limited ability to provide the 

torque needed by these vehicles. It’s 

anticipated that full-size trucks and 

SUVs would use the 2-mode hybrid 

system. The 2002 NAS study didn’t 

consider this technology, while the 

NESCCAF study estimated the 

incremental costs at to be $3,500 prior 

to any cost adjustment. Based on the 

NESCCAF study and fuel economy test 

data from EPA’s certification database 

which shows these systems being 

capable of reducing fuel consumption 

by 25 to 35 percent, NHTSA estimates 

that Power Split hybrids can achieve 

incremental fuel consumption 

reductions of 25 to 35 percent over 

conventionally powered vehicles at an 

incremental cost of $3,700 to $3,850. 

Because NHTSA applies technologies 

incrementally to the technologies 

preceding them on our decision trees, 

the incremental fuel consumption 

reductions for Power Split hybrids are 

estimated to be 5 to 6.5 percent 

incremental to 2-Mode Hybrids (the 

technology that precedes Power Split 

hybrids on the decision tree), because 

the technologies applied prior to and 

including 2-Mode hybrids are estimated 

to have incremental fuel consumption 

reductions of 20 to 28.5 percent over 

conventionally powered vehicles. The 

technologies discussed below were not 

projected for use during the MY 2011 to 

2015 timeframes because NHTSA isn’t 

aware that any manufacturer is 

including these technologies in any 

vehicle for which we have production 

plans for nor has any manufacturer 

publicly stated that any of these 

technologies will definitively be 

included on future products. If NHTSA 

receives such information regarding one 

or more technologies, it will revisit this 

decision for the final rule. NHTSA is 

including its discussion of these 

technologies and their estimated costs 

and fuel consumption reductions as a 

reference for commenters and in 

anticipation of their possible inclusion 

in the final rule. 

Variable Compression Ratio 

A spark-ignited engine’s specific 

power is limited by the engine’s 

compression ratio, which is, in turn, 

currently limited by the engine’s 

susceptibility to knock, particularly 

under high load conditions. Engines 

with variable compression ratio (VCR) 

improve fuel economy by the use of 

higher compression ratios at lower loads 

and lower compression ratios under 

higher loads. The NAS Report projected 

that VCR could incrementally reduce 


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fuel consumption by 2 to 6 percent over 

4-valve VVT at an incremental cost of 

$218 to $510. NHTSA has no 

information which suggests that VCR 

will be included on any vehicles during 

the MY 2011–2015 timeframe, thus 

NHTSA does not use this technology in 

its analysis. Additionally, no updates to 

these estimates were sought. 

Lean-Burn Gasoline Direct Injection 

Technology 

One way to improve dramatically an 

engine’s thermodynamic efficiency is by 

operating at a lean air-fuel mixture 

(excess air). Fuel system improvements, 

changes in combustion chamber design 

and repositioning of the injectors have 

allowed for better air/fuel mixing and 

combustion efficiency. There is 

currently a shift from wall-guided 

injection to spray guided injection, 

which improves injection precision and 

targeting towards the spark plug, 

increasing lean combustion stability. 

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

be a possibility in North America. 

However, a key technical requirement 

for lean-burn GDI engines to meet EPA’s 

Tier 2 NOX emissions levels is the 

availability of low-sulfur gasoline, 

which is projected to be unavailable 

during MY 2011–2015. 

According to the NESCCAF report 

and confidential manufacturer data 

NHTSA estimates that lean-burn GDI 

engines could incrementally reduce fuel 

consumption from 9 to 16 percent at an 

incremental cost of $500 to $750 

compared to a port-fueled 

(stoichiometric) engine. NHTSA did not 

project the use of this technology during 

the time frame covered by this proposal, 

due to large uncertainties surrounding 

the availability of low-sulfur gasoline. 

Nonetheless, we have estimated the 

incremental compliance cost for these 

systems at $750, independent of vehicle 

class, and incremental to a 

stoichiometric GDI engine. 

Homogeneous Charge Compression 

Ignition 

Homogeneous charge compression 

ignition (HCCI), also referred to as 

controlled auto ignition (CAI), is an 

alternate engine operating mode that 

does not rely on a spark event to initiate 

combustion. The principles are more 

closely aligned with a diesel 

combustion cycle, in which the 

compressed charge exceeds a 

temperature and pressure necessary for 

spontaneous ignition. The resulting 

burn is much shorter in duration with 

higher thermal efficiency. 

An HCCI engine has inherent 

advantages in its overall efficiency for 

several reasons. An extremely lean fuel/ 

air charge increases thermodynamic 

efficiency. Shorter combustion times 

and higher EGR tolerance permit very 

high compression ratios (which also 

increase thermodynamic efficiency). 

Additionally, pumping losses are 

reduced because the engine can run 

unthrottled. 

However, due to the nature of its 

combustion process, HCCI is difficult to 

control, requiring in-cylinder pressure 

sensors and very fast engine control 

logic to optimize combustion timing, 

especially considering the variable 

nature of operating conditions seen in a 

vehicle. To be used in a commercially 

acceptable vehicle application, an HCCIequipped engine would most likely be 

‘‘dual-mode,’’ in which HCCI operation 

is complemented with a traditional SI 

combustion process at idle and at higher 

loads and speeds. 

Until recently, HCCI technology was 

considered to still be in the research 

phase. However, several manufacturers 

have made public statements about the 

viability of incorporating HCCI into 

production vehicles over the next 10 

years. The NESCCAF study estimated 

the cost to range from $560 to $840, 

depending on vehicle class, including 

the costs for a stoichiometric GDI 

system with DVVL. We have based our 

estimated incremental compliance cost 

on the NESCCAF estimates and, after 

subtracting out the estimated 

incremental cost for a stoichiometric 

GDI system with DVVL, we estimate the 

incremental cost for HCCI to be from 

$263 to $685, depending on vehicle 

class. This estimated incremental 

compliance cost is incremental to a 

stoichiometric GDI engine. 

According to the NESCCAF report 

and confidential manufacturer data, 

NHTSA estimates that gasoline HCCI/ 

GDI dual-mode engines could 

incrementally reduce fuel consumption 

from 10 to 12 percent at an incremental 

cost of $233 to $606, compared to a 

comparable GDI engine. 

Advanced CVT 

Advanced CVTs have the ability to 

deliver higher torques than existing 

CVTs and have the potential for broader 

market penetration. These new designs 

incorporate toroidal friction elements or 

cone-and-ring assemblies with varying 

diameters. According to the NAS 

Report, advanced CVT could 

incrementally reduce fuel consumption 

by up to 2 percent at an incremental 

cost of $364 to $874. NHTSA has no 

information which suggests that VCR 

will be included on any vehicles during 

the MY 2011–2015 timeframe, thus 

NHTSA does not use this technology in 

its analysis. Additionally, no updates to 

these estimates were sought. 

Plug-in Hybrids 

Plug-In Hybrid Electric Vehicles 

(PHEVs) are very similar to hybrid 

electric vehicles, but with three 

significant functional differences. The 

first is the addition of a means to charge 

the battery pack from an outside source 

of electricity (usually the electric grid). 

Second, a PHEV would have a larger 

battery pack with more energy storage, 

and a greater capability to be 

discharged. Finally, a PHEV would have 

a control system that allows the battery 

pack to be significantly depleted during 

normal operation. 

Deriving some of their propulsion 

energy from the electric grid provides 

several advantages for PHEVs. PHEVs 

offer a significant opportunity to replace 

petroleum used for transportation 

energy with domestically-produced 

electricity. The reduction in petroleum 

usage does, of course, depend on the 

amount of electric drive the vehicle is 

capable of under its duty cycle. 

The fuel consumption reduction 

potential of PHEVs depends on many 

factors, the most important being the 

electrical capacity designed into the 

battery pack. To estimate the fuel 

consumption reduction potential of 

PHEVs, EPA has developed an in-house 

vehicle energy model (PEREGRIN) 

which is based on the PERE (Physical 

Emission Rate Estimator) physics-based 

model used as a fuel consumption input 

for EPA’s MOVES mobile source 

emissions modelB. 

EPA modeled the PHEV small car, 

large car, minivan and small trucks 

using parameters from a midsize car 

similar to today’s hybrids and scaled to 

each vehicle’s weight. The large truck 

PHEV was modeled separately assuming 

very little engine downsizing. Each 

PHEV was assumed to have enough 

battery capacity for a 20-mile-equivalent 

all-electric range and a power 

requirement to provide similar 

performance to a hybrid vehicle. A 

twenty mile range was selected because 

it offers a good compromise for vehicle 

performance, weight, battery packaging 

and cost. 

To calculate the total energy use of a 

PHEV, a vehicle can be thought of as 

operating in two distinct modes, electric 

(EV) mode, and hybrid (HEV) mode. The 

energy consumed during EV operation 

can be accounted for and calculated in 

terms of gasoline-equivalent MPG by 

using 10CFR474, Electric and Hybrid 

Vehicle Research, Development, and 

Demonstration Program; PetroleumEquivalent Fuel Economy Calculation. 

The EV mode fuel economy can then be 


rwilkins on PROD1PC63 with PROPOSALS2
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63This estimate is based on the EPA test cycle. 

We are unable to provide cost estimates for PHEV 

technology due to the great amount of uncertainty in deciding the appropriate battery chemistry to be 

used. 

combined with the HEV mode fuel 

economy using the Utility Factor 

calculation in SAE J1711 to determine a 

total MPG value for the vehicle. 

Calculating a total fuel consumption 

reduction based on model outputs, 

gasoline-equivalent calculations, and 

the Utility Factor calculations, results in 

a 28 percent fuel consumption 

reduction for small cars, large cars, 

minivans, and small trucks and a 31 

percent fuel consumption reduction for 

large trucks. 

The fuel consumption reduction 

potential of PHEVs will vary based on 

the electrical capacity designed into the 

battery pack. Assuming a 20-mile ‘‘allelectric range’’ design, a PHEV might 

incrementally reduce fuel consumption 

by 28 to 31 percent.63 Based on 

discussions with EPA, we have 

estimated the incremental cost of PHEVs 

to be from $4,500 to $10,200, depending 

on vehicle class. 

However, all indications suggest that 

any PHEVs that may be available within 

the time frame of this rulemaking will 

be concept vehicles and not production 

vehicles. Additionally, NHTSA is 

unaware of the existence of any batteries 

that are deemed acceptable for the 

performance characteristics necessary 

for a plug-in hybrid. Therefore, although 

we discuss them here, the model does 

not apply them. 

NHTSA would like to note that if it 

receives new and/or updated 

information from manufacturers 

regarding the likelihood of PHEV 

production during the MY 2011 to 2015 

timeframe, it will make every effort to 

include PHEVs as a technology in its 

final rule. To enable the possible 

inclusion of PHEVs as a technology, 

NHTSA would also have to configure 

the Volpe model to account for the 

estimated source(s) that would supply 

the electricity for electrical grid 

charging of the battery. Work has started 

on this effort, but has not yet been 

completed. 

Tables III–1 through III–3 below 

summarize for each of the 10 classes of 

vehicles the cost and effectiveness 

assumptions used in this rulemaking as 

well as the year of availability of each 

technology. The agency seeks comments 

on our assumptions and the cost and 

effectiveness estimates provided. 

TABLE III–1.—TECHNOLOGY COST ESTIMATES

Technologies 

Vehicle technology incremental retail price equivalent per vehicle ($) by vehicle class 

Subcompact 

car 

Compact car Midsize 

car 

Large 

car 

Small 

pickup 

Small 

SUV Minivan Midsize SUV 

Large 

pickup 

Large 

SUV 

Low friction lubricants—incremental to base engine .... 3 3 3 3 3 3 3 3 3 3 

Engine friction reduction—incremental to base engine 0–84 0–84 0–126 0–126 0–126 0–126 0–126 0–126 0–168 0–168 

Overhead Cam Branch ................................................. .............. .............. .............. .............. .............. .............. .............. .............. .............. ..............

VVT—intake cam phasing ............................................ 59 59 119 119 119 119 119 119 119 119 

VVT—coupled cam phasing ......................................... 59 59 119 119 119 119 119 119 119 119 

VVT—dual cam phasing ............................................... 89 89 209 209 209 209 209 209 209 209 

Cylinder deactivation ..................................................... n.a. n.a. 203 203 203 203 203 203 229 229 

Discrete VVLT ............................................................... 169 169 246 246 246 246 246 246 322 322 

Continuous VVLT .......................................................... 254 254 466 466 466 466 466 466 508 508 

Overhead Valve Branch ................................................ .............. .............. .............. .............. .............. .............. .............. .............. .............. ..............

Cylinder deactivation ..................................................... n.a. n.a. 203 203 203 203 203 203 229 229 

VVT—coupled cam phasing ......................................... 59 59 59 59 59 59 59 59 59 59 

Discrete VVLT ............................................................... 169 169 246 246 246 246 246 246 322 322 

Continuous VVLT (includes conversion to Overhead 

Cam) .......................................................................... 599 599 1262 1262 1262 1262 1262 1262 1380 1380 

Camless valvetrain (electromagnetic) ........................... 336–673 336–673 336–673 336–673 336–673 336–673 336–673 336–673 336–673 336–673 

GDI—stoichiometric ...................................................... 122–420 122–420 204–525 204–525 204–525 204–525 204–525 204–525 228–525 228–525 

GDI—lean burn ............................................................. 750 750 750 750 750 750 750 750 750 750 

Gasoline HCCI dual-mode ............................................ 263 263 390 390 390 390 390 390 685 685 

Turbocharge & downsize .............................................. 690 690 120 120 120 120 120 120 810 810 

Diesel—Lean NOX trap ................................................. 1586 1586 .............. .............. .............. .............. .............. .............. .............. ..............

Diesel—urea SCR ......................................................... .............. .............. 2051 2051 2411 2411 2126 2411 2261 2261 

Aggressive shift logic .................................................... 38 38 38 38 38 38 38 38 38 38 

Early torque converter lockup ....................................... 30 30 30 30 30 30 30 30 30 30 

5-speed automatic ......................................................... 76–167 76–167 76–167 76–167 76–167 76–167 76–167 76–167 76–167 76–167 

6-speed automatic ......................................................... 76–187 76–187 76–187 76–187 76–187 76–187 76–187 76–187 76–187 76–187 

6-speed AMT ................................................................. 141 141 141 141 141 141 141 141 141 141 

6-speed manual ............................................................ 107 107 107 107 107 107 107 107 107 107 

CVT ............................................................................... 100 100 139 139 n.a. 139 139 139 n.a. n.a. 

Stop-Start with 42 volt system ...................................... 563 563 600 600 600 600 600 600 600 600 

IMA/ISA/BSG (includes engine downsize) .................... 1636 1636 2274 2274 n.a n.a n.a n.a n.a n.a 

2-Mode hybrid electric vehicle ...................................... n.a. n.a. 4655 4655 4655 4655 4655 4655 6006 6006 

Power-split hybrid electric vehicle (P–S HEV) .............. 3700–

3850 

3700–

3850 

3700–

3850 

3700–

3850 

3700–

3850 

3700–

3850 

3700–

3850 

3700–

3850 

.............. ..............

Plug-in hybrid electric vehicle (PHEV) .......................... 4500 4500 6750 6750 6750 6750 6750 6750 10200 10200 

Improved high efficiency alternator & electrification of 

accessories (12 volt) ................................................. 124–166 124–166 124–166 124–166 124–166 124–166 124–166 124–166 124–166 124–166 

Electric power steering (12 or 42 volt) .......................... 118–197 118–197 118–197 118–197 118–197 118–197 118–197 118–197 118–197 118–197 

Improved high efficiency alternator & electrification of 

accessories (42 volt) ................................................. 124–166 124–166 124–166 124–166 124–166 124–166 124–166 124–166 124–166 124–166 

Aero drag reduction (20% on cars, 10% on trucks) ..... 0–75 0–75 0–75 0–75 0–75 0–75 0–75 0–75 0–75 0–75 

Low rolling resistance tires (10%) ................................. 6 6 6 6 6 6 6 6 .............. ..............

Low drag brakes (ladder frame only) ............................ .............. .............. .............. .............. 87 87 .............. 87 87 87 

Secondary axle disconnect (unibody only) ................... 676 676 676 676 676 676 676 676 .............. ..............

Front axle disconnect (ladder frame only) .................... .............. .............. .............. .............. 114 114 .............. 114 114 114 

Weight reduction (1%)—above 5,000 lbs only ............. .............. .............. .............. .............. .............. .............. .............. .............. 1 1

Weight reduction (2%)—incremental to 1% .................. .............. .............. .............. .............. .............. .............. .............. .............. 1 1


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24380 Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 

TABLE III–1.—TECHNOLOGY COST ESTIMATES—Continued 

Technologies 

Vehicle technology incremental retail price equivalent per vehicle ($) by vehicle class 

Subcompact car 

Compact car Midsize car Large 

car 

Small 

pickup 

Small 

SUV Minivan Midsize SUV 

Large 

pickup 

Large 

SUV 

Weight reduction (3%)—incremental to 2% .................. .............. .............. .............. .............. .............. .............. .............. .............. 2 2

1 2/pound. 

2 3/pound. 

TABLE III–2.—TECHNOLOGY PERCENT EFFECTIVENESS ESTIMATES

Technologies 

Vehicle technology incremental fuel consumption reduction (%) by vehicle class 

Subcompact car 

Compact car Midsize car Large 

car 

Small 

pickup 

Small 

SUV Minivan Midsize SUV 

Large 

pickup 

Large 

SUV 

Low friction lubricants—incremental to base engine .... 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 

Engine friction reduction—incremental to base engine 1–3 1–3 1–3 1–3 1–3 1–3 1–3 1–3 1–3 1–3 

Overhead Cam Branch 

VVT—intake cam phasing ............................................ 2 2 1 1 1 1 1 1 2 2 

VVT—coupled cam phasing ......................................... 1 1 3 3 2 2 1 1 2 2 

VVT—dual cam phasing ............................................... 1 1 3 3 1 1 1 1 2 2 

Cylinder deactivation ..................................................... n/a n/a 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 

Discrete VVLT ............................................................... 3 3 1.5 1.5 1.5 1.5 0.5 0.5 1.5 1.5 

Continuous VVLT .......................................................... 4 4 3.5 3.5 2.5 2.5 1.5 1.5 2.5 2.5 

Overhead Valve Branch 

Cylinder deactivation ..................................................... n/a n/a 6 6 6 6 6 6 6 6 

VVT—coupled cam phasing ......................................... 3 3 2.5 2.5 1.5 1.5 0.5 0.5 2.5 2.5 

Discrete VVLT ............................................................... 1.5 1.5 1.5 1.5 1.5 1.5 0.5 0.5 1.5 1.5 

Continuous VVLT (includes conversion to Overhead 

Cam) .......................................................................... 2.5 2.5 3.5 3.5 2.5 2.5 1.5 1.5 2.5 2.5 

Camless valvetrain (electromagnetic) ........................... 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 

GDI—stoichiometric ...................................................... 1–2 1–2 1–2 1–2 1–2 1–2 1–2 1–2 1–2 1–2 

GDI—lean burn ............................................................. — — — — — — — — — —

Gasoline HCCI dual-mode ............................................ 10–12 10–12 10–12 10–12 10–12 10–12 10–12 10–12 10–12 10–12 

Turbocharge & Downsize .............................................. 5.0–7.5 5.0–7.5 5.0–7.5 5.0–7.5 5.0–7.5 5.0–7.5 5.0–7.5 5.0–7.5 5.0–7.5 5.0–7.5 

Diesel—Lean NOx trap ................................................. 11.5 11.5 n/a n/a n/a n/a n/a n/a n/a n/a 

Diesel—urea SCR ......................................................... n/a n/a 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 

Aggressive shift logic .................................................... 1–2 1–2 1–2 1–2 1–2 1–2 1–2 1–2 1–2 1–2 

Early torque converter lockup ....................................... 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 

5-speed automatic ......................................................... 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 

6-speed automatic ......................................................... 0.5–2.5 0.5–2.5 0.5–2.5 0.5–2.5 0.5–2.5 0.5–2.5 0.5–2.5 0.5–2.5 0.5–2.5 0.5–2.5 

6-speed AMT ................................................................. 4.5–7.5 4.5–7.5 4.5–7.5 4.5–7.5 4.5–7.5 4.5–7.5 4.5–7.5 4.5–7.5 4.5–7.5 4.5–7.5 

6-speed manual ............................................................ 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 

CVT ............................................................................... 3.5 3.5 3.5 3.5 n/a 3.5 3.5 3.5 n/a n/a 

Stop-Start with 42 volt system ...................................... 7.5 7.5 7.5 7.5 7.5 7.5 7.5 7.5 7.5 7.5 

IMA/ISA/BSG (includes engine 

downsize) ................................................................... 8.5 8.5 3.5 3.5 n/a n/a n/a n/a n/a n/a 

2-Mode hybrid electric vehicle ...................................... n/a n/a 3.5 3.5 7 7 7 7 3.5 3.5 

Power-split hybrid electric vehicle (P–S HEV) .............. 5 5 6.5 6.5 6.5 6.5 6.5 6.5 n/a n/a 

Plug-in hybrid electric vehicle (PHEV) .......................... 28 28 28 28 28 28 28 28 31 31 

Improved high efficiency alternator & electrification of 

accessories (12 volt) ................................................. 1–2 1–2 1–2 1–2 1–2 1–2 1–2 1–2 1–2 1–2 

Electric power steering (12 or 42 volt) .......................... 1.5 1.5 1.5–2 1.5–2 2 2 2 2 2 2 

Improved high efficiency alternator & electrification of 

accessories (42 volt) ................................................. 1–2 1–2 1–2 1–2 1–2 1–2 1–2 1–2 1–2 1–2 

Aero drag reduction (20% on cars, 10% on trucks) ..... 3 3 3 3 2 2 3 3 2 2 

Low rolling resistance tires (10%) ................................. 1–2 1–2 1–2 1–2 1–2 1–2 1–2 1–2 n/a n/a 

Low drag brakes (ladder frame only) ............................ n/a n/a n/a n/a 1 1 n/a n/a 1 1 

Secondary axle disconnect (unibody only) ................... 1 1 1 1 1 1 1 1 n/a n/a 

Front axle disconnect (ladder frame only) .................... n/a n/a n/a n/a 1.5 1.5 n/a n/a 1.5 1.5 

Weight reduction (1%)—above 5,000 lbs only ............. n/a n/a n/a n/a n/a n/a n/a n/a 0.7 0.7 

Weight reduction (2%)—incremental to 1% .................. n/a n/a n/a n/a n/a n/a n/a n/a 0.7 0.7 

Weight reduction (3%)—incremental to 2% .................. n/a n/a n/a n/a n/a n/a n/a n/a 0.7 0.7 


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Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 24381 

64NAS Report, p. 151. 

65 Id. 

66U.S. Department of Energy, Energy Information 

Administration, Transportation Sector Module of 

the National Energy Modeling System: Model 

Documentation 2007, May 2007, Washington, DC, 

DOE/EIA–M070(2007), pp. 29–30. 

67This tool is a simple spreadsheet model that 

represents energy consumption in terns of average 

performance over the fuel economy test procedure, 

rather than explicitly analyzing specific drive 

cycles. The tool begins with an apportionment of 

fuel consumption across several loss mechanisms, 

and accounts for the average extent to which 

different technologies affect these loss mechanisms, 

using estimates of engine and motor characteristics 

and other variables that are averaged over a driving 

cycle. 

68EPA contracted with Ricardo, Inc. (an 

independent consulting firm) to study the potential 

effectiveness of carbon dioxide-reducing (and thus, 

fuel economy-improving) vehicle technologies. The 

Ricardo study is available in the docket for this 

NPRM. 

TABLE III–3.—YEAR OF AVAILABILITY

Technologies Year of 

availability 

Low friction lubricants—incremental to base engine.Present. 

Engine friction reduction—incremental to base engine.Present. 

Overhead Cam Branch 

VVT—intake cam phasing.Present. 

VVT—coupled cam phasing.Present. 

VVT—dual cam phasing Present. 

Cylinder deactivation ...... Present. 

Discrete VVLT ................. Present. 

Continuous VVLT ............ Present. 

Overhead Valve Branch 

Cylinder deactivation ...... Present. 

VVT—coupled cam phasing.Present. 

Discrete VVLT ................. Present. 

Continuous VVLT (includes conversion to 

Overhead Cam).

Present. 

Camless valvetrain (electromagnetic).2020. 

GDI—stoichiometric ............... Present. 

GDI—lean burn ...................... 2020. 

Gasoline HCCI dual-mode ..... 2016. 

Turbocharging & Downsizing 2010. 

Diesel—Lean NOX trap .......... 2010. 

Diesel—urea SCR .................. 2010. 

Aggressive shift logic ............. Present. 

Early torque converter lockup Present. 

5-speed automatic ................. Present. 

6-speed automatic ................. Present. 

6-speed AMT ......................... 2010. 

6-speed manual ..................... Present. 

CVT ........................................ Present. 

Stop-Start with 42 volt system 2014. 

IMA/ISA/BSG (includes engine downsize).2014. 

2-Mode hybrid electric vehicle 2014. 

Power-split hybrid electric vehicle (P–S HEV).2014. 

Full-Series hydraulic hybrid ... NA. 

Plug-in hybrid electric vehicle 

(PHEV).

NA. 

Full electric vehicle (EV) ........ NA. 

Improved high efficiency alternator & electrification of accessories (12 volt).Present. 

Electric power steering (12 or 

42 volt).

Present. 

Improved high efficiency alternator & electrification of accessories (42 volt).Present. 

Aero drag reduction (20% on 

cars, 10% on trucks).

Present. 

Low rolling resistance tires 

(10%).

Present. 

Low drag brakes (ladder 

frame only).

Present. 

Secondary axle disconnect 

(unibody only).

2012. 

Front axle disconnect (ladder 

frame only).

Present. 

Weight reduction (1%)—

above 6,000 lbs only.

Present. 

Weight reduction (2%)—incremental to 1%.Present. 

Weight reduction (3%)—incremental to 2%.Present. 

C. Technology Synergies 

When two or more technologies are 

added to a particular vehicle model to 

improve its fuel efficiency, the resultant 

fuel consumption reduction may 

sometimes be higher or lower than the 

product of the individual effectiveness 

values for those items. This may occur 

because one or more technologies 

applied to the same vehicle partially 

address the same source or sources of 

engine or vehicle losses. Alternately, 

this effect may be seen when one 

technology shifts the engine operating 

points, and therefore increases or 

reduces the fuel consumption reduction 

achieved by another technology or set of 

technologies. The difference between 

the observed fuel consumption 

reduction associated with a set of 

technologies and the product of the 

individual effectiveness values in that 

set is sometimes referred to as a 

‘‘synergy.’’ Synergies may be positive 

(increased fuel consumption reduction 

compared to the product of the 

individual effects) or negative 

(decreased fuel consumption reduction). 

The NAS committee which authored 

the 2002 Report was aware of 

technology synergies and considered 

criticisms as part of the peer-review 

process that its analysis was ‘‘judgmentsimplified,’’ but concluded overall that 

its approach was ‘‘sufficiently rigorous’’

for purposes of the report.64 After 

examining its analysis again, the 

committee stated that ‘‘* * * the path 1 

and path 2 estimate average fuel 

consumption improvements * * * 

appear quite reasonable, although the 

uncertainty in the analysis grows as 

more technology features are 

considered.’’65 In essence, as more 

technology features are considered, the 

features are more likely to overlap and 

result in synergies. Because NAS did 

not expect vehicle manufacturers to 

reach ‘‘path 3’’ in the timeframe 

considered, it did not concern itself 

deeply with the effect of technology 

synergies in its analysis. 

NHTSA’s rulemaking regarding CAFE 

standards for MY 2008–MY 2011 light 

trucks made significant use of NAS’

‘‘path 2’’ estimates of the effectiveness 

and cost of available technologies. In 

part because its analysis did not extend 

to the more aggressive ‘‘path 3,’’ the 

agency concluded that the NAS-based 

multiplicative approach it followed 

when aggregating these technologies 

was reasonable. In contrast, the agency’s 

current proposal is based on an analysis 

that includes a broader range of 

technologies than was considered by 

NAS in 2001 and 2002. Also, the extent 

to which technologies are included in 

the current analysis is more consistent 

with NAS’ prior ‘‘path 3’’ approach. 

Therefore, the agency’s current analysis 

uses estimated ‘‘synergies’’ to address 

the uncertainties mentioned in the 2002 

NAS report. 

The Volpe model has been modified 

to estimate the interactions of 

technologies using estimates of 

incremental synergies associated with a 

number of technology pairs identified 

by NHTSA, Volpe Center, and EPA staff. 

The use of discrete technology pair 

incremental synergies is similar to that 

in DOE’s National Energy Modeling 

System (NEMS).66 Inputs to the Volpe 

model incorporate NEMS-identified 

pairs, as well as additional pairs from 

the set of technologies considered in the 

Volpe model. However, to maintain an 

approach that was consistent with the 

technology sequencing developed by 

NHTSA, Volpe Center, and EPA staff, 

new incremental synergy estimates for 

all pairs were obtained from a first-order 

‘‘lumped parameter’’ analysis tool 

created by EPA.67 Results of this 

analysis were generally consistent with 

those of full-scale vehicle simulation 

modeling performed by Ricardo, Inc.68

NHTSA’s analysis applies these 

incremental synergy values, obtained 

from the tool using baseline passenger 

car engine and vehicle inputs, to all 

vehicle classes. 

Incremental synergy values are 

specified in Volpe model input files in 

two ways: as part of the incremental 

effectiveness values table (same path 

technologies) and in a separate 

incremental synergies table (separate 

path technologies). In the case of same 

path technologies, each technology’s 

incremental effectiveness value was 

obtained from the technical literature 

and manufacturers’ submitted 

information, and then the sum of all 


rwilkins on PROD1PC63 with PROPOSALS2
24382 Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 

69 In other words, this would mean having the 

Volpe model run a full vehicle simulation every 

time the Volpe model is evaluating the potential 

effect of applying a specific technology to a specific 

vehicle model. 

70This approach was proposed in a paper 

criticizing NAS’ approach to synergies in the 2001–

02 peer-review process for the NAS Report. See 

Patton, et al., ‘‘Aggregating Technologies for 

Reduced Fuel Consumption: A Review of the 

Technical Content in the 2002 National Research 

Council Report on CAFE’’, SAE 2002–01–0628, 

March 2002. 

incremental synergies associated with 

that technology and each technology 

located higher on the same path was 

subtracted to determine the incremental 

effectiveness. For example, all engine 

technologies take into account 

incremental synergy factors of preceding 

engine technologies; all transmission 

technologies take into account 

incremental synergy factors of preceding 

transmission technologies. These factors 

are expressed in the fuel consumption 

improvement factors in the input files 

used by the Volpe model. 

For applying incremental synergy 

factors in separate path technologies, 

the Volpe model uses an input table 

which lists technology pairings and 

incremental synergy factors associated 

with those pairings, most of which are 

between engine technologies and 

transmission technologies. When a 

technology is applied to a vehicle by the 

Volpe model, all instances of that 

technology in the incremental synergy 

table which match technologies already 

applied to the vehicle (either preexisting or previously applied by the 

Volpe model) are summed and applied 

to the fuel consumption improvement 

factor of the technology being applied. 

When the Volpe model applies 

incremental synergies, the fuel 

consumption improvement factors 

cannot be reduced below zero. 

Incremental synergy values were 

calculated assuming the prior 

application (implying succession in 

some cases) of all technologies located 

higher along both paths than the pair 

considered. This is usually a true 

reflection of a given vehicle’s equipment 

at any point in the model run and thus 

the method is expected to produce 

reasonable results in most cases. 

NHTSA considered other methods for 

estimating interactions between 

technologies. For example, the agency 

has considered integrating detailed 

simulation of individual vehicles’

performance into the Volpe model.69

However, while application of such 

simulation techniques could provide a 

useful source of information when 

developing inputs to the Volpe model, 

the agency believes that applying 

detailed simulation when analyzing the 

entire fleet of future vehicles is neither 

necessary nor feasible. NHTSA is 

charged with setting standards at the 

maximum feasible level. To understand 

the potential impacts of its standards, 

the agency analyzes entire fleets of 

vehicles expected to be produced in the 

future. Although some expected 

engineering characteristics of these 

vehicles are available, the level of detail 

needed for full vehicle simulation—a 

level of detail that would be important 

if NHTSA were actually designing 

vehicles—is not available. 

As another possible alternative to 

using ‘‘synergy’’ factors, NHTSA has 

also considered modifying the Volpe 

model to accept as inputs different 

measures of efficiency for each engine, 

transmission, and vehicle model in the 

product plans. For instance, 

manufacturers could provide estimates 

of mechanical and drivetrain 

efficiencies. Mechanical efficiency 

(usually between 70 and 90 percent) 

gives an estimate of the amount of fuel 

consumed by engine friction and 

pumping losses. Drivetrain efficiency 

(usually between 80 and 90 percent) 

gives an estimate of the amount of fuel 

consumed by parasitic loads, gearbox 

friction, and torque converter losses. 

From these efficiencies along with other 

inputs such as compression ratio, 

aerodynamic drag, rolling resistance, 

and vehicle mass, the model could 

estimate the fuel consumption 

associated with each loss mechanism 

and enforce a maximum fuel 

consumption reduction for each vehicle 

model based on those estimates and the 

technologies applied. Like the use of 

incremental synergies, this method 

could help the model avoid double 

counting fuel consumption benefits 

when applying multiple technologies to 

the same vehicle model.70 The agency 

believes that this approach, like the use 

of ‘‘synergy’’ factors currently used by 

the Volpe model, could conceivably 

provide a means of addressing 

uncertainty in fuel consumption 

estimation within the context of CAFE 

analysis. However, the agency is not 

confident that model-by-model 

estimates of baseline fuel consumption 

partitioning would be available. Also, 

partitioned estimates of the effects of all 

the technologies considered in the 

analysis of this proposal were not 

available. If both of these concerns 

could be addressed, NHTSA believes it 

would be possible to implement 

partitioned accounting of fuel 

consumption. However, the agency is 

unsure whether and, if so, to what 

extent doing so would represent an 

improvement over our current approach 

of using incremental synergy factors. 

The agency solicits comments on its 

use of incremental synergy factors to 

address uncertainty in the estimation of 

the extent to which fuel consumption is 

reduced by applying technologies. For 

additional detail on the synergies used, 

please see Section V of this document. 

In particular, the agency solicits 

comment on (a) the values of the factors 

the agency has applied, (b) possible 

variations across the ten categories of 

vehicles the agency has considered, and 

(c) additional technology pairs that may 

involve such interactions. The proposal 

of any additional methodologies, such 

as prototyping and testing, full vehicle 

simulation, or partitioned accounting, 

should address information and 

resource requirements, particularly as 

related to the analysis of entire fleets of 

future vehicles expected to be produced 

through MY 2015. Synergies used for 

this analysis can be found in Section V 

of this document. 

D. Technology Cost Learning Curve 

In past rulemaking analyses, NHTSA 

did not explicitly account for the cost 

reductions a manufacturer may realize 

through learning achieved from 

experience in actually applying a given 

technology. NHTSA understood 

technology cost-estimates to reflect 

already the full learning costs of 

technology. EPA felt that for some of the 

newer, emerging technologies, cost 

estimates did not reflect the full impact 

of learning. NHTSA tentatively agreed, 

but is seeking comment on the impact 

of learning on cost and the production 

volumes where it occurs. NHTSA has 

modified its previous approach in this 

rulemaking for that reason. In this 

rulemaking we have included a learning 

factor for some of the technologies. The 

‘‘learning curve’’ describes the 

reduction in unit incremental 

production costs as a function of 

accumulated production volume and 

small redesigns that reduce costs. 

NHTSA implemented technology 

learning curves by using three 

parameters: (1) The initial production 

volume that must be reached before cost 

reductions begin to be realized (referred 

to as ‘‘threshold volume’’); (2) the 

percent reduction in average unit cost 

that results from each successive 

doubling of cumulative production 

volume (usually referred to as the 

‘‘learning rate’’); and (3) the initial cost 

of the technology. Section V below 

describing the Volpe model contains 

additional information on learning 

curve functions. 

Figure III–1 illustrates a learning 

curve for a vehicle technology with an 


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Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 24383 

initial average unit cost of $100 and a 

learning rate of approximately 20 

percent. In this hypothetical example, 

the initial production volume before 

cost reductions begin to be realized is 

set at 12,000 units and the production 

volume at the cost floor is set at roughly 

50,000 units with a cost of $64. 

Most studies of the effect of the 

learning curve on production costs 

appear to assume that cost reductions 

begin only after some initial volume 

threshold has been reached, but not all 

of these studies specify what this 

threshold volume is. The rate at which 

costs decline beyond the initial 

threshold is usually expressed as the 

percent reduction in average unit cost 

that results from each successive 

doubling of cumulative production 

volume, sometimes referred to as the 

learning rate. Many estimates of 

learning experience curves do not 

specify a cumulative production volume 

beyond which cost reductions no longer 

occur, instead depending on the 

asymptotic behavior of the above 

expression of (CQ) for learning rates 

below 100 percent to establish a floor on 

costs. 

For this analysis, NHTSA has applied 

learning curve cost reductions on a 

manufacturer-specific basis, and has 

assumed that learning-based reductions 

in technology costs occur at the point 

that a manufacturer applies the given 

technology to the first 25,000 cars or 

trucks, and are repeated a second time 

as it produces another 25,000 cars or 

trucks for the second learning step (car 

and truck volumes are treated separately 

for determining these sales volumes). 

The volumes chosen represent our best 

estimate for where learning would 

occur. As such, we believe that these 

estimates are better suited to this 

analysis than a more general approach 

of a single number for the learning curve 

factor, because each manufacturer 

would be implementing technologies at 

its own pace in this rule, rather than 

assuming that all manufacturers 

implement identical technology at the 

same time. NHTSA is aware that some 

of the cost estimates that it has relied 

upon were derived from suppliers and 

has added multipliers so that these costs 

are reflective of what manufacturers 

would pay for this technology. NHTSA 

seeks comments on the estimated level 

of price markups that manufacturers pay 

for technologies purchased from 

suppliers and whether different learning 

curves should be applied to those types 

of technologies. In addition, NHTSA 

seeks comments on how learning curves 

should be adjusted if a supplier supplies 

more than one manufacturer. 

Ideally, we would know the 

development production cycle and 

maturity level for each technology so 

that we could calculate learning curves 

precisely. Without that knowledge, we 

have to use engineering judgment. After 

having produced 25,000 cars or trucks 

with a specific part or system, we 

believe that sufficient learning will have 

taken place such that costs will be lower 

by 20 percent for some technologies and 

10 percent for others. After another 

25,000 units, it is expected that, for 

some technologies, such as 6-speed 

AMTs, another cost reduction will have 

been realized. 

For each of the technologies, we have 

considered whether we could project 

future cost reductions due to 

manufacturer learning. In making this 

determination, we considered whether 

or not the technology was in widespread use today or expected to be by 

the model year 2011–2012 time frame, 

in which case no future learning curve 

would apply because the technology 

would already be in wide-spread 

production by the automotive industry 

by that timeframe, e.g., on the order of 

multi-millions of units per year. 

(Examples of these include 5-speed 

automatic transmissions and intake-cam 

phasing variable valve timing. These 

technologies have been in production 

for light-duty vehicles for more than 10 

years.) In addition, we carefully 

considered the underlying source data 

for our cost estimates. If the source data 

specifically stated that manufacturer 

cost reduction from future learning 

would occur, we took that information 

into account in determining whether we 

would apply manufacturer learning in 

our cost projections. Thus, for many of 

the technologies, we have not applied 

any future cost reduction learning 

curve. 

However, there are a number of 

technologies which are not yet in mass 

production for which we have applied 

a learning curve. As indicated in Table 

III–4 below, we have applied the 

learning curve beginning in MY 2011 to 

one set of technologies, and for a 

number of additional technologies we 

did not apply manufacturer learning 

until MY 2014. The distinction between 

MYs 2011 and 2014 is due to our source 

data for our cost estimates. For those 

technologies where we have applied 

manufacturer learning in MY 2011, the 

source of our cost estimate did not rely 

on manufacturer learning to develop the 

initial cost estimate we have used—

therefore we apply the manufacturer 


rwilkins on PROD1PC63 with PROPOSALS2EP02MY08.001</GPH>
24384 Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 

71 ‘‘Variable Costs of Fuel Economy 

Technologies’’ Martec Group, Inc Report Presented 

to: Committee to Assess Technologies for Improving 

Light-Duty Vehicle Fuel Economy. Division on 

Engineering and Physical Systems, Board on Energy 

and Environmental Systems, the National Academy 

of Sciences, January 24, 2008. 

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

Comparison of Indirect Cost Multipliers for Vehicle 

Manufacturing, Center for Transportation Research, 

Argonne National Laboratory, April 2000. 73PRIA, VII–9. 

learning methodology beginning in MY 

2011. 

TABLE III.–4.—LEARNING CURVE APPLICATION TO TECHNOLOGIES

Technology First year of 

application 

Learning 

factor 

(percent) 

Overhead Cam Branch Cylinder deactivation ................................................................................................................. 2014 20 

Continuous VVLT ............................................................................................................................................................. 2014 20 

Camless valvetrain (electromagnetic) ............................................................................................................................. 2011 20 

GDI—lean burn ................................................................................................................................................................ 2011 20 

Gasoline HCCI dual-mode ............................................................................................................................................... 2011 20 

Turbocharging & downsizing ........................................................................................................................................... 2014 20 

Diesel—Lean NOX trap* .................................................................................................................................................. 2011 10 

Diesel—urea SCR* .......................................................................................................................................................... 2011 10 

6-speed AMT ................................................................................................................................................................... 2011 20 

Stop-Start with 42 volt system ......................................................................................................................................... 2014 20 

IMA/ISA/BSG (includes engine downsize) ...................................................................................................................... 2014 20 

2-Mode hybrid electric vehicle ......................................................................................................................................... 2014 20 

Power-split hybrid electric vehicle (P–S HEV) ................................................................................................................ 2014 20 

Plug-in hybrid electric vehicle (PHEV) ............................................................................................................................ 2011 20 

Improved high efficiency alternator & electrification of accessories (42 volt) ................................................................. 2011 20 

Secondary axle disconnect (unibody only) ...................................................................................................................... 2011 20 

Weight reduction (1%)—above 6,000 lbs only ................................................................................................................ 2011 20 

Weight reduction (2%)—incremental to 1% .................................................................................................................... 2011 20 

Weight reduction (3%)—incremental to 2% .................................................................................................................... 2011 20 

* For diesel technologies, learning is only applied to the cost of the emission control equipment, not the cost for the entire diesel system. 

The technologies for which we do not 

begin applying learning until 2014 all 

have the same reference source, the 

2004 NESCCAF study, for which the 

sub-contractor was The Martec Group. 

In the work done for the 2004 NESCCAF 

report, Martec relied upon actual price 

quotes from Tier 1 automotive suppliers 

to develop automotive manufacturer 

cost estimates. Based on information 

presented by Martec to the National 

Academy of Sciences (NAS) Committee 

during their January 24, 2008, public 

meeting in Dearborn, Michigan,71 we 

understand that the Martec cost 

estimates incorporated some element of 

manufacturer learning. Martec stated 

that the Tier 1 suppliers were 

specifically requested to provide price 

quotes which would be valid for three 

years (2009–2011), and that for some 

components the Tier 1 supplier 

included cost reductions in years two 

and three which the supplier 

anticipated could occur, and which they 

anticipated would be necessary in order 

for their quote to be competitive with 

other suppliers. Therefore, for this 

analysis, we did not apply any learning 

curve to any of the Martec-sourced costs 

for the first three years of this proposal 

(2011–2013). However, the theory of 

manufacturer learning is that it is a 

continuous process, though the rate of 

improvement decreases as the number 

of units produced increases. While we 

were not able to gain access to the 

detailed submissions from Tier 1 

suppliers which Martec relied upon for 

their estimates, we do believe that 

additional cost reductions will occur in 

the future for a number of the 

technologies for which we relied upon 

the Martec cost estimates for the reasons 

stated above in reference to the general 

learning curve effect. For those 

technologies we applied a learning 

curve beginning in 2014. Martec has 

recently submitted a study to the NAS 

Committee comparing the 2004 

NESCCAF study with new updated cost 

information. Given that this study had 

just been completed, the agency could 

not take it into consideration for the 

NPRM. However, the agency will review 

the new study and consider its findings 

in time for the final rule. 

Manufacturers’ actual costs for 

applying these technologies to specific 

vehicle models are likely to include 

significant additional outlays for 

accompanying design or engineering 

changes to each model, development 

and testing of prototype versions, 

recalibrating engine operating 

parameters, and integrating the 

technology with other attributes of the 

vehicle. Manufacturers may also incur 

additional corporate overhead, 

marketing, or distribution and selling 

expenses as a consequence of their 

efforts to improve the fuel economy of 

individual vehicle models and their 

overall product lines. 

In order to account for these 

additional costs, NHTSA has applied an 

indirect cost multiplier of 1.5 to its 

estimate of the vehicle manufacturers’

direct costs for producing or acquiring 

each fuel economy-improving 

technology to arrive at a consumer cost. 

This estimate was developed by 

Argonne National Laboratory in a recent 

review of vehicle manufacturers’

indirect costs. The Argonne study was 

specifically intended to improve the 

accuracy of future cost estimates for 

production of vehicles that achieve high 

fuel economy by employing many of the 

same advanced technologies considered 

in the agency’s analysis.72 Thus, its 

recommendation that a multiplier of 1.5 

be applied to direct manufacturing costs 

to reflect manufacturers’ increased 

indirect costs for deploying advanced 

fuel economy technologies appears to be 

appropriate for use in the current 

analysis. Historically, NHTSA has used 

almost the exact same multiplier, a 

multiplier of 1.51, as the markup from 

variable costs or direct manufacturing 

costs to consumer costs. This markup 

takes into account fixed costs, burden, 

manufacturer’s profit, and dealer’s 

profit. Table VII–2 of the PRIA shows 

the estimated incremental consumer 

costs for each vehicle type.73


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Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 24385 

E. Ensuring Sufficient Lead Time 

In analyzing potential technological 

improvements to the product offerings 

for each manufacturer with a substantial 

share of the market, NHTSA added 

technologies based on our engineering 

judgment and expertise about possible 

adjustments to the detailed product 

plans submitted to NHTSA. Our 

decision whether and when to add a 

technology reflected our consideration 

of the practicability of applying a 

specific technology and the necessity for 

lead time in its application. NHTSA 

recognizes that vehicle manufacturers 

must have sufficient lead time to 

incorporate changes and new features 

into their vehicles and hence added 

technologies in a cost-minimizing 

fashion. That is, we generally added 

technologies that were most costeffective and took into account the year 

of availability of the technologies. 

NHTSA realizes that not all 

technologies will be available 

immediately or could be applied 

immediately and that there are different 

phase-in rates (how rapidly a 

technology is able to be applied across 

a manufacturer’s fleet of vehicles) 

applicable to each technology as well as 

windows of opportunities when certain 

technologies could be applied (i.e., 

when a product is redesigned or 

refreshed). 

a. Linking To Redesign and Refresh 

In the automobile industry there are 

two terms that describe when changes to 

vehicles occur: redesign and refresh. In 

projecting the technologies that could be 

applied to specific vehicle models, 

NHTSA tied the application of the 

majority of the technologies to a 

vehicle’s refresh/redesign cycle. Vehicle 

redesign usually encompasses changes 

to a vehicle’s appearance, shape, 

dimensions, and powertrain and is 

traditionally associated with the 

introduction of ‘‘new’’ vehicles into the 

market, and often is characterized as the 

next generation of a vehicle. In contrast 

vehicle refresh usually only 

encompasses changes to a vehicle’s 

appearance, and may include an 

upgraded powertrain and is 

traditionally associated with mid-cycle 

cosmetic changes to a vehicle within its 

current generation to make it appear 

‘‘fresh.’’ Vehicle refresh traditionally 

occurs no earlier than two years after a 

vehicle redesign or at least two years 

before a scheduled redesign. Table III–

5 below contains a complete list of the 

technologies that were applied and 

whether NHTSA allowed them to be 

applied during a redesign year, a refresh 

year or during any model year is shown 

in the table below. 

TABLE III–5.—TECHNOLOGY REFRESH AND REDESIGN APPLICATION

Technology Abbr. 

Can be 

applied during redesign 

model year 

only 

Can be 

applied during a redesign or 

refresh 

model year 

Can be 

applied 

during any 

model year 

Low Friction Lubricants ...................................................................................................... LUB .......... .................... X X 

Engine Friction Reduction ................................................................................................. EFR ......... .................... X ....................

Variable Valve Timing (ICP) .............................................................................................. VVTI ......... .................... X ....................

Variable Valve Timing (CCP) ............................................................................................ VVTC ....... .................... X ....................

Variable Valve Timing (DCP) ............................................................................................ VVTD ....... .................... X ....................

Cylinder Deactivation ......................................................................................................... DISP ........ .................... X ....................

Variable Valve Lift & Timing (CVVL) ................................................................................. VVLTC ..... X .................... ....................

Variable Valve Lift & Timing (DVVL) ................................................................................. VVLTD ..... X .................... ....................

Cylinder Deactivation on OHV ........................................................................................... DISPO ..... .................... X ....................

Variable Valve Timing (CCP) on OHV .............................................................................. VVTO ....... .................... X ....................

Multivalve Overhead Cam with CVVL ............................................................................... DOHC ...... X .................... ....................

Variable Valve Lift & Timing (DVVL) on OHV ................................................................... VVLTO ..... X .................... ....................

Camless Valve Actuation ................................................................................................... CVA ......... X .................... ....................

Stoichiometric GDI ............................................................................................................. SIDI .......... X .................... ....................

Lean Burn GDI ................................................................................................................... LBDI ......... X .................... ....................

Turbocharging and Downsizing ......................................................................................... TURB ....... X .................... ....................

HCCI .................................................................................................................................. HCCI ........ X .................... ....................

Diesel with LNT ................................................................................................................. DSLL ........ X .................... ....................

Diesel with SCR ................................................................................................................. DSLS ....... X .................... ....................

5 Speed Automatic Transmission ...................................................................................... 5SP .......... .................... X ....................

Aggressive Shift Logic ....................................................................................................... ASL .......... .................... X X 

Early Torque Converter Lockup ........................................................................................ TORQ ...... .................... X ....................

6 Speed Automatic Transmission ...................................................................................... 6SP .......... .................... X ....................

Automatic Manual Transmission ....................................................................................... AMT ......... X .................... ....................

Continuously Variable Transmission ................................................................................. CVT ......... X .................... ....................

6 Speed Manual ................................................................................................................ 6MAN ...... X .................... ....................

Improved Accessories ....................................................................................................... IACC ........ .................... .................... X 

Electronic Power Steering ................................................................................................. EPS ......... .................... X ....................

42-Volt Electrical System ................................................................................................... 42V .......... X .................... ....................

Low Rolling Resistance Tires ............................................................................................ ROLL ....... .................... .................... X 

Low Drag Brakes ............................................................................................................... LDB .......... .................... .................... X 

Secondary Axle Disconnect—Unibody .............................................................................. SAXU ....... .................... X ....................

Secondary Axle Disconnect—Ladder Frame .................................................................... SAXL ....... .................... X ....................

Aero Drag Reduction ......................................................................................................... AERO ...... .................... X ....................

Material Substitution (1%) ................................................................................................. MS1 ......... X .................... ....................

Material Substitution (2%) ................................................................................................. MS2 ......... X .................... ....................

Material Substitution (5%) ................................................................................................. MS5 ......... X .................... ....................

ISG with Idle-Off ................................................................................................................ ISGO ........ X .................... ....................

IMA/ISAD/BSG Hybrid (includes engine downsizing) ....................................................... IHYB ........ X .................... ....................

2-Mode Hybrid ................................................................................................................... 2HYB ....... X .................... ....................


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TABLE III–5.—TECHNOLOGY REFRESH AND REDESIGN APPLICATION—Continued 

Technology Abbr. 

Can be 

applied during redesign 

model year 

only 

Can be 

applied during a redesign or 

refresh 

model year 

Can be 

applied 

during any 

model year 

Power Split Hybrid ............................................................................................................. PHYB ....... X .................... ....................

As can be seen in the above table, 

most technologies would only be 

applied by the Volpe model when a 

specific vehicle was due for a redesign 

or refresh. However, for a limited set of 

technologies, the model was not 

restricted to applying them during a 

refresh/redesign year and thus they 

were made available for application at 

any time. 

These specific technologies are: 

• Low Friction Lubricants 

• Improved Accessories 

• Low Rolling Resistance Tires 

• Low Drag Brakes 

All of these technologies are very 

cost-effective, can apply to multiple 

vehicle models/platforms and can be 

applied across multiple vehicle models/ 

platforms in one year. Although they 

can also be applied during a refresh/ 

redesign year, they are not restricted to 

that timeframe because their application 

is not viewed as necessitating a major 

engineering redesign and testing/ 

calibration. 

There is an additional technology 

whose application is not tied to refresh/ 

redesign, which is Aggressive Shift 

Logic (ASL). ASL is accomplished 

through reprogramming the shift points 

for a transmission to be more like a 

manual transmission. Upgrading a 

transmission to utilize ASL can happen 

at refresh/redesign, but because it is not 

a hardware change, it can also occur at 

other points in a vehicle’s design cycle. 

If a model that is scheduled for refresh/ 

redesign has a transmission that is being 

upgraded to ASL, it is possible that all 

other vehicles that utilize the same 

transmission (which is usually 

produced at the same manufacturing 

plant) could be upgraded at the same 

time to incorporate ASL and that ASL 

could permeate other vehicle models in 

years other than a refresh/redesign year. 

NHTSA based the redesign rates used 

in the Volpe Model on a combination of 

the manufacturers’ confidential product 

plans and NHTSA’s engineering 

judgment. In most instances, NHTSA 

has accepted the projected redesign 

periods from the companies who 

provided them through MY 2013. If 

companies did not provide product plan 

date, NHTSA used publicly available 

data about vehicle redesigns to establish 

the redesign rates for the vehicles 

produced by these companies. 

NHTSA assumes that passenger cars 

will be redesigned every 5 years, based 

on the trend over the last 10–15 years 

for passenger cars to be redesigned 

every 5 years. These trends are reflected 

in the manufacturer production plans 

that NHTSA received in response to its 

request for product plan information 

and was confirmed by many automakers 

in meetings held with NHTSA to 

discuss various issues with 

manufacturers. 

NHTSA believes that the vehicle 

design process has progressed and 

improved rapidly over the last decade 

and these improvements have resulted 

in the ability of manufacturers to 

shorten the design process and to 

introduce vehicles more frequently to 

respond to competitive market forces. 

Almost all passenger cars will be on a 

5-year redesign cycle by the end of the 

decade, with the exception being some 

high performance vehicles and vehicles’

with specific market niches. 

Currently, light trucks are redesigned 

every 5 to 7 years, with some vehicles 

having longer redesign periods (e.g., 

full-size vans). In the most competitive 

SUV and crossover vehicle segments, 

the redesign cycle currently averages 

slightly above 5 years. It is expected that 

the light truck redesign schedule will be 

shortened in the future due to 

competitive market forces and in 

response to fuel economy and other 

regulatory requirements. It is expected 

that by MY 2014, almost all light trucks 

will be redesigned on a 5-year cycle. 

Thus, for almost all vehicles scheduled 

for a redesign in model year 2014 and 

later, NHTSA estimated that all vehicles 

would be redesigned on a 5-year cycle. 

Exceptions were made for high 

performance vehicles and other vehicles 

that traditionally had longer than 

average design cycles (e.g., 2-seater 

sports cars). For those vehicles, NHTSA 

attempted to preserve the historic 

redesign cycle rates. 

b. Technology Phase-in Caps 

In analyzing potential technological 

improvements to the product offerings 

for each manufacturer with a substantial 

share of the market, NHTSA added 

technologies based on our engineering 

judgment and expertise about possible 

adjustments to the detailed product 

plans submitted to NHTSA. Our 

decision whether and when to add a 

technology reflected our consideration 

of the practicability of applying a 

specific technology and the necessity for 

lead-time in its application. 

NHTSA recognizes that vehicle 

manufacturers must have sufficient lead 

time to incorporate changes and new 

features into their vehicles and that 

these changes cannot occur all at once, 

but must be phased in over time. As 

discussed above, our analysis addresses 

these realities in part by timing the 

estimated application of most 

technologies to coincide with 

anticipated vehicle redesigns and/or 

freshenings. We have estimated that 

future vehicle redesigns can be 

implemented on a 5-year cycle with 

mid-cycle freshening, except where 

manufacturers have indicated plans for 

shorter redesign cycles. 

However, the agency further 

recognizes that engineering, planning 

and financial constraints prohibit most 

technologies from being applied across 

an entire fleet of vehicles within a year. 

Thus, as for the analysis supporting its 

2006 rulemaking regarding light truck 

CAFE, the agency is employing overall 

constraints on the rates at which each 

technology can penetrate a 

manufacturer’s fleet. The Volpe model 

applies these ‘‘phase-in caps’’ by 

ceasing to add a given technology to a 

manufacturer’s fleet in a specific model 

year once it has increased the 

corresponding penetration rate by at 

least amount of the cap. Having done so, 

the model proceeds to apply other 

technologies in lieu of the ‘‘capped’’

technology. 

For its regulatory analysis in 2006, 

NHTSA applied phase-in caps expected 

to be consistent with NAS’ indication in 

its 2002 report that even existing 

technologies would require 4 to 8 years 

to achieve widespread penetration of 

the fleet. The NAS report, which is 

believed to be the only peer-reviewed 

source which provides phase-in rates, 

was relied upon for establishing the 

phase-in caps that we used for all 


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Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 24387 

technologies, except diesels and 

hybrids, for which the report didn’t 

include that information. Most of the 

phase-in caps applied by the agency in 

2006 ranged from 25 percent (4 year 

introduction) to 17 percent 

(approximately 6 years, the midpoint of 

the NAS estimate). The agency assumed 

shorter implementation rates for 

technologies that did not require 

changes to the manufacturing line. For 

other technologies (e.g., hybrid and 

diesel powertrains), the agency 

employed phase-in caps as low as 3 

percent, to reflect the major redesign 

efforts and capital investments required 

to implement these technologies. 

Considerable changes have occurred 

since NHTSA’s 2006 analysis, and even 

more since the 2002 NAS report. Not 

only have fuel prices increased, but 

official forecasts of future fuel prices 

have increased, as well. This suggests a 

market environment in which 

consumers are more likely to demand 

fuel-saving technologies than previously 

anticipated, and it suggests a financial 

environment in which investors are 

more likely to invest in companies 

developing and producing such 

technologies. Indeed, some technologies 

have penetrated the marketplace more 

quickly than projected in 2006. 

Confidential product plan information 

submitted to NHTSA in 2007 and 

information from suppliers confirm that 

the rate of technology penetration has 

increased as compared to 2006. 

Also, the statutory environment has 

changed since 2006. With the enactment 

of EISA, Congress has adopted the 

specific objectives of increasing new 

vehicle fuel economy to at least 35 mpg 

by 2020 and making ratable progress 

toward that objective in earlier model 

years. This reduces manufacturers’

uncertainty about the general direction 

of future fuel economy standards in the 

United States. Moreover, developments 

in other regions (e.g., Europe) and 

countries (e.g., Canada and China) 

suggest that the generalized expectation 

that future vehicles will perform well 

with respect to energy efficiency is not 

unique to the United States. Discussions 

with manufacturers in late 2007 and 

early 2008 indicate that the industry is 

highly sensitive to all of these 

developments and has been anticipating 

the need to accelerate the rate of 

technology deployment in response to 

the passage of major energy legislation 

in the U.S. 

