Document ID: EPA-HQ-OAR-2014-0827-0679
Agency: epa
Document Type: Supporting & Related Material
Title: 
Posted Date: 2015-07-13T04:00Z

NHTSA and EPA Responses to Interagency Line Item Comments on Rebound Section of HDV Phase 2 NPRM Preamble Received on May 29, 2015

OMB suggested edits = red 
Draft Agencies' edits = blue 

Edit #1
      "For example, the owners and operators of LDVs would likely view may respond to the costs and benefits associated with changes in their personal vehicle's fuel efficiency very differently than a HDV fleet owner or operator would view the costs and benefits (e.g., profits, offering more competitive prices for services) associated with changes in their HDVs' fuel efficiency. "To the extent the response differs, such differences may be smaller for The potential exception is HD pick-ups and vans, which share some similarities with LDV."

Draft Agencies' Response: We accept these edits. 

Comment A1/Edit #2
      "Alternatively, HDV operators could simply use fuel savings to spend more on other costs such as driver labor or vehicle capital (e.g., holding freight output constant), which may not result in higher VMT." 

A1: Commenters understand that this behavior, as described here, would not be consistent with profit maximization in a competitive market. No profit maximizer takes savings from one input and gives it to another input for no apparent reason. Commenter requests that you either please either delete or provide a testable explanation of how it is in fact consistent with profit maximization.

Draft Agencies' Response: We accept this deletion. 

Edit #3
      "For example, customers might demand more ship more frequently shipments, ship products or materials over longer distances, or shift traffic to HDVs from other shipping modes such as rail, barge or air."

Draft Agencies' Response: We propose the following revision to replace that suggested by Interagency Commenters:  
      "For example, customers might order more frequent shipments or choose products that entail longer shipping distances, while freight carriers might divert some shipments to trucks from other shipping modes such as rail, barge or air."

Comment A2/Edit #4
      "Conversely, if fuel efficiency standards lead to net increases in the total costs of HDV operation because fuel cost savings do not fully offset the increase in HDV purchase prices and associated depreciation costs, then the price of HDV services could rise. This is likely to spur a decrease in HDV VMT, and perhaps a shift to alternative shipping modes. These effects could also ripple through the economy and affect GDP."

A2: Commenters note that for this to be the case wouldn't technology costs have to be greater than after-tax fuel process? Is that consistent with the analysis supporting the rule?

Draft Agencies' Response: We are not suggesting that technology costs fully offset fuel cost savings, only discussing the fact that technology costs are an important factor that can affect the magnitude of the rebound effect.  We reject the deletion of this sentence, however, we will clarify that we assume fuel savings fully offset technology costs in our analysis supporting the NPRM:

      "Conversely, if fuel efficiency standards lead to net increases in the total costs of HDV operation because fuel cost savings do not fully offset the increase in HDV purchase prices and associated depreciation costs, then the price of HDV services could rise. This is likely to spur a decrease in HDV VMT, and perhaps a shift to alternative shipping modes. These effects could also ripple through the economy and affect GDP. Note, however, that we project fuel cost savings will offset technology costs in our analysis supporting our proposed standards."

Comment A3
Commenters note that all of the points made in this paragraph taken together appear to indicate UNCERTAINTY, but not necessarily unequivocal BIAS in a particular direction as it might be applied to the U.S. Commenters note that it is not sufficient to establish a degree of uncertainty with regard to their application to the U.S. the agencies must establish unambiguous and substantial bias in these estimates for purposes of applying to this rule. Commenters do not see sufficient justification for giving it zero weight in the analysis of this rule.

Draft Agencies' Response: We agree with the commenter that there is not necessarily an unequivocal bias in the two studies (Matos and Silva; De Borger and Mulalic).  Our discussion of these two studies was intended to emphasize the uncertainly regarding their application to our proposed standards, rather than uncertainty surrounding their empirical results.  We note, however, that we did not give these studies "zero weight" as the commenter suggests; we took these studies and all the studies we discuss in the preamble into consideration when selecting our proposed Phase 2 values.  As we discuss in the preamble, we did not find these two studies - or any other study we became aware of since the Phase 1 rule  -  sufficiently compelling to propose using different values from those that we used in Phase 1.  