Considering these developments, the 

agency revisited the phase-in caps it had 

applied in 2006 and determined that it 

would be appropriate to relax many of 

them. In our judgment, most of the 

engine technologies could penetrate the 

fleet in as quickly as five years—rather 

than in the six we previously 

estimated—as long as they are applied 

during redesign. Low friction lubricants 

are already widely used, and our 

expectation is that they can quickly 

penetrate the remainder of the fleet. 

Therefore, we relaxed the 25 percent (4- 

year) phase-in cap to 50 percent (2 

years). Similarly, product plans indicate 

that transmissions with 5 or more 

forward gears will widely penetrate the 

fleet even without the current proposal. 

Also, given the technology cost and 

effectiveness estimates discussed above, 

the Volpe model frequently estimates 

that manufacturers will ‘‘leapfrog’’ past 

5-speed transmissions to apply more 

advanced transmissions (e.g., 6-speed or 

AMT). We have therefore increased the 

phase-in cap for 5-speed transmissions 

from 25 percent (4 years) to 100 percent 

(1 year). However, in our judgment, 

phase-in caps of 17 percent (6 years) are 

currently still appropriate for most other 

transmission technologies. 

Although NHTSA has applied phasein caps of 25 percent (4 years) for most 

remaining technologies, we continue to 

anticipate that phase-in caps of 3 

percent are appropriate for some 

advanced technologies, such as hybrids 

and diesels. Although engine, vehicle, 

and exhaust aftertreatment 

manufacturers have, more recently, 

expressed greater optimism than before 

regarding the outlook for light vehicle 

diesel engines, our expectation is that 

the phase-in cap that we have chosen is 

appropriate at this time. We also 

estimate that a 3 percent rate is 

appropriate for hybrid technologies, 

which are very complex, require 

significant engineering resources to 

implement, but are just now starting to 

penetrate the market. 

Table III–6 below presents the phasein caps applied in the current analysis, 

with rates from the analysis of the 2006 

final rule provided for comparison. 

NHTSA requests comments on the 

phase-in caps shown here, and on 

whether slower or faster rates would be 

more appropriate and, if so, why. 

TABLE III.—6. PHASE-IN CAP APPLICATION

Technology 2006 final 

rule 

Current 

NPRM 

Low Friction Lubricants .................................................................................................................................................... 25 50 

Engine Friction Reduction ............................................................................................................................................... 17 20 

Variable Valve Timing (ICP) ............................................................................................................................................ 17 20 

Variable Valve Timing (CCP) .......................................................................................................................................... 17 20 

Variable Valve Timing (DCP) .......................................................................................................................................... 17 20 

Cylinder Deactivation ....................................................................................................................................................... 17 20 

Variable Valve Lift & Timing (CVVL) ............................................................................................................................... 17 20 

Variable Valve Lift & Timing (DVVL) ............................................................................................................................... 17 20 

Cylinder Deactivation on OHV ......................................................................................................................................... 17 20 

Variable Valve Timing (CCP) on OHV ............................................................................................................................ 17 20 

Multivalve Overhead Cam with CVVL ............................................................................................................................. 17 20 

Variable Valve Lift & Timing (DVVL) on OHV ................................................................................................................. 17 20 

Camless Valve Actuation ................................................................................................................................................. 10 20 

Stoichiometric GDI ........................................................................................................................................................... 3 20 

Diesel following GDI-S (SIDI) .......................................................................................................................................... 3 3 

Lean Burn GDI ................................................................................................................................................................. .................... 20 

Turbocharging and Downsizing ....................................................................................................................................... 17 20 

Diesel following Turbo D/S .............................................................................................................................................. 3 3 

HCCI ................................................................................................................................................................................ .................... 13 

Diesel following HCCI ...................................................................................................................................................... 3 3 

5 Speed Automatic Transmission .................................................................................................................................... 17 100 

Aggressive Shift Logic ..................................................................................................................................................... 17 25 

Early Torque Converter Lockup ...................................................................................................................................... .................... 25 

6 Speed Automatic Transmission .................................................................................................................................... 17 17 


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24388 Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 

74The 2002 NAS Report, on which NHTSA relied 

in reforming the CAFE program for light trucks, 

described at length and quantified the potential 

safety problem with average fuel economy 

standards that specify a single numerical 

requirement for the entire industry. See National 

Academy of Sciences, ‘‘Effectiveness and Impact of 

Corporate Average Fuel Economy (CAFE) 

Standards,’’ (‘‘NAS Report’’) National Academy 

Press, Washington, DC (2002), 5, finding 12. 

Available at http://www.nap.edu/openbook.

php?record_ 

id=10172page=R1 (last accessed April 20, 2008). 

75Id. at 4–5, finding 10. 

76The proposed definition for track width is the 

same as that used in NHTSA’s April 2006 light 

truck CAFE rule, which is ‘‘the lateral distance 

between the centerlines of the base tires at ground, 

including camber angle.’’ 49 CFR 523.2, 71 FR 

19450 (Apr. 14, 2006). 

77The proposed definition for wheelbase is also 

the same as that used in NHTSA’s April 2006 light 

truck CAFE rule. Wheelbase is ‘‘the longitudinal 

distance between front and rear wheel centerlines.’’

Id. 

TABLE III.—6. PHASE-IN CAP APPLICATION—Continued 

Technology 2006 final 

rule 

Current 

NPRM 

Automated Manual Transmission .................................................................................................................................... 17 17 

Continuously Variable Transmission ............................................................................................................................... 17 17 

6 Speed Manual .............................................................................................................................................................. .................... 17 

Improved Accessories ..................................................................................................................................................... 25 25 

Electric Power Steering ................................................................................................................................................... 17 25 

42-Volt Electrical System ................................................................................................................................................. 17 25 

Low Rolling Resistance Tires .......................................................................................................................................... 25 25 

Low Drag Brakes ............................................................................................................................................................. 17 25 

Secondary Axle Disconnect—Unibody ............................................................................................................................ 17 17 

Secondary Axle Disconnect—Ladder Frame .................................................................................................................. 17 17 

Aero Drag Reduction ....................................................................................................................................................... 17 17 

Material Substitution (1%) ............................................................................................................................................... 17 17 

Material Substitution (2%) ............................................................................................................................................... 17 17 

Material Substitution (5%) ............................................................................................................................................... 17 17 

ISG with Idle-Off .............................................................................................................................................................. 5 3 

IMA/ISAD/BSG Hybrid (includes engine downsizing) ..................................................................................................... 5 3 

2-Mode Hybrid ................................................................................................................................................................. 5 3 

Power Split Hybrid ........................................................................................................................................................... 5 3 

Plug-in Hybrid .................................................................................................................................................................. .................... 3 

IV. Basis for Attribute-Based Structure 

for Setting Fuel Economy Standards 

A. Why attribute-based instead of a 

single industry-wide average? 

NHTSA is obligated under 49 U.S.C. 

32902(a)(3)(A), recently added by 

Congress, to set attribute-based fuel 

economy standards for passenger cars 

and light trucks. NHTSA welcomes 

Congress’ affirmation through EISA of 

the value of setting attribute-based fuel 

economy standards, because we believe 

that an attribute-based structure is 

preferable to a single industry-wide 

average standard for the following 

reasons. First, attribute-based standards 

increase fuel savings and reduce 

emissions when compared to an 

equivalent industry-wide standard 

under which each manufacturer is 

subject to the same numerical 

requirement. Under such a single 

industry-wide average standard, there 

are always some manufacturers that are 

not required to make any improvements 

for any given year because they already 

exceed the standard. Under an attributebased system, in contrast, every 

manufacturer can potentially be 

required to continue improving each 

year. Because each manufacturer 

produces a different mix of vehicles, 

attribute-based standards are 

individualized for each manufacturer’s 

different product mix. All 

manufacturers must ensure they have 

used available technologies to enhance 

fuel economy levels of the vehicles they 

sell. Therefore, fuel savings and 

emissions reductions will always be 

higher under an attribute-based system 

than under a comparable industry-wide 

standard. 

Second, attribute-based standards 

eliminate the incentive for 

manufacturers to respond to CAFE 

standards in ways harmful to safety.74

Because each vehicle model has its own 

target (based on the attribute chosen), 

attribute-based standards provide no 

incentive to build smaller vehicles 

simply to meet a fleet-wide average, 

because the smaller vehicles will be 

subject to more stringent fuel economy 

and emissions targets. 

Third, attribute-based standards 

provide a more equitable regulatory 

framework for different vehicle 

manufacturers.75 A single industry-wide 

average standard imposes 

disproportionate cost burdens and 

compliance difficulties on the 

manufacturers that need to change their 

product plans and no obligation on 

those manufacturers that have no need 

to change their plans. Attribute-based 

standards spread the regulatory cost 

burden for fuel economy more broadly 

across all of the vehicle manufacturers 

within the industry. 

And fourth, attribute-based standards 

respect economic conditions and 

consumer choice, instead of having the 

government mandate a certain fleet mix. 

Manufacturers are required to invest in 

technologies that improve the fuel 

economy achieved by the vehicles they 

sell, regardless of their size. 

B. Which attribute is most effective? 

Although NHTSA previously set the 

MY 2008–2011 light truck fuel economy 

standards based on vehicle footprint as 

the relevant attribute, the agency took a 

fresh look for purposes of this 

rulemaking. Although several attributes 

offer benefits, NHTSA has preliminarily 

concluded that a footprint-based 

function will again be the most effective 

and efficient for both passenger car and 

light truck standards. The discussion 

below explains our conclusion in favor 

of footprint, and also examines the 

relative benefits and drawbacks of the 

other attributes considered. 

1. Footprint-Based Function 

NHTSA is proposing to set fuel 

economy standards for manufacturers 

according to vehicle footprint, as light 

truck CAFE standards are currently set 

by NHTSA. A vehicle’s ‘‘footprint’’ is 

the product of the average track width 

(the distance between the centerline of 

the tires 76 ) and wheelbase (basically, 

the distance between the centers of the 

axles 77 ). Each vehicle footprint value is 

assigned a mile per gallon target specific 

to that footprint value. Footprint-based 


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78See Kahane, Charles J., PhD, DOT HS 809 662, 

‘‘Vehicle Weight, Fatality Risk and Crash 

Compatibility of Model Year 1991–99 Passenger 

Cars and Light Trucks,’’ October 2003. Available at 

http://www.nhtsa.dot.gov/cars/rules/regrev/ 

Evaluate/809662.html (last accessed April 20, 

2008). See also Van Auken, R.M. and J.W. Zellner, 

‘‘An Assessment of the Effects of Vehicle Weight on 

Fatality Risk in Model Year 1985–98 Passenger Cars 

and 1985–97 Light Trucks,’’ Dynamic Research, 

Inc., February 2002. Available at Docket No. 

NHTSA–2003–16318–2. 

79See Van Auken, R.M. and J.W. Zellner, 

Supplemental Results on the Independent Effects of 

Curb Weight, Wheelbase, and Track on Fatality Risk 

in 1985–1997 Model Year LTVs, Dynamic Research, 

Inc., May 2005. Available at Docket No. NHTSA–

2003–16318–17. 

80The vehicle compatibility safety problem refers 

to the disparity in effects experienced by smaller 

lighter vehicles in crashes with larger heavier 

vehicles. 

81For example, the Aluminum Association 

indicated in the April 2006 light truck CAFE 

rulemaking that using aluminum to decrease a 

vehicle’s weight by 10 percent could improve its 

fuel economy (and thus, reduce its CO2 emissions) 

by 5–8 percent, without reducing performance in 

frontal barrier crash tests. See comments provided 

by the Aluminum Association, Inc., at Docket No. 

NHTSA–2003–16128–1120, pp. 5 and 12. 

standards have a number of benefits, as 

described below. 

First, NHTSA tentatively concludes 

that use of the footprint-attribute helps 

us achieve greater fuel economy/ 

emissions reductions without having a 

potentially negative impact on safety. 

While past analytic work 78 focused on 

the relationship between vehicle weight 

and safety, weight was understood to 

encompass a constellation of sizerelated factors, not just weight. More 

recent studies 79 have begun to consider 

whether the relationship between 

vehicle size and safety differs. To the 

extent that reduction of mass has 

historically been associated with 

reductions in many other size attributes, 

and given the construct of the current 

fleet, we believe that the relationship 

between size or weight (on the one 

hand) and safety (on the other) has been 

similar. 

Overall, use of vehicle footprint is 

‘‘weight-neutral’’ and thus does not 

exacerbate the vehicle compatibility 

safety problem.80 A footprint-based 

system does not encourage 

manufacturers to add weight to move 

vehicles to a higher footprint category, 

because additional weight makes no 

difference to the required target. Nor 

would the system penalize 

manufacturers for making limited 

weight reductions. By using vehicle 

footprint in lieu of a weight-based 

metric, the standards would also 

facilitate the use of promising 

lightweight materials that, although 

perhaps not cost-effective in mass 

production today, may ultimately 

achieve wider use in the fleet, become 

less expensive, and enhance emissions 

reductions, vehicle safety, and fuel 

economy.81

Finally, vehicle footprint is more 

difficult to modify than other attributes. 

It is more integral to a vehicle’s design 

than either vehicle weight or shadow, 

and cannot easily be altered between 

model years in order to move a vehicle 

into a different category with a lower 

fuel economy target. Footprint is 

dictated by the vehicle platform, which 

is typically used for a multi-year model 

lifecycle. Short-term changes to a 

vehicle’s platform would be expensive 

and difficult to accomplish without 

disrupting multi-year product planning. 

In some cases, several models share a 

common platform, thus adding to the 

cost, difficulty, and therefore 

unlikelihood of short-term changes. 

Concurrent with the NPRM, NHTSA 

will develop a test procedure for 

measuring wheelbase and track width 

and for calculating footprint. This test 

procedure will be available on NHTSA’s 

Web site. We note that the test 

procedure will be used to validate the 

corresponding wheelbase, track width, 

and footprint data provided to us by the 

manufacturers in their pre-model year 

reports but could include other CAFErelated enforcement activities in the 

future. We seek comment on the test 

procedure. 

2. Functions Based on Other Attributes 

Although NHTSA has concluded that 

footprint is the best attribute for CAFE 

standards, we considered a number of 

other attributes on which to base the 

standards, including, but not limited to, 

curb weight, engine displacement, 

interior volume, passenger capacity, 

towing capability, and cargo hauling 

capability. Below we have described the 

relative merits and drawbacks of the 

other attributes considered. 

Curb weight: One of the benefits of 

choosing curb weight as the relevant 

attribute for the standards is that it 

correlates with fuel economy and 

emissions controls better than vehicle 

footprint. Additionally, because 

reductions in weight would lead to 

higher targets, weight-based standards 

prevent the systemic downweighting of 

vehicles and the associated detriment to 

safety. However, weight-based standards 

also discourage the down-weighting of 

vehicles through the use of lightweight 

materials that could improve fuel 

economy and safety and reduce 

emissions. Weight-based standards are 

also more susceptible to gaming and 

creep, because weight can be altered 

very easily compared to other attributes. 

Weight is also only rarely considered by 

consumers, in contrast to size (which is 

reflected in footprint and shadow), and 

can be raised considerably (thus 

decreasing fuel economy/increasing CO2

emissions) without consumers being 

aware of the change. 

Engine displacement: The primary 

benefit of choosing engine displacement 

as the relevant attribute for the 

standards is that it correlates well with 

fuel economy, since a larger engine 

consumes fuel at a faster rate. However, 

engine-displacement-based standards 

would be highly susceptible to gaming 

and creep, given that many vehicle 

manufacturers already offer identical 

models with different size engines. 

Additionally, engine-displacementbased standards would discourage the 

use of small turbo-charged engines, 

which have the potential to improve 

fuel economy without sacrificing the 

engine power that American consumers 

generally seek. 

Interior volume: Standards based on 

interior volume would have virtually no 

correlation with fuel economy, so they 

were not extensively considered. Such 

standards would have the advantage of 

not encouraging downsizing, so they 

could have a positive impact on safety 

in that respect, but few other benefits 

were discerned. 

Passenger capacity: Besides having 

virtually no correlation with fuel 

economy, passenger capacity has the 

disadvantage of being identical for a 

substantial portion of the light-duty 

vehicle population (i.e., many vehicles 

have five seats). Thus, using passenger 

capacity as the attribute on which to 

base fuel economy standards would 

essentially result in a single industrywide average standard, which is 

precisely what Congress sought to avoid 

in requiring attribute-based standards. 

Towing or cargo-hauling capability: In 

its light truck rulemaking for MYs 2008–

2011, NHTSA sought comment on 

whether towing or cargo-hauling 

capability should be used as an attribute 

in addition to footprint—in other words, 

whether the footprint attribute should 

be modified in any way due to towing 

or cargo-hauling capability. The reason 

that NHTSA sought comment was that 

two vehicles with equal footprint would 

nevertheless achieve different fuel 

economies if one’s towing or cargohauling capability was greater, because 

engineering a vehicle to provide that 

kind of power occurs at the expense of 

engineering for fuel economy. NHTSA 

posited that perhaps for vehicle 

manufacturers that have a product mix 

weighted toward vehicles with superior 

towing and/or cargo-hauling 

capabilities, a footprint-based Reformed 

CAFE standard might not provide a 


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24390 Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 

82That is to say, an increase of one mpg in a 

vehicle with low fuel economy (e.g., 20 mpg to 21 

mpg) results in higher fuel savings than if the 

change occurs in a vehicle with high fuel economy 

(e.g., 30 mpg to 31 mpg). Increasing fuel economy 

by equal increments of gallons per mile provides 

equal fuel savings regardless of the fuel economy 

of a vehicle. For example, increasing the fuel 

economy of a vehicle from 0.06 gpm to 0.05 gpm 

saves exactly the same amount of fuel as increasing 

the fuel economy of a vehicle from 0.03 gpm to 0.02 

gpm. 

83A ‘‘constrained’’ logistic function is still Sshaped, like an unconstrained logistic function, but 

plateaus at the top and bottom rather than 

continuing to increase or decrease to infinity. 

84NHTSA determined the values of the 

parameters establishing the upper and lower 

asymptotes by calculating the sales-weighted 

harmonic average values of optimized fuel economy 

levels for light trucks with footprints below 43 

square feet and above 65 square feet, respectively. 

Because these ranges respectively included the 

smallest and largest models represented at that time 

in the light truck fleet, the agency determined that 

these two segments of the light truck fleet were 

appropriate for establishing the upper and lower 

fuel economy bounds of a continuous function. 

The remaining two parameters (i.e., the 

‘‘midpoint’’ and ‘‘curvature’’ parameters) were 

estimated using production-weighted nonlinear 

least-squares regression to achieve the closest fit to 

data on footprint and optimized fuel economy for 

all light truck models expected to be produced 

during each of the model years 2008–2011. More 

fully equitable competitive 

environment. Based on comments to the 

final rule for the MY 2008–2011 light 

truck rulemaking, however, NHTSA 

concluded that the lack of an objective 

measure for tow rating and the potential 

for gaming of a system based on this 

attribute made towing or cargo-hauling 

capacity an inappropriate attribute at 

that time. NHTSA tentatively concludes 

that such is still the case. 

In summary, then, NHTSA has 

tentatively decided that a footprintbased system will be optimal for this 

rulemaking. However, we seek comment 

on whether the proposed standards 

should be based on vehicle footprint 

alone, or whether other attributes such 

as the ones described above should be 

considered. If any commenters advocate 

one or more additional attributes, the 

agency requests those commenters to 

supply a specific, objective measure for 

each attribute that is accepted within 

the industry and that can be applied to 

the full range of light-duty vehicles 

covered by this rulemaking. 

C. The Continuous Function 

NHTSA considered this issue of how 

to set attribute-based functions in its 

2006 light truck CAFE rulemaking, and 

examined the relative merits of both 

step functions and continuous 

functions. In the CAFE context, a step 

function would separate the vehicle 

models along the spectrum of attribute 

magnitudes into discrete groups, and 

each group would be assigned a fuel 

economy target (that end up looking like 

steps), so that the average of the groups 

would be the average fleet fuel 

economy. A continuous function, in 

contrast, would not separate the 

vehicles into a set of discrete categories. 

Each vehicle model produced by a 

manufacturer would have its own fuel 

economy target, based on its particular 

footprint. In other words, a continuous 

function is a mathematical function that 

defines attribute-based targets across the 

entire range of possible footprint values, 

and applies them through a 

harmonically weighted formula to 

derive regulatory obligations for fleet 

averages. 

In proposing the current standards in 

this rulemaking, NHTSA relied on its 

experience in the last light truck 

rulemaking. In that rulemaking, NHTSA 

decided in favor of the continuous 

function for three main reasons. 

• First, under a step function, 

manufacturers who build vehicle 

models whose footprints fall near the 

upper boundary of a step have a 

considerable incentive to upsize the 

vehicle in order to receive the lower 

target of the next step. A continuous 

function reduces the incentive created 

by a step function to upsize a vehicle 

whose footprint is near a category 

boundary, because on an uninterrupted 

spectrum, upsizing slightly can never 

cause a drastic decrease in the 

stringency of the applicable target. 

• Second, the continuous function 

minimizes the incentive to downsize a 

vehicle as a way to meet the standards, 

because any downsizing results in 

higher targets being applicable. 

• And finally, the continuous 

function provides manufacturers with 

greater regulatory certainty, because 

there are no category boundaries that 

could be redefined in future rulemaking. 

The considerations in favor of 

NHTSA’s decision to base the MY 2008–

11 light truck CAFE standards on a 

continuous function are also applicable 

to the current rulemaking, which would 

set footprint-based fuel economy 

standards for both light trucks and 

passenger cars. Thus, NHTSA has 

tentatively decided that a continuous 

function is the best choice for applying 

the footprint-based standards. 

We note, however, that there are a 

variety of mathematical forms available 

to estimate the relationship between 

vehicle footprint and fuel economy that 

could be used as a continuous function. 

In the MY 2008–11 light truck CAFE 

rule, NHTSA considered a simple linear 

(straight-line) function, a quadratic (Ushaped) function, an exponential (curve 

that continuously becomes steeper or 

shallower) function, and an 

unconstrained logistic (S-shaped) 

function. Each of these relationships 

was estimated in gallons per mile (gpm) 

rather than in miles per gallon (mpg), 

because the relationship between fuel 

economy measured in mpg and fuel 

savings is not linear.82 NHTSA plotted 

the optimized fleets in terms of footprint 

versus gpm, and once a shape of a 

function was determined in terms of 

gpm, the agency then converted the 

functions to mpg for the purpose of 

evaluating the potential target values. 

See 71 FR 17600–17607 (Apr. 6, 2006) 

for a fuller discussion of the agency’s 

process. 

Ultimately, NHTSA decided in the 

light truck CAFE rule that none of those 

four functional forms as presented 

would be appropriate for the CAFE 

program because they tended toward 

excessively high stringency levels at the 

smaller end of the footprint range, 

excessively low stringency levels at the 

larger end of the footprint range, or 

both. Too high stringency levels for 

smaller vehicles could potentially result 

in target values beyond the 

technological capabilities of 

manufacturers, while too low levels for 

larger vehicles would reduce fuel 

savings below that of the optimized 

fleet. NHTSA determined that a 

constrained logistic function 83 provided 

a relatively good fit to the data points 

without creating problems associated 

with some or all of the other forms, i.e., 

excessively high targets for small 

vehicles, excessively low targets for 

large vehicles, or regions in which 

targets for large vehicles exceeded those 

for small vehicles. The constrained 

logistic function also limited the 

potential for the curve to be 

disproportionately influenced by a 

single vehicle model located at either 

end of the range (i.e., by outliers). 

Because most vehicle models are 

clustered in the middle of the footprint 

range, models toward either end have a 

greater influence on their target value, 

and thus on the overall shape of the 

curve that fits the data points. The 

constrained logistic function minimizes 

this problem. 

NHTSA’s constrained logistic 

function in the light truck rule was 

defined by four parameters. Two 

parameters established the function’s 

upper and lower bounds (asymptotes), 

respectively. A third parameter 

specified the footprint at which the 

function was halfway between the 

upper and lower bounds. The last 

parameter established the rate or 

‘‘steepness’’ of the function’s transition 

between the upper (at low footprint) and 

lower (at high footprint) boundaries.84


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precisely, these two parameters determine the range 

between the vehicle footprints where the upper and 

lower limits of fuel economy are reached, and the 

value of footprint for which the value of fuel 

economy is midway between its upper and lower 

bounds. 

85The market forecast is an input to the Volpe 

model developed by NHTSA using product plan 

information provided to the agency by individual 

vehicle manufacturers in response to NHTSA’s 

requests. The submitted product plans contain 

confidential business information (CBI), which the 

agency is prohibited by federal law from disclosing. 

As the agency receives new product plan 

information in response to future requests, the 

market forecast is updated. 

86U.S. Department of Energy, ‘‘Transportation 

Sector Module of the National Energy Modeling 

System: Model Documentation 2007,’’ DOE/EIA–

M070, May 2007. Available at http:// 

tonto.eia.doe.gov/FTPROOT/modeldoc/ 

m070(2007).pdf (last accessed April 20, 2008). 

NEMS’s Manufacturers Technology Choice 

Submodule (MTCS) is believed to have logical 

structures similar to those in Energy and 

Environmental Analysis, Inc.’s (EEA’s) Fuel 

Economy Regulatory Analysis Model (FERAM). 

However, FERAM documentation and source code 

have not been made available to NHTSA or Volpe 

Center staff. 

87 Greene, David. ‘‘TAFV Alternative Fuels and 

Vehicles Choice Model Documentation,’’ ORNL// 

TM–2001//134, July 2001. Available at http://wwwcta.ornl.gov/cta/Publications/Reports/ 

ORNL_TM_2001_134.pdf (last accessed April 20, 

2008). 

88Northeast States Center for a Clean Air Future 

(NESCCAF), Reducing Greenhouse Gases from 

Light-Duty Vehicles (2004). Available at http:// 

bronze.nescaum.org/committees/mobile/ 

rpt040923ghglightduty.pdf (last accessed April 20, 

2008). 

The resulting curve was an elongated 

reverse ‘‘S’’ shape, with fuel economy 

targets decreasing as footprint increased. 

NHTSA has tentatively concluded 

that a constrained logistic function 

would continue to be appropriate for 

setting CAFE standards for both 

passenger cars and light trucks. We have 

reached that conclusion because the 

concerns that prevented NHTSA from 

choosing another mathematical function 

in the light truck CAFE rule continue to 

be relevant to the new standards. The 

description below of the Volpe model 

and how it works explains in much 

more detail how the constrained logistic 

function has been updated for purposes 

of this rulemaking. NHTSA seeks 

comment on whether another 

mathematical function might result in 

improved standards consistent with 

EPCA and EISA. 

V. Volpe Model/Analysis/Generic 

Description of Function 

A. The Volpe model 

1. What is the Volpe model? 

As it did for the development and 

analysis of the April 2006 light truck 

final rule, in developing this proposal 

NHTSA made significant use of a peerreviewed modeling system developed 

by the Department of Transportation’s 

Volpe National Transportation Systems 

Center (Volpe Center). The CAFE 

Compliance and Effects Modeling 

System (referred to herein as the Volpe 

model) serves two fundamental 

purposes: Identifying technologies each 

manufacturer could apply in order to 

comply with a specified set of CAFE 

standards, and calculating the costs and 

effects of manufacturers’ application of 

technologies. 

Before working with the Volpe Center 

to develop and apply this model, 

NHTSA had considered other options, 

including other modeling systems. 

NHTSA was unable to identify any 

other system that could operate at a 

sufficient level of detail with respect to 

manufacturers’ future products, which 

involve thousands of unique vehicle 

models using hundreds of unique 

engines and hundreds of unique 

transmissions. NHTSA was also unable 

to identify any other system that could 

simulate a range of different possible 

reforms to CAFE standards. The Volpe 

model provides these and other 

capabilities, and helps NHTSA examine 

potential regulatory options. 

2. How does the Volpe model apply 

technologies to manufacturers’ future 

fleets? 

The Volpe model begins with an 

‘‘initial state’’ of the domestic vehicle 

market, which in this case is the market 

for passenger cars and light trucks to be 

sold during the period covered by the 

proposed rule. The vehicle market is 

defined on a model-by-model, engineby-engine, and transmission-bytransmission basis, such that each 

defined vehicle model refers to a 

separately-defined engine and a 

separately-defined transmission. 

For the model years covered by the 

current proposal, the light vehicle 

(passenger car and light truck) market 

forecast included more than 3,000 

vehicle models, more than 400 specific 

engines, and nearly 400 specific 

transmissions.85 This level of detail in 

the representation of the vehicle market 

is vital to an accurate analysis of 

manufacturer-specific costs and the 

analysis of reformed CAFE standards, 

and is much greater than the level of 

detail used by many other models and 

analyses relevant to light vehicle fuel 

economy. Because CAFE standards 

apply to the average performance of 

each manufacturer’s fleets of cars and 

light trucks, the impact of potential 

standards on individual manufacturers 

cannot be credibly estimated without 

analysis of manufacturers’ planned 

fleets. NHTSA has used this level of 

detail in CAFE analysis throughout the 

history of the program. Furthermore, 

because required CAFE levels under an 

attribute-based CAFE standard depend 

on manufacturers’ fleet composition, the 

stringency of an attribute-based 

standard cannot be predicted without 

performing analysis at this level of 

detail. 

Examples of other models and 

analyses that NHTSA and Volpe Center 

staff have considered include DOE’s 

NEMS, Oak Ridge National Laboratory’s 

(ORNL) Transitional Alternative Fuels 

and Vehicles (TAFV) model, and the 

California Air Resources Board’s (CARB) 

analysis supporting California’s adopted 

greenhouse gas emissions standards for 

light vehicles. 

DOE’s NEMS represents the light-duty 

fleet in terms of four ‘‘manufacturers’’

(domestic cars, imported cars, domestic 

light trucks, and imported light trucks), 

twelve vehicle market classes (e.g., 

‘‘standard pickup’’), and sixteen power 

train/fuel combinations (e.g., methanol 

fuel-cell vehicle).86 Therefore, as 

currently structured, NEMS is unable to 

estimate manufacturer-specific 

implications of attribute-based CAFE 

standards. 

TAFV accounts for many power train/ 

fuel combinations, having been 

originally designed to aid understanding 

of possible transitions to alternative 

fueled vehicles, but it represents the 

light-duty fleet as four aggregated (i.e., 

industry-wide) categories of vehicles: 

Small cars, large cars, small light trucks, 

and large light trucks.87 Thus, again, as 

currently structured, TAFV is unable to 

estimate manufacturer-specific 

implications of attribute-based CAFE 

standards. 

CARB’s analysis of light vehicle GHG 

emissions standards uses two levels of 

accounting. First, based on a report 

prepared for Northeast States Center for 

a Clean Air Future (NESCCAF), CARB 

represents the light-duty fleet in terms 

of five ‘‘representative’’ vehicles. Use of 

these ‘‘representative’’ vehicles ignores 

the fact that the engineering 

characteristics of individual vehicle 

models vary widely both among 

manufacturers and within 

manufacturers’ individual fleets. For 

each of these five vehicles, NESCCAF’s 

report contains the results of full vehicle 

simulation given several pre-specified 

technology ‘‘packages.’’88 Second, to 

evaluate manufacturer-specific 

regulatory costs, CARB essentially 

reduces each manufacturer’s fleet to 

only two average test weights, one for 

each of California’s two regulatory 


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89California Environmental Protection Agency, 

Air Resources Board, Staff Report: Initial Statement 

of Reasons (CARB ISOR) (2004), at 111–114. 

Available at http://www.arb.ca.gov/regact/ 

grnhsgas/isor.pdf (last accessed April 20, 2008). We 

note that California has adopted these standards but 

is currently unable to enforce them, due to EPA’s 

February 29, 2008, denial of California’s request for 

waiver of federal preemption under Section 209 of 

the Clean Air Act. For information on EPA’s 

decision, see http://www.epa.gov/otaq/cawaiver.htm. (Last accessed April 20, 2008.) 

California filed a petition in the Ninth Circuit Court 

of Appeals challenging EPA’s denial of the waiver 

on January 2, 2008. 

90Although CARB’s analysis covered a wider 

range of model years than does NHTSA’s analysis, 

this does not lessen the importance of a detailed 

representation of manufacturers’ fleets. 

91The sensitivity analysis and its usefulness are 

explained more fully below. 

classes.89 Even for a flat standard such 

as considered by California, NHTSA 

would not base its analysis of 

manufacturer-level costs on this level of 

aggregation. Use of CARB’s methods 

would not enable NHTSA to estimate 

manufacturer-specific implications of 

the attribute-based CAFE standards 

proposed today.90

The Volpe model also uses several 

additional categories of data and 

estimates provided in various external 

input files: 

One input file specifies the 

characteristics of fuel-saving 

technologies to be represented, and 

includes, for each technology, the first 

year in which the technology is 

expected to be ready for commercial 

application; upper and lower estimates 

of the effectiveness and cost (retail price 

equivalent) of the technology; 

coefficients defining the extent to which 

costs are expected to decline as a result 

of ‘‘learning effects’’ (discussed below); 

inclusion or exclusion of the technology 

on up to three technology ‘‘paths’’; and 

constraints (‘‘phase-in caps’’) on the 

annual rate at which manufacturers are 

estimated to be able to increase the 

technology’s penetration rate. These 

technology characteristics and estimates 

are specified separately for each of the 

following categories of vehicles: Small 

sport/utility vehicles (SUVs), midsize 

SUVs, large SUVs, small pickups, large 

pickups, minivans, subcompact cars, 

compact cars, midsize cars, and large 

cars. In addition, the input file defining 

technology characteristics can (but need 

not) contain specified ‘‘synergies’’

between technologies—that is, 

differences in a given technology’s effect 

on fuel consumption that result from the 

presence of other technologies. 

Another input file specifies vehicular 

emission rates for the following 

pollutants: Carbon monoxide (CO), 

volatile organic compounds (VOCs), 

nitrogen oxides (NOX), particulate 

matter (PM), and sulfur dioxide (SO2). 

These rates are defined on a model yearby-model year and calendar year-bycalendar year basis, and are used to 

estimate changes in emissions that 

result from changes in vehicular travel 

(i.e., vehicle-miles traveled or VMT). 

A third input file specifies a variety 

of economic and other data and 

estimates. The model can accommodate 

vehicle survival (i.e., percent of vehicles 

of a given vintage that remain in service) 

and mileage accumulation (i.e., annual 

travel by vehicles of a given vintage) 

rates extending as many years beyond 

the year of sale as for which estimates 

are available and use those for 

estimating VMT, fuel consumption, and 

emissions. The model can also 

accommodate forecasts of price and fuel 

taxation rates for up to seven fuels (e.g., 

gasoline, diesel) over a similar period. 

The model uses pump prices (i.e., 

including taxes) to estimate the value 

manufacturers expect vehicle 

purchasers to place on saved fuel, 

because they indicate the amount by 

which the manufacturer is expected to 

consider itself able to increase the retail 

price of the vehicle based on the 

purchaser’s consideration of the 

vehicle’s increased fuel economy. 

However, the model uses pretax fuel 

prices to estimate the monetized societal 

benefits of reduced fuel consumption, 

because fuel taxes represent transfers of 

resources from fuel buyers to 

government agencies rather than real 

resources that are consumed in the 

process of supplying or using fuel, so 

their value must be deducted from retail 

fuel prices to determine the value of fuel 

savings to the U.S. economy. 

Other economic inputs include the 

rebound effect coefficient (i.e., the 

elasticity of VMT with respect to the 

per-mile cost of fuel); the discount rate; 

the ‘‘payback period’’ (i.e., the number 

of years manufacturers are estimated to 

assume vehicle purchasers consider 

when taking into account fuel savings); 

the ‘‘gap’’ between laboratory and actual 

fuel economy; the per-vehicle value of 

travel time (in dollars per hour); the 

economic costs (in dollars per gallon) of 

petroleum consumption; various 

external costs (all in dollars per mile) 

associated with changes in vehicle use; 

damage costs (all on a dollar per ton 

basis) for each of the above-mentioned 

criteria pollutants; and the rate at which 

noncompliance causes civil penalties. 

Section V below describes in much 

more detail how these inputs are 

included and used by the model. 

The model also accommodates input 

data and estimates addressing the 

properties of different fuels. These 

include upstream carbon dioxide and 

criteria pollutant emission rates (i.e., 

U.S. emissions resulting from the 

production and distribution of each 

fuel), density (pounds/gallon), energy 

density (BTU/gallon), carbon content, 

shares of fuel savings leading to reduced 

domestic refining, and relative shares of 

different gasoline blends. These fuel 

properties and related estimates are 

used to calculate changes in domestic 

upstream emissions resulting from 

changes in fuel consumption. 

Coefficients defining the probability 

distributions to apply when performing 

sensitivity analysis (i.e., Monte Carlo 

simulation) are also specified in this 

input file.91 These coefficients 

determine the likelihood that any given 

value will be selected when performing 

this type of analysis (e.g., the likelihood 

that a rebound effect of -0.1 will be 

tested). High and low fuel price 

forecasts are also specified in this input 

file for this purpose. 

The final input file contains CAFE 

scenarios to be examined. The model 

accommodates a baseline (i.e., businessas-usual) scenario and different 

alternative scenarios. Effects of the 

alternative scenarios are calculated 

relative to results for the baseline 

scenario. Each scenario defines the 

coverage, structure, and stringency of 

CAFE standards for each of the covered 

model years. 

With all of the above input data and 

estimates, the modeling system 

develops an estimate of a set of 

technologies each manufacturer could 

apply in response to each specified 

CAFE scenario. Because manufacturers 

have many choices regarding how to 

respond to CAFE standards, it is 

impossible to predict precisely how a 

given manufacturer would respond to a 

given set of standards. The modeling 

system begins with the ‘‘initial state’’

(i.e., business-as-usual) of each 

manufacturer’s future vehicles, and 

accumulates the estimated costs of 

progressive additions of fuel-saving 

technologies. Within a set of specified 

constraints, the system adds 

technologies following a costminimizing approach, because this is 

what NHTSA expects a manufacturer 

would do in real life. At each step, the 

system evaluates the effective cost of 

applying available technologies to 

individual vehicle models, engines, or 

transmissions, and selects the 

application of technology that produces 

the lowest effective cost. The effective 

cost estimated to be considered by the 

manufacturer is calculated by adding 

the total incurred technology costs (in 

retail price equivalent or RPE), 

subtracting the reduction in civil 


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92The estimated value of the reduction in fuel 

costs represents the amount by which the 

manufacturer is expected to consider itself able to 

increase the retail price of the vehicle based on the 

purchaser’s consideration of the vehicle’s increased 

fuel economy. This calculation considers the 

change in the discounted outlays for fuel (and fuel 

taxes) during a ‘‘payback period’’ specified as an 

input to the model. 

93For example, if Honda is expected to produce 

the Civic in 2012 and 2013, a version of the Civic 

estimated to be produced in 2013 may carry over 

technologies from a version of the Civic produced 

in 2012 if the latter is identified as a ‘‘predecessor’’

of the former. 

penalties owed for noncompliance with 

the CAFE standard, subtracting the 

estimated value 92 of the reduction in 

fuel costs, and dividing the result by the 

number of affected vehicles. 

In representing manufacturer 

decision-making in response to a given 

CAFE standard, the modeling system 

accounts for the fact that historically 

some manufacturers have been 

unwilling to pay penalties and some 

have been willing to do so. Thus, the 

system applies technologies until any of 

the following conditions are met: the 

manufacturer no longer owes civil 

penalties for failing to meet the 

applicable standard, the manufacturer 

has exhausted technologies expected to 

be available in that model year, or the 

manufacturer is estimated to be willing 

to pay civil penalties, and doing so is 

estimated to be less expensive than 

continuing to add technologies. The 

system then progresses to the next 

model year (if included in the vehicle 

market and scenario input files), 

‘‘carrying over’’ technologies where 

vehicle models are projected to be 

succeeded by other vehicle models.93

In the modeling system, this 

‘‘compliance simulation’’ is constrained 

in several ways. First, technologies are 

defined as being applicable or not 

applicable to each of the ten vehicle 

categories listed above. The vehicle 

market forecast input file may also 

define some technologies as being 

already present or not applicable to 

specific vehicles, engines or 

transmissions. For example, a 

manufacturer may have indicated it 

plans to use low-drag brakes on some 

specific vehicle model, or NHTSA may 

expect that another manufacturer is not 

likely to apply a 7- or 8-speed 

transmission after it installs a 6-speed 

transmission on a vehicle. Second, some 

technologies are subject to specific 

‘‘engineering constraints.’’ For example, 

secondary-axle disconnect can only be 

applied to vehicles with four-wheel (or 

all-wheel) drive. Third, some 

technologies (e.g., conversion from 

pushrod valve actuation to overhead 

cam actuation) are nearly always 

applied only when the vehicle is 

expected to be redesigned and others 

(e.g., cylinder deactivation) are applied 

only when the vehicle is expected to be 

refreshed or redesigned, so the model 

will only apply them at those particular 

points. Fourth, once the system applies 

a given technology to a percentage of a 

given manufacturers’ fleet exceeding a 

specified phase-in cap, the system 

instead applies other technologies. The 

third and fourth of these constraints are 

intended to produce results consistent 

with manufacturers’ product planning 

practices and with limitations on how 

quickly technologies can penetrate the 

fleet. 

One important aspect of this 

compliance simulation is that it does 

not attempt to account for either CAFE 

credits or intentional over-compliance. 

In the real world, manufacturers may 

earn CAFE credits by selling flex-fueled 

vehicles (FFVs) and/or by exceeding 

CAFE standards, and may, within 

limitations, count those credits toward 

compliance in future or prior model 

years. However, EPCA and EISA do not 

allow NHTSA to consider these 

flexibilities in setting the standards. 

Therefore, the Volpe model does not 

attempt to account for these flexibilities. 

Another possibility NHTSA and 

Volpe Center staff have considered, but 

do not yet know how to analyze, is the 

potential that manufacturers might 

‘‘pull ahead’’ the implementation of 

some technologies in response to CAFE 

standards that they know will be 

steadily increasing over time. For 

example, if a manufacturer plans to 

redesign many vehicles in MY2011 and 

not in MY2013, but the standard for 

MY2013 is considerably higher than 

that for MY2011, the manufacturer 

might find it less expensive during 

MY2011–MY2013 (taken together) to 

apply more technology in MY2011 than 

is necessary for compliance with the 

MY2011 standard. Under some 

circumstances, doing so might make 

sense even without regard to the 

potential to earn and bank CAFE credits. 

NHTSA and Volpe Center staff have 

discussed the potential to represent this 

type of response, but have thus far 

encountered two challenges. First, 

NHTSA is not certain that in 

determining the maximum feasible 

standard in a given model year, it would 

be appropriate to count on 

manufacturers overcomplying with 

standards in preceding model years. 

Second, considering other inter-model 

year dependencies (e.g., technologies 

that carry over between model years, 

phase-in caps that accumulate across 

model years, volume-based learning 

curves), Volpe Center staff currently 

anticipate that some iterative procedure 

would likely be necessary. Also, the 

agency wonders whether trying to 

represent this type of response would 

require make undue implicit 

assumptions regarding manufacturers’

ability to predict future market 

conditions. Although NHTSA and Volpe 

Center staff will continue to explore the 

potential to represent inter-model year 

timing, it is not yet clear that it will be 

appropriate and feasible to do so in the 

near term. 

The agency requests comment on the 

appropriateness under EPCA of 

considering (in the standard-setting 

context) this type of anticipatory 

application of technology. The agency 

further requests comment on 

appropriate methodologies for 

projecting and representing such 

decisions by manufacturers. 

3. What effects does the Volpe model 

estimate? 

Having completed this compliance 

simulation for all manufacturers and all 

model years, the system calculates the 

total cost of all applied technologies, as 

well as a variety of effects of changes in 

fuel economy. The system calculates 

year-by-year mileage accumulation, 

taking into account any increased 

driving estimated to result from the 

rebound effect. Based on the calculated 

mileage accumulation and on fuel 

economy and the estimated gap between 

laboratory and actual fuel economy, the 

system calculates year-by-year fuel 

consumption. Based on calculated 

mileage accumulation and fuel 

consumption, and on specified emission 

factors, the system calculates future full 

fuel-cycle domestic carbon dioxide and 

criteria pollutant emissions. The system 

calculates total discounted and 

undiscounted national societal costs of 

year-by-year fuel consumption, taking 

into account estimated future fuel prices 

(before taxes) and the estimated 

economic externalities of fuel 

consumption. Based on changes in yearby-year mileage accumulation, the 

system calculates changes in consumer 

surplus related to additional travel, as 

well as economic externalities related to 

additional congestion, accidents, and 

noise stemming from additional travel. 

The system calculates the value of time 

saved because increases in fuel 

economy produce increases in driving 

range, thereby reducing the frequency 

with which some vehicles require 

refueling. The system calculates the 

monetary value of damages resulting 

from criteria pollutants. Finally, the 

system accumulates all discounted and 

undiscounted societal benefits of each 

scenario as compared to the baseline 


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94The number e is one of the most important 

numbers in mathematics and statistics. The 

function has a hockey stick appearance when 

plotted. The value of e itself is a never ending 

number whose first 8 digits equal 2.7182818. 

NHTSA uses it here because it occurs in many 

natural processes and tends to fit data well. In the 

last light truck rulemaking, NHTSA examined 

several functional forms that did not rely on e, but 

they were judged not to provide as good a fit for 

the data. We are using the same conclusion here. 

scenario. For each model year, the 

system compares total incurred 

technology costs to the total present 

value of societal benefits for each model 

year, calculating net societal benefits 

(i.e., discounted societal benefits minus 

total incurred technology costs) and the 

benefit-cost ratio (i.e., discounted 

societal benefits divided by total 

incurred technology costs). 

One effect not currently estimated by 

the Volpe model is the market response 

to CAFE-induced changes in vehicle 

prices and fuel economy levels. NHTSA 

and Volpe Center staff have worked to 

try and develop and apply a market 

share model capable of estimating 

changes in sales of individual vehicle 

models. Doing so would allow 

estimation of the feedback between 

market shifts and CAFE requirements. 

For example, if the relative market share 

of vehicles with small footprints 

increases, the average required CAFE 

level under a footprint-based standard 

will also increase. 

In an early experimental version of 

the Volpe model, Volpe Center staff 

included a market share model using a 

nested multinomial logit specification to 

calculate model-by-model changes in 

sales volumes. This allowed the Volpe 

model to calculate the resulting changes 

in manufacturers’ required CAFE levels, 

and to seek iteratively a solution at 

which prices, fuel economy levels, sales 

volumes, and required CAFE levels 

converged to stable values. Although the 

market share model appeared to operate 

properly (and to converge rapidly), 

Volpe Center staff suspended its 

development because of three 

challenges: 

First, Volpe Center staff were not 

successful in calibrating a logically 

consistent set of coefficients for the 

underlying multinomial logit model. 

The analysis, performed using 

information from a known (2002 model 

year) fleet, consistently yielded one or 

more coefficients that were either 

directionally incorrect (e.g., indicating 

that some attributes actually detract 

from value) or implausibly large (e.g., 

indicating that some attributes were of 

overwhelming value). Although Volpe 

Center staff tested many different 

specifications of the market share 

model, none produced results that 

appeared to merit further consideration. 

Second, NHTSA and Volpe Center 

staff are not confident that baseline sales 

prices for individual vehicle models, 

which would be required by a market 

share model, can be reliably predicted. 

Although NHTSA requests that 

manufacturers include planned MSRPs 

in product plans submitted to NHTSA, 

MSRPs do not include the effect of 

various sales incentives that can change 

actual selling prices. The availability 

and dollar value of such incentives have 

been observed to vary considerably, but 

not necessarily predictably. 

Finally, before applying a market 

share model, it would be necessary to 

estimate how manufacturers would 

allocate compliance costs among vehicle 

models. Although one obvious approach 

would be to assume that all costs would 

be passed through in the form of higher 

prices for those vehicle models with 

improved fuel economy, other 

approaches are perhaps equally 

plausible. For example, a manufacturer 

might shift compliance costs toward 

high-demand vehicles in order to 

compete better in certain market 

segments. Although the abovementioned experimental version of the 

Volpe model included a ‘‘cost 

allocation’’ model that offered several 

different allocation options, NHTSA and 

Volpe Center staff never achieved 

confidence that these aspects of 

manufacturer decisions could be 

reasonably estimated. 

NHTSA and Volpe Center staff are 

continuing to explore options for 

including these types of effects. At the 

same time, EPA has contracted with 

Resources for the Future (RFF) to 

develop a potential market share model. 

Depending on the extent to which these 

efforts are successful, the Volpe model 

could at some point be modified to 

include cost allocation and market share 

models. NHTSA seeks comments on 

possible methodologies for 

incorporating market responses to 

CAFE-induced changes in vehicle price 

and fuel economy in the Volpe model. 

In particular, NHTSA seeks comments 

addressing the concerns identified 

above regarding the formulation and 

calibration of a market share model, the 

estimation of future vehicle prices, and 

the estimation of manufacturers’

decisions regarding the allocation of 

compliance costs. 

4. How can the Volpe model be used to 

calibrate and evaluate potential CAFE 

standards? 

The modeling system can also be 

applied in a more highly-automated 

mode whereby the optimal shape of an 

attribute-based CAFE standard may be 

estimated and its stringency may be set 

at a level that produces a specified total 

technology cost or average required 

CAFE level among a specified set of 

manufacturers, or that is estimated to 

maximize net societal benefits. The first 

step in this operating mode involves 

identifying manufacturer-bymanufacturer CAFE levels at which 

societal benefits are estimated to be 

maximized. The second step involves 

combining the resultant fleets and 

statistically fitting a constrained logistic 

curve of the following form: 

TARGET

LIMIT LIMIT LIMIT

e

UPPER LOWER UPPER

=

+ − 



 





1

1 11 FOOTPRINT MIDPOINT /WIDTH

FOOTPRINT MIDPOINT /WIDTH

( ) −

( ) − 1 e +

Here, TARGET is the fuel economy 

target (in mpg) applicable to vehicles of 

a given footprint (FOOTPRINT, in 

square feet), LIMITLOWER and 

LIMITUPPER are the function’s lower and 

upper asymptotes (also in mpg), e is 

approximately equal to 2.718,94

MIDPOINT is the footprint (in square 

feet) at which the inverse of the fuel 

economy target falls halfway between 

the inverses of the lower and upper 

asymptotes, and WIDTH is a parameter 

(in square feet) that determines how 

gradually the fuel economy target 

transitions from the upper toward the 

lower asymptote as the footprint 

increases. Figure V–1 below shows an 

example of a logistic target function, 

where LIMITLOWER = 20 mpg, 

LIMITUPPER = 30 mpg, MIDPOINT = 

40 square feet, and WIDTH = 5 square 

feet: 


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The lower asymptote is determined by 

calculating the average fuel economy of 

the largest vehicles in the ‘‘optimized’’

fleet discussed above, where the 

percentage of the fleet to consider is 

specified externally. Similarly, the 

upper asymptote is determined by 

calculating the average fuel economy of 

the smallest vehicles in the same fleet. 

Initial values of the other two 

coefficients of the logistic function are 

determined through a standard 

statistical technique (nonlinear leastsquare regression), except as discussed 

in sections V and VI below regarding the 

adjusting of the original curve for the 

passenger car function. 

Following this initial calibration of 

the target function, the system adjusts 

the lower and upper asymptotes 

uniformly (on a gallon per mile basis) 

until one of the following externally 

specified conditions is met: the average 

CAFE level required of the included 

manufacturers approximately equals an 

externally specified goal; net societal 

benefits (i.e., total benefits minus total 

costs) are maximized, or total benefits 

are as close as observed (among 

evaluated stringency levels) to total 

costs. Due to rounding of fuel economy 

and CAFE levels, the first condition can 

only be satisfied on an approximate 

basis. 

The modeling system provides 

another type of higher-level 

automation—the ability to perform 

uncertainty analysis, also referred to as 

Monte Carlo simulation. For some input 

parameters, such as technology costs, 

values can be tested over a specified 

continuous probability distribution. For 

others, such as fuel prices, discrete 

scenarios (e.g., high, low, and reference 

cases), each with a specified probability, 

can be tested. The system performs 

sensitivity analysis by randomly 

selecting values for parameters to be 

varied, performing the compliance 

simulation and effects calculations, 

repeating these results many times and 

recording results for external analysis. 

This operating mode enables the 

examination of the uncertainty of highlevel results (e.g., total costs, fuel 

savings, or net societal benefits), as well 

as their sensitivity to variations in the 

model’s input parameters. 

5. How has the Volpe model been 

updated since the April 2006 light truck 

CAFE final rule? 

Several changes were made to the 

Volpe model between the analysis 

reported in the April 2006 light truck 

final rule and the analysis of the current 

NPRM. As discussed above, the set of 

technologies represented was updated, 

the logical sequence for progressing 


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through these technologies was 

changed, methods to account for 

‘‘synergies’’ (i.e., interactions) between 

technologies and technology cost 

reductions associated with a 

manufacturer’s ‘‘learning’’ were added, 

the effective cost calculation used in the 

technology application algorithm was 

modified, and the procedure for 

calibrating a reformed standard was 

changed, as was the procedure for 

estimating the optimal stringency of a 

reformed standard. 

As discussed in Section III above, the 

set of technologies considered by the 

agency has evolved since the previous 

light truck CAFE rulemaking. The set of 

technologies now included in the Volpe 

model is shown below in Table V–1, 

with codes used by the model to refer 

to each technology. 

TABLE V–1.—REVISED TECHNOLOGY

SET FOR VOLPE MODEL

Technology 

Code 

(for 

Model) 

Low Friction Lubricants ................... LUB 

Engine Friction Reduction ............... EFR 

Variable Valve Timing (Intake Cam 

Phasing).

VVTI 

Variable Valve Timing (Coupled 

Cam Phasing).

VVTC 

Variable Valve Timing (Dual Cam 

Phasing).

VVTD 

Cylinder Deactivation ...................... DISP 

Variable Valve Lift & Timing (Continuous VVL).VVLTC 

Variable Valve Lift & Timing (Discrete VVL).VVLTD 

Cylinder Deactivation on Overhead 

Valve (OHV).

DISPO 

Variable Valve Timing (CCP) on 

OHV.

VVTO 

Multivalve Overhead Cam with 

CVVL.

DOHC 

TABLE V–1.—REVISED TECHNOLOGY

SET FOR VOLPE MODEL—Continued 

Technology 

Code 

(for 

Model) 

Variable Valve Lift & Timing (DVVL) 

on OHV.

VVLTO 

Camless Valve Actuation ................ CVA 

Stoichiometric Gasoline Direct Injection (GDI).SIDI 

Lean Burn GDI ................................ LBDI 

Turbocharging and Downsizing ...... TURB 

Homogeneous Charge Compression Ignition.HCCI 

Diesel with Lean NOX Trap (LNT) .. DSLL 

Diesel with Selective Catalytic Reduction (SCR).DSLS 

5 Speed Automatic Transmission ... 5SP 

Aggressive Shift Logic .................... ASL 

Early Torque Converter Lockup ...... TORQ 

6 Speed Automatic Transmission ... 6SP 

Automatic Manual Transmission ..... AMT 

Continuously Variable Transmission CVT 

6 Speed Manual .............................. 6MAN 

Improved Accessories ..................... IACC 

Electronic Power Steering .............. EPS 

42-Volt Electrical System ................ 42V 

Low Rolling Resistance Tires ......... ROLL 

Low Drag Brakes ............................ LDB 

Secondary Axle Disconnect—

Unibody.

SAXU 

Secondary Axle Disconnect—Ladder Frame.SAXL 

Aero Drag Reduction ...................... AERO 

Material Substitution (1%) ............... MS1 

Material Substitution (2%) ............... MS2 

Material Substitution (5%) ............... MS5 

Integrated Starter/Generator (ISG) 

with Idle-Off.

ISGO 

IMA/ISAD/BSG Hybrid (includes engine downsizing).IHYB 

2-Mode Hybrid ................................ 2HYB 

Power Split Hybrid .......................... PHYB 

Full Diesel Hybrid ............................ DHYB 

The logical sequence for progressing 

between these technologies has also 

been changed. As in the previous 

version of the Volpe model, 

technologies are assigned to groups (e.g., 

engine technologies) and the model 

follows a cost-minimizing approach to 

selecting technologies. However, the 

model now includes some ‘‘branch 

points’’ at which it selects from two or 

more technologies within the same 

group. This enables a more detailed 

representation of some technologies that 

have multiple variants (e.g., variable 

valve timing) and, as relevant to the 

applicability of different technologies, 

more specific differentiation between 

technologies that have already been 

applied to vehicles (e.g., single versus 

dual overhead cam engines). This 

revised logical sequencing is expected 

to produce results that are more realistic 

in terms of the application of 

technologies to different vehicle models. 

For example, in this analysis OHV 

engines and OHC engines were 

considered separately, and the model 

was generally not allowed to apply 

multivalve OHC technology to OHV 

engines (except where continuous 

variable valve timing and lift is applied 

to OHV engines, in which case the 

model assumes conversion to DOHC 

valvetrain). 

Figure V–2 below shows the resultant 

‘‘decision tree’’ for the group of engine 

technologies. As an example of the 

‘‘branching’’ mentioned above, having 

applied cylinder deactivation and 

coupled cam phasing to an overhead 

valve engine, the Volpe model selects 

either discrete valve lift or an engine 

redesign to multivalve overhead cam 

with continuous variable valve lift. 

Figure V–3 shows the decision tree for 

transmission technologies, and Figure 

V–4 shows the decision trees for other 

technologies. 

BILLING CODE 4910–59–P 


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Each time the model applies a 

technology to a vehicle in the fleet, it 

considers the next available technology 

on every available path. An available 

technology is one that is not included in 

the base vehicle, has not been applied 

by the model, and is not disqualified 

due to the vehicle’s characteristics 

(discussed below). For a given path, the 

next available technology is the first 

available item (if no technologies on the 

path have yet been applied) or the first 

available item following the most 

recently applied technology on that 

path. An available path is any path that 

includes available technologies. 

The engine and transmission paths 

contain several forks where the model 

may choose among two or more samepath items along with items from other 

paths. At some of these forks, conditions 

on the connecting arrows require the 

model to follow a particular branch. 

These conditions are based on 

previously applied technologies or 

vehicle characteristics. For example, 

ladder frame vehicles must follow the 

left branch of the transmission 

technology path, while unibody 

vehicles can follow either the right or 

left branch. The consequence is that the 

model considers both aggressive shift 

logic (ASL) and CVT for unibody 

vehicles, but only ASL for ladder frame 

vehicles. Conditions along the engine 

technologies path are based on 

valvetrain design (OHV, OHC, SOHC, 

and DOHC). 

Other conditions require the model to 

discontinue considering technologies 

along a given path. For example, 2- 

Mode Hybrid and Power Split Hybrid 

drivetrains can be applied only to 

vehicles equipped with automatic 

transmissions. If the model has already 

chosen a manual transmission and IMA/ 

ISAD/BSG Hybrid drivetrain (or if the 

base vehicle is equipped with these), the 

hybrid path becomes unavailable and 

the model must choose subsequent 

technologies from other paths. 

a. Technology Synergies 

In some cases, the change in fuel 

economy achieved by applying a given 

technology depends on what other 

technologies are already present. The 

Volpe model has been modified to 

provide the ability to represent such 

‘‘synergies’’ between technologies, as 

discussed above. These effects are 

specified in one of the model’s input 

files. As shown below in Table V–2, 

which uses technology codes listed in 

Table V–1 above, most of the synergies 

represented in the analysis of this 

proposal are negative. In other words, 

most of the interactions are such that a 

given technology has a smaller effect on 

fuel economy if some other technologies 

have already been applied. The 

inclusion of such effects in the model is 


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expected to produce more realistic estimates of the benefit of applying 

various technologies. 