Comment A4

Previous comment applies here as well.

Draft Agencies' Response:  See response to Comment A3.

Comment A5
Commenters request clarity on relevance of this point. Once again this indicates uncertainty but there is no substantiated claim they are biased in one direction of another.

      "Volpe analysts tested a large number of different specifications for its national and state level models that incorporated the effects of factors such as aggregate economic activity and its composition, the volume of U.S. exports and imports, and factors affecting the cost of producing trucking services (e.g., driver wage rates, truck purchase prices, and fuel costs), and the extent and capacity of the U.S. and states' highway networks. Table XX summarizes Volpe's Phase 1 estimates of the elasticity of truck VMT with respect to fuel cost per mile.19 As it indicates, these estimates vary widely, and the estimates based on state-level and national data differ substantially."

Draft Agencies' Response:  The paragraph is intended to provide a description of the analysis performed and the results.  It is not intended conflate bias and uncertainty.  We are simply discussing the fact that the estimates vary widely; we are not suggesting a bias in one direction or another.  

Comment A6
Presumably it will be available for the final rule, no? Commenters request clarity on Why not lay out here and seek comment?

      "Volpe staff conducted additional analysis of the models that yielded the estimates of the elasticity of truck VMT with respect to fuel cost per mile reported in Table XX, using updated information on fuel costs and other variables appearing in these models, together with revised historical data on truck VMT provided by DOT's Federal Highway Administration. The newly-available data, statistical procedures employed in conducting this additional analysis, and its results are summarized in materials that can be found in the docket for this rulemaking. This new Volpe analysis was not available at the time the agencies selected the values of the rebound effect for this proposal, but the agencies will consider this work and any other new work that becomes available in the final rule."
Draft Agencies' Response:  This analysis is on-going and is expected to be docketed before the NPRM is published.

Comment A7
Is this evidence on the responsiveness of truck use, vehicle use, or aggregate energy use? Commenters suggest clarifying whether this literature is directly applicable to heavy trucks.

      "Similarly, there is some evidence in the literature that demand for fuel is more responsive to fuel price increases than to decreases.[22]"
      
      [22]Gately, D. 1993. The Imperfect Price-Reversibility of World Oil Demand. The Energy Journal, International Association for Energy Economics, vol. 14 (4), pp. 163-182; Dargay, J.M., Gately, D. 1997. The demand for transportation fuels: imperfect price-reversibility? Transportation Research Part B 31(1); and Sentenac-Chemin, E., 2012. Is the price effect on fuel consumption symmetric? Some evidence from an empirical study. Energy Policy, vol. 41, pp. 59-65.  

Draft Agencies' Response:  The three studies cited respectively address the responsiveness of world oil consumption, gasoline, diesel, and LPG consumption, and gasoline consumption to changes in prices for petroleum, gasoline, and gasoline.   We can clarify the sentence as follows: 
      "Similarly, there is some evidence in the literature that demand for crude petroleum and refined fuels is more responsive to increases than to decreases in their prices, although this research is not specific to the HDV sector.

Edit #5
      "This is because the United States has extensive rail, waterway, pipeline, and air transport networks in addition to an extensive highway network; these networks often closely parallel each other and are often viable choices for freight transport for many long-distance shipping routes within the continental U.S. If rates for one mode decline, demand for that mode is likely to increase, and some of this new demand could represent shifts from other modes.[27]"

Draft Agencies' Response: We accept this edit.

Comment A8
Commenters want to know if you mean "differentiate" here?

Draft Agencies' Response: We will replace "discern" with "differentiate.

      "In our assessment, we do not discern differentiate between short-run and long-run rebound effects, although these effects may differ."