TABLE V–2.—‘‘SYNERGIES’’ FROM TECHNOLOGY INPUT FILE FOR VOLPE MODEL

[In percent] 

Synergies Synergy values by vehicle class. 

Positive values are synergies, negative values are dissynergies. 

Technology A Technology B SUV-Small SUV-Mid SUV-Large Minivan PickupSmall 

VVTI .............................................. 5SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVTI .............................................. ISGO ............................................. ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVTC ............................................ 5SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVTC ............................................ CVT ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVTC ............................................ ASL ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

DISP ............................................. 5SP ............................................... ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

DISP ............................................. CVT ............................................... ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

DISP ............................................. ASL ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

DISP ............................................. ISGO ............................................. ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVLTC .......................................... 5SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVLTC .......................................... CVT ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVLTC .......................................... ASL ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVLTC .......................................... 6MAN ............................................ ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVLTD .......................................... CVT ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVLTD .......................................... 6SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

DISPO ........................................... 5SP ............................................... ¥1.50 ¥1.50 ¥1.50 ¥1.50 ¥1.50 

DISPO ........................................... CVT ............................................... ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

DISPO ........................................... ASL ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

DISPO ........................................... 6SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

DISPO ........................................... ISGO ............................................. ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

VVTO ............................................ CVT ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVTO ............................................ 6MAN ............................................ 0.50 0.50 0.50 0.50 0.50 

DOHC ........................................... 5SP ............................................... ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

DOHC ........................................... CVT ............................................... ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

DOHC ........................................... ASL ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

DOHC ........................................... 6SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

DOHC ........................................... 6MAN ............................................ ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

DOHC ........................................... ISGO ............................................. 0.50 0.50 0.50 0.50 0.50 

VVLTO .......................................... 5SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVLTO .......................................... CVT ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVLTO .......................................... 6SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

[In percent] 

Synergies Synergy values by vehicle class 

Positive values are synergies, negative values are dissynergies. 

Technology A Technology B SUV-Small SUV-Mid SUV-Large Minivan PickupSmall 

CVA .............................................. 5SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

CVA .............................................. CVT ............................................... ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

CVA .............................................. ASL ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

CVA .............................................. 6SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

CVA .............................................. 6MAN ............................................ 0.50 0.50 0.50 0.50 0.50 

HCCI ............................................. CVT ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

HCCI ............................................. 6SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

TURB ............................................ 5SP ............................................... ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

TURB ............................................ CVT ............................................... ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

TURB ............................................ ASL ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

TURB ............................................ 6SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

TURB ............................................ 6MAN ............................................ ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

E25 ............................................... 5SP ............................................... 0.50 0.50 0.50 0.50 0.50 

E25 ............................................... 6MAN ............................................ 0.50 0.50 0.50 0.50 0.50 

E25 ............................................... ISGO ............................................. ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

ISGO ............................................. IACC ............................................. ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

ISGO ............................................. EPS ............................................... ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

ISGO ............................................. 42V ............................................... ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

DSLT ............................................. 5SP ............................................... 0.50 0.50 0.50 0.50 0.50 

DSLT ............................................. CVT ............................................... 0.50 0.50 0.50 0.50 0.50 

DSLT ............................................. ISGO ............................................. 0.50 0.50 0.50 0.50 0.50 

DSLT ............................................. ASL ............................................... 0.50 0.50 0.50 0.50 0.50 

DSLH ............................................ 5SP ............................................... 0.50 0.50 0.50 0.50 0.50 

DSLH ............................................ CVT ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

DSLH ............................................ 6SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 


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[In percent] 

Synergies Synergy values by vehicle class 

Positive values are synergies, negative values are dissynergies. 

Technology A Technology B SUV-Small SUV-Mid SUV-Large Minivan PickupSmall 

DSLH ............................................ 6MAN ............................................ 0.50 0.50 0.50 0.50 0.50 

DSLH ............................................ ISGO ............................................. 0.50 0.50 0.50 0.50 0.50 

DSLS ............................................ 5SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

DSLS ............................................ CVT ............................................... ¥2.50 ¥2.50 ¥2.50 ¥2.50 ¥2.50 

DSLS ............................................ 6SP ............................................... ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

DSLS ............................................ 6MAN ............................................ ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

DSLS ............................................ ISGO ............................................. 0.50 0.50 0.50 0.50 0.50 

[In percent] 

Synergies Synergy values by vehicle class. 

Positive values are synergies, negative values are dissynergies. 

Technology A Technology B PickupLarge Subcompact Compact Midsize Large 

VVTI .............................................. 5SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVTI .............................................. ISGO ............................................. ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVTC ............................................ 5SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVTC ............................................ CVT ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVTC ............................................ ASL ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

DISP ............................................. 5SP ............................................... ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

DISP ............................................. CVT ............................................... ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

DISP ............................................. ASL ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

DISP ............................................. ISGO ............................................. ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVLTC .......................................... 5SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVLTC .......................................... CVT ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVLTC .......................................... ASL ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVLTC .......................................... 6MAN ............................................ ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVLTD .......................................... CVT ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVLTD .......................................... 6SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

DISPO ........................................... 5SP ............................................... ¥1.50 ¥1.50 ¥1.50 ¥1.50 ¥1.50 

DISPO ........................................... CVT ............................................... ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

DISPO ........................................... ASL ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

DISPO ........................................... 6SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

DISPO ........................................... ISGO ............................................. ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

VVTO ............................................ CVT ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVTO ............................................ 6MAN ............................................ 0.50 0.50 0.50 0.50 0.50 

DOHC ........................................... 5SP ............................................... ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

DOHC ........................................... CVT ............................................... ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

DOHC ........................................... ASL ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

DOHC ........................................... 6SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

DOHC ........................................... 6MAN ............................................ ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

DOHC ........................................... ISGO ............................................. 0.50 0.50 0.50 0.50 0.50 

VVLTO .......................................... 5SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVLTO .......................................... CVT ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

VVLTO .......................................... 6SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

[In percent] 

Synergies Synergy values by vehicle class. 

Positive values are synergies, negative values are dissynergies. 

Technology A Technology B PickupLarge Subcompact Compact Midsize Large 

CVA .............................................. 5SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

CVA .............................................. CVT ............................................... ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

CVA .............................................. ASL ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

CVA .............................................. 6SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

CVA .............................................. 6MAN ............................................ 0.50 0.50 0.50 0.50 0.50 

HCCI ............................................. CVT ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

HCCI ............................................. 6SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

TURB ............................................ 5SP ............................................... ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

TURB ............................................ CVT ............................................... ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

TURB ............................................ ASL ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

TURB ............................................ 6SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

TURB ............................................ 6MAN ............................................ ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

E25 ............................................... 5SP ............................................... 0.50 0.50 0.50 0.50 0.50 

E25 ............................................... 6MAN ............................................ 0.50 0.50 0.50 0.50 0.50 


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95See, e.g., Robert H. Williams, ‘‘Toward Cost 

Buydown via Learning-by-Doing for Environmental 

Energy Technologies,’’ paper presented at 

Workshop on Learning-by-Doing in Energy 

Technologies, Resources for the Future, 

Washington, DC, June 17–18, 2003, pp. 1–2. 

Another common but equivalent formulation of the 

relationship between L and b is (1-L) = 2 b, where 

(1-L) is referred to as the progress ratio; see Richard 

P. Rumelt, ‘‘Note on Strategic Cost Dynamics,’’ POL 

2001–1.1, Anderson School of Business, University 

of California, Los Angeles, California, 2001, pp. 4–

5. 

[In percent] 

Synergies Synergy values by vehicle class. 

Positive values are synergies, negative values are dissynergies. 

Technology A Technology B PickupLarge Subcompact Compact Midsize Large 

E25 ............................................... ISGO ............................................. ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

ISGO ............................................. IACC ............................................. ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

ISGO ............................................. EPS ............................................... ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

ISGO ............................................. 42V ............................................... ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

DSLT ............................................. 5SP ............................................... 0.50 0.50 0.50 0.50 0.50 

DSLT ............................................. CVT ............................................... 0.50 0.50 0.50 0.50 0.50 

DSLT ............................................. ISGO ............................................. 0.50 0.50 0.50 0.50 0.50 

DSLT ............................................. ASL ............................................... 0.50 0.00 0.00 0.50 0.50 

DSLH ............................................ 5SP ............................................... 0.50 0.50 0.50 0.50 0.50 

DSLH ............................................ CVT ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

DSLH ............................................ 6SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

DSLH ............................................ 6MAN ............................................ 0.50 0.50 0.50 0.50 0.50 

DSLH ............................................ ISGO ............................................. 0.50 0.50 0.50 0.50 0.50 

DSLS ............................................ 5SP ............................................... ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

DSLS ............................................ CVT ............................................... ¥2.50 ¥2.50 ¥2.50 ¥2.50 ¥2.50 

DSLS ............................................ 6SP ............................................... ¥1.00 ¥1.00 ¥1.00 ¥1.00 ¥1.00 

DSLS ............................................ 6MAN ............................................ ¥0.50 ¥0.50 ¥0.50 ¥0.50 ¥0.50 

DSLS ............................................ ISGO ............................................. 0.50 0.50 0.50 0.50 0.50 

b. Technology learning curves 

The Volpe model has also been 

modified to provide the ability to 

account for cost reductions a 

manufacturer may realize through 

learning achieved from experience in 

actually applying a given technology. 

Thus, for some of the technologies, we 

have included a learning factor. Stated 

another way, the ‘‘learning curve’’

describes the reduction in unit 

production costs as a function of 

accumulated production volume and 

small redesigns that reduce costs. 

As explained above, a typical learning 

curve can be described by three 

parameters: (1) The initial production 

volume before cost reductions begin to 

be realized; (2) the rate at which cost 

reductions occur with increases in 

cumulative production beyond this 

initial volume (usually referred to as the 

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

volume after which costs reach a 

‘‘floor,’’ and further cost reductions no 

longer occur. Over the region where 

costs decline with accumulating 

production volume, an experience curve 

can be expressed as C(Q) = aQ¥b, where 

a is a constant coefficient, Q represents 

cumulative production, and b is a 

coefficient corresponding to the 

assumed learning rate. In turn, the 

learning rate L, which is usually 

expressed as the percent by which 

average unit cost declines with a 

doubling of cumulative production, and 

is related to the value of the coefficient 

b by L = 100*(1 ¥ 2–b).95

The new learning curves are 

described in greater detail above in 

Section III. We seek comment on the 

assumptions used to develop the new 

proposed learning curves. 

c. Calibration of reformed CAFE 

standards 

The procedure used by the Volpe 

model to develop (i.e., calibrate) the 

initial shape of a reformed standard was 

also modified. In the version of the 

model used to analyze NHTSA’s April 

2006 light truck final rule, the 

asymptotes for the constrained logistic 

function defining fuel economy targets 

were assigned based on the set of 

vehicles that would have been assigned 

to the lowest and highest bins defined 

in that rule’s 2005 NPRM. The Volpe 

model has been modified to accept 

specified percentages (in terms of either 

models or sales) of the fleet to include 

when assigning asymptotes. 

The procedure used by the Volpe 

model to estimate the ‘‘optimized’’

stringency of a reformed standard was 

also modified. In the version of the 

model used to analyze the 2006 light 

truck final rule, the shape of the 

function (i.e., the constrained logistic 

function) defining fuel economy targets 

was recalibrated every model year and 

then shifted up and down to estimate 

the stringency at which marginal costs 

begin to exceed marginal benefits or, 

equivalently, the point at which net 

societal benefits are maximized. 

However, analysis conducted by the 

agency to prepare for the current 

rulemaking revealed several 

opportunities to refine the procedure 

described above before applying it to an 

action that spans several model years. 

The first refinement is a method for 

gradually transforming the shape of the 

continuous function between model 

years and guarding against erratic 

fluctuations in the shape (though not 

necessarily the stringency) of the 

continuous function. The second is the 

implementation of several antibacksliding measures that prevents the 

average required CAFE level from 

falling between model years and 

prevents the continuous function for a 

given model from crossing or falling 

below that of the preceding model year. 

The third, applied to passenger cars 

only, is an option to specify a fixed 

relationship between the function’s 

midpoint and width coefficients. These 

refinements are discussed in greater 

detail in Section V.B below. 

6. What manufacturer information does 

the Volpe model use? 

For purposes of determining and 

analyzing CAFE standards, NHTSA has 

historically made significant use of 

detailed product plan information 

provided to the agency by individual 

manufacturers, supplementing this 

information where appropriate with 

information from other sources, such as 

data submitted to the agency in relation 

to CAFE compliance. Such information 

is considered confidential business 


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information (CBI) under federal law. 

Although NHTSA shares the 

information with other agencies (Volpe, 

EPA, and DOE) involved in CAFE 

activities, neither NHTSA nor any other 

agency may release the information to 

the public. 

Consistent with this practice, the 

Volpe model uses detailed 

representations of (i.e., model-by-model, 

linked to specific engines and 

transmissions) the fleets manufacturers 

are expected to produce for sale in the 

U.S. In preparation for today’s action, 

the agency issued in the spring of 2006 

a request that manufacturers provide 

updated product plans for passenger 

cars and light trucks. 

NHTSA received product plan 

information from Chrysler, Ford, GM, 

Honda, Nissan, Mitsubishi, Porsche and 

Toyota. The agency did not receive any 

product plan information from BMW, 

Ferrari, Hyundai, Mercedes or VW. 

Chrysler, Ford, GM, Honda, Nissan, 

Mitsubishi, Porsche and Toyota 

provided information covering multiple 

model years. However, only Chrysler 

and Mitsubishi provided us with 

product plans that showed differing 

production quantities, vehicle 

introductions, vehicle redesigns/ 

refreshes changes, without any 

carryover production quantities, from 

MY 2007 to MY 2015. The agency 

incorporated their product plan 

information as part of the input file to 

the model without the need to project or 

carryover any vehicle production data. 

For the other companies that provided 

data, the agency carried over production 

quantities for their vehicles, allowing 

for growth, starting with the year after 

their product plan data showed changes 

in production quantities or showed the 

introduction or redesign/refresh of 

vehicles. Product plan information was 

provided until MY 2013 for Ford and 

Toyota, thus the first year that we 

started to carry over production 

quantities for those companies was MY 

2014. Product plan information was 

provided until MY 2012 for GM and 

Nissan, thus the first year that we 

started to carry over production 

quantities for those companies was MY 

2013. Product plan information was 

provided by Honda until MY 2008. 

Honda asked the agency to carry over 

those plans and also provided data for 

the last redesign of a vehicle and asked 

us to carry them forward. 

Product plan information was 

provided until MY 2008 for Porsche, 

thus the first year that we started to 

carry over production quantities for 

Porsche was MY 2009. 

For Hyundai, given that it is one of 

the largest 7 manufacturers, the agency 

used the mid-year 2007 data contained 

in the agency’s CAFE database to 

establish the baseline models and 

production quantities for their vehicles. 

For the other manufacturers, because of 

the time constraint the agency was 

under to meet the statutory deadline, we 

used the 2005 information from our 

database, which is the latest information 

used in the current analysis. To the 

extent possible, because, the CAFE 

database does not capture all of the 

product plan data that we request from 

companies, we supplemented the CAFE 

database information with information 

on public Web sites, from commercial 

information sources and for Hyundai, 

from the MY 2008–2011 light truck rule. 

In all cases, manufacturers’ respective 

sales volumes were normalized to 

produce passenger car and light truck 

fleets that reflected manufacturers’

MY2006 market shares and to reflect 

passenger car and light truck fleets of 

projected aggregate volume consistent 

with forecasts in the EIA’s 2007 Annual 

Energy Outlook. The agency requests 

comment on whether alternative 

methods should be used to estimate 

manufacturers’ market shares and the 

overall sizes of the future passenger car 

and light truck fleets. 

In a companion notice, the agency is 

requesting updated product plan 

information from all companies, and as 

in previous fuel economy rulemakings, 

we will be using those plans for the 

final rule. These plans will impact the 

standards for the final rule. To that end, 

the agency is requesting that these plans 

be as detailed and as accurate as 

possible. 

7. What economic information does the 

Volpe model use? 

NHTSA’s preliminary analysis of 

alternative CAFE standards for the 

model years covered by this proposed 

rulemaking relies on a range of 

information, economic estimates, and 

input parameters. This section describes 

this information and each assumption 

and specific parameter values, and 

discusses the rationale for tentatively 

choosing each one. Like the product 

plan information, these economic 

assumptions play a role in the 

determination of the level of the 

standards, with some having greater 

impacts than others. The cost of 

technologies and as discussed below, 

the price of gasoline and discount rate 

used for discounting future benefits 

have the greatest influence over the 

level of the standards. The agency seeks 

comment on the economic assumptions 

presented below. On the first question, 

based on the comparisons of the side 

cases to the base case that Jim did on 

Friday, the order of impact for the 

economic assumptions is: (1) 

Technology cost and effectiveness; (2) 

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

import externalities; (5) rebound effect; 

(6) criteria air pollutant damage costs; 

(7) carbon costs. This reflects the base 

case assumptions, and could change 

slightly if we used different 

assumptions to start, but 1st through 3rd 

should stay the same. 

For the reader’s reference, Table V–3 

below summarizes the values used to 

calculate the impacts of each scenario: 

TABLE V–3.—ECONOMIC VALUES FOR BENEFITS COMPUTATIONS (2006$) 

Rebound Effect (VMT Elasticity w/respect to Fuel Cost per Mile) .......................................................................................................... ¥0.15 

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

Payback Period (years) ........................................................................................................................................................................... 5.0 

‘‘Gap’’ between Test and On-Road mpg ................................................................................................................................................. 20% 

Value of Travel Time per Vehicle ($/hour) .............................................................................................................................................. $24.00 

Economic Costs of Oil Imports ($/gallon) 

‘‘Monopsony’’ Component ......................................................................................................................................................... $0.176 

Price Shock Component ........................................................................................................................................................... $0.109 

Military Security Component ..................................................................................................................................................... $—

Total Economic Costs ($/gallon) ...................................................................................................................................................... $0.285 

Total Economic Costs ($/BBL) .................................................................................................................................................. $11.97 

External Costs from Additional Automobile Use Due to ‘‘Rebound’’ Effect ($/vehicle-mile) 

Congestion ................................................................................................................................................................................ $0.047 

Accidents ................................................................................................................................................................................... $0.025 

Noise ......................................................................................................................................................................................... $0.001 

External Costs from Additional Light Truck Use Due to ‘‘Rebound’’ Effect ($/vehicle-mile) 


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24404 Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 

96See Docket No. NHTSA–2007–27454, Item 4. 

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

Comparison of Indirect Cost Multipliers for Vehicle 

Manufacturing, Center for Transportation Research, 

Argonne National Laboratory, April 2000. Available 

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

57.pdf (last accessed April 20, 2008). 

TABLE V–3.—ECONOMIC VALUES FOR BENEFITS COMPUTATIONS (2006$)—Continued 

Congestion ................................................................................................................................................................................ $0.052 

Accidents ................................................................................................................................................................................... $0.023 

Noise ......................................................................................................................................................................................... $0.001 

Emission Damage Costs 

Carbon Monoxide ($/ton) .......................................................................................................................................................... $—

Volatile Organic Compounds ($/ton) ......................................................................................................................................... $1,700 

Nitrogen Oxides ($/ton) ............................................................................................................................................................. $3,900 

Particulate Matter ($/ton) ........................................................................................................................................................... $164,000 

Sulfur Dioxide ($/ton) ................................................................................................................................................................ $16,000 

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

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

a. Costs of Fuel Economy Technologies 

We developed detailed estimates of 

the costs of applying fuel economyimproving technologies to vehicle 

models for use in analyzing the impacts 

of alternative standards considered in 

this rulemaking. The estimates were 

based on those reported by the 2002 

NAS Report analyzing costs for 

increasing fuel economy, but were 

modified for purposes of this analysis as 

a result of extensive consultations 

among engineers from NHTSA, EPA, 

and the Volpe Center. As part of this 

process, the agency also developed 

varying cost estimates for applying 

certain fuel economy technologies to 

vehicles of different sizes and body 

styles. We may adjust these cost 

estimates based on comments received 

to this NPRM. 

The technology cost estimates used in 

this analysis are intended to represent 

manufacturers’ direct costs for highvolume production of vehicles with 

these technologies and sufficient 

experience with their application so that 

all cost reductions due to ‘‘learning 

curve’’ effects have been fully realized. 

However, NHTSA recognizes that 

manufacturers’ actual costs for applying 

these technologies to specific vehicle 

models are likely to include additional 

outlays for accompanying design or 

engineering changes to each model, 

development and testing of prototype 

versions, recalibrating engine operating 

parameters, and integrating the 

technology with other attributes of the 

vehicle. Manufacturers may also incur 

additional corporate overhead, 

marketing, or distribution and selling 

expenses as a consequence of their 

efforts to improve the fuel economy of 

individual vehicle models and their 

overall product lines. 

In order to account for these 

additional costs, NHTSA applies an 

indirect cost multiplier of 1.5 to the 

estimate of the vehicle manufacturers’

direct costs for producing or acquiring 

each fuel economy-improving/CO2

emission-reducing technology. 

Historically, NHTSA has used an almost 

identical multiplier, 1.51, for the 

markup from variable costs or direct 

manufacturing costs to consumer costs. 

This markup takes into account fixed 

costs, burden, manufacturer’s profit, and 

dealers’ profit. NHTSA’s methodology 

for determining this markup was 

recently peer reviewed.96

This estimate was confirmed by 

Argonne National Laboratory in a recent 

review of vehicle manufacturers’

indirect costs. The Argonne study was 

specifically intended to improve the 

accuracy of future cost estimates for 

production of vehicles that achieve high 

fuel economy/low CO2 emissions by 

employing many of the same advanced 

technologies considered in our 

analysis.97 Thus, we believe that its 

recommendation that a multiplier of 1.5 

be applied to direct manufacturing costs 

to reflect manufacturers’ increased 

indirect costs for deploying advanced 

fuel economy technologies is 

appropriate for use in the analysis for 

this rulemaking. 

b. Potential Opportunity Costs of 

Improved Fuel Economy 

An important concern is whether 

achieving the fuel economy 

improvements required by alternative 

CAFE standards would require 

manufacturers to compromise the 

performance, carrying capacity, safety, 

or comfort of their vehicle models. If it 

did so, the resulting sacrifice in the 

value of these attributes to consumers 

would represent an additional cost of 

achieving the required improvements in 

fuel economy, and thus of 

manufacturers’ compliance with stricter 

CAFE standards. While exact dollar 

values of these attributes to consumers 

are difficult to infer from vehicle 

purchase prices, changing vehicle 

attributes can affect the utility that 

vehicles provide to their owners, and 

thus their value to potential buyers. 

NHTSA has approached this potential 

problem by developing tentative cost 

estimates for fuel economy-improving 

technologies that include any additional 

manufacturing costs that would be 

necessary to maintain the product plan 

levels of performance, comfort, capacity, 

or safety of any light-duty vehicle model 

to which those technologies are applied. 

In doing so, we primarily followed the 

precedent established by the 2002 NAS 

Report, although we updated its 

assumptions as necessary for the 

purposes of the current rulemaking. The 

NAS study estimated ‘‘constant 

performance and utility’’ costs for fuel 

economy technologies, and NHTSA has 

used these as the basis for their further 

efforts to develop the technology costs 

employed in analyzing manufacturer’s 

costs for complying with alternative 

light truck standards. 

NHTSA acknowledges the difficulty 

of estimating technology costs that 

include costs for the accompanying 

changes in vehicle design that are 

necessary to maintain performance, 

capacity, and utility. However, we 

believe that our tentative cost estimates 

for fuel economy/CO2 emissionreduction technologies should be 

generally sufficient to prevent 

significant reductions in consumer 

welfare provided by vehicle models to 

which manufacturers apply those 

technologies. Nevertheless, we seek 

comments on alternative ways to deal 

with these issues. 

c. The On-Road Fuel Economy ‘‘Gap’’

Actual fuel economy levels achieved 

by light-duty vehicles in on-road driving 

fall somewhat short of their levels 

measured under the laboratory-like test 

conditions used by EPA to establish its 

published fuel economy ratings for 

different models. In analyzing the fuel 

savings from alternative CAFE 

standards, NHTSA has previously 

adjusted the actual fuel economy 

performance of each light truck model 

downward from its rated value to reflect 

the expected size of this on-road fuel 


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Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 24405 

98 71 FR 77871 (Dec. 27, 2006). 

99Energy Information Administration, Annual 

Energy Outlook 2008, Early Release, Reference Case 

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

aeo/pdf/aeotab_12.pdf (last accessed April 20, 

2008). EIA says that it will release the complete 

version of AEO 2008—including the High and Low 

Price and other side cases—at the end of April. The 

agency will use those figures for the final rule. 

100The agency defines the maximum lifetime of 

vehicles as the highest age at which more than 2 

percent of those originally produced during a model 

year remain in service. In the case of light-duty 

trucks, for example, this age has typically been 36 

years for recent model years. 

101Energy Information Administration, Annual 

Energy Outlook 2007, High Price Case, Table 12, 

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

aeohptab_12.pdf (last accessed April 20, 2008) and 

Energy Information Administration, Annual Energy 

Outlook 2007 Low Price Case, Table 12, http:// 

www.eia.doe.gov/oiaf/aeo/pdf/aeolptab_12.pdf (last 

accessed April 20, 2008). 

economy ‘‘gap.’’ On December 27, 2006, 

EPA adopted changes to its regulations 

on fuel economy labeling, which were 

intended to bring vehicles’ rated fuel 

economy levels closer to their actual onroad fuel economy levels.98

In its Final Rule, EPA estimated that 

actual on-road fuel economy for lightduty vehicles averages 20 percent lower 

than published fuel economy levels. For 

example, if the overall EPA fuel 

economy rating of a light truck is 20 

mpg, the on-road fuel economy actually 

achieved by a typical driver of that 

vehicle is expected to be 16 mpg 

(20*.80). NHTSA has employed EPA’s 

revised estimate of this on-road fuel 

economy gap in its analysis of the fuel 

savings resulting from alternative CAFE 

standards proposed in this rulemaking. 

d. Fuel Prices and the Value of Saving 

Fuel 

Projected future fuel prices are a 

critical input into the preliminary 

economic analysis of alternative CAFE 

standards, because they determine the 

value of fuel savings both to new 

vehicle buyers and to society. NHTSA 

relied on the most recent fuel price 

projections from the U.S. Energy 

Information Administration’s (EIA) 

Annual Energy Outlook (AEO) for this 

analysis. Specifically, we used the AEO 

2008 Early Release forecasts of inflationadjusted (constant-dollar) retail gasoline 

and diesel fuel prices, which represent 

the EIA’s most up-to-date estimate of the 

most likely course of future prices for 

petroleum products.99 Federal 

government agencies generally use EIA’s 

projections in their assessments of 

future energy-related policies. 

The retail fuel price forecasts 

presented in AEO 2008 span the period 

from 2008 through 2030. Measured in 

constant 2006 dollars, the Reference 

Case forecast of retail gasoline prices 

during calendar year 2020 is $2.36 per 

gallon, rising gradually to $2.51 by the 

year 2030 (these values include federal, 

state and local taxes). However, valuing 

fuel savings over the 36-year maximum 

lifetime of light trucks assumed in this 

analysis requires fuel price forecasts 

that extend through 2050, the last year 

during which a significant number of 

MY 2015 vehicles will remain in 

service.100 To obtain fuel price forecasts 

for the years 2031 through 2050, the 

agency assumes that retail fuel prices 

forecast in the Reference Case for 2030 

will remain constant (in 2006 dollars) 

through 2050. 

The value of fuel savings resulting 

from improved fuel economy/reduced 

CO2 emissions to buyers of light-duty 

vehicles is determined by the retail 

price of fuel, which includes federal, 

state, and any local taxes imposed on 

fuel sales. Total taxes on gasoline 

averaged $0.47 per gallon during 2006, 

while those levied on diesel averaged 

$0.53. State fuel taxes are weighted by 

sales. Because fuel taxes represent 

transfers of resources from fuel buyers 

to government agencies, however, rather 

than real resources that are consumed in 

the process of supplying or using fuel, 

their value must be deducted from retail 

fuel prices to determine the value of fuel 

savings resulting from more stringent 

CAFE standards to the U.S. economy as 

a whole. 

In estimating the economy-wide or 

‘‘social’’ value of fuel savings of 

increasing CAFE/reducing CO2

emissions levels, NHTSA assumes that 

current fuel taxes will remain constant 

in real or inflation-adjusted terms over 

the lifetimes of the vehicles proposed to 

be regulated. In effect, this assumes that 

the average value per gallon of taxes on 

gasoline and diesel fuel levied by all 

levels of government will rise at the rate 

of inflation over that period. This value 

is deducted from each future year’s 

forecast of retail gasoline and diesel 

prices reported in AEO 2008 to 

determine the social value of each 

gallon of fuel saved during that year as 

a result of improved fuel economy/ 

reduced CO2 emissions. Subtracting fuel 

taxes results in a projected value for 

saving gasoline of $1.83 per gallon 

during 2020, rising to $2.02 per gallon 

by the year 2030. 

In conducting the preliminary 

uncertainty analysis of benefits and 

costs from alternative CAFE standards, 

as required by OMB, NHTSA also 

considered higher and lower forecasts of 

future fuel prices. The results of the 

sensitivity runs can be found in the 

PRIA. EIA includes ‘‘High Price Case’’

and ‘‘Low Price Case’’ in AEO analyses 

that reflect uncertainties regarding 

future levels of oil production, but those 

cases are not meant to be probabilistic, 

and simply illustrate the range of 

uncertainty that exists. Because AEO 

2008 Early Release included only a 

Reference Case of forecast of fuel prices 

and did not include the High and Low 

Price cases, the agency estimated high 

and low fuel prices corresponding to the 

AEO 2008 Reference Case forecast by 

assuming that high and low price 

forecasts would bear the same 

relationship to the Reference Case 

forecast as reported in AEO 2007.101

These alternative scenarios project retail 

gasoline prices that range from a low of 

$1.94 per gallon to a high of $3.26 per 

gallon during 2020, and from $2.03 to 

$3.70 per gallon during 2030. In 

conjunction with our assumption that 

fuel taxes will remain constant in real 

or inflation-adjusted terms over this 

period, these forecasts imply social 

values of saving fuel ranging from $1.47 

to $2.79 per gallon during 2020, and 

from $1.56 to $3.23 per gallon in 2030. 

EIA is widely-recognized as an 

impartial and authoritative source of 

analysis and forecasts of U.S. energy 

production, consumption, and prices. 

The agency has published annual 

forecasts of energy prices and 

consumption levels for the U.S. 

economy since 1982 in its Annual 

Energy Outlook (AEO). These forecasts 

have been widely relied upon by federal 

agencies for use in regulatory analysis 

and for other purposes. Since 1994, 

EIA’s annual forecasts have been based 

upon the agency’s National Energy 

Modeling System (NEMS), which 

includes detailed representation of 

supply pathways, sources of demand, 

and their interaction to determine prices 

for different forms of energy. 

From 1982 through 1993, EIA’s 

forecasts of world oil prices—the 

primary determinant of prices for 

gasoline, diesel, and other 

transportation fuels derived from 

petroleum—consistently overestimated 

actual prices during future years, often 

very significantly. Of the total of 119 

forecasts of future world oil prices for 

the years 1985 through 2005 that EIA 

reported in its 1982–1993 editions of 

AEO, 109 overestimated the subsequent 

actual values for those years, on average 

exceeding their corresponding actual 

values by 75 percent. 

Since that time, however, EIA’s 

forecasts of future world oil prices show 

a more mixed record for accuracy. The 

1994–2005 editions of AEO reported 91 

separate forecasts of world oil prices for 

the years 1995–2005, of which 33 have 

subsequently proven too high while the 


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24406 Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 

102See http://www.eia.doe.gov/oiaf/archive/ 

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

103 Vehicles are defined to be of age 1 during the 

calendar year corresponding to the model year in 

which they are produced; thus for example, model 

year 2000 vehicles are considered to be of age 1 

during calendar year 2000, age 1 during calendar 

year 2001, and to reach their maximum age of 26 

years during calendar year 2025. NHTSA considers 

the maximum lifetime of vehicles to be the age after 

which less than 2% of the vehicles originally 

produced during a model year remain in service. 

Applying these conventions to vehicle registration 

data indicates that passenger cars have a maximum 

age of 26 years, while light trucks have a maximum 

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

Analysis and Evaluation Division, ‘‘Vehicle 

Survivability and Travel Mileage Schedules,’’ DOT 

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

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

Rpts/2006/809952.pdf (last accessed April 20, 

2008). 

104The most recent edition is Energy Information 

Administration, Annual Energy Outlook 2008: Early 

Release. Available at http://www.eia.doe.gov/oiaf/ 

aeo/index.html (last accessed April 20, 2008). 

105Lu, S., NHTSA, Regulatory Analysis and 

Evaluation Division, ‘‘Vehicle Survivability and 

Travel Mileage Schedules,’’ DOT HS 809 952, 8–11 

(January 2006). Available at http://wwwnrd.nhtsa.dot.gov/pdf/nrd-30/NCSA/Rpts/2006/ 

809952.pdf (last accessed April 20, 2008). These 

updated survival rates suggest that the expected 

lifetimes of recent-model passenger cars and light 

trucks are 13.8 and 14.5 years. 

remaining 58 have underestimated 

actual prices. The average absolute error 

(i.e., regardless of its direction) of these 

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

offset one another, so that on average 

EIA’s more recent forecasts have 

underestimated actual world oil prices 

by 7 percent. Although both its 

overestimates and underestimates of 

future world oil prices for recent years 

have often been large, the most recent 

editions of AEO have significantly 

underestimated petroleum prices during 

those years for which actual prices are 

now available. 

However, NHTSA does not regard 

EIA’s recent tendency to underestimate 

future prices for petroleum and refined 

products or the high level of current fuel 

prices as adequate justification to 

employ forecasts that differ from the 

Reference Case forecast presented in 

EIA’s Annual Energy Outlook 2008 

Revised Early Release. This is 

particularly the case because this 

forecast has been revised upward 

significantly since the initial release of 

AEO 2008, which in turn represented a 

major upward revision from EIA’s fuel 

price forecast reported previously in 

AEO 2007. NHTSA also notes that retail 

gasoline prices across the U.S. have 

averaged $2.94 per gallon (expressed in 

2005 dollars) for the first three months 

of 2008, slightly below EIA’s recently 

revised forecast that gasoline prices will 

average $2.98 per gallon (also in 2005 

dollars) throughout 2008. 

Comparing different forecasts of 

world oil prices also shows that EIA’s 

Reference Case forecast reported in 

Annual Energy Outlook 2007 (AEO 

2007) was actually the highest of all six 

publicly-available forecasts of world oil 

prices over the 2010–30 time horizon.102

Because world petroleum prices are the 

primary determinant of retail prices for 

refined petroleum products such as 

transportation fuels, this suggests that 

the Reference Case forecast of U.S. fuel 

prices reported in AEO 2007 is likely to 

be the highest of those projected by 

major forecasting services. Further, as 

indicated above, EIA’s most recent fuel 

price forecasts have been revised 

significantly upward from those 

previously projected in AEO 2007. 

e. Consumer Valuation of Fuel Economy 

and Payback Period 

In estimating the value of fuel 

economy improvements that would 

result from alternative CAFE standards 

to potential vehicle buyers, NHTSA 

assumes that buyers value the resulting 

fuel savings over only part of the 

expected lifetime of the vehicles they 

purchase. Specifically, we assume that 

buyers value fuel savings over the first 

five years of a new vehicle’s lifetime, 

and that buyers behave as if they do not 

discount the value of these future fuel 

savings. The five-year figure represents 

the current average term of consumer 

loans to finance the purchase of new 

vehicles. We recognize that the period 

over which individual buyers finance 

new vehicle purchases may not 

correspond to the time horizons they 

apply in valuing fuel savings from 

higher fuel economy. However, NHTSA 

believes that five years represents a 

reasonable estimate of the average 

period over which buyers who finance 

their purchases of new vehicle receive—

and thus must recognize—the monetary 

value of future fuel savings resulting 

from higher fuel economy. 

The value of fuel savings over the first 

five years of a vehicle model’s lifetime 

that would result under each alternative 

fuel economy standard is calculated 

using the projections of retail fuel prices 

described above. It is then deducted 

from the technology costs incurred by 

its manufacturer to produce the 

improvement in that model’s fuel 

economy estimated for each alternative 

standard, to determine the increase in 

the ‘‘effective price’’ to buyers of that 

vehicle model. The Volpe model uses 

these estimates of effective costs for 

increasing the fuel economy of each 

vehicle model to identify the order in 

which manufacturers would be likely to 

select models for the application of fuel 

economy-improving technologies in 

order to comply with stricter standards. 

The average value of the resulting 

increase in effective cost from each 

manufacturer’s simulated compliance 

strategy is also used to estimate the 

impact of alternative standards on its 

total sales for future model years. 

However, it is important to recognize 

that NHTSA estimates the aggregate 

value to the U.S. economy of fuel 

savings resulting from alternative 

standards—or their ‘‘social’’ value—over 

the entire expected lifetimes of vehicles 

manufactured under those standards, 

rather than over this shorter ‘‘payback 

period’’ we assume for their buyers. 

This is discussed directly below in 

section f on ‘‘Vehicle survival and use 

assumptions.’’ As indicated previously, 

the maximum vehicle lifetimes used to 

analyze the effects of alternative fuel 

economy standards are estimated to be 

25 years for automobiles and 36 years 

for light trucks. 

f. Vehicle Survival and Use 

Assumptions 

NHTSA’s preliminary analysis of fuel/ 

CO2 emissions savings and related 

benefits from adopting alternative 

standards for MY 2011–2015 passenger 

cars and light trucks is based on 

estimates of the resulting changes in 

fuel use over their entire lifetimes in the 

U.S. vehicle fleet. The first step in 

estimating lifetime fuel consumption by 

vehicles produced during a model year 

is to calculate the number that is 

expected to remain in service during 

each future year after they are produced 

and sold.103 This number is calculated 

by multiplying the number of vehicles 

originally produced during a model year 

by the proportion expected to remain in 

service at the age they will have reached 

during each subsequent year, often 

referred to as a ‘‘survival rate.’’

The agency relies on projections of 

the number of passenger cars and light 

trucks that will be produced during 

future years reported by the EIA in its 

AEO Reference Case forecast.104 It uses 

updated values of age-specific survival 

rates for cars and light trucks estimated 

from yearly registration data for vehicles 

produced during recent model years, to 

ensure that forecasts of the number of 

vehicles in use reflect recent increases 

in the durability and expected life spans 

of cars and light trucks.105

The next step in estimating fuel use 

is to calculate the total number of miles 

that the cars and light trucks produced 

in each model year affected by the 

proposed CAFE standards will be driven 

during each year of their lifetimes. To 


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Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 24407 

106For a description of the Survey, see http:// 

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

20, 2008). 

107Calculated from data reported in FHWA, 

Highway Statistics, Summary to 1995, Table 

vm201at http://www.fhwa.dot.gov/ohim/ 

summary95/vm201a.xlw, (last accessed April 20, 

2008).and annual editions 1996–2005, Table VM–1 

at http://www.fhwa.dot.gov/policy/ohpi/hss/ 

hsspubs.htm (last accessed April 20, 2008). 

108A slight increase in the fraction of new 

passenger cars remaining in service beyond age 10 

has accounted for a small share of growth in the 

U.S. automobile fleet. The fraction of new 

automobiles remaining in service to various ages 

was computed from R.L. Polk vehicle registration 

data for 1977 through 2005 by the agency’s Center 

for Statistical Analysis. 

109See supra note [2 above here] 

110FHWA data show that growth in total miles 

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

that includes most or all light trucks used as 

passenger vehicles, averaged 5.1% annually from 

1985 through 2005. However, the number of miles 

light trucks are driven each year averaged 11,114 

during 2005, almost unchanged from the average 

figure of 11,016 miles during 1985. Id. 

111Unpublished analysis of R.L. Polk vehicle 

registration data conducted by NHTSA Center for 

Statistical Analysis, 2005. 

112Assuming that average annual miles driven 

per automobile will continue to increase over the 

future would increase the agency’s estimates of total 

lifetime mileage for MY 2011–18 passenger cars. 

Their estimated lifetime fuel use would also 

increase under each alternative standard considered 

in this analysis, but in inverse relation to their fuel 

economy. Thus lifetime fuel use will increase by 

more under the No Increase alternative than under 

any of the alternatives that would increase 

passenger car CAFE standards, and by progressively 

less for the alternatives that impose stricter 

standards. Taking account of this factor would thus 

increase the agency’s estimates of fuel savings for 

those alternatives, and omitting it will cause the 

agency’s analysis to underestimate those fuel 

savings. 

estimate total miles driven, the number 

of cars and light trucks projected to 

remain in use during each future year 

(calculated as described above) is 

multiplied by the average number of 

miles they are expected to be driven at 

the age they will have reached in that 

year. The agency estimated the average 

number of miles driven annually by cars 

and light trucks of each age using data 

from the Federal Highway 

Administration’s 2001 National 

Household Transportation Survey 

(NHTS).106

Finally, fuel consumption during each 

year of a model year’s lifetime is 

estimated by dividing the total number 

of miles its surviving vehicles are driven 

by the fuel economy they are expected 

to achieve under each alternative CAFE 

standard. Each model year’s total 

lifetime fuel consumption is the sum of 

fuel use by the cars or light trucks 

produced during that model year that 

are projected to remain in use during 

each year of their maximum life spans. 

In turn, the savings in a model year’s 

lifetime fuel use that will result from 

each alternative CAFE standard is the 

difference between its lifetime fuel use 

at the fuel economy level it attains 

under the Baseline alternative, and its 

lifetime fuel use at the higher fuel 

economy level it is projected to achieve 

under that alternative standard. 

To illustrate these calculations, the 

most recent edition of the AEO 

projections that 8.52 million light trucks 

will be produced during 2012, and the 

agency’s updated survival rates show 

that slightly more than half of these 

—50.1 percent, or 4.27 million—are 

projected to remain in service during 

the year 2027, when they will have 

reached an age of 14 years. At that age, 

light trucks achieving the fuel economy 

level required under the Baseline 

alternative are driven an average of 

about 10,400 miles, so model year 2012 

light trucks will be driven a total of 44.4 

billion miles (= 4.27 million surviving 

vehicles × 10,400 miles per vehicle) 

during 2027. Summing the results of 

similar calculations for each year of 

their 36-year maximum lifetime, model 

year 2012 light trucks will be driven a 

total of 1,502 billion miles under the 

Baseline alternative. Under that 

alternative, they are projected to achieve 

a test fuel economy level of 23.8 mpg, 

which corresponds to actual on-road 

fuel economy of 19.0 mpg (= 23.8 mpg 

× 80 percent). Thus their lifetime fuel 

use under the Baseline alternative is 

projected to be 79.0 billion gallons (= 

1,502 billion miles divided by 19.0 

miles per gallon). 

g. Growth in Total Vehicle Use 

By assuming that the annual number 

of miles driven by cars and light trucks 

at any age will remain constant over the 

future, NHTSA’s procedure for 

estimating the number of miles driven 

by cars and light trucks over their 

lifetimes in effect assumes that all future 

growth in total vehicle-miles driven 

stems from increases in the number of 

vehicles in service, rather than from 

increases in the average number of miles 

they are driven each year. Similarly, 

because the survival rates used to 

estimate the number of cars and light 

trucks remaining in service to various 

ages are assumed to remain fixed for 

future model years, growth in the total 

number of cars and light trucks in use 

is effectively assumed to result only 

from increasing sales of new vehicles. In 

order to determine the validity of these 

assumptions, the agency conducted a 

detailed analysis of the causes of recent 

growth in car and light truck use. 

From 1985 through 2005, the total 

number of miles driven (usually referred 

to as vehicle-miles traveled, or VMT) by 

passenger cars increased 35 percent, 

equivalent to a compound annual 

growth rate of 1.5 percent.107 During 

that time, the total number of passenger 

cars registered for in the U.S. grew by 

about 0.3 percent annually, almost 

exclusively as a result of increasing 

sales of new cars.108 Thus growth in the 

average number of miles automobiles 

are driven each year accounted for the 

remaining 1.2 percent (= 1.5 percent—

0.3 percent) annual growth in total 

automobile use.109

Over this same period, total VMT by 

light trucks increased much faster, 

growing at an annual rate of 5.1 percent. 

In contrast to the causes of growth in 

automobile use, however, nearly all 

growth in light truck use over these two 

decades was attributable to rapid 

increases in the number of light trucks 

in use.110 In turn, growth in the size of 

the nation’s light truck fleet has resulted 

almost exclusively from rising sales of 

new light trucks, since the fraction of 

new light trucks remaining in service to 

various ages has remained stable or even 

declined slightly over the past two 

decades.111

On the basis of this analysis, the 

agency tentatively concludes that its 

projections of future growth in light 

truck VMT account fully for the primary 

cause of its recent growth, which has 

been the rapid increase in sales of new 

light trucks during recent model years. 

However, the assumption that average 

annual use of passenger cars will remain 

fixed over the future appears to ignore 

an important source of recent growth in 

their total use, the gradual increase in 

the average number of miles they are 

driven. To the extent that this factor 

continues to represent a significant 

source of growth in future passenger car 

use, the agency’s analysis is likely to 

underestimate the reductions in fuel use 

and related environmental impacts 

resulting from stricter CAFE standards 

for passenger cars.112 The agency plans 

to account explicitly for potential future 

growth in average annual use of both 

cars and light trucks in the analysis 

accompanying its Final Rule 

establishing CAFE standards for model 

years 2011–15. 

h. Accounting for the Rebound Effect of 

Higher Fuel Economy 

The rebound effect refers to the 

tendency for owners to increase the 

number of miles they drive a vehicle in 

response to an increase in its fuel 

economy, as would result from more 

stringent fuel economy standards. The 

rebound effect occurs because an 

increase in a vehicle’s fuel economy 

reduces its owner’s fuel cost for driving 

each mile, which is typically the largest 


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113Fuel cost per mile is equal to the price of fuel 

in dollars per gallon divided by fuel economy in 

miles per gallon, so this figure declines when a 

vehicle’s fuel economy increases. 

114Some studies estimate that the long-run 

rebound effect is significantly larger than the 

immediate response to increased fuel efficiency. 

Although their estimates of the adjustment period 

required for the rebound effect to reach its long-run 

magnitude vary, this long-run effect is most 

appropriate for evaluating the fuel savings and 

emissions reductions resulting from stricter 

standards that would apply to future model years. 

115 In effect, these studies treat U.S. states as a 

data ‘‘panel’’ by applying appropriate estimation 

procedures to data consisting of each year’s average 

values of these variables for the separate states. 

116 In some cases, NHTSA derived estimates of 

the overall rebound effect from more detailed 

results reported in the studies. For example, where 

studies estimated different rebound effects for 

households owning different numbers of vehicles 

but did not report an overall value, we computed 

a weighted average of the reported values using the 

distribution of households among vehicle 

ownership categories. 

single component of the cost of 

operating a vehicle. Even with the 

vehicle’s higher fuel economy, this 

additional driving uses some fuel, so the 

rebound effect will reduce the net fuel 

savings that result when the fuel 

economy standards require 

manufacturers to increase fuel economy. 

The rebound effect is usually expressed 

as the percentage by which annual 

vehicle use increases when average fuel 

cost per mile driven decreases in 

response to a change in the marginal 

cost of driving an extra mile, due either 

an increase in fuel economy or a 

reduction in the price of fuel. 

The magnitude of the rebound effect 

is one of the determinants of the actual 

fuel savings that are likely to result from 

adopting stricter standards, and thus an 

important parameter affecting NHTSA’s 

evaluation of alternative standards for 

future model years. The rebound effect 

can be measured directly by estimating 

the elasticity of vehicle use with respect 

to fuel economy itself, or indirectly by 

the elasticity of vehicle use with respect 

to fuel cost per mile driven.113 When 

expressed as a positive percentage, 

either of these parameters gives the 

fraction of fuel savings that would 

otherwise result from adopting stricter 

standards, but is offset by the increase 

in fuel consumption that results when 

vehicles with increased fuel economy 

are driven more. 

Research on the magnitude of the 

rebound effect in light-duty vehicle use 

dates to the early 1980s, and almost 

unanimously concludes that a 

statistically significant rebound effect 

occurs when vehicle fuel efficiency 

improves.114 The most common 

approach to estimating its magnitude 

has been to analyze statistically 

household survey data on vehicle use, 

fuel consumption, fuel prices (often 

obtained from external sources), and 

other determinants of household travel 

demand to isolate the response of 

vehicle use to higher fuel economy. 

Other studies have relied on 

econometric analysis of annual U.S. 

data on vehicle use, fuel economy, fuel 

prices, and other variables to identify 

the response of total or average vehicle 

use to changes in fleet-wide average fuel 

economy and its effect of fuel cost per 

mile driven. Two recent studies 

analyzed yearly variation in vehicle 

ownership and use, fuel prices, and fuel 

economy among individual states over 

an extended time period in order to 

measure the response of vehicle use to 

changing fuel economy.115

An important distinction among 

studies of the rebound effect is whether 

they assume that the effect is constant, 

or varies over time in response to the 

absolute levels of fuel costs, personal 

income, or household vehicle 

ownership. Most studies using aggregate 

annual data for the U.S. assume a 

constant rebound effect, although some 

of these studies test whether the effect 

can vary as changes in retail fuel prices 

or average fuel economy alter fuel cost 

per mile driven. Many studies using 

household survey data estimate 

significantly different rebound effects 

for households owning varying numbers 

of vehicles, although they arrive at 

differing conclusions about whether the 

rebound effect is larger among 

households that own more vehicles. 

One recent study using state-level data 

concludes that the rebound effect varies 

directly in response to changes in 

personal income and the degree of 

urbanization of U.S. cities, as well as 

fuel costs. 

In order to arrive at a preliminary 

estimate of the rebound effect for use in 

assessing the fuel savings, emissions 

reductions, and other impacts of 

alternative standards, NHTSA reviewed 

22 studies of the rebound effect 

conducted from 1983 through 2005. We 

then conducted a detailed analysis of 

the 66 separate estimates of the long-run 

rebound effect reported in these studies, 

which is summarized in the table 

below.116 As the table indicates, these 

66 estimates of the long-run rebound 

effect range from as low as 7 percent to 

as high as 75 percent, with a mean value 

of 23 percent. 

Limiting the sample to 50 estimates 

reported in the 17 published studies of 

the rebound effect yields the same range 

but a slightly higher mean (24 percent), 

while focusing on the authors’ preferred 

estimates from published studies 

narrows this range and lowers its 

average only slightly. The median 

estimate of the rebound effect in all 

three samples, which is generally 

regarded as a more reliable indicator of 

their central tendency than the average 

because it is less influenced by 

unusually small and large estimates, is 

22 percent. As Table V–4 indicates, 

approximately two-thirds of all 

estimates reviewed, of all published 

estimates, and of authors’ preferred 

estimates fall in the range of 10–30 

percent. 

TABLE V–4.—SUMMARY OF REBOUND EFFECT ESTIMATES

Category of estimates Number 

of studies 

Number 

of 

estimates 

Range Distribution 

Low High Median Mean Std. Dev. 

All Estimates ........................................................................ 22 66 7% 75% 22% 23% 14% 

Published Estimates ............................................................ 17 50 7% 75% 22% 24% 14% 

Authors’ Preferred Estimates ............................................... 17 17 9% 75% 22% 22% 15% 

U.S. Time-Series Estimates ................................................. 7 34 7% 45% 14% 18% 9% 

Household Survey Estimates ............................................... 13 23 9% 75% 31% 31% 16% 

Pooled U.S. State Estimates ............................................... 2 9 8% 58% 22% 25% 14% 

Constant Rebound Effect (1) ............................................... 15 37 7% 75% 20% 23% 16% 

Variable Rebound Effect: (1).

Reported Estimates ............................................................. 10 29 10% 45% 23% 23% 10% 

Updated to 2006 (2) ............................................................. 10 29 6% 46% 16% 19% 12% 

(1) Three studies estimate both constant and variable rebound effects. 


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Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 24409 

117As an illustration, Small and Van Dender 

(2005) allow the rebound effect to vary over time 

in response to changes in real per capita income as 

well as average fuel cost per mile driven. While 

their estimate for the entire interval (1966–2001) 

they analyze is 22 percent, updating this estimate 

using 2006 values of these variables reduces the 

rebound effect to approximately 10 percent. 

Similarly, updating Greene’s 1992 original estimate 

of a 15 percent rebound effect to reflect 2006 fuel 

prices and average fuel economy reduces it to 6 

percent. See David L. Greene, ‘‘Vehicle Use and 

Fuel Economy: How Big is the Rebound Effect?’’

The Energy Journal, 13:1 (1992), 117–143. In 

contrast, the distribution of households among 

vehicle ownership categories in the data samples 

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

(1999) are nearly identical to the most recent 

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

estimates to current U.S. conditions changes them 

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

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

Vehicle Use in the Urban Household Sector: Theory 

and Empirical Evidence,’’ Journal of Transport 

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

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

Gibson, ‘‘Fuel Economy Rebound Effect for 

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

(1999), 1–21. 

118 In the most recent light truck CAFE 

rulemaking, NHTSA chose not to preference the 

Small and Van Dender study over other published 

estimates of the value of the rebound effect, stating 

that since it ‘‘remains an unpublished working 

paper that has not been subjected to formal peer 

review, ‘‘the agency does not yet consider the 

estimates it provides to have the same credibility 

as the published and widely-cited estimates it 

relied upon.’’ See 71 FR 17633 (Apr. 6, 2006). The 

study has subsequently been published and peerreviewed, so NHTSA is now prepared to ‘‘consider 

it in developing its own estimate of the rebound 

effect for use in subsequent CAFE rulemakings.’’

(2) Reported estimates updated to reflect 2006 values of vehicle use, fuel prices, fleet fuel efficiency, household income, and household vehicle ownership. 

The type of data used and authors’

assumption about whether the rebound 

effect varies over time have important 

effects on its estimated magnitude. The 

34 estimates derived from analysis of 

U.S. annual time-series data produce a 

median estimate of 14 percent for the 

long-run rebound effect, while the 

median of 23 estimates based on 

household survey data is more than 

twice as large (31 percent), and the 

median of 9 estimates based on pooled 

state data matches that of the entire 

sample (22 percent). The 37 estimates 

assuming a constant rebound effect 

produce a median of 20 percent, while 

the 29 originally reported estimates of a 

variable rebound effect have a slightly 

higher median value (23 percent). 

In selecting a single value for the 

rebound effect to use in analyzing 

alternative standards for future model 

years, NHTSA tentatively attaches 

greater significance to studies that allow 

the rebound effect to vary in response to 

changes in the various factors that have 

been found to affect its magnitude. 

However, it is also important to update 

authors’ originally-reported estimates of 

variable rebound effects to reflect 

current conditions. Recalculating the 29 

original estimates of variable rebound 

effects to reflect current (2006) values 

for retail fuel prices, average fuel 

economy, personal income, and 

household vehicle ownership reduces 

their median estimate to 16 percent.117

NHTSA also tentatively attaches greater 

significance to the recent study by Small 

and Van Dender (2005), which finds 

that the rebound effect tends to decline 

as average fuel economy, personal 

income, and suburbanization of U.S. 

cities increase, but—in accordance with 

previous studies—rises with increasing 

fuel prices.118

Considering the empirical evidence 

on the rebound effect as a whole, but 

according greater importance to the 

updated estimates from studies allowing 

the rebound effect to vary—particularly 

the Small and Van Dender study—

NHTSA has selected a rebound effect of 

15 percent to evaluate the fuel savings 

and other effects of alternative standards 

for the time period covered by this 

rulemaking. However, we do not believe 

that evidence of the rebound effect’s 

dependence on fuel prices or household 

income is sufficiently convincing to 

justify allowing its future value to vary 

in response to forecast changes in these 

variables. A range extending from 10 

percent to at least 20 percent—and 

perhaps as high as 25 percent—appears 

to be appropriate for the required 

analysis of the uncertainty surrounding 

these estimates. While the agency 

selected 15 percent, it also ran 

sensitivity analyses at 10 and 20 

percent. The results are shown in the 

PRIA. 

i. Benefits From Increased Vehicle Use 

The increase in vehicle use from the 

rebound effect provides additional 

benefits to their owners, who may make 

more frequent trips or travel farther to 

reach more desirable destinations. This 

additional travel provides benefits to 

drivers and their passengers by 

improving their access to social and 

economic opportunities away from 

home. As evidenced by their decisions 

to make more frequent or longer trips 

when improved fuel economy reduces 

their costs for driving, the benefits from 

this additional travel exceed the costs 

drivers and passengers incur in making 

more frequent or longer trips. 

The amount by which the benefits 

from this additional travel exceed its 

costs (for fuel and other operating 

expenses) measures the net benefits that 

drivers receive from the additional 

travel, usually referred to as increased 

consumer surplus. NHTSA’s analysis 

estimates the economic value of the 

increased consumer surplus provided 

by added driving using the conventional 

approximation, which is one half of the 

product of the decline in vehicle 

operating costs per vehicle-mile and the 

resulting increase in the annual number 

of miles driven. The magnitude of these 

benefits represents a small fraction of 

the total benefits from the alternative 

fuel economy standards considered. 

j. Added Costs From Congestion, 

Crashes and Noise 

Although it provides some benefits to 

drivers, increased vehicle use associated 

with the rebound effect also contributes 

to increased traffic congestion, motor 

vehicle accidents, and highway noise. 

Depending on how the additional travel 

is distributed over the day and on where 

it takes place, additional vehicle use can 

contribute to traffic congestion and 

delays by increasing traffic volumes on 

facilities that are already heavily 

traveled during peak periods. These 

added delays impose higher costs on 

drivers and other vehicle occupants in 

the form of increased travel time and 

operating expenses. Because drivers do 

not take these added costs into account 

in deciding when and where to travel, 

they must be accounted for separately as 

a cost of the added driving associated 

with the rebound effect. 

Increased vehicle use due to the 

rebound effect may also increase the 

costs associated with traffic accidents. 

Drivers may take account of the 

potential costs they (and their 

passengers) face from the possibility of 

being involved in an accident when 

they decide to make additional trips. 

However, they probably do not consider 

all of the potential costs they impose on 

occupants of other vehicles and on 

pedestrians when accidents occur, so 

any increase in these ‘‘external’’

accident costs must be considered as 

another cost of additional reboundeffect driving. Like increased delay 

costs, any increase in these external 

accident costs caused by added driving 

is likely to depend on the traffic 

conditions under which it takes place, 

since accidents are more frequent in 

heavier traffic (although their severity 

may be reduced by the slower speeds at 

which heavier traffic typically moves). 

Finally, added vehicle use from the 

rebound effect may also increase traffic 

noise. Noise generated by vehicles 


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119These estimates were developed by FHWA for 

use in its 1997 Federal Highway Cost Allocation 

Study; see http://www.fhwa.dot.gov/policy/hcas/ 

final/index.htm (last accessed April 20, 2008). 

120See Federal Highway Administration, 1997 

Federal Highway Cost Allocation Study, http:// 

www.fhwa.dot.gov/policy/hcas/final/index.htm, 

Tables V–22, V–23, and V–24 (last accessed April 

20, 2008). 

121The Federal Highway Administration’s 

estimates of these costs agree closely with some 

other recent estimates. For example, recent 

published research conducted by Resources for the 

Future (RFF) estimates marginal congestion and 

external accident costs for increased light-duty 

vehicle use in the U.S. to be 3.5 and 3.0 cents per 

vehicle-mile in year-2002 dollars. See Ian W.H. 

Parry and Kenneth A. Small, ‘‘Does Britain or the 

U.S. Have the Right Gasoline Tax?’’ Discussion 

Paper 02–12, Resources for the Future, 19 and Table 

1 (March 2002). Available at http://www.rff.org/rff/ 

Documents/RFF–DP–02–12.pdf (last accessed April 

20, 2008). 

122See, e.g., Bohi, Douglas R. and W. David 

Montgomery (1982). Oil Prices, Energy Security, 

and Import Policy Washington, DC: Resources for 

the Future, Johns Hopkins University Press; Bohi, 

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

Security: Externalities and Policies,’’ Energy Policy 

21:1093–1109; and Toman, M. A. (1993). ‘‘The 

Economics of Energy Security: Theory, Evidence, 

Policy,’’ in A. V. Kneese and J. L. Sweeney, eds. 

(1993). Handbook of Natural Resource and Energy 

Economics, Vol. III. Amsterdam: North-Holland, pp. 

1167–1218. 

123For example, if the U.S. imports 10 million 

barrels of petroleum per day at a world oil price of 

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

million. If increasing imports to 11 million barrels 

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

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

million. The resulting increase of $31 million per 

day ($231 million minus $200 million) is 

attributable to increasing daily imports by only 1 

million barrels. This means that the incremental 

cost of importing each additional barrel is $31, or 

$10 more than the newly-increased world price of 

$21 per barrel. This additional $10 per barrel 

represents a cost imposed on all other purchasers 

in the global petroleum market by U.S. buyers, in 

excess of the price they pay to obtain those 

additional imports. 124For a summary see Leiby, Paul N., Donald W. 

Jones, T. Randall Curlee, and Russell Lee, Oil 

Imports: An Assessment of Benefits and Costs, 

ORNL–6851, Oak Ridge National Laboratory, 

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

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

20, 2008). 

125 Id. 18–19. 

causes inconvenience, irritation, and 

potentially even discomfort to 

occupants of other vehicles, to 

pedestrians and other bystanders, and to 

residents or occupants of surrounding 

property. Because these effects are 

unlikely to be taken into account by the 

drivers whose vehicles contribute to 

traffic noise, they represent additional 

externalities associated with motor 

vehicle use. Although there is 

considerable uncertainty in measuring 

their value, any increase in the 

economic costs of traffic noise resulting 

from added vehicle use must be 

included together with other increased 

external costs from the rebound effect. 

NHTSA relies on estimates of 

congestion, accident, and noise costs 

caused by automobiles and light trucks 

developed by the Federal Highway 

Administration to estimate the 

increased external costs caused by 

added driving due to the rebound 

effect.119 These estimates are intended 

to measure the increases in costs from 

added congestion, property damages 

and injuries in traffic accidents, and 

noise levels caused by automobiles and 

light trucks that are borne by persons 

other than their drivers (or ‘‘marginal’’

external costs). Updated to 2006 dollars, 

FHWA’s ‘‘Middle’’ estimates for 

marginal congestion, accident, and 

noise costs caused by automobile use 

amount to 5.2 cents, 2.3 cents, and 0.1 

cents per vehicle-mile (for a total of 7.6 

cents per mile), while those for pickup 

trucks and vans are 4.7 cents, 2.5 cents, 

and 0.1 cents per vehicle-mile (for a 

total of 7.3 cents per mile).120, 121 These 

costs are multiplied by the annual 

increases in automobile and light truck 

use from the rebound effect to yield the 

estimated increases in congestion, 

accident, and noise externality costs 

during each future year. 

k. Petroleum Consumption and Import 

Externalities 

U.S. consumption and imports of 

petroleum products also impose costs 

on the domestic economy that are not 

reflected in the market price for crude 

petroleum, or in the prices paid by 

consumers of petroleum products such 

as gasoline. In economics literature on 

this subject, these costs include (1) 

higher prices for petroleum products 

resulting from the effect of U.S. oil 

import demand on the world oil price; 

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

economy caused by sudden reductions 

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

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

military presence to secure imported oil 

supplies from unstable regions, and for 

maintaining the strategic petroleum 

reserve (SPR) to cushion against 

resulting price increases.122 Higher U.S. 

imports of crude oil or refined 

petroleum products increase the 

magnitude of these external economic 

costs, thus increasing the true economic 

cost of supplying transportation fuels 

above the resource costs of producing 

them. Conversely, reducing U.S. imports 

of crude petroleum or refined fuels or 

reducing fuel consumption can reduce 

these external costs. Any reduction in 

their total value that results from 

improved light truck fuel economy 

represents an economic benefit of 

setting more stringent CAFE standards 

in addition to the value of fuel savings 

and emissions reductions itself. 

Increased U.S. oil imports can impose 

higher costs on all purchasers of 

petroleum products, because the U.S. is 

a sufficiently large purchaser of foreign 

oil supplies that changes in U.S. 

demand can affect the world price. The 

effect of U.S. petroleum imports on 

world oil prices is determined by the 

degree of OPEC monopoly power over 

global oil supplies, and the degree of 

monopsony power over world oil 

demand exerted by the U.S. The 

combination of these two factors means 

that increases in domestic demand for 

petroleum products that are met through 

higher oil imports can cause the price of 

oil in the world market to rise, which 

imposes economic costs on all other 

purchasers in the global petroleum 

market in excess of the higher prices 

paid by U.S. consumers.123 Conversely, 

reducing U.S. oil imports can lower the 

world petroleum price, and thus 

generate benefits to other oil purchasers 

by reducing these ‘‘monopsony costs.’’

Although the degree of current OPEC 

monopoly power is subject to debate, 

the consensus appears to be that OPEC 

remains able to exercise some degree of 

control over the response of world oil 

supplies to variation in world oil prices, 

so that the world oil market does not 

behave completely competitively.124

The extent of U.S. monopsony power is 

determined by a complex set of factors 

including the relative importance of 

U.S. imports in the world oil market, 

and the sensitivity of petroleum supply 

and demand to its world price among 

other participants in the international 

oil market. Most evidence appears to 

suggest that variation in U.S. demand 

for imported petroleum continues to 

exert some influence on world oil 

prices, although this influence appears 

to be limited.125

The second component of external 

economic costs imposed by U.S. 

petroleum imports arises partly because 

an increase in oil prices triggered by a 

disruption in the supply of imported oil 

reduces the level of output that the U.S. 

economy can produce. The reduction in 

potential U.S. economic output depends 

on the extent and duration of the 

increases in petroleum product prices 

that result from a disruption in the 

supply of imported oil, as well as on 

whether and how rapidly these prices 

return to pre-disruption levels. Even if 

prices for imported oil return 

completely to their original levels, 

however, economic output will be at 

least temporarily reduced from the level 

that would have been possible without 

a disruption in oil supplies. 

Because supply disruptions and 

resulting price increases tend to occur 


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126Leiby, Paul N., Donald W. Jones, T. Randall 

Curlee, and Russell Lee, Oil Imports: An 

Assessment of Benefits and Costs, ORNL–6851, Oak 

Ridge National Laboratory, November 1, 1997. 

Available at http://pzl1.ed.ornl.gov/ORNL6851.pdf 

(last accessed April 20, 2008). 

127Leiby, Paul N. ‘‘Estimating the Energy Security 

Benefits of Reduced U.S. Oil Imports,’’ Oak Ridge 

National Laboratory, ORNL/TM–2007/028, Revised 

July 23, 2007. Available at http://pzl1.ed.ornl.gov/ 

energysecurity.html (click on link below ‘‘Oil 

Imports Costs and Benefits’’) (last accessed April 

20, 2008). 

128 72 FR 23899 (May 1, 2007). 

129Peer Review Report Summary: Estimating the 

Energy Security Benefits of Reduced U.S. Oil 

Imports, ICF, Inc., September 2007. 

suddenly rather than gradually, they can 

also impose costs on businesses and 

households for adjusting their use of 

petroleum products more rapidly than if 

the same price increase had occurred 

gradually over time. These adjustments 

impose costs because they temporarily 

reduce economic output even below the 

level that would ultimately be reached 

once the U.S. economy completely 

adapted to higher petroleum prices. The 

additional costs to businesses and 

households reflect their inability to 

adjust prices, output levels, and their 

use of energy and other resources 

quickly and smoothly in response to 

rapid changes in prices for petroleum 

products. 

Since future disruptions in foreign oil 

supplies are an uncertain prospect, each 

of these disruption costs must be 

adjusted by the probability that the 

supply of imported oil to the U.S. will 

actually be disrupted. The ‘‘expected 

value’’ of these costs— the product of 

the probability that an oil import 

disruption will occur and the costs of 

reduced economic output and abrupt 

adjustment to sharply higher petroleum 

prices—is the appropriate measure of 

their magnitude. Any reduction in these 

expected disruption costs resulting from 

a measure that lowers U.S. oil imports 

represents an additional economic 

benefit beyond the direct value of 

savings from reduced purchases of 

petroleum products. 

While the vulnerability of the U.S. 

economy to oil price shocks is widely 

thought to depend on total petroleum 

consumption rather than on the level of 

oil imports, variation in imports is still 

likely to have some effect on the 

magnitude of price increases resulting 

from a disruption of import supply. In 

addition, changing the quantity of 

petroleum imported into the U.S. may 

also affect the probability that such a 

disruption will occur. If either the size 

of the likely price increase or the 

probability that U.S. oil supplies will be 

disrupted is affected by oil imports, the 

expected value of the costs from a 

supply disruption will also depend on 

the level of imports. 

Businesses and households use a 

variety of market mechanisms, 

including oil futures markets, energy 

conservation measures, and 

technologies that permit rapid fuel 

switching to ‘‘insure’’ against higher 

petroleum prices and reduce their costs 

for adjusting to sudden price increases. 

While the availability of these market 

mechanisms has likely reduced the 

potential costs of disruptions to the 

supply of imported oil, consumers of 

petroleum products are unlikely to take 

account of costs they impose on others, 

so these costs are probably not reflected 

in the price of imported oil. Thus 

changes in oil import levels probably 

continue to affect the expected cost to 

the U.S. economy from potential oil 

supply disruptions, although this 

component of oil import costs is likely 

to be significantly smaller than 

estimated by studies conducted in the 

wake of the oil supply disruptions 

during the 1970s. 

The third component of the external 

economic costs of importing oil into the 

U.S. includes government outlays for 

maintaining a military presence to 

secure the supply of oil imports from 

potentially unstable regions of the world 

and to protect against their interruption. 

Some analysts also include outlays for 

maintaining the U.S. Strategic 

Petroleum Reserve (SPR), which is 

intended to cushion the U.S. economy 

against the consequences of disruption 

in the supply of imported oil, as 

additional costs of protecting the U.S. 

economy from oil supply disruptions. 

NHTSA believes that while costs for 

U.S. military security may vary over 

time in response to long-term changes in 

the actual level of oil imports into the 

U.S., these costs are unlikely to decline 

in response to any reduction in U.S. oil 

imports resulting from raising future 

CAFE standards for passenger cars and 

light trucks. U.S. military activities in 

regions that represent vital sources of oil 

imports also serve a broader range of 

security and foreign policy objectives 

than simply protecting oil supplies, and 

as a consequence are unlikely to vary 

significantly in response to changes in 

the level of oil imports prompted by 

higher standards. 

Similarly, while the optimal size of 

the SPR from the standpoint of its 

potential influence on domestic oil 

prices during a supply disruption may 

be related to the level of U.S. oil 

consumption and imports, its actual size 

has not appeared to vary in response to 

recent changes in oil imports. Thus 

while the budgetary costs for 

maintaining the Reserve are similar to 

other external costs in that they are not 

likely to be reflected in the market price 

for imported oil, these costs do not 

appear to have varied in response to 

changes in oil import levels. 

In analyzing benefits from its recent 

actions to increase light truck CAFE 

standards for model years 2005–07 and 

2008–11, NHTSA relied on a 1997 study 

by Oak Ridge National Laboratory 

(ORNL) to estimate the value of reduced 

economic externalities from petroleum 

consumption and imports.126 More 

recently, ORNL updated its estimates of 

the value of these externalities, using 

the analytic framework developed in its 

original 1997 study in conjunction with 

recent estimates of the variables and 

parameters that determine their 

value.127 These include world oil prices, 

current and anticipated future levels of 

OPEC petroleum production, U.S. oil 

import levels, the estimated 

responsiveness of oil supplies and 

demands to prices in different regions of 

the world, and the likelihood of oil 

supply disruptions. ORNL prepared its 

updated estimates of oil import 

externalities for use by EPA in 

evaluating the benefits of reductions in 

U.S. oil consumption and imports 

expected to result from its Renewable 

Fuel Standard Rule of 2007 (RFS).128

The updated ORNL study was 

subjected to a detailed peer review by 

experts selected by EPA, and its 

estimates of the value of oil import 

externalities were subsequently revised 

to reflect their comments and 

recommendations.129 Specifically, 

reviewers recommended that ORNL 

increase its estimates of the sensitivity 

of oil supply by non-OPEC producers 

and oil demand by nations other than 

the U.S. to changes in the world oil 

price, as well as reduce its estimate of 

the sensitivity of U.S. gross domestic 

product (GDP) to potential sudden 

increases in world oil prices. 

After making the revisions 

recommended by peer reviewers, 

ORNL’s updated estimates of the 

monopsony cost associated with U.S. oil 

imports range from $5.22 to $9.68 per 

barrel, with a most likely estimate of 

$7.41 per barrel. These estimates imply 

that each gallon of fuel saved as a result 

of adopting higher CAFE standards will 

reduce the monopsony costs of U.S. oil 

imports by $0.124 to $0.230 per gallon, 

with the actual value most likely to be 

$0.176 per gallon saved. ORNL’s 

updated and revised estimates of the 

increase in the expected costs associated 

with oil supply disruptions to the U.S. 

and the resulting rapid increase in 

prices for petroleum products amount to 

$4.54 to $5.84 per barrel, although its 


rwilkins on PROD1PC63 with PROPOSALS2
24412 Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 

130U.S. Environmental Protection Agency, 

MOBILE6 Vehicle Emission Modeling Software, 

available at http://www.epa.gov/otaq/m6.htm#m60 

(last accessed April 20, 2008). 

131Estimates of the response of gasoline imports 

and domestic refining to fuel savings from stricter 

standards are variable and highly uncertain, but our 

preliminary analysis indicates that under any 

reasonable assumption about these responses, the 

magnitude of the net change in criteria pollutant 

emissions (accounting for both the rebound effect 

and changes in refining emissions) is extremely low 

relative to their current total. 

132Argonne National Laboratories, The 

Greenhouse Gas and Regulated Emissions from 

Transportation (GREET) Model, Version 1.8, June 

2007, available at http:// 

www.transportation.anl.gov/software/GREET/ 

index.html (last accessed April 20, 2008). 

133Emissions that occur during vehicle refueling 

at retail gasoline stations (primarily evaporative 

emissions of volatile organic compounds, or VOCs) 

are already accounted for in the ‘‘tailpipe’’ emission 

factors used to estimate the emissions generated by 

increased light truck use. GREET estimates 

emissions in each phase of gasoline production and 

distribution in mass per unit of gasoline energy 

content; these factors are then converted to mass 

per gallon of gasoline using the average energy 

content of gasoline. 

134 In effect, this assumes that the distances crude 

oil travels to U.S. refineries are approximately the 

same regardless of whether it travels from domestic 

oilfields or import terminals, and that the distances 

that gasoline travels from refineries to retail stations 

are approximately the same as those from import 

terminals to gasoline stations. 

most likely estimate of $4.59 per barrel 

is very close to the lower end of this 

range. According to these estimates, 

each gallon of fuel saved will reduce the 

expected costs disruptions to the U.S. 

economy by $0.108 to $0.139, with the 

actual value most likely to be $0.109 per 

gallon. 

The updated and revised ORNL 

estimates suggest that the combined 

reduction in monopsony costs and 

expected costs to the U.S. economy from 

oil supply disruptions resulting from 

lower fuel consumption total $0.232 to 

$0.370 per gallon, with a most likely 

estimate of $0.286 per gallon. This 

represents the additional economic 

benefit likely to result from each gallon 

of fuel saved by higher CAFE standards, 

beyond the savings in resource costs for 

producing and distributing each gallon 

of fuel saved. NHTSA employs this 

midpoint estimate in its analysis of the 

benefits from fuel savings projected to 

result from alternative CAFE standards 

for model years 2011–15. It also 

analyzes the effect on these benefits 

estimates from variation in this value 

over the range from $0.232 to $0.370 per 

gallon of fuel saved. 

NHTSA’s analysis of benefits from 

alternative CAFE standards does not 

include cost savings from either reduced 

outlays for U.S. military operations or 

maintaining a smaller SPR among the 

external benefits of reducing gasoline 

consumption and petroleum imports by 

means of tightening future standards. 

This view concurs with that of both the 

original ORNL study of economic costs 

from U.S. oil imports and its recent 

update, which conclude that savings in 

government outlays for these purposes 

are unlikely to result from reductions in 

consumption of petroleum products and 

oil imports on the scale of those likely 

to result from the alternative increases 

in CAFE standards considered for model 

years 2011–15. 

l. Air Pollutant Emissions 

(i) Impacts on Criteria Air Pollutant 

Emissions 

While reductions in domestic fuel 

refining and distribution that result 

from lower fuel consumption will 

reduce U.S. emissions of criteria 

pollutants, additional vehicle use 

associated with the rebound effect from 

higher fuel economy will increase 

emissions of these pollutants. Thus the 

net effect of stricter CAFE standards on 

emissions of each criteria pollutant 

depends on the relative magnitudes of 

its reduced emissions in fuel refining 

and distribution, and increases in its 

emissions from vehicle use. Because the 

relationship between emissions rates 

(emissions per gallon refined of fuel or 

mile driven) in fuel refining and vehicle 

use is different for each criteria 

pollutant, the net effect of fuel savings 

from the proposed standards on total 

emissions of each pollutant is likely to 

differ. Criteria air pollutants emitted by 

vehicles and during fuel production 

include carbon monoxide (CO), 

hydrocarbon compounds (usually 

referred to as ‘‘volatile organic 

compounds,’’ or VOC), nitrogen oxides 

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

and sulfur oxides (SOX). 

The increase in emissions of these 

pollutants from additional vehicle use 

due to the rebound effect is estimated by 

multiplying the increase in total miles 

driven by vehicles of each model year 

and age by age-specific emission rates 

per vehicle-mile for each pollutant. 

NHTSA developed these emission rates 

using EPA’s MOBILE6.2 motor vehicle 

emissions factor model.130 Emissions of 

these pollutants also occur during crude 

oil extraction and transportation, fuel 

refining, and fuel storage and 

distribution. The reduction in total 

emissions from each of these sources 

thus depends on the extent to which 

fuel savings result in lower imports of 

refined fuel, or in reduced domestic fuel 

refining. To a lesser extent, they also 

depend on whether any reduction in 

domestic gasoline refining is translated 

into reduced imports of crude oil or 

reduced domestic extraction of 

petroleum. 

Based on analysis of changes in U.S. 

gasoline imports and domestic gasoline 

consumption forecast in AEO’s 2008 

Early Release, NHTSA tentatively 

estimates that 50 percent of fuel savings 

resulting from higher CAFE standards 

will result in reduced imports of refined 

gasoline, while the remaining 50 

percent will reduce domestic fuel 

refining.131 The reduction in domestic 

refining is assumed to leave its sources 

of crude petroleum unchanged from the 

mix of 90 percent imports and 10 

percent domestic production projected 

by AEO. 

NHTSA proposes to estimate 

reductions in criteria pollutant 

emissions from gasoline refining and 

distribution using emission rates 

obtained from Argonne National 

Laboratories’ Greenhouse Gases and 

Regulated Emissions in Transportation 

(GREET) model.132 The GREET model 

provides separate estimates of air 

pollutant emissions that occur in four 

phases of fuel production and 

distribution: crude oil extraction, crude 

oil transportation and storage, fuel 

refining, and fuel distribution and 

storage.133 We tentatively assume that 

reductions in imports of refined fuel 

would reduce criteria pollutant 

emissions during fuel storage and 

distribution only. Reductions in 

domestic fuel refining using imported 

crude oil as a feedstock are tentatively 

assumed to reduce emissions during 

crude oil transportation and storage, as 

well as during gasoline refining, 

distribution, and storage, because less of 

each of these activities would be 

occurring. Similarly, reduced domestic 

fuel refining using domesticallyproduced crude oil is tentatively 

assumed to reduce emissions during all 

phases of gasoline production and 

distribution.134

The net changes in emissions of each 

criteria pollutant are calculated by 

adding the increases in their emissions 

that result from increased vehicle use 

and the reductions that result from 

lower domestic fuel refining and 

distribution. The net change in 

emissions of each criteria pollutant is 

converted to an economic value using 

estimates of the economic costs per ton 

emitted (which result primarily from 

damages to human health) developed by 

EPA and submitted to the federal Office 

of Management and Budget for review. 

For certain criteria pollutants, EPA 

estimates different per-ton costs for 

emissions from vehicle use than for 

emissions of the same pollutant during 

fuel production, reflecting differences in 

their typical geographic distributions, 


rwilkins on PROD1PC63 with PROPOSALS2
Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 24413 

135For purposes of this rulemaking, NHTSA 

estimated emissions of vehicular CO2 emissions, 

but did not estimate vehicular emissions of 

methane, nitrous oxide, and hydroflourocarbons. 

Methane and nitrous oxide account for less than 3 

percent of the tailpipe GHG emissions from 

passenger cars and light trucks, and CO2 emissions 

accounted for the remaining 97 percent. Of the total 

(including non-tailpipe) GHG emissions from 

passenger cars and light trucks, tailpipe CO2

represents about 93.1 percent, tailpipe methane and 

nitrous oxide represent about 2.4 percent, and 

hydroflourocarbons (i.e., air conditioner leaks) 

represent about 4.5 percent. Calculated from U.S 

CO2. EPA, Inventory of U.S> Greenhouse Gas 

Emissions and Sinks 1990–2006, EPA430–R–08–05, 

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

climatechange/emissions/downloads/08_CR.pdf, 

Table 215. (Last accessed April 20, 2008.) 

136This assumption results in a slight 

overestimate of carbon dioxide emissions, since a 

small fraction of the carbon content of gasoline is 

emitted in the forms of carbon monoxide and 

unburned hydrocarbons. However, the magnitude 

of this overestimate is likely to be extremely small. 

This approach is consistent with the 

recommendation of the Intergovernmental Panel on 

Climate Change for ‘‘Tier 1’’ national greenhouse 

gas emissions inventories. Cf. Intergovernmental 

Panel on Climate Change, 2006 Guidelines for 

National Greenhouse Gas Inventories, Volume 2, 

Energy, p. 3.16. 

137NHTSA did not, for purposes of this proposed 

rulemaking, attempt to estimate changes in 

‘‘upstream’’ emissions of greenhouse gases (GHGs) 

other than CO2. This was because carbon dioxide 

from final combustion itself accounts for nearly 97 

percent of the total CO2-equivalent emissions from 

petroleum production and use, even with other 

GHGs that result from those activities (principally 

methane and nitrous oxide) weighted by their 

higher global warming potentials (GWPs) relative to 

CO2. Calculated from U.S. EPA, Inventory of U.S. 

Greenhouse Gas Emissions and Sinks 1990–2006, 

EPA430–R–08–05, April 15, 2008. Available at 

http://epa.gov/climatechange/emissions/ 

downloads/08_CR.pdf, Tables 3–3, 3–39, and 3–41. 

(Last accessed April 20, 2008.) 

138Carbon itself accounts for 12/44, or about 

27%, of the mass of carbon dioxide (12/44 is the 

ratio of the molecular weight of carbon to that of 

carbon dioxide). Thus each ton of carbon emitted 

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

dioxide emissions. Estimates of the SCC are 

typically reported in dollars per ton of carbon, and 

must be divided by 3.67 to determine their 

equivalent value per ton of carbon dioxide 

emissions. 

139For a discussion of these factors, see Yohe, 

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

Cohen, C. Hope, A.C. Janetos and R.T. Perez, 2007: 

Perspectives on climate change and sustainability. 

Climate Change 2007: Impacts, Adaptation and 

Vulnerability. Contribution of Working Group II to 

the Fourth Assessment Report of the 

Intergovernmental Panel on Climate Change, M.L. 

Parry, O.F. Canziani, J.P. Palutikof, P.J. van der 

Linden and C.E. Hanson, Eds., Cambridge 

University Press, Cambridge, UK, pp. 821–824. 

140Climate Change 2007—Impacts, Adaptation 

and Vulnerability, Contribution of Working Group 

II to the Fourth Assessment Report of the IPCC, 17. 

Available at http://www.ipcc-wg2.org (last accessed 

<Feb. 4, 2008>). 

contributions to ambient pollution 

levels, and resulting population 

exposure. 

(ii) Reductions in CO2 Emissions 

Fuel savings from stricter CAFE 

standards also result in lower emissions 

of carbon dioxide (CO2), the main 

greenhouse gas emitted as a result of 

refining, distribution, and use of 

transportation fuels.135 Lower fuel 

consumption reduces carbon dioxide 

emissions directly, because the primary 

source of transportation-related CO2

emissions is fuel combustion in internal 

combustion engines. NHTSA tentatively 

estimates reductions in carbon dioxide 

emissions resulting from fuel savings by 

assuming that the entire carbon content 

of gasoline, diesel, and other fuels is 

converted to carbon dioxide during the 

combustion process.136

Reduced fuel consumption also 

reduces carbon dioxide emissions that 

result from the use of carbon-based 

energy sources during fuel production 

and distribution.137 NHTSA currently 

estimates the reductions in CO2

emissions during each phase of fuel 

production and distribution using CO2

emission rates obtained from the GREET 

model, using the previous assumptions 

about how fuel savings are reflected in 

reductions in each phase. The total 

reduction in CO2 emissions from the 

improvement in fuel economy under 

each alternative CAFE standard is the 

sum of the reductions in emissions from 

reduced fuel use and from lower fuel 

production and distribution. 

NHTSA has not attempted to estimate 

changes in emissions of other 

greenhouse gases, in particular methane, 

nitrous oxide, and hydrofluorocarbons. 

The agency invites comment on the 

importance and potential implications 

of doing so under NEPA. 

(iii) Economic value of reductions in 

CO2 emissions 

NHTSA has taken the economic 

benefits of reducing CO2 emission into 

account in this rulemaking, both in 

developing proposed CAFE standards 

and in assessing the economic benefits 

of each alternative that was considered. 

As noted above, the Ninth Circuit found 

in CBD that NHTSA had been arbitrary 

and capricious in deciding not to 

monetize the benefit of reducing CO2

emissions, saying that the agency had 

not substantiated the conclusion in its 

April 2006 final rule that the 

appropriate course was not to monetize 

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

emissions reduction at all. 

To this end, NHTSA reviewed 

published estimates of the ‘‘social cost 

of carbon emissions’’ (SCC). The SCC 

refers to the marginal cost of additional 

damages caused by the increase in 

expected climate impacts resulting from 

the emission of each additional metric 

ton of carbon, which is emitted in the 

form of CO2.138 It is typically estimated 

as the net present value of the impact 

over some time period (100 years or 

longer) of one additional ton of carbon 

emitted into the atmosphere. Because 

accumulated concentrations of 

greenhouse gases in the atmosphere and 

the projected impacts on global climate 

are increasing over time, the economic 

damages resulting from each additional 

ton of CO2 emissions in future years are 

believed to be greater as a result. Thus 

estimates of the SCC are typically 

reported for a specific year, and these 

estimates are generally larger for 

emissions in more distant future years. 

There is substantial variation among 

different authors’ estimates of the SCC, 

much of which can be traced to 

differences in their underlying 

assumptions about several variables. 

These include the sensitivity of global 

temperatures and other climate 

attributes to increasing atmospheric 

concentrations of greenhouse gases, 

discount rates applied to future 

economic damages from climate change, 

whether damages sustained by 

developing regions of the globe should 

be weighted more heavily than damages 

to developed nations, how long climate 

changes persist once they occur, and the 

economic valuation of specific climate 

impacts.139

Taken as a whole, recent estimates of 

the SCC may underestimate the true 

damage costs of carbon emissions 

because they often exclude damages 

caused by extreme weather events or 

climate response scenarios with low 

probabilities but potentially extreme 

impacts, and may underestimate the 

climate impacts and damages that could 

result from multiple stresses on the 

global climatic system. At the same 

time, however, many studies fail to 

consider potentially beneficial impacts 

of climate change, and do not 

adequately account for how future 

development patterns and adaptations 

could reduce potential impacts from 

climate change or the economic 

damages they cause. 

Given the uncertainty surrounding 

estimates of the SCC, the use of any 

single study may not be advisable since 

its estimate of the SCC will depend on 

many assumptions made by its authors. 

The Working Group II’s contribution to 

the Fourth Assessment Report of the 

United Nations Intergovernmental Panel 

on Climate Change (IPCC)140 notes that: 

The large ranges of SCC are due in the large 

part to differences in assumptions regarding 

climate sensitivity, response lags, the 

treatment of risk and equity, economic and 

non-economic impacts, the inclusion of 

potentially catastrophic losses, and discount 

rates. 


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24414 Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 

141Tol, Richard. The marginal damage costs of 

carbon dioxide emissions: an assessment of the 

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

2072. The summary SCC estimates reported by Tol 

are assumed to be denominated in U.S. dollars of 

the year of publication, 2005. 

142The reduction in payments from U.S. oil 

purchasers to domestic petroleum producers is not 

included as a benefit, since it represents a transfer 

that occurs entirely within the U.S. economy. 

143The estimate of $43 per ton of carbon 

emissions is reported by Tol (p. 2070) as the mean 

of the ‘‘best’’ estimates reported in peer-reviewed 

studies (see fn. 144). It thus differs from the mean 

of all estimates reported in the peer-reviewed 

studies surveyed by Tol. The $43 per ton value is 

also attributed to Tol by IPCC Working Group II 

(2007), p. 822. 

144Tol’s more recent (2007) and inclusive survey 

has been published online with peer-review 

comments. The agency has elected not to rely on 

the estimates it reports, but will consider doing so 

in its analysis of the final rule if the survey has been 

published, and will also consider any other newlypublished evidence. 

145For purposes of comparison, we note that in 

the rulemaking to establish CAFE standards for MY 

2008–11 light trucks, NRDC recommended a value 

of $10 to $25 per ton of CO2 emissions reduced by 

fuel savings and both Environmental Defense and 

Union of Concerned Scientists recommended a 

value of $50 per ton of carbon (equivalent to about 

$14 per ton of CO2 emissions). 

Although the IPCC does not 

recommend a single estimate of the 

SCC, it does cite the Tol (2005) study on 

four separate occasions (pages 17, 65, 

813, 822) as the only available survey of 

the peer-reviewed literature that has 

itself been subjected to peer review. Tol 

developed a probability function using 

the SCC estimates of the peer reviewed 

literature and found estimates ranging 

from less than zero to over $200 per 

metric ton of carbon. In an effort to 

resolve some of the uncertainty in 

reported estimates of climate damage 

costs from carbon emissions, Tol (2005) 

reviewed and summarized one hundred 

and three estimates of the SCC from 28 

published studies. He concluded that 

when only peer-reviewed studies 

published in recognized journals are 

considered, ‘‘* * * climate change 

impacts may be very uncertain but is 

unlikely that the marginal damage costs 

of carbon dioxide emissions exceed $50 

per [metric] ton carbon [about $14 per 

metric ton of CO2].’’ 141 He also 

concluded that the costs may be less 

than $14. 

Because of the number of assumptions 

required by each study, the wide range 

of uncertainty surrounding these 

assumptions, and their critical influence 

on the resulting estimates of climate 

damage costs, some studies have 

undoubtedly produced estimates of the 

SCC that are unrealistically high, while 

others are likely to have estimated 

values that are improbably low. Using a 

value for the SCC that reflects the 

central tendency of estimates drawn 

from many studies reduces the chances 

of relying on a single estimate that 

subsequently proves to be biased. 

It is important to note that estimates 

of the SCC almost invariably include the 

value of worldwide damages from 

potential climate impacts caused by 

carbon dioxide emissions, and are not 

confined to damages likely to be 

suffered within the U.S. In contrast, the 

other estimates of costs and benefits of 

increasing fuel economy included in 

this proposal include only the economic 

values of impacts that occur within the 

U.S. For example, the economic value of 

reducing criteria air pollutant emissions 

from overseas oil refineries is not 

counted as a benefit resulting from this 

rule, because any reduction in damages 

to health and property caused by 

overseas emissions are unlikely to be 

experienced within the U.S. 

In contrast, the reduced value of 

transfer payments from U.S. oil 

purchasers to foreign oil suppliers that 

results when lower U.S. oil demand 

reduces the world price of petroleum 

(the reduced ‘‘monopsony effect’’) is 

counted as a benefit of reducing fuel 

use.142 If the agency’s analysis was 

conducted from a worldwide rather than 

a U.S. perspective, however, the benefit 

from reducing air pollution overseas 

would be included, while reduced 

payments from U.S. oil consumers to 

foreign suppliers would not. 

In order to be consistent with 

NHTSA’s use of exclusively domestic 

costs and benefits in prior CAFE 

rulemakings, the appropriate value to be 

placed on changes climate damages 

caused by carbon emissions should be 

one that reflects the change in damages 

to the United States alone. Accordingly, 

NHTSA notes that the value for the 

benefits of reducing CO2 emissions 

might be restricted to the fraction of 

those benefits that are likely to be 

experienced within the United States. 

Although no estimates of benefits to 

the U.S. itself that are likely to result 

from reducing CO2 emissions are 

currently available, NHTSA expects that 

if such values were developed, the 

agency would employ those rather than 

global benefit estimates in its analysis. 

NHTSA also anticipates that if such 

values were developed, they would be 

lower than comparable global values, 

since the U.S. is likely to sustain only 

a fraction of total global damages 

resulting from climate change. 

In the meantime, the agency has 

elected to use the IPCC estimate of $43 

per metric ton of carbon as an upper 

bound on the benefits resulting from 

reducing each metric ton of U.S. 

emissions.143 This corresponds to 

approximately $12 per metric ton of CO2

when expressed in 2006 dollars. This 

estimate is based on the 2005 Tol 

study.144 The Tol study is cited 

repeatedly as an authoritative survey in 

various IPCC reports, which are widely 

accepted as representing the general 

consensus in the scientific community 

on climate change science. Since the 

IPCC estimate includes the worldwide 

costs of potential damages from carbon 

dioxide emissions, NHTSA has elected 

to employ it as an upper bound on the 

estimated value of the reduction in U.S. 

domestic damage costs that is likely to 

result from lower CO2 emissions.145

The IPCC Working Group II Fourth 

Assessment Report (2007, p. 822) 

further suggests that the SCC of carbon 

is growing at an annual 2.4 percent 

growth rate, based on estimated 

increases in damages from future 

emissions reported in published studies. 

NHTSA has also elected to apply this 

growth rate to Tol’s original 2005 

estimate. Thus by 2011, the agency 

estimates that the upper bound on the 

benefits of reducing CO2 emissions will 

have reached about $14 per metric ton 

of CO2, and will continue to increase by 

2.4 percent annually thereafter. 

In setting a lower bound, the agency 

agrees with the IPCC Working Group II 

(2007) report that ‘‘significant warming 

across the globe and the locations of 

significant observed changes in many 

systems consistent with warming is very 

unlikely to be due solely to natural 

variability of temperatures or natural 

variability of the systems’’ (pp. 9). 

Although this finding suggests that the 

global value of economic benefits from 

reducing carbon dioxide emissions is 

unlikely to be zero, it does not 

necessarily rule out low or zero values 

for the benefit to the U.S. itself from 

reducing emissions. 

For most of the analysis it performed 

to develop this proposal, NHTSA 

required a single estimate for the value 

of reducing CO2 emissions. The agency 

thus elected to use the midpoint of the 

range from $0 to $14 (or $7.00) per 

metric ton of CO2 as the initial value for 

the year 2011, and assumed that this 

value would grow at 2.4 percent 

annually thereafter. This estimate is 

employed for the analyses conducted 

using the Volpe CAFE model to support 

development of the proposed standards. 

The agency also conducted sensitivity 

analyses of the benefits from reducing 

CO2 emissions using both the upper 

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

metric ton) bounds of this range. 

NHTSA seeks comment on its 

tentative conclusions for the value of 


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146See Department of Transportation, Guidance 

Memorandum, ‘‘The Value of Saving Travel Time: 

Departmental Guidance for Conducting Economic 

Evaluations,’’ Apr. 9, 1997. Available at http:// 

ostpxweb.dot.gov/policy/Data/VOT97guid.pdf (last 

accessed October 20, 2007); update available at 

http://ostpxweb.dot.gov/policy/Data/ 

VOTrevision1_2-11-03.pdf (last accessed October 

20, 2007). 

147The hourly wage rate during 2006 is estimated 

to be $24.00. Personal travel (94.4 percent of urban 

travel) is valued at 50 percent of the hourly wage 

rate. Business travel (5.6 percent or urban travel) is 

valued at 100 percent of the hourly wage rate. For 

intercity travel, personal travel (87 percent) is 

valued at 70 percent of the wage rate, while 

business travel (13 percent) is valued at 100 percent 

of the wage rate. The resulting values of travel time 

are $12.67 for urban travel and $17.66 for intercity 

travel, and must be multiplied by vehicle 

occupancy (1.6) to obtain the estimate value of time 

per vehicle hour. 

148Office of Management and Budget, Circular A–

4, ‘‘Regulatory Analysis,’’ September 17, 2003, 33. 

Available at http://www.whitehouse.gov/omb/ 

circulars/a004/a-4.pdf (last accessed Feb. 14, 2008). 

149 Id. 

150Some empirical evidence also demonstrates 

that used car purchasers are willing to pay higher 

prices for greater fuel economy; see, e.g., James A. 

Kahn, ‘‘Gasoline Price Expectations and the Used 

Automobile Market: A Rational Expectations Asset 

Price Approach,’’ Quarterly Journal of Economics, 

Vol. 101 (May 1986), 323–339. 

151See Federal Reserve Bank, Statistical Release 

H.15, Selected Interest Rates (Weekly) (click on 

‘‘Historical Data,’’ then ‘‘Treasury constant 

maturities,’’ then ‘‘10-year, monthly’’), available at 

http://www.federalreserve.gov/Releases/H15/data/ 

Monthly/H15_TCMNOM_Y10.txt (last accessed 

February 13, 2008); and Federal Reserve Bank, 

Statistical Release G.19, Consumer Credit, (click on 

‘‘Historical Data,’’ then ‘‘Terms of Credit’’) available 

at http://www.federalreserve.gov/releases/g19/hist/ 

cc_hist_tc.html (last accessed February 13, 2008). 

152See The White House, Joint Press Release of 

the Council of Economic Advisors, the Department 

of the Treasury, and the Office of Management and 

Budget, November 29, 2007, available at http:// 

www.whitehouse.gov/news/releases/2007/11/ 

20071129-4.html (last accessed February 13, 2008). 

the SCC, the use of a domestic versus 

global value for the economic benefit of 

reducing CO2 emissions, the rate at 

which the value of the SCC grows over 

time, the desirability of and procedures 

for incorporating benefits from reducing 

emissions of greenhouse gases other 

than CO2, and any other aspects of 

developing a reliable SCC value for 

purposes of establishing CAFE 

standards. 

m. The Value of Increased Driving 

Range 

Improving vehicles’ fuel economy 

may also increase their driving range 

before they require refueling. By 

reducing the frequency with which 

drivers typically refuel their vehicles, 

and by extending the upper limit of the 

range they can travel before requiring 

refueling, improving fuel economy thus 

provides some additional benefits to 

their owners. (Alternatively, if 

manufacturers respond to improved fuel 

economy by reducing the size of fuel 

tanks to maintain a constant driving 

range, the resulting cost saving will 

presumably be reflected in lower 

vehicle sales prices.) 

No direct estimates of the value of 

extended vehicle range are readily 

available, so NHTSA’s analysis 

calculates the reduction in the annual 

number of required refueling cycles that 

results from improved fuel economy, 

and applies DOT-recommended values 

of travel time savings to convert the 

resulting time savings to their economic 

value.146 As an illustration of how the 

value of extended refueling range is 

estimated, a typical small light truck 

model has an average fuel tank size of 

approximately 20 gallons. Assuming 

that drivers typically refuel when their 

tanks are 20 percent full (i.e., 4 gallons 

in reserve), increasing this model’s 

actual on-road fuel economy from 24 to 

25 mpg would extend its driving range 

from 384 miles (= 16 gallons × 24 mpg) 

to 400 miles (= 16 gallons × 25 mpg). 

Assuming that it is driven 12,000 miles/ 

year, this reduces the number of times 

it needs to be refueled each year from 

31.3 (= 12,000 miles per year/384 miles 

per refueling) to 30.0 (= 12,000 miles 

per year/400 miles per refueling), or by 

1.3 refuelings per year. 

Weighted by the nationwide mix of 

urban (about 2/3) and rural (about 1/3) 

driving and average vehicle occupancy 

for all driving trips (1.6 persons), the 

DOT-recommended value of travel time 

per vehicle-hour is $24.00 (in 2006 

dollars).147 Assuming that locating a 

station and filling up requires ten 

minutes, the annual value of time saved 

as a result of less frequent refueling 

amounts to $5.20 (calculated as 10/60 × 

1.3 × $24.00). This calculation is 

repeated for each future calendar year 

that vehicles of each model year affected 

by the alternative CAFE standards 

proposed in this rule would remain in 

service. Like fuel savings and other 

benefits, however, the value of this 

benefit declines over a model year’s 

lifetime, because a smaller number of 

vehicles originally produced during that 

model year remain in service each year, 

and those remaining in service are 

driven fewer miles. 

n. Discounting Future Benefits and 

Costs 

Discounting future fuel savings and 

other benefits is intended to account for 

the reduction in their value to society 

when they are deferred until some 

future date rather than received 

immediately. The discount rate 

expresses the percent decline in the 

value of these benefits—as viewed from 

today’s perspective—for each year they 

are deferred into the future. NHTSA 

uses a rate of 7 percent per year to 

discount the value of future fuel savings 

and other benefits to analyze the 

potential impacts of alternative CAFE 

standards. However, the agency also 

performed an alternative analysis of 

benefits from alternative increases in 

CAFE standards using a 3 percent 

discount rate, and seeks comment on 

whether the standards should be set 

using a 3 percent rate instead of a 7 

percent rate. 

There are several reasons that NHTSA 

relies primarily on 7 percent as the 

appropriate rate for discounting future 

benefits from increased CAFE standards. 

First, OMB Circular A–4 indicates that 

this rate reflects the economy-wide 

opportunity cost of capital.148 It also 

states that this ‘‘is the appropriate 

discount rate whenever the main effect 

of a regulation is to displace or alter the 

use of capital in the private sector.’’149

We believe that a substantial portion of 

the cost of this regulation may come at 

the expense of other investments the 

auto manufacturers might otherwise 

make. Several large manufacturers are 

resource-constrained with respect to 

their engineering and productdevelopment capabilities. As a result, 

other uses of these resources will be 

foregone while they are required to be 

applied to technologies that improve 

fuel economy. 

Second, 7 percent also appears to be 

an appropriate rate to the extent that the 

costs of the regulation come at the 

expense of consumption as opposed to 

investment. NHTSA believes that 

financing rates on vehicle loans 

represent an appropriate discount rate, 

because they reflect the opportunity 

costs faced by consumers when buying 

vehicles with greater fuel economy and 

a higher purchase price. Most new and 

used vehicle purchases are financed, 

and because most of the benefits from 

higher fuel economy standards accrue to 

vehicle purchasers in the form of fuel 

savings, the appropriate discount rate is 

the interest rate buyers pay on loans to 

finance their vehicle purchases.150

According to the Federal Reserve, the 

interest rate on new car loans made 

through commercial banks has closely 

tracked the rate on 10-year treasury 

notes, but exceeded it by about 3 

percent.151 The official Administration 

forecast is that real (or inflationadjusted) interest rates on 10-year 

treasury notes will average about 3 

percent through 2016, implying that 6 

percent is a reasonable forecast for the 

real interest rate on new car loans.152 In 

turn, the interest rate on used car loans 


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153See supra [2 above here] and Federal Reserve 

Bank, Statistical Release G.20, Finance Companies, 

(click on ‘‘Historical Data,’’ then ‘‘Terms of Credit’’) 

available at http://www.federalreserve.gov/releases/ 

g20/hist/fc_hist_tc.html (last accessed February 13, 

2008). 

154 Id. 

155 Id. 

156See 71 FR 17596–97 (Apr. 6, 2006) for a more 

complete discussion of this process. 

made through automobile financing 

companies has closely tracked the rate 

on new car loans made through 

commercial banks, but exceeded it by 

about 3 percent.153 (We consider rates 

on loans that finance used car 

purchases, because some of the fuel 

savings resulting from improved fuel 

economy accrue to used car buyers.) 

Given the 6 percent estimate for new car 

loans, a reasonable forecast for used car 

loans is thus 9 percent. 

Because the benefits of fuel economy 

accrue to both new and used car 

owners, a discount rate between 6 

percent and 9 percent is thus 

appropriate for evaluating future 

benefits resulting from more stringent 

fuel economy standards. Assuming that 

new car buyers discount fuel savings at 

6 percent for 5 years (the average 

duration of a new car loan) 154 and that 

used car buyers discount fuel savings at 

9 percent for 5 years (the average 

duration of a used car loan), 155 the 

single constant discount rate that yields 

equivalent present value fuel savings is 

very close to 7 percent. 

However, NHTSA also seeks comment 

on whether a discount rate of 3 percent 

would be more appropriate for this 

proposed rulemaking. OMB Circular A–

4 also states that when regulation 

primarily and directly affects private 

consumption (e.g., through higher 

consumer prices for goods and services), 

instead of primarily affecting the 

allocation of capital, a lower discount 

rate may be appropriate. The alternative 

discount rate that is most appropriate in 

this case is the social rate of time 

preference, which refers to the rate at 

which society discounts future 

consumption to determine its value at 

the present time. The rate that savers are 

willing to accept to defer consumption 

into the future when there is no risk that 

borrowers will fail to pay them back 

offers one possible measure of the social 

rate of time preference. As noted above, 

the real rate of return on long-term 

government debt, which has averaged 

around 3 percent over the last 30 years, 

provides a reasonable estimate of this 

value. 

In the context of CAFE standards for 

motor vehicles, the appropriate discount 

rate depends on one’s view of how the 

costs and benefits of more stringent 

standards are distributed between 

vehicle manufacturers and consumers. 

Given that the discount rate plays a 

significant role in determining the level 

of the standards under a ‘‘social 

optimization’’ context, NHTSA 

conducted an analysis of what the 

standards and associated costs and 

benefits would be if the future benefits 

were discounted at 3 percent. The 

results of this analysis can be found in 

the PRIA. We estimated that following 

the same methods and criteria discussed 

below, but applying a 3 percent 

discount rate rather than a 7 percent 

discount rate, would suggest standards 

reaching about 33.6 mpg (average 

required fuel economy among both 

passenger cars and light trucks) in 

MY2015, 2 mpg higher than the 31.6 

mpg average resulting from the 

standards we are proposing based on a 

7 percent discount rate. The more 

stringent standards during MY2011–

MY2015 would reduce CO2 emissions 

by 672 million metric tons (mmt), or 29 

percent more than the 521 mmt 

achieved by the proposed standards. On 

the other hand, we estimated that 

standards increasing at this pace would 

require about $85b in technology 

outlays during MY2011–MY2015, or 89 

percent more than the $45b in 

technology outlays associated with the 

standards proposed today. 

Thus, although our proposed 

standards are based on a 7 percent 

discount rate, NHTSA seeks comment 

on whether it should set standards 

based on discount rate assumptions of 3 

percent, instead of 7 percent. 

o. Accounting for Uncertainty in 

Benefits and Costs 

In analyzing the uncertainty 

surrounding its estimates of benefits and 

costs from alternative CAFE standards, 

NHTSA has considered alternative 

estimates of those assumptions and 

parameters likely to have the largest 

effect. These include the projected costs 

of fuel economy-improving technologies 

and their expected effectiveness in 

reducing vehicle fuel consumption, 

forecasts of future fuel prices, the 

magnitude of the rebound effect, the 

reduction in external economic costs 

resulting from lower U.S. oil imports, 

the value to the U.S. economy of 

reducing carbon dioxide emissions, and 

the discount rate applied to future 

benefits and costs. The range for each of 

these variables employed in the 

uncertainty analysis is presented in the 

section of this document discussing 

each variable. 

The uncertainty analysis was 

conducted by assuming independent 

normal probability distributions for 

each of these variables, using the low 

and high estimates for each variable as 

the values below which 5 percent and 

95 percent of observed values are 

believed to fall. Each trial of the 

uncertainty analysis employed a set of 

values randomly drawn from each of 

these probability distributions, 

assuming that the value of each variable 

is independent of the others. Benefits 

and costs of each alternative standard 

were estimated using each combination 

of variables. A total of 1,000 trials were 

used to establish the likely probability 

distributions of estimated benefits and 

costs for each alternative standard. 

B. How Has NHTSA Used the Volpe 

Model To Select the Proposed 

Standards? 

1. Establishing a Continuous Function 

Standard 

NHTSA’s analysis supporting 

determination of the proposed 

continuous function standard builds on 

the analysis that supported the 

determination of the standards in 

NHTSA’s 2006 light truck final rule. 

That process involved three steps.156

In ‘‘phase one,’’ NHTSA added fuel 

saving technologies to each 

manufacturer’s fleet, model by model, 

for a model year until the net benefit 

from doing so reached its maximum 

value (i.e., until the incremental cost of 

improving its fuel economy further just 

equals the incremental value of fuel 

savings and other benefits from doing 

so). This was done for each of the seven 

largest manufacturers. Data points 

representing each vehicle’s size and 

‘‘optimized’’ fuel economy from the 

light truck fleets of those manufacturers 

were then combined into a single data 

set. 

In ‘‘phase two,’’ a preliminary 

continuous function was statistically 

fitted through these data points, subject 

to constraints at the upper and lower 

ends of the footprint range. 

Once a preliminary continuous 

function was statistically fitted to the 

data for a model year, ‘‘phase three’’ was 

performed. In that phase, the level of the 

function was adjusted to maximize net 

benefits, that is, the preliminary 

continuous function was raised or 

lowered until industry-wide (limited to 

the seven largest manufacturers) 

benefits were maximized. 

For NHTSA’s 2006 light truck 

rulemaking, the optimization procedure 

was applied in its entirety only for MY 

2011. The levels of the functions for 

MYs 2008–2010 were set at levels 

producing incremental costs 

approximately equivalent to those 

produced by the alternative Unreformed 


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157Some functions are not bounded. For example, 

a line that is not flat will increase in one direction 

without limit and will, in the other direction, 

decrease without limit. The continuous function 

applied by the agency is of a form with upper and 

lower boundaries. Even as vehicle footprint 

declines or increases, the function’s value (in mpg 

or grams/mile) will never exceed or fall below a 

specific value. These upper and lower limits are 

called asymptotes. 

158Consistent with EPCA, the passenger car and 

light truck fleets were analyzed separately. For 

passenger cars, the agency determined the 

asymptotes of the continuous function by 

calculating the average fuel economy of the smallest 

8 percent and the largest 5 percent of the fleet. For 

light trucks, the agency considered the smallest 11 

percent and the largest 10 percent of the fleet. These 

cohorts were determined by identifying gaps in the 

distribution of vehicles according to footprint. 

CAFE standards promulgated for those 

model years in the same rulemaking. 

Analysis conducted by NHTSA to 

prepare for the current proposed 

rulemaking revealed several 

opportunities to refine the procedure 

described above before applying it to 

this action, which spans several model 

years. The resultant procedure is 

described below. 

2. Calibration of Initial Continuous 

Function Standards 

For the optimized standards, the first 

step in the current procedure involves 

all three phases described above. 

Separately, for each of the seven largest 

manufacturers, the agency determined 

the level of additional technology that 

would maximize net benefits. The 

agency then combined the resultant 

fleets and used standard statistical 

analysis procedures to specify a 

continuous function (i.e., a function 

without abrupt changes) with 

asymptotes 157 set at the average fuel 

economy levels of the smallest and 

largest vehicles in this ‘‘optimized’’

fleet.158

In the 2006 light truck final rule, 

NHTSA created an attribute-based fuel 

economy standard based upon a 

continuous function using a logistic 

curve. The 2006 rulemaking, and its 

antecedent advanced notice of proposed 

rulemaking, contain an extended 

discussion of alternative approaches, 

including a bin-based system and 

different potential curves. As discussed 

below, that final rule explains NHTSA’s 

decision to promulgate a standard based 

on a logistic (‘‘S shaped’’) curve with 

constrained asymptotes (upper and 

lower limits). 

Although we did not explicitly 

discuss it in the MY 2008–2011 light 

truck rulemaking, NHTSA now wishes 

to explain that any continuous function 

with lower asymptotes, as was 

promulgated in the last rulemaking and 

is proposed in this rulemaking, provides 

an absolute lower fuel economy level 

which guards against manufacturers 

having an unlimited economic incentive 

to upsize their vehicles in order to lower 

their fuel economy requirement. As 

vehicle footprint continues to increase, 

decreases in the corresponding fuel 

economy target become progressively 

smaller, such that the target approaches 

but never reaches the value of the lower 

asymptote. Because the required level of 

CAFE is the harmonic average of targets 

applicable to a manufacturer’s vehicle 

models, the value of the standard can 

approach but will never fall to the value 

of this lower asymptote, no matter how 

far the manufacturer’s product mix 

shifts toward larger vehicles. This will 

limit any loss of fuel savings due to 

manufacturer decisions to upsize their 

vehicles. 

In a perfect world, NHTSA would 

develop the continuous functions for 

setting passenger car and light truck 

standards by letting the vehicle attribute 

(footprint) completely control the shape 

of the curves used for the functions in 

a way that provides the clearest 

observed relationship between this 

attribute and its fuel economy. But, 

NHTSA must balance many real world 

practical and public policy aspects in 

order to ensure that the standards are 

achieving the purpose set forth by EPCA 

and EISA. In developing the Agency’s 

last light truck rule, the curve used to 

fit the data (attribute versus fuel 

economy) was a sales-weighted leastsquares logistic curve. During this 

rulemaking, as NHTSA continued to 

look for ways to improve its standard 

setting methodology, consideration was 

given to other methods that could be 

used to develop the continuous 

functions. One such method that 

NHTSA explored and is using in this 

proposal is unweighted analysis of the 

data using the Mean Absolute Deviation 

(MAD) statistical procedure. 

Unweighted regression involves 

counting each vehicle model once, 

rather than as many times as vehicles 

included in that model are to be 

produced. MAD involves weighting 

deviations from predicted values based 

on their absolute rather than squared 

magnitude. As discussed below, NHTSA 

has tentatively concluded that, 

compared to sales-weighted leastsquares analysis, unweighted MAD is 

better suited to data with wide 

disparities in weight (i.e., sales volumes) 

and with many outliers. 

In establishing footprint-based CAFE 

standards, the agency does not have the 

sole objective of seeking to reflect a 

clear engineering relationship between 

footprint and fuel economy. Attributes 

other than footprint would be more 

closely correlated with fuel economy. 

The agency’s objective is to make CAFE 

regulations more consistent with public 

policy goals, in particular (1) a 

rebalancing of requirements such that 

full-line manufacturers are not 

disproportionately burdened and (2) the 

establishment of an incentive that 

discourages manufacturers from 

responding to CAFE standards in ways 

that could compromise occupant 

protection and highway safety. While it 

is helpful that the attribute—in this case 

footprint—has an observed relationship 

to fuel economy, it is not necessary that 

this relationship be isolated from 

accompanying relationships (e.g., 

between weight and fuel economy) that 

can be better related to estimable 

physical processes. Similarly, it is more 

important that the functional form for 

the attribute-based standard yield 

desirable outcomes than that it singly 

seek a clear foundation in estimable 

physical processes. 

In general, public policy 

considerations and available vehicle 

data combine to suggest that the fuel 

economy standard should be generally 

downward sloping (on a fuel economy 

basis) with respect to NHTSA’s chosen 

attribute, vehicle footprint. The 

arguments that favor an attribute-based 

system (maintaining consumer choice, 

protecting safety, more equitable 

distribution of costs, reducing the cost 

of regulation) all argue for a downward 

sloping curve. Larger vehicles should, in 

principle, have higher drag, weigh more, 

and therefore have greater inertia than 

otherwise identical smaller vehicles. 

Hence, all other factors remaining equal, 

larger vehicles should have lower fuel 

economy than smaller vehicles. 

Therefore, the selection of vehicle 

footprint as the reference attribute 

should produce downward sloping 

curves. Also, the tendency of larger 

vehicles to have lower fuel economy 

than smaller vehicles should provide 

some disincentive to shift to larger 

vehicles rather than adding technology; 

although doing so would tend to reduce 

the required CAFE level, it would also 

tend to reduce the achieved CAFE level. 

However, vehicle data, by itself, does 

not necessarily define what functional 

form that the curve ought to take. In the 

2006 light truck rulemaking, NHTSA 

considered linear, quadratic, 

exponential, unconstrained logistic, and 

constrained logistic functions as 

possible alternatives. For light trucks, 

the various approaches produced 

broadly similar standards through the 

most commonly used vehicle sizes, but 

drastically different standards at the 

high and low ends of the range. 

• Linear functions produced very 

high fuel economy standards for the 


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159That is, the midpoint. 

160For the purpose of the Reformed CAFE 

standard, we are carrying e out to only three 

decimal places. 

smallest vehicles, and low standards for 

the largest vehicles. 

• The quadratic function generated a 

minimum at about 75 square feet, and 

then perversely turned upward for 

vehicles with larger footprints. The 

standard for very small vehicles was 

unreasonably high. 

• The exponential and unconstrained 

logistic functions produced 

unreasonably high standards for small 

vehicles, but flattened out for larger 

vehicles. 

• The constrained logistic function 

provided a broadly linear downwardsloping through the most commonly 

used vehicle sizes, along with basically 

flat standards for very large and very 

small vehicles. 

On this basis, NHTSA believed that, 

while the data did not dictate a 

particular functional form, public policy 

considerations made the constrained 

logistic function particularly attractive. 

The considerations include: 

• A relatively flat standard for larger 

vehicles acts as a de facto ‘backstop’ for 

the standard in the event that future 

market conditions encourage 

manufacturers to build very large 

vehicles. Nothing prevents 

manufacturers from building larger 

vehicles. With a logistic curve, however, 

vehicles upsizing beyond some limit 

face a flat standard that is increasingly 

difficult to meet. 

• A constrained logistic curve doesn’t 

impose unachievable fuel economy 

standards on vehicles that have 

unusually small footprints, thus 

continuing to keep manufacturing fuelefficient small vehicles available as a 

compliance option. 

• A curve fitted without upper and 

lower constraints could reach very high 

fuel economy levels for small vehicles 

and very low fuel economy vehicles for 

large vehicles. While such a curve might 

produce similar required CAFE levels 

for the industry as a whole, it could 

have a particular adverse impact on 

manufacturers that specialize in very 

small vehicles, for example, two-seater 

sports cars. By the same token, it could 

require little or nothing of 

manufacturers specializing in very large 

vehicles. 

• The transition from the ‘flat’

portions of the curve to the ‘slope’

portions of the curve is smooth and 

gradual, reducing the incentive for 

manufacturers to achieve compliance 

through marginal changes in vehicle 

size. 

• The inflection points are set by the 

data and can potentially vary from year 

to year, rather than being chosen by 

NHTSA. 

On the other hand, a constrained 

logistic curve shares with other 

functional forms a risk of an excessively 

steep or excessively flat slope. The slope 

of the compliance curve may be 

considered as ‘too steep’ for public 

policy purposes when manufacturers 

can achieve appreciable reductions in 

compliance costs by marginally 

increasing the size of a vehicle’s 

footprint—e.g., the cost of compliance 

from upsizing is lower than other costeffective compliance methods open to 

manufacturers. 

A slope is ‘too flat’ for public policy 

purposes when it negates the advantages 

of an attribute-based system: Where the 

standard doesn’t meaningfully vary with 

respect to changes in the underlying 

attribute, it cannot be said to be an 

attribute-based system within the 

meaning of the statute. 

NHTSA chose footprint as the best 

attribute for an attribute-based standard 

in part because we believed changing a 

vehicle’s footprint would involve 

significant costs for manufacturers, 

probably requiring a redesign of the 

vehicle. 

While ‘‘too steep’’ or ‘‘too flat’’

inevitably cannot be defined with 

precision, they need to be kept in mind. 

For the proposed standards, the 

agency defined the continuous function 

using the following formula: 

T

a ba

e

e

xc d

xc d

=

+ − 



 



 +

( ) −

( ) −

1

1 11

1

/

/

Where: 

T = the fuel economy target (in mpg) 

a = the maximum fuel economy target (in 

mpg) 

b = the minimum fuel economy target (in 

mpg) 

c = the footprint value (in square feet) at 

which the fuel economy target is midway 

between a and b 159

d = the parameter (in square feet) defining 

the rate at which the value of targets 

decline from the largest to smallest 

values 

e = 2.718160

x = footprint (in square feet, rounded to the 

nearest tenth) of the vehicle model 

NHTSA invites comment regarding 

the relative importance of the curve as 

a means of (1) providing a basis for 

describing the observed relationship 

between footprint and fuel economy, (2) 

providing a basis for describing a 

theoretical physical relationship 

(assuming one can be defined) between 

footprint and fuel economy, and (3) 

providing socially desirable incentives 

to manufacturers. The agency further 

invites comment on functional forms 

that would be consistent with each of 

these purposes. 

As for analysis of the light truck rule 

promulgated in 2006, NHTSA 

constrained this function by 

determining the maximum and 

minimum targets (a and b) and then 

holding those targets constant while 

using statistical techniques to fit the 

other two coefficients (c and d) in this 

equation. 

In the current analysis for passenger 

cars, the upper and lower asymptotes 

are based on the smallest three percent 

and largest four percent, respectively, of 

the fleet. These reflect footprint values 

defining distinct cohorts outside the 

bulk of the fleet, and correspond to 

footprint values of less than 39.5 square 

feet (i.e., up to the approximate size of 

a Honda Fit) and greater than 52.5 

square feet (i.e., at least as great as the 

approximate size of a Toyota Avalon), 

respectively: 


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For light trucks, the upper asymptote 

(i.e., the highest mpg value of the 

continuous function defining fuel 

economy targets) is based on the 

smallest (in terms of footprint) eleven 

percent of the fleet, and the lower 

asymptote is based on the largest six 

percent of the fleet. These cohorts 

correspond to footprint values of less 

than 44.5 square feet (i.e., up to the 

approximate size of a Honda CR–V) and 

greater than 72.5 square feet (i.e., 

comprised primarily of extended vans 

and long-bed pickup trucks), 

respectively: 


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NHTSA invites comment on the 

identification of vehicle cohorts for 

purposes of establishing upper and 

lower limits (asymptotes) bounding the 

attribute-based standard. After updating 

its baseline market forecast in 

consideration of new product plan 

information from manufacturers, the 

agency plans to reevaluate these cohorts 

for both passenger cars and light trucks 

before promulgating a final rule, and 

notes that changes in approach could 

lead to changes in stringency. 

Given the above asymptotes, fitting 

the above functional form to the 

‘‘optimized’’ passenger car fleet resulted 

in the following initial continuous 

functions: 


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For each model year, NHTSA then 

raised or lowered the resultant 

continuous function until net benefits 

were maximized for the seven largest 

manufacturers (in total). Without 

subsequent recalibrations discussed 

below, this produced the following 

continuous functions for passenger cars: 


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The agency followed the same 

procedures for setting light truck 

standards and doing so resulted in the 

following continuous functions: 


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161 In the case of a dataset not drawn from a 

sample with a Gaussian, or normal, distribution, 

there is often a need to employ robust estimation 

methods rather than rely on least-squares approach 

to curve fitting. The least-squares approach has, as 

an underlying assumption, that the data are drawn 

from a normal distribution, and hence fits a curve 

using a sum-of-squares method to minimize errors. 

This approach will, in a sample drawn from a nonnormal distribution, give excessive weight to 

outliers by making their presence felt in proportion 

to the square of their distance from the fitted curve, 

and, hence, distort the resulting fit. With outliers in 

the sample, the typical solution is to use a robust 

method such as a minimum absolute deviation, 

rather than a squared term, to estimate the fit (see, 

e.g., ‘‘AI Access: Your Access to Data Modeling,’’

at http://www.aiaccess.net/English/Glossaries/ 

GlosMod/e_gm_O_Pa.htm#Outlier). The effect on 

the estimation is to let the presence of each 

observation be felt more uniformly, resulting in a 

curve more representative of the data (see, e.g., 

Peter Kennedy, A Guide to Econometrics, 3rd 

edition, 1992, MIT Press, Cambridge, MA). 

In fitting the continuous function, 

NHTSA considered a range of statistical 

estimation techniques. In the 2006 light 

truck rulemaking, NHTSA estimated the 

parameters of the logistic function using 

fuel consumption (measured in gallons 

per mile) for each vehicle produced in 

a particular model year, weighted by 

sales. 

For this rulemaking, we observed that 

estimated fuel consumption functions 

for passenger cars were significantly 

affected by several outliers—a small 

number of popular vehicles that had 

significantly higher fuel economy than 

the fleet as a whole and, even more so, 

than vehicles of similar footprint. For 

passenger cars, the function, as 

estimated by weighted ordinary least 

squares, was exceptionally steep within 

the range considered. This observation, 

in turn, led NHTSA to consider 

alternative approaches to statistically 

fitting the continuous function. 

Among the options considered by 

NHTSA were the following: dropping 

the outlying vehicles from the 

estimation process, weighted and 

unweighted ordinary least squares, and 

weighted and unweighted mean 

absolute deviation (MAD). MAD is a 

statistical procedure that has been 

demonstrated to produce more efficient 

parameter estimates in the presence of 

significant outliers.161 As examples, the 

following two charts show the MY2015 

passenger car and light truck fleets after 

the application of technologies to each 

manufacturer’s fleet. These charts reveal 

numerous outliers for the passenger car 

fleet and, to a lesser extent, the light 

truck fleet: 


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NHTSA requests comment on the best 

method for statistically fitting the 

continuous function. 

There are good theoretical arguments 

for using an unweighted (rather than 

weighted) analysis. Although the 

purpose of the attribute-based standard 

is to discourage downsizing (because of 

safety implications) and more equitably 

distribute compliance burdens among 

manufacturers, we strive to develop the 

curves based on the observed physical 

relationship between vehicle size (i.e., 

footprint) and fuel economy. The curve 

developed using unweighted sales data 

better reflects this relationship. 

However, the process by which we 

select the stringency (as distinct from 

the form) of the standard must consider 

sales volumes because the standards are 

based on sales-weighted average 

performance. Therefore, even if we use 

unweighted analysis develop the form 

of the standard, we would continue to 

evaluate the standard’s stringency (and, 

therefore, its costs and benefits) based 

on sales-weighted average calculations 

done on a manufacturer-bymanufacturer basis. 

There is already precedent for using 

unweighted data to produce curves that 

are descriptive of engineering 

relationships. In NHTSA’s Preliminary 

Regulatory Impact Analysis for FMVSS 

216 roof crush standards, a series of 

force-versus-deflection curves were 

produced for individual vehicle models 

and then averaged together. In that case, 

the agency was seeking observed 

relationships that reflect engineering 

possibilities, rather than a profile of the 

existing sales fleet. 

In terms of relative emphasis on 

different vehicle models, the distinction 

between unweighted and weighted 

analysis is profound in the light vehicle 

market, in part because of the way 

‘‘models’’ are defined for purposes of 

CAFE. The highest-selling passenger car 

model represents 356,000 units, and the 

lowest-selling model represents only 5 

units. As a group, the five lowest-selling 

models represent only 305 units. Thus, 

weighted analysis places more than 

1,000 times the emphasis on the 

highest-selling model than on the five 

lowest-selling models, and more than 

70,000 times the emphasis than on the 

single lowest-selling model. The 

following histograms show the broader 

distributions of models and sales with 

respect to model-level sales (first for 

passenger cars, then for light trucks): 


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For purposes of setting the stringency 

of the corporate average fuel economy 

standard, this is vital because 

enforcement is based on the salesweighted average. However, for 

purposes of developing a curve 

intended to represent fuel economy 

levels achieved at a given footprint, 

weighted analysis effectively ignores 

many models. 

On the other hand, unweighted 

estimation is depending on the 

definition of a ‘‘model’’. Manufacturers 

will sometimes offer substantially 

similar vehicles with different badges 

(i.e., Ford Taurus/Mercury Sable) as two 

different models. The distinction 

between differing ‘‘options packages’’

on a single model and two distinct 

models is inevitably a bit blurry. When 

estimating fuel economy standards 

using a sales-weighted regression, this 

distinction is not material, since the 

estimation process will produce 

substantially the same results 

independently of the number of 

distribution of those sales into larger or 

smaller numbers of models. In 

unweighted estimation, however, 

dividing a particular vehicle family into 

a larger number of distinct models give 

that family some extra influence in the 

analysis. Nonetheless, considering that 

such parsing less than does sales 

weighting. NHTSA has tentatively 

concluded that unweighted estimation 

remains preferable to sales-weighted 

estimation, but invites comment on 

whether and, if so how substantially 

similar vehicles should be combined for 

purposes of fitting an attribute-based 

function when using unweighted 

estimation. 

The following charts show, for 

MY2015 passenger cars and light trucks, 

how the use of sales-weighted leastsquares estimation compares to the 

proposed approach, which uses 

unweighted mean absolute deviation. 

For passenger cars, the curve resulting 

from proposed approach is somewhat 

shallower than the curve resulting from 

sales-weighted least squares estimation. 

For light trucks, the curve resulting from 

proposed approach is somewhat steeper: 

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NHTSA invites comment on the 

relative merits of unweighted and 

weighted estimation, as well as on the 

other curve fitting options (e.g., the use 

of mean absolute deviation) raised here. 

The agency plans to reevaluate curve 

fitting approaches for both passenger 

cars and light trucks before 

promulgating a final rule, and notes that 

changes in approach could lead to 

changes in stringency and impacts on 

different manufacturers. 


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3. Adjustments To Address Policy 

Considerations 

NHTSA believes that the resultant 

curve characteristics discussed above 

are empirically correct in that they 

correspond to the footprint and fuel 

economy values of the fleet obtained by 

adding fuel saving technologies to each 

manufacturer’s fleet until the net benefit 

from doing so reached its maximum 

value. 

However, there are three issues 

(described above) which may tend to 

reduce the effectiveness of fuel economy 

regulation over time. These concerns 

are: 

• Curve crossings; 

• Excessive steepness of the 

passenger car curve; 

• Risk of upsizing. 

In this rule, NHTSA proposes a 

solution to the curve crossing issue, 

requests comment on various methods 

of reducing the steepness of the 

passenger car, and examines the 

potential for upsizing generally under 

the provisions of this proposed rule. 

a. Curve Crossings 

For both passenger cars and light 

trucks, NHTSA observed some curve 

crossings from one model year to the 

next (i.e., for the same footprint, some 

targets fell below the levels attained in 

the previous model year), as revealed in 

the above charts. The upper limit of the 

MY 2012 passenger car curve falls 

slightly (about 0.1 mpg) below the MY 

2011 value. For light trucks, the lower 

asymptote in MY 2012 is 0.9 mpg below 

the lower asymptote in MY 2011. This 

was not observed during the last round 

of light truck rulemaking because 

reformed CAFE was fully implemented 

only in MY 2011. During the transition 

period (MYs 2008–2010), the standards 

were set at levels equivalent in cost to 

unreformed CAFE. However, for this 

rulemaking, because the projected fleet 

composition changes between model 

years and the fuel economy target 

function is optimized in every model 

year, the initial continuous functions do 

not change monotonically (i.e., in only 

one direction—increasing) from year to 


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year at every footprint value. Given the 

availability of lead time and the 

importance of improving fuel economy, 

NHTSA has decided that, in the setting 

of the standards, we should ensure that 

the fuel economy targets do not fall from 

one year to the next at any footprint 

value. 

To address the year-to-year 

fluctuations in the functions, which 

may lead to these curve crossings, 

NHTSA recalibrated each continuous 

function to prevent it from crossing the 

continuous function from any previous 

model year. In doing so, the agency 

attempted to avoid continuous functions 

that would artificially encourage the 

product mix to approximate that of 

earlier years. Instead, the agency 

recalibrated by gradually shifting the 

initial continuous functions for each 

model year toward the initial 

continuous function determined above 

for the product mix for MY 2015. For 

both passenger cars and light trucks, the 

agency adjusted each of the four 

coefficients in the formula determining 

the continuous function such that 

regular steps were taken year by year 

between the values determined above 

for MY 2011 and those for MY 2015. For 

example, the inflection point (the 

coefficient determining the footprint at 

which the target falls halfway between 

its minimum and maximum values) 

defining the light truck target function 

was increased by 0.034 square feet 

annually from 51.9 square feet in MY 

2011 to 52.1 square feet in MY 2015. 

NHTSA also recalibrated the 

continuous function for each model year 

by adding, as needed, anti-backsliding 

constraints that prevent the function 

from either (a) yielding an industry 

wide average level of CAFE lower than 

that for the preceding model year, (b) for 

a given footprint, having targets that fall 

below the level of previous year, and (c) 

having an asymptote lower than that of 

the preceding model year. The 

‘‘decision tree’’ for determining for each 

model year the need for each of these 

constraints is summarized below in 

Figure V 16. 


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The industry-wide average CAFE is 

prevented from decreasing between 

model years in order to prevent 

standards from falling below the level 

that was determined to be achievable for 

the model year before. To allow the 

industry-wide CAFE level to fall 

between successive model years would 

be to promulgate a standard that, 

notwithstanding maximizing net 

benefits, falls below what the agency 

has determined to be feasible in 

previous years. In a model year in 

which simple maximization of net 

benefits would have caused this to 

occur, NHTSA shifted the resultant 

curve upward (without changing the 

curve’s shape) in order to produce an 

industry-wide CAFE equal to that of the 

preceding model year. 

Application of the decision tree 

shown above results in the following 

target functions for passenger cars and 

light trucks, respectively. These target 

functions are identical to those shown 

below in Section VI, which discusses 

the standards proposed today by 

NHTSA: 

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b. Steep Curves for Pasenger Cars 

NHTSA has developed a set of 

attribute-based curves for passenger cars 

for this proposal consistent with the 

methodology used in the 2008–2011 

light duty truck rule. However, unlike 

the relatively gradually sloped curve 

related fuel economy to footprint for 

trucks, our analysis for cars when 

utilizing a constained logistic curve 

produces a comparatively steep ‘‘S’’- 

shaped curve for passenger cars. This 

occurs primarily because—unlike 

trucks—current passenger car sales 

include vehicles with a wide range of 

fuel economy spanning a relatively 

narrow footprint range. Consequently, 

there is a relatively steep curve applied 

to the middle range of footprint values 

with a more rapid change of slope in the 

tails to flatten curve and thus satisfy the 

constrained logistic functional form. 

In this rule, NHTSA is proposing a 

relatively ‘‘steep’’ curve. The agency has 

considered and experimented with 

several methods of reducing the 

steepness of the passenger car curve. 

However, each of these approaches has 

created challenges that may potentially 

be worse than the problem they are 

trying to cure. The Agency is 

questioning whether the steep slope 

portion of the curve could potentially 

motivate vehicle manufacturers to 

reduce their compliance obligation 

under the standard by slightly 

increasing its footprint when they 

redesign their vehicles. We do not know 

the extent to which this is a real 

problem, but the agency has considered 

this possibility and has worked to 

minimize steepness of the slope while 

maintaining the scientific integrity 

behind our methodology. 

However, any attempt to ‘‘fix’’ the 

steepness of the passenger car curve 

appears to come at a price: First, 

flattening the curve by any particular 

method will move the curve away from 

the actual vehicle data. Second, flatter 

curves are generally place greater 

compliance burdens on full-line 

manufacturers than comparatively 

stringent (in terms of average require 

CAFE) standards. Furthermore, NHTSA 

believes that this could increase the 

overall costs required to achieve a given 

amount of fuel savings and societal 


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benefits, and it increases the risk that 

NHTSA would need to return to a ‘‘least 

capable manufacturer’’ approach in 

order to ensure economic practicability. 

Doing so would likely reduce 

stringency, and reduce fuel savings. In 

deciding on a particular approach, 

NHTSA must balance the certainty of 

high costs and lost fuel savings through 

a less ‘‘efficient’’ standard against the 

risk that the steepness of the curve 

might stimulate manufacturers to evade 

the standard over time by redesigning 

their vehicles over time. 

In proposing the steep curve for this 

rule, NHTSA has tentatively decided 

that the cures that we have identified 

come at too high a price, i.e., lost 

stringency or undesirable side effects. 

However, NHTSA requests comment on 

these and other potential solutions to 

reduce the steepness of the proposed car 

curves for passenger cars. 

Some of the approaches considered or 

tested by NHTSA include: 

Linear standards. When the fuel 

consumption of vehicles with added 

technologies is plotted against footprint, 

we note a roughly linear relationship 

over the existing range of footprint 

values. Hence, a simple alternative to 

the current constrained logistic function 

would be to estimate a linear form of the 

curve with the sales data. However, 

NHTSA is concerned that such an 

approach may result in very low fuel 

economy standards for the largest 

footprint vehicles, very high fuel 

economy standards for the smallest 

vehicles, and loss of the inherent 

backstop properties of the constrained 

logistic function. 

In addition, the slope of a line 

estimated through a ‘‘cloud’’ of data 

may be very sensitive to the exact 

characteristics of vehicles with the 

largest and smallest footprints. It may 

turn out that small changes in vehicle 

characteristics in the tails could shift 

the slope of a linear estimate. Further, 

it may be impossible to materially adjust 

the slope of a linear standard in future 

years without accepting curve crossing. 

The following two charts compare linear 

regression results for MY2015 to the 

curves proposed today by NHTSA. The 

result for passenger cars illustrates the 

concern regarding behavior at large and 

small footprints. Over the range of 

footprints in which light trucks are 

expected to be offered in MY2015, the 

result for light trucks shows less 

difference from the proposed curve. 


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Constrained linear standards. 

Another possible approach would be to 

retain the flattened tails proposed today 

but reduce the steepness of the middle 

portion by allowing it to directly reflect 

a linear relationship. This approach 

could be likened to a simplification or 

linearization of the constrained logistic 

function. The same minima and maxima 

would be used to bound the vertical 

extent of the linear form. The following 

two charts suggest that, at least for the 

MY2015 passenger car and light truck 

fleets considered today, a constrained 

linear standard would, compared to the 

standard proposed today, likely result in 

a similar distribution of compliance 

burdens among manufacturers (because 

the stringency at each footprint would 

be similar): 

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BILLING CODE 4910–59–C 

However, the agency remains 

concerned that the slope could exhibit 

greater year-to-year variation than the 

proposed logistic form (although further 

analysis would be required in order to 

address this concern). Also, as 

discussed in the preamble to the 2006 

Federal Register notice regarding light 

truck CAFE standards, the agency 

remains concerned that the upper and 

lower ‘‘kinks’’ in the function could 

offer unexpected incentives for 

manufacturers to redesign vehicles with 

footprints close to the kink-point. 

Dual Attribute Approaches. A third 

possible solution would be to use 

additional attribute-based information 

to spread out the distribution of 

passenger cars across the x-axis. In 

effect, this approach uses a second 

attribute to normalize the footprint-fuel 

economy relationship. This second 

attribute might be horsepower, weight, 

or horsepower-to-weight. 

In analyzing the expected passenger 

car market, NHTSA observes that the 

ratio of engine horsepower to vehicle 

weight generally increases with 

increasing footprint. Higher power-toweight ratios tend to imply lower fuel 

economy, as the engine is typically 

larger and operating less efficiently 

under driving conditions applicable to 

certification. Thus, the fuel 

consumption versus footprint curves for 

passenger cars reflect this relationship. 

For trucks, there does not appear to be 

a relationship between footprint and the 

power-to-weight ratio. For passenger 

cars, then, adjusting fuel consumption 

values to normalize for differences in 

power-to-weight ratio may produce a 

flatter curve providing less of an 

upsizing incentive for middle footprint 

values. 

NHTSA has experimented with 

normalizing footprint by horsepower-toweight ratio. The result was a nearly flat 

standard with respect to footprint across 

the most popular size ranges. This did 

not appear to deliver the benefits of an 

attribute-based system. In addition, it 

involves significant downward 

adjustments to the fuel economy of 

hybrid electric vehicles (such as the 

Toyota Prius), for which the engine is 

not the sole source of motive power. 

Also, it involves significant upward 

adjustments to the fuel economy of 


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vehicles with high power-to-weight 

ratios (such as the Chevrolet Corvette). 

Some of these upward and downward 

adjustments are large enough to suggest 

radical changes in the nature of the 

original vehicles. Furthermore, insofar 

as such normalization implies that 

NHTSA should adopt a two-attributed 

standard (e.g., in which the target 

depends on footprint and power-toweight ratio), it may be challenging and 

time consuming to come up with a 

sufficiently precise vehicle-by-vehicle 

definition of horsepower or horsepowerto-weight to be used for regulatory 

purposes. 

Shape Based on Combined Fleet. A 

fourth possible solution would be to 

combine the passenger car and light 

truck fleet to determine the shape of the 

constrained logistic curve, and then 

determine the stringency (i.e., height) of 

that curve separately for each fleet. On 

one hand, this approach would base the 

curve’s shape on the widest available 

range of information. On the other, the 

resultant initial shape for each fleet 

would be based on vehicles from the 

other fleet. For example, the initial 

shape applied to passenger cars would 

be based, in part, on large SUVs and 

pickup trucks, and the initial shape 

applied to light trucks would be based, 

in part, on subcompact cars. Stringency 

would still be determined separately for 

passenger cars and light trucks. NHTSA 

invites comments on the consistency of 

this approach with the requirement in 

EPCA to establish separate standards for 

passenger cars and light trucks. 

NHTSA performed a preliminary 

analysis of this approach. Considering 

the very wide range of fuel consumption 

levels in the combined fleet, NHTSA 

developed the asymptotes based on the 

average fuel consumption of all 

passenger cars and light trucks, 

respectively, rather than on the smallest 

passenger cars and the largest light 

trucks. The resultant MY2015 curve, 

shown below, is similar in curvature to 

the proposed curve for passenger cars 


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and notably steeper than the proposed 

curve for light trucks. 

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Ignoring Outliers. A fifth possible 

solution would be to ignore outliers 

(data points that are unique and skew 

the curve). Lacking an objective means 

of classifying specific vehicle models as 

outliers that should be excluded from 

the analysis, NHTSA explored the 

possibility of excluding all hybrid 

electric vehicles (HEVs). The Japanese 

government also excluded HEVs for 

purposes of developing Japan’s light 

vehicle efficiency standards. However, 

doing so yields initial curves of shapes 

similar to those proposed, but displaced 

slightly in the direction of lower fuel 

consumption. The similarity of the 

shapes of these curves suggests that 

optimization against the full fleet (with 

HEVs) would produce standards whose 

stringency is similar to that of those 

proposed today. 

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NHTSA invites comments on the 

importance of addressing the relative 

steepness of the proposed curves for 

passenger cars, and on the feasibility of, 

technical basis for, and implications of 

any options for doing so. The agency 

plans to reevaluate standards for both 

passenger cars and light trucks before 

promulgating a final rule, and notes that 

changes in approach—including 

measures to address the steepness of the 

passenger car curves—could lead to 

changes in stringency as well as 

different impacts on different 

manufacturers. 

c. Risk of Upsizing 

The steepness of the proposed curve 

for passenger cars presents a localized 

risk that manufacturers will respond in 

ways that compromise expected fuel 

savings. That is, although the 

constrained logistic curve has a steep 

region, that region does not cover a wide 

range of footprints. However, any 

attribute-based system involves the 

broader risk that manufacturers will 

shift toward vehicles with the lowest 

fuel economy targets to the extent that 

upsizing can be accomplished 

sufficiently cheaply and without so 

much weight increase as to nullify the 

effect of a lower target. As mentioned 

above, the constrained logistic curve 

proposed by NHTSA provides an 

absolute floor. That is, even if 

manufacturers discontinue all but the 

very largest known passenger cars and 

light trucks, they would still be required 

to meet CAFE standards no lower than 

the lower asymptote (on an mpg basis) 

of the constrained logistic curve. Also, 

for domestic passenger cars, EISA 

establishes a floor or ‘‘backstop’’ equal 

to 92 percent of the average required 

CAFE level for passenger cars. This 

backstop is discussed below in Section 

VI. 

It is difficult to assess the risk that 

manufacturers may shift the mix of 

vehicles enough to approach the EISA 

floor for domestic passenger cars, or to 

approach the lower asymptotes for light 

trucks or imported passenger cars. 

However, considering the footprint 

distribution of vehicles (as indicated by 

the various histograms and scatter plots 

shown above in this section) expected to 

be covered by the proposed rule, 


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NHTSA anticipates that manufacturers 

would not be able to approach these 

reductions in stringency without 

dramatically altering product mix. The 

agency doubts that manufacturers could 

do so unless consumer preferences for 

larger vehicles also shift dramatically. 

NHTSA also notes that under 

attribute-based CAFE standards such as 

the agency is proposing today, shifts in 

consumer preferences could cause 

manufacturers’ required CAFE levels 

and, therefore, achieved fuel savings 

(and perhaps costs) to increase. For 

example, if changes in fuel prices 

combine with demographic and/or other 

factors to cause market preferences to 

shift significantly toward vehicles with 

smaller footprints, manufacturers 

shifting (relative to current estimates) in 

that direction will face higher required 

CAFE levels than the agency has 

estimated. 

VI. Proposed Fuel Economy Standards 

A. Standards for Passenger Cars and 

Light Trucks 

For both passenger cars and light 

trucks, the agency is proposing CAFE 

standards estimated, as for the 

previously-promulgated reformed MY 

2008–2011 light truck standards, to 

maximize net benefits to society. 

However, as discussed in Section V, the 

agency considered and analyzed 

modified approaches to calibrating the 

continuous function and fitting the data 

in order to address characteristics of the 

data (vehicles with outlying fuel 

economy, footprint, and or sales), and to 

address the issues of backsliding, 

steepness of the curve, and curve 

crossings from one model year to the 

next. While the agency is proposing the 

curves below, we continue to be 

concerned about the steepness of the 

passenger car curve and about gaming 

potential and are seeking comments on 

different approaches to address the 

steepness, as discussed in Section V. 

The proposed curves below and their 

respective shapes are calibrated using 

unweighted mean absolute deviation 

(MAD) regression and determined 

through a gradual transformation of 

curves to guard against erratic 

fluctuations and through a series of antibacksliding measures that prevents the 

average required CAFE level from 

falling between model years and 

prevents the continuous function for a 

given model from crossing or falling 

below that of the preceding model year. 

These refinements are discussed in 

greater detail in Section V of the notice. 

1. Proposed Passenger Car Standards 

MY 2011–2015 

We have tentatively determined that 

the proposed standards for MY 2011–

2015 passenger cars would result in 

required fuel economy levels that are 

technologically feasible, economically 

practicable, and set by taking into 

account both the effect of other motor 

vehicle standards of the Government on 

fuel economy and the need of the 

United States to conserve energy. Values 

for the parameters defining the target 

functions defining these proposed 

standards for cars are as follows: 

Parameter 

Model year 

2011 2012 2013 2014 2015 

a ............................................................................................................... 38.2 40.0 40.8 41.2 41.7 

b ............................................................................................................... 25.9 27.4 28.7 29.9 31.2 

c ............................................................................................................... 45.9 45.8 45.7 45.6 45.5 

d ............................................................................................................... 1.6 1.5 1.5 1.4 1.4 

Where, per the adjusted continuous function 

formula above in Section V: 

a = the maximum fuel economy target (in 

mpg) 

b = the minimum fuel economy target (in 

mpg) 

c = the footprint value (in square feet) at 

which the fuel economy target is midway 

between a and b 

d = the parameter (in square feet) defining 

the rate at which the value of targets 

decline from the largest to smallest 

values 

The resultant target functions have 

the following shapes: 

Based on the product plan 

information provided by manufacturers 

in response to the February 2007 request 

for information and the incorporation of 

publicly available supplemental data 

and information, NHTSA has estimated 

the required average fuel economy 

levels under the proposed adjusted 

standards for MYs 2011–2015 as 

follows: 


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TABLE VI–1.—REQUIRED CAFE LEVELS (MPG) FOR PASSENGER CARS

Manufacturer MY 2011 MY 2012 MY 2013 MY 2014 MY 2015 

BMW ........................................................................................................ 33.3 35.0 36.0 36.8 37.7 

Chrysler .................................................................................................... 28.7 29.3 32.2 32.6 33.6 

Ferrari ...................................................................................................... 30.4 32.0 33.1 33.9 34.9 

Ford .......................................................................................................... 31.0 32.7 33.7 34.5 35.5 

Fuji (Subaru) ............................................................................................ 36.9 38.7 39.6 40.1 40.8 

General Motors ........................................................................................ 30.0 31.7 32.8 33.7 34.7 

Honda ...................................................................................................... 32.1 33.8 34.8 35.5 36.4 

Hyundai .................................................................................................... 33.4 35.1 36.0 36.7 37.5 

Lotus ........................................................................................................ 38.1 40.0 40.8 41.2 41.7 

Maserati ................................................................................................... 28.9 30.6 31.8 32.8 34.0 

Mercedes ................................................................................................. 31.7 33.3 34.4 35.3 36.2 

Mitsubishi ................................................................................................. 33.0 35.1 35.9 37.0 37.9 

Nissan ...................................................................................................... 31.2 33.2 34.2 35.0 35.9 

Porsche .................................................................................................... 37.6 39.4 40.3 40.7 41.3 

Suzuki ...................................................................................................... 37.3 39.2 40.1 40.6 41.2 

Toyota ...................................................................................................... 30.1 31.5 32.7 33.6 34.6 

Volkswagen .............................................................................................. 35.4 37.2 38.2 38.8 39.5 

Total/Average ................................................................................... 31.2 32.8 34.0 34.8 35.7 


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Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 24445 

2. Proposed Standards for Light Trucks 

MY 2011–2015 

NHTSA is proposing light truck fuel 

economy standards for MYs 2011 

through 2015. In taking a fresh look at 

what truck standard should be 

established for MY 2011, as required by 

EISA, NHTSA used the newer set of 

assumptions that it had developed for 

the purpose of this rulemaking. These 

assumptions differ from those used by 

the agency in setting the MY 2008–2011 

light truck standards in early 2006, and 

result in an increase in the projected 

overall average fuel economy for MY 

2011. The agency used the most up-todate EIA projections for available 

gasoline prices. These projections are, 

on average, at approximately $0.25 per 

gallon higher than the projections used 

in the last light truck rulemaking. Other 

differences in assumptions include 

more current product plan information 

(i.e., spring 2007 product plans 

reflecting persistently higher fuel prices, 

instead of the fall 2005 plans used in the 

2006 final rule), an updated technology 

list and updated costs estimates and 

penetration rates for technologies, and 

updated values for externalities such as 

energy security and placing a value of 

carbon dioxide emission reductions. 

NHTSA is proposing ‘‘optimized’’

standards for MY 2011–2015 light 

trucks, the process for establishing 

which is described at length above, but 

which may be briefly described as 

maximizing net social benefits plus antibacksliding measures. We have 

tentatively determined that the 

proposed light truck standards for MYs 

2011–2015 represent the maximum 

feasible fuel economy level for that 

approach. In reaching this tentative 

conclusion, we have balanced the 

express statutory factors and other 

relevant considerations, such as safety 

and effects on employment, and we will 

also consider our NEPA analysis in the 

agency’s final action. 

The proposed standards are 

determined by a continuous function 

specifying fuel economy targets 

applicable at different vehicle footprint 

sizes, the equation for which is given 

above in Section V Values for the 

parameters defining the target functions 

defining these proposed standards for 

light trucks are as follows: 

Parameter 

Model year 

2011 2012 2013 2014 2015 

A ............................................................................................................... 30.9 32.7 34.1 34.1 34.3 

B ............................................................................................................... 21.5 22.8 23.8 24.3 24.8 

C .............................................................................................................. 51.9 52.0 52.0 52.1 52.1 

D .............................................................................................................. 3.8 3.8 3.8 3.9 3.9 

Where: 

a = the maximum fuel economy target (in 

mpg) 

b = the minimum fuel economy target (in 

mpg) 

c = the footprint value (in square feet) at 

which the fuel economy target is midway 

between a and b 

d = the parameter (in square feet) defining 

the rate at which the value of targets 

decline from the largest to smallest 

values 

The resultant target functions have 

the following shapes: 


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24446 Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 

Based on the product plans provided 

by manufacturers in response to the 

February 2007 request for information 

and the incorporation of publicly 

available supplemental data and 

information, the agency has estimated 

the required average fuel economy 

levels under the proposed optimized 

standards for MYs 2011–2015 as 

follows: 

TABLE VI–2.—REQUIRED CAFE LEVELS (MPG) FOR LIGHT TRUCKS

Manufacturer MY 2011 MY 2012 MY 2013 MY 2014 MY 2015 

BMW ........................................................................................................ 28.2 29.9 31.2 31.4 31.7 

Chrysler .................................................................................................... 25.2 26.6 28.0 28.5 29.1 

Ford .......................................................................................................... 24.7 26.1 28.0 28.3 28.8 

Fuji (Subaru) ............................................................................................ 30.0 31.7 33.1 33.2 33.4 

General Motors ........................................................................................ 23.9 25.4 26.5 27.0 27.4 

Honda ...................................................................................................... 26.1 27.7 28.9 29.2 29.6 

Hyundai .................................................................................................... 27.5 29.1 30.4 30.6 31.0 

Mercedes ................................................................................................. 28.4 30.1 31.4 31.6 31.9 

Mitsubishi ................................................................................................. 29.4 30.8 32.2 32.3 32.6 

Nissan ...................................................................................................... 24.9 26.2 27.3 27.7 28.2 

Porsche .................................................................................................... 25.9 27.4 28.7 29.0 29.4 

Suzuki ...................................................................................................... 30.3 32.1 33.5 33.5 33.7 

Toyota ...................................................................................................... 24.9 26.0 27.2 27.6 28.0 

Volkswagen .............................................................................................. 26.2 27.8 29.0 29.3 29.7 


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Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 24447 

162 49 U.S.C. 32902(b)(4). 

163A flat standard is one that requires each 

manufacturer to achieve the same numerical level 

of CAFE. 

TABLE VI–2.—REQUIRED CAFE LEVELS (MPG) FOR LIGHT TRUCKS—Continued 

Manufacturer MY 2011 MY 2012 MY 2013 MY 2014 MY 2015 

Total/Average ................................................................................... 25.0 26.4 27.8 28.2 28.6 

We recognize that the manufacturer 

product plans that we used in 

developing the manufacturers’ required 

fuel economy levels for both passenger 

cars and light trucks will be updated in 

some respects before the final rule is 

published. To that end, the agency is 

publishing a separate request for 

product plans at the same time as this 

NPRM to obtain whatever updates have 

been made already. Further, we note 

that a manufacturer’s required fuel 

economy level for a model year under 

the adjusted standards would be based 

on its actual production numbers in that 

model year. Therefore, its official 

required fuel economy level would not 

be known until the end of that model 

year. However, because the targets for 

each vehicle footprint would be 

established in advance of the model 

year, a manufacturer should be able to 

estimate its required level accurately 

and develop a product plan that would 

comply with that level. 

3. Energy and Environmental Backstop 

EISA requires each manufacturer to 

meet a minimum fuel economy standard 

for domestically manufactured 

passenger cars in addition to meeting 

the standards set by NHTSA. The 

minimum standard ‘‘shall be the greater 

of (A) 27.5 miles per gallon; or (B) 92 

percent of the average fuel economy 

projected by the Secretary for the 

combined domestic and non-domestic 

passenger automobile fleets 

manufactured for sale in the United 

States by all manufacturers in the model 

year. * * *’’ 162 The agency must 

publish the projected minimum 

standards in the Federal Register when 

the passenger car standards for the 

model year in question are promulgated. 

NHTSA calculated 92 percent of the 

proposed projected passenger car 

standards as the minimum standard, 

which is presented below. The 

calculated minimum standards will be 

updated for the final rule to reflect any 

changes in the projected passenger car 

standards. 

Model year Minimum 

standard 

2011 .......................................... 28.7 

2012 .......................................... 30.2 

2013 .......................................... 31.3 

2014 .......................................... 32.0 

Model year Minimum 

standard 

2015 .......................................... 32.9 

The agency would like to note that 

EISA requires the minimum domestic 

passenger car standard to be the greater 

of 27.5 mpg or the calculated 92 

percent, the calculated minimum 

standard. In all five model years, the 

percentage-based value exceeded 27.5 

mpg. We also note that the minimum 

standards apply only to domestically 

manufactured passenger cars, not to 

non-domestically manufactured 

passenger cars or to light trucks. 

In CBD, the Ninth Circuit agreed with 

the agency that EPCA, as it was then 

written, did not explicitly require the 

adoption of a backstop, i.e., a minimum 

CAFE standard that is fixed. A fixed 

minimum standard is one that does not 

change in response to changes in a 

manufacturer’s vehicle mix. 

The Court said, however, that the 

issue was not whether the adoption was 

expressly required, but whether it was 

arbitrary and capricious for the agency 

to decline to adopt a backstop. The 

Court said that Congress was silent in 

EPCA on this issue. The Court 

concluded that it was arbitrary and 

capricious for the agency to decline to 

adopt a backstop because it did not, in 

the view of the Court, address the 

statutory factors for determining the 

maximum feasible level of average fuel 

economy. 

NHTSA believes that it considered 

and discussed the express statutory 

factors such as technological feasibility 

and economic practicability and related 

factors such as safety in deciding not to 

adopt a backstop. We do not believe that 

further discussion is warranted because 

Congress has spoken directly on this 

issue since the Ninth Circuit’s decision. 

The enactment of EISA resolved this 

issue. Congress expressly mandated that 

CAFE standards for automobiles be 

attribute-based. That is, they must be 

based on an attribute related to fuel 

economy, e.g., footprint and they must 

adjust in response to changes in vehicle 

mix. Taken by itself, this mandate 

precludes the agency from adopting a 

fixed minimum standard. The only 

exception to that mandate is the 

provision in which Congress mandated 

a fixed and flat 163 minimum standard 

for one of the three compliance 

categories. It required one for domestic 

passenger cars, but not for either 

nondomestic passenger cars or light 

trucks. 

Given the clarity of the requirement 

for attribute-based standards and the 

equally clear narrow exception to that 

requirement, the agency tentatively 

concludes that had Congress intended 

backstops to be established for either of 

the other two compliance categories, it 

would have required them. Congress did 

not, however, do so. Absent explicit 

statutory language that provides the 

agency authority to set flat standards, 

the agency believes that the setting of a 

supplementary minimum flat standard 

for the other two compliance categories 

would be contrary to the requirement to 

set an attribute-based standard under 

EISA. 

Regardless, the agency notes that the 

curve of an attribute-based standard has 

features that limit backsliding. Some of 

these features, which are fully described 

in Section V.B of the notice, were added 

as the agency refined and modified the 

Volpe model for the purpose of this 

rulemaking. Others, such as the lower 

asymptote, which serves as a backstop, 

are inherent in the logistic function. We 

believe that these features help address 

the concern that has been expressed 

regarding the possibility of vehicle 

upsizing without compromising the 

benefits of reform. In addition, the 

agency notes that the 35 mpg 

requirement in and of itself serves as a 

backstop. The agency must set the 

standards high enough to ensure that 

the average fuel economy level of the 

combined car and light fleet is making 

steady progress toward and achieves the 

statutory requirement of at least 35 mpg 

by 2020. If the agency finds that this 

requirement might not be achieved, it 

will consider setting standards for 

model years 2016 through 2015 early 

enough and in any event high enough to 

ensure reaching the 35 mpg 

requirement. 

4. Combined Fleet Performance 

The combined industry wide average 

fuel economy (in miles per gallon, or 

mpg) levels for both cars and light 


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24448 Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 

trucks, if each manufacturer just met its 

obligations under the proposed 

‘‘optimized’’ standards for each model 

year, would be as follows: 

MY 2011: 27.8 mpg 

MY 2012: 29.2 mpg 

MY 2013: 30.5 mpg 

MY 2014: 31.0 mpg 

MY 2015: 31.6 mpg 

The annual average increase during 

this five year period is approximately 

4.5 percent. Due to the uneven 

distribution of new model introductions 

during this period and to the fact that 

significant technological changes can be 

most readily made in conjunction with 

those introductions, the annual 

percentage increases are greater in the 

early years in this period. In order for 

the combined industry wide average 

fuel economy to reach at least 35 mpg 

by MY 2020, it would have to increase 

an average of 2.1 percent per year for 

MYs 2016 through 2020. 

B. Estimated Technology Utilization 

Under Proposed Standards 

NHTSA anticipates that 

manufacturers will significantly 

increase the use of fuel-saving 

technologies in response to the 

standards we are proposing for 

passenger cars. Although it is 

impossible to predict exactly how 

manufacturers will respond, the Volpe 

model provides estimates of 

technologies manufacturers could apply 

in order to comply with the proposed 

standards. The preliminary Regulatory 

Impact Analysis (PRIA) presents 

estimated increases in the industry-wide 

utilization of each technology included 

in agency’s analysis. Tables VI–3 and 

VI–4 show rates at which the seven 

largest manufacturers’ product plans 

indicated plans to use some selected 

technologies, as well as rates at which 

the Volpe model estimated that the 

same technologies might penetrate these 

manufacturers’ passenger car fleet in 

response to the baseline and proposed 

standards. 

The average penetration rate is the 

percentage of the entire fleet to which 

the technology is applied. For example, 

tables VI–3 and VI–4 show that these 

manufacturers could apply hybrid 

powertrains to 15 percent of the entire 

passenger car fleet in MY 2015, as 

opposed to the 5 percent shown in their 

product plans. However, not all 

manufacturers begin with the same 

technology penetration rates, and not all 

manufacturers are affected equally by 

the proposed standards. The next 

column shows the maximum 

penetration rate among the seven 

manufacturers with a significant market 

share (Chrysler, Ford, GM, Honda, 

Hyundai, Nissan, and Toyota). For 

example, the Volpe model estimated 

that one of these manufacturers would 

apply hybrid powertrains to 19 percent 

of its passenger car fleet to comply with 

the proposed MY 2015 standard. 

As tables VI–3 and VI–4 demonstrate, 

the Volpe model estimated that 

manufacturers might need to apply 

significant numbers of advanced 

engines, advanced transmissions, and 

hybrid powertrains in order to comply 

with the proposed standards. (Most of 

the hybrids are integrated starter 

generators, although significant 

numbers of IMA and power-split 

hybrids also penetrate the fleet.) For 

example, the Volpe model estimated 

that one of the seven largest light truck 

manufacturers could be including diesel 

engines in 45 percent of its light trucks 

by MY2015 in response to the proposed 

standards. 

TABLE VI.—3. ESTIMATED TECHNOLOGY PENETRATION RATES IN MY2015 FOR PASSENGER CARS

[In percent] 

Technology 

Average among seven largest manufacturers Maximum among seven largest manufacturers 

Product plan Adjusted 

baseline 

Under 

proposed 

standard 

Product plan Adjusted 

baseline 

Under 

proposed 

standard 

Passenger Cars 

Automatically Shifted Manual Transmission ................................................. 10 10 39 59 59 86 

Spark Ignited Direct Injection ................... 22 22 30 76 76 82 

Turbocharging & Engine Downsizing ...... 5 5 17 11 11 51 

Diesel Engine ........................................... 0 0 2 0 0 5 

Hybrid Electric Vehicles ........................... 5 5 15 14 14 19 

TABLE VI.—4. ESTIMATED TECHNOLOGY PENETRATION RATES IN MY2015 FOR LIGHT TRUCKS

[In percent] 

Technology 

Maximum among seven largest manufacturers Maximum among seven largest manufacturers 

Product plan Adjusted 

baseline 

Under 

proposed 

standard 

Product plan Adjusted 

baseline 

Under 

proposed 

tandard 

Automatically Shifted Manual Transmission ................................................. 10 14 55 41 41 72 

Spark Ignited Direct Injection ................... 23 24 40 46 46 73 

Turbocharing & Engine Downsizing ........ 9 11 31 32 32 44 

Diesel Engine ........................................... 3 6 10 7 29 45 

Hybrid Electric Vehicles ........................... 2 6 25 5 13 32 

The agency uses Volpe model analysis 

of technology application rates as a way 

of determining the economic 

practicability and technological 

feasibility of the proposed standards, 

but we note that manufacturers may 

always comply with the standards by 

applying different technologies in 

different orders and at different rates. 


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Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 24449 

164See supra text accompanying note 103. 

165The $31 billion estimate is based on a 7% 

discount rate for valuing future impacts. NHTSA 

estimated benefits using both 7% and 3% discount 

rates. Under a 3% rate, total consumer benefits for 

passenger car CAFE improvements total $36 billion. 

166 Gross consumer benefits are benefits measured 

prior to accounting for the negative impacts of the 

rebound effect. They include fuel savings, 

consumer surplus from additional driving, reduced 

refueling time, reduced criteria pollutants, and 

reduced greenhouse gas production. Negative 

impacts from the rebound effect include added 

congestion, noise, and crash costs due to additional 

driving. 

167Based on a value of $7.00 per ton of carbon 

dioxide. 

168The $57 billion estimate is based on a 7% 

discount rate for valuing future impacts. NHTSA 

estimated benefits using both 7% and 3% discount 

rates. Under a 3% rate, total consumer benefits for 

light truck CAFE improvements are $72 billion. 

169See Section V.A.7 below for discussion of 

payback period. 

170The fuel prices (shown here in 2006 dollars) 

used to calculate the length of the payback period 

are those projected (Annual Energy Outlook 2008, 

revised early release) by the Energy Information 

Administration over the life of the MY 2011–2015 

light trucks, not current fuel prices. 

Insofar as our conclusion of what the 

maximum feasible standards would be 

is predicated on our analysis, however, 

the agency requests comment on the 

feasibility of these rates of increase in 

the penetration of these advanced 

technologies, and for other technologies 

discussed in the PRIA. 

C. Benefits and Costs of Proposed 

Standards 

1. Benefits 

We estimate that the proposed 

standards for passenger cars would save 

approximately 19 billion gallons of fuel 

and prevent 178 billion metric tons of 

tailpipe CO2 emissions over the lifetime 

of the passenger cars sold during those 

model years, compared to the fuel 

savings and emissions reductions that 

would occur if the standards remained 

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

of manufacturer’s plans and the 

manufacturer’s required level of average 

fuel economy for MY 2010).164

We estimate that the value of the total 

benefits of the proposed passenger car 

standards would be approximately $31 

billion 165 over the lifetime of the 5 

model years combined. This estimate of 

societal benefits includes direct impacts 

from lower fuel consumption as well as 

externalities, and also reflects offsetting 

societal costs resulting from the rebound 

effect. Direct benefits to consumers, 

including fuel savings, account for 85 

percent ($29.5 billion) of the roughly 

$35 billion in gross 166 consumer 

benefits resulting from increased 

passenger car CAFE. Petroleum market 

externalities account for roughly 10 

percent ($3.6 billion). Environmental 

externalities, i.e., reduction of air 

pollutants accounts for roughly 5 

percent ($1.8 billion). Over half of this 

$1.8 billion figure is the result of 

greenhouse gas (primarily CO2) 

reduction ($1.0 billion). Increased 

congestion, noise and accidents from 

increased driving will offset roughly 

$3.8 billion of the $35 billion in 

consumer benefits, leaving net 

consumer benefits of $31 billion. 

The following table sets out the 

relative dollar value of the various 

benefits of this rulemaking on a per 

gallon saved basis: 

TABLE VI–5.—ECONOMIC BENEFITS AND COSTS PER GALLON OF FUEL SAVED

[Undiscounted] 

Category Variable 

Value 

(2006 $ per 

gallon) 

Benefits ..................................................... Savings in Fuel Production Cost ................................................................................. $1.99 

Reduction in Oil Import Externalities ........................................................................... .28 

Value of Additional Rebound-Effect Driving ................................................................ .24 

Reduction in Criteria Pollutant Emissions .................................................................... .16 

Value of Reduced Refueling Time ............................................................................... .12 

Reduction in CO2 Emissions ........................................................................................ 167 .02 

Gross Benefits .............................................................................................................. 2.81 

Costs ......................................................... Externalities from Additional Rebound-Effect Driving .................................................. 0.30 

Net Benefits .............................................. Net Benefits .................................................................................................................. 2.51 

We estimate that the proposed 

standards for light trucks would save 

approximately 36 billion gallons of fuel 

and prevent 343 million metric tons of 

tailpipe CO2 emissions over the lifetime 

of the light trucks sold during those 

model years, compared to the fuel 

savings and emissions reductions that 

would occur if the standards remained 

at the adjusted baseline. 

We estimate that the value of the total 

benefits of the proposed light truck 

standards would be approximately $57 

billion 168 over the lifetime of the 5 

model years of light trucks combined. 

This estimate of societal benefits 

includes direct impacts from lower fuel 

consumption as well as externalities 

and also reflects offsetting societal costs 

resulting from the rebound effect. Direct 

benefits to consumers, including fuel 

savings, account for 84 percent ($52.7 

billion) of the roughly $63 billion in 

gross consumer benefits resulting from 

increased light truck CAFE. Petroleum 

market externalities account for roughly 

10 percent ($6.5 billion). Environmental 

externalities, i.e., reduction of air 

pollutants accounts for roughly 6 

percent ($3.5 billion). Over half of this 

figure is the result of greenhouse gas 

(primarily CO2) reduction ($1.9 billion). 

Increased congestion, noise and 

accidents from increased driving will 

offset roughly $5.4 billion of the $63 

billion in consumer benefits, leaving net 

consumer benefits of $57 billion. 

2. Costs 

The total costs for manufacturers just 

complying with the standards for MY 

2011–2015 passenger cars would be 

approximately $16 billion, compared to 

the costs they would incur if the 

standards remained at the adjusted 

baseline. The resulting vehicle price 

increases to buyers of MY 2015 

passenger cars would be recovered or 

paid back 169 in additional fuel savings 

in an average of 56 months, assuming 

fuel prices ranging from $2.26 per gallon 

in 2016 to $2.51 per gallon in 2030.170

The total costs for manufacturers just 

complying with the standards for MY 

2011–2015 light trucks would be 

approximately $31 billion, compared to 

the costs they would incur if the 

standards remained at the adjusted 


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24450 Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 

baseline. The resulting vehicle price 

increases to buyers of MY 2015 light 

trucks would be paid back in additional 

fuel savings in an average of 50 months, 

assuming fuel prices ranging from $2.26 

to $2.51 per gallon. 

Comparison of Estimated Benefits to 

Estimated Costs 

The table below compares the 

incremental benefits and costs for the 

car and light truck CAFE standards, in 

millions of dollars. 

TABLE VI–6.—PASSENGER CARS

Model year Total 

2011 2012 2013 2014 2015 2011–2015 

Benefits .................................................... 2,596 4,933 6,148 7,889 9,420 30,986 

Costs ........................................................ 1,884 2,373 2,879 3,798 4,862 15,796 

Net Benefits ............................................. 712 2,560 3,269 4,091 4,558 15,190 

TABLE VI–7.—LIGHT TRUCKS

Model Year Total 

2011 2012 2013 2014 2015 2011–2015 

Benefits .................................................... 3,909 8,779 13,560 14,915 16,192 57,355 

Costs ........................................................ 1,649 4,986 7,394 8,160 8,761 30,949 

Net Benefits ............................................. 2,260 3,793 6,166 6,755 7,431 26,406 

The average annual per vehicle cost 

increases are shown in the PRIA. 

D. Flexibility Mechanisms 

The agency’s benefit and cost 

estimates do not reflect the availability 

and use of flexibility mechanisms, such 

as compliance credits and credit trading 

because EPCA prohibits NHTSA from 

considering the effects of those 

mechanisms in setting CAFE standards. 

EPCA has precluded consideration of 

the FFV adjustments ever since it was 

amended to provide for those 

adjustments. The prohibition against 

considering compliance credits was 

added by EISA. 

The benefit and compliance cost 

estimates used by the agency in 

determining the maximum feasible level 

of the CAFE standards assume that 

manufacturers will rely solely on the 

installation of fuel economy technology 

to achieve compliance with the 

proposed standards. In reality, however, 

manufacturers are likely to rely to some 

extent on three flexibility mechanisms 

provided by EPCA and will thereby 

reduce the cost of complying with the 

proposed standards. First, some 

manufacturers will rely on a 

combination of technology and 

compliance credits that they earn 

(including credits transferred from one 

compliance category to another) as their 

compliance strategy. Second, they may 

also supplement their technological 

efforts by relying on the special fuel 

economy adjustment procedures 

provided by EPCA as an incentive for 

manufacturers to produce flexible fuel 

vehicles (FFV). Third, the agency is 

instituting a credit trading program that, 

if taken advantage of, would further 

provide flexibility. 

The agency believes that 

manufacturers are likely to take 

advantage of these flexibility 

mechanisms, thereby reducing benefits 

and costs meaningfully, but does not 

have any reliable basis for predicting 

which manufacturers might use 

compliance credits, how they might use 

them or the extent to which they might 

do so. 

With respect to earned credits through 

over-compliance NHTSA notes that 

while the manufacturers have relatively 

few light truck credits, several 

manufacturers already have a 

substantial amount of banked passenger 

car credits earned under the long term 

27.5 mpg flat or nonattributed-based 

standard for those automobiles. Further, 

they will earn significant additional 

passenger car credits through MY 2010, 

the last year before the passenger car 

standards are increased and the first 

year in which those standards will be 

attribute-based. These pre-MY 2011 

passenger car credits can be carried 

forward into the MY 2011–2015 period. 

While manufacturers might use 

credits to a significant extent, thereby 

reducing benefits and costs to a 

meaningful level, the agency believes it 

important to note that the potential 

effect of these flexibility mechanisms is 

largely limited to MY 2011–2015. The 

earning of credits will become more 

difficult in MY 2011. MY 2011 is the 

first year in which all manufacturers 

will be required to comply with 

attribute-based CAFE standards for 

passenger cars and light trucks. The 

earning of compliance credits will be 

more challenging under attribute-based 

standards since each manufacturer’s 

legal obligation to improve CAFE will 

be based, in part, on that manufacturer’s 

own product mix. Further, the standards 

will significantly increase every year. 

On the other hand, credits earned in MY 

2011 or thereafter can be transferred 

across fleets to a limited extent, adding 

additional flexibility to the system. 

With respect to overcompliance 

through production of FFV vehicles, 

EISA also extended the FFV adjustment 

through 2019. Manufacturers can build 

enough FFV vehicles to raise the CAFE 

of their fleets. FFVs are assigned high 

fuel economy values using a formula 

specified in the Alternative Motor Fuels 

Act (AMFA). For example, a Ford 

Taurus has a fuel economy of 26.39 

mpg—if it is converted to a FFV, its fuel 

economy increases to 44.88 mpg. 

Converting a vehicle into an FFV is 

more cost-effective than converting it, 

for example, into a diesel, which is 

more costly and achieves lower fuel 

economy. However, the maximum 

extent to which the adjustments can be 

used to raise the CAFE of a 

manufacturer’s fleet is 1.2 mpg in MY 

2011–2014. In MY 2015, the cap begins 

to decline. The cap continues to decline 

each year thereafter by 0.2 mpg until it 

reaches 0 mpg in MY 2020 and beyond. 

Given that there will be considerably 

less opportunity to use credits in lieu of 

installing fuel saving technologies after 

MY 2015, the manufacturers may elect 

to apply technology early in the MY 

2011–2020 period when redesign 


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Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 24451 

171 ‘‘The Economic Costs of Fuel Economy 

Standards Versus a Gasoline Tax’’, Report from the 

Congressional Budget Office, December, 2003. 

opportunities arise rather than relying 

on credits or FFV adjustments, but then 

face being limited compliance options 

in later years. The declining influence of 

the flexibility mechanisms during this 

period guarantees that the standards for 

that year will be met almost entirely 

through the use of technology, thus 

helping to ensure the 35.0 mpg goal of 

EISA will be achieved. 

Finally, with respect to cost reduction 

through reliance on credit trading, 

credits earned in MY 2011 or thereafter 

can be traded. There is a study in which 

the Congressional Budget Office 

estimated that credit trading would cut 

the costs of achieving a combined 27.5 

mpg standard by 16 percent.171 This 

study assumed that manufacturer 

compliance costs varied widely and that 

manufacturers were willing to engage in 

trading. While some manufacturers have 

expressed reluctance to trade with 

competitors, we believe that the credit 

trading program has the potential to 

reduce compliance costs meaningfully 

without any impact on overall fuel 

savings. 

E. Consistency of Proposed Passenger 

Car and Light Truck Standards With 

EPCA Statutory Factors 

As explained above, EPCA requires 

the agency to set fuel economy 

standards for each model year and for 

each fleet separately at the maximum 

feasible level for that model year and 

fleet. In determining the ‘‘maximum 

feasible’’ level of average fuel economy, 

the agency considers the four statutory 

factors: Technological feasibility, 

economic practicability, the effect of 

other motor vehicle standards of the 

Government on fuel economy, and the 

need of the United States to conserve 

energy, along with additional relevant 

factors such as safety. In determining 

how to weigh these considerations, we 

are mindful of EPCA’s overarching 

purpose of energy conservation. 

NHTSA’s NEPA analysis for this 

rulemaking (see Section XIII.B of this 

document) also will inform the agency’s 

final action. 

The section above proposes footprintbased CAFE standards for MY 2011–

2015 passenger cars and light truck. The 

agency has considered this set of 

standards in light of both the relevant 

factors and EPCA’s overarching purpose 

of energy conservation, and seeks 

comment on whether the public agrees 

that the agency’s analysis is sound or 

should have considered the factors 

differently or considered additional 

factors. 

We have tentatively determined that 

the proposed passenger car and light 

truck standards are at the maximum 

feasible level for passenger car and light 

truck manufacturers for MY 2011–2015. 

As discussed above, the standards are 

basically determined by following the 

same procedure as for setting the 

optimized light truck standards for 

2008–2011. 

1. Technological Feasibility 

We tentatively conclude that the 

proposed standards are technologically 

feasible. Whether a technology may be 

feasibly applied in a given model year 

is not simply a function of whether the 

technology will exist in that model year, 

but also whether the data sources 

reviewed by the agency indicate that the 

technology is mature enough to be 

applied in that year, whether it will 

conflict with other technologies being 

applied, and so on. The Volpe model 

maximizes net benefits by applying fuelsaving technologies to vehicle models in 

a cost-effective manner, which generally 

prevents it from applying technologies 

to vehicles before manufacturers would 

be ready to do so. Thus, we tentatively 

conclude that standards that maximize 

net benefits based on Volpe model 

analysis are technologically feasible. 

We described above how we 

tentatively conclude that the additional 

measures used to set the optimized 

standards do not take the standards out 

of the realm of technological feasibility, 

because if targets are feasible in one 

year, they will continue to be feasible. 

2. Economic Practicability 

NHTSA has historically assessed 

whether a potential CAFE standard is 

economically practicable in terms of 

whether the standard is one ‘‘within the 

financial capability of the industry, but 

not so stringent as to threaten 

substantial economic hardship for the 

industry.’’ See, e.g., Public Citizen v. 

NHTSA, 848 F.2d 256, 264 (DC Cir. 

1988). We tentatively conclude that the 

proposed standards are economically 

feasible. Making appropriate 

assumptions about key factors such as 

leadtime and using them in the Volpe 

model provides a benchmark for 

assessing the economic practicability of 

a proposed standard, because it avoids 

applying technologies at an infeasible 

rate and avoids application of 

technologies whose benefits are 

insufficient to justify their costs when 

the agency determines a manufacturer’s 

capability. In other words, this approach 

ensures that each identified private 

technology investment projected by the 

model produces marginal benefits at 

least equal to marginal cost. The Volpe 

model also takes into account other 

factors closely associated with economic 

practicability, such as lead time and 

phase-in rates for technologies that it 

applies. By limiting the consideration of 

technologies to those that will be 

available and limiting their rate of 

application using these assumptions, 

the cost-benefit analysis assumes that 

manufactures will make improvements 

that are cost-justified. 

In addition to carefully making these 

assumptions and using cost-benefit 

analysis, the agency also performs sales 

and employment impacts analysis on 

individual manufacturers. The sales 

analysis looks at a purchasing decision 

from the eyes of a knowledgeable and 

rational consumer, comparing the 

estimated cost increases versus the 

payback in fuel savings over 5 years (the 

average new vehicle loan) for each 

manufacturer. This relationship 

depends on the cost-effectiveness of 

technologies available to each 

manufacturer. Overall, based on a 7 

percent discount rate for future fuel 

savings, we expect there would be no 

significant sales or job losses for these 

proposed standards. Therefore, we 

tentatively conclude that the proposed 

standards are economically practicable. 

3. Effect of Other Motor Vehicle 

Standards of the Government on Fuel 

Economy 

We tentatively conclude that the 

proposed standards for passenger cars 

and light trucks account for the effect of 

other motor vehicle standards of the 

Government on fuel economy. This 

statutory factor constitutes an express 

recognition that fuel economy standards 

should not be set without due 

consideration given to the effects of 

efforts to address other regulatory 

concerns, such as motor vehicle safety 

and pollutant emissions. The primary 

influence of many of these regulations is 

the addition of weight to the vehicle, 

with the commensurate reduction in 

fuel economy. Manufacturers 

incorporate this information in their 

product plans, which are accounted for 

as part of the Volpe model analysis used 

to set the standards. Because the 

addition of weight to the vehicle is only 

relevant if it occurs within the 

timeframe of the regulations (i.e., MY 

2011–2015), we consider the Federal 

Motor Vehicle Safety Standards set by 

NHTSA and the Federal Motor Vehicle 

Emissions Standards set by EPA which 

become effective during the timeframe. 


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24452 Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 

172 72 FR 51907 (Sept. 11, 2007). 173 Id. 51971–72. 

Federal Motor Vehicle Safety Standards 

NHTSA has completed a preliminary 

evaluation of the impact of the Federal 

motor vehicle safety standards 

(FMVSSs) using MY 2010 vehicles as a 

baseline for passenger cars. We have 

issued or proposed to issue a number of 

FMVSSs that become effective between 

the baselines and MY 2015. These have 

been analyzed for their potential impact 

on vehicle weights for vehicles 

manufactured in these years: The fuel 

economy impact, if any, of these new 

requirements will take the form of 

increased vehicle weight resulting from 

the design changes needed to meet the 

new FMVSSs. 

The average test weight (curb weight 

plus 300 pounds) of the passenger car 

fleet is currently 3,570 lbs. During the 

time period addressed by this 

rulemaking, the average test weight is 

the passenger car fleet is projected to be 

between 3,608 and 3,635 lbs. The 

average test weight of Chrysler’s 

passenger car fleet is currently 3,928 lbs. 

The average test weight of Chrysler’s 

passenger car fleet is projected to be 

between 3,844 and 3,993 lbs in the 

future. For Ford, the average test weight 

of the passenger car fleet is currently 

3,660 lbs, and is projected to be between 

3,649 and 3,677 lbs. For GM, the average 

test weight of the passenger car fleet is 

currently 3,649 lbs, and is projected to 

be between 3,768 and 3,855 lbs. For 

Toyota, the average test weight of the 

passenger car fleet is currently 3,330 lbs, 

and is projected to be between 3,416 

and 3,451 lbs. 

The average test weight (curb weight 

plus 300 pounds) of the light truck fleet 

is 4,727 pounds, and during the time 

period addressed by this rulemaking, 

the average test weight of the light truck 

fleet is projected to be between 4,824 

and 4,924 lbs. The average test weight 

of Chrysler’s light truck fleet is currently 

4,673 lbs, while during the time period 

addressed by this rulemaking, the 

average test weight of Chrysler’s light 

truck fleet is projected to be between 

4,830 and 4,906 lbs. For Ford, the light 

truck fleet’s average test weight is 

currently 4,887 lbs, while during the 

time period addressed by this 

rulemaking, the average test weight is 

projected to be between 4,619 and 4,941 

lbs. For GM, the light truck fleet’s 

average test weight is currently 5,024 

lbs, while during the time period 

addressed by this rulemaking, the 

average test weight is projected to be 

between 5,324 and 5,415 lbs. For 

Toyota, the light truck fleet’s average 

test weight is currently 4,567 lbs, while 

during the time period addressed by this 

rulemaking, the average test weight is 

projected to be between 4,535 and 4,583 

lbs. 

Thus, overall, the four largest 

manufacturers of light-duty vehicles 

expect the average weight of their 

vehicles to remain mostly unchanged, 

with slight weight increases projected 

during the time period addressed by this 

rulemaking. The changes in weight 

include all factors, such as changes in 

the fleet mix of vehicles, required safety 

improvements, voluntary safety 

improvements, and other changes for 

marketing purposes. These changes in 

weight over the model years in question 

would have a negligible impact on fuel 

economy of their vehicles. 

Weight Impacts of Required Safety 

Standards (Final Rules) 

NHTSA has issued two final rules on 

safety standards that become effective 

for passenger cars and light trucks 

between MY 2011 and MY 2015. These 

have been analyzed for their potential 

impact on passenger car and light truck 

weights, using MY 2010 as a baseline. 

1. FMVSS No. 126, Electronic Stability 

Control 

2. FMVSS No. 214, Side Impact Oblique Pole 

Test 

FMVSS No. 126, Electronic Stability 

Control: 

The phase-in schedule for vehicle 

manufacturers is: 

Model year Production beginning date Requirement 

2009 ................................................................ September 1, 2008 ........... 55% with carryover credit. 

2010 ................................................................ September 1, 2009 ........... 75% with carryover credit. 

2011 ................................................................ September 1, 2010 ........... 95% with carryover credit. 

2012 ................................................................ September 1, 2011 ........... All light vehicles. 

The final rule requires 75 percent of 

all light vehicles to meet the ESC 

requirement for MY 2010, 95 percent of 

all light vehicles to meet the ESC 

requirements by MY 2011, and all light 

vehicles to meet the requirements by 

MY 2012. Thus, in MY 2010, 

manufacturers must add ESC to 20 

percent of vehicles; in MY 2011, to an 

additional 20 percent of vehicles; and in 

MY 2012, to another 5 percent of 

vehicles. 

The agency’s analysis of weight 

impacts found that ABS adds 10.7 lbs. 

and ESC adds 1.8 lbs. per vehicle for a 

total of 12.5 lbs. Based on 

manufacturers’ plans for voluntary 

installation of ESC, 85 percent of 

passenger cars in MY 2010 would have 

ABS and 52 percent would have ESC. 

Thus, the total added weight in MY 

2011 for passenger cars would be about 

2.5 lbs. (0.15 × 10.7 + 0.48 × 1.8), and 

in MY 2012 would be about 0.6 lbs. For 

light trucks, manufacturers’ plans 

indicate that 99 percent of all light 

trucks would have ABS by MY 2011 and 

that 52 percent would have ESC by that 

time. Thus for light trucks, the 

incremental weight impacts of adding 

ESC would be slightly less than 1 pound 

(0.01 × 10.7 + 0.48 × 1.8). 

FMVSS No. 214, Side Impact Protection 

NHTSA recently issued a final rule to 

incorporate a dynamic pole test into 

FMVSS No. 214, ‘‘Side Impact 

Protection.’’ 172 The rule will lead to the 

installation of new technologies, such as 

side curtain air bags and torso side air 

bags, which are capable of improving 

head and thorax protection to occupants 

of vehicles and that crash into poles and 

trees and vehicles that are laterally 

struck by a higher vehicle. The phasein requirements for the side impact test 

are as shown below: 173

Phase-in date Percent of each manufacturer’s light vehicles that must 

comply during the production period 

September 1, 2009 to August 31, 2010 ............. 20 percent (excluding vehicles GVWR > 8,500 lbs.). 

September 1, 2010 to August 31, 2011 ............. 50 percent of vehicles (excluding vehicles GVWR > 8,500 lbs.). 

September 1, 2011 to August 31, 2012 ............. 75 percent of vehicles (excluding vehicles GVWR > 8,500 lbs.). 


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Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 24453 

174 Khadilkar, et al. ‘‘Teardown Cost Estimates of 

Automotive Equipment Manufactured to Comply 

with Motor Vehicle Standard—FMVSS 214(D)—

Side Impact Protection, Side Air Bag Features’’, 

April 2003, DOT HS 809 809. 

175Ludtke & Associates, ‘‘Perform Cost and 

Weight Analysis, Head Protection Air Bag Systems, 

FMVSS 201’’, page 4–3 to 4–5, DOT HS 809 842. 

176 70 FR 49223 (Aug. 23, 2005). The PRIA for this 

NPRM is available at Docket No. NHTSA–2005–

22143–2. 

Phase-in date Percent of each manufacturer’s light vehicles that must 

comply during the production period 

September 1, 2012 to August 31, 2013 ............. All vehicles including limited line vehicles, except vehicles with GVWR > 8,500 lbs., alterers, 

and multi-stage manufacturers. 

On or after September 1, 2013 .......................... All vehicles, including vehicles with GVWR > 8,500 lbs., alterers and multi-stage manufacturers. 

Based on manufacturers’ plans to 

provide window curtains and torso bags 

voluntarily, we estimate that 90 percent 

of passenger cars and light trucks would 

have window curtains and 72 percent 

would have torso bags for MY 2010. A 

very similar percentage is estimated for 

MY 2011. A teardown study of 5 thorax 

air bags resulted in an average weight 

increase per vehicle of 4.77 pounds 

(2.17 kg).174 A second study performed 

teardowns of 5 window curtain 

systems.175 One of the window curtain 

systems was very heavy (23.45 pounds). 

The other four window curtain systems 

had an average weight increase per 

vehicle of 6.78 pounds (3.08 kg), a figure 

which is assumed to be average for all 

vehicles in the future. 

Assuming in the future that the 

typical system used to comply with the 

requirements of FMVSS No. 214 will be 

thorax bags with a window curtain, the 

average weight increase would be 2 

pounds (0.10 × 6.78 + 0.28 × 4.77). 

However, there is the potential that 

some light trucks might need to add 

structure to meet the test. The agency 

has no estimate of this potential weight 

impact for structure. 

Weight Impacts of Proposed/Planned 

Standards 

Proposed FMVSS No. 216, Roof Crush 

On August 23, 2005, NHTSA 

proposed amending the roof crush 

standard to increase the roof crush 

standard from 1.5 times the vehicle 

weight to 2.5 times the vehicle 

weight.176 The NPRM proposed to 

extend the standard to vehicles with a 

GVWR of 10,000 pounds or less, thus 

including many light trucks that had not 

been required to meet the standard in 

the past. The proposed effective date 

was the first September 1 occurring 

three years after publication of the final 

rule. Thus, it is still possible that the 

final rule could be effective with MY 

2011. In the PRIA, the average light 

truck weight was estimated to increase 

by 6.1 pounds for a 2.5 strength to 

weight ratio. Based on comments on the 

NPRM, the agency believes that this 

weight estimate is likely to increase. 

However, the agency does not yet have 

an estimate for the final rule. 

Planned NHTSA Initiative on Ejection 

Mitigation 

The agency is planning on issuing a 

proposal on ejection mitigation. The 

likely result of the planned proposal is 

for window curtain side air bags to be 

made larger and for a rollover sensor to 

be installed. The likely result will be an 

increase in weight of at least 1 pound; 

however, this analysis is not completed. 

In addition, advanced glazing is one 

alternative that manufacturers might 

pursue for specific window applications 

(possibly for fixed windows for third 

row applications) or more broadly. 

Advanced glazing is likely to have 

weight implications. Again, the agency 

has not made an estimate of the 

likelihood that advanced glazing might 

be used or its weight implications. 

Summary—Overview of Anticipated 

Weight Increases 

The following table summarizes 

estimates made by NHTSA regarding the 

weight added in MY 2010 or later to 

institute the above discussed standards 

or likely rulemakings. In summary, 

NHTSA estimates that weight additions 

required by final rules and likely 

NHTSA regulations effective in MY 

2011 and beyond for passenger cars, 

compared to the MY 2010 fleet, will 

increase passenger car weight by an 

average of 12.2 pounds or more (5.5 kg 

or more). The agency estimates that 

weight additions required by final rules 

and likely NHTSA regulations effective 

in MY 2011 and beyond for light trucks, 

compared to the MY 2010 fleet, will 

increase light truck weight by an 

average of 10.1 pounds or more. 

TABLE VI–8.—MINIMUM WEIGHT ADDITIONS DUE TO FINAL RULES OR LIKELY NHTSA REGULATIONS COMPARED TO MY 

2010 BASELINE FLEET

Standard no. Added weight 

in pounds 

Added weight 

in kilograms 

126 ........................................................................................................................................................................... 3.1 1.4 

214 ........................................................................................................................................................................... 2.0 0.9 

216 ........................................................................................................................................................................... 6.1–? 2.8–? 

Ejection Mitigation .................................................................................................................................................... 1.0–? 0.4–? 

Total .................................................................................................................................................................. 12.2–? 5.5–? 

Based on NHTSA’s weight-versusfuel-economy algorithms, a 3–4 pound 

increase in weight equates to a loss of 

0.01 mpg in fuel economy. Thus, the 

agency’s estimate of the safety/weight 

effects is 0.025 to 0.04 mpg or more for 

already issued or likely future safety 

standards. 

Federal Motor Vehicle Emissions 

Standards 

EPA’s Fuel Economy Labeling Rule 

employs a new vehicle-specific, 5-cycle 

approach to calculating fuel economy 


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24454 Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 

177See 71 FR 77872 (December 26, 2006). 178 Id. section I.F. 179 Id. sections II, IV. 180 42 U.S.C. 7543 (a). 

181Energy Information Administration, Annual 

Energy Review 2006, Table 5.21, p. 171. Available 

at http://www.eia.doe.gov/emeu/aer/pdf/pages/ 

sec5_51.pdf (last accessed Nov. 29, 2007). 

182Energy Information Administration, Annual 

Energy Review 2006, Table 5.1, p. 125. Available at 

http://www.eia.doe.gov/emeu/aer/pdf/pages/ 

sec5_5.pdf (last accessed Nov. 29, 2007). 

labels which incorporates estimates of 

the fuel efficiency of each vehicle 

during high speed, aggressive driving, 

air conditioning operation and cold 

temperatures into each vehicle’s fuel 

economy label.177 The rule became 

effective January 26, 2007, and will take 

effect starting with MY 2008. 

The new testing procedures will 

combine measured fuel economy over 

the two current fuel economy tests, the 

FTP and HFET, as well as that over the 

US06, SC03 and cold FTP tests into 

estimates of city and highway fuel 

economy for labeling purposes. The test 

results from each cycle will be weighted 

to represent the contribution of each 

cycle’s attributes to onroad driving and 

fuel consumption. The labeling rule 

does not alter the FTP and HFET driving 

cycles, the measurement techniques, or 

the calculation methods used to 

determine CAFE. 

The EPA Labeling Rule will not 

impact CAFE standards or test 

procedures or other USG regulations.178

Rather, the changes to existing test 

procedures will allow for the collection 

of appropriate fuel economy data to 

ensure that existing test procedures 

better represent real-world 

conditions.179 Further, the labeling rule 

does not have a direct effect upon a 

vehicle’s weight, nor on the fuel 

economy level that a vehicle can 

achieve. Instead, the labeling rule serves 

to provide consumers with a more 

accurate estimate of fuel economy based 

on more comprehensive factors 

reflecting real-world driving use. 

There are two groups of State 

emissions standards do not qualify 

under 49 U.S.C. 32902(f), and therefore 

are not considered. One is consists of 

State standards that cannot be adopted 

and enforced by any State because there 

has been no waiver granted by the EPA 

under the preemption waiver provision 

in the Clean Air Act.180 The other 

consists of State emissions standards 

that are expressly or impliedly 

preempted under EPCA, regardless of 

whether or not they have received such 

a waiver. Preempted standards include, 

for example: 

(1) A fuel economy standard; and 

(2) A law or regulation that has essentially 

all of the effects of a fuel economy standard, 

but is not labeled as one (i.e., a State tailpipe 

CO2 standard). 

4. Need of the U.S. To Conserve Energy 

Congress’ requirement to set 

standards at the maximum feasible level 

and inclusion of the need of the nation 

to conserve energy as a factor to 

consider in setting CAFE standards 

ensures that standard setting decisions 

are made with this purpose and all of 

the associated benefits in mind. As 

discussed above, ‘‘the need of the 

United States to conserve energy’’

means ‘‘the consumer cost, national 

balance of payments, environmental, 

and foreign policy implications of our 

need for large quantities of petroleum, 

especially imported petroleum.’’

Environmental implications principally 

include reductions in emissions of 

criteria pollutants and carbon dioxide. 

The need to conserve energy is, from 

several different standpoints, more 

crucial today as it was at the time of 

EPCA’s enactment in the late 1970s. 

U.S. energy consumption has been 

outstripping U.S. energy production at 

an increasing rate. Crude oil prices are 

currently around $100 per barrel, 

despite having averaged about $13 per 

barrel as recently as 1998, and gasoline 

prices have doubled in this period.181

Net petroleum imports now account for 

60 percent of U.S. domestic petroleum 

consumption.182 World crude oil 

production continues to be highly 

concentrated, exacerbating the risks of 

supply disruptions and their negative 

effects on both the U.S. and global 

economies. Figure VI–3 below shows 

the increase of crude oil imports and the 

decline of U.S. oil production since 

1920. 


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183However, increases in ethanol fuel 

consumption have mitigated the growth in 

transportation-related emissions somewhat 

(emissions from energy inputs to ethanol 

production plants are counted in the industrial 

sector). 

184The above statistics are derived from Energy 

Information Administration, ‘‘Emissions of 

Greenhouse Gases Report,’’ Report # DOE/EIA–0573 

(2006), released November 28, 2007. Available at 

http://www.eia.doe.gov/oiaf/1605/ggrpt/ 

carbon.html (last accessed Feb. 3, 2008). 

The need to conserve energy is also 

more crucial today because of growing 

greenhouse gas emissions from 

petroleum consumption by motor 

vehicles and growing concerns about 

the effects of those emissions. Since 

1999, the transportation sector has led 

all U.S. end-use sectors in emissions of 

carbon dioxide. Transportation sector 

CO2 emissions in 2006 were 407.5 

million metric tons higher than in 1990, 

an increase that represents 46.4 percent 

of the growth in unadjusted energy 

related carbon dioxide emissions from 

all sectors over the period. Petroleum 

consumption, which is directly related 

to fuel economy, is the largest source of 

carbon dioxide emissions in the 

transportation sector.183 Moreover, 

transportation sector emissions from 

gasoline and diesel fuel combustion 

generally parallel total vehicle miles 

traveled. The need of the nation to 

conserve energy also encompasses all of 

these issues, insofar as carbon dioxide 

emissions from passenger cars and light 

trucks decrease as fuel economy 

improves and more energy is 

conserved.184

The need of the nation to reduce 

energy consumption would be properly 

reflected in the buying decisions of 

vehicle purchasers, if: 

• Vehicle buyers behave as if they 

have unbiased expectations of their 

future driving patterns and fuel prices; 

and 

• The public social, economic, 

security, and environmental impacts of 

petroleum consumption are fully 

identified, quantified and reflected in 

current and future gasoline prices; and 

• Vehicle buyers behave as if they 

account for the impact of fuel economy 


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24456 Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 

185See, e.g., Competitive Enterprise Institute v. 

NHTSA (CEI I), 901 F.2d 107, 120 at n. 11 (DC Cir. 

1990) (‘‘NHTSA has always examined the safety 

consequences of the CAFE standards in its overall 

consideration of relevant factors since its earliest 

rulemaking under the CAFE program.’’) 

186 Kahane study, supra note 78. 

187 49 U.S.C. 32901(a)(7). 

188 49 U.S.C. 32906(a). 

on their future driving costs in their 

purchasing decisions. 

Basic economic theory suggests that the 

price of vehicles should reflect the value 

that the consumer places on the fuel 

economy attribute of his or her vehicle. 

It is not clear that consumers have the 

information or inclination to value the 

impact of fuel economy in their vehicle 

purchasing decisions. Consumers 

generally have no direct incentive to 

value benefits that are not included in 

the price of fuel—for example, benefits 

such as energy security and limiting 

global climate change. These are the 

market failures which EPCA requires 

NHTSA to address. 

By accounting for the need of the 

nation to conserve energy in setting 

CAFE standards, NHTSA helps to 

mitigate the risks posed by petroleum 

consumption. In its analysis, NHTSA 

quantifies the need of the nation to 

conserve energy by calculating how 

much fuel economy a vehicle buyer 

ought to purchase, or rather, how much 

a vehicle buyer ought to value fuel 

economy, based both on fuel prices and 

potentially estimable externalities 

(including energy security, the benefits 

of mitigating a ton of CO2 emissions, 

criteria pollutant emissions, noise, 

safety, and others). 

The Volpe model uses values for these 

effects in helping to determine each 

model year’s CAFE standards. Thus, 

each model year’s CAFE standards are 

set based on an attempt to quantify the 

need of the United States to conserve 

energy, balanced against the other 

factors considered in the Volpe model, 

such as the technology inputs that help 

the model establish economically 

practicable and technologically feasible 

standards. 

Also, as Congress intended, by 

accounting for the need of the nation to 

conserve energy in setting CAFE 

standards, NHTSA fulfills EPCA’s 

overall goal of improving energy 

conservation. Factors that increase the 

need of the nation to conserve energy, 

such as rising oil prices or 

environmental concerns, may be 

reflected in more stringent, but still 

demonstrably economically practicable 

fuel economy standards. Balancing the 

EPCA factors against each other, and 

considering NHTSA’s NEPA analysis for 

this rulemaking (see Section XIII.B. of 

this document), NHTSA may decide to 

set higher CAFE standards, and achieve 

more fuel savings and CO2 emissions 

reduction, by expressly including the 

quantifiable values of the factors that 

affect the need of the nation to conserve 

energy. 

These standards will enhance the 

normal market response to higher fuel 

prices, and will reduce light duty 

vehicle fuel consumption and CO2

tailpipe emissions over the next several 

decades, responding to the need of the 

nation to conserve energy, as EPCA 

intended. More specifically, the 

proposed standards will save 55 billion 

gallons of fuel and 521 million metric 

tons of CO2 over the lifetime of the 

regulated vehicles. NHTSA will 

evaluate the potential environmental 

impacts associated with such CO2

emissions reductions and other 

environmental impacts of the proposed 

standards through the NEPA process. 

F. Other Considerations in Setting 

Standards Under EPCA 

As explained above, EPCA requires 

NHTSA to balance the four factors of 

technological feasibility, economic 

practicability, the effect of other motor 

vehicle standards of the Government on 

fuel economy, and the need of the 

United States to conserve energy in 

setting CAFE standards for passenger 

cars and light trucks. As discussed 

above, EPCA also prohibits NHTSA 

from considering certain factors (e.g., 

credits) in setting CAFE standards. The 

next section highlights some of the 

issues that NHTSA may (and does) and 

may not take into account in setting 

CAFE standards under EPCA. 

1. Safety 

NHTSA has historically included the 

potential for adverse safety 

consequences when deciding upon a 

maximum feasible level, and has been 

upheld by courts in doing so.185

Currently, we account for safety in the 

model as we develop the standards: 

Because downweighting is a common 

compliance strategy, and because the 

agency believes that downweighting of 

lighter vehicles makes them less safe, 

our model does not rely on weight 

reductions to achieve the standards for 

vehicles under 5,000 pounds GVWR,186

and then only up to 5 percent. As 

explained above, the overarching 

principle that emerges from the 

enumerated factors and the courtsanctioned practice of considering 

safety and links them together is that 

CAFE standards should be set at a level 

that will achieve the greatest amount of 

fuel savings without leading to adverse 

economic or other societal 

consequences. 

2. Alternative Fuel Vehicle Incentives 

49 U.S.C. 32902(h) expressly prohibits 

NHTSA from considering the fuel 

economy of ‘‘dedicated’’ automobiles in 

setting CAFE standards. Dedicated 

automobiles are those that operate only 

on an alternative fuel, like all-electric or 

natural gas vehicles.187 Dedicated 

vehicles often achieve higher mile per 

gallon (or equivalent) ratings than 

regular gasoline vehicles, so this 

prohibition prevents NHTSA from 

raising CAFE standards by averaging 

these vehicles into our determination of 

a manufacturer’s maximum feasible fuel 

economy level. 

Section 32902(h) also directs NHTSA 

to ignore the fuel economy incentives 

for dual-fueled (e.g., E85-capable) 

automobiles in setting CAFE standards. 

§ 32905(b) and (d) use special 

calculations for determining the fuel 

economy of dual-fueled automobiles 

that give those vehicles higher fuel 

economy ratings than identical regular 

automobiles. Through MY 2014, 

manufacturers may use this ‘‘dual-fuel’’

incentive to raise their average fuel 

economy up to 1.2 miles a gallon higher 

than it would otherwise be; after MY 

2014, Congress has set a schedule by 

which the dual-fuel incentive 

diminishes ratably until it is 

extinguished after MY 2019.188

Although manufacturers may use this 

additional credit for their CAFE 

compliance, NHTSA may not consider it 

in setting standards. As above, this 

prohibition prevents NHTSA from 

raising CAFE standards by averaging 

these vehicles into our determination of 

a manufacturer’s maximum feasible fuel 

economy level. 

3. Manufacturer Credits 

Section 32903 was recently revised by 

EISA, and allows manufacturers to earn 

credits for exceeding CAFE standards in 

a given year and to apply them to CAFE 

compliance for up to three model years 

before and five model years after the 

year in which they were earned. 

However, section 32903(a) states 

expressly that fuel economy standards 

must be ‘‘determined * * * without 

regard to credits under this section.’’

Thus, NHTSA may not raise CAFE 

standards because manufacturers have 

enough credits to meet the higher 

standards, nor may NHTSA lower 

standards because manufacturers do not 

have enough credits to meet existing 

standards. 


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189Because CO2 accounts for such a large fraction 

of total greenhouse gases (GHG) emitted during fuel 

production and use—more than 95%, even after 

accounting for the higher global warming potentials 

of other GHG—NHTSA’s analysis of the GHG 

impacts of increasing CAFE standards focuses on 

reductions in CO2 emissions resulting from the 

savings in fuel use that accompany higher fuel 

economy. 

190 ‘‘Work trucks’’ are vehicles rated between 

8,500 and 10,000 lbs GVWR and which are not 

medium-duty passenger vehicles. 49 U.S.C. 

32901(a)(19). 

191 49 U.S.C. 32902(k)(1). 

G. Environmental Impacts of the 

Proposed Standards 

As noted above, environmental 

concerns are among the issues bearing 

on the need of the nation to conserve 

energy. They are also relevant under the 

National Environmental Policy Act 

(NEPA), 42 U.S.C. 4321–4347. Requiring 

improvements in fuel economy will 

necessarily reduce CO2 emissions, 

because the less fuel a vehicle burns, the 

less CO2 it emits. Reductions in CO2

emissions, in turn, may slow or mitigate 

climate change and associated 

environmental impacts. Increased fuel 

economy also may affect other aspects 

of the environment, such as emissions 

of criteria air pollutants and air 

quality.189 In order to inform its 

consideration of the proposed 

standards, NHTSA has initiated an 

environmental review of the proposed 

standards and reasonable alternatives 

pursuant to NEPA. On March 28, 2008, 

NHTSA published a notice of intent to 

prepare an environmental impact 

statement and requested scoping 

comments (73 FR 16615). NHTSA is 

publishing a supplemental notice of 

public scoping and request for scoping 

comments that invites Federal, State, 

and local agencies, Indian tribes, and 

the public to participate in the scoping 

process and to help identify the 

environmental issues and reasonable 

alternatives to be examined in the EIS. 

The scoping notice also provides 

information about the proposed 

standards, the alternatives NHTSA 

expects to consider in its NEPA 

analysis, and the scoping process. 

As discussed in the scoping notice, in 

preparing an EIS for this rulemaking, 

NHTSA expects to consider potential 

environmental impacts of the proposed 

standards and reasonable alternatives, 

including impacts associated with CO2

emissions and climate change. NHTSA 

expects that its NEPA analysis will 

include: direct impacts related to fuel 

and energy use and emissions of CO2

and air pollutants; indirect impacts 

related to emissions and climate change, 

such as impacts on air quality and 

temperature and resulting impacts on 

natural resources and on the human 

environment; and other indirect 

impacts. NHTSA’s NEPA analysis will 

inform its decisions on the proposed 

standards, consistent with NEPA and 

EPCA. 

H. Balancing the Factors to Determine 

Maximum Feasible CAFE Levels 

While the agency carefully considered 

alternative stringencies as discussed in 

section X, it tentatively concludes that 

in stopping at the point that maximizes 

net benefits, it has achieved the best 

balancing of all of the statutory 

requirements, including the 35 mpg 

requirement. In striking that balance, 

the agency was mindful of the growing 

need of the nation to conserve energy 

for reasons that include increasing 

energy independence and security and 

protecting the environment. It was 

mindful also that this is the first 

rulemaking in which the agency has 

simultaneously proposed to raise both 

passenger car and light truck standards, 

and that it was doing so in the context 

of statutory requirements for significant 

annual increases over an extended 

period of years. 

Among the steps it took in its analysis 

and balancing were the following: 

• First, the agency pushed many of 

the manufacturers in their application of 

technology. NHTSA is proposing 

standards that it estimates will entail 

risk that some manufacturers will 

exhaust available technologies in some 

model years. However, the agency has 

tentatively concluded that the 

additional risk is outweighed by the 

significant increase in estimated net 

benefits to society. 

• Second, as observed in the 

technology penetration table above, the 

agency believes that more and more 

advanced, but expensive fuel economy 

technologies will penetrate the fleet by 

2015. However, the agency was careful 

to ensure that those technologies are 

applied in an economically and 

technologically feasible manner by 

focusing on linking certain expensive 

technologies to redesign and refresh 

dates and by phasing in technologies 

over time as it is difficult for companies 

to implement many of the technologies 

on 100 percent of their vehicles all at 

once. Sections III and V describe in 

fuller detail how the agency addressed 

these issues in its modeling. 

• Third, in assessing costs and 

benefits, the agency took into account 

the private and social benefits, 

including environmental and energy 

security benefits (e.g., it monetized 

important externalities, such as energy 

security and CO2) and ensured that for 

every dollar of investment the country 

gets at least 1 dollar of benefits. 

• Fourth, in setting attribute based 

standards as required by EISA, the 

agency will minimize safety 

implications and preserve consumer 

choice. Further, through its choice of 

footprint as an attribute, the agency 

minimized the risk of upsizing as it is 

more difficult to change the footprint 

than to simply add weight to the 

vehicle. 

• Fifth, the agency evaluated the costs 

and benefits described above and 

ensured that the standards were 

achievable without the industry’s being 

economically harmed through 

significant sales losses. 

• Sixth, the agency weighed those 

costs and benefits vis-a`-vis the need of 

the nation to conserve energy for 

reasons that include increasing energy 

independence and security and 

protecting the environment and 

compared the results for a wide variety 

of alternatives as discussed in Chapter 

X. 

• NHTSA tentatively concludes that 

it has exercised sound judgment and 

discretion in considering degrees of 

technology utilization and degrees of 

risk, and has appropriately balanced 

these considerations against estimates of 

the resultant costs and benefits to 

society, thereby arriving at standards 

that represent the maximum feasible 

standards as required by EPCA. The 

agency invites comment regarding 

whether it has struck a proper balance 

and, if not, how it should do so. 

VII. Standards for Commercial 

Medium- and Heavy-Duty On-Highway 

Vehicles and ‘‘Work Trucks’’ 

NHTSA is not promulgating standards 

for commercial medium- and heavyduty on-highway vehicles or ‘‘work 

trucks’’ 190 as part of this proposed rule. 

EISA added a new provision to 49 

U.S.C. 32902 requiring DOT, in 

consultation with the Department of 

Energy and the EPA, to examine the fuel 

efficiency of commercial medium- and 

heavy-duty on-highway vehicles and 

work trucks, and determine the 

appropriate test procedures and 

methodologies for measuring the fuel 

efficiency of these vehicles, as well as 

the appropriate metric for measuring 

and expressing their fuel efficiency 

performance and the range of factors 

that affect their fuel efficiency. This 

study would need to be performed 

within 1 year of the publication of the 

NAS study required by section 108 of 

EISA.191

Within 2 years of the completion of 

the study, DOT would need to 

undertake rulemaking to ‘‘determine’’


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192 49 U.S.C. 32902(k)(2). 

193 49 U.S.C. 32902(k)(2) and (3). 

194 42 FR 38362, 38365–67; July 28, 1977. 

195 Id. 38366. 

196We stated that ‘‘the word ‘primarily’ has two 

ordinary, everyday meanings in legal usage—

‘chiefly’ and ‘substantially.’ ’’ See Board of 

Governors of the Federal Reserve System v. Agnew, 

329 U.S. 441, 446 (1947). 

197 42 FR 38362, 38365 (Jul. 28, 1977). 

198 Id. at 38365–66. 

199 Id. at 38366. 

200The Vehicle Safety Act distinguished between 

‘‘passenger cars’’ and ‘‘trucks.’’

201 42 FR 38362, 38366. 

202 Id. 

203We note that the 2003 ANPRM that preceded 

the 2006 CAFE rule incorrectly summarized the 

agency’s review of the legislative history in the late 

1970s. The 2003 ANPRM erroneously stated that 

Congress intended that passenger automobiles be 

defined as those used primarily for the transport of 

individuals. 68 FR 74926 (Dec. 29, 2003) 

204 Id. at 38367. 

* * * how to implement a commercial 

medium- and heavy-duty on-highway 

vehicle and work truck fuel efficiency 

improvement program designed to 

achieve the maximum feasible 

improvement, and * * * adopt and 

implement appropriate test methods, 

measurement metrics, fuel economy 

standards, and compliance and 

enforcement protocols that are 

appropriate, cost-effective, and 

technologically feasible’’ for these 

vehicles.192 EISA also requires a fouryear lead time for fuel economy 

standards promulgated under this 

section, and would allow separate 

standards to be prescribed for different 

classes of vehicles.193

VIII. Vehicle Classification 

A. Origins of the Regulatory Definitions 

NHTSA developed the regulatory 

definitions for passenger cars and light 

trucks based on our interpretation of 

EPCA’s language and of Congress’ intent 

as evidenced through the legislative 

history. The statutory language is clear 

that some vehicles must be passenger 

automobiles and some must be nonpassenger automobiles. Passenger 

automobiles were defined as ‘‘any 

automobile (other than an automobile 

capable of off-highway operation) which 

the Secretary [i.e., NHTSA] decides by 

rule is manufactured primarily for use 

in the transportation of not more than 

10 individuals.’’ EPCA § 501(2), 89 Stat. 

901. 

Thus, under EPCA, there are two 

general groups of automobiles that 

qualify as non-passenger automobiles: 

(1) Those defined by NHTSA in its 

regulations as other than passenger 

automobiles due to their having not 

been manufactured ‘‘primarily’’ for 

transporting up to ten individuals; and 

(2) those expressly excluded from the 

passenger category by statute due to 

their capability for off-highway 

operation regardless of whether they 

were manufactured primarily for 

passenger transportation. NHTSA’s 

classification rule directly tracks those 

two broad groups of non-passenger 

automobiles in subsections (a) and (b), 

respectively, of 49 CFR 523.5. 

EPCA also defined vehicle ‘‘capable of 

off-highway operation’’ as one that 

NHTSA decides by regulation: 

has a ‘‘significant feature’’ (other than 4- 

wheel drive) which is designed to equip such 

automobile for off-highway operation, and 

either (i) is a 4-wheel drive automobile or (ii) 

is rated at more than 6,000 pounds gross 

vehicle weight.’’

Thus under the statute, any vehicle 

that has a ‘‘significant feature’’ and also 

is either 4-wheel drive or over 6,000 lbs 

GVWR can never be a passenger vehicle. 

Generally speaking, the ‘‘significant 

feature’’ that NHTSA’s regulation 

focuses on relates to high ground 

clearance. EPCA does not prohibit us 

from choosing other or additional 

significant features, but Congress has 

had multiple opportunities to disagree 

with our interpretation and has not 

done so. 

In its final rule establishing its vehicle 

classification regulation, NHTSA noted 

the ambiguity of the statutory 

definitions of ‘‘automobile’’ and 

‘‘passenger automobile’’ and considered 

at length the legislative history of those 

definitions.194 The agency concluded 

that ‘‘* * * both houses of Congress 

had expressed an intent that vehicles 

classed by EPA as light duty vehicles be 

subject to average fuel economy 

standards separate from the standards 

imposed on passenger cars.’’195 The 

agency thus found it necessary to 

analyze what Congress meant by 

‘‘primarily.’’

In establishing 49 CFR part 523 in the 

1970s, we determined that Congress 

intended ‘‘primarily’’ to mean ‘‘chiefly’’

[or firstly, in the first place], not 

‘‘substantially’’ [or largely, in large 

part],196 for two main reasons. First, if 

‘‘primarily’’ meant ‘‘substantially’’ or 

‘‘in large part,’’ ‘‘then almost every 

automobile would be a passenger 

automobile, since a substantial function 

of almost all automobiles is to transport 

at least two persons. The only nonpassenger automobiles under this 

interpretation would be those 

specifically excluded by the definition 

*** ’’197 Because Congress gave 

NHTSA authority to develop the 

definitions by regulation, it did not 

make sense to read ‘‘primarily’’ as 

limiting the category of non-passenger 

automobiles to just those specifically 

excluded by the precise language of the 

statute. 

And second, we concluded that 

considering ‘‘primarily’’ ‘‘against a 

legislative backdrop of other statutes 

using the identical phrase, and the 

remedial purposes of this Act,’’ justified 

a broad interpretation of ‘‘non-passenger 

automobile.’’198 The remedial purposes 

of EPCA—to improve fuel efficiency and 

increase fuel savings—do not require all 

vehicles to be classified as passenger 

automobiles. Since non-passenger 

automobile CAFE standards must still 

be set at the maximum feasible level, 

fuel economy of all vehicles would be 

improved regardless of how the vehicles 

were classified.199 Additionally, 

interpreting ‘‘non-passenger 

automobile’’ broadly was determined to 

be consistent with the Vehicle Safety 

Act 200 and EPA emissions regulations 

promulgated under the Clean Air Act. A 

broad interpretation of ‘‘non-passenger 

automobile’’ served to ‘‘minimize the 

possibility of inconsistent regulatory 

requirements.’’201 And finally, 

analyzing the legislative history, 

NHTSA concluded that ‘‘By using 

existing terms with existing applications 

[such as ‘‘light duty truck’’ as used by 

EPA], Congress gave a clear indication 

of the types of automobiles that were 

intended to be treated separately from 

passenger automobiles.’’202 203

Thus, as NHTSA developed the 

regulatory definitions, we kept these 

indications from Congress in mind, 

which resulted in four basic types of 

non-passenger automobiles: 

(1) Automobiles designed primarily to 

transport more than 10 persons. 

As a practical matter, this category 

basically encompasses large passenger vans. 

(2) Automobiles designed primarily for 

purposes of transportation of property. 

NHTSA has included in this category 

both vehicles with open beds like 

pickup trucks, and vehicles which 

provide greater cargo-carrying than 

passenger-carrying volume. As we 

stated in the 1977 final rule, pickup 

trucks are not ‘‘manufactured chiefly to 

transport individuals, since well over 

half of the available space on those 

automobiles consists of the cargo bed, 

which is exclusively cargo-carrying 

area. Further, this type of automobile is 

designed to carry heavy loads.’’ 204

Regarding vehicles which provide 

greater cargo-carrying than passengercarrying volume, we stated that ‘‘Since 

more of the space inside the vehicle has 

been dedicated to transporting cargo, 

and such vehicles are typically designed 

to carry heavy loads, this agency 


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205EPA included pickup trucks as ‘‘light duty 

trucks,’’ and the Senate bill which became EPCA 

used EPA’s definition of light duty trucks as 

examples of vehicles that would be non-passenger 

automobiles. 42 FR 38362, 38366 (Jul. 28, 1977). 

206 Id. 38367. 

207 In 1981, General Motors asked NHTSA 

whether a 2-wheel drive utility vehicle would be 

properly classified as a light truck as long as the 

cargo-carrying volume exceeded the passengercarrying volume. We agreed in a letter of 

interpretation responding to GM that ‘‘two-wheel 

drive utility vehicles which are truck derivatives 

and which, in base form, have greater cargocarrying volume than passenger-carrying volume 

should be classified as light trucks for fuel economy 

purposes.’’ (Emphasis added.) This letter of 

interpretation indicates that in order to be properly 

classified as a light truck under § 523.5(a)(4), a 2- 

wheel drive SUV must have greater cargo-carrying 

volume than passenger-carrying volume ‘‘in base 

form.’’ Base form means the version of the vehicle 

sold as ‘‘standard,’’ without optional equipment 

installed, and does not include a version that would 

meet the cargo volume criterion only if ‘‘delete 

options’’ were exercised to remove standard 

equipment. For example, a base vehicle that comes 

equipped with a standard second-row seat would 

not be classified as a light truck merely because the 

purchaser has an option to delete the second-row 

seat. 

concludes that the chief consideration 

in designing the vehicle was the ability 

to transport property.’’ This included, 

for example, cargo vans and multistop 

vehicles. 

(3) Automobiles which are derivatives of 

automobiles designed primarily for the 

transportation of property. 

This could include vehicles in which 

the cargo-carrying area has been 

converted to provide temporary living 

quarters, because they would typically 

be a derivative of a cargo van or a 

pickup truck. Additionally, these could 

include a passenger van with seating 

positions for less than 10 people. Such 

a vehicle would be basically a cargo van 

with readily removable seats, so 

removing the seats would create more 

cargo-carrying than passenger-carrying 

volume. These vehicles would be 

distinguished from station wagons, 

which have seats that can fold down to 

create a flat cargo space, but are not 

‘‘derivatives,’’ in that their parent 

vehicle is not a non-passenger 

automobile, and do not have the same 

chassis, springs, or suspension system 

as a non-passenger automobile. 

(4) Automobiles which are capable of offhighway operation. 

NHTSA generally defines ‘‘capable of 

off-highway operation’’ as meeting the 

high ground clearance characteristics of 

§ 523.5(b)(2) and either having 4-wheel 

drive or being rated at more than 6,000 

pounds gross vehicle weight, or both. 

We note that a vehicle is considered as 

having 4-wheel drive only if it is 

manufactured with 4-wheel drive. The 

fact that the same model is available in 

4-wheel drive would not be sufficient to 

classify a 2-wheel drive vehicle as one 

that ‘‘has’’ 4-wheel drive under 

§ 523.5(b)(1)(i). 

B. The Rationale for the Regulatory 

Definitions in Light of the Current 

Automobile Market 

The categories listed above make up 

the various criteria which allow 

classification of a vehicle as a light truck 

under Part 523. However, as the 2002 

NAS Report noted, the national vehicle 

market has evolved, and the fleets have 

changed. Until the passage of the Energy 

Independence and Security Act of 2007, 

Congress had provided no further 

insight since EPCA’s enactment into 

how new types of vehicles that have 

developed since the 1970s should be 

classified. NHTSA had to classify these 

vehicles based on the words of the 

statute and on its own interpretation of 

what Congress appears to have wanted. 

The following section identifies the 

main vehicle types currently classified 

as light trucks, and explains the 

agency’s reasoning for each. 

Pickup trucks were among the 

original automobiles identified by 

Congress in EPCA’s legislative history as 

vehicles that would not be passenger 

automobiles.205 As mentioned earlier, 

we originally identified automobiles 

‘‘which can transport property on an 

open bed’’ as ones ‘‘not manufactured 

chiefly to transport individuals, since 

well over half of the available space on 

those automobiles consists of the cargo 

bed, which is exclusively cargo carrying 

area.’’ 206 We stated further that ‘‘this 

type of automobile is designed to carry 

heavy loads,’’ and is therefore properly 

a non-passenger automobile or light 

truck. 

NHTSA recognizes that pickup trucks 

have evolved since the 1970s, and that 

some now come with extended cabs for 

extra passenger room and smaller open 

beds. These features, however, do not 

change the fact that pickup trucks are 

designed to carry loads. Moreover, even 

with an extended cab and a smaller 

open bed, the fact that the open bed is 

still present indicates to us that the 

vehicle was manufactured chiefly for 

transporting cargo. If the manufacturer 

intended the vehicle’s first purpose to 

be the carrying of passengers, it could 

have enclosed the entire vehicle. Thus, 

as 49 CFR 523.5(a)(3) indicates, a 

pickup truck with an open bed is to be 

classified as a light truck regardless of 

any other features it may possess. 

Sport utility vehicles (SUVs), which 

possess a substantial market share 

today, had not yet developed when 

EPCA was enacted or when NHTSA first 

promulgated Part 523, although their 

forebears like the AMC Jeep and other 

off-road and military style vehicles were 

known at the time. These vehicles 

originally tended to be classified as light 

trucks because they were capable of offhighway operation, and possessed either 

the necessary high ground clearance 

characteristics or 4-wheel drive or both. 

They may also be greater than 6,000 

pounds GVWR, and/or manufactured to 

permit expanded use of the automobile 

for cargo-carrying or other 

nonpassenger-carrying purposes. 

Part of the overall popularity of SUVs 

is due to the great variety of forms in 

which they are available. For example, 

consumer demand has led 

manufacturers to offer smaller SUVs 

(i.e., less than 6,000 pounds GVWR) 

with features such as the high ground 

clearance that many drivers enjoy. 

These vehicles may come with two or 

even three rows of seats as standard. If 

these smaller vehicles actually have 4- 

wheel drive and the requisite number of 

clearance characteristics, they would 

properly be classified as light trucks 

under § 523.5(b) without regard to 

functional considerations such as cargo 

volume. 

However, if these lighter vehicles (i.e., 

under 6,000 pounds) have 2-wheel 

drive, they would not qualify as light 

trucks under § 523.5(b) despite having 

the clearance characteristics. Such 

vehicles may nevertheless be classified 

as light trucks if they meet one or more 

of the functional criteria in § 523.5(a). 

For example, if a vehicle has three 

standard rows of seats, it should be 

classified in accordance with 

§ 523.5(a)(5)(ii), on the same basis as 

many minivans are currently 

classified—that it provides a certain 

minimum potential cargo-carrying 

capacity that NHTSA has believed is 

consistent with what Congress had in 

mind when it originally considered the 

distinction between passenger and nonpassenger automobiles. Alternatively, a 

2-wheel drive automobile may properly 

be classified as a light truck under 

§ 523.5(a)(4) if it provides ‘‘greater 

cargo-carrying than passenger-carrying 

volume’’ as discussed in one of 

NHTSA’s longstanding 

interpretations.207

Minivans are another general category 

of vehicles that essentially developed 

after the enactment of EPCA and the 

promulgation of Part 523 are minivans. 

Minivans are classified as light trucks 

under the ‘‘flat floor’’ provision of 

§ 523.5(a)(5), because their seats may be 

easily removed or folded down to create 

a large flat level surface for cargocarrying. The flat floor provision was 

originally based on the agency’s 


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208 42 FR 38362, 38367 (Jul. 28, 1977). 

209 45 FR 81593, 81599 (Dec. 11, 1980). 

determination that passenger vans with 

removable seats and a flat load floor 

were derived from cargo vans, and 

should therefore be classified as light 

trucks.208

In the preamble to the final rule 

establishing the MY 1983–1985 light 

truck fuel economy standards, in 

response to a comment by Chrysler, we 

explained that the regulations classified 

‘‘large passenger vans as light trucks 

based on the ability of passenger van 

users to readily remove the rear seats to 

produce a flat, floor level cargo-carrying 

space.’’ 209 Manufacturers generally 

responded to NHTSA’s statement by 

building compact passenger vans—i.e., 

minivans—with readily removable rear 

seats in order to qualify as light trucks 

under the flat floor provision. In short, 

because minivans often have removable 

seats and a flat floor, they have 

traditionally been classified as light 

trucks for fuel economy purposes. EPA 

also classifies minivans as light duty 

trucks for emissions purposes, as 

derivatives of light trucks. 

In recent years, many minivans have 

been designed with seats that fold down 

flat or into the floor pan, rather than 

being completely removable. In the 2006 

light truck CAFE final rule, NHTSA 

revised § 523.5(a)(5) to allow these 

minivans to continue to qualify for 

classification as light trucks, requiring 

‘‘vehicles equipped with at least 3 rows 

of seats’’ to be able to create a ‘‘flat, 

leveled cargo surface’’ instead of a ‘‘flat, 

floor level, surface.’’ We believe that this 

is consistent with Congress’ intent that 

vehicles manufactured with the capacity 

to permit expanded use of the 

automobile for cargo-carrying or other 

nonpassenger-carrying purposes be 

classified as light trucks. Minivans have 

this capacity just as passenger vans do. 

In order to distinguish them from other 

vehicles like station wagons that also 

arguably have this capacity, we require 

vehicles to have three rows of seats in 

order to qualify as light trucks on this 

basis. This helps to guarantee a certain 

amount of potential cargo-carrying 

volume, since manufacturers will not be 

able to fit an additional row of seats in 

a vehicle under a certain size. Congress 

did not specify how much cargo volume 

was necessary for a vehicle to be 

classified as a light truck. We believe 

that this requirement for light truck 

classification is both consistent with 

Congress’ intent that light trucks permit 

expanded use for cargo-carrying 

purposes, and accommodates the 

evolution of this section of the modern 

vehicle fleet. 

The latest vehicle type growing 

rapidly in the U.S. market today is the 

‘‘crossover’’ vehicle. Crossover vehicles 

are generally designed on passenger carlike platforms (unibody construction), 

but are also designed with the 

functionality of SUVs and minivans. 

Crossover vehicles blur the typical 

divisions between passenger cars, SUVs 

and minivans (higher ground clearance, 

two or three rows of seats, and varying 

amounts of cargo space). These vehicles 

can come in any shape or size, they may 

or may not look like traditional 

passenger cars, SUVs or minivans, and 

they may be available in a variety of 

drive configurations (2WD, 4WD, AWD, 

or some combination). As more and 

more of these vehicles become available 

it will become more difficult to 

categorize them into one particular 

vehicle category. The majority of 

existing crossover vehicles have been 

categorized by vehicle manufacturers as 

light trucks under section 523.5(b) if 

they are off-highway capable, or under 

section 523.5(a) due to their functional 

characteristics. NHTSA plans to 

continue to allow these vehicles to be 

classified as light trucks as long as they 

continue to meet the light truck 

classification requirements as specified 

in part 523. As with SUVs, when 

determining off road capability, a 

vehicle ‘‘has’’ 4-wheel drive (or AWD) if 

it is actually equipped with it; a 2-wheel 

drive vehicle is counted as a 2-wheel 

drive vehicle regardless of whether the 

same model is available in 4-wheel 

drive. Furthermore, when evaluating the 

functional capabilities against the 

requirements of section 523.5(a), 

vehicles should be classified by model, 

including all vehicles of a particular 

model. When the light truck 

determination is made based upon the 

functional characteristics requirements 

of section 523.5(a), the base or standard 

vehicle (vehicle with no options) is used 

to classify the associated model. For 

example, if a vehicle model does not 

come standard with a third row of seats, 

but can be purchased with an optional 

third row seat, the vehicle, and all the 

vehicles within that model line, cannot 

be classified as a light truck under 

523.5(a)(5), which requires vehicles to 

be equipped, as standard equipment, 

with at least 3 rows of seats and able to 

create a ‘‘flat, leveled cargo’’ surface. 

C. NHTSA Is Not Proposing To Change 

the Regulatory Definitions at This Time 

As explained above, NHTSA’s 

regulations defining vehicle 

classifications for fuel economy 

purposes (49 CFR part 523) are based on 

the underlying statute. We continue to 

believe that they are valid, as discussed 

above. In addition, EISA Congress 

specifically addressed the vehicle 

classification issue. It redefined 

‘‘automobile,’’ added a definition of 

‘‘commercial medium- and heavy-duty 

on-highway vehicle,’’ defined nonpassenger automobile and defined 

‘‘work truck.’’ Significantly, it did not 

change other definitions and its new 

definition of ‘‘non-passenger 

automobile,’’ which is most relevant in 

this context, in no way contradicted 

how NHTSA has long construed that 

term. In enacting EISA, Congress 

demonstrated its full awareness of how 

NHTSA classifies vehicles for fuel 

economy purposes and chose not to 

alter those classifications. That strongly 

suggests Congressional approval of the 

agency’s 30-year approach to vehicle 

classification. 

Accordingly, other than by 

incorporating EISA’s new and revised 

definitions, we are not proposing to 

change the agency’s regulations defining 

vehicle classification. Congress has 

indicated no need for us to do so and 

such changes would not help achieve 

Congress’ objectives. 

Moreover, Congress has given clear 

direction that overall objectives must be 

obtained regardless of vehicle 

classification. The EISA adds a 

significant requirement to EPCA—the 

combined car and light truck fleet must 

achieve at least 35 mpg in the 2020 

model year. Thus, regardless of whether 

the entire fleet is classified as cars or 

light trucks, or any proportion of each, 

the result must still be a fleet 

performance of at least 35 mpg in 2020. 

This suggests that Congress did not 

want to spend additional time on the 

subject of whether vehicles are cars or 

light trucks. Instead, Congress focused 

on mandating fuel economy 

performance, regardless of 

classifications. 

With respect to the impact on fuel 

savings, our tentative conclusion is that 

moving large numbers of vehicles from 

the light truck to the passenger car 

category would not increase fuel savings 

or stringency of the standards. Under a 

Reformed attribute-based CAFE system, 

passenger car and light truck CAFE 

standards will simply be reoptimized if 

vehicles are moved from one category to 

another. To the extent that some 

relatively fuel-efficient vehicles are 

moved out of the light truck category, 

the optimization for the remainder of 

the group would likely result in lower 

standards, because there would now be 

fewer higher performers in the light 

truck category. However, when these 

trucks are moved into the car category, 

they are likely to be less fuel-efficient 

than similarly sized cars. Thus, 


rwilkins on PROD1PC63 with PROPOSALS2
Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 24461 

210Federal Civil Penalties Inflation Adjustment 

Act of 1990, 28 U.S.C. 2461 note, as amended by 

the Debt Collection Improvement Act of 1996, Pub. 

L. 104–134, 110 Stat. 1320, § 31001(s). 211 49 U.S.C. 32912(c). 

212The credit provision (currently codified at 49 

U.S.C. 32903) was originally section 508 of EPCA’s 

Public Law version. 

213NAS, Finding 11, 113. 

including those vehicles could well drag 

down the optimized targets for the car 

category. Preliminary analyses have 

suggested that this is what happens, but 

the agency specifically requests 

comments on this and any supporting 

data for the commenter’s position. 

Further, since EISA now permits 

manufacturers to transfer CAFE credits 

earned for their passenger car fleet to 

their light truck fleet and vice versa, it 

makes even less difference how a 

vehicle is classified, because the benefit 

a manufacturer gets for exceeding a 

standard may be applied anywhere. If 

there is no fuel savings benefit to be 

gained from revising the regulatory 

definitions, NHTSA does not see how 

doing so would facilitate achieving 

EPCA’s overarching goal of improving 

fuel savings. Although NHTSA does not 

propose to change the vehicle 

classification standards, the agency does 

intend to apply those definitions strictly 

and in accordance with agency 

interpretations, as set out above, and the 

standards presented in the final rule 

will reflect this. NHTSA seeks comment 

on its reading of the statute with regard 

to vehicle classification and its decision 

not to change its definitions. 

IX. Enforcement 

A. Overview 

NHTSA’s enforcement under the 

CAFE program essentially consists of 

gauging a manufacturer’s compliance in 

each model year with the passenger car 

and light truck standards against their 

credit status. If a manufacturer’s average 

miles per gallon for a given fleet falls 

below the relevant standard, and the 

manufacturer cannot make up the 

difference by using credits earned 

previously or anticipated to be earned 

for over-compliance, the manufacturer 

is subject to penalties. The penalty, as 

adjusted for inflation by law,210 is $5.50 

for each tenth of a mpg that a 

manufacturer’s average fuel economy 

falls short of the standard for a given 

model year multiplied by the total 

volume of those vehicles in the affected 

fleet (i.e., import or domestic passenger 

car, or light truck), manufactured for 

that model year. NHTSA has collected 

$735,422,635.50 to date in CAFE 

penalties, the largest ever being paid by 

DaimlerChrysler for its MY 2006 import 

passenger car fleet, $30,257,920.00. For 

their MY 2006 fleets, six manufacturers 

paid CAFE fines for not meeting an 

applicable standard—Ferrari, Maserati, 

BMW, Porsche, Volkswagen, and 

DaimlerChrysler—for a total of 

$43,170,896.50. 

EPCA authorizes increasing the civil 

penalty up to $10.00, exclusive of 

inflationary adjustments, if NHTSA 

decides that the increase in the 

penalty—

(i) Will result in, or substantially further, 

substantial energy conservation for 

automobiles in model years in which the 

increased penalty may be imposed; and 

(ii) Will not have a substantial deleterious 

impact on the economy of the United States, 

a State, or a region of a State.211

The agency requests comment on 

whether it should initiate a proceeding 

to consider raising the civil penalty. 

Paying civil penalties represents a 

substantial less expensive alternative to 

installing fuel saving technology in 

order to achieve compliance with the 

CAFE standards or buying credits from 

another manufacturer. (See discussion 

of credit trading below.) 

Manufacturers can earn CAFE credits 

to offset deficiencies in their CAFE 

performances under 49 U.S.C. 32903. 

Specifically, when the average fuel 

economy of either the domestic or 

imported passenger car or light truck 

fleet for a particular model year exceeds 

the established standard for that 

category of vehicles, the manufacturer 

earns credits. The amount of credit a 

manufacturer earns is determined by 

multiplying the tenths of a mile per 

gallon that the manufacturer exceeded 

the CAFE standard in that model year 

by the number of vehicles in that 

category it manufactured in that model 

year. Credits are discussed at much 

greater length in the section below. 

NHTSA begins to determine CAFE 

compliance by considering pre- and 

mid-model year reports submitted by 

manufacturers pursuant to 49 CFR part 

537, Automotive Fuel Economy Reports. 

The reports for the current model year 

are submitted to NHTSA every 

December and July. Although the 

reports are used for NHTSA’s reference 

only, they help the agency, and the 

manufacturers who prepare them, 

anticipate potential compliance issues 

as early as possible, and help 

manufacturers plan compliance 

strategies. 

NHTSA makes its ultimate 

determination of manufacturers’ CAFE 

compliance based on EPA’s official 

calculations, which are in turn based on 

final model year data submitted by 

manufacturers to EPA pursuant to 40 

CFR 600.512, Model Year Report, no 

later than 90 days after the end of the 

calendar year. EPA then verifies the data 

submitted by manufacturers and issues 

final CAFE reports to manufacturers and 

to NHTSA between April and October of 

each year (for the previous model year). 

NHTSA identifies the manufacturers’

fleets that have failed to meet the 

applicable CAFE fleet standards, and 

issues enforcement letters to 

manufacturers not meeting one or more 

of the standards. Letters are generally 

issued within one to two weeks of 

receipt of EPA’s final CAFE reports. 

For the enforcement letters, NHTSA 

calculates a cumulative credit status for 

each of a manufacturer’s vehicle 

categories according to 49 U.S.C. 32903. 

If sufficient credits are available, 

NHTSA determines a carry-forward 

credit allocation plan. If the 

manufacturer does not have enough 

credits to offset the shortfall, NHTSA 

requests payment of a corresponding 

civil penalty unless the manufacturer 

submits a carry-back credit allocation 

plan. We note that any penalties paid 

are paid to the U.S. Treasury and not to 

NHTSA itself. 

After enforcement letters are sent, 

NHTSA continues to monitor civil 

penalty payments that are due within 60 

days from the date of receipt of the letter 

by the vehicle manufacturer, and takes 

further action if the manufacturer is 

delinquent in payment. NHTSA also 

monitors receipt of carry-back plans 

from manufacturers who choose this 

compliance alternative. Plans are 

required within 60 days from the date 

of receipt of the enforcement letter by 

the vehicle manufacturer. 

B. CAFE Credits 

The ability to earn and apply credits 

has existed since EPCA’s original 

enactment,212 but the issue of the ability 

to trade credits, i.e., to sell credits to 

other manufacturers or buy credits from 

them, was first raised in the 2002 NAS 

Report. NAS found that 

changing the current CAFE system to one 

featuring tradable fuel economy credits and 

a ‘‘cap’’ on the price of these credits appears 

to be particularly attractive. It would provide 

incentives for all manufacturers, including 

those that exceed the fuel economy targets, 

to continually increase fuel economy, while 

allowing manufacturers flexibility to meet 

consumer preferences.213

After receiving the 2002 NAS Report, 

Secretary of Transportation Mineta 

wrote to Congress asking for authority to 

implement all of NAS’’

recommendations. 

While waiting for that express 

authority, NHTSA raised the issue of 


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24462 Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 

214 67 FR 5767, 5772 (Feb. 7, 2002). 

215 68 FR 74908, 74915–16 (Dec. 29, 2003). 

216 Id. 

217 70 FR 51414, 51439–40 (Aug. 30, 2005). 

218 71 FR 17566, 17616 (Apr. 6, 2006). 

219 Id. 17653–54. 

220Transcript available at http:// 

commerce.senate.gov/public/ 

index.cfm?FuseAction=Hearings.Testimony

Hearing_ID=1827_Witness_ID=2362 (last accessed 

Feb. 2, 2008). 

221 49 U.S.C. 32903(f)(1). 

222 49 U.S.C. 32903(f)(2). 223 49 U.S.C. 32903(f)(1). 

credit trading in both its 2002 Request 

for Comments 214 and its 2003 

ANPRM.215 The initial response to the 

idea was mixed: environmental and 

consumer groups expressed concern 

that vehicle manufacturers would use a 

credit trading system in lieu of 

increasing fuel economy to meet the 

CAFE standards, while vehicle 

manufacturers generally supported the 

prospect of increased flexibility in the 

CAFE program.216 However, without 

clear authority to implement a credit 

trading program, NHTSA was unable to 

take further action at the time. 

NHTSA raised the issue of credit 

transfer, i.e., the application of credits 

earned by manufacturer in one 

compliance category to another 

compliance category, in its 2005 

NPRM 217 and 2006 final rule for the MY 

2008–11 light truck standards, but 

concluded that it would interfere with 

the transition to Reformed CAFE by 

making it more difficult for 

manufacturers to determine their 

compliance obligations.218 The 2006 

final rule also stated that the agency 

would not adopt a credit trading 

program, again on the basis that its 

authority to do so was unclear.219

However, NHTSA submitted several 

draft bills to Congress during this time 

period and after, most recently in 

February 2007. In an address to the 

Senate Committee on Commerce, 

Science, and Transportation on March 

6, 2007 regarding the February 2007 bill, 

Administrator Nason stated that credit 

trading was a ‘‘natural extension’’ of the 

existing EPCA credit framework, and 

that trading would be ‘‘purely 

voluntary, and [that] we believe[d] it 

will help lower the industry’s cost of 

complying with CAFE.’’ 220

EISA provided express authority for 

both credit trading and transferring and 

made other changes as well to EPCA 

regarding credits: 

• Authorizing the establishment of a 

credit trading program; 

• Requiring the establishment of a 

credit transferring program; and 

• Extending the carry-forward period 

from 3 to 5 years. 

NHTSA has developed a proposal for 

a new Part 536 setting up these two 

credit programs. We believe that our 

proposal is consistent with Congress’

intent. The agency seeks comment 

generally on the following three topics 

with respect to the proposed Part 536: 

(1) Whether the agency has correctly 

interpreted Congress’ intent; (2) whether 

there are any ways to improve the 

proposed credit trading and transferring 

system consistent with EISA and 

Congress’ intent that the agency might 

have overlooked; and (3) whether any of 

the aspects of the programs proposed by 

the agency are either inconsistent with 

EISA and Congress’ intent or the rest of 

the CAFE regulations, or are otherwise 

unworkable. The following section 

describes the proposed credit trading 

and transfer programs, as well as several 

other related ideas that the agency is 

considering. 

1. Credit Trading 

EPCA, as amended by EISA, states 

The Secretary of Transportation [by 

delegation, the Administrator of NHTSA] 

may establish by regulation a fuel economy 

credit trading program to allow 

manufacturers whose automobiles exceed the 

average fuel economy standards prescribed 

under section 32902 to earn credits to be sold 

to manufacturers whose automobiles fail to 

achieve the prescribed standards such that 

the total oil savings associated with 

manufacturers that exceed the prescribed 

standards are preserved when trading credits 

to manufacturers that fail to achieve the 

prescribed standards.221

EISA also prevents traded credits from 

being used by a manufacturer to meet 

the minimum fuel economy standard for 

domestically-manufactured passenger 

cars.222

Proposed new part 536 would permit 

credit trading, beginning with credits 

earned in MY 2011. Although only 

manufacturers may earn credits and 

apply them toward compliance, NHTSA 

would allow credits to be purchased 

and traded by both manufacturers and 

non-manufacturers in order to facilitate 

greater flexibility in the credit market. 

NHTSA proposes that credit trading 

be conducted as follows: If a credit 

holder wishes to trade credits to another 

party, the current credit holder and the 

receiving party must jointly issue an 

instruction to NHTSA, identifying the 

specific credits to be traded by quantity, 

vintage (model year of origin), 

compliance category of origin (domestic 

passenger cars, imported passenger cars, 

or light trucks), and originating 

manufacturer. These identification 

requirements are intended to help 

ensure accurate calculation for 

preserving total oil savings. If the credit 

recipient is not already an account 

holder, it must provide sufficient 

information for NHTSA to establish an 

account for them. Once an account has 

been established or identified, NHTSA 

will complete the trade by debiting the 

transferor’s account and crediting the 

recipient’s account. NHTSA will track 

the quantity, vintage, compliance 

category, and originator of all credits 

held or traded by all account-holders. 

Manufacturers need not restrict their 

use of traded credits to the compliance 

category from which the credits were 

earned. However, if a manufacturer 

wishes to transfer a credit received by 

trade to another compliance category, it 

must instruct NHTSA of its intention so 

that NHTSA can apply an adjustment 

factor in order to preserve ‘‘total oil 

savings,’’ as required by EISA.223 EISA 

requires total oil savings to be preserved 

because one credit is not necessarily 

equal to another, as Congress realized. 

For example, the fuel savings lost if the 

average fuel economy of a manufacturer 

falls one-tenth of a mpg below the level 

of a relatively low standard are greater 

than the fuel savings gained by raising 

the average fuel economy of a 

manufacturer one-tenth of a mpg above 

the level of a relatively high CAFE 

standard. 

Table IX–1 shows a simple numerical 

example of this on an individual vehicle 

level. Vehicle A has a fuel economy of 

30 mpg and is driven 150,000 miles over 

its lifetime, consuming 5,000 gallons of 

fuel. Increasing the fuel economy of 

vehicle A by one mpg lowers the 

lifetime fuel consumption by 161 

gallons to 4,839 gallons. Vehicle B has 

a fuel economy of 15 mpg and is driven 

150,000 miles over its lifetime, 

consuming 10,000 gallons of fuel. 

Increasing the fuel economy of vehicle 

B by one mpg lowers the lifetime fuel 

consumption by 625 gallons to 9,375 

gallons. Both vehicles’ fuel economy 

rises by the same amount, one mpg, but 

much more fuel is saved by vehicle B 

because it uses much more gas per mile 

than does vehicle A. 


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TABLE IX–I.—COMPARISON OF FUEL SAVINGS AT DIFFERENT FUEL ECONOMY BASELINES

Vehicle A Vehicle B 

Lifetime Miles Driven ............................................................................................................................................... 150,000 150,000 

Initial Fuel Economy ................................................................................................................................................ 30 15 

Initial Lifetime Fuel Consumption ............................................................................................................................ 5,000 10,000 

Final Fuel Economy ................................................................................................................................................. 31 16 

Final Lifetime Fuel Consumption ............................................................................................................................. 4,839 9,375 

Savings .................................................................................................................................................................... 161 625 

To preserve total oil savings in credit 

trading, NHTSA would apply an 

adjustment factor to traded credits. 

More specifically, the agency would 

multiply the value of each credit (with 

a nominal value of 0.1 mpg per vehicle) 

by an adjustment factor calculated by 

the following formula: 

/

* .

*

A

VMTe

MPGe MPGe

VMTu

MPGu

=





 



 − −





 



 



 









 



 −

1 1

0 1

1 1

MPGu − 0 1





 



 



 



























 .

Where: 

A = adjustment factor applied to traded 

credits by multiplying mpg for a 

particular credit; 

VMTe = lifetime vehicle miles traveled for 

the compliance category in which the 

credit was earned (152,000 miles for 

domestic and imported passenger cars; 

179,000 miles for light trucks); 

VMTu = lifetime vehicle miles traveled for 

the compliance category in which the 

credit is used for compliance (152,000 

miles for domestic and imported 

passenger cars; 179,000 miles for light 

trucks); 

MPGe = fuel economy standard for the 

originating manufacturer, compliance 

category, and model year in which the 

credit was earned; 

MPGu = fuel economy standard for the 

manufacturer, compliance category, and 

model year in which the credit will be 

used. 

The effect of applying this formula 

would be to increase the value of credits 

that were earned for exceeding a 

relatively low CAFE standard and are to 

be applied to a compliance category 

with a relatively high CAFE standard 

and decrease the value of credits that 

were earned for exceeding a relatively 

high CAFE standard and are to be 

applied to a compliance category with a 

relatively low CAFE standard. NHTSA 

is proposing to use the fuel economy 

standard in the formula rather than the 

actual fuel economy or some average of 

the two, primarily because we believe it 

will be more predictable for credit 

holders and traders. However, we seek 

comment on those two alternatives, 

since they may be more precise in their 

ability to account for fuel savings. 

Congress also restricted the use of 

credit trading in EISA by providing that 

manufacturers must comply with the 

minimum domestic passenger car 

standard specified in 49 U.S.C. 

32902(b)(4) without the aid of credits 

obtained through trading. The minimum 

standard equals the greater of 27.5 mph 

or 92 percent of the projected average 

fuel economy level for all passenger cars 

for the model year in question. 49 U.S.C. 

32903(f)(2) states that trading and 

transferring of credits to the domestic 

passenger car compliance category are 

limited to the extent that the fuel 

economy of such automobiles shall 

comply with the minimum standard 

without regard to trading or transferring 

of credits from other compliance 

categories. Thus, our proposed credit 

trading regulation prevents the use of 

traded credits to comply with the 

minimum domestic passenger car 

standard. 

In developing this regulation, NHTSA 

has proposed additional restrictions on 

the use of credits as necessary for 

consistency with Congress’ intent in 

EISA. For example, a credit that has 

been traded and is then traded back to 

the originating manufacturer is deemed 

never to have been traded, to avoid 

manufacturers gaining value from the 

same credit twice. 

2. Credit Transferring 

If a credit holding manufacturer 

wishes to transfer credits that it has 

earned, it need simply instruct NHTSA 

which credits to transfer to which 

alternate compliance category, 

identifying the quantity, vintage, and 

original compliance category in which 

the credits were earned. NHTSA will 

then transfer the credits. As explained 

above, if a credit holding manufacturer 

wishes to transfer credits that it has 

received by trade, it must similarly 

instruct NHTSA. NHTSA will apply an 

adjustment factor to the traded credits to 

ensure, pursuant to EISA, that total oil 

(fuel) savings are preserved. 

Credit transfers are limited by EISA 

both in the extent to which they may 

increase a manufacturer’s average fuel 

economy in a compliance category, and 

when they may be begun to be used. 

Section 32903(g)(3) states that a 

manufacturer’s average fuel economy in 

a compliance category cannot be 

increased through the use of transferred 

credits by more than 1 mpg in MYs 

2011–2013, more than 1.5 mpg in MYs 

2014–2017, or more than 2 mpg in MYs 

2018 and after. Section 32903(g)(5) also 

states that credits can only be 

transferred if they are earned after MY 

2010. Our proposed credit transferring 

regulation reflects these limitations. 

Congress also restricted the use of 

credit transferring in EISA by providing 

that manufacturers must comply with 

the minimum domestic passenger car 

standard without the aid of credits 

obtained through transfer. 49 U.S.C. 

32903(g)(4) states that transferring of 

credits to the domestic passenger car 

compliance category is limited to the 

extent that the fuel economy of such 

automobiles shall comply with the 

minimum standard without regard to 

transferring of credits from other 

compliance categories. Thus, our 

proposed credit transferring regulation 

prevents the use of transferred credits to 

comply with the minimum domestic 

passenger car standard. 

NHTSA is proposing to denominate 

credits in miles per gallon (mpg), not in 

gallons. NHTSA requests comments, 

however, on whether transferred credits 


rwilkins on PROD1PC63 with PROPOSALS2EP02MY08.033</GPH>
24464 Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 

224NHTSA previously addressed this issue in the 

2006 final rule establishing CAFE standards for MY 

2008–2011 light trucks. See 71 FR 17566, 17616. 

225EISA’s effective date was December 20, 2007; 

the 2008 model year began on October 1, 2007. 226 49 U.S.C. 32906. 227 71 FR 17566, 17669–70; April 6, 2006. 

should be denominated in gallons, 

because doing so would ensure that no 

transfers result in any loss of fuel 

savings or in a missed opportunity to 

reduce CO2 emissions.224 The risk of 

fuel savings loss can be illustrated by 

the following example. Suppose there 

were a manufacturer that produces the 

same number of automobiles in two 

different compliance categories. Each of 

the two categories is required to meet 

the same level of CAFE. If the 

manufacturer exceeds the standard for 

one category by one mile per gallon and 

falls short of the other standard by the 

same amount, the additional fuel saved 

by the automobiles subject to the first 

standard would be less than the 

additional fuel consumed by the 

automobiles subject to the second 

standard. The risk is even greater if the 

example is changed so that the 

standards are different and the 

manufacturer exceeds the higher 

standard and falls short of the lower 

standard. 

3. Credit Carry-Forward/Carry-Back 

Credit lifespan has always been 

dictated by statute. A manufacturer may 

only use credits for a certain number of 

model years before and after the year in 

which it was earned. Congress intended 

credits to provide manufacturers greater 

compliance flexibility, but did not wish 

that flexibility to be so great as to 

obviate the need to continue improving 

fleet fuel economy. Before EISA’s 

enactment, EPCA permitted credits to be 

used for 3 model years before and after 

the model year in which a credit was 

earned; EISA extended the ‘‘carryforward’’ time to 5 model years. Because 

EISA was enacted in the middle of 

model year 2008,225 NHTSA concluded 

that the best interpretation of this 

change in lifespan was to apply it only 

to vehicles manufactured in or after MY 

2009; the alternative of finding some 

way to prorate the change in lifespan 

presents considerable administrative 

difficulties, especially since credits are 

denominated by year of origin, not 

month and year of origin. Thus, credits 

earned for MYs 2008 and earlier will 

continue to have a 3-year carry-forward/ 

carry-back lifespan; credits earned in 

MY 2009 or thereafter will have a 5-year 

carry-forward and a 3-year carry-back 

lifespan. 

C. Extension and Phasing Out of 

Flexible-Fuel Incentive Program 

EPCA encourages manufacturers to 

build alternative-fueled and dual-fueled 

vehicles. This is accomplished by using 

a special, statutorily specified 

calculation procedure for determining 

the fuel economy of these vehicles. The 

specially calculated fuel economy figure 

is based on the assumption that the 

vehicle operates on the alternative fuel 

a significant portion of the time. This 

approach gives such vehicles a muchhigher fuel economy level compared to 

similar gasoline-fueled vehicles. These 

vehicles can then be factored into a 

manufacturer’s general fleet fuel 

economy calculation, thus raising the 

average fuel economy level of the fleet. 

EPCA limited the extent to which a 

manufacturer could raise its fuel 

economy level due to the incentive to 

1.2 mpg per compliance category. 

Prior to the enactment of EISA, this 

incentive was only available through 

MY 2010. EISA extended the incentive, 

but also provided for phasing it out 

between MYs 2015 and 2019, by 

progressively reducing the amount by 

which fleet fuel economy could be 

raised due to the incentive.226 Thus, the 

maximum fuel economy increase which 

may be attributed to the incentive is as 

follows for: 

mpg 

MYs 1993–2014 ........................... 1.2 

MY 2015 ....................................... 1.0 

MY 2016 ....................................... 0.8 

MY 2017 ....................................... 0.6 

MY 2018 ....................................... 0.4 

MY 2019 ....................................... 0.2 

After MY 2019 .............................. 0 

NHTSA promulgated 49 CFR part 538 

to implement the statutory alternativefueled and dual-fueled vehicle 

manufacturing incentive. We are not 

now proposing to amend Part 538 to 

reflect the EISA changes, due to the 

already-large scope of the current 

rulemaking, but will do so in an 

upcoming rulemaking. 

X. Regulatory Alternatives 

As noted above, in developing the 

proposed standards, the agency 

considered the four statutory factors 

underlying maximum feasibility 

(technological feasibility, economic 

practicability, the effect of other 

standards of the Government on fuel 

economy, and the need of the nation to 

conserve energy) as well as other 

relevant considerations such as safety. 

NHTSA assessed what fuel saving 

technologies would be available, how 

effective they are, and how quickly they 

could be introduced. This assessment 

considered technological feasibility, 

economic practicability and associated 

energy conservation. We also 

considered other standards to the extent 

captured by EPCA 227 and 

environmental and safety concerns. This 

information was factored into the 

computer model used by NHTSA for 

applying technologies to particular 

vehicle models. The agency then 

balanced the factors relevant to standard 

setting. NHTSA’s NEPA analysis, 

discussed in Section XIII.B. of this 

document, also will inform NHTSA’s 

consideration of the proposed standards 

and reasonable alternatives in 

developing a final rule. 

In balancing these factors, NHTSA 

generally observes that the increasing 

application of technologies increases 

fuel economy and associated benefits, 

but it also increases costs. Initial 

applications of technologies provide far 

more fuel savings per dollar of 

expenditure on them than applications 

of remaining technologies, which 

provide less incremental fuel savings at 

greater cost and, with progressive 

additions of technologies, eventually far 

greater cost. At some stage, the 

increasing application of technologies is 

not justified. A significant question is 

what methodology and decisionmaking 

criteria are used in the balancing to 

determine when to cease adding 

technologies and thus arrive at 

regulatory fuel economy targets. 

In developing its proposed standards, 

the agency used a net benefitmaximizing analysis that placed 

monetary values on relevant 

externalities (both energy security and 

environmental externalities, including 

the benefits of reductions in CO2

emissions) and produced what is called 

the ‘‘optimized scenario.’’ The 

optimized standards reflect levels such 

that, considering the seven largest 

manufacturers, net benefits (that is, total 

benefits minus total costs) are higher 

than at every other examined level of 

stringency. The agency also reviewed 

the results of the model’s estimates of 

stringencies maximizing net benefits to 

assure that the results made sense in 

terms of balancing EPCA’s statutory 

factors and in meeting EISA’s 

requirements for improved fuel 

economy. 

In addition to the optimized scenario, 

NHTSA considered and analyzed five 

additional regulatory alternatives that 

do not rely upon marginal benefit-cost 


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228The agency considered the ‘‘TC = TB’’

alternative because one or more commenters in the 

rulemaking on standards for MY 2008–2011 light 

trucks urged NHTSA to consider setting the 

standards on this basis rather than on the basis of 

maximizing net benefits. In addition, while the 

Ninth Circuit Court of Appeals concluded that 

EPCA neither requires nor prohibits the setting of 

standards at the level at which net benefits are 

maximized, the Court raised the possibility of 

tilting the balance more toward reducing energy 

consumption and CO2. 

229This was accomplished by determining the 

stringency at which a reformed standard would 

require every manufacturer to apply every 

technology estimated to be potentially available. At 

such stringencies, all but one manufacturer would 

be expected to fail to comply with the standard, and 

many manufacturers would owe large civil 

penalties as a result. The agency considered this 

alternative because the agency wished to explore 

the stringency and consequences of standards based 

solely on the potential availability of technologies 

at the individual manufacturer level. 

analysis. In ascending order of 

stringency, the six alternatives are: 

• Standards that fall below the 

optimized scenario by the same absolute 

amount by which the +25 percent 

alternative exceeds the optimized 

scenario (‘‘25 percent below optimized’’

alternative), 

• Standards based on applying 

technologies until net benefits are 

maximized (optimized scenario), and 

• Standards that exceed the 

optimized scenario by 25 percent of the 

interval between the optimized scenario 

and the TC = TB alternative (see below) 

(‘‘25 percent above optimized’’

alternative), 

• Standards that exceed the 

optimized scenario by 50 percent of the 

interval between the optimized scenario 

and the TC = TB alternative (‘‘50 

percent above optimized’’ alternative), 

• Standards based on applying 

technologies until total costs equal total 

benefits (zero net benefits) (TC = TB 

alternative),228 and 

• Standards based on applying all 

feasible technologies without regard to 

cost (technology exhaustion 

alternative).229

NHTSA chose these alternatives in 

order to consider and evaluate the 

impacts of balancing the EPCA factors 

differently in determining maximum 

feasibility than the agency has in prior 

rulemakings. In Center for Biological 

Diversity v. NHTSA, the Ninth Circuit 

Court recognized that ‘‘EPCA gives 

NHTSA discretion to decide how to 

balance the statutory factors—as long as 

NHTSA’s balancing does not undermine 

the fundamental purpose of EPCA: 

Energy conservation.’’ 508 F.3d 508, 527 

(9th Cir. 2007). The Court also raised the 

possibility that NHTSA’s current 

balancing of the statutory factors might 

be different from the agency’s balancing 

in the past, given the greater importance 

today of the need of the nation to 

conserve energy and more advanced 

understanding of climate change. Id. at 

530–31. 

Given EPCA’s mandate that NHTSA 

consider four specific factors in setting 

CAFE standards and NEPA’s instruction 

that agencies give effect to NEPA’s 

policies as well, NHTSA recognizes that 

numerous alternative CAFE levels are 

theoretically conceivable and that the 

alternatives described above essentially 

represent only several on a continuum 

of alternatives. Along the continuum, 

each alternative represents a different 

way in which NHTSA conceivably 

could assign weight to each of the four 

EPCA factors and NEPA’s policies. For 

the alternatives that fall above the 

optimized scenario (the +25, +50 and 

TC = TB alternatives), the agency would 

evaluate policies that put increasingly 

more emphasis on reducing energy 

consumption and CO2 emissions, given 

their impact on global warming, and 

less on the other factors, including the 

economic impacts on the industry. 

Conversely, for the alternative that falls 

below the optimum scenario, the agency 

would evaluate policies that place 

relatively more weight on the economic 

situation of the industry and less on 

reducing energy consumption and CO2

emissions. 

The graphs below show, for passenger 

cars, light trucks, and the combined 

fleet, the average annual fuel economy 

levels for the four alternatives as 

compared to the proposed standards. 

Subsequent graphs and tables present 

their estimated costs, benefits, and net 

benefits (in billions of dollars). In 

addition, tables that are provided 

summarized the average extent to which 

manufacturers’ CAFE levels are 

projected to fall short of CAFE 

standards—i.e., the average shortfall—

under each of these alternatives. 

Manufacturer-specific shortfall is shown 

for the proposed and TC=TB alternative. 

BILLING CODE 4910–59–P 


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BILLING CODE 4910–59–C 

For the proposal and each regulatory 

alternative, the Tables X–1 and X–3 

show the total net benefits in millions 

of dollars at a 7 percent discount rate for 

the projected fleet of sales for each 

model year. 

TABLE X–1.—TOTAL BENEFITS OVER THE VEHICLE’S LIFETIME—PRESENT VALUE

[Millions of 2006 dollars, discounted 7%] 

MY 

2011 

MY 

2012 

MY 

2013 

MY 

2014 

MY 

2015 

Passenger Cars: 

25% Below .................................................................... 1,156 2,104 3,235 5,197 6,799 

Optimized ...................................................................... 2,596 4,933 6,148 7,889 9,420 

25% Above ................................................................... 3,755 7,280 8,454 10,638 12,083 

50% Above ................................................................... 4,274 8,825 10,213 12,576 14,495 

TC = TB ........................................................................ 5,769 10,878 12,087 14,644 16,492 

Technology Exhaust ..................................................... 5,834 11,282 12,968 15,930 18,061 

Light Trucks: 

25% Below .................................................................... 3,508 7,910 12,603 12,433 12,441 

Optimized ...................................................................... 3,909 8,779 13,560 14,915 16,192 

25% Above ................................................................... 4,201 9,990 14,236 16,587 19,457 

50% Above ................................................................... 4,642 10,507 15,011 17,687 20,892 

TC = TB ........................................................................ 5,027 11,453 16,330 19,515 22,367 


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TABLE X–1.—TOTAL BENEFITS OVER THE VEHICLE’S LIFETIME—PRESENT VALUE—Continued 

[Millions of 2006 dollars, discounted 7%] 

MY 

2011 

MY 

2012 

MY 

2013 

MY 

2014 

MY 

2015 

Technology Exhaust ..................................................... 5,088 11,512 19,395 22,074 24,779 

Combined PC+LT: 

25% Below .................................................................... 4,664 10,014 15,838 17,630 19,240 

Optimized ...................................................................... 6,505 13,712 19,708 22,804 25,612 

25% Above ................................................................... 7,956 17,270 22,690 27,225 31,540 

50% Above ................................................................... 8,916 19,331 25,224 30,263 35,387 

TC = TB ........................................................................ 10,796 22,331 28,417 34,159 38,860 

Technology Exhaust ..................................................... 10,922 22,795 32,363 38,004 42,820 

TABLE X–2.—TOTAL COSTS

[Millions of 2006 dollars, discounted 7%] 

MY 

2011 

MY 

2012 

MY 

2013 

MY 

2014 

MY 

2015 

Passenger Cars: 

25% Below .................................................................... 835 818 1,253 2,153 3,209 

Optimized ...................................................................... 1,884 2,373 2,879 3,798 4,862 

25% Above ................................................................... 3,387 5,653 6,445 8,240 9,084 

50% Above ................................................................... 4,010 7,885 8,986 11,207 12,981 

TC = TB ........................................................................ 5,913 10,796 12,303 15,403 17,398 

Technology Exhaust ..................................................... 6,079 12,595 14,701 18,759 21,110 

Light Trucks: 

25% Below .................................................................... 1,349 4,296 6,329 6,212 6,326 

Optimized ...................................................................... 1,649 4,986 7,394 8,160 8,761 

25% Above ................................................................... 2,072 7,034 9,815 11,903 14,781 

50% Above ................................................................... 2,922 8,098 11,586 14,386 17,969 

TC = TB ........................................................................ 3,788 10,525 15,196 18,762 21,364 

Technology Exhaust ..................................................... 3,933 10,670 18,275 21,051 23,479 

Combined PC+LT: 

25% Below .................................................................... 2,184 5,114 7,582 8,365 9,534 

Optimized ...................................................................... 3,534 7,358 10,273 11,957 13,623 

25% Above ................................................................... 5,459 12,687 16,261 20,143 23,865 

50% Above ................................................................... 6,932 15,983 20,572 25,593 30,950 

TC = TB ........................................................................ 9,702 21,321 27,499 34,164 38,761 

Technology Exhaust ..................................................... 10,013 23,266 32,976 39,810 44,589 

TABLE X–3.—NET TOTAL BENEFITS OVER THE VEHICLE’S LIFETIME—PRESENT VALUE * 

[Millions of 2006 dollars, discounted 7%] 

MY 

2011 

MY 

2012 

MY 

2013 

MY 

2014 

MY 

2015 

Passenger Cars: 

25% Below .................................................................... 321 1,285 1,982 3,045 3,590 

Optimized ...................................................................... 711 2,560 3,269 4,092 4,558 

25% Above ................................................................... 368 1,627 2,009 2,398 2,999 

50% Above ................................................................... 264 940 1,226 1,370 1,514 

TC = TB ........................................................................ ¥144 82 ¥216 ¥759 ¥906 

Technology Exhaust ..................................................... ¥245 ¥1,313 ¥1,733 ¥2,829 ¥3,049 

Light Trucks: 

25% Below .................................................................... 2,154 3,633 6,348 6,288 6,258 

Optimized ...................................................................... 2,260 3,793 6,167 6,755 7,432 

25% Above ................................................................... 2,129 2,956 4,421 4,684 4,676 

50% Above ................................................................... 1,720 2,408 3,426 3,301 2,924 

TC = TB ........................................................................ 1,239 928 1,134 753 1,003 

Technology Exhaust ..................................................... 1,155 843 1,120 1,023 1,280 

Combined PC+LT: 

25% Below .................................................................... 2,476 4,919 8,330 9,333 9,848 

Optimized ...................................................................... 2,971 6,353 9,435 10,847 11,989 

25% Above ................................................................... 2,497 4,583 6,430 7,082 7,675 

50% Above ................................................................... 1,984 3,349 4,652 4,670 4,437 

TC = TB ........................................................................ 1,094 1,010 918 ¥5 98 

Technology Exhaust ..................................................... 909 ¥471 ¥613 ¥1,806 ¥1,769 

* Negative values mean that costs exceed benefits. 


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In tentatively deciding which 

alternative to propose, the agency 

looked at a variety of factors. The 

agency notes that once stringency levels 

exceed the point at which net benefits 

are maximized, the societal costs of each 

incremental increase in stringency 

exceed the accompanying societal 

benefits. If we have valued benefits 

appropriately, it does not make 

economic sense to mandate the 

spending of more money than society 

receives in return. The resources used to 

meet overly stringent CAFE standards, 

instead of the optimized scenario 

standards, would better be allocated to 

other uses such as technology research 

and development, or improvements in 

vehicle safety. 

The agency considered the burden 

placed on specific manufacturers, 

consumers and employment. As CAFE 

standards increase, the incremental 

benefits are approximately constant 

while the incremental costs increase 

rapidly. Figure X–5 above shows that as 

stringency is increased, costs rise out of 

proportion compared to the benefits or 

the fuel savings. Increasingly higher 

costs have a negative impact on sales 

and employment. Each of the 

alternatives that is more stringent than 

the optimized alternative negatively 

impact sales and employment. 

The agency also considered 

technological feasibility. The Volpe 

model assumes that major 

manufacturers will exhaust all available 

technology before paying 

noncompliance civil penalties, even 

though the latter is often less costly. 

Historically, the large manufacturers 

have never paid civil penalties. In the 

more stringent alternatives, the Volpe 

model predicts that increasing numbers 

of manufacturers will run out of 

technology to apply and, theoretically, 

resort to penalty payment. NHTSA 

provisionally believes that setting 

standards this high is not 

technologically feasible, nor does it 

serve the need of the nation to conserve 

fuel. Paying a CAFE penalty does not 

result in any fuel savings. 

In analyzing the ‘‘¥25 percent below 

optimized’’ alternative, the agency notes 

that these standards are more aggressive 

than the standards that the agency has 

proposed since the first years of the 

program and would impose 

unprecedented costs on manufacturers. 

The agency also recognizes that even 

this pace of increase in the standards 

may burden some of the manufacturers, 

particularly since the agency is now 

increasing car and light truck standards 

simultaneously. However, in light of the 

need of the nation to conserve energy 

and reduce global warming, the agency 

does not believe that this alternative 

would be maximum feasible under the 

statute. The agency is also concerned 

that the combined fleet might not reach 

the 35 mpg requirement by 2020 under 

EISA. 

Underlying the differences in costs, 

benefits, and net benefits for the other 

alternatives are differences in the degree 

to which NHTSA has estimated that 

technologies might be applied in 

response to the standards corresponding 

to each of these alternatives. The 

following tables show estimates of the 

average penetration rates of some 

selected technologies in the MY2015 

passenger car and light truck fleets 

under each of the alternatives discussed 

here: 

TABLE X–4.—ESTIMATED AVERAGE TECHNOLOGY PENETRATION (LARGEST SEVEN MANUFACTURERS) MY2015 

PASSENGER CARS

[In percent] 

Technology 

Average among seven largest manufacturers 

Product 

plan 

Adjusted 

baseline 

25% Below 

proposed 

Proposed 

standard 

25% Above 

proposed 

50% Above 

proposed TC = TB Tech. exhaustion 

Automatically Shifted 

Manual Transmissions 10 10 23 39 47 55 63 69 

Spark Ignited Direct Injection Engines .................. 22 22 22 30 37 48 68 63 

Turbocharging & Engine 

Downsizing ................... 5 5 8 17 30 40 62 57 

Diesel Engines ................. 0 0 3 2 7 13 18 21 

Hybrid Electric Vehicles ... 5 5 14 15 22 28 35 38 

TABLE X–5.—ESTIMATED AVERAGE TECHNOLOGY PENETRATION (LARGEST SEVEN MANUFACTURERS) MY2015 LIGHT

TRUCKS

[In percent] 

Technology 

Average among seven largest manufacturers 

Product 

plan 

Adjusted 

baseline 

25% Below 

proposed 

Proposed 

standard 

25% Above 

proposed 

50% Above 

proposed TC = TB Tech. exhaustion 

Automatically Shifted 

Manual Transmissions 10 14 42 55 58 60 59 70 

Spark Ignited Direct Injection Engines .................. 23 24 31 40 42 55 60 69 

Turbocharging & Engine 

Downsizing ................... 9 11 21 31 38 51 54 65 

Diesel Engines ................. 3 6 8 10 20 23 26 28 

Hybrid Electric Vehicles ... 2 6 15 25 29 31 30 30 

As the first of the above tables 

indicates, the Volpe model estimated 

that, under the standards proposed 

today, manufacturers might triple the 

planned utilization of turbochargers and 

hybrid electric powertrains in the 


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passenger car fleet. This table also 

indicates that the use of turbochargers 

in passenger cars might increase by an 

additional factor of two under the ‘‘25% 

above proposed’’ alternative. 

Similarly, the second table indicates 

that manufacturers might triple the 

planned utilization of diesel engines in 

the light truck fleet, and increase the 

utilization of hybrid electric 

powertrains by more than an order of 

magnitude. This table also shows a 

significant difference between the 

proposed and ‘‘25% above proposed’’

alternative, including an additional 

doubling in the utilization of diesel 

engines. 

NHTSA has examined the extent to 

which each alternative would (as 

estimated by the Volpe model and using 

the input information discussed in 

preceding sections) cause manufacturers 

to exhaust technologies projected to be 

available during MY2011–MY2015. The 

following chart summarizes the 

frequency with which this was 

estimated to occur—i.e., the number of 

instances in which an individual 

manufacturer exhausted technologies 

and thus fell below a standard in 

individual model years divided by 35 

(seven manufacturers times five model 

years). 

As this analysis indicates, the ‘‘25% 

below proposed’’ alternative caused 

technologies to be exhausted 3 percent 

of the time for passenger cars, and 17 

percent of the time for light trucks. 

Under the proposed standards, the rate 


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230 If included in the new product plans that the 

agency is requesting, these vehicles will be 

included in our analysis for the final rule. 

231 In assessing the alternatives set out in this 

document, commenters may find it useful to 

examine the approaches being taken by other 

countries to improving fuel economy and reducing 

tailpipe CO2 emissions, e.g., Canada, http:// 

www.tc.gc.ca/pol/en/environment/ 

FuelConsumption/index.html (last accessed April 

20, 2008); European Union, http://ec.europa.eu/ 

environment/co2/co2_home.htm (last accessed 

April 20, 2008); and Japan, http://www.eccj.or.jp/ 

top_runner/pdf/vehicles_gasdiesel_feb2007.pdf (last 

accessed April 20, 2008). 

of technology exhaustion increased to 

11 percent for passenger cars, but did 

not change for light trucks. However, 

under the ‘‘25% above proposed’’

alternative, the corresponding rates 

increased to 26 percent and 37 percent, 

respectively. In other words, under this 

alternative, the Volpe model estimated 

that, more than a quarter of the time, 

manufacturers would be unable to 

comply with the passenger car 

standards solely using technologies 

expected to be available, and that they 

would be unable to comply with the 

light truck standards using available 

technologies more than a third of the 

time. These rates were estimated to be 

considerably higher for the remaining 

three alternatives. 

These estimates of technology 

utilization and the exhaustion of 

available technologies indicate that all 

of the alternatives NHTSA has 

considered entail risk that one or more 

manufacturers would not be able to 

comply with both the passenger car and 

light truck standards in every model 

year solely by applying technology. This 

risk is mitigated somewhat by the fact 

that our analysis may not encompass 

every technology that will potentially be 

available during MY2011–MY2015. For 

example, some manufacturers have 

made public statements regarding hopes 

to offer ‘‘plug-in’’ HEVs before MY2015, 

but such vehicles are not represented in 

our analysis.230 Nonetheless, the agency 

has tentatively concluded that the scope 

of technologies it has included is 

comprehensive enough that the analysis 

shown above indicates that under some 

alternatives, there is considerable risk 

that some manufacturers would exhaust 

available technologies in some model 

years. 

In tentatively concluding that the 

proposed standards are the maximum 

feasible standards, NHTSA has balanced 

this risk against the other considerations 

it must take into account, in particular 

the need of the nation to conserve 

energy, which encompasses concerns 

regarding carbon dioxide emissions. The 

agency’s analysis includes economic 

measures of these needs—that is, 

economic measures of the externalities 

of petroleum consumption and the 

damages associated with carbon dioxide 

emissions. These measures are reflected 

in the agency’s estimates of the total and 

net benefits of each of the alternatives. 

NHTSA is proposing standards that it 

estimates will entail risk that some 

manufacturers will exhaust available 

technologies in some model years. 

However, relative to the less stringent 

‘‘25% below proposed’’ alternative, the 

agency has tentatively concluded that 

the additional risk is outweighed by the 

significant increase in estimated net 

benefits to society, ranging from an 

additional $0.5b in MY2011 to an 

additional $2.1b in MY2015. 

Conversely, the agency has tentatively 

concluded that, relative to the proposed 

standards, the more than doubling of 

risk posed by the ‘‘25% above 

proposed’’ alternative is not warranted, 

especially considering that this 

alternative is estimated to significantly 

reduce net benefits, by $0.5b in MY2011 

and, eventually, $4.3b in MY2015. 

NHTSA tentatively concludes that it 

has exercised reasonable judgment in 

considering degrees of technology 

utilization and degrees of risk, and has 

appropriately balanced these 

considerations against estimates of the 

resultant costs and benefits to society. 

Notwithstanding the tentative 

conclusions described above, NHTSA 

seeks comment on these and other 

regulatory alternatives to aid in 

determining what standards to adopt in 

the final rule.231 The agency invites 

comment regarding whether it has 

struck a proper balance and, if not, how 

it should do so. The alternatives 

identified by the agency are intended to 

aid public commenters in helping the 

agency to explore that issue. NHTSA’s 

NEPA analysis also will inform its 

further action on today’s proposal and 

may influence the final standards. 

Specific sensitivity runs that vary fuel 

prices, the rebound effect, CO2 and 

discount rate were conducted for the 

proposed Optimized standards. These 

analyses have an impact on the 

standards, costs and benefits. For 

example, in analyzing the ‘‘optimized 

alternative’’, we estimated that 

following the same methods and criteria 

for setting the standards, but applying a 

3 percent discount rate rather than a 7 

percent discount rate, would suggest 

standards reaching about 33.6 mpg 

(average required fuel economy among 

both passenger cars and light trucks) in 

MY2015, 2 mpg higher than the 31.6 

mpg average resulting from the 

standards we are proposing based on a 

7 percent discount rate. The more 

stringent standards during MY2011–

MY2015 would reduce CO2 emissions 

by 672 million metric tons (mmt), or 29 

percent more than the 521 mmt 

achieved by the proposed standards. On 

the other hand, we estimate that 

standards increasing at this pace would 

require about $85b in technology 

outlays during MY2011–MY2015, or 89 

percent more than the $45b in 

technology outlays associated with the 

standards proposed today. The impact 

of the 3 percent rate is shown in the 

body of the PRIA along with the 6 

formal alternatives. All other sensitivity 

analyses are shown in Chapter IX of the 

PRIA. 

XI. Sensitivity and Monte Carlo 

Analysis 

NHTSA is proposing fuel economy 

standards that maximize net societal 

benefits, based on the Volpe model. 

That is, where the estimated benefits to 

society exceed the estimated cost of the 

rule by the highest amount. This 

analysis is based, among other things, 

on many underlying estimates, all of 

which entail uncertainty. Future fuel 

prices, the cost and effectiveness of 

available technologies, the damage cost 

of carbon dioxide emissions, the 

economic externalities of petroleum 

consumption, and other factors cannot 

be predicted with certainty. 

Recognizing these uncertainties, 

NHTSA has used the Volpe model to 

conduct both sensitivity analyses, by 

changing one factor at a time, and a 

probabilistic uncertainty analysis (a 

Monte Carlo analysis that allows 

simultaneous variation in these factors) 

to examine how key measures (e.g., mpg 

levels of the standard, total costs and 

total benefits) vary in response to 

changes in these factors. 

However, NHTSA has not conducted 

a probabilistic uncertainty analysis to 

evaluate how optimized stringency 

levels respond to such changes in these 

factors. The Volpe model currently does 

not have the capability to integrate 

Monte Carlo simulation with stringency 

optimization. 

The results of the sensitivity analyses 

indicate that the value of CO2, the value 

of externalities, and the value of the 

rebound effect have almost no impact 

on the level of the standards. Assuming 

a higher price of gasoline has the largest 

impact of the sensitivity analyses 

examined (raising the MY 2015 

passenger car standard level by 6.7 mpg 

and the light truck level by 0.8 mpg). It 

appears that the light truck levels are 

not as sensitive as the passenger car 

levels to changes in the estimated 

benefits. This can occur because the 

technologies that have not been used 


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232 In a few cases the upper range results were 

obtained from the 7% rate and the lower range 

results were obtained from the 3% rate. While this 

may seem counterintuitive, it results from the 

random selection process that is inherent in the 

Monte Carlo technique. 233See 49 CFR 553.21. 

under the Optimized alternative, and 

are still available for light trucks, are not 

that close to being cost effective and it 

takes a larger increase in benefits to 

bring them over the cost-benefit 

threshold. 

NHTSA’s sensitivity analysis found 

that changes in the damage cost of 

carbon dioxide emissions and the 

economic externalities of petroleum 

consumption had very little impact on 

the stringency levels of the proposed 

standards (at most 0.1 mpg per year). 

The agency varied estimated carbon 

dioxide damage costs over a range of $0 

to $14 per metric ton and varied the 

economic externalities of petroleum 

consumption over a range of $0.120 to 

$0.504 per gallon. 

However, the sensitivity analysis did 

show significant changes in the 

stringency of the standards in response 

to large increases in the projected future 

cost of gasoline. By increasing the price 

of gasoline by an average of $0.88 in 

2016 to $1.22 in 2020 per gallon, the 

passenger car standard that maximized 

net societal benefits for MY 2015 

increased from 35.7 mpg to 42.4 mpg 

and the light truck standard for MY 

2015 increases from 28.6 mpg to 29.4 

mpg. NHTSA notes that, unlike carbon 

dioxide damage costs and the economic 

externalities of petroleum consumption, 

the price of gasoline is not an 

externality. The Volpe model assumes 

manufacturers consider fuel prices 

when selecting among available 

technologies. 

OMB Circular A–4 requires formal 

probabilistic uncertainty analysis of 

complex rules where there are large, 

multiple uncertainties whose analysis 

raises technical challenges or where 

effects cascade and where the impacts of 

the rule exceed $1 billion. The agency 

identified and quantified the major 

uncertainties in the preliminary 

regulatory impact analysis and 

estimated the probability distribution of 

how those uncertainties affect the 

benefits, costs, and net benefits of the 

alternatives considered in a Monte Carlo 

analysis. The results of that analysis, 

summarized for the combined passenger 

car and light truck fleet across both the 

7 percent (typically the lower range) and 

3 percent (typically upper range) 

discount rates 232 are as follows: 

Fuel Savings: The analysis indicates 

that MY 2011 vehicles (both passenger 

cars and light trucks) will experience 

between 3,370 million and 4,735 

million gallons of fuel savings over their 

useful lifespan. MY 2012 vehicles will 

experience between 7,476 million and 

9,639 million gallons of fuel savings 

over their useful lifespan. MY 2013 

vehicles will experience between 10,863 

million and 13,763 million gallons of 

fuel savings over their useful lifespan. 

MY 2014 vehicles will experience 

between 12,568 and 15,664 million 

gallons of fuel savings over their useful 

lifespan. MY 2015 vehicles will 

experience between 14,188 and 17,659 

million gallons of fuel savings over their 

useful lifespan. Over the combined 

lifespan of the five model years, 

between 48.5 billion and 61.4 billion 

gallons of fuel will be saved. 

Total Costs: The analysis indicates 

that owners of MY 2011 passenger cars 

and light trucks will pay between 

$2,447 million and $5,256 million in 

higher vehicle prices to purchase 

vehicles with improved fuel efficiency. 

MY 2012 owners will pay between 

$5,817 million and $10,427 million 

more. MY 2013 owners will pay 

between $7,942 million and $15,288 

million more. MY 2014 owners will pay 

between $9,338 million and $17,189 

million more. MY 2015 owners will pay 

between $10,940 million and $19,842 

million more. Owners of all five model 

years vehicles combined will pay 

between $36.5 billion and $67.9 billion 

in higher vehicle prices to purchase 

vehicles with improved fuel efficiency. 

Societal Benefits: The analysis 

indicates that changes to MY 2011 

passenger cars and light trucks to meet 

the proposed CAFE standards will 

produce overall societal benefits valued 

between $4,375 million and $13,041 

million. MY 2012 vehicles will produce 

benefits valued between $9,363 million 

and $28,214 million. MY 2013 vehicles 

will produce benefits valued between 

$13,370 million and $41,027 million. 

MY 2014 vehicles will produce benefits 

valued between $15,586 million and 

$47,087 million. MY 2015 vehicles will 

produce benefits valued between 

$17,486 million and $53,708 million. 

Over the combined lifespan of the five 

model years, societal benefits valued 

between $60.1 billion and $183.1 billion 

will be produced. 

Net Benefits: The uncertainty analysis 

indicates that the net impact of the 

higher CAFE requirements for MY 2011 

passenger cars and light trucks will be 

a net benefit of between $937 million 

and $9,678 million. There is at least a 

99.3 percent certainty that changes 

made to MY 2011 vehicles to achieve 

the higher CAFE standards will produce 

a net benefit. The net impact of the 

higher CAFE requirements for MY 2012 

will be a net benefit of between $283 

million and a net benefit of $21,139 

million. There is at least a 99.6 percent 

certainty that changes made to MY 2012 

vehicles to achieve the CAFE standards 

will produce a net benefit. The net 

impact of the higher CAFE requirements 

for MY 2013 will be a net benefit of 

between $494 million and a net benefit 

of $31,311 million. There is at least a 

99.6 percent certainty that changes 

made to MY 2013 vehicles to achieve 

the higher CAFE standards will produce 

a net benefit. The net impact of the 

higher CAFE requirements for MY 2014 

will be a net benefit of between $711 

million and $35,746 million. There is 

100 percent certainty that changes made 

to MY 2014 vehicles to achieve the 

CAFE standards will produce a net 

benefit. The net impact of the higher 

CAFE requirements for MY 2015 will be 

a net benefit of between $654 million 

and $40,703 million. There is 100 

percent certainty that changes made to 

MY 2015 vehicles to achieve the CAFE 

standards will produce a net benefit. 

Over all five model years, the higher 

CAFE standards will produce net 

benefits ranging from $3.1 billion to 

$138.6 billion. There is at least a 99.3 

percent certainty that higher CAFE 

standards will produce a net societal 

benefit in each of the model years 

covered by this final rule. In most years, 

this probability is 100 percent. 

XII. Public Participation 

How do I prepare and submit 

comments? 

Your comments must be written and 

in English. To ensure that your 

comments are correctly filed in the 

Docket, please include the docket 

number of this document in your 

comments. Your comments must not be 

more than 15 pages long.233 We 

established this limit to encourage you 

to write your primary comments in a 

concise fashion. However, you may 

attach necessary additional documents 

to your comments. There is no limit on 

the length of the attachments. 

Please submit your comments by any 

of the following methods: 

• Federal eRulemaking Portal: Go to 

http://www.regulations.gov. Follow the 

online instructions for submitting 

comments. 

• Mail: 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. 

• Hand Delivery or Courier: West 

Building Ground Floor, Room W12–140, 

1200 New Jersey Avenue, SE., between 


rwilkins on PROD1PC63 with PROPOSALS2
Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 24477 

234Optical character recognition (OCR) is the 

process of converting an image of text, such as a 

scanned paper document or electronic fax file, into 

computer-editable text. 

235See 49 CFR 512. 

9 a.m. and 5 p.m. Eastern Time, Monday 

through Friday, except Federal holidays. 

• Fax: (202) 493–2251. 

If you are submitting comments 

electronically as a PDF (Adobe) file, we 

ask that the documents submitted be 

scanned using the Optical Character 

Recognition (OCR) process, thus 

allowing the agency to search and copy 

certain portions of your submissions.234

Please note that pursuant to the Data 

Quality Act, in order for substantive 

data to be relied upon and used by the 

agency, it must meet the information 

quality standards set forth in the OMB 

and DOT Data Quality Act guidelines. 

Accordingly, we encourage you to 

consult the guidelines in preparing your 

comments. OMB’s guidelines may be 

accessed at http://www.whitehouse.gov/ 

omb/fedreg/reproducible.html. DOT’s 

guidelines may be accessed at http:// 

dmses.dot.gov/submit/ 

DataQualityGuidelines.pdf. 

How can I be sure that my comments 

were received? 

If you submit your comments by mail 

and wish Docket Management to notify 

you upon its receipt of your comments, 

enclose a self-addressed, stamped 

postcard in the envelope containing 

your comments. Upon receiving your 

comments, Docket Management will 

return the postcard by mail. 

How do I submit confidential business 

information? 

If you wish to submit any information 

under a claim of confidentiality, you 

should submit three copies of your 

complete submission, including the 

information you claim to be confidential 

business information, to the Chief 

Counsel, NHTSA, at the address given 

above under FOR FURTHER INFORMATION

CONTACT. When you send a comment 

containing information claimed to be 

confidential business information, you 

should include a cover letter setting 

forth the information specified in our 

confidential business information 

regulation.235

In addition, you should submit a 

copy, from which you have deleted the 

claimed confidential business 

information, to the Docket by one of the 

methods set forth above. 

Will the agency consider late 

comments? 

We will consider all comments 

received before the close of business on 

the comment closing date indicated 

above under DATES. To the extent 

possible, we will also consider 

comments received after that date. If 

interested persons believe that any new 

information the agency places in the 

docket affects their comments, they may 

submit comments after the closing date 

concerning how the agency should 

consider that information for the final 

rule. However, the agency’s ability to 

consider late comments in this 

rulemaking will be limited as the agency 

anticipates issuing a final rule this fall. 

If a comment is received too late for 

us to consider in developing a final rule 

(assuming that one is issued), we will 

consider that comment as an informal 

suggestion for future rulemaking action. 

How can I read the comments submitted 

by other people? 

You may read the materials placed in 

the docket for this document (e.g., the 

comments submitted in response to this 

document by other interested persons) 

at any time by going to http:// 

www.regulations.gov. Follow the online 

instructions for accessing the dockets. 

You may also read the materials at the 

Docket Management Facility by going to 

the street address given above under 

ADDRESSES. The Docket Management 

Facility is open between 9 a.m. and 5 

p.m. Eastern Time, Monday through 

Friday, except Federal holidays. 

XIII. Regulatory Notices and Analyses 

A. Executive Order 12866 and DOT 

Regulatory Policies and Procedures 

Executive Order 12866, ‘‘Regulatory 

Planning and Review’’ (58 FR 51735, 

Oct. 4, 1993), provides for making 

determinations whether a regulatory 

action is ‘‘significant’’ and therefore 

subject to OMB review and to the 

requirements of the Executive Order. 

The Order defines a ‘‘significant 

regulatory action’’ as one that is likely 

to result in a rule that may: 

(1) Have an annual effect on the 

economy of $100 million or more or 

adversely affect in a material way the 

economy, a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

State, local or Tribal governments or 

communities; 

(2) Create a serious inconsistency or 

otherwise interfere with an action taken 

or planned by another agency; 

(3) Materially alter the budgetary 

impact of entitlements, grants, user fees, 

or loan programs or the rights and 

obligations of recipients thereof; or 

(4) Raise novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

set forth in the Executive Order. 

The rulemaking proposed in this 

NPRM will be economically significant 

if adopted. Accordingly, OMB reviewed 

it under Executive Order 12866. The 

rule, if adopted, would also be 

significant within the meaning of the 

Department of Transportation’s 

Regulatory Policies and Procedures. 

The benefits and costs of this proposal 

are described above. Because the 

proposed rule would, if adopted, be 

economically significant under both the 

Department of Transportation’s 

procedures and OMB guidelines, the 

agency has prepared a Preliminary 

Regulatory Impact Analysis (PRIA) and 

placed it in the docket and on the 

agency’s Web site. Further, pursuant to 

OMB Circular A–4, we have prepared a 

formal probabilistic uncertainty analysis 

for this proposal. The circular requires 

such an analysis for complex rules 

where there are large, multiple 

uncertainties whose analysis raises 

technical challenges or where effects 

cascade and where the impacts of the 

rule exceed $1 billion. This proposal 

meets these criteria on all counts. 

B. National Environmental Policy Act 

In litigation concerning NHTSA’s 

2006 final rule, ‘‘Average Fuel Economy 

Standards for Light Trucks, Model Years 

2008–2011,’’ 71 FR 17566, April 6, 2006 

(Final Rule), the U.S. Court of Appeals 

for the Ninth Circuit ordered NHTSA to 

prepare an Environmental Impact 

Statement (EIS) for that rule. Center for 

Biological Diversity v. NHTSA, 508 F.3d 

508, 558 (9th Cir. 2007). The 

Government is seeking rehearing on the 

appropriateness of that remedy, instead 

of a remand of the agency’s 

Environmental Assessment (EA) and 

Finding of No Significant Impact 

(FONSI) for further consideration. 

Simultaneously, NHTSA has initiated 

the EIS process under the National 

Environmental Policy Act (NEPA), 42 

U.S.C. 4321–4347, and implementing 

regulations issued by the Council on 

Environmental Quality (CEQ), 40 CFR 

part 1500, and NHTSA, 49 CFR part 

520. On March 28, 2008, NHTSA 

published a notice of intent to prepare 

an EIS for this rulemaking and 

requested scoping comments. (73 FR 

16615) NHTSA is publishing a 

supplemental notice of public scoping 

and request for scoping comments that 

invites Federal, State, and local 

agencies, Indian tribes, and the public to 

participate in the scoping process and to 

help identify the environmental issues 

and reasonable alternatives to be 

examined in the EIS. The scoping notice 

also provides information about the 

proposed standards, the alternatives 


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236BMW, Mercedes, Chrysler, Ferrari, Ford, 

Subaru, General Motors, Honda, Hyundai, Lotus, 

Maserati, Mitsubishi, Nissan, Porsche, Suzuki, 

Toyota, and Volkswagen. 

237The Regulatory Flexibility Act only requires 

analysis of small domestic manufacturers. There are 

four passenger car manufacturers we know of and 

no light truck manufacturers: Avanti, Panoz, Saleen, 

and Shelby. 

238 67 FR 77015, 77025; December 16, 2002, and 

68 FR 16868, 16895; April 7, 2003. 

239 70 FR 51414, 51457; August 30, 2005, and 71 

FR 17566, 17654–17670; April 6, 2006. 

NHTSA expects to consider in its NEPA 

analysis, and the scoping process. 

C. Regulatory Flexibility Act 

Pursuant to the Regulatory Flexibility 

Act (5 U.S.C. 601 et seq., as amended by 

the Small Business Regulatory 

Enforcement Fairness Act (SBREFA) of 

1996), whenever an agency is required 

to publish a notice of rulemaking for 

any proposed or final rule, it must 

prepare and make available for public 

comment a regulatory flexibility 

analysis that describes the effect of the 

rule on small entities (i.e., small 

businesses, small organizations, and 

small governmental jurisdictions). The 

Small Business Administration’s 

regulations at 13 CFR part 121 define a 

small business, in part, as a business 

entity ‘‘which operates primarily within 

the United States.’’ 13 CFR 121.105(a). 

No regulatory flexibility analysis is 

required if the head of an agency 

certifies the rule will not have a 

significant economic impact on a 

substantial number of small entities. 

I certify that the proposed rule would 

not have a significant economic impact 

on a substantial number of small 

entities. The following is NHTSA’s 

statement providing the factual basis for 

the certification (5 U.S.C. 605(b)). 

If adopted, the proposal would 

directly affect seventeen large single 

stage motor vehicle manufacturers.236

The proposal would also affect four 

small domestic single stage motor 

vehicle manufacturers.237 According to 

the Small Business Administration’s 

small business size standards (see 13 

CFR 121.201), a single stage automobile 

or light truck manufacturer (NAICS code 

336111, Automobile Manufacturing; 

336112, Light Truck and Utility Vehicle 

Manufacturing) must have 1,000 or 

fewer employees to qualify as a small 

business. All four of the vehicle 

manufacturers have less than 1,000 

employees and make less than 1,000 

vehicles per year. We believe that the 

rulemaking would not have a significant 

economic impact on the small vehicle 

manufacturers because under Part 525, 

passenger car manufacturer making less 

than 10,000 vehicles per year can 

petition NHTSA to have alternative 

standards set for those manufacturers. 

These manufacturers currently don’t 

meet the 27.5 mpg standard and must 

already petition the agency for relief. If 

the standard is raised, it has no 

meaningful impact on these 

manufacturers, they still must go 

through the same process and petition 

for relief. Given that there already is a 

mechanism for handling small 

businesses, which is the purpose of the 

Regulatory Flexibility Act, a regulatory 

flexibility analysis was not prepared. 

D. Executive Order 13132 Federalism 

Executive Order 13132 requires 

NHTSA to develop an accountable 

process to ensure ‘‘meaningful and 

timely input by State and local officials 

in the development of regulatory 

policies that have federalism 

implications.’’ The Order defines the 

term ‘‘Policies that have federalism 

implications’ to include regulations that 

have ‘‘substantial direct effects on the 

States, on the relationship between the 

national government and the States, or 

on the distribution of power and 

responsibilities among the various 

levels of government.’’ Under the Order, 

NHTSA may not issue a regulation that 

has federalism implications, that 

imposes substantial direct compliance 

costs, and that is not required by statute, 

unless the Federal government provides 

the funds necessary to pay the direct 

compliance costs incurred by State and 

local governments, or NHTSA consults 

with State and local officials early in the 

process of developing the proposed 

regulation. The agency has complied 

with Order’s requirements. 

The issue of preemption of State 

emissions standard under EPCA is not 

a new one; there is an ongoing public 

dialogue regarding the preemptive 

impact of CAFE standards whose 

beginning pre-dates this rulemaking. 

This dialogue has involved a variety of 

parties (i.e., the States, the federal 

government and the general public) and 

has taken place through a variety of 

means, including several rulemaking 

proceedings. NHTSA first addressed the 

issue in its rulemaking on CAFE 

standards for MY 2005–2007 light 

trucks 238 and explored it at great length, 

after receiving extensive public 

comment, in its rulemaking for MY 

2008–2011 light trucks.239 Throughout 

this time, NHTSA has consistently taken 

the position that state regulations 

regulating CO2 tailpipe emissions from 

automobiles are expressly and impliedly 

preempted. 

NHTSA’s position remains 

unchanged, notwithstanding the 

occurrence of several significant events 

since the issuance of the final rule for 

MY 2008–2011 light trucks in April 

2006. In 2007, the Supreme Court ruled 

Massachusetts v. EPA that carbon 

dioxide is an ‘‘air pollutant’’ within the 

meaning of the Clean Air Act and thus 

potentially subject to regulation under 

that statute. Later that year, two Federal 

district courts ruled in Vermont and 

California that the GHG motor vehicle 

emission standards adopted by those 

states are not preempted under EPCA. 

Still later that year, Congress enacted 

EISA, amending EPCA by mandating 

substantial and sustained annual 

increases in the passenger car and light 

truck CAFE standards. As further 

amended by EISA, EPCA also mandates 

that standards be attribute-based and 

established and implemented separately 

for passenger cars and light trucks. As 

it did before EISA, EPCA permits 

manufacturers to adjust their product 

mix on a national basis in order to 

achieve compliance while meeting 

consumer demand. 

NHTSA has carefully considered 

those events and reexamined the 

detailed technological and scientific 

analyses and conclusions it presented in 

its 2006 final rule. The agency reaffirms 

those analyses and conclusions. 

The Supreme Court did not consider 

the issue of preemption under EPCA of 

state regulations regulating CO2 tailpipe 

emissions from automobiles. Instead, it 

addressed the relationship of EPA and 

NHTSA rulemaking. 

We respectfully disagree with the two 

district court rulings. We note that an 

appeal has been filed concerning the 

Vermont decision and that the 

appellants’ briefs have already been 

filed. EPCA’s express preemption 

provision preempts state standards 

‘‘related to’’ average fuel economy 

standards. Under the relatedness test, 

preemption is not dependent on the 

existence or nonexistence of any 

inconsistency or any difference between 

those State standards and the CAFE 

standards. Likewise, it is not dependent 

upon a state standard or a portion of a 

state standard’s being identical to or 

equivalent to a CAFE standard. 

The enactment of EISA has increased 

the conflict between state regulations 

regulating CO2 tailpipe emissions from 

automobiles and EPCA. A conflict 

between state and federal law arises 

when compliance with both federal and 

state regulations is a physical 

impossibility or when state law stands 

as an obstacle to the accomplishment 

and execution of the full purposes and 

objectives of Congress. Contrary to the 

recommendations of NAS, the judgment 

of NHTSA, and the mandate of 


rwilkins on PROD1PC63 with PROPOSALS2
Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 24479 

240 61 FR 4729 (Feb. 7, 1996). 

Congress, the state regulations 

regulating CO2 tailpipe emissions, 

which are equivalent in effect to fuel 

economy standards, are not attributebased, thus presenting risks to safety 

and employment. Contrary also to EISA, 

the state regulations do not establish 

separate standards. 

In reaffirming its position, NHTSA 

fully appreciates the great importance to 

the environment of addressing and 

reducing GHG emissions. Given that 

substantially reducing CO2 tailpipe 

emissions from automobiles is 

unavoidably and overwhelmingly 

dependent upon substantially 

increasing fuel economy through 

installation of engine technologies; 

transmission technologies; accessory 

technologies; vehicle technologies; and 

hybrid technologies, increases in fuel 

economy will produce commensurate 

reductions in CO2 tailpipe emissions. 

And as noted above, through EISA, 

Congress has ensured that there will be 

substantial and sustained, long term 

improvements in fuel economy. 

Given the importance of an effective, 

smooth functioning national program to 

improve fuel economy and in light of 

the fact that district court considered 

this agency’s analysis and carefully 

crafted position on preemption, NHTSA 

is considering taking the further step of 

summarizing that position in 

appendices to be added to the parts in 

the Code of Federal Regulations setting 

forth the passenger car and light truck 

CAFE standards. That summary is as 

follows: 

(a) To the extent that any state regulation 

regulates tailpipe carbon dioxide emissions 

from automobiles, such a regulation relates to 

average fuel economy standards within the 

meaning of 49 U.S.C. 32919. 

1. Automobile fuel economy is directly and 

very substantially related to automobile 

tailpipe emissions of carbon dioxide. 

2. Carbon dioxide is the natural by-product 

of automobile fuel consumption. 

3. The most significant and controlling 

factor in making the measurements necessary 

to determine the compliance of automobiles 

with the fuel economy standards in this Part 

is their rate of tailpipe carbon dioxide 

emissions. 

4. Most of the technologically feasible 

reduction of tailpipe emissions of carbon 

dioxide is achievable only through improving 

fuel economy, thereby reducing both the 

consumption of fuel and the creation and 

emission of carbon dioxide. 

5. Accordingly, as a practical matter, 

regulating fuel economy controls the amount 

of tailpipe emissions of carbon dioxide to a 

very substantial extent, and regulating the 

tailpipe emissions of carbon dioxide controls 

fuel economy to a very substantial extent. 

(b) As a state regulation related to fuel 

economy standards, any state regulation 

regulating tailpipe carbon dioxide emissions 

from automobiles is expressly preempted 

under 49 U.S.C. 32919. 

(c) A state regulation regulating tailpipe 

carbon dioxide emissions from automobiles, 

particularly a regulation that is not attributebased and does not separately regulate 

passenger cars and light trucks, conflicts with 

1. The fuel economy standards in this Part, 

2. The judgments made by the agency in 

establishing those standards, and 

3. The achievement of the objectives of the 

statute (49 U.S.C. Chapter 329) under which 

those standards were established, including 

objectives relating to reducing fuel 

consumption in a manner and to the extent 

consistent with manufacturer flexibility, 

consumer choice, and automobile safety. 

(d) Any state regulation regulating tailpipe 

carbon dioxide emissions from automobiles 

is impliedly preempted under 49 U.S.C. 

Chapter 329. 

We have closely examined our 

authority and obligations under EPCA 

and that statute’s express preemption 

provision. For those rulemaking actions 

undertaken at an agency’s discretion, 

Section 3(a) of Executive Order 13132 

instructs agencies to closely examine 

their statutory authority supporting any 

action that would limit the 

policymaking discretion of the States 

and assess the necessity for such action. 

This is not such a rulemaking action. 

NHTSA has no discretion not to issue 

the CAFE standards proposed in this 

document. EPCA mandates that the 

issuance of CAFE standards for 

passenger cars and light trucks for 

model years 2011–2015. Given that a 

State regulation for tailpipe emissions of 

CO2 is the functional equivalent of a 

CAFE standard, there is no way that 

NHTSA can tailor a fuel economy 

standard so as to avoid preemption. 

Further, EPCA itself precludes a State 

from adopting or enforcing a law or 

regulation related to fuel economy (49 

U.S.C. 32919(a)). 

E. Executive Order 12988 (Civil Justice 

Reform) 

Pursuant to Executive Order 12988, 

‘‘Civil Justice Reform,’’ 240 NHTSA has 

considered whether this rulemaking 

would have any retroactive effect. This 

proposed rule does not have any 

retroactive effect. 

F. Unfunded Mandates Reform Act 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

requires Federal agencies to prepare a 

written assessment of the costs, benefits, 

and other effects of a proposed or final 

rule that includes a Federal mandate 

likely to result in the expenditure by 

State, local, or tribal governments, in the 

aggregate, or by the private sector, of 

more than $100 million in any one year 

(adjusted for inflation with base year of 

1995). Adjusting this amount by the 

implicit gross domestic product price 

deflator for 2006 results in $126 million 

(116.043/92.106 = 1.26). Before 

promulgating a rule for which a written 

statement is needed, section 205 of 

UMRA generally requires NHTSA to 

identify and consider a reasonable 

number of regulatory alternatives and 

adopt the least costly, most costeffective, or least burdensome 

alternative that achieves the objectives 

of the rule. The provisions of section 

205 do not apply when they are 

inconsistent with applicable law. 

Moreover, section 205 allows NHTSA to 

adopt an alternative other than the least 

costly, most cost-effective, or least 

burdensome alternative if the agency 

publishes with the final rule an 

explanation why that alternative was 

not adopted. 

This proposed rule will not result in 

the expenditure by State, local, or tribal 

governments, in the aggregate, of more 

than $126 million annually, but it will 

result in the expenditure of that 

magnitude by vehicle manufacturers 

and/or their suppliers. In promulgating 

this proposal, NHTSA considered a 

variety of alternative average fuel 

economy standards lower and higher 

than those proposed. NHTSA is 

statutorily required to set standards at 

the maximum feasible level achievable 

by manufacturers and has tentatively 

concluded that the proposed fuel 

economy standards are the maximum 

feasible standards for the passenger car 

fleet for MYs 2011–2015 and for the 

light truck fleet for MYs 2011–2015 in 

light of the statutory considerations. 

G. Paperwork Reduction Act 

Under the procedures established by 

the Paperwork Reduction Act of 1995, a 

person is not required to respond to a 

collection of information by a Federal 

agency unless the collection displays a 

valid OMB control number. The 

proposed rule would amend the 

reporting requirements under 49 CFR 

part 537, Automotive Fuel Economy 

Reports. In addition to the vehicle 

model information collected under the 

approved data collection (OMB control 

number 2127–0019) in Part 537, 

passenger car manufacturers would also 

be required to provide data on vehicle 

footprint. Manufacturers and other 

persons wishing to trade fuel economy 

credits would be required to provide an 

instruction to NHTSA on the credits to 

be traded. 

In compliance with the PRA, we 

announce that NHTSA is seeking 

comment on the proposed revisions to 

the collection. 


rwilkins on PROD1PC63 with PROPOSALS2
24480 Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 

241 62 FR 19885 (Apr. 23, 1997). 

Agency: National Highway Traffic 

Safety Administration (NHTSA). 

Title: 49 CFR part 537, Automotive 

Fuel Economy (F.E.) Reports. 

Type of Request: Amend existing 

collection. 

OMB Clearance Number: 2127–0019. 

Form Number: This collection of 

information will not use any standard 

forms. 

Requested Expiration Date of 

Approval: Three years from the date of 

approval. 

Summary of the Collection of 

Information 

NHTSA is proposing that 

manufacturers would be required to 

provide data on vehicle (including 

passenger car) footprint so that the 

agency could determine a 

manufacturer’s required fuel economy 

level. This information collection would 

be included as part of the existing fuel 

economy reporting requirements. 

NHTSA is also proposing that 

manufacturers and other persons 

wishing to trade fuel economy credits 

would be required to provide an 

instruction to NHTSA on the credits to 

be traded. 

Description of the Need for the 

Information and Proposed Use of the 

Information 

NHTSA would need the footprint 

information to determine a 

manufacturer’s required fuel economy 

level and its compliance with that level. 

NHTSA would need the credit trading 

instruction to ensure that its records of 

a manufacturer’s available credits are 

accurate in order to determine whether 

a manufacturer has sufficient credits 

available to offset any non-compliance 

with the CAFE requirements in a given 

year. 

Description of the Likely Respondents 

(Including Estimated Number, and 

Proposed Frequency of Response to the 

Collection of Information) 

NHTSA estimates that 20 

manufacturers would submit the 

required information. The frequency of 

reporting would not change from that 

currently authorized under collection 

number 2127–0019. 

Estimate of the Total Annual Reporting 

and Recordkeeping Burden Resulting 

from the Collection of Information 

For footprint, NHTSA estimates that 

each passenger car manufacturer would 

incur an additional 10 burden hours per 

year. This estimate is based on the fact 

that data collection would involve only 

computer tabulation. Thus, each 

passenger car manufacturer would incur 

an additional burden of 10 hours or a 

total on industry of an additional 200 

hours a year (assuming there are 20 

manufacturers). At an assumed rate of 

$21.23 an hour, the annual, estimated 

cost of collecting and preparing the 

additional passenger car footprint 

information is $4,246. 

For credit trading, NHTSA estimates 

that each instruction would incur an 

additional burden hour per year. This 

estimate is based on the fact that the 

data required is already available and 

thus the only burden is the actual 

preparation of the instruction. NHTSA 

estimates that the maximum 

instructions it would receive each year 

is 20. While non-manufacturers may 

also participate in credit trading, 

NHTSA does not believe that every 

manufacturer would need to, or be able 

to, participate in credit trading every 

year. NHTSA does not, at this time, 

have a way of estimating how many 

non-manufacturers may wish to 

participate in credit trading. Therefore 

NHTSA believes that the total number 

of manufacturers is a reasonable 

estimate, for a total annual additional 

burden of 20 hours a year. At an 

assumed rate of $21.23 an hour, the 

annual estimated cost of collecting and 

preparing the credit trading instruction 

is $425. 

NHTSA estimates that the 

recordkeeping burden resulting from the 

collection of information would be 0 

hours because the information would be 

retained on each manufacturer’s existing 

computer systems for each 

manufacturer’s internal administrative 

purposes. There would be no capital or 

start-up costs as a result of this 

collection. Manufacturers can collect 

and tabulate the information by using 

existing equipment. Thus, there would 

be no additional costs to respondents or 

record keepers. 

NHTSA requests comment on its 

estimates of the total annual hour and 

cost burdens resulting from this 

collection of information. Please submit 

any comments to the NHTSA Docket 

Number referenced in the heading of 

this document, and to Ken Katz, Lead 

Engineer, Fuel Economy Division, 

Office of International Policy, Fuel 

Economy, and Consumer Programs, 

National Highway Traffic Safety 

Administration, 1200 New Jersey 

Avenue, SE., Washington, DC 20590. 

You may also contact him by phone at 

(202) 366–0846, by fax at (202) 493–

2290, or by e-mail at ken.katz@dot.gov. 

Comments are due by July 1, 2008. 

H. Regulation Identifier Number (RIN) 

The Department of Transportation 

assigns a regulation identifier number 

(RIN) to each regulatory action listed in 

the Unified Agenda of Federal 

Regulations. The Regulatory Information 

Service Center publishes the Unified 

Agenda in April and October of each 

year. You may use the RIN contained in 

the heading at the beginning of this 

document to find this action in the 

Unified Agenda. 

I. Executive Order 13045 

Executive Order 13045 1A 241 applies 

to any rule that: (1) Is determined to be 

economically significant as defined 

under E.O. 12866, and (2) concerns an 

environmental, health or safety risk that 

NHTSA has reason to believe may have 

a disproportionate effect on children. If 

the regulatory action meets both criteria, 

we must evaluate the environmental 

health or safety effects of the proposed 

rule on children, and explain why the 

proposed regulation is preferable to 

other potentially effective and 

reasonably feasible alternatives 

considered by us. 

This proposed rule does not pose 

such a risk for children. The primary 

effects of this proposal are to conserve 

energy and to reduce tailpipe emissions 

of CO2, the primary greenhouse gas, by 

setting fuel economy standards for 

motor vehicles. 

J. National Technology Transfer and 

Advancement Act 

Section 12(d) of the National 

Technology Transfer and Advancement 

Act (NTTAA) requires NHTSA to 

evaluate and use existing voluntary 

consensus standards in its regulatory 

activities unless doing so would be 

inconsistent with applicable law (e.g., 

the statutory provisions regarding 

NHTSA’s vehicle safety authority) or 

otherwise impractical. 

Voluntary consensus standards are 

technical standards developed or 

adopted by voluntary consensus 

standards bodies. Technical standards 

are defined by the NTTAA as 

‘‘performance-based or design-specific 

technical specification and related 

management systems practices.’’ They 

pertain to ‘‘products and processes, 

such as size, strength, or technical 

performance of a product, process or 

material.’’

Examples of organizations generally 

regarded as voluntary consensus 

standards bodies include the American 

Society for Testing and Materials 

(ASTM), the Society of Automotive 

Engineers (SAE), and the American 

National Standards Institute (ANSI). If 

NHTSA does not use available and 

potentially applicable voluntary 


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242 66 FR 28355 (May 18, 2001). 

consensus standards, we are required by 

the Act to provide Congress, through 

OMB, an explanation of the reasons for 

not using such standards. 

The document proposes to categorize 

passenger cars according to vehicle 

footprint (average track width X 

wheelbase). For purposes of this 

calculation, NHTSA proposes to base 

these measurements on those developed 

by the automotive industry. 

Determination of wheelbase would be 

consistent with L101-wheelbase, 

defined in SAE J1100 MAY95, Motor 

vehicle dimensions. NHTSA’s proposal 

uses a modified version of the SAE 

definitions for track width (W101-treadfront and W102-tread-rear as defined in 

SAE J1100 MAY95). The proposed 

definition of track width reduces a 

manufacturer’s ability to adjust a 

vehicle’s track width through minor 

alterations. 

K. Executive Order 13211 

Executive Order 13211 242 applies to 

any rule that: (1) Is determined to be 

economically significant as defined 

under E.O. 12866, and is likely to have 

a significant adverse effect on the 

supply, distribution, or use of energy; or 

(2) that is designated by the 

Administrator of the Office of 

Information and Regulatory Affairs as a 

significant energy action. If the 

regulatory action meets either criterion, 

we must evaluate the adverse energy 

effects of the proposed rule and explain 

why the proposed regulation is 

preferable to other potentially effective 

and reasonably feasible alternatives 

considered by us. 

The proposed rule seeks to establish 

passenger car and light truck fuel 

economy standards that will reduce the 

consumption of petroleum and will not 

have any adverse energy effects. 

Accordingly, this proposed rulemaking 

action is not designated as a significant 

energy action. 

L. Department of Energy Review 

In accordance with 49 U.S.C. 

32902(j)(1), we submitted this proposed 

rule to the Department of Energy for 

review. That Department did not make 

any comments that we have not 

addressed. 

M. Plain Language 

Executive Order 12866 requires each 

agency to write all rules in plain 

language. Application of the principles 

of plain language includes consideration 

of the following questions: 

• Have we organized the material to 

suit the public’s needs? 

• Are the requirements in the rule 

clearly stated? 

• Does the rule contain technical 

language or jargon that isn’t clear? 

• Would a different format (grouping 

and order of sections, use of headings, 

paragraphing) make the rule easier to 

understand? 

• Would more (but shorter) sections 

be better? 

• Could we improve clarity by adding 

tables, lists, or diagrams? 

• What else could we do to make the 

rule easier to understand? 

If you have any responses to these 

questions, please include them in your 

comments on this proposal. 

N. Privacy Act 

Anyone is able to search the 

electronic form of all comments 

received into any of our dockets by the 

name of the individual submitting the 

comment (or signing the comment, if 

submitted on behalf of an organization, 

business, labor union, etc.). You may 

review DOT’s complete Privacy Act 

statement in the Federal Register 

published on April 11, 2000 (Volume 

65, Number 70; Pages 19477–78) or you 

may visit http://www.dot.gov/ 

privacy.html. 

XIV. Regulatory Text 

List of Subjects in 49 CFR Parts 523, 

531, 533, 534, 535, 536, and 537 

Fuel economy and Reporting and 

recordkeeping requirements. 

In consideration of the foregoing, 

under the authority of 49 U.S.C. 32901, 

32902, 32903, and 32907, and 

delegation of authority at 49 CFR 1.50, 

NHTSA proposes to amend 49 CFR 

Chapter V as follows: 

PART 523—VEHICLE CLASSIFICATION 

1. Amend the authority citation for 

part 523 by revising to read as follows: 

Authority: 49 U.S.C. 32901, delegation of 

authority at 49 CFR 1.50. 

2. Amend § 523.2 by adding, in 

alphabetical order, definitions of ‘‘light 

truck’’ and ‘‘work truck’’ to read as 

follows: 

§ 523.2 Definitions. 

* * * * * 

Light truck means a non-passenger 

automobile as defined in § 523.5. 

* * * * * 

Work truck means a vehicle that is 

rated at more than 8,500 and less than 

or equal to 10,000 pounds gross vehicle 

weight, and is not a medium-duty 

passenger vehicle as defined in 40 CFR 

86.1803–01 as in effect on December 20, 

2007. 

3. Amend § 523.3 by revising 

paragraph (a) to read as follows: 

§ 523.3 Automobile. 

(a) An automobile is any 4-wheeled 

vehicle that is propelled by fuel, or by 

alternative fuel, manufactured primarily 

for use on public streets, roads, and 

highways and rated at less than 10,000 

pounds gross vehicle weight, except: 

(1) A vehicle operated only on a rail 

line; 

(2) A vehicle manufactured in 

different stages by 2 or more 

manufacturers, if no intermediate or 

final-stage manufacturer of that vehicle 

manufactures more than 10,000 multistage vehicles per year; or 

(3) A work truck. 

* * * * * 

4. Amend § 523.5 by revising the 

introductory text, and paragraphs (a) 

introductory text, (b) introductory text, 

(b)(1), and (b)(2) introductory text to 

read as follows: 

§ 523.5 Non-passenger automobile. 

A non-passenger automobile means 

an automobile that is not a passenger 

automobile or a work truck and includes 

vehicles described in paragraphs (a) or 

(b) of this section: 

(a) An automobile designed to 

perform at least one of the following 

functions: 

* * * * * 

(b) An automobile capable of offhighway operation, as indicated by the 

fact that it: 

(1)(i) Has 4-wheel drive or 

(ii) Is rated at more than 6,000 pounds 

gross vehicle weight; and 

(2) Has at least four of the following 

characteristics—

* * * * * 

PART 531—PASSENGER 

AUTOMOBILE AVERAGE FUEL 

ECONOMY STANDARDS 

5. The authority citation for part 531 

continues to read as follows: 

Authority: 49 U.S.C. 32902; delegation of 

authority at 49 CFR 1.50. 

6. Amend § 531.5 by revising 

paragraph (a), redesignating paragraph 

(b) as paragraph (d), and adding 

paragraphs (b) and (c) to read as follows: 

§ 531.5 Fuel economy standards. 

(a) Except as provided in paragraph 

(d) of this section, each manufacturer of 

passenger automobiles shall comply 

with the average fuel economy 

standards in Table I, expressed in miles 

per gallon, in the model year specified 

as applicable: 


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TABLE I 

Model year Standard 

1978 ...................................... 18.0 

1979 ...................................... 19.0 

1980 ...................................... 20.0 

1981 ...................................... 22.0 

1982 ...................................... 24.0 

1983 ...................................... 26.0 

1984 ...................................... 27.0 

TABLE I—Continued 

Model year Standard 

1985 ...................................... 27.5 

1986 ...................................... 26.0 

1987 ...................................... 26.0 

1988 ...................................... 26.0 

1989 ...................................... 26.5 

1990–2010 ............................ 27.5 

(b) For each of model years 2011 

through 2015, a manufacturer’s 

passenger automobile fleet shall comply 

with the fuel economy level calculated 

for that model year according to Figure 

1 and the appropriate values in Table II. 

 FIGURE 1

Required_Fuel_Economy_Level = N

N

T

i

i i

∑

Where: 

N is the total number (sum) of passenger 

automobiles produced by a 

manufacturer, 

Ni is the number (sum) of the ith model 

passenger automobile produced by the 

manufacturer, and 

Ti is fuel economy target of the ith model 

passenger automobile, which is determined 

according to the following formula, rounded 

to the nearest hundredth: 

T

a ba

e

e

xc d

xc d

=

+ − 



 



 +

( ) −

( ) −

1

1 11

1

/

/

Where, 

Parameters a, b, c, and d are defined in 

Table II; 

e = 2.718; and 

x = footprint (in square feet, rounded to the 

nearest tenth) of the vehicle model. 

TABLE II.—PARAMETERS FOR THE PASSENGER AUTOMOBILE FUEL ECONOMY TARGETS

Model year 

Parameters 

a b c d 

2011 ................................................................................................................................. 38.20 25.80 45.88 1.60 

2012 ................................................................................................................................. 40.00 27.40 45.79 1.54 

2013 ................................................................................................................................. 40.80 28.70 45.70 1.48 

2014 ................................................................................................................................. 41.20 29.90 45.61 1.42 

2015 ................................................................................................................................. 41.70 31.20 45.51 1.36 

(c) In addition to the requirement of 

paragraph (b) of this section, each 

manufacturer shall also meet the 

minimum standard for domestically 

manufactured passenger automobiles 

expressed in Table III: 

TABLE III 

Model year Minimum 

standard 

2011 .......................................... 28.7 

2012 .......................................... 30.2 

2013 .......................................... 31.3 

2014 .......................................... 32.0 

2015 .......................................... 32.9 

* * * * * 

7. Part 531 is amended by adding the 

following new Appendix A at the end: 

Appendix A to Part 531—Preemption of 

State Regulations Regulating Tailpipe 

Carbon Dioxide Emissions From 

Automobiles 

(a) To the extent that any state regulation 

regulates tailpipe carbon dioxide emissions 

from automobiles, such a regulation relates to 

average fuel economy standards within the 

meaning of 49 U.S.C. 32919. 

1. Automobile fuel economy is directly and 

very substantially related to automobile 

tailpipe emissions of carbon dioxide. 

2. Carbon dioxide is the natural by-product 

of automobile fuel consumption. 

3. The most significant and controlling 

factor in making the measurements necessary 

to determine the compliance of automobiles 

with the fuel economy standards in this Part 

is their rate of tailpipe carbon dioxide 

emissions. 

4. Most of the technologically feasible 

reduction of tailpipe emissions of carbon 

dioxide is achievable only through improving 

fuel economy, thereby reducing both the 

consumption of fuel and the creation and 

emission of carbon dioxide. 

5. Accordingly, as a practical matter, 

regulating fuel economy controls the amount 

of tailpipe emissions of carbon dioxide to a 

very substantial extent, and regulating the 

tailpipe emissions of carbon dioxide controls 

fuel economy to a very substantial extent. 

(b) As a state regulation related to fuel 

economy standards, any state regulation 

regulating tailpipe carbon dioxide emissions 

from automobiles is expressly preempted 

under 49 U.S.C. 32919. 

(c) A state regulation regulating tailpipe 

carbon dioxide emissions from automobiles, 

particularly a regulation that is not attributebased and does not separately regulate 

passenger cars and light trucks, conflicts with 

1. The fuel economy standards in this Part, 

2. The judgments made by the agency in 

establishing those standards, and 

3. The achievement of the objectives of the 

statute (49 U.S.C. Chapter 329) under which 

those standards were established, including 

objectives relating to reducing fuel 

consumption in a manner and to the extent 

consistent with manufacturer flexibility, 

consumer choice, and automobile safety. 

(d) Any state regulation regulating tailpipe 

carbon dioxide emissions from automobiles 

is impliedly preempted under 49 U.S.C. 

Chapter 329. 

PART 533—LIGHT TRUCK FUEL 

ECONOMY STANDARDS 

8. The authority citation for part 533 

continues to read as follows: 

Authority: 49 U.S.C. 32902; delegation of 

authority at 49 CFR 1.50. 

9. Amend § 533.5 by revising Table V 

of paragraph (a) and revising paragraph 

(h) to read as follows: 


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§ 533.5 Requirements. 

(a) * * * 

TABLE V.—PARAMETERS FOR THE LIGHT TRUCK FUEL ECONOMY TARGETS

Model year 

Parameters 

a b c d 

2008 ................................................................................................................. 28.56 19.99 49.30 5.58 

2009 ................................................................................................................. 30.07 20.87 48.00 5.81 

2010 ................................................................................................................. 29.96 21.20 48.49 5.50 

2011 ................................................................................................................. 30.90 21.50 51.94 3.80 

2012 ................................................................................................................. 32.70 22.80 51.98 3.82 

2013 ................................................................................................................. 34.10 23.80 52.02 3.84 

2014 ................................................................................................................. 34.10 24.30 52.06 3.86 

2015 ................................................................................................................. 34.30 24.80 52.11 3.87 

* * * * * 

(h) For each of model years 2011–

2015, a manufacturer’s light truck fleet 

shall comply with the fuel economy 

level calculated for that model year 

according to Figure 1 and the 

appropriate values in Table V. 

10. Part 533 is amended by adding the 

following new Appendix B at the end: 

Appendix B to Part 533—Preemption of 

state regulations regulating tailpipe 

carbon dioxide emissions from 

automobiles 

(a) To the extent that any state regulation 

regulates tailpipe carbon dioxide emissions 

from automobiles, such a regulation relates to 

average fuel economy standards within the 

meaning of 49 U.S.C. 32919. 

1. Automobile fuel economy is directly and 

very substantially related to automobile 

tailpipe emissions of carbon dioxide. 

2. Carbon dioxide is the natural by-product 

of automobile fuel consumption. 

3. The most significant and controlling 

factor in making the measurements necessary 

to determine the compliance of automobiles 

with the fuel economy standards in this Part 

is their rate of tailpipe carbon dioxide 

emissions. 

4. Most of the technologically feasible 

reduction of tailpipe emissions of carbon 

dioxide is achievable only through improving 

fuel economy, thereby reducing both the 

consumption of fuel and the creation and 

emission of carbon dioxide. 

5. Accordingly, as a practical matter, 

regulating fuel economy controls the amount 

of tailpipe emissions of carbon dioxide to a 

very substantial extent, and regulating the 

tailpipe emissions of carbon dioxide controls 

fuel economy to a very substantial extent. 

(b) As a state regulation related to fuel 

economy standards, any state regulation 

regulating tailpipe carbon dioxide emissions 

from automobiles is expressly preempted 

under 49 U.S.C. 32919. 

(c) A state regulation regulating tailpipe 

carbon dioxide emissions from automobiles, 

particularly a regulation that is not attributebased and does not separately regulate 

passenger cars and light trucks, conflicts with 

1. The fuel economy standards in this Part, 

2. The judgments made by the agency in 

establishing those standards, and 

3. The achievement of the objectives of the 

statute (49 U.S.C. Chapter 329) under which 

those standards were established, including 

objectives relating to reducing fuel 

consumption in a manner and to the extent 

consistent with manufacturer flexibility, 

consumer choice, and automobile safety. 

(d) Any state regulation regulating tailpipe 

carbon dioxide emissions from automobiles 

is impliedly preempted under 49 U.S.C. 

Chapter 329. 

PART 534—RIGHTS AND 

RESPONSIBILITIES OF 

MANUFACTURERS IN THE CONTEXT 

OF CHANGES IN CORPORATE 

RELATIONSHIPS 

11. The authority citation for part 534 

continues to read as follows: 

Authority: 49 U.S.C. 32901; delegation of 

authority at 49 CFR 1.50. 

12. Amend § 534.4 by revising 

paragraphs (c) and (d) to read as follows: 

§ 534.4 Successors and predecessors. 

* * * * * 

(c) Credits earned by a predecessor 

before or during model year 2008 may 

be used by a successor, subject to the 

availability of credits and the general 

three-year restriction on carrying credits 

forward and the general three-year 

restriction on carrying credits backward. 

Credits earned by a predecessor after 

model year 2008 may be used by a 

successor, subject to the availability of 

credits and the general five-year 

restriction on carrying credits forward 

and the general three-year restriction on 

carrying credits backward. 

(d) Credits earned by a successor 

before or during model year 2008 may 

be used to offset a predecessor’s 

shortfall, subject to the availability of 

credits and the general three-year 

restriction on carrying credits forward 

and the general three-year restriction on 

carrying credits backward. Credits 

earned by a successor after model year 

2008 may be used to offset a 

predecessor’s shortfall, subject to the 

availability of credits and the general 

five-year restriction on carrying credits 

forward and the general three-year 

restriction on carrying credits backward. 

13. Amend § 534.5 by revising 

paragraphs (c) and (d) to read as follows: 

§ 534.5 Manufacturers within control 

relationships. 

* * * * * 

(c) Credits of a manufacturer within a 

control relationship may be used by the 

group of manufacturers within the 

control relationship to offset shortfalls, 

subject to the agreement of the other 

manufacturers, the availability of the 

credits, and the general three-year 

restriction on carrying credits forward 

or backward prior to or during model 

year 2008, or the general five-year 

restriction on carrying credits forward 

and the general three-year restriction on 

carrying credits backward after model 

year 2008. 

(d) If a manufacturer within a group 

of manufacturers is sold or otherwise 

spun off so that it is no longer within 

that control relationship, the 

manufacturer may use credits that were 

earned by the group of manufacturers 

within the control relationship while 

the manufacturer was within that 

relationship, subject to the agreement of 

the other manufacturers, the availability 

of the credits, and the general three-year 

restriction on carrying credits forward 

or backward prior to or during model 

year 2008, or the general five-year 

restriction on carrying credits forward 

and the general three-year restriction on 

carrying credits backward after model 

year 2008. 

* * * * * 

PART 535—[REMOVED] 

14. Remove Part 535. 

15. Part 536 is added to read as 

follows: 


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PART 536—TRANSFER AND TRADING 

OF FUEL ECONOMY CREDITS 

Sec. 

536.1 Scope. 

536.2 Application. 

536.3 Definitions. 

536.4 Credits. 

536.5 Trading infrastructure. 

536.6 Treatment of credits earned prior to 

model year 2011. 

536.7 Treatment of carryback credits. 

536.8 Conditions for trading of credits. 

536.9 Use of credits with regard to the 

domestically manufactured passenger 

automobile minimum standard. 

536.10 Treatment of dual-fuel and 

alternative fuel vehicles—consistency 

with 49 CFR Part 538. 

Authority: 49 U.S.C. 32903; delegation of 

authority at 49 CFR 1.50. 

§ 536.1 Scope. 

This part establishes regulations 

governing the use and application of 

CAFE credits up to three model years 

before and five model years after the 

model year in which the credit was 

earned. It also specifies requirements for 

manufacturers wishing to transfer fuel 

economy credits between their fleets 

and for manufacturers and other persons 

wishing to trade fuel economy credits to 

achieve compliance with prescribed fuel 

economy standards. 

§ 536.2 Application. 

This part applies to all credits earned 

(and transferable and tradable) for 

exceeding applicable average fuel 

economy standards in a given model 

year for domestically manufactured 

passenger cars, imported passenger cars, 

and light trucks. 

§ 536.3 Definitions. 

(a) Statutory terms. In this part, all 

terms defined in 49 U.S.C. 32901(a) are 

used in their statutory meaning. 

(b) Other terms. As used in this part: 

Above standard fuel economy means, 

with respect to a compliance category, 

that the automobiles manufactured by a 

manufacturer in that compliance 

category in a particular model year have 

greater average fuel economy (calculated 

in a manner that reflects the incentives 

for alternative fuel automobiles per 49 

U.S.C. 32905) than that manufacturer’s 

fuel economy standard for that 

compliance category and model year. 

Adjustment factor means a factor used 

to adjust the value of a traded credit for 

compliance purposes to ensure that the 

compliance value of the credit reflects 

the total volume of oil saved when the 

credit was earned. 

Below standard fuel economy means, 

with respect to a compliance category, 

that the automobiles manufactured by a 

manufacturer in that compliance 

category in a particular model year have 

lower average fuel economy (calculated 

in a manner that reflects the incentives 

for alternative fuel automobiles per 49 

U.S.C. 32905) than that manufacturer’s 

fuel economy standard for that 

compliance category and model year. 

Compliance. (1) Compliance means a 

manufacturer achieves compliance in a 

particular compliance category when: 

(i) The average fuel economy of the 

vehicles in that category exceed or meet 

the fuel economy standard for that 

category, or 

(ii) The average fuel economy of the 

vehicles in that category do not meet the 

fuel economy standard for that category, 

but the manufacturer proffers a 

sufficient number of valid credits, 

adjusted for total oil savings, to cover 

the gap between the average fuel 

economy of the vehicles in that category 

and the required average fuel economy. 

(2) A manufacturer achieves 

compliance for its fleet if conditions 

(1)(i) or (1)(ii) of this definition are 

simultaneously met for all compliance 

categories. 

Compliance category means any of 

three categories of automobiles subject 

to Federal fuel economy regulations. 

The three compliance categories 

recognized by 49 U.S.C. 32903(g)(6) are 

domestically manufactured passenger 

automobiles, imported passenger 

automobiles, and non-passenger 

automobiles (‘‘light trucks’’). 

Credit holder (or holder) means a legal 

person that has valid possession of 

credits, either because they are a 

manufacturer who has earned credits by 

exceeding an applicable fuel economy 

standard, or because they are a 

designated recipient who has received 

credits from another holder. Credit 

holders need not be manufacturers, 

although all manufacturers may be 

credit holders. 

Credits (or fuel economy credits) 

means an earned or purchased 

allowance recognizing that the average 

fuel economy of a particular 

manufacturer’s vehicles within a 

particular compliance category and 

model year exceeds that manufacturer’s 

fuel economy standard for that 

compliance category and model year. 

One credit is equal to 1⁄10 of a mile per 

gallon above the fuel economy standard 

per one vehicle within a compliance 

category. Credits are denominated 

according to model year in which they 

are earned (vintage), originating 

manufacturer, and compliance category. 

Expiry date means the model year 

after which fuel economy credits may 

no longer be used to achieve compliance 

with fuel economy regulations. Expiry 

Dates are calculated in terms of model 

years: For example, if a manufacturer 

earns credits for model year 2011, these 

credits may be used for compliance in 

model years 2008–2016. 

Fleet means all automobiles that are 

manufactured by a manufacturer in a 

particular model year and are subject to 

fuel economy standards under 49 CFR 

Part 531 and 533. For the purposes of 

this regulation, a manufacturer’s fleet 

means all domestically manufactured 

and imported passenger automobiles 

and non-passenger automobiles (‘‘light 

trucks’’). ‘‘Work trucks’’ and medium 

and heavy trucks are not included in 

this definition for purposes of this 

regulation. 

Light truck means the same as ‘‘nonpassenger automobile,’’ as that term is 

defined in 49 U.S.C. 32901(a)(17), and 

as ‘‘light truck,’’ as that term is defined 

at 49 CFR 523.5. 

Originating manufacturer means the 

manufacturer that originally earned a 

particular credit. Each credit earned will 

be identified with the name of the 

originating manufacturer. 

Trade means the receipt by NHTSA of 

an instruction from a credit holder to 

place one of its credits in the account of 

another credit holder. A credit that has 

been traded can be identified because 

the originating manufacturer will be a 

different party than the current credit 

holder. If a credit has been traded to 

another credit holder and is 

subsequently traded back to the 

originating manufacture, it will be 

deemed not to have been traded for 

compliance purposes. 

Transfer means the application by a 

manufacturer of credits earned by that 

manufacturer in one compliance 

category or credits acquired by trade 

(and originally earned by another 

manufacturer in that category) to 

achieve compliance with fuel economy 

standards with respect to a different 

compliance category. For example, a 

manufacturer may purchase light truck 

credits from another manufacturer, and 

transfer them to achieve compliance in 

the manufacturer’s domestically 

manufactured passenger car fleet. 

Vintage means, with respect to a 

credit, the model year in which the 

credit was earned. 

§ 536.4 Credits. 

(a) Type and vintage. All credits are 

identified and distinguished in the 

accounts by originating manufacturer, 

compliance category, and model year of 

origin (vintage). 

(b) Application of credits. All credits 

earned and applied are calculated, per 

49 U.S.C. 32903(c), in tenths of a mile 

per gallon by which the average fuel 

economy of vehicles in a particular 


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compliance category manufactured by a 

manufacturer in the model year in 

which the credits are earned exceeds the 

applicable average fuel economy 

standard, multiplied by the number of 

vehicles sold in that compliance 

category. However, credits that have 

been traded, defined as credits that are 

used for compliance by a manufacturer 

other than the originating manufacturer, 

are valued for compliance purposes 

using the adjustment factor specified in 

paragraph (c) of this section, pursuant to 

the ‘‘total oil savings’’ requirement of 49 

U.S.C. 32903(f)(1). 

(c) Adjustment factor. Vehicle fuel 

economy, measured in miles per gallon 

(mpg), is adjusted to ensure constant oil 

savings when traded between 

manufacturers. Adjusted mpg is shown 

by multiplying the value of each credit 

(with a nominal value of 0.1 mpg per 

vehicle) by an adjustment factor 

calculated by the following formula: 

/

* .

*

A

VMTe

MPGe MPGe

VMTu

MPGu

=





 



 − −





 



 



 









 



 −

1 1

0 1

1 1

MPGu − 0 1





 



 



 



























 .

Where: 

A = Adjustment Factor applied to traded 

credits by multiplying mpg for a 

particular credit; 

VMTe = Lifetime vehicle miles traveled for 

the compliance category in which the 

credit was earned: 152,000 miles for 

domestically manufactured and 

imported passenger cars, 179,000 miles 

for light trucks; 

VMTu = Lifetime vehicle miles traveled for 

the compliance category in which the 

credit is used for compliance: 152,000 

miles for domestically manufactured and 

imported passenger cars, 179,000 miles 

for light trucks; 

MPGe = Fuel economy standard for the 

originating manufacturer, compliance 

category, and model year in which the 

credit was earned; 

MPGu = Fuel economy standard for the 

manufacturer, compliance category, and 

model year in which the credit will be 

used. 

§ 536.5 Trading Infrastructure. 

(a) Accounts. NHTSA maintains 

‘‘accounts’’ for each credit holder. The 

account consists of a balance of credits 

in each compliance category and vintage 

held by the holder. 

(b) Who may hold credits. Every 

manufacturer subject to fuel economy 

standards under 49 CFR parts 531 or 

533 is automatically an account holder. 

If the manufacturer earns credits 

pursuant to this part, or receives credits 

from another party, so that the 

manufacturer’s account has a non-zero 

balance, then the manufacturer is also a 

credit holder. Any party designated as a 

recipient of credits by a current credit 

holder will receive an account from 

NHTSA and become a credit holder, 

subject to the following conditions: 

(1) A designated recipient must 

provide name, address, contacting 

information, and a valid taxpayer 

identification number or social security 

number; 

(2) NHTSA does not grant a request to 

open a new account by any party other 

than a party designated as a recipient of 

credits by a credit holder; 

(3) NHTSA maintains accounts with 

zero balances for a period of time, but 

reserves the right to close accounts that 

have had zero balances for more than 

one year. 

(c) Automatic debits and credits of 

accounts. 

(1) Upon receipt of a verified 

instruction to trade credits from an 

existing credit holder, NHTSA verifies 

the presence of sufficient credits in the 

account of the trader, then debit the 

account of the trader and credit the 

account of the recipient with credits of 

the vintage, origin, and compliance 

category designated. If the recipient is 

not a current account holder, NHTSA 

establishes the account subject to the 

conditions described in paragraph (b) of 

this section, and shifts the credits to the 

newly-opened account. 

(2) NHTSA automatically deletes 

unused credits from holders’ accounts 

as they reach their expiry date. 

(d) Compliance. 

(1) NHTSA assesses compliance with 

fuel economy standards each year, 

utilizing the certified and reported 

CAFE data provided by the 

Environmental Protection Agency for 

enforcement of the CAFE program 

pursuant to 49 U.S.C. 32904(e). Credit 

values are calculated based on the CAFE 

data from the EPA. If a particular 

compliance category within a 

manufacturer’s fleet has above standard 

fuel economy, NHTSA adds credits to 

the manufacturer’s account for that 

compliance category and vintage in the 

appropriate amount by which the 

manufacturer has exceeded the 

applicable standard. 

(2) If a manufacturer’s vehicles in a 

particular compliance category have 

below standard fuel economy, NHTSA 

automatically debits the manufacturer’s 

unexpired credits, earned or obtained 

through trading, within the compliance 

category from the manufacturer’s 

account, beginning with the oldest 

credits held by the manufacturer. 

(3) If there are insufficient credits 

within the compliance category to 

enable the manufacturer to achieve 

compliance in that category, NHTSA 

automatically transfers any available 

existing surplus credits, including 

credits obtained through trading, from 

other compliance categories to the 

extent permitted by 49 U.S.C. 

32903(g)(3) and this regulation, 

beginning with the oldest vintage of 

available surplus credits. 

(4) The value, when used for 

compliance, of any credits received via 

trade is adjusted, using the adjustment 

factor described in § 536.4(c), pursuant 

to 49 U.S.C. 32902(f)(1). 

(5) If a manufacturer is still unable to 

comply with the applicable standards 

for one or more compliance categories 

after NHTSA has applied all available 

credits from within and without the 

compliance category, NHTSA shall 

inform the manufacturer of its noncompliant status and their liability for 

fines, which may be avoided by 

submitting additional credits obtained 

through trading, or deferred by 

submitting a carryback plan for 

NHTSA’s approval pursuant to 49 

U.S.C. 32903(b)(2). 

(6) NHTSA will enforce the CAFE 

program using the certified and reported 

CAFE values provided by the 

Environmental Protection Agency as 

required by 49 U.S.C. 32904(c) and (e). 

Credit values will be calculated from the 

CAFE numbers issued from EPA. 

(e) Reporting. 

(1) NHTSA periodically publishes the 

names and credit holdings of all credit 

holders. NHTSA does not publish 

individual transactions, nor respond to 

individual requests for updated 

balances from any party other than the 

account holder. 


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(2) NHTSA issues an annual credit 

status letter to each party that is a credit 

holder at that time. The letter to a credit 

holder includes a credit accounting 

record that identifies the credit status of 

the credit holder including any activity 

(earned, expired, transferred, traded, 

carry-forward and carry-back credit 

transactions/allocations) that took place 

during the identified activity period. 

§ 536.6 Treatment of credits earned prior 

to model year 2011. 

(a) Credits earned in a compliance 

category before and during model year 

2008 may be applied by the 

manufacturer that earned them to 

carryback plans for that compliance 

category approved up to three model 

years prior to the year in which the 

credits were earned, or may be applied 

to compliance in that compliance 

category for up to three model years 

after the year in which the credits were 

earned. 

(b) Credits earned in a compliance 

category after model year 2008 may be 

applied by the manufacturer that earned 

them to carryback plans for that 

compliance category approved up to 

three years prior to the year in which 

the credits were earned, or may be held 

or applied for up to five model years 

after the year in which the credits were 

earned. 

(c) Credits earned in a compliance 

category prior to model year 2011 may 

not be transferred or traded by a 

manufacturer to another compliance 

category. 

§ 536.7 Treatment of carryback credits. 

(a) Credits earned in a compliance 

category in any model year may be used 

in carryback plans approved by NHTSA, 

pursuant to 49 U.S.C. 32903(b), for up 

to three model years prior to the year in 

which the credit was earned. 

(b) For purposes of this regulation, 

NHTSA will treat the use of future 

credits for compliance, as through a 

carryback plan, as a deferral of penalties 

for non-compliance with an applicable 

fuel economy standard. 

(c) If NHTSA receives and approves a 

manufacturer’s carryback plan to earn 

future credits within the following three 

model years in order to comply with 

current regulatory obligations, NHTSA 

will defer levying fines for noncompliance until the date(s) when the 

manufacturer’s approved plan indicates 

that credits will be earned or acquired 

to achieve compliance, and upon 

receiving confirmed CAFE data from 

EPA. If the manufacturer fails to acquire 

or earn sufficient credits by the plan 

dates, NHTSA will initiate compliance 

proceedings. 

(d) In the event that NHTSA fails to 

receive or approve a plan for a noncompliant manufacturer, NHTSA will 

levy fines pursuant to statute. If within 

three years, the non-compliant 

manufacturer earns or acquires 

additional credits to reduce or eliminate 

the non-compliance, NHTSA will 

reduce any fines owed, or repay fines to 

the extent that credits received reduce 

the non-compliance. 

(e) No credits from any source will be 

accepted in lieu of compliance after 

three model years after the noncompliance. 

(f) If a manufacturer is unable to 

comply in any compliance category in 

any model year, NHTSA will 

automatically deduct and extinguish 

any eligible credits subsequently held, 

earned, or acquired to reduce the oldest 

instance of non-compliance before 

allowing credits to accumulate or 

applying credits to achieve compliance 

in later years. 

(g) A carryback plan may not include 

the use of credits earned before model 

year 2011 that have been subsequently 

traded or transferred to another party. 

§ 536.8 Conditions for trading of credits. 

(a) Trading of credits. If a credit 

holder wishes to trade credits to another 

party, the current credit holder and the 

receiving party must jointly issue an 

instruction to NHTSA, identifying the 

quantity, vintage, compliance category, 

and originator of the credits to be 

traded. If the recipient is not a current 

account holder, the recipient must 

provide sufficient information for 

NHTSA to establish an account for the 

recipient. Once an account has been 

established or identified for the 

recipient, NHTSA completes the trade 

by debiting the transferor’s account and 

crediting the recipient’s account. 

NHTSA will track the quantity, vintage, 

compliance category, and originator of 

all credits held or traded by all accountholders. 

(b) Trading between and within 

compliance categories. For credits 

earned in model year 2011 or thereafter, 

and used to satisfy compliance 

obligations for model year 2011 or 

thereafter: 

(1) Manufacturers may use credits 

originally earned by another 

manufacturer in a particular compliance 

category to satisfy compliance 

obligations within the same compliance 

category. 

(2) Once a manufacturer acquires by 

trade credits originally earned by 

another manufacturer in a particular 

compliance category, the manufacturer 

may transfer the credits to satisfy its 

compliance obligations in a different 

compliance category, but only to the 

extent that the CAFE increase 

attributable to the transferred credits 

does not exceed the limits in 49 U.S.C. 

32903(g)(3). For any compliance 

category, the sum of a manufacturer’s 

transferred credits earned by that 

manufacturer and transferred credits 

obtained by that manufacturer through 

trade must not exceed that limit. 

(c) Changes in corporate ownership 

and control. Manufacturers must inform 

NHTSA of corporate relationship 

changes to ensure that credit accounts 

are identified correctly and credits are 

assigned and allocated properly. 

(1) In general, if two manufacturers 

merge in any way, they must inform 

NHTSA how they plan to merge their 

credit accounts. NHTSA will 

subsequently assess corporate fuel 

economy and compliance status of the 

merged fleet instead of the original 

separate fleets. 

(2) If a manufacturer divides or 

divests itself of a portion of its 

automobile manufacturing business, it 

must inform NHTSA how it plans to 

divide the manufacturer’s credit 

holdings into two or more accounts. 

NHTSA will subsequently distribute 

holdings as directed by the 

manufacturer, subject to provision for 

reasonably anticipated compliance 

obligations. 

(3) If a manufacturer is a successor to 

another manufacturer’s business, it must 

inform NHTSA how it plans to allocate 

credits and resolve liabilities per 49 CFR 

part 534, Rights and Responsibilities of 

Manufacturers in the Context of 

Corporate Relationships. 

(d) No short or forward sales. NHTSA 

will not honor any instructions to trade 

or transfer more credits than are 

currently held in any account. NHTSA 

will not honor instructions to trade or 

transfer credits from any future vintage 

(i.e., credits not yet earned). NHTSA 

will not participate in or facilitate 

contingent trades. 

(e) Cancellation of credits. A credit 

holder may instruct NHTSA to cancel 

its currently held credits, specifying the 

originating manufacturer, vintage, and 

compliance category of the credits to be 

cancelled. These credits will be 

permanently null and void; NHTSA will 

remove the specific credits from the 

credit holder’s account, and will not 

reissue them to any other party. 

(f) Errors or fraud in earning credits. 

If NHTSA determines that a 

manufacturer has been credited, through 

error or fraud, with earning credits, 

NHTSA will cancel those credits if 

possible. If the manufacturer credited 

with having earned those credits has 

already traded them when the error or 


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Federal Register / Vol. 73, No. 86 / Friday, May 2, 2008 / Proposed Rules 24487 

fraud is discovered, NHTSA will hold 

the receiving manufacturer responsible 

for returning the same or equivalent 

credits to NHTSA for cancellation. 

(g) Error or fraud in trading. In 

general, all trades are final and 

irrevocable once executed, and may 

only be reversed by a new, mutuallyagreed transaction. If NHTSA executes 

an erroneous instruction to trade credits 

from one holder to another through 

error or fraud, NHTSA will reverse the 

transaction if possible. If those credits 

have been traded away, the recipient 

holder is responsible for obtaining the 

same or equivalent credits for return to 

the previous holder. 

§ 536.9 Use of credits with regard to the 

domestically manufactured passenger 

automobile minimum standard. 

(a) Transferred or traded credits may 

not be used, pursuant to 49 U.S.C. 

32903(g)(4), to meet the domestically 

manufactured passenger automobile 

minimum standard specified in 49 

U.S.C. 32902(b)(4). 

(b) Each manufacturer is responsible 

for compliance with both the minimum 

standard and the attribute-based 

standard. 

(c) If a manufacturer’s average fuel 

economy level for domestically 

manufactured passenger automobiles is 

lower than the attribute-based standard, 

but higher than the minimum standard, 

then the manufacturer may achieve 

compliance with the attribute-based 

standard by applying credits. 

(d) If a manufacturer’s average fuel 

economy level for domestically 

manufactured passenger automobiles is 

lower than both the attribute-based 

standard and the minimum standard, 

then the difference between the 

attribute-based standard and the 

minimum standard may be relieved by 

the use of credits, but the difference 

between the minimum standard and the 

manufacturer’s actual fuel economy 

level may not be relieved by credits and 

will be subject to penalties. 

§ 536.10 Treatment of dual-fuel and 

alternative fuel vehicles—consistency with 

49 CFR Part 538. 

(a) Statutory alternative fuel and dualfuel vehicle calculations are treated as a 

change in the underlying fuel economy 

of the vehicle for purposes of this 

regulation, not as a credit that may be 

transferred or traded. Improvements in 

alternative fuel or dual fuel vehicle fuel 

economy as calculated pursuant to 49 

U.S.C. 32905 and limited by 49 U.S.C. 

32906 are therefore attributable only to 

the particular compliance category and 

model year to which the alternative or 

dual-fuel vehicle belongs. 

(b) If a manufacturer’s calculated fuel 

economy for a particular compliance 

category, including any required 

calculations for alternative fuel and dual 

fuel vehicles, is higher or lower than the 

applicable fuel economy standard, 

manufacturers will earn credits or must 

apply credits or pay fines equal to the 

difference between the calculated fuel 

economy level in that compliance 

category and the applicable standard. 

Credits earned are the same as any other 

credits, and may be held, transferred, or 

traded by the manufacturer subject to 

the limitations of the statute and this 

regulation. 

(c) If a manufacturer builds enough 

alternative fuel or dual fuel vehicles to 

improve the calculated fuel economy in 

a particular compliance category by 

more than the limits set forth in 49 

U.S.C. 32906(a), the improvement in 

fuel economy for compliance purposes 

is restricted to the statutory limit. 

Manufacturers may not earn credits nor 

reduce the application of credits or fines 

for calculated improvements in fuel 

economy based on alternative or dual 

fuel vehicles beyond the statutory limit. 

PART 537—AUTOMOTIVE FUEL 

ECONOMY REPORTS 

16. The authority citation for part 537 

continues to read as follows: 

Authority: 49 U.S.C. 32907, delegation of 

authority at 49 CFR 1.50. 

17. Amend § 537.7 by revising 

paragraphs (b) and (c)(4)(xvi)(A) to read 

as follows: 

§ 537.7 Pre-model year and mid-model 

year reports. 

* * * * * 

(b) Projected average and target fuel 

economy. (1) State the projected average 

fuel economy for the manufacturer’s 

automobiles determined in accordance 

with § 537.9 and based upon the fuel 

economy values and projected sales 

figures provided under paragraph (c)(2) 

of this section. 

(2) State the projected final average 

fuel economy that the manufacturer 

anticipates having if changes 

implemented during the model year will 

cause that average to be different from 

the average fuel economy projected 

under paragraph (b)(1) of this section. 

(3) State the projected target fuel 

economy for the manufacturer’s 

passenger automobiles and light trucks 

determined in accordance with 49 CFR 

531.5(c) and 49 CFR 533.5(h) and based 

upon the projected sales figures 

provided under paragraph (c)(2) of this 

section. 

(4) State the projected final target fuel 

economy that the manufacturer 

anticipates having if changes 

implemented during the model year will 

cause the targets to be different from the 

target fuel economy projected under 

paragraph (b)(3) of this section. 

(5) State whether the manufacturer 

believes that the projections it provides 

under paragraphs (b)(2) and (b)(4) of this 

section, or if it does not provide an 

average or target under those 

paragraphs, the projections it provides 

under paragraphs (b)(1) and (b)(3) of this 

section, sufficiently represent the 

manufacturer’s average and target fuel 

economy for the current model year for 

purposes of the Act. In the case of a 

manufacturer that believes that the 

projections are not sufficiently 

representative for those purposes, state 

the specific nature of any reason for the 

insufficiency and the specific additional 

testing or derivation of fuel economy 

values by analytical methods believed 

by the manufacturer necessary to 

eliminate the insufficiency and any 

plans of the manufacturer to undertake 

that testing or derivation voluntarily 

and submit the resulting data to the 

Environmental Protection Agency under 

40 CFR 600.509. 

* * * * * 

(c) * * * 

(4) * * * 

(xvi)(A) In the case of passenger 

automobiles: 

(1) Interior volume index, determined 

in accordance with subpart D of 40 CFR 

part 600, 

(2) Body style, 

(3) Beginning model year 2010, track 

width as defined in 49 CFR 523.2, 

(4) Beginning model year 2010, 

wheelbase as defined in 49 CFR 523.2, 

and 

(5) Beginning model year 2010, 

footprint as defined in 49 CFR 523.2. 

* * * * * 

Issued: April 22, 2008. 

Nicole R. Nason, 

Administrator. 

[FR Doc. 08–1186 Filed 4–23–08; 9:16 am] 

BILLING CODE 4910–59–P 


